West Asia & North Africa Digest by Ambassador Mahesh Sachdev | July 2022

HIGHLIGHTS

• Political Developments 
• Economic Developments
• Bilateral Developments

IA) Political Developments: Pan-Regional and Global Issues

WANA and Ukraine Conflict:

  • On June 29, Syria announced that it has recognised the independence and sovereignty of Donetsk and Luhansk republics, the two pro-Russia entities which have broken away from Ukraine.
  • A Turkish military delegation travelled to Russia during the last week of June to discuss a proposal to create a grain corridor across the Black Sea to enable the stranded wheat, corn, sunflower oil, fertiliser, etc from the Ukraine conflict zone to reach the global markets via Turkey. Ukrainian authorities have alleged that Russia was clandestinely moving “stolen” Ukrainian grains by ships from Crimea, which it annexed in 2014. The grain export issue was also discussed during Russian Foreign Minister Sergei Lavrov’s visit to Ankara on June 9. Separately, private satellite tracking outfit Maxar disclosed on June 16 that Russian ships have been bringing Ukrainian grain consignments to Syria.
  • On June 12, the Egyptian Finance Minister put the additional burden imposed by the Ukraine conflict on Egypt at $13 billion – $10 bn for higher oil prices and $3 bn for higher wheat prices. Earlier, on June 8, another Egyptian minister sought to reassure the countrymen that the strategic wheat reserves were sufficient till the yearend. In the same connection, on June 26, Egypt contracted for the supply of 180,000 tons of Indian wheat. The two countries were also in discussion of a barter arrangement under which Indian wheat would be exchanged for Egyptian exports. (Comment: Egypt is the world’s largest importer of wheat.)
  • Russian Foreign Minister Sergei Lavrov visited Tehran on June 22 to discuss bilateral cooperation and the nuclear deal negotiations. 
  • Iran’s state-run shipping company said on June 12 that it started its first transfer of Russian goods to India, using a new trade corridor via the Caspian Sea that transits the Islamic Republic port of Bandar Abbas. The Russian cargo consisting of two 40’ containers of wood laminate sheets, weighing 41 tons, departed St. Petersburg for the Caspian Sea port city of Astrakhan.
  • On June 27, Turkish drone maker Baykar decided to donate three TB2 UAVs to Ukraine. Its drones have reportedly been effective against Russian armour during the conflict.
  • There were reports during the month about Russian commodity traders replacing Switzerland with Dubai. These came amidst the US reminder to the UAE authorities on June 22 about the need to exercise greater vigilance to prevent evasion of the Western sanction against Russia.

Covid-19 and Other Pandemics:

  • Somali President Hassan Sheikh Mohamud tested positive for COVID-19 on June 24 on his return from a visit to the United Arab Emirates.
  • On June 13, Saudi Arabia ended all Covid-related restrictions in the run-up to the hajj season.
  • On June 2, the UAE announced that 100% of those targeted categories have been vaccinated against Covid 19.
  •  On June 3, Iraq reported an outbreak of highly pathogenic H5N8 avian influenza, commonly called bird flu, on a farm southeast of Baghdad. The outbreak in the previous month at the poultry farm in the province of Wasit killed 24,060 birds.

Regional Security and Extremism:

  • On June 13, Israeli Foreign Minister Yair Lapid publicly warned Israelis to avoid Istanbul citing a threat of Iranian attempts to kill or abduct Israelis vacationing in Turkey. He also warned Iran of Israeli retribution. He visited Turkey on June 23 to thank Turkish authorities for help in saving Israeli lives. Perhaps in a related move, Iran replaced the head of IRGC intelligence on June 23 without assigning any reasons.
  • The US forces made two raids against Islamic militants in north-eastern Syria. On June 18, they captured Hani Ahmed al-Kurdi, “an experienced bomb maker and operational facilitator” of the Islamic State group from a hideout near Aleppo. On July 27, its rocket attack killed Abu Hamzah al Yemeni, a “senior leader” of Al Qaeda-aligned Hurras al-Din.
  • Islamic State claimed an attack on a bus in Raqqah killing 11 Syrian soldiers and 2 civilians.
  • Iran stated on June 13 that two of its aerospace workers have been “martyred” in unexplained accidents.

IB) Political Developments

Iran:
In determined bids to dispel its diplomatic isolation, Iran hosted three presidential visits in June alone. The highest profiled among these was Venezuelan president Nicolas Maduro’s visit to Iran on June 10-11 which provided the highest political validity to the growing and deepening ties between two large oil producers both subject to the US economic sanctions. During the third week of the month  president Kassym-Jomart Tokayev of Kazakhstan and president Serdar Berdymukhamedov, of Turkmenistan paid two separate visits to Iran. All three of them met Iranian president Ibrahim Raisi and signed several cooperation agreements. Venezuela and Iran signed a 20-year cooperation plan during president Maduro’s visit. In a related move, al-Jazeera reported on June 9 that Iran had established a drone factory in Tajikistan near the capital Dushanbe in May 2022. Maduro also visited Turkey (June 7-8), Kuwait (June 13), Qatar (June 14) and Algeria.

European Union’s foreign policy chief Josep Borrell visited Tehran on June 25 to meet with Iranian foreign minister Hossein Amirabdollahian to push for a resumption of the stalled indirect negotiations to restore the JCPOA between Iran and the United States. Following their agreement, the indirect talks were held in Doha on June 28 and 29, but they ended without progress being made on the contentious issues, which included the Iranian demand to lift the US designation of IRGC as a Foreign Terrorist Organisation. Both Iran and the US accused each other of continuing the stalemate.

In tandem with the softer approach on the nuclear issue, on June 7 the US and three of her EU allies (UK, France and Germany) in JCPOA tabled a draft resolution at the IAEA’s 35-nation Board of Governors meeting criticising Iran for not fully answering the watchdog’s questions on uranium traces at undeclared sites. It expressed the board’s profound concern” that the traces remain unexplained due to insufficient cooperation by Iran and calls on Iran to engage with the watchdog “without delay”. The resolution was adopted the next day with 30 votes in favour, two (Russia & China) against and three abstentions. In an apparent riposte to the resolution, Iran turned off several cameras installed by the global nuclear watchdog. (Comment: The dismantled cameras were those put by Iran voluntarily and the cameras under the safeguard agreement were not affected.)

The UN Annual Report on Human Rights in Iran released on June 21 mentioned that number of executions in the country had gone up from 260 in 2020 to 310 in 2021.

On June 16, the U.S. Treasury Department imposed penalties on two companies based in Hong Kong, three in Iran, and four in the UAE, as well as on Chinese citizen Jinfeng Gao and Indian national Mohammed Shaheed Ruknooddin Bhore for violation of the US economic sanctions imposed on Iran. The charges against the Indian national were not specified.

On June 8, a Greek court on Wednesday overturned an earlier court ruling that allowed the confiscation by the US of part of a cargo of Iranian oil on an Iranian-flagged tanker Lana off the Greek coast. This led to the release of the Iranian oil tanker.

Turkey: 

On a formal request from Ankara, the United Nations agreed on June 4 to rename the country as “Türkiye.”

On June 28, Turkey finally lifted its veto over the requests by Sweden and Finland for NATO membership. The 45-day standoff, resolved hours before Madrid NATO Summit, was caused by president Recep Tayyip Erdogan’s insistent that the two candidate countries take steps to meet Ankara’s conditions about lifting the arms embargo and curb the activities of the “terrorist” exiled groups on their soil. The foreign ministers of Turkey, Sweden and Finland signed an MoU laying down the terms for resolution which were not made public. Circumstantial evidence suggested that the Biden presidency’s promised support for the supply of F-16s and their kits also played a part in persuading Turkey to relent. The deal was domestically projected by Erdogan supporters as a major diplomatic victory for Turkey.  

On June 1, president Erdogan ordered a halt in talks with Greece as the tensions mounted on several fronts despite the German chancellor’s intervention. On June 9, president Erdogan warned Greece not to arm the demilitarised island in the disputed Aegean Sea. On its part, Greece rejected the warning as it questioned its sovereignty.         

Yemen:

On June 2, Yemen’s warring parties agreed to extend a U.N.-brokered truce for another two months under the same terms as the original deal that was on its last day. The renewed agreement will allow for fuel ships to continue to dock in Houthi-held Hodeidah port and some commercial flights from the airport in the capital Sanaa, which is controlled by the group. There had been intense efforts to salvage the deal which was threatened by stalled talks on reopening roads in disputed Taiz, where Houthi troops have imposed a siege for years. This and other matters were to be discussed at the UN-sponsored talks in Amman.

The southern part of Yemen under the nominal control of Saudi backed coalition government continued to suffer political and security instability during the month. Two months after its formation, the Yemeni Presidential Council was still a work in progress. The al-Qaeda attacks on June 23 and 29 killed 10 Yemeni soldiers in Lahej province and more than 6 persons in an STC carcade in Aden respectively.

Saudi Arabia:

Crown Prince Mohammed bin Salman, MbS, went on a regional tour to Egypt (20/6), Jordan (21/6), and Turkey (22/6). (Comment: Several aspects of the MbS tour were noteworthy. It was his first such high-profile foreign foray since he was widely accused of involvement in the 2018 murder of Saudi American journalist Jamal Khashoggi. His visit to Jordan and Turkey, two estranged regional countries, indicated incremental reconciliation. Lastly, it was expected to be a stage-setting exercise to prepare the Saudi leadership for the US president’s visit next month. Further Reading: “Saudi Arabia still thinks money can buy a new reputation”, The Economist, June 24; https://www.economist.com/middle-east-and-africa/2022/06/23/saudi-arabia-still-thinks-money-can-buy-a-new-reputation)

There were a few bilateral moves in the run-up to US president Joe Biden’s coming visit to Saudi Arabia in July 2022. Two Saudi delegations led by the ministers of commerce and investments visited the US during the second half of June. On other hand, at the beginning of the month, some US lawmakers relaunched efforts to stop the US support for the Saudi military campaign in Yemen. A House panel also began a probe into the Saudi business dealings of Jared Kushner, the high-profile son-in-law of former US president Donald Trump.  

On June 24, the Saudi industry and Mineral Resources minister said that the country would invest $3.4 bn in the vaccine and biomedical drugs sector.

The UAE:

Israeli PM Neftali Bennett paid a surprise visit to Abu Dhabi on June 9 to meet with the UAE president Sheikh Mohammed bin Zayed Al-Nahyan. No other details were provided.

On June 22, Thomas Barrack, a fundraiser for former U.S. President Donald Trump, lost a bid to dismiss the criminal charges that he illegally lobbied the U.S. government on behalf of the UAE.

On June 4, Dubai police arrested Sanjay Shah, a British national, over a $1.7bn tax scheme, one of Denmark’s largest-ever fraud cases.

On June 17, the third of the four-unit Barakah 5600 Mwe nuclear power plant near Abu Dhabi was licenced. When completed, the $24.4 bn project, being built by a South Korean consortium, would meet a quarter of the UAE electricity demand.

On June 3, three South Korean companies signed a $1 bn contract with UAE’s Petrolyn Chemie to build a green hydrogen and ammonia production plant in KIZAD Industrial Area near Abu Dhabi.

Israel

President Isaac Herzog met King Abdullah on June 29 in Amman.

Israeli Knesset was formally dissolved on June 30 as the ruling 8-party coalition lost its majority. The current government is to continue in a caretaker capacity with Yair Lapid taking over as the prime minister. The next election shave been scheduled for November 1. (Comment: The only thing surprising about the collapse of the 8-party rainbow coalition was how it managed to stay around for over a year from June 13 2021. This government was the shortest in Israeli political history. It also made history by being the first to include a party (United Arab List, or Ra’am) representing Palestinian citizens of Israel. The coalition members were united only by their determination to keep the longest-serving Israeli PM Binyamin Netanyahu out of power. Despite coalition members’ divergent positions and a one-vote majority in 120-seat Knesset, their government could still be credited with several achievements, including passing the national budget after three years, keeping the momentum with Abraham Accords and ensuring  8.1% GDP growth in 2021.  Although the intervening period of four months makes it hazardous to predict the outcome, the dice is loaded against the ruling coalition and the return of Netanyahu, its bête noire, cannot be ruled out. It being the fifth Knesset election in less than four years attests to the mercurial nature of Israeli domestic politics.)

According to the annual report of Stockholms-based SIPRI released on June 15, Israel spent $1.2 bn on nuclear weapons in 2021. SIPRI estimates that the Israeli arsenal consists of approximately 80 nuclear weapons. Israel has not signed the NPT and has not acknowledged having nuclear weapons.

On June 20, Israeli defence minister Benny Gantz briefed the Israeli MPs about the outline to create a Middle East Air Defence Alliance (MEADA), widely believed to be aimed at Iran and leveraging Israeli and US technologies. He claimed that such cooperation had American blessing and was already underway without mentioning precisely the names of the regional countries under the proposed alliance. Earlier, Israeli prime minister Naftali Bennett claimed on June 1 that a laser-based air defence system that Israel hopes to deploy next year to neutralise enemy rockets and drones will cost just $2 per interception. (Comment: Although the concept of a Middle East NATO has been around for some time, the stakeholders have had to tiptoe around it for two reasons: the inclusion of Israel and declaring Iran as the source of the threat. Both these push-pull factors were politically inconvenient for countries such as Saudi Arabia, Qatar and Kuwait. Therefore, MEADA is likely to be implemented on the ground while being kept under wraps in public. Most of the time in the Middle East things are the other way around: more heat than light on strategic issues.  Further Reading: “Fear of Iran is turning former enemies into allies: Israel’s unexpected military alliance in the Gulf”; The Economist Jun 30th 2022; https://www.economist.com/middle-east-and-africa/2022/06/30/israels-unexpected-military-alliance-in-the-gulf)

IAEA Director General Rafael Grossi arrived in Israel on June 2 for a meeting with prime minister Naftali Bennett.

Lebanon:

Najib Mikati, the outgoing prime minister, was renamed to the same position on June 23. (Comment: The renomination of Najib Mikati, a billionaire business tycoon, who has already served as PM three times, largely attested to the May 15 parliamentary election having failed to come up with a roadmap for resolving the country’s myriad eco-political crises. His continuation was thought to be a safe bet by the country’s entrenched political elite to shield them from direct criticism and allow the government to meet serious challenges such as negotiating a loan agreement with the IMF to rescue the economy and holding the presidential election.)

On June 30,  Qatar pledged $60 mn to support the salaries of Lebanese soldiers. (Further Reading: “FACTBOX-Just how bad is Lebanon’s economic meltdown?” Reuters, June 23 2022; https://www.reuters.com/world/middle-east/factbox-just-how-bad-is-lebanons-economic-meltdown-2022-06-23)

Lebanese presidency warned Israel on June 5 against any aggressive actions in disputed gas-rich off-shore waters in the eastern Mediterranean. On June 9, the Hezbollah chief publicly asserted that his militia can stop Israeli activities to explore and extract the natural gas from the Karish field, about 80 km (50 miles) west of the city of Haifa where a British company has deployed floating production storage and offloading vessel on a contract with Israel. During the last week of the month, a US mediator on the sea boundary dispute held separate talks in Beirut and Jerusalem. (Comment: The simmering dispute has suddenly acquired a new edge for several reasons, including the need for West Europe to find alternatives for the Russian supplies, high international prices of natural gas and Lebanon’s desperation for new sources of revenue and exports. Further Reading: “Explainer: Israel-Lebanon sea boundary row obstructs energy development”, Reuters, June 6; https://www./world/middle-east/israel-lebanon-sea-boundary-row-obstructs-energy-development-2022-06-06)  

Libya:

The country continued to suffer from political instability due to the two rival administrations based in Tripoli and Benghazi respectively being unable to agree on terms of ending the decade-old civil strife. The UN-sponsored talks were held in Cairo (June 12-20) and Geneva (June 28-29) to create harmonised conditions for holding the presidential and parliamentary elections aimed at unifying the country under a stable political order. However, Both these rounds of talks proved inconclusive due to irreconcilable differences between the negotiating parties.

On June 2, UNHCR evacuated a group of 132 vulnerable asylum seekers out of Libya to safety in Rwanda. The group included children & survivors of violence & torture.

Sudan

On June 27, Sudan recalled its ambassador to Addis Ababa in protest over the alleged execution of seven Sudanese troops by Ethiopian forces in the disputed Fashaga region on the bilateral border. Ethiopia denied the charge. Following this incident border tension rose as Sudanese forces fired heavy artillery.

The bad news continues to emanate from Sudan. On June 30, seven anti-government demonstrators were killed in police firing. On June 23, the UN estimated that ongoing unrest in Darfour had displaced 84,000 persons during June alone. On June 17, the UN stated that hunger stalked at least half of Sudan’s population. Meanwhile, political talks to resolve the domestic impasse between the ruling military junta and civilian groups demanding a return to civilian rule and democracy began on June 9. These talks, sponsored by the UN, African Union and IGAD, were boycotted by a section of the civilian groups.

Qatar:

On June 24, emir Sheikh Tamim Hamad Al-Thani met with Egyptian president Abdul Fattah al-Sisi in Cairo.  It was Sheikh Tamim’s first visit to Egypt following years of frayed bilateral ties and a boycott of Doha by Egypt and three GCC states.

On June 28, Emir Sheikh Tamim received the UAE National Security Adviser Sheikh Tahnoun bin Zayed Al-Nahyan. It was the UAE NSA’s second visit to Doha since the normalisation of the bilateral ties.

On June 8, the FBI initiated an investigation against Gen John Allen about his acting as a paid lobbyist for Qatar without proper procedure being followed. Brookings Institution, where he was serving as the president, suspended him pending the outcome of these investigations.

A report by the BBC Arabic Service on June 9 alleged that Qatar was under-reporting the deaths of expatriate workers due to excessive heat.

Syria:

An Israeli surface-to-surface missile attack from Golan Heights on Damascus international airport caused heavy damage on June 11 forcing its closure for the next 12 days.  

On June 1, Turkish President Erdogan threatened to launch a military campaign to rid the bordering area of northeastern Syria of “the terrorist elements.” To ward off this threat, Self Defence Forces (SDF), a Kurdish militia, warned the day after that if such an attack came, it would turn to Damascus government forces for protection.  (Comment: SDF is the military wing of YPG, which is the Syrian branch of the PKK, regarded as a terrorist outfit by Turkey and the EU. During the Syrian civil war, SDF has operated to promote Kurdish autonomy in northeastern Syria bordering Iraq and Turkey. At different times, it has fought against both al-Assad’s forces as well as those of Daesh. It has enjoyed US support.  In the event, Syrian troop mobilisation, the US and Russian pressure averted the Turkish military campaign against SDF/YPG, at least temporarily.)           

Iraq:

Prime Minister Mustafa al-Kadhimi visited Jeddah and Tehran on June 25 and 26 respectively in an apparent bid to restart the Iraq-facilitated talks between Saudi Arabia and Iran to lower the regional tensions and promote stability. In Jeddah, he met Crown Prince Mohammed bin Salman and in Tehran, he was received by President Ibrahim Raisi. (Comment: Five rounds of Saudi-Iranian talks have so far been held in Baghdad at the senior official level yielding some forward movement. The last round, held in March, was suspended by Iran apparently to express its displeasure at 81 Saudis being executed on a single day, 41 of them being Shia Muslims. Relevant to note that the bilateral diplomatic relations were broken in 2016 when an Iranian mob set fire to the Saudi embassy in Tehran in protest against a senior Saudi Shia cleric being executed.)             

Influential Shia theologist and populist leader Moqtada al-Sadr lived up to his reputation as a political maverick on June 12, when he ordered his 73 loyalist MPs, the largest bloc to emerge from October 2021 elections, to resign en masse from the Iraqi parliament. Three days later he announced his withdrawal from the national political process. His action led to the resigned MPs being replaced mostly by pro-Iranian Shia candidates whose number went up to 130 in a 329 membered parliament, still well short of the majority needed to form a government. (Comment: Sadr’s action, apparently caused by his inability to put together a majority coalition, also cast a long shadow over the future course of Iraqi politics and could prompt a return to street politics, where he retains a large following. Relevant to note that since parliamentary elections over 8 months ago, the new set-up has not been able to elect a new president of Iraq, who is then expected to appoint the new prime minister.)

Palestine:

European Commission President Ursula von der Leyen visited the West Bank on June 14 and met Palestinian PM Mohammed Shtayyeh. She also announced that the European Union would resume full funding to the Palestine Authority. (Comment: The EU, along with European states and other institutions, have together been PA’s biggest backer, giving about €600m annually. Since 2020, however, a large portion of the EU’s funding – valued at about €215m – has not been handed over because officials were concerned over Palestinian textbooks glorifying violence and promoting anti-Semitism. This reduction contributed to PA’s worst financial crisis. EC President did not say if the textbooks have been modified.)

PA said that an Israeli raid on June 17 on Jenin in the West Bank killed three Palestinians and injured ten others. Hamas retaliated the next day by firing several rockets at the southern Israeli city of Ashkelon. The action drew Israeli air-raids on Hamas-related targets in Gaza.

On June 21, Hamas announced the restoration of ties with the Syrian government after a decade of animus. (Comment: The Hamas action indicated the confluence of two contrarian trends in the Arab mainstream: the marginalisation of the Palestine militancy after the Abraham Accords and the gradual rehabilitation of the Al-Assad regime.)

The Palestinian Affairs Unit in the US embassy in Jerusalem was redesignated as the US Office of Palestinian Affairs. While still being part of the US embassy,  the OPA would report directly to the Bureau of Near Eastern Affairs in the US Department of State “on substantive matters”. (Comment: The facile change in nomenclature and functionality was a smoke-and-mirror exercise to find a via media between the Biden Presidency’s intention of repealing the Trump administration’s decision to close the US Consulate in East Jerusalem (which used to liaise with the Palestine Authority) and dogged Israeli resistance to reopening it.)

A spokesperson of the U.N. human rights office said on June 24 that information reviewed by the suggests Israeli security forces fired the shot that killed Palestinian-American reporter Shireen Abu Akleh in May, not indiscriminate firing from Palestinians. (Comment: Apart from the merit of wading into a politically charged event, this was the rare occasion on which the office has granted itself a definitive forensic authority.)

Tunisia:

On June 30, the Presidency published a draft Constitution to replace the earlier one brought in 2014 after the Arab Spring revolution. It is to be voted in a referendum on July 25 and if approved, would lead to parliamentary elections in December 2022. (Comment: The draft constitution strengthens the presidential powers at the expense of the legislative and the judiciary. For instance, the president would have the power to dissolve parliament, while no clause allows for the removal of a president. The government would answer to the president and not to parliament. The president would be the head of the armed forces and be charged with naming judges, who would be banned from striking. The constitution would create a new parliamentary chamber for “regions and districts.” It removes references to both Islam and the civilian nature of Tunisia, simply saying that it is a “free, independent and sovereign state.” The draft constitution was unveiled against the backdrop of a strike by the judges from June 4 protesting the sacking of over 50 of them by the presidency. The powerful labour union UGTT also organised a strike on June 16 over low wages and high inflation. On June 5, the Chief of Ennahda, the biggest political party, decried the presidential coup that has unleashed tyranny. Undeterred, president Kais Saied has blamed the corrupt elite for the country’s dismal political and economic state.)    

Kuwait:

On June 15, several Kuwaiti MPs began a sit-in within the parliament premises to press for a new government.

Egypt:

On June 28, an Egyptian court sentenced several members of the Muslim Brotherhood for their anti-state activities during 2013-15. Ten were sentenced to death and fifty were sentenced to life.

On June 29, Russia’s Rosatom was given green light by Egypt for the construction of the country’s first nuclear power plant at Daba’a with four reactors of 1200 MWe capacity.

Bahrain:

On June 3, Bahrain’s King Hamad bin Isa al-Khalifa ordered the largest cabinet reshuffle in the country’s history resulting in changing of 17 out of 22 ministers including that the oil minister.

Algeria:

On June 8, Algeria suspended a 20-year-old friendship treaty with Spain that committed the two sides to cooperate in controlling migration flows, and also banned imports from Spain, escalating a row over Madrid’s pro-Morocco stance on Western Sahara. (Comment: Algeria seems to have several objectives in mind while escalating the row with Spain. It wants to staunch the haemorrhage of the international support for the Polisario after the Abraham Accord resulted in the US recognition of the Moroccan sovereignty over disputed Western Sahara. By making an example of Spain, it may be trying to prevent France and the UK from following the US on this issue. Algiers may want to free itself of the commitment to supply its natural gas to Spain and supply instead to Italy or other West European countries facing uncertainty about the supplies from Russia. Lastly, by upending the ties with important NATO countries it may seek to maintain a dynamic balance with Russia, its main military supplier.)  

II) Economic Developments

Oil & Gas Related Developments:

  • After a few months of turbulence due to the Ukraine conflict and resulting sanctions on the oil and gas from Russia, among the world’s largest suppliers, the markets tended to be more stable as no quick fixes were available. There was a bearish trend in the prices as the global demand fell due to factors such as the spread of covid-19 in China, fear of global economic recession and high oil prices themselves. The oil prices drifted lower during the month and the WTI grade hovered around $100/barrel by end of the month. There were no major spare crude and gas production capacities to replace Russian supplies. The Russian oil and gas, incentivised by substantive discounts, managed to reach the global markets. There were reports of  Russia becoming the top crude source to major consumers such as India and China, much to the detriment of traditional Gulf suppliers, such as Iraq, Saudi Arabia, Iran, etc.
  • 23 Ministers of OPEC+ met twice during the month, on June 2 and June 30 respectively. They agreed on June 2 that the group should add 648,000 bpd of oil to the market in July and August, an increase of nearly 50% to its oil-supply hikes of 432,000 bpd in recent months. However, the group’s capacity to deliver extra crude to the market was in doubt with major producers such as Russia, Nigeria, Venezuela and Iran unable to meet their earlier quotas. Thus, according to IEA, OPEC+ was 1.3 mbpd below its target in April. June 30 meeting of the OPEC+ ratified the decision taken at the earlier meeting to raise the oil production to 648,000 bpd for July and August. OPEC’s 13 ministers’ online meeting on June 29 was also limited to internal issues and the collective oil policy issues were not discussed.
  • In its monthly report on June 14, OPEC expected world consumption to surpass the 100 mbpd mark in the third quarter, in line with earlier projections, and for the 2022 average to reach 100.29 million bpd, just above the pre-pandemic rate in 2019. The report also showed that in May OPEC output fell by 176,000 bpd to 28.51 mbpd due to losses in Libya, Nigeria and other countries. The growth forecast for non-OPEC supply in 2022 was reduced by 300,000 bpd to 2.1 mbpd. OPEC cut its forecast for Russian output by 250,000 bpd and left its U.S. output growth estimate steady. The report expected the supply of U.S. shale oil production to rise by 880,000 bpd in 2022.
  • In a report on June 16, Wood Mackenzie consultancy expected fuel prices at the pump to remain high into next year due to disruptions in Russian oil supplies and as refineries struggle to meet surging demand. It predicted that the pressure should ease in the second half of next year.
  • Iraqi ambitions to hit a production level of 4.58 mbpd by July 2022 were stymied for several reasons including legal problems with Kurdistan Regional Government (KRG) refusing to put oil assets under the central government’s control as required by the Iraqi federal court’s decision. Iraqi government’s Basra Oil  Company had to buy out ExxonMobil’s 32.7% stake in the southern West Qurna 1 oil field to avoid it going to the Chinese companies. It thus acquired the largest share in one of the world’s largest oil fields with recoverable reserves estimated to exceed 20 billion barrels.
  • On June 11, the Iranian oil minister claimed that the country had sold over 1 mbpd in the two months to May 21, adding that there was a 40% increase in volume and 60% in value terms over the previous year. Crude oil dealer Vittal speculated on June 5 that the US may allow Iranian oil exports without the JCPOA being revived.
  • While Libyan oil exports were affected due to shutdowns during the early part of the month, by June 18,  the production held up to 700,00 bpd.
  • Omani cabinet reshuffle on June 16 included the long-serving oil minister Mohammed bin Hamad Al-Rumhi being replaced by Salem al-Aufi. Earlier on June 4, Oman announced new oil discoveries capable of raising its production by 50,000 to 100,000 bpd in the coming two to three years. Crude oil reserves in the Sultanate currently stand at 5.2 bn barrels, and gas reserves at around 24 tcf.
  • During the month Qatar picked up partners for its $30 bn LNG expansion project. These included TotalEnergie (June 12), Eni (June 19) and ConocoPhillips on June 20.
  • EU signed natural gas supply deals with Israel and Egypt on June 16. Israeli gas will be brought via a pipeline to Egypt’s LNG terminal on the Mediterranean, where some will be converted to LNG for transporting to European shores. Israel has two major gas fields off its coast with an estimated 690 bcm of natural gas combined.

Following economy-related developments took place in WANA countries:

  • Turkey’s economy continued to bleed red. The annual inflation figure released on June 3 jumped to 73.5%, the highest since 1998. Undeterred, president Erdogan played down inflation promising more interest rate cuts. The Turkish central bank’s net international reserves fell to their lowest level in 20 years at $7.38 billion as of June 17. The exchange rate on June 23 was 17.288. The lira lost 44% against the dollar in 2021  and has lost a further 24% against the greenback so far this year. On June 9 Turkey’s treasury issued state enterprise income-indexed domestic bonds to encourage Turks to make savings in lira assets, while the banking watchdog announced maturity limits for consumer loans. On June 20 the government submitted a proposal to parliament for a supplementary budget of some 1 tn lira ($57.74 bn) to cover the rising costs of tackling a currency slide, soaring energy prices and rampant inflation.
  • Saudi Arabia’s economy grew by 9.9% in Q1/22 y/y, the fastest in a decade on a low base and surging oil prices. The FDI inflows to the kingdom were at 7.4 bn riyals ($1.97 bn) in Q1/22, up 9.5% y/y.
  • In its second such auction, the UAE raised Dh1.5 bn in local currency bonds on June 20. DAL group of Abu Dhabi announced on June 20 that it would invest $6 bn to build a new port and ancillary infrastructure 200 kms north of Port Sudan. On June 6, DP World sold assets worth $5 bn to cut its debt.
  • The Iranian currency, the rial, reached a new low of 330,000 against the US dollar on June 12.  
  • On June 21 Egypt’s parliament approved the state budget for the financial year that begins on July 1, with expenditure rising by 15%  to $111 bn and the deficit going up by 14.5% to stand at 6.1% of the GDP. On June 16, the Saudi-based Islamic Trade Finance Corporation (ITFC) began dispersing a $3 bn credit facility extension with Egypt to finance food and energy imports. It also signed an extension of the latest agreement, doubling its value to $6 bn. The ITFC has provided some $14 bn to Egypt under five framework agreements since 2008.
  • On June 21, the UK launched negotiations with the GCC states for a free trade area.  
  • On June 15, the GCC central banks raised their interest rates by 0.75% in tandem with the US Federal Reserve.
  •  Bahrain announced on June 20 that its GDP has grown by 5.5% y/y in Q1/22.
  • Qatar Airways posted a record $1.5 bn profit during 2021-22. It suffered a record loss of $4.1 bn in the previous year due to Covid-19 lockdowns.
  • Lebanese forex reserves stood at $11 bn on June 21, having shrunk by $2.2 bn in 2022.

III) Bilateral Developments

  • Vice President Shri M. Venkaiah Naidu paid an official visit to Qatar on June 4-5. He met Sheikh Hamad bin Khalifa Al-Thani, father of the emir of Qatar and held delegation-level talks with Sheikh Khalid bin Abdulaziz Al-Thani, the prime minister and minister of interior of the country. The visit was partially eclipsed by the opprobrium in Islamic Ummah about a BJP spokesperson making disrespectful remarks on a TV programme against Prophet Mohammed. Qatari foreign ministry summoned the Indian ambassador to make a demarche on this issue.
  • On his return from G7 Summit in Germany, prime minister Shri Narendra Modi had a brief stopover on June 28 in Abu Dhabi to meet Sheikh Mohammed bin Zayed Al-Nahyan (MbZ), president of the UAE. This was their first physical meeting since August 2019 and was, protocol-wise aimed at personally condoling the passing away of Sheikh Kalifa bin Zayed Al-Nahyan and congratulating Sheikh Mohamed bin Zayed Al-Nahyan on his election as the third President of the UAE and becoming the Ruler of Abu Dhabi. PM thanked Sheikh Mohamed for taking great care of the 3.5 mn Indian community in UAE, especially during the COVID-19 pandemic. He also invited Sheikh Mohamed to visit India at an early date. (Further Reading: “Modi’s two summits: UAE trumps G7”, by Mahesh Sachdev, The Hindu, June 28; https://www.thehindu.com/opinion/op-ed/modis-two-summits-uae-trumps-g7/article65573417.ece)
  • On June 2, PM Shri Modi received the visiting Israeli defence minister Benny Gantz, who also met RM Shri Rajnath Singh.
  • On June 8, Iranian foreign minister Hossein Amir Abdollahian began his two-day visit to India during which he was received by the PM and discussed bilateral and other issues of common concern with the EAM. (Comment: The visit was conspicuous for having taken place during the widespread criticism in Islamic Ummah of the disrespectful remarks by a BJP spokesperson on a TV programme against Prophet Mohammed.)
  • There were sharp official and popular condemnations in several WANA countries of the disrespectful remarks by a BJP spokesperson on a domestic TV programme against Prophet Mohammed. However, the social and economic fallout of the issue was limited as the BJP clarified that the statement did not reflect its views and acted against the recalcitrant spokesperson and her handler. The Indian ministry of external affairs also disassociated the government from this issue.  On June 7, the terrorist organisation Al Qaeda in the Subcontinent (AQIS) issued a threat to India saying that they are ready to blow themselves up in Gujarat, UP, Bombay and Delhi to “fight for the dignity of our Prophet”.
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  • Some contrarian trends were also noted, while the Kuwaiti government statement was on expected lines and a supermarket chain pulled out the Indian products, the authorities also threatened the anti-India demonstrators with deportation. OIC’s statement on this issue on June 5 was singled out by the MEA official spokesman and responded to the next day.
  • On June 8, the Indian cabinet approved the signing of an MoU with the UAE on cooperation in advanced technologies.
  • The fifth session of the India – Saudi Arabia Joint Committee on Defence Cooperation was held in New Delhi on June 29. Saudi Arabia’s Deputy Minister of Defence for Strategic Affairs Mr Ahmed A. Aseeri, who led the Kingdom’s delegation for the talks, was received by Indian Defence Secretary.
  • An Indian delegation arrived in Jerusalem on June 13 to discuss framework rules and coordinate expectations for negotiations for a bilateral CEPA.
  • Defence cooperation with Egypt was boosted during the month as the two countries’ air forces held tactical leadership exercises in Egypt from June 26 to July 24 Further, INS Kochi visited the Egyptian Red Sea port of Safaga from June 28 to 30. 
  • Economic Times reported on June 29 that following the UAE being placed under the grey list of the Financial Action Task Force (FATF) in March 2022, the equity investments coming into India from that country were facing enhanced scrutiny. There are currently 149 FPIs hailing from the UAE operating in India. Also, there is a large section of the non-resident Indian population resident in the UAE which tend to invest in Indian markets.
  • On June 29, India’s National Infrastructure Fund (NIIF) invested $300 mn in DP World’s container subsidiary, taking the total sum invested to $500 mn.
  • According to a Bloomberg report on June 29, Russia was on course to deliver somewhere between 1 million and 1.2 million barrels a day of its discounted crude to India during June 2022. That would place it neck-and-neck with, or a little above, Iraq, the leading supplier to India and far ahead of Saudi Arabia. 
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  • India’s fuel consumption in June rose by 17.9% from a year earlier, government data released on July 8 showed. Diesel sales rose 23.9% year-on-year and petrol sales up 23.2% from a year earlier. The sharp increases were largely due to the low base effect.
  • In a move designed to boost the Indian hydrocarbon industry and bring more investments, the Union Cabinet on June 29 decided to give marketing freedom to domestic crude oil producers, allowing them to sell petroleum to any company in the local market.
  • On June 2, India’s Welspun Industries got a contract to supply Saudi Arabia steel pipelines worth SR 490 mn (Rs 1000 cr approx.).
  • Three Gupta brothers were arrested by the UAE on South Africa’s extradition request. They are accused of illegal economic activities in cahoots with former South African president Jacob Juma.
  • International Indian Film Academy (IIFA) Awards ceremony was held in Abu Dhabi on June 4-5.


The previous issues of West Asia & North Africa Digest are available here: LINK
………………………………………………………………………………………………
(The views expressed are personal)
………………………………………………………………………………………………

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