IA) Political Developments: Pan-Regional and Global Issues
Gaza Conflict
After several weeks of demurral, on May 5 Israel Defence Force (IDF) launched its military campaign, without fanfare, on Rafah after asking the residents to move to safer areas. The next day Israeli war cabinet asserted that the operations there would continue despite humanitarian concerns from various quarters. Israel hinted at expanding the Rafah operations on May 10 and asked the remaining residents there to evacuate. On May 14, IDF said that 4 Hamas battalions were bottled up at Rafah. However, the same day, IDF units were sent back to northern Gaza, earlier sanitised by IDF, to prevent Hamas fighters from relocating there. Intensified fighting and instances of friendly fire between IDF units caused Israeli casualties to surge reaching 278 IDF deaths since the launch of ground operations on Oct 27. By May 28, Israeli tanks had reached the centre of Rafah and the next day they were in control of 14 kms Philadelphi corridor between Gaza and Egypt. Al-Jazeera claimed on May 31 that Israel has encroached upon 32% of Gaza’s land for setting up buffer zones along Israel’s borders as well as along the 1.4 kms east-west Nazarim Axis cutting Gaza Strip into half in the middle. (Comment: Hamas has long used Philadelphi Corridor, Gaza’s only land border with Egypt, to set up an extensive tunnel network to smuggle goods and men. Therefore, IDF control on this corridor was a significant denial of both “oxygen” and possible retreat and escape to Hamas leadership and fighters.)
Despite continued attempts at peace-making mostly in Cairo, a ceasefire deal continued to prove illusive due to irreconcilable differences between Israel and Hamas even as both sides blamed the stalemate on the other. While Israeli authorities continued to insist on fighting till the full elimination of Hamas, the latter refused to have any ceasefire and release of hostages until Israel agreed to complete the withdrawal of IDF from Gaza. On May 29, the Israeli NSA estimated that the fighting is likely to continue at least through the end of 2024. However, the next day Hamas reiterated its readiness to complete the ceasefire agreement if Israel agreed to stop the war.
On the humanitarian front, the tragedies continued to unfold in Gaza. On May 31, Hamas-run Gazan Ministry of Health put the number of war dead at 36,280. On May 27, an Israeli air raid on a tent camp for evacuees from Rafah caused a massive fire killing 46 persons and causing an international outcry. IDF’s Rafah campaign disrupted the supply of humanitarian material and according to the Norwegian Relief Committee, only 906 trucks were able to enter Gaza from May 7 to 24 with over 2000 trucks waiting on the border. On May 21, UNRWA suspended relief material distribution in Rafah due to insecurity. The US supplied shipping pier meant to enable entry of relief material by sea from Cyprus continued to face weather-related disruptions.
For developments in the West Bank: Please see Palestine Authority and West Bank.
For details on the flare-up between Iran and Israel: Please see Iran.
For details on the Israel-Hezbollah tensions: Please see Lebanon.
For the Houthi missile attacks on Israel and the Red Sea area: Please see Yemen.
WANA and Multilateral Diplomacy:
On May 10, the UN General Assembly passed a resolution by an overwhelming majority (143-9:25) stating that the State of Palestine was qualified to join the United Nations as a full member and recommending the U.N. Security Council “reconsider the matter favourably.” The move followed the US exercising its veto last month preventing the approval of a similar move.
On May 20 International Criminal Court chief prosecutor Karim Khan sought issuance of arrest warrants against PM Netanyahu, Defence Minister Yoav Gallant as well as Hamas chief Yahya Sinwar, commander-in-chief of the military wing of Hamas Mohammed Al-Masri (aka Deif) and Ismail Haniyeh, Head of Hamas political wing. He said that there were reasonable grounds to believe the five men “bear criminal responsibility” for alleged war crimes and crimes against humanity. Israeli leadership reacted with considerable vehemence to the move. Israeli PM Netanyahu dismissed the move as a “complete distortion of reality”. On the other hand, senior Hamas official Sami Abu Zuhri said the prosecutor’s decision to request warrants for the three Hamas leaders “equates the victim with the executioner” demanding the arrest warrant request for its leaders be cancelled. US President Joe Biden called the legal step “outrageous”, while Secretary of State Antony Blinken said it could jeopardize negotiations on a hostage deal and ceasefire. (Comment: Neither the US nor Israel are among 124 members of the ICC covenant, but Palestine is. If approved the two Israeli politicians would be the first Western leaders to be issued ICC arrest warrants. ICC itself has no authority to arrest them. The move would further deepen Israel’s international isolation over the Gaza war. Although the arrest and prosecution of the three indicted Hamas leaders is also unlikely, they may prefer that outcome to be taken in by Israeli authorities, which declared them “dead men walking”.)
On May 24, the International Court of Justice adopted a ruling by a 13-2 majority on the case titled “Application of the Convention on the Prevention and Punishment of the Crime of Genocide in the Gaza Strip (South Africa v. Israel)”. Its Operative Clause was:
“THE COURT,
(1) Reaffirms the provisional measures indicated in its Orders of 26 January 2024 and 28 March 2024, which should be immediately and effectively implemented;
(2) Indicates the following provisional measures:
The State of Israel shall, in conformity with its obligations under the Convention on the Prevention and Punishment of the Crime of Genocide, and in view of the worsening conditions of life faced by civilians in the Rafah Governorate:
(a) Immediately halt its military offensive, and any other action in the Rafah Governorate, which may inflict on the Palestinian group in Gaza conditions of life that could bring about its physical destruction in whole or in part;
(b) Maintain open the Rafah crossing for unhindered provision at scale of urgently needed basic services and humanitarian assistance;
(c) Take effective measures to ensure unimpeded access to the Gaza Strip of any commission of inquiry, fact-finding mission or other investigative body mandated by competent organs of the United Nations to investigate allegations of genocide;
(3) Decides that the State of Israel shall submit a report to the Court on all measures taken to give effect to this Order, within one month as from the date of this Order.”
Israel reacted to the ICJ ruling with defiance as PM Netanyahu’s office rejected it as “false, outrageous and morally repugnant” adding “Israel is acting based on its right to defend its territory and its citizens, consistent with its moral values and in compliance with international law.” There was an opposite reaction from the plaintiff side which swelled with several countries joining South Africa, the originator of the complaining reference.
(Comment: The ICJ’s latest ruling was a groundbreaking move as it put Israel squarely in the dock, ordering it to undertake several measures that it had been dismissive of, viz. immediate halt to Rafah military operation, keep the Rafah border crossing open and allow UN investigations into genocide allegations. The ICJ order followed ICC’s move to seek arrest warrants for two Israeli and three Hamas leaders. While Israel pretended to be dismissive of both the hurricanes from the Hague, its moral imperative for waging the war against Hamas in Gaza was eroded.)
On May 28, Ireland, Spain and Norway each officially recognised a Palestinian state portraying it as a move towards a two-state solution of the Israel-Palestine problem. The decision was welcomed by the Palestinian Authority and by Hamas, which has ruled the Gaza Strip since driving the PA out of the enclave in 2007. The next day, the Prime Minister of Slovenia also announced his government’s decision to recognise Palestine as a state and following parliamentary approval on June 4, the decision was implemented. Israel, as expected, denounced the moves and recalled its ambassadors from the countries. PM Netanyahu stated “The intention of several European countries to recognize a Palestinian state is a reward for terrorism” adding “This would be a terrorist state. It would try to carry out the October 7 massacre again and again – and that, we shall not agree to. Rewarding terrorism will not bring peace and neither will it stop us from defeating Hamas.” About 144 of the 193 member-states of the United Nations recognise Palestine as a state.
On May 27, Colombian President Gustavo Petro ordered the opening of an embassy in the Palestinian capital of Ramallah following the closure of its embassy in Israel on May 3.
Several international organisations issued statements during the month concerning the humanitarian situation in Gaza. On May 1, the UN Office for the Coordination of Humanitarian Affairs (OCHA) accused Israel of still impeding and denying the aid flow into Gaza and warned of mass starvation deaths in six months unless relief supplies improved. On May 5 Executive Director of World Food Programme, too, told NBC News, “There is famine, full-blown famine, in the north, and it’s moving its way south.” According to a UN report released on May 2, rebuilding Gaza’s shattered homes will cost around $50 bn take at least until 2040 but could drag on for many decades. In a scenario where the war lasts nine months, poverty is set to increase from 38.8% of Gaza’s population at the end of 2023 to 60.7%. On May 14, WHO denied the contention that the casualty figures provided by the Gaza Ministry of Health were disputable. Finally, a World Bank estimate released on May 24 saw the Palestinian economy shrinking between 6.5% to 9.4% in 2024 with nearly half a million jobs being lost. It faces a widening financing gap from $682 mn in 2023 to $1.2 bn in 2024.
The Arab Summit in Manama on May 16 called for the deployment of the UN Peacekeepers in Occupied Palestinian Territories.
On May 5, G7 Finance Ministers asked Israel to allow the retention of current links with Palestinian banks.
WANA and the United States:
On May 31, President Joe Biden personally unveiled, for the first time, a roadmap for bringing a durable peace in the Gaza conflict. He said that Israel has offered a comprehensive new proposal through Qatar to Hamas. He laid out its terms for the American citizens and the world. According to Reuters, it had the following three phases:
PHASE ONE: CEASEFIRE, LIMITED HOSTAGE RELEASE AND ISRAELI WITHDRAWAL
Biden said the first phase of Israel’s offer would last for six weeks and would include a “full and complete” ceasefire, the withdrawal of Israeli forces from “all populated areas” of Gaza and the “release of a number of hostages including women, the elderly, the wounded in exchange for release of hundreds of Palestinian prisoners.”
Biden added that in this phase, Palestinian civilians will return to their homes and neighborhoods in all areas of Gaza, while humanitarian assistance will increase to 600 trucks carrying aid into Gaza every day.
“With a ceasefire, that aid could be safely and effectively distributed to all who need it. Hundreds of thousands of temporary shelters, including housing units could be delivered by the international community,” Biden added, saying the first phase could begin immediately after a deal is reached.
The first phase will also include talks between Israel and Hamas to get to the next stage of the proposal.
PHASE TWO: RELEASE OF ALL HOSTAGES, FULL ISRAELI WITHDRAWAL
Biden called the second phase “a permanent end to hostilities.” However, he added that the negotiations to arrive at the second phase could take longer than six weeks as there were going to be differences between the two sides.
“Israel will want to make sure its interests are protected but the proposal says if the negotiations take longer than six weeks from phase one, the ceasefire will still continue for as long as negotiations continue,” Biden said, which would mark a new development from previous proposals.
He added that the U.S., Qatar and Egypt will ensure that talks continue during this period until “all agreements are reached” to start the second phase.
The second phase would see a release of all remaining hostages who are alive, including male soldiers, while Israeli forces will withdraw from Gaza, according to Biden. He added: “And as long as Hamas lives up to its commitments, a temporary ceasefire will become – in the words of the Israeli proposal – the cessation of hostilities permanently.”
PHASE THREE: RECONSTRUCTION, BODIES RETURNED
In the third phase, Biden said “A major reconstruction plan for Gaza would commence and any final remains of hostages who have been killed would be returned to their families.”
Biden said Israel had “devastated Hamas forces over the past eight months,” adding: “At this point, Hamas no longer is capable of carrying out another Oct. 7.”
In the deal to rebuild Gaza, Arab nations and the international community will also participate in a “manner that does not allow Hamas to rearm,” Biden said. He added Washington will work with its partners to rebuild homes, schools and hospitals in Gaza, where the war has displaced nearly the entire 2.3 million population and caused widespread hunger.
Hamas released a statement reacting positively to Biden’s proposal, saying it was ready to engage “positively and in a constructive manner” with any proposal based on a permanent ceasefire, withdrawal of Israeli forces, the reconstruction of Gaza, a return of those displaced, and a “genuine” prisoner swap deal if Israel “clearly announces commitment to such deal”. Israeli PM Netanyahu’s office said he had authorized his negotiating team to present the deal, “while insisting that the war will not end until all of its goals are achieved, including the return of all our hostages and the destruction of Hamas’ military and governmental capabilities.” (Comments: Biden’s articulation of the “Israeli proposal” seems an exercise in ventriloquism aimed at multiple audiences. President Biden had several motives ranging from shoring up his base electorate in the forthcoming US elections by being seen to be personally engaged in peacemaking {his support among Arab-Americans had dropped to 20%}, pushing Israeli PM into moving his three goalposts in pursuing the Gaza war and positioning himself for a grand bargain with Saudi Arabia. In the event, the unspecified devil-in-details in the proposal resuscitated the contradictions which had derailed seven rounds of shuttle diplomacy by the US Secretary of State. Further Reading: “Remarks by President Biden on the Middle East”, White House, May 31.)
In a pointed show of defiance to President Biden’s ill-concealed friction with Israeli PM Benyamin Netanyahu, the US Congress decided on May 23 to invite him to address its joint session. Making the announcement, the House Speaker said that this would be “a strong show of support for the Israeli government in their time of greatest need.” The formal invitation for an address on July 24 was delivered on June 2. PM Netanyahu has been extended this honour for the record third time, vying with UK PM Winston Churchill.
Voices from Washington during the month were increasingly critical of the Israel war strategy in Gaza in general and the assault on Rafah in particular. For instance, on May 13, the Deputy Secretary of State doubted if Israel could achieve a “total victory in Gaza.” On May 13, Secretary of State Anthony Blinken highlighted the risk of Rafah operations raising the risk of full-blown insurgency in Gaza.
The Financial Times disclosed on May 26 that the US was to lift the ban on the supply of offensive weapons to Saudi Arabia imposed by the Biden administration in 2021.
Bloomberg disclosed on May 29 that the US was slowing down the export of large-scale AI accelerator shipments to the Middle East pending a national security review of AI development in the region. The move seemed prompted by the UAE and Saudi Arabia placing massive orders for these chips used in AI data centres.
US Secretary of State Anthony Blinken concluded his seventh tour of the region since Oct 7 on May 1. While he did not visit the region during the month, his statements during the month warned of Israel risking insurgency after the Rafah campaign (May 13) and stated on May 29 that Israel cannot win the Gaza conflict without a “day after” plan. US NSA Jake Sullivan visited Saudi Arabia and Israel on May 18-19.
The US establishment spoke and acted with variance during the month. On one hand, the Biden administration blocked some weapons such as JDAM bomb kits, even as on May 16 House of Representatives passed the Israel Security Assistance Support Act by 224 to 187 votes seeking to force President Joe Biden to send weapons to Israel. The act is not expected to become law, but its passage underscored the deep U.S. election-year divide over Israel policy. On May 12, a much-awaited State Department report on whether Israel’s use of US-supplied arms broke international law turned out to be a damp squib. The report largely exonerated Israel saying it “found no specific violations justifying withholding US military aid”, saying “the chaos of war prevented verification of alleged individual breaches.”
WANA and Russia:
On May 23 Bahrain’s King Hamad bin Isa Al Khalifa had a meeting with Russian President Vladimir Putin in Moscow. The King said after the meeting that there was no reason to postpone the resumption of diplomatic relations between the kingdom and Iran. The two countries also discussed Russian group Nornickel putting up a Platinum Group Metals refining plant in Bahrain to take advantage of lower energy costs and to sidestep the Western sanctions.
The arrival in Iran of the Chairman of Russia’s Gazprom, the world’s largest natural gas producer, on May 16 raised eyebrows as it coincided with President Putin’s high profile State visit to Beijing where the building of a new gas pipeline to China was to be finalised. In the event, no such decision was announced in Beijing.
WANA and China:
On May 30, China hosted the 10th China-Arab States Cooperation Forum (CASCF) in Beijing with an address by President Xi Jinping laying out his vision for greater cooperation with the Arab world particularly in artificial intelligence, green tech and finance. The session, the largest so far was participated by all 22 Arab States and included the King of Bahrain, the Presidents of the UAE, Egypt and Tunisia, the PM of Libya, as well as foreign ministers of Saudi Arabia, Morocco, Yemen, Sudan, Syria, Iraq, Algeria, Mauritania (Arab League Chair) and Qatar. It concluded by adopting the Beijing Declaration, the CASCF execution plan for 2024-2026, and a China-Arab states joint statement on the Palestinian issue. Apart from the usual diplomatic niceties, Xi also announced 500 mn Yuan in emergency humanitarian assistance and a $3 mn grant to UNRWA. China also announced that the second China-Arab Summit shall be held in Beijing in 2026. (Comment: With bilateral trade touching $286.9 bn in 2023 (40% of it with Saudi Arabia alone) China is perhaps Arab world’s largest trading partner. Following President Xi’s successful triple summits in Riyadh in 2022, the CASCF structure seems to have been overtaken by the more ambitious framework. In any case, CASCF was not meant to involve the Heads of State. There were unconfirmed reports that the Saudi crown prince was expected to be the star attraction at the event, but was held back due to King Salman’s hospitalisation.)
The CASCF event was followed by President Xi’s bilateral summit with UAE President Mohammed bin Zayed.
Reuters reported on May 14 that the two-decade-old negotiations between China and the Gulf Cooperation Council for a free trade agreement have stalled over concerns by Saudi Arabia that cheap Chinese imports could undermine its industrial ambitions.
WANA and Pakistan:
On May 14 Pakistani Daily Dawn published some data on properties owned by Pakistanis in Dubai citing C4ADS, a Washington-based non-profit organisation. According to its report titled ‘Dubai Unlocked’, between 17000 to 22,000 nationals of cash-strapped Pakistan owned properties in Dubai worth $12 bn.
Bloomberg reported on May 12 that the Bahrain-based Al Baraka Bank will open 15 new branches across Pakistan that was embracing interest-free Islamic banking.
IB) Political Developments
Israel:
On May 30, Benny Gantz, leader of the National Unity Party and member of Israel’s war cabinet issued a public ultimatum to PM Netanyahu to come up with a “day-after” plan on post-war Gaza by June 8 or face his resignation. In his ultimatum, Gantz also proposed the dissolution of the Knesset and the holding of fresh elections by September 2024. (Comment: Although his centrist party has only 8 seats in the 120-seat Knesset with the PM-led Likud party coalition with ultra-orthodox parties enjoying a majority of 64 seats, Gantz, a former army chief, is more popular than Netanyahu and is widely seen as the next PM.)
Israeli opposition leader Yair Lapid met with the UAE Foreign Minister Abdullah bin Zayed in Abu Dhabi on May 2. The meeting indicated growing differences between the UAE leadership and PM Netanyahu mainly because of the Israeli military’s no-holds-barred campaign causing wanton death and destruction in Gaza.
On May 16, PM Netanyahu referred a highly contested bill seeking to conscript ultra-Orthodox Jews into the military to a ministerial committee. (Comment: Currently ultra-orthodox Jews, 13% of the total population, are exempt from military conscription and reservist duties – which is resented by the more secular majority. However, the PM’s ruling coalition could lose its majority in Knesset if two ultra-orthodox parties withdraw their support. Hence, PM Netanyahu has an unenviable quandary and has decided to kick the can further down the road.)
Palestine Authority and West Bank:
The security situation in the Occupied West Bank (OWB) continued to be disturbed. Israeli forces raided Jenin, a militancy hotbed in OWB on May 21 and 22 killing in total 17 persons. An Israeli raid on Tulkarm on May 4 killed five Palestinians.
On May 22, the Israeli military announced a decision to reoccupy three Jewish settlements, evacuated in 2005, near Jenin and Nablus two centres of Palestinian militancy in OWB.
On May 2 and 13, Israeli settlers in Occupied West Bank blocked aid trucks headed for Gaza and strewed their food packages on the road. The US NSA criticised such “attacking and looting behaviour” calling it “completely and utterly unacceptable.” The US later sanctioned such settlers.
Lebanon:
While the exchange of rockets, drones and airstrikes continued between IDF and Hezbollah fighters, these were slightly less intense than the previous month which saw first direct hostilities between Israel and Iran. In a televised address on May 31, Hezbollah Chief Syed Hassan Nasrallah claimed that the tension on its border with Lebanon was pressing Israeli military capabilities in Gaza. Earlier on May 13he asserted that Israelis would not be able to come back to the abandoned area bordering Lebanon as long as the Gaza war continued.
On May 23, the World Bank published a report on Lebanon’s socio-economic crisis based on a detailed survey of several of the country’s provinces. It painted a varied but uniformly grim picture. It stated that the poverty in Lebanon has more than tripled over the past decade, with the overall proportion of the country’s population living below the poverty line soaring to 44%. While the poverty rate among Lebanese was 33% in 2022, it reached 87% among Syrian refugees in Lebanon. While the country desperately needed a large IMF bailout, the entrenched political elite has blocked the package of politico-economic reforms sought by the IMF. Following a visit to Beirut this month, an IMF delegation found that while “some progress has been made on monetary and fiscal reforms”, the measures “fall short of what is needed to enable a recovery from the crisis”.
Iran:
A mysterious helicopter crash on May 19 at Tawal amidst the rugged mountainous Iran-Azerbaijan border caused the deaths of President Ebrahim Raisi, 63, and Foreign Minister Hossein Amirabdollahian. There were no survivors. The helicopter was part of a formation of three and the remaining two were able to land safely. President Raisi and his entourage were returning after jointly inaugurating a dam on the common border with Azeri President Aliev. The official rescue team had difficulty locating the crash site due to bad weather and tough terrain. The post-death political transition was smooth and Vice President Mohammed Mukhber and Deputy FM Ali Bagheri Kani were appointed as interim President and Foreign Minister respectively. The official funeral ceremony for President Raisi and his entourage, held on May 22 was led by the Supreme Leader Ali Khamenei. The regional foreign dignitaries present included Qatari Emir & PM. Foreign Ministers of Saudi Arabia, the UAE and Kuwait also attended. The elections for the new President are to take place within 50 days, on June 28 – as constitutionally required, and the nomination process began on May 30. (Comment: Although a subsequent official enquiry did not reveal anything suspicious in the crash, some observers were sceptical. The US-made Bell helicopter itself was over 40 years old and was poorly maintained. Iran’s relations with Azerbaijan were strained till recently over its conflict with Armenia and Baku allowed an Israeli embassy to open, ignoring Iranian concerns. Israeli Defence Minister had also visited Baku last year. Raisi’s three years as Iran’s President were tumultuous, marked by growing discontent at home with his hardline policies that saw the repression of Hijab protests, declining living standards due to high inflation and high political alienation as hardliners controlled all levers of power. External challenges mounted as moves to revive the JCPOA were scuttled denying Iran any peace dividend after Trump Presidency. After Oct 7, Iran got embroiled in regional tensions as its Arab proxies engaged Israel. Only a month before Raisi’s death Iran was involved in its first direct clash with Israel. Apart from leaving a sudden vacuum at the apex of the Islamic Republic’s executive structure, Raisi’s death also revived speculation about the succession of 85-year-old Supreme Leader Ali Khamenei. Until his death, Raisi was increasingly being taken as the Supreme Leader’s designated successor. On the constructive side, Iran managed to increase its oil exports defying the American sanctions. The relations with China (the largest buyer of Iranian crude) and Russia (with a surging two-way defence partnership) gained significance as Iran joined BRICS and SCO. Chinese mediation led to a tangible improvement in relations with Saudi Arabia. While Iran continued to have live wire engagements with both big and small Shaitans (The US and Israel), these were consummately calibrated to avoid any uncontrolled escalation. Further Reading: “President Raisi’s sudden death to test Iran with West Asia already in turmoil” Mahesh Sachdev, Economic Times, May 21;
and “Aggression or Caution: The choice facing Iran’s next leaders” NYT News Service, 20/5/24.)
Run-off for 22 of the 245 parliamentary constituencies was held on May 10. These were also marked by low voter turnout, despite the Supreme Leader’s statement urging high participation.
Western media continued to purvey “leaks” from the IAEA’s reports alleging Iranian violations of its nuclear energy-related commitments. Thus, on May 27 Reuters quoted from IAEA DG’s report to claim that Iran’s stock of uranium enriched to up to 60% purity, close to the roughly 90% of weapons-grade, grew by 20.6 kg over the quarter to 142.1 kg as of May 11, and Iran later diluted 5.9 kg to a lower enrichment level. Earlier on May 9, an advisor to the Supreme Leader warned that Iran will change its doctrine of peaceful use of nuclear energy if Israel threatens its existence.
A report by Amnesty International on May 29 claimed that 79% of 1153 known executions in 2023 were by Iranian authorities who sentenced over 853 persons to death sentence. Saudi Arabia was responsible for 15% of such executions. Although the report estimated China to have carried out the largest number of executions (“thousands”) in 2023, the lack of precise data was conveniently cited as an excuse for excluding it from the Report.
Yemen:
While the Ansar Allah (aka al-Houthis) regime in Sana’a kept up the rhetoric and boastful claims, the perceptible de-escalation in the Red Sea-Gulf of Aden maritime choke point continued. Whether this was due to deterrent airstrikes by the US and UK or a political deal being struck behind the scenes – or a combination of both – was difficult to say. On May 31, the US and UK launched their heaviest airstrike since January hitting 13 Houthi targets. 16 persons were killed and 41 wounded. Iran’s semi-official Tasnim news agency, regarded as close to IRGC, reported on May 29 that Tehran’s sea-launched ballistic missile called Ghadr has been made available to the Houthis.
Among other signs of cooling of the Yemeni conflict tensions were the release of 113 prisoners, mostly Yemeni civilians by the Houthis on May 26 and the resumption of the Hajj flights from Sanaa on May 28.
Turkey:
On May 13 Turkish President Tayyip Erdogan held a summit with Greek Prime Minister Kyriakos Mitsotakis in Ankara marked by constructive expressions to resolve the longstanding strains among the two neighbours. (Comment: The relations between Turkey and Greece, two neighbours across the Aegean Sea, have been saddled with the baggage of the history of Ottoman occupation. In the current times, they have sharp differences on several issues such as maritime boundaries, energy resources in the eastern Mediterranean, flights over the Aegean Sea, and ethnically split Cyprus. President Erdogan’s trenchant Islamic nationalism has also raised heckles in Greece. However, the Ankara summit, their second meeting in six months, raised some hopes about their differences being better managed.)
On March 10, President Erdogan formally inaugurated the Kariye structure in Istanbul after it was converted from a 4th-century Chora church into a mosque.
Turkey claimed that its military operations on May 3 had killed 32 Kurdish militiamen in Iraq. Later on May 10, the killing of 17 Kurdish militiamen in Syria was announced.
On May 21, President Erdogan lamented the country’s birth rate has fallen below the replacement level of 2.1 children per woman calling it “a disaster for Turkey.”
On May 2, Turkey banned all trade with Israel until it ended its Gaza campaign – putting in jeopardy the business worth $6.8 bn in 2023. However, a week later the authorities introduced a three-month reprieve for companies with existing export deals to Israel allowing them to supply goods through third countries, even as the blanket trade ban on Israel would stay in effect.
Sudan:
Various reports emerging from Sudan spoke of the vicious civil war taking an enormous toll on its citizens, particularly in the Darfur region in south west which has been mired in alleged ethnic cleansing since 2003. In a report on May 9 citing US sources, Bloomberg stated that as many as 150,000 people may have been killed since the full-fledged civil war erupted between the Sudan Armed Force and Rapid Support Force on April 15 2023. Medecins Sans Frontieres (MSF), an international NGO, said on May 26 that at least 134 people had been killed and more than 900 wounded since May 10 in el-Fasher, the capital of North Darfur.
Syria:
President Bashar Al-Assad visited Tehran on May 30 to commiserate the death of President Ebrahim Raisi in a helicopter crash. He was received by Supreme Leader Ali Khamenei.
On May 27, the European Union pledged €2 bn to support the Syrian refugees outside their country.
On May 24, a French court sentenced three Syrian intelligence officers in absentia to life in prison for the disappearance of a father and son, both with Franch-Syrian dual nationality in Syria in 2013. The trial lasted 3 days and was hailed as a landmark, even as the three sentenced persons stayed well out of reach of the French legal system.
Iraq:
On May 3, Islamic resistance in Iraq claimed to have fired an Arqub cruise missile at Tel Aviv. Israel denied this being done.
A Reuter report on May 12 mentioned that Iraqi Shia cleric Moqtada al-Sadr was planning to re-enter active politics to fight next year’s parliamentary elections in Iraq. Comment: Moqtada al-Sadr is a maverick among Iraqi religio-political leaders whose group scored the largest number of seats in the last parliamentary elections but could not cobble up a majority due to his being shunned by pro-Iranian Shia groups. After a protracted stand-off, his elected MPs resigned en masse and were replaced. As he continues to have a dedicated following among the downtrodden Shia majority of Iraq, his return could upend the next elections and challenge the pro-Iran groups.
On May 13, five Iraqi soldiers were killed by ISIS in eastern Iraq. On May 6, Iraq executed 11 persons for terrorism
Saudi Arabia:
Following his surgery for a lung inflammation, King Salman bin Abdulaziz, 88, chaired a virtual meeting of the Saudi cabinet on May 28.
Saudi Crown Prince Mohammed bin Salman received Jake Sullivan, US NSA, in Dhahran on May 19. According to a report by the Saudi Press Agency they almost ‘finalised’ the draft of a comprehensive bilateral Strategic Alliance Agreement (SAA). Apart from committing the United States to defend Saudi Arabia, the proposed SAA is part of a wider package that would include a US-Saudi civil nuclear pact, steps toward the establishment of a Palestinian state and an end to the war in Gaza. It would grant Washington access to Saudi territory and airspace to protect U.S. interests and regional partners. It would also bind Riyadh closer to Washington by prohibiting China from building bases in the kingdom or pursuing security cooperation with Riyadh. (Comment: The proposed SAA would be a “grand bargain” involving not only bilateral ties but also envelope a two-state solution to the Israel-Palestine problem and normalisation of the Kingdom’s ties with Israel. Given the veritable turmoil in the region, the SAA’s ambit may appear over-ambitious. However, the need for the proposed treaty’s approval by a two-thirds majority vote in the U.S. Senate, a threshold can only be achieved unless the SAA were tied to Israeli-Saudi normalisation. Hence, an all-or-nothing approach was needed. Further Reading: “Exclusive: U.S. to Offer Landmark Defense Treaty to Saudi Arabia in Effort to Spur Israel Normalization Deal”, WSJ, June 9 2024.)
On May 26 Saudi Arabia appointed a new ambassador to Syria after a gap of 12 years. The Saudi embassy in Riyadh was closed in 2012 due to the Syrian civil war.
Saudi Arabia’s persistence in requiring foreign companies to locate their regional offices in Riyadh has had some success. On May 24, Goldman Sachs became the first Wall Street bank to shift its Middle East base to Riyadh. Other US and MNCs in financial services have also been veering in that direction.
The UAE:
On May 11, the United Arab Emirates Foreign Minister issued a statement rebuking Israel’s PM for saying that the UAE, Saudi Arabia and other countries could assist a civilian government with Gazans in the enclave after the war. The UAE FM stressed that the Israeli PM does not have any legal capacity to take this step, and the UAE refuses to be drawn into any plan aimed at providing cover for the Israeli presence in the Gaza Strip.” He went on to add that the UAE would be prepared to support a Palestinian government that met the hopes and aspirations of the Palestinian people, including independence. (Comment: The UAE FM’s remarks appear intended to distance Abu Dhabi from the Israeli PM’s attempt to show that friendly Arab states would help the “day-after” management of Gaza. While the UAE has no love lost for Hamas’s version of political Islam and militancy, it has also been at pains to show that it opposes the ongoing Israeli military campaign in Gaza which has caused massive death and devastation. Such an impression about the UAE’s complicity with Israel would provoke aftershocks from Islamic militants.)
The UAE, COP28 host, unveiled a 10-year “blue visa” for those making ‘exceptional efforts and contributions to protecting the environment, whether marine or land’.
Egypt:
President Abdel Fattah el-Sisi took part in the China-Arab States Cooperation Forum meeting held in Beijing on May 30.
Following the launch of the IDF assault on Rafah on May 5 and its capture of the Philadelphi Corridor, Egyptian authorities denied any coordination with Israel in this regard or on aid supplies through the Rafah crossing. On May 27, there was an exchange of fire between IDF and Egyptian forces, leading to the death of an Egyptian soldier.
On May 29, Egypt quadrupled the price of the subsidised bread to 20 piastre after it had remained frozen for several decades. (Comment: The price of the Khubz has been an emotive issue in Egypt and the last such attempt by President Anwar Sadat in the 1970s triggered mass protests that nearly toppled him. Since then, the authorities have resisted the temptation to bring the price near the market value. However, current runaway inflation has rendered the price rise a meaningless exercise for both the government and the consumers.)
Egypt’s al-Ahly football club lifted the African Champions League Trophy on May 27 following their 1-0 win over Tunisia’s Esperance club. It was al-Ahly’s fourth consecutive win.
Qatar:
In a report on May 3, The Washington Post cited an unnamed U.S. official as saying Washington had told Doha to expel Hamas if the group continued to reject a ceasefire deal with Israel. The next day Reuters quoted an unnamed Qatari source as saying that the Gulf state could close the political office of Hamas as part of a broader review of its role as a mediator in the war between Israel and the militant Palestinian Islamist group. Israel and some sections of the US political circles have criticised Qatar for hosting and funding Hamas since 2012.
Kuwait:
Emir Sheikh Meshal Al-Ahmed Al-Sabah dissolved indefinitely the parliament on May 10, barely five weeks after its members were elected. He also announced the suspension of some articles of the constitution for up to four years to study all aspects of the democratic process. Two days later a new cabinet under existing PM Sheikh Ahmed Abdullah Al-Sabah was formed which kept the existing ministers of oil, finance and foreign affairs. (Comment: Kuwait has had four parliamentary elections in less than four years without being able to resolve the deep conflict between the radically dominated legislature and the Royal family. These perineal differences have impeded the politico-economic development of the state. Ironically, Kuwait had prided itself on being the only truly democratic polity in the GCC, but this feature has made it the wrong poster child.)
Libya:
Italian PM Giorgia Meloni visited Libya on May 7 where she met with the heads of both Tripoli and Benghazi-based regimes. Italy, which briefly colonised Libya last century, has been pushing for the “Mattei Plan” to have more hydrocarbons from Africa in general, and Libya in particular. Italy has also been keen to stem the tide of illegal African immigrants crossing the Mediterranean Sea from Libya and Tunisia, from where 17,000 irregular migrants landed in Italy in 2023. According to the International Organization For Migration about 3,000 migrants and asylum seekers drowned while crossing the sea since 2023. In the first 11 months of 2023, Tunisia’s National Guard intercepted almost 70,000 irregular migrants and asylum seekers. Of those, 77.5% had travelled to Tunisia from across Africa.
Jordan:
On May 15 Jordanian authorities announced having foiled a suspected plot by pro-Iranian militias in Syria to smuggle weapons to help anti-monarchy elements in the country to carry out acts of sabotage. Inexplicably, the announcement referred to the plot foiled nearly two months ago, in late March 2024.
II) Economic Developments
Oil & Gas Related Developments:
Global Issues:
The oil prices were range-bound during the month, registering below $78/barrel for WTI and near $82/barrel for Brent future on May 31, with both headed for their second monthly modest drop. This month’s decline was despite the US currency itself having depreciated, indicating oversupply.
In its monthly bulletin, OPEC stuck to its optimistic forecast of the global crude demand growth of 2.25 mbpd during 2024, nearly one mbpd higher than the prediction of the IEA. It also said that henceforth its bulletin would consider the OPEC+ oil scenario instead of OPEC. (Comment: 12-member OPEC produced 26.58 mbpd in April 2024 while 22-member OPEC+ produced 41.02 mbpd. The world oil demand was 104.5 mbpd. Russia with 9.3 mbpd and Saudi Arabia with 9.0 mbpd were the largest producers in OPEC+ and OPEC respectively. OPEC was a subset of OPEC+.)
Country Specific Development:
On May 30 Saudi government filed papers with Riyadh’s Saudi Exchange for the sale of 0.64% of assets of Saudi Aramco, the world’s largest oil and gas company, in June 2024 tentatively expected to raise around $12 bn, the world’s fourth largest since its IPO in 2019. As the company is 86% owned by the Saudi state, the share sale would help the Kingdom’s revenue stream which has been depleted due to lower oil earnings. There was considerable enthusiasm among investors as Aramco has been giving above-average quarterly dividends despite lower earnings to boost the Saudi state’s revenues. On May 5, Saudi Aramco raised the official selling price for its crude for Asian buyers.
Iraq held auctions for 29 oil and gas blocks this month aimed at boosting the output capacity to 6 mbpd by 2030 from 5 mbpd at present. It also wanted to boost gas output for domestic use. Although more than 20 companies pre-qualified for the bids round, the Chinese companies were the biggest winners, bagging at least 10 blocks. On May 11, the Oil Minister ruled out Iraq agreeing to any new OPEC+ production cuts, only to reverse himself the very next day. (Comment: In recent years, several Western oil majors have left Iraq, OPEC’s second-largest producer, due to various problems, including insecurity, arbitrary and bureaucratic governance and corruption. The bid round was also aimed at reversing the trend and seemed to have only been a partial success in this respect.)
On May 2, the UAE’s ADNOC claimed to have reached an oil production capacity of 4.85 mbpd, up from the 4.65 mbpd it reported at the end of last year. During May 20-22, ADNOC made two acquisitions abroad: it took a 10% stake in an LNG project in Mozambique paying Portuguese company Galp $650 mn. It also took an 11.7% stake in NextDecade Corp.’s natural gas export project in Texas, its first US acquisition. On the other hand, ADNOC offered a 5.5% stake in its drilling unit to investors to help raise liquidity and widen its shareholding. (Comment: By aggressively increasing its production capacity, the UAE hopes to acquire an OPEC+ quota higher than its present ceiling of 3.219 mbpd, only two-thirds of its enhanced capacity. OPEC+ is to allocate fresh quotas after a technical group submits its report in June 2024. Abu Dhabi has long sought higher production quotas and at times threatened to leave OPEC if this is not done.)
Following economy-related developments took place in WANA countries:
Saudi Arabia’s Finance Ministry revealed on May 6 that the country’s budgetary deficit for Q1/24 was $3.3 bn. This was a sixth straight quarterly budget deficit as increased spending outpaced revenue growth. While the figure was more than four times higher than a year ago, it was only a third of the previous quarter’s figure indicating a move towards greater balance in the budget. Bloomberg reported on May 28 that during the month four Saudi companies have drawn a combined SR 659 bn ($176 bn) in orders for their IPOs, as investors flocked to share sales that have offered near-guaranteed returns over the last two years. This combined sum was larger than Saudi Aramco’s record IPO picking in 2019. Moody’s raised Saudi Arabia’s local and foreign currency ratings to Aa1. Reuters reported on May 24 that Saudi Arabia’s $925 bn Public Investment Fund (PIF) was planning to reorganise to delegate more powers to internal fund managers and sharpen its focus on more productive investments. PIF is also reviewing costly consultancy contracts, including with BCG and McKinsey. In Q1/24, PIF almost halved its holdings of U.S. stocks, to $18 bn from $35 bn in the previous quarter.
Economic data revealed on May 31 revealed that Turkey’s economy grew by a robust 5.7% in Q1/24 buoyed by strong domestic demand and growing faith in conventional monetary policy leading to record inflows. On May 24, the Turkish Central Bank’s MPC left the bank rate unchanged at 50% for the second consecutive month to fight the inflation expected to peak this month at 70%. Turkey’s government also took steps to rein in public spending to curb inflation. On May 9, the authorities scrapped rules forcing banks to buy Lira-denominated bonds. Greater economic stability made S&P raise Turkey’s rating to B+.
A detailed report by Swissaid published on May 29 claimed that up to 85% of Africa’s artisanal gold, mined by small-scale miners, was being smuggled to the UAE. It put the total production of such gold in 2022 at 435 tons worth $30 bn of which 405 was sent to the UAE. According to the report, over the previous decade, UAE accepted more than 2,500 tons of smuggled gold with a total value of over $115 bn. The report accused the UAE of gold laundering because large quantities of smuggled gold acquire a legal existence by transiting through the UAE and are exported legally to much of the world. Aside from the loss in tax revenues, experts and governments have warned that smuggling on this scale indicates a vast parallel illicit economy vulnerable to potential money laundering, terrorist finance and sanctions evasion. The report found discrepancies between declared exports and declared imports of the gold in case of the UAE. Such discrepancies were not found for Switzerland and India, the two other major gold-importing countries from Africa. In response to this report, a UAE Ministry of Economy spokesperson said the UAE cannot be held accountable for other government’s export records. (Comment: While Switzerland competes with the UAE in global gold trade and therefore the report can be regarded as intrinsically partisan, the basic facts cited seem credible as is the anecdotal evidence about rampant smuggling of the commodity across the Arabian Sea. If the basic figures are correct, African gold constitutes nearly 6% of the UAE’s GDP. This report is likely to revive the UAE’s FATF listing from which the country exited last year.)
In the same context, Reuters reported on May 1 of a visit by a team from the US, the EU and Britain to press the UAE to crack down on firms evading sanctions imposed on Russia over the war in Ukraine.
Reuters reported on May 8 that the war in Gaza has cooled Israeli business activity with the UAE, with the once-celebrated relationship now conducted away from public scrutiny amid anger in the Arab world over the conflict. The bilateral trade grew 17% in 2023 to reach $2.95 bn. Despite cooling in the wake of the war, it grew by 7% y/y in Q1/24.
Assets under the Management of Mubadala, Abu Dhabi’s SWF rose 9.5% in 2023 to reach $302 bn. Its portfolio mix remained broadly unchanged, with 38% in private equity, 25% in public markets and 16% in real estate and infrastructure. Abu Dhabi Global Market’s turnover increased by 211% in Q1/24 on a y/y basis. Dubai International Financial Centre, too, had a good run having 112 new financial services licenses in 2023, it was already about 50% ahead of last year. Both bourses had benefited from the entry of large hedge funds.
On May 27, the monthly meeting of the MPC of the Bank of Israel decided to continue its bank rate at 4.5% for the third month running.
Fitch raised Egypt’s credit rating outlook on May 54 to positive from stable, after Cairo secured an international bailout of $57 billion for its cash-strapped economy. Even after the upgrade, Fitch rated Egypt as B- still leaving it six notches below investment grade.
III) Bilateral Developments
- On May 31, President of India Smt. Droupadi Murmu received the credentials of new Kuwaiti Ambassador Meshal Mustafa J. al-Shamli.
- Vice President Shri Jagdeep Dhankar represented India at the official funeral in Tehran on May 22 for President Ebrahim Raisi who died in a helicopter crash on May 19. India observed a day of mourning on May 21 for the departed Iranian President. PM Shri Narendra Modi sent a message of condolence.
- On May 13, India’s Minister of Ports and Shipping Shri Sarbananda Sonowal and his Iranian counterpart Minister of Roads and Urban Development Mehrdad Bazrpash co-presided signing of an enabling agreement for the operation of Shahid-Behesti port in the Chabahar Port Development Project for 10 years. The agreement was between Indian Ports Global Limited (IPGL) of India and the Port & Maritime Organisation (PMO) of Iran. Under its terms, IPGL will invest approximately $120 mn in equipping the port. India has also offered an in-credit window equivalent to $250 mn, for mutually identified projects aimed at improving Chabahar-related infrastructure. Responding to the US State Department’s comment about the possibility of the US economic sanctions being invoked, EAM Dr S. Jaishankar said on May 14 that people shouldn’t take a “narrow view of it”, adding that the pact is “actually for everyone’s benefit”. (Comment: After a longish delay, India finally bit the bullet of this controversial project due to several factors, including the need to connect with Afghanistan and Central Asia without transiting via Pakistan the ongoing Red Sea disruption, the Gaza war delaying IMEC, linking this project with International North-South Transit Corridor (INSTC) and unstated competition with the China aided Gwadar project in Pakistan. The Chabahar project may also enable us to partner with the socio-economic growth of relatively underdeveloped eastern Iran. The Chabahar project was mooted mainly for linking with pro-west Afghanistan; the Taliban takeover three years ago has upended that motive and the project may become a wager over the future geo-economic re-integration of Iran as well as the Taliban.)
- During the debate in the UN General Assembly on Palestine’s full membership of the United Nations on May 2, the Indian Permanent Representative reiterated, “India is committed to supporting a Two-State solution where the Palestinian people can live freely in an independent country within secure borders, with due regard to the security needs of Israel…”
- On May 13, Col Baibhav Anil Kale, a former Indian army officer working with the UN Department of Safety and Security, was killed by Israeli tank fire on his UN-marked vehicle in Khan Younis of the Gaza conflict zone. He was the first international civil servant to have died during the ongoing Gaza conflict. So far 254 aid workers including 191 UN staff members have perished
- According to Reuters, Indian refiners shipped in nearly 1.8 mbpd of Russian oil in April 2024, up about 8.2% over the previous month. India’s global imports during the month stood at 4.8 mbpd, a decline of 6.5% from the previous month and marginally higher than April 2023. Thus, Russia’s share in India’s crude imports rose to about 38% from 32% in the previous month.
- Air India resumed flights to Tel Aviv from May 16.
- Jordanian armed forces training delegation visited training institutions under the Southern Naval Command from May 6 onwards.
- On May 9, Iran released 17 Indian sailors deployed on MSC Aries, a vessel detained last month by the IRGC Navy. In an unconnected move, Indian Coast Guards detained a private Iranian fishing vessel on the Kerala coast on May 6 as its Indian sailors complained about maltreatment by its owner.
- India’s Kalpataru Projects bagged an EPC contract worth Rs 7550 crores from Saudi Aramco for laying over 800 kms of pipelines under the Master Gas System Network (MGS‐3) in Saudi Arabia.
- Israel’s EVR Motors announced its intention to set up a plant at Manesar (Haryana) for fabricating sophisticated electric coils used in EVs.
- According to Forbes, Abu Dhabi-based Indian retailing tycoon M.A. Yusuff Ali now has a net worth of $7.8 bn (approximately Rs 65,150 crore).
