• Political Developments
• Economic Developments
• Bilateral Developments
IA) Political Developments: Pan-Regional and Global Issues
WANA and Afghanistan:
On April 11, Afghan protesters chanted slogans such as “death to Iran” outside the Iranian embassy in Kabul and pelted Iran’s consulate in Herat with rocks. These protests were reacting to the videos allegedly showing Iranian border guards and mobs hurting Afghan refugees. Iranian Foreign Ministry dismissed the videos and summoned the Afghan Cd’A in Tehran to remonstrate the attacks. (Comment: The presence of estimated 5 mn Afghan refugees in Iran is a recurring source of P2P and G2P friction. Iran, which shares a 900-kilometre-long border with Afghanistan, has not yet formally recognised the Taliban government, referring to it as the “governing body” of Afghanistan pending the formation of an administration “inclusive” of ethnicities, religions and women in Afghanistan. The two sides, nevertheless, maintain the embassies in each other’s capital.)
Russian Invasion of Ukraine:
- Al-Jazeera reported on April 2 that the Russian mercenary entity Wagner Group and its supported Syrian fighter groups have been recruiting men to fight alongside Russian troops in Ukraine. Thousands across the war-torn country have reportedly expressed an interest in signing up. The report quoted US Pentagon as having learnt of such recruitment of fighters from Syria, Libya, and other countries to deploy “a thousand or so” in the eastern province. In March 2022, Russian President Putin approved up to 16,000 fighters from the Middle East to be deployed in Ukraine’s Donbas region to support Russian-backed rebel groups. The Financial Times reported on April 29 that Russia had reduced the number of Syrian fighters and Wagner mercenaries in Libya. The reduction was seen as a sign that Moscow’s invasion of Ukraine had strained its deployments across Africa.
- During the month under review, Turkey continued to equivocate about its position on the Russia-Ukraine conflict. Ankara’s April 23 decision to close its airspace for all Russian flights to Syria was seen as a measure to press Moscow to revive negotiations to end the war against Ukraine. At the same time, Ankara did not join NATO and the West in either providing direct military assistance to Ukraine or imposing economic sanctions on Russia and the oligarchs from both sides were welcomed to relocate to Turkey. On April 8, Turkey deflected the Russian complaints to Turkey about the supply of the military drone to Ukraine as a commercial deal and not a military assistance package. (Comment: Turkish official foreign trade statistics showed that the military exports to Ukraine rose 30-fold in Q1/2022 y/y to $59.1 mn as 16 Bayraktar TB2 armed drones were supplied. In 2021, Turkey exported $3.224 billion in defence products, an increase of 41.5% compared with 2020. Further Reading: “How Turkey is courting Russia’s oligarchs” The Economist April 9; https://www.economist.com/europe/2022/04/07/how-turkey-is-courting-russias-oligarchs)
- In a break from the past policy, on April 5 Israeli Foreign Minister Yair Lapid condemned Russia’s “war crimes” in Ukraine.
- The Russia-Ukraine war caused the surge in international prices of several commodities. In particular, the price of oil and gas as well as foodstuffs such as wheat and corn soared between 25% to 40%. This impacted the economies of several WANA countries, such as Egypt, Turkey, Tunisia, Sudan, Syria, Lebanon, etc which were net importers of both these commodities
- There were conflicting reports about the UAE’s economic policies on the Ukraine crisis. On one hand, several UAE officials sought to reassure the West that the UAE was serious about shunning illicit fund transfers from the warring countries. Further, Mubadala, a large Abu Dhabi based Sovereign Wealth Fund, declared in March that it would avoid investing in Russia “for now”, becoming the first Middle East wealth fund to offer public comments on the war. At the same time there were several credible, but circumstantial, reports pointing to large swathes of Russian funds, both from the oligarchs living outside Russia as well as the Russia-based companies and individuals being transferred to the UAE, particularly in Dubai’s real estate. The UAE also appeared sensitive to the Russian interests in avoiding criticism of the invasion of Ukraine. As a member of OPEC+, the UAE also largely acts in concert with Russia.
- Islamic holy month of Ramadhan (from April 3) and Jewish festivities of Passover (April 15-23) kept the religious fervour and tensions high during April in and around Jerusalem, particularly on Fridays when weekly prayers were held. Palestinian worshippers clashed with the Israeli police on April 15 (152 injured) and 22 (57 injured) and 29 (42 injured). The tensions were further raised as the Jewish radical groups attempted to force their entry into the Al-Aqsa compound, which they revere as their Temple Mount. On April 21, the Arab League said Israel has broken the status quo and was allowing Jews to pray at the compound, calling it a “provocation.” Israel, however, said there has been no change in its long-standing ban on Jewish prayer at the flashpoint site. On April 17, Turkish President Erdogan told his Palestinian counterpart, Mahmoud Abbas, that he condemned Israeli “intervention on worshippers” at Al-Aqsa mosque and threats to its “status or spirit”.
- Apparently spurred by seasonal fervour, a string of terrorist attacks took place in Israel, perpetrated by the Palestinians and the Israeli Arabs. At least 16 Israelis were killed in such attacks since mid-March 2022. Israeli counter-measures included at least two air attacks over Gaza.
- The heightened religious tensions had significant political fallout on the Israeli cabinet. On April 17, the United Arab List – the first party drawn from the country’s 21% Arab minority to join an Israeli government – suspended its government membership over Israel’s handling of the Al-Aqsa violence and would consider officially resigning if things did not change. This put the Neftali Bennett government, already reduced to a minority in Knesset due to the defection of a member, in a precarious position.
IB) Political Developments
The indirect talks in Vienna for the revival Joint Comprehensive Plan of Action (JCPOA) completed their first year during the month under review. Yet, the US and Iran were not close to a final deal, even as an outline has been on the horizon for the past two months. Each of the two sides has accused the other of inability to take the final political call to clinch the deal. In a speech to mark the country’s “Nuclear Technology Day” on April 9, Iranian President Ebrahim Raisi reiterated that Iran would not give up its right to develop its nuclear industry for peaceful purposes, and all parties involved in talks to revive the 2015 nuclear accord should respect this. Testifying at the US Senate on April 26, the Secretary of State Anthony Blinken defended the negotiations, even as he acknowledged that the deal does not address Iran’s ballistic missile programme and support for armed groups seen as hostile to the US and its allies in the region. In his testimony, Blinken said that Iran’s accelerated nuclear programme could have reduced the breakout time needed to produce enough fissile material for a nuclear device to a few weeks. The White House clarified afterwards that this did not mean that Iran would have a nuclear bomb in a few weeks as more than just the fissile material was needed for this purpose.
According to some reliable media sources, a major sticking point to concluding the JCPOA revival has been Iran’s demand for revocation Trump administration’s classification in 2019 of the Islamic Revolutionary Guards Corps (IRGC) as a Foreign Terrorist Organisation (FTO). Indirectly alluding to this issue, the IRGC navy commander asserted on April 21 that Iran will not abandon plans to avenge the 2020 U.S. killing of Quds Force Commander Qassem Soleimani, despite “regular offers” from Washington to lift sanctions and provide other concessions in return.
On April 10, 250 Iranian MPs out of a total of 290 issued a signed statement setting tough conditions for the revival of the JCPOA, including legal guarantees approved by the US Congress that Washington would not quit it again.
IAEA reported on April 28 that Iran had moved machines to make IR-1 advanced uranium centrifuges to an underground facility at Natanz to protect them from attack and sabotage. These were earlier located at Karaj where they suffered a sabotage action last year allegedly by Israel.
On April 29, Iran marked Quds (Jerusalem) Day with emotionally-charged mass rallies against Israel and support for oppressed Palestinians and Lebanese.
(Comment: The last Friday of Ramadhan, widely celebrated in the Muslim world as the Lailat al-Qadr or “Night of Power.” By marking it as the annual Quds Day, Iranian clergy has channelled this most pious day of Ramadhan for showcasing her commitment to the liberation of Islam’s third holiest site.)
On April 23, unidentified gunmen opened fire on a car carrying a senior IRGC commander in restive Iran’s Sistan-Baluchistan province bordering Pakistan and Afghanistan. The attack failed to harm the commander, although a bodyguard died. The attackers were arrested. (Comment: The predominantly Sunni Sistan-Baluchistan province has long been plagued by unrest from both drug smuggling gangs and Sunni Islamist militants fighting the country’s Shi’ite authorities.)
President Recep Tayyip Erdogan visited Saudi Arabia on April 28-29, the first bilateral summit since 2017, on a fence-mending mission. He was received by King Salman bin Abdulaziz and had discussions with Crown Prince Mohammed bin Salman. (Comment: President Erdogan’s visit to Jeddah was aimed at burying the hatchet of the gruesome murder of Jamil Khashoggi, a Saudi American journalist in the Kingdom’s consulate in Istanbul in Oct 2018. Erdogan government’s disclosures of the crime, allegedly by the Kingdom’s operatives acting on orders from the highest authority, and their subsequent trial in absentia in Turkey, deeply embarrassed Saudi leadership. In turn, Riyadh enforced an informal squeeze on the bilateral ties with Ankara leading to a 98% decline in Turkey’s exports to Saudi Arabia. The two Sunni powers also competed for the supremacy of the Islamic ummah – a contest that got Pakistan hurt in the crossfire in 2019. Historically, the mutual antipathy between Saudi Arabia and Turkey dates back to medieval times when the Ottoman Empire sought to crush Al-Saud attempts to have an emirate in the Nejd. In the event, Ankara had to blink first as pursuance of a hyper-nationalist foreign policy with Saudi Arabia and other neighbours deeply hurt its economy. Turkey launched a charm offensive in 2020 to improve her ties with its estranged neighbours such as the UAE, Egypt, Russia and Armenia etc and the rapprochement with Saudi Arabia came under this strategy. A month before Erdogan’s visit to Jeddah, Turkey closed the Khashoggi murder trial and transferred the case to Saudi Arabia. Erdogan chose Lailatul Qadr in Ramadhan, the holiest day of the Islamic calendar, to visit, hoping to leverage the shared piety of the occasion. However, true to their penchant for making diplomatic haste slowly, the Saudis did not offer any immediate rewards to Turkey.)
There were tentative signs of improved ties between Turkey and the United States following talks in Ankara on April 4 between the visiting US Under Secretary of State. Turkish Foreign Minister Mevlut Cavusoglu is to travel to Washington on May 18 to meet with Secretary of State Anthony Blinken, the first such bilateral talks in three years between the two NATO members. (Comment: Over the years, Ankara and Washington have accumulated a formidable list of contentious issues including Turkey’s purchase of Russian S-400 defences, which triggered U.S. sanctions and Ankara’s removal from an F-35 fighter jet programme where it was a buyer and manufacturer, Turkey’s unwillingness to follow NATO consensus against Russia for its invasion of Ukraine, US support to YPG Kurdish militia in Syria which Turkey regards as a terrorist outfit. While Trump and Biden administrations followed radically different foreign policies, President Erdogan has managed to remain a “frenemy” through this transition. Hence, this high maintenance relationship would need a basic overhaul to affect any strategic improvement.)
On April 18, Turkish warplanes, helicopters and drones hit Kurdish militant targets in northern Iraq in an air and land operation that targeted facilities ranging from camps to ammunition stores, Turkey’s defence ministry said on Monday18. The operation was part of a long-running Turkish campaign in Iraq and Syria against militants of the Kurdistan Workers Party (PKK) and the Syrian Kurdish YPG militia, both regarded as terrorist groups by Ankara. No details of causalities were provided.
In a high-profile court case, Turkish philanthropist Osman Kavala, 64, was jailed for life without parole on April 25. He was convicted of trying to overthrow the government by financing protests, in a case that Europe’s top court, ECHR, and Western powers say was politically motivated.
A two-month-long UN-mediated truce in Yemeni hostilities between al-Houthi militia and Saudi-led coalition forces finally commenced on April 2 coinciding with the holy Muslim month of Ramadhan. The terms stipulate halting offensive military operations, including cross-border attacks, and allowing fuel ships to enter Houthi-held Hodeidah port and commercial flights in and out of the airport in the capital, Sanaa, “to predetermined destinations in the region”. The parties agreed to discuss opening roads in Taiz, effectively under siege and other Yemeni regions. On April 1, the U.N. Secretary-General Antonio Guterres said the truce “must be a first step to ending Yemen’s devastating war.” U.S. President Joe Biden also welcomed the truce. While the ceasefire held in most places, there were reports of continued fighting, albeit at a lower intensity, in the oil-rich Marib region in central Yemen, the last vestige of control of the coalition forces in the north which al-Houthis have long sought to over-run.
As follow up of the decisions taken at the Saudi-hosted conference on Yemen’s future held in Riyadh on March 28, President al-Hadi ceded power on April 7 to an eight-member council, led by Rashad Al-Alimi. Under the financial package to help the new dispensation, Saudi Arabia and the UAE would each inject $1 bn into Yemen’s central bank and the kingdom will grant an additional $1 bn for oil derivatives and development. Riyadh would also give $300 mn to the U.N. aid response, which in March raised less than a third of the $4.27 bn sought. In his first televised speech after taking over, Council President Rashad Al-Alimi said “The leadership council promises the people to end the war and achieve peace through a comprehensive peace process that guarantees the Yemeni people all its aspirations.” However, Houthi chief negotiator Mohammed Abdulsalam responded to the formation of the council on Thursday by calling the move a farce and a “desperate attempt to restructure the ranks of mercenaries to push them towards further escalation.” The eight members of the presidential council were sworn in in a ceremony in Aden on April 19. (Comment: While President al-Hadi would not be missed, the Presidential Council, comprising of some longstanding foes, would hardly evoke confidence as the country transits a crucial phase from a tactical cease-fire to a comprehensive political settlement. It is chaired by a leader who enjoys Riyadh’s confidence and is supported by the Islah Islamist party, which is distrusted by several pro-UAE Council members, esp. the Southern Transitional Council led by powerful Aden-based warlord Aidarous al-Zubaidi. It remains to be seen if this motley Council can morph into a cohesive entity long enough to patch up a facile political settlement to enable the Saudis to extricate themselves from the seven-year-old conflict. Further Reading: “War-ravaged Yemen gets a truce and dumps a tired president” The Economist, Apr 16 https://www.economist.com/middle-east-and-africa/2022/04/16/war-ravaged-yemen-gets-a-truce-and-dumps-a-tired-president)
On April 24, Omani mediation secured the release of 14 foreign civilians, including seven Indians, imprisoned by al-Houthis. Separately, The Saudi Arabian-led coalition fighting in Yemen said on April 28 that it would release 163 prisoners from al-Houthi militia who fought against the kingdom, as part of a humanitarian initiative.
On April 9, the Saudi Ministry of Haj and Umrah announced that after two years of highly restricted participation due to the Covid-19 pandemic, a million pilgrims would be allowed for the next Haj scheduled in coming July. (Comment: Normal Haj has nearly 2.5 mn pilgrims. In normal times, the Haj and Umrah pilgrimages contribute nearly $12 bn to the Kingdom’s economy annually.)
On April 1, Israel and the United Arab Emirates concluded negotiations for a free trade agreement designed to include 95% of traded products, which would be customs free, immediately or gradually, according to a statement by the Israeli Economy Ministry A separate UAE statement said the agreement would substantially reduce or remove tariffs on a wide range of goods, enhance market access for services and promote investment flows. The two sides did not indicate any date for their FTA being put into operation. The current bilateral trade between UAE and Israel, which established formal diplomatic relations only in 2020, is estimated to be around $600 mn.
On April 30, China’s Suzhou Abogen Biosciences Co said its COVID-19 vaccine candidate using the messenger RNA (mRNA) technology and targeting the Omicron variant has obtained clinical trial approval in the United Arab Emirates
On April 7, the Saudi ambassador to Lebanon returned to Beirut nearly six months after being withdrawn to protest a former Lebanese minister’s criticism of the Kingdom’s role in Yemen. In a relevant development, on April 26 Saudi Arabia and France announced a joint development fund for crisis-hit Lebanon, pledging an initial $30 million to support food security and the country’s crippled health sector.
On April 7, the IMF and the Lebanese government reached a draft funding deal subject to extensive financial and economic reforms. As part of the package, on April 27 the parliament began considering a capital control law, which was expected to add to the considerable misery of the man in the street of Lebanon. (Further Reading: Factbox: “Just how bad is Lebanon’s economic meltdown?” Reuters, April 7; https://www.reuters.com/world/middle-east/just-how-bad-is-lebanons-economic-meltdown-2022-04-07)
On April 9, the military commanders in eastern Libya issued a statement announcing the suspension of their participation in a U.N.-backed joint military council, accusing the Tripoli-based government of failing to hand power to a new cabinet. They also asked their chief Gen. Khalifa Haftar’s permission to close the road to the western part of the country to be closed. The move follows the installation of a government led by Prime Minister Fathi Bashagha in Benghazi to challenge Tripoli-based Prime Minister Abdul Hamid al-Dbeibah.
Over the next few days, the eastern Libyan National Army (LNA) units forcibly closed several oil facilities run by Libya’s National Oil Company (NOC) in a bid to press the Tripoli-based government led by Prime Minister Dbeibah to step down. On April 29, the Libyan Oil Minister lamented that this forced closure of nearly 600,000 bpd of crude exports was costing the country at least $60 mn a day. However, the stand-off appeared not close to its end as the incumbent insisted that he would only hand power to an elected successor. (Comment: Throughout the decade long civil war in the country, the warring sides have normally avoided interfering with the hydrocarbon production and exports as they have readily shared the oil and gas revenues to buy the arms to slay each other. So, the LNA’s stoppage of nearly half of Libyan oil production was unusual. It could be intended also to help the major foreign oil-producing backers of Gen Haftar, including Russia and the UAE by curbing the supplies to western Europe. Further Reading: “Libya misses out on oil price boom as political divide continues”, al-Jazeera, April 26; https://www.aljazeera.com/news/2022/4/26/libya-misses-out-oil-price-boom-political-divide-continues)
In an exclusive on April 6, Reuters reported that the factions aligned with Sudan’s military had drawn up a deal to form a transitional government aimed at cementing the army’s control and bypassing the pro-democracy groups it shared power with before an October coup. According to the report, the initiative had support from some political parties aligned with the military, former rebels who signed a peace deal in 2020, and some tribal and religious leaders and the military leadership was trying to persuade some of the traditional political parties to join it. The incipient deal includes some steps that the military had already indicated it would take, such as the appointment of a technocratic cabinet and parliament to govern until elections expected next year and the nomination of judicial bodies and an election commission. It also elevates the military as Sudan’s paramount authority, diverging sharply from the power-sharing enshrined after Bashir’s overthrow in a Constitutional Declaration that remained a reference point even after the coup. Meanwhile, the public demonstrations led by the Sudanese Professionals Association and Forces of Freedom and Change Coalition (FFC) calling for the military to quit running the country have continued. Sudanese military authorities did not comment on the report. (Further Reading: “EXCLUSIVE- Draft Sudan deal seeks to cement military’s grip”, Reuters, April 7; https://www.reuters.com/world/africa/exclusive-draft-sudan-deal-seeks-cement-militarys-grip-2022-04-06 and “Sudan faces collapse three years after the fall of its dictator” The Economist, April 9 https://www.economist.com/middle-east-and-africa/2022/04/09/sudan-faces-collapse-three-years-after-the-fall-of-its-dictator)
On April 5, the International Criminal Court at the Hague began its first trial for crimes in Darfur in Western Sudan, in which 300,000 people were killed and 2.5 million fled their homes. Ali Muhammad Ali Abd-Al-Rahman, who led Sudan’s feared government-linked militia known as “Janjaweed” during 2003-04 pleaded not guilty to dozens of war crimes charges. The trial did not stop the further bloodshed and al-Jazeera reported on April 24 that At least 168 people were killed in fighting between Arabs and non-Arabs in Sudan’s war-torn Darfur region. It quoted the aid groups as having blamed the Janjaweed for orchestrating the latest attacks.
On April 6, the multi-party peace talks between the Chad government and 52 rebel groups began in Doha under Qatari government sponsorship. (Comment: Following the battlefield death of its longstanding President Idriss Deby in April 2021, Chad, a Central African country, has been led by a Transitional Military Council led by his son, Mahamat Idriss Deby.)
The draw of eight groups of 4 teams each was held on April 1 in Doha for the next FIFA World Cup to be hosted by Qatar from November 21, 2022. The following are the eight groups:
Group A — Qatar, Ecuador, Senegal, Netherlands;
Group B — England, IR Iran, USA, European Playoff Winner;
Group C — Argentina, Saudi Arabia, Mexico, Poland;
Group D — France, Inter-Continental Playoff 1 winner, Denmark, Tunisia;
Group E — Spain, Inter-Continental Playoff 2 winner, Germany, Japan;
Group F — Belgium, Canada, Morocco, Croatia;
Group G — Brazil, Serbia, Switzerland, Cameroon;
Group H — Portugal, Ghana, Uruguay, South Korea;
There were signs of increasing insecurity in north-eastern Syria as the government forces struggled to retain territorial control over resurgent armed groups. A Reuters report on April 14 mentioned that the US-backed Kurdish Syrian Democratic Forces (SDF) tightened their grip around Qamishli and Hasaka, the two cities in north-eastern Syria which remain in the government forces’ control. In an April 17 statement, Daesh or ISIL hinted at larger attacks, notably in north-eastern Syria’s al-Hol camp, controlled by SDF, which houses over 50,000 ISIL-linked individuals.
Israel’s unannounced attacks on Syria, mostly on Iranian or pro-Iran militia installations continued during the month under review. The deadliest of these took place on April 27, when nine combatants, including five Syrian soldiers, were killed outside Damascus. The Syria Observatory for Human Rights, a war monitor, said that an ammunition depot and several positions linked to Iran’s military presence in Syria were targeted in that attack. Other attacks were reported on April 15 in the vicinity of Damascus, and an April 9 attack in central Hama province.
During the month under review, Iraqi Foreign Minister Fuad Hussein and new parliament speaker, Mohammed al-Halbousi, led separate delegations to Tehran to hold high-level meetings with President Ebrahim Raisi and Foreign Minister Hossein Amirabdollahian.
On April 22, President Kais Saied issued a decree seizing control of the country’s election commission, saying that he would select three of the existing nine members of the electoral commission to stay on. Comment: The move, was seemingly designed to alter the political architecture of the country in tandem with the new constitution being drafted separately. These and other Presidential moves have been sharply criticised by the opposition politicians as motivated by the dictatorial tendencies. President has, however, defended his strategy as needed to purge the country of its self-serving political elite which has misled the Arab Spring revolution.)
Western Sahara Dispute
Spanish Prime Minister Pedro Sanchez visited Morocco on April 7-8 during which he met with King Mohammed VI.
On April 27 Algeria warned Spain that it would terminate gas supplies to Spain if Madrid sold any Algerian gas to other countries, citing what it said was a Spanish decision to supply gas to Morocco via a pipeline. Only a week ago, Algerian President Abdulmadjid Tebboune had said “We assure the Spanish friends, the Spanish people that Algeria will never abandon its commitment to supply Spain with gas under any circumstances.” (Comments: 47 years after it abandoned Western Sahara, its former colony, the disputed territory continues to bedevil Madrid’s ties with Morocco and Algeria, its two important neighbours. Spain had long adhered to the international consensus of backing a referendum in Western Sahara to determine its future, which was broken in 2020 when the Trump administration recognised Moroccan sovereignty over the territory as a part of the Abraham Accords. Algeria had last year broken diplomatic relations with Morocco and refused an extension of the natural gas supply arrangement. A month before PM Sanchez’s Rabat visit, he conveyed in a letter to King Mohammed VI Spain’s backing for Morocco’s 2007 plan to give more autonomy to Western Sahara as long as it remains unquestionably under Moroccan grip. This tilt in Spain’s long-held position angered Algeria, Morocco’s regional rival that had long backed Polisario Fronte in fighting for Western Sahara’s independence. Algeria withdrew her Ambassador to Spain in protest. Following the Rabat Summit, Spain unveiled plans to supply third country natural gas to Morocco by the same pipeline that till recently used to carry Algerian gas to Morocco and Spain. This further angered Algiers into threatening Madrid about halting its gas flow (through a direct pipeline to Spain) altogether. Algerian gas meets over a third of Spain’s requirements. The entire episode illustrates that the Western Sahara dispute continues to be a zero-sum game between Algeria and Morocco. Moreover, the doubts about the continued supply of the Russian gas to Western Europe due to the Ukraine Crisis, further limited Spain’s options.)
On April 5, Kuwait’s cabinet led by Prime Minister Sheikh Sabah al-Khalid submitted its resignation, a day ahead of a scheduled no-confidence vote against it in the parliament.
(Comment: The turf battle between an elected parliament and the Royal family dominated cabinet has been a perineal and recurring feature of Kuwaiti polity for many years. For instance, the current cabinet was appointed in December, the third in 2021 as the standoff with the elected parliament dragged on. It also showed that reconciliation measures by the Emit Sheikh Nawaf Al-Ahmad Al-Jaber Al-Sabah late last year were unsuccessful at diffusing the confrontation, which has greatly hindered urgently needed fiscal reform in the Gulf oil producer.)
On April 10, King Abdullah II travelled to Germany to undergo an urgent slip disc surgery in a Frankfurt hospital.
On April 24, the assets of the Oman Investment Authority were split into two: local (“National Development Portfolio”) and foreign (“Generation Portfolio”). While the former was intended to promote the growth and development of the domestic economy, the latter was held mostly abroad and was meant to achieve higher returns for future generations. (Comment: The OIA, established in 2020, was estimated to have a total corpus of $17 bn. The respective proportions of the two proposed portfolios were not known. Further Reading: “Oman’s sultan breaks with the past in economics” The Economist April 2; https://www.economist.com/middle-east-and-africa/2022/04/02/omans-sultan-breaks-with-the-past-in-economics)
II) Economic Developments
Oil & Gas Related Developments:
- The international oil and gas market remained range-bound during the month under review with the Brent oil price recording a 1.3% to end the month at $107.14/barrel on April 30. Although there was less price volatility than in the previous two months, there was no dearth of uncertainties affecting the market. arising from the fallout of the Ukraine conflict with the EU countries unable to unlock their dependence on the Russian oil and gas supplies and the IMF reducing its forecast for the global growth due to it. The reduction in oil consumption by China, the world’s largest importer, with anti-Covid lockdowns in Shanghai, the business capital, also weighed on the market. On the bullish side, the perplexing inability of the American Shale producers to ramp up their production, and supply disruptions in Libya and elsewhere also affected the market sentiments.
- The OPEC+ held on to their pre-programmed monthly production increase of 432,000 b/d in May, ignoring its internal report disclosing that it produced 1.45 mn bpd below its targets in March, as Russian output began to decrease following sanctions imposed by the West over its invasion of Ukraine.
- An exclusive report by Reuters on April 27 quoted from an internal Russian Economy Ministry document as predicting an up to 17% fall in the country’s oil production in 2022to According to the document, Russian oil output may decline to between 433.8 million and 475.3 million tonnes (between 8.68 million and 9.5 million barrels per day) in 2022 from 524 million tonnes in 2021. Oil exports are seen declining to between 213.3 million and 228.3 million tonnes (4.27 million to 4.57 million bpd) from 231 million tonnes in 2021. That would be the lowest since 2003 Secondary sources indicated that Russia produced about 300,000 bpd below its target in March at 10.018 million bpd. It had fallen by around 7.5% by mid-April. In a release on April 13, IEA predicted that “From May onwards, close to 3 million bpd of Russian production could be offline as the full impact of a widening customer-driven voluntary embargo on Moscow comes into effect.” Earlier it had predicted the same degree of production reduction from April onwards. Russia is the world’s third-largest crude producer and second-largest exporter.
- The Iraqi oil ministry said on April 2 that the country, OPEC’s second-largest producer, had exported 3.3 mbpd of crude to earn a record revenue of $11.07 bn of oil in March 2022. Oil exports account for more than 90% of Iraq’s income. On April 28, Iraq said that Iran has agreed to resume natural gas supplies following the settlement of the pending dues. Iraq relies on natural gas from Iran to generate power and the reduction in Iranian gas supplies had caused a power loss of around 3,400 MW since Dec 2021.
- On April 13, Saudi Arabia and Kuwait formally invited Iran for negotiations to determine the eastern limit of a joint, energy-rich, offshore area containing the Durra natural gas field with recoverable reserves estimated at some 220 bcm (7 tcf). Kuwait said in March the field was expected to produce one bcf of natural gas and 84,000 barrels of condensate per day. Saudi Arabia and Kuwait claim that the offshore area is entirely within their EEZ and they have full rights to exploit it and the negotiations with Iran are limited to fixing its eastern limit. Iran, however, maintains that it has a stake in the field and considers a Saudi-Kuwaiti agreement signed last month to develop it “illegal”.
- On April 13, the Italian energy group Eni signed a deal to boost gas production in Egypt and boost LNG supplies to Europe. Eni said the agreement could result in shipping up to 3 bcm of LNG to Europe this year.
- On April 5, Saudi Aramco raised its official selling price (OSP) for its flagship Arab Light crude for Asian refiners to a record premium of $9.35/barrel above the Oman/Dubai regional benchmark. This rise prompted a decline in the offtake of Saudi crude by Indian and Chinese buyers, preferring the discounted Ural crudes from Russia.
Following economy-related developments took place in WANA countries:
- In its World Economic Outlook released on April 27, the International Monetary Fund forecasted that the growth for the Middle East and North Africa (MENA) region at 5%, down from 5.8% in 2021 largely due to the Russia-Ukraine war. However, in the six oil-producing Gulf Arab states, growth is projected to accelerate to 6.4% from 2.7% last year. Inflation in MENA is expected to remain elevated at 13.9% due to higher food and energy prices. The IMF’s April report assumes that the price of oil will average $106.83 a barrel in 2022. The IMF earlier in April upgraded Saudi Arabia’s economic growth outlook to 7.6% in 2022, citing higher oil output and prices, from 3.2% in 2021.
- According to SIPRI annual report released on April 24, in 2021 the global military spending rose by 0.7% to reach $2.1 tn. However, Saudi Arabia’s defence spending decreased by 17% to an estimated $55.6bn, making the country slip out of the list of top-5 spenders for the first time in many years.
- According to the official data released on April 4, Turkey’s annual consumer inflation leapt to a 20-year high of 61.14% in March. The upsurge was fuelled by rising energy and commodity prices as the fallout of the Russia-Ukraine conflict compounds the impact of the lira’s plunge last year. Later, on April 19, it was revealed that the Turkish Housing Market index jumped at the annual rate of 96% in February 2022.
- Egypt was particularly impacted by the Russia-Ukraine war. The two countries were not only the main source of wheat but also of the tourist inflows. Egypt is the world’s largest importer of wheat and the tourism sector is the largest forex contributor to the national economy. The central bank data released on April 3, showed that Egyptian net foreign assets (NFAs) went sharply negative in February, declining by 60 bn Egyptian pounds ($3.29 bn) to minus 50.3 bn pounds. It was their fifth month of decline from 186.3 bn pounds as of end-Sept 2021. Further, the bank disclosed on April 7 that Egypt’s net foreign reserves fell by nearly $4 bn in March. This decline was despite the country receiving remittances of $31.5 bn in 2021 from Egyptians abroad. To help it overcome a currency crisis, the Gulf Arab states, viz. Saudi Arabia, Qatar and the UAE are channelling up to $22 bn to Egypt, their third such rescue in a decade. In a related move to reform the economy, on April 26, President Abdel Fattah al-Sisi ordered the government to set a program for the private sector’s participation in state-owned assets, with a target of $10 bn annually for four years. (Further Reading: “Why Egypt isn’t open for business” The Economist, April 22; https://www.economist.com/middle-east-and-africa/2022/04/21/why-egypt-isnt-open-for-business)
- Tunisia’s phosphate production doubled to 1.3 mn tonnes in the first quarter of 2022, compared to the same period last year. It aims to produce 5.5 mn tonnes of phosphate this year compared to 3.7 mn tonnes last year to take advantage of the higher international prices due to the Ukraine conflict.
- On April 8, Moodys’ rating agency raised the outlook for Israel to “Positive” and affirmed its A1 rating.
- On April 26, a British judge denied a bid by Qatar Airways (QA) to reinstate a contract for A321neo jetliners cancelled by Europe’s Airbus Industrie. (Comment: Qatar Airways and Airbus Industrie have locked horns over the airworthiness of in latter’s A350 long-haul jets of which the Doha-based airline is the largest buyer. Qatar has grounded more than 20 A350s after paint erosion exposed damage to a metallic sub-layer designed to absorb lightning. The Gulf carrier is refusing to take more deliveries pending investigation and sought $1 bn in compensation. Airbus, while acknowledging the quality problems, insists its aeroplanes are safe. It has retaliated by cancelling the QA’s order for 50 A321neo, which are currently in demand as post-pandemic air travel revives and the competing Boeing 737Max model is mired in quality-related controversies of its own. Thus, the British judge’s ruling was a serious setback to QA.)
- An initial public offering by Dubai Electricity and Water Authority (DEWA) on April 6 raised $6.1 bn, in the Gulf’s biggest IPO since Saudi Aramco’s record deal in 2019. It was 15 times oversubscribed.
- On April 25, the Fitch rating agency raised the outlook for Saudi Aramco to “Positive” from “Stable”, owing to higher oil revenues.
III) Bilateral Developments
- A group of business leaders from the UAE accompanied Prime Minister Narendra Modi during his visit to Jammu and Kashmir on April 24. The UAE firms, including DP World, Emaar Properties, Lulu Group, Royal Strategic Partners and WizzFinancial, proposed investments amounting to over Rs 3,000 crore in infrastructure, IT, hospitality and food processing.
- On April 24, PTI quoted the Indian Petroleum and Natural Gas ministry’s Petroleum Planning & Analysis Cell (PPAC) to report the following data on India’s oil and gas imports: (i) India spent $119.2 bn in 2021-22, up from $62.2 bn in the previous fiscal year on importing the oil and gas; (ii) Net oil and gas import bill, after adjusting for exports, came to $113 bn, up from $63.5 bn in FY21 and $92.7 bn in FY20; (iii) India imported 212.2 mn tonnes of crude oil in FY22, up from 196.5 mn tonnes in the previous year. This was, however, lower than pre-pandemic imports of 227 mn tonnes in FY20. The spending on oil imports in 2019-20 was USD 101.4 billion. The nation consumed 202.7 mn tonnes of petroleum products in FY22, up from 194.3 mn tonnes in the previous fiscal, but lower than the pre-pandemic 214.1 mn tonnes demand in FY20. (iii) The Import of petroleum products in the 2021-22 fiscal was 40.2 mn tonnes worth $24.2 bn. On the other hand, 61.8 mn tonnes of petroleum products were exported for $42.3 bn; (iv) Besides, India also spent $11.9 bn on the import of 32 billion cubic meters (bcm) of LNG in 2021-22. This compared to $7.9 bn spent on import of 33 bcm of gas in the previous fiscal and USD 9.5 bn on import of 33.9 bcm in FY20. (v) The nation produced 32.2 mn tonnes of crude oil in FY20, which fell to 30.5 mn tonnes in the following year and to 29.7 mn tonnes in FY22. (vi) India’s oil import dependence was 85% in FY20, which declined marginally to 84.4% in the following year before climbing to 85.5%FY22.
- On April 19, a Reuters analysis of India’s oil imports mentioned the following: (i) Total crude imports by India, the world’s third-biggest oil importer and consumer, rose by an annual 7.2% to 4.26 mbpd in FY22 from a low base in the previous year; (ii) The OPEC’s share of the Indian import basket was 71.6% in FY22, having come down significantly from 88% of India’s crude imports in FY08. (iii) The share of Middle East oil in India’s imports improved to 64% in FY22, up from 62% the previous year, while that of Latin America and Africa declined. (iv) Russian oil continued to account for less than 1% of India’s crude imports in FY22; and (v) India’s fuel demand in FY22 rose by 4.3%, the biggest increase in four years.
- Reuters reported on April 6 that at least two Indian refiners plan to buy less Saudi oil than usual in May after the kingdom raised the official selling price (OSP) to record highs for Asia as India increases purchases of cheap Russian crude. In recent months, Iraq and Saudi Arabia have been the top two suppliers to India.
- Reuters also reported on April 20 that Egypt’s agriculture ministry had approved India as a wheat import origin but has placed several conditions including inspection for pests before export and the use of only a specific pesticide. Traders and government officials in India, however, have said it had not received any complaints when exporting large quantities this year to countries including WANA countries such as Oman and Qatar. India’s wheat exports hit 7.85 mn tonnes in FY22, an all-time high and a sharp increase from 2.1 mn tonnes in the previous year.
- Following investment-related developments took place in the India-WANA eco-space during April 2022: (i) On April 8 International Holding Co (IHC) agreed to invest $2 bn in three of Adani Group’s portfolio companies. (Comment: IHC is chaired by Sheikh Tahnoun bin Zayed Al-Nahyan, the UAE national security adviser and a brother of the country’s de facto ruler, Crown Prince Mohammed bin Zayed. Sheikh Tahnoun is also the chairman of Royal Group, which owns 74% of IHC, and is chairman of ADQ.) (ii) On April 14 Tata Power Company said that BlackRock Real Assets and Abu Dhabi’s Mubadala Investment Company would invest Rs40 bn ($525.76 mn) in its renewable energy unit for a 10.53% stake. (iii) HDFC Ltd, India’s top housing finance firm, said on April 20 that it planned to sell a 10% stake in unit HDFC Capital to an arm of Abu Dhabi Investment Authority (ADIA) for Rs1.84 bn ($24 mn).
- On April 29 the administrators of NMC Health PLC filed a lawsuit against EY in the UK for alleged negligence in the audit work it did for the troubled hospital operator between 2012 to 2018. The claim filed in London was reportedly for $2.5 bn. (Comment: NMC, which used to be listed in London, ran into trouble in 2020 and went into administration after it disclosed more than $4 bn in hidden debt. The core operations of NMC, the largest private healthcare provider in the UAE earlier owned by Dr BR Shetty, an NRI Tycoon, come out of administration in Abu Dhabi in March and are now part of a new company. However, the UK-registered NMC Healthcare PLC and UAE-registered NMC Healthcare Ltd remain in administration while restructuring and legal issues related to these entities are resolved.)
- Aviram Azari, an Israeli private detective detained in New York since 2019 on charges of involvement in a hacker-for-hire scheme pleaded guilty on April 20 to wire fraud, conspiracy to commit hacking and aggravated identity theft on Wednesday. He is being charged for acting in concert with the New Delhi-based BellTroX InfoTech Services, which was reported in 2021 by Reuters as behind a worldwide hacking campaign targeting lawyers, government officials, businessmen, investors and activists.
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(The views expressed are personal)