West Asia & North Africa Digest by Ambassador Mahesh Sachdev | November 2020

Ananta Centre

I) Political Developments

Regional Impact of Covid-19Second Wave Persists

The second wave of Covid-19 pandemic continued to roil the region during October 2020, with unchanged growth in confirmed cases and slightly higher death rate. The total number of affected cases in the WANA region on Oct 31 crossed 3.45 million with over 85,000 fatalities. The region saw nearly 31% increase in confirmed cases and a 29.2% increase in cumulative deaths during October 2020. (For comparison, two figures were up for India by 29.6% and 23.7% and for the world by 35.6% and 17.8% respectively.) The pecking order at the top of the table remained largely stable as the respective authorities and public seemed better adept at tackling the pandemic. However, there was some shuffling in the mid-order of the table due to some “superspreader” states. The numbers of cumulative incidence and/or deaths during the month were up by over 50% in Israel, Morocco, Libya and Palestine. Further, these numbers more than doubled in Lebanon, Jordan, and Tunisia. The details are in the Table on the following page:

Cumulative Covid-19 Cases in WANA (as of November 1 2020)[1]

CountryNo. of Confirmed CasesNo. of Deaths
Total World Wide46,118,0511,196,020
India8,184,082 122,111 
Iran612,772 34,864 
Iraq472,630 10,910 
Turkey375,367 10,252 
Saudi Arabia347,282 5,402 
Israel314,498 2,541* 
Morocco219,084* 3,695* 
UAE132,629 495
Qatar132,556 232
Kuwait125,926 779
Oman114,434 1,208 
Egypt107,555 6,266 
Bahrain81,645 321
Lebanon81,228** 637* 
Jordan72,607** 829** 
Tunisia61,115** 1,348** 
Libya61,095* 857*
Algeria57,942 1,964 
Palestine53,520 483*
Sudan13,804?1 837? 
Mauritania7,703 163?2 
Syria5,728 288
Somalia3,941 104 
Yemen2,063 599
Western Sahara10

Total for WANA
3,457,134 (+31.2%)85,075 (+29.2%)

Source: Johns Hopkins University Coronavirus Resource Center.
Legend: *Increase of over 50% since last month; ** Double or more since last month

[1] There were sporadic revelations about understating the Covid-19 data by some WANA countries for political reasons. An opposition politician in Turkey claimed that though the government’s internal data for Sep 10 showed 29,377 new Covid-19 positive cases, only 1,512 were officially published. Health minister denied any discrepancy claiming that the published data excluded asymptotic patients. In Jordan, the cumulative deaths of pandemic patients climbed 13-fold during October to 829 after staying in double digits for months. It followed, perhaps coincidentally, Cabinet’s dismissal on Oct 4.   

Covid-19 and the Individual WANA Countries:

Iran A spurt in Covid-19 cases and associated death towards the end of October alarmed authorities into declaring it as the “Third Wave” of the pandemic in the country. They blamed nonchalance by some citizens and President Rouhani personally announced on Oct 31 the new lockdown measures for ten days from Nov 4 in 25 of Iran’s 31 provinces. Earlier measures from Oct 3 in Tehran failed to curb the spurt in the Covid-19 infections in the capital.

After permitting Umrah visits from Oct 4, Saudi Arabia also allowed the daily prayer congregations at Makkah’s Grand Mosque from Oct 18.

The UAE permitted trials of Russian Covid-19 vaccine from Oct 12.

Follow Up on Abraham Accords:

An Israeli delegation led by the National Security Advisor and accompanied by the US Secretary of Treasury travelled to Bahrain on Oct 18 to sign a formal agreement to set up diplomatic ties. Next day they proceeded to Abu Dhabi to sign Israel-UAE Bilateral Investment Protection and Promotion Agreement and a Civil Aviation Agreement providing for 28 flights a week between the two countries. A bilateral Business Summit was also held. 

First UAE cargo ship docked in Haifa on Oct 13 and first UAE civilian flight landed at Tel Aviv on Oct 19.

On Oct 29, Trump administration notified the US Congress about its intention to sell 50 state-of-the-art F-35 fighter jets to the UAE, meeting one of the putative expectations of Abu Dhabi from Abraham Accords.
Comment:
Under the US commitment to ensuring Israel’s Qualitative Military Edge (QME) over the Arab neighbours, Pentagon has been reluctant to permit the sale of F-35 to the UAE as a peace dividend. However, after intense behind the scene negotiations, Israel lifted its opposition to the proposed sale on Oct 23, clearing the way for the deal barely a week before the US Presidential election. However, approval of the Congress is not only time consuming, it cannot be taken as for granted. Israel already has two squadrons of F-35s since 2018.  

Sudan:

After weeks of demurral, Sudan’s transitional government finally agreed on Oct 23 to “reconcile” its relations with Israel leading eventually to the establishment of bilateral diplomatic relations. However, the tripartite statement issued by Sudan, Israel and the US (which mediated the deal) said, “The leaders agreed to the normalization of relations between Sudan and Israel and to end the state of belligerence between their nations.” The step was preceded by Oct 19 by President Trump’s announcement that the US would remove Sudan from its list of States Sponsoring Terrorism (SST) as soon as Khartoum has deposited $335 mn in the escrow account of the US victims of terrorism. This was marked by formal signing on a US-Sudan bilateral agreement on Oct 31 to restore sovereign immunity. An Israeli delegation paid an unannounced visit to Khartoum on Oct 21. Israel also announced a gift of $5 mn worth of wheat to help Sudan overcome the food shortage.
Comment:   
Sudan, under President Omar Hassan al-Bashir, was put in SST list in 1993 owing to its close ties with al-Qaeda and other militant organisations. This classification led to strong economic sanctions being imposed by the US after bombing of the US embassies in Kenya and Tanzania in 1998 and the subsequent bombing of USS Cole in Yemeni waters. These sanctions debilitated Sudan’s economy by denying foreign aid and investments. Although Sudan moved away from its ties with militant organisations and Iran and got closer to the GCC states, the SST Listing tag remained. The ouster of al-Bashir last year removed the causal link as well. However, the Trump administration demanded compensation to the American victims as well as normalisation of ties with Israel in return for Sudan’s removal from the SST list. In a facile concession, the US eventually agreed to delist Sudan first without linking it to Khartoum recognising Israel. Sudan’s desperate economy (foreign debt $60 bn, annual inflation 212% and Sudanese Pound’s open market value against US Dollar being less than a fourth of its official rate) left Khartoum with no real choice. 

Sudan’s recognition of Israel was important for several reasons: 
(i) By being third Arab country in as many months to recognise Israel, it helped both US President Trump and Israeli PM Netanyahu to pander to their respective vote-banks. 
(ii) But for Sudan, the sudden abandoning of the long-cherished “Palestinian Cause” was a traumatic development at home. Former PM Sadiq Al-Mahdi and his al-Ummah party denounced this volte-face. The Emotive aspects of this development could be grist to many detractors of the transitional government. Therefore, unlike the UAE and Bahrain, Sudan is likely to make haste slowly with Israel. 
(iii) Sudan is the second-largest Arab country by population after Egypt and has been sporadically active against Israel by acting as a conduit of Iranian weapons to Hamas. So, bagging Sudan is an important achievement for Israel and the US.  
(iv) Historically, Khartoum Arab League Summit in 1967 had passed a “Triple No” resolution against Israel and the Oct 23 announcement was its total repudiation. 
(v) Last but not the least, Sudan being the third-largest African country by area, the step could be a precursor to greater acceptance of Israel in the black continent.   

Sudan’s power-sharing government and a coalition of armed groups called the Sudanese Revolutionary Front (SRF) formally signed a peace agreement on Oct 3 in Juba, capital of South Sudan. On federal government’s behalf, the agreement was signed by Lt Gen Mohamed Hamdan Dagalo in presence of Head of the Transitional Sovereign Council Gen Abdel Fattah al-Burhan and PM Abdalla Hamdok. Chad, Qatar, Egypt, the AU, the EU and the UN stood as its guarantors.
Comment:
While the signing of the peace agreement should be counted as a huge positive for both Sudan’s Transitional government and South Sudan’s mediators, its implementation on the ground could be problematic. Further, two powerful rebel groups – the Darfur-based Sudan Liberation Movement (SLM) faction led by Abdelwahid Mohamed al-Nour and the Sudan People’s Liberation Movement-North (SPLM-N) led by Abdelaziz al-Hilu are still to sign any peace agreement with Khartoum, reflecting the challenges still facing the peace process.  

Fatou Bensouda, Chief Prosecutor of Hague-based International Criminal Court visited Khartoum on Oct 20 to demand handing over of the former President Omar Hassan al-Bashir to face trial for genocide and war crimes in Darfour region of Sudan. Sudanese government’s reaction was not provided.

Israel:

On Oct 14, Israel authorised the construction of 1300 new houses for Jewish settlers in Occupied West Bank. According to the Peace Now movement, this authorisation took the total approvals this year to over 12,000 houses.

Syria:

In an interview on Oct 6, President Bashar Al-Assad told Russian news agency RIA: “He (Erdogan) … was the main instigator and the initiator of the recent conflict in Nagorno-Karabakh between Azerbaijan and Armenia.” Ironically, this observation was also supported by Syrian Observatory for Human rights, an opposition war monitor, saying that Turkey has sent more than 1,200 Syrian militants to fight alongside Azeri forces and 72 of them had been killed so far. There were other imputations, including French President Macron and Armenian Foreign Minister who both alleged that Syrian rebel fighters had been gang-pressed by Turkey to fight on Azerbaijan side in the conflict. Russian air raids on training camps of Failaq al-Sham, pro-Turkey Syrian rebel fighters in Idlib area on Oct 26 killing up to 78 persons were thought to be a warning against their involvement in the Nagorno-Karabakh conflict. 

Syrian Democratic Council, a Kurdish militia in north-eastern Syria, released 631 ISIL fighters as a part of an amnesty on Oct 15.

Oman becomes first GCC state to reinstate ambassador in Syria on Oct 5. The UAE had reopened its embassy in Damascus in 2018 at the level of a Cd’A.

Turkey:

During the month, Turkey continued with a high-adrenaline multi-pronged foreign policy pursued by President Recep Tayyip Erdogan resulting in acerbic exchanges with several interlocutors. The EU leaders warned on Oct 2 that they could sanction Turkey if it failed to stop what the bloc views as illegal drilling and research in waters claimed by Cyprus and Greece. Turkey “rejected” the EU threats and asserted that the proposed exploration was within its territorial waters and deployed an exploration ship from Oct 14. The pyrotechnics between Turkey and Greece over this deployment provoked the Greek foreign ministry to formally ask the EU on Oct 20 to suspend the customs union with Turkey. Mediatory efforts by the Secretary-General of NATO, to which both countries belong, resulted on Oct 23 in cancellation of rival military exercises in the disputed zone. However, Ankara subsequently recanted on her promise to withdraw the exploration ship and extended its stay by an extra week till Nov 4 – much to the chagrin of Athens. A strong 7.0 Richter scale earthquake in the shared region on Oct 30 killing 132 persons in Turkey alone led to the airing of some tactical empathetic bilateral noises, but mutual misgivings between various stakeholders were set to resurface.

On Oct 1, Turkey rebuffed Russia, France and U.S. over Nagorno-Karabakh ceasefire moves and reiterated its support to Azerbaijan. (Please also see an entry under “Syria” above)

Iran:

The UN arms embargo on Iran, in place since 2007, expired on Oct 18 under the terms of the JCPOA. However, most observers believed that Iran’s desperate economic situation was unlikely to permit any large-scale acquisition of the advanced defence platforms.

IAEA Director-General Grossi revealed on Oct 27 that Iran had commenced building an underground centrifuge assembly plant to replace the previous one at Natanz damaged in a mysterious explosion last July.

There was no let-up during the month in the US policy of “maximum pressure” on Iran. On Oct 8, Washington slapped fresh sanctions on Iran’s financial sector, targeting 18 banks to further choke off Iranian revenues. The move froze any U.S. assets of the blacklisted entities and generally bars Americans from dealing with them while extending secondary sanctions to those who do business with them. This implied that the foreign banks dealing with Iran risk losing access to the U.S. market and financial system. On Oct 29, the US announced the seizure of Iranian missile parts and sale of 1.1 mn barrels of Iranian petroleum products seized on way to Venezuela.
On Oct 22, Director of US Intelligence alleged that Iran and Russia had tried to interfere in forthcoming US elections. Iran denied this allegation as baseless.
Further reading: “Friends with few benefits: Iran wants a “strategic partnership” with China” The Economist Oct 10, 2020; 
http://go.pardot.com/e/827843/gsjw4h0F51kPiQi7OgM3Rugb8TgfPQ/9tksq/116686161?h=OnYy1s-i8oLeczTm9mCBKn6-OU30eBHcI9_tcFZ7Fbw   

Lebanon:

On Oct 22, President Aoun named Sa’ad al-Hariri as Prime Minister asking him to submit his cabinet for processing.
Comment:
Sa’ad al-Hariri’s nomination as Prime Minister almost a year after he resigned in wake of a popular uprising was a complete repudiation of the popular demand for a replacing the confession-based polity with better governance. It also largely ignored the international efforts, led by France, to push through the political and economic reforms as a price for Western financial assistance needed to rescue Lebanon’s imperilled economy. It showed that in the end, the Lebanese political elite puts collective self-preservation above everything else. Although Saad al-Hariri promised to form a reform-oriented technocratic government in what would be his fourth stint as the PM, odds were stake against him. He was hostage to various political forces impeding any attempts to tackle existential challenges such as banking crisis, financial insolvency, Covid-19 pandemic and general maladministration.  

Lebanon and Israel held two rounds of military-level talks in Naqoura on Oct 14 and Oct 28-29 to settle their maritime boundary dispute. This was the first time in over 30 years that two countries – which are technically at war – held any bilateral contacts. These were held under the UN auspices and were mediated by the United States. This issue acquired importance due to discovery of sizable hydrocarbon reserves in the 1430 sq km of disputed waters.  

Iraq:

On Oct 11, an array of Iran-backed Iraqi militia groups suspended rocket attacks on U.S. forces on condition that Iraq’s government present a timetable for their withdrawal from Iraq. US Secretary of State Mike Pompeo appreciated efforts of the Iraqi government in this regard.

Following criticism of their activities as “outside the law” by a Kurdish ex-Minister, members of Hashd al-Sha’abi, Iran-backed Shia militia, burned several offices of the Kurdish Democratic Party on Oct 17. The militia has also been accused of intimidatory tactics against student protestors and independent journalists.

While reform-seeking youth protestors marked the first anniversary of their uprising on Oct 25, six days later their main stakeout at al-Jamhuriyah bridge in Baghdad was removed by security forces.
Comment:
The movement appears to have fizzled out without achieving most of its objectives due to variety of reasons, including Covid-19 pandemic, stonewalling by politico-religious elite and intimidation. While the new Prime Minister Mustafa al-Kadhimi has taken a more accommodating stand by promising elections next year and avoiding the use of force, he is yet to exercise full authority over the politico-security establishment. 

During the month, the US and Iran both publicly designated each other’s ambassador in Baghdad as a “terrorist”. Reaction, if any, of Iraq, the accredited government, was not known.
Comment
The tit-for-tat declarations would appear comical if not for the surreal and surcharged security situation in Iraq. It also revealed continued “open season” between the two countries operatives in Iraq since the assassination of Iranian Gen Qassem Soleimani by the US drone strike earlier this year.

Libya:

On Oct 31, the GNA Prime Minister Fayez al-Serraj withdrew the voluntary resignation he had offered two months ago without assigning any reasons.

There was tangible progress towards peace in Libya after nearly a decade of mayhem. The United Nations and Germany co-hosted a virtual ministerial meeting of 23 countries on Libya on Oct 5 in Berlin. In his speech at the event, UNSG Antonio Guterres reiterated his sharp criticism for the countries that continued to flout the arms embargo, warning that Libya’s very future was at stake. The fourth round of military-level talks between GNA and LNA began on Oct 19 in Geneva under UNSMIL aegis. These led to the signing of a “permanent ceasefire agreement” four days later. The agreement loftily called upon all foreign fighters to leave the country within three months. The initial political level talks were held in Tunis on Oct 26 to pave the way for formal negotiations from Nov 9 for a country-wide election.

On Oct 2, the European Union removed Aguila Saleh, Speaker of the Benghazi-based parliament and a major powerbroker, from its blacklist. The action was in anticipation of his assistance in fostering a peace deal conducive to the EU-interests in Libya.

On Oct 16, former President Nicolas Sarkozy was formally charged in France with criminal conspiracy in accepting cash in 2007 from Libyan leader Muammar Qaddafi for his electoral campaign. Mr Sarkozy has denied the allegation.

Saudi Arabia:

The kingdom failed in its bid for a seat of the UN Human Rights Commission. In an election on Oct 13, the Kingdom got only 90 votes and thus did not qualify. This was a disappointing outcome for Riyadh.

Turkish Fiancée of late Saudi dissident journalist Jamal Khashoggi file a lawsuit in a US court on Oct 20 alleging Crown Prince Mohammed bin Salman having ordered his killing in the Saudi consulate in Istanbul on Oct 2, 2018, and seeking unspecified damages.

Yemen:

In a complex operation involving the International Red Cross/Crescent Committee (ICRC), Saudi Arabia and Oman, the two warring sides in Yemen exchanged 1056 prisoners of war during Oct 14-16. While most of those were Yemenis, al-Houthis also released 15 Saudis, 2 Sudanese and 2 Americans were also exchanged. Remains of some dead soldiers were also exchanged. The swap, under ICRC supervision, offered hope for a future pathway to a ceasefire and political settlement in a six-year-old conflict that has caused over 100,000 deaths.

On Oct 8, the United Nations called for an immediate end to clashes near Yemen’s main port of Hodeidah after a surge in fighting killing dozens of people despite an UN-sponsored ceasefire in place in the area.

Kuwait:

On Oct 6, Prime Minister Sheikh Sabah al-Khalid al-Sabah formally submitted his cabinet’s resignation to the new Emir Sheikh Nawaf Al Ahmad Al Sabah who asked him to continue. On Oct 7, Emir Sheikh Nawaf al-Ahmad al-Sabah named Sheikh Mesha’al al-Ahmad al-Jaber al-Sabah, 80, currently the deputy head of the National Guard, as the Crown Prince. Sheikh Mesha’al is a younger brother of the late emir.

In a speech to the outgoing National Parliament on Oct 20, Emir Sheikh Nawaf Al-Ahmed urged National Unity in face of challenges such as economy in crisis and Covid-19 pandemic. The country faces a fiscal deficit of $46 bn in 2020 or nearly third of its GDP. The parliamentary elections are due on Dec 5.

Qatar:

Afghanistan’s President Ashraf Ghani arrived in Qatar on Oct 5 for a bilateral meeting with top leaders. He, however, not hold a meeting with Taliban officials even as structured intra-Afghan peace talks commenced on Oct 6 in Doha.

On Oct 7, Turkish President Recep Tayyip Erdogan arrived in the Doha for talks with Qatar’s Emir Sheikh Tamim bin Hamad Al Thani.

On Oct 8, Qatar submitted a formal request to the United States to buy stealthy F-35 fighter jets, in a deal that if pursued could strain U.S. ties with Saudi Arabia and Israel.

On Oct 6, Qatar announced that it was planning to loosened restrictions on foreign property ownership under which non-Qataris can buy real estate outright at more locations. Qatar is implementing a two-tiered residency programme under which buyers of a property worth $1m or more will be eligible for permanent residency with benefits including healthcare and education.

Algeria:

On Oct 29, President Abdelmajid Tebboune, 74, was transferred to a hospital in Germany for unspecified medical tests. Earlier on Oct 24, he was admitted to a local hospital after a number of his staffers tested positive for Covid-19. His sudden departure two days before Algeria’s National Day on Nov 1 – also the date for National Referendum for the proposed Constitution – was quite conspicuous.

On Oct 1, Mark Esper, the US defence secretary, visited Algiers – first such visit in 14 years – aimed at deepening the bilateral cooperation. He also visited Tunisia and Morocco.

Jordan:

On Oct 11, King Abdullah swore in Bisher al-Khaswaneh as the new Prime Minister replacing Omar al-Razzaz who resigned a week ago. The transition was prompted by widespread unrest about the deteriorating economy and spread of Covid-19 pandemic cases. The country is scheduled to have a parliamentary election on Nov 10.

Egypt:

The first round of parliamentary elections, held on Oct 24, was conspicuous with low voter turnout.

Nile Waters Dispute:

The AU Presidency (South Africa) mediated talks between Ethiopia, Sudan and Egypt on the issues related to the Grand Ethiopian Renaissance Dam (GERD) resumed on Oct 27 after a hiatus of 7 weeks. Earlier, US President Trump publicly suggested on Oct 23 that Egypt would eventually bomb the dam if an agreement is not reached over control of operations and water flow. Ethiopia has denounced “belligerent threats” and Prime Mister’s office said that the country would not cave in face of such threats. On Oct 5, Ethiopia banned flights over the GERD.

WANA and Terrorism in France:

Inter-faith friction in France came in for harsh focus in the WANA region owing to two cases of terrorism during the month. On Oct 16 a Chechen refugee in France beheaded a school teacher in a Paris suburb for displaying some cartoons of Prophet Mohammed (published a few years ago in French satirical weekly Charlie Hebdo) to illustrate the concept of freedom of expression. The murderer was shot dead by police. Later on Oct 29, a Tunisian attacker killed three persons in a church in Nice before being critically injured. France, home to Europe’s largest Muslim community, reacted with shock and indignation at these two incidents widely seen as an attack on laïcité or secularism as well as the freedom of expression, both considered the fundamental values of the French society. Amidst various assertions, French President Macron described Islam as “a religion in crisis” and promised concerted action to defend the French values He conspicuously ignored the contrarian narrative of such cartoons being considered blasphemous in Islam. This led to widespread public indignation in Muslim world, in general, and in some WANA countries, in particular where calls for boycott of French goods were made. Turkish President Erdogan publicly called for “mental checks” of French President Macron leading to withdrawal of French Ambassador from Ankara.   

II) Economic Developments

Regional Economic Outlook:

On Oct 13, IMF released it semi-annual Middle East North Africa Economic Outlook (MEO) which is summerised in the Table below:

MENAP Region: Selected Economic Indicators, 2000–21
(Percent of GDP, unless otherwise indicated)
                                                                                        Average                                                                        2000–16201720182019Projections
20202021
MENAP1
Real GDP(annual growth)4.62.41.80.9-4.42.9
of which non-oil growth5.62.82.42.4-3.92.7
Current Account Balance7.320.63.10.9-3.622.6
Overall Fiscal Balance2.225.622.724.1-10.327.6
Inflation (year average; percent)6.87.28.97.39.59.9
MENAP oil exporters
Real GDP(annual growth)4.81.50.420.3-6.63.4
of which non-oil growth6.02.01.32.1-5.83.4
Current Account Balance10.71.86.63.2-3.422.0
Overall Fiscal Balance4.825.221.223.0-11.227.7
Inflation (year average; percent)6.53.58.06.67.58.4
MENAP oil exporters excl. conflict countries and Iran
Real GDP(annual growth)5.220.31.61.1-6.52.4
of which non-oil growth6.81.82.02.7-6.13.2
Current Account Balance12.61.36.93.9-3.722.3
Overall Fiscal Balance6.025.521.022.3-10.727.4
Inflation (year average; percent)3.50.92.220.91.72.8
Of which: Gulf Cooperation Council (GCC)
Real GDP(annual growth)4.720.21.90.7-6.02.3
of which non-oil growth6.42.11.72.4-5.72.9
Current Account Balance14.32.88.65.8-1.80.4
Overall Fiscal Balance7.625.621.522.0-9.225.7
Inflation (year average; percent)2.90.22.221.51.52.9
MENAP oil importers
Real GDP(annual growth)4.33.94.12.8-1.02.2
Current Account Balance22.626.826.725.8-4.124.4
Overall Fiscal Balance25.926.626.927.3-7.927.3
Inflation (year average; percent)7.314.110.38.612.612.3
MENA1
Real GDP(annual growth)4.62.01.20.8-5.03.2
of which non-oil growth5.72.41.92.5-4.43.0
Current Account Balance7.920.34.01.3-3.922.7
Overall Fiscal Balance2.725.622.323.7-10.627.7
Inflation (year average; percent)6.77.79.77.59.410.1
Arab World
Real GDP(annual growth)4.81.62.42.0-5.03.2
of which non-oil growth6.02.02.62.7-4.42.8
Current Account Balance8.820.93.71.4-4.823.5
Overall Fiscal Balance3.126.422.423.3-10.827.9
Inflation (year average; percent)4.77.36.22.76.27.1
Sources: National authorities; and IMF staff calculations and projections.
MENAP stands for Middle East North Africa and Pakistan
12011–21 data exclude Syrian Arab Republic.
Notes: Data refer to the fiscal year for the following countries: Afghanistan (March 21/March 20) until 2011, and December 21/December 20 thereafter, Iran (March 21/March 20), and Egypt and Pakistan (July/June).
MENAP oil exporters: Algeria, Bahrain, Iran, Iraq, Kuwait, Libya, Oman, Qatar, Saudi Arabia, the United Arab Emirates, and Yemen.
GCC countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates.
MENAPoil importers: Afghanistan, Djibouti, Egypt, Jordan, Lebanon, Mauritania, Morocco, Pakistan, Somalia, Sudan, Syria, Tunisia, and West Bank and Gaza.
Arab World: Algeria, Bahrain, Djibouti, Egypt, Iraq, Jordan, Kuwait, Lebanon, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Somalia, Sudan, Syria, Tunisia, United Arab Emirates, West Bank and Gaza, and Yemen.

The Salient points emerging from 83-page MEO, the following IMF Media Briefings and IMF MD Kristalina Georgieva’s interaction with GCC FMs and Central Bankers are the following:

  • The IMF revised its forecast for global growth – 4.4% for 2020 – less severe than its summer forecast of -5.2% but still on track for the worst performance since the Great Depression. It projected growth of +5.2% in 2021, which is 0.2% below their June projection.
  • Latin America and the MENA were the two worst-affected regions, respectively.
  • The IMF revised its economic forecast for the MENA region upward, with an expected contraction of 5% this year – slightly better than the 5.7% it the IMF had forecast in July.
  • The IMF was particularly concerned with the “fragile states” defined as those are racked by armed conflict or steeped in political and economic uncertainty such as Afghanistan, Iraq, Lebanon, Libya, Somalia, Syria, and Yemen. For instance, it expected Lebanon’s economy to shrink by 25% this year– 13% more than what IMF predicted in April and second only to Libya as the worst performing in MENA.
  • The region’s oil exporters are expected to experience a $224 bn revenue shortfall this year.
  • The economies of the six GCC states are expected to collectively shrink 6% this year – a marked improvement over the IMF’s July forecast for a 7.3% contraction. It would be followed by a growth of 2.3% in 2021. The specific rates of GDP change of some are as follows: Qatar (-4.5% in 2020 and +2.5% in 2021), Kuwait (-12.1%; +2.5%), Saudi Arabia (-5.4%; +3.1%) Oman (-10.0%; -0.5%).
  • The corporate default risk and credit risk for region’s banks with potential losses that could amount to $190 bn, or 5% of GDP.
  • Tunisian economy will see a contraction by 7% this year followed by 4% growth in 2021.
  • IMF MD said on Oct 14 that the Fund is “ready and very willing” to work with Lebanon to solve its financial problems and restructure its debt, but needs a partner in the Lebanese government.

Mohammed al-Jadaan, finance minister of Saudi Arabia, current G20 chair, presided over a meeting of the financial leaders from the Group of 20 major economies on Oct 14. He underscored the urgent need to bring the spread of the coronavirus pandemic under control, and vowed to “do whatever it takes” to support the global economy and financial stability. In a lengthy communiqué, G20 finance ministers and central bank governors also agreed in principle for the first time on a “Common Framework” to deal on a case-by-case basis with the rising number of low-income countries facing debt distress. The Paris Club of official creditors also backs the framework.

Oil Matters:

The Organisation of the Petroleum Exporting Countries (OPEC) published its annual World Oil Outlook (WOO) for 2020 on Oct 8. Over the short term, it projected the global oil use rising from 90.7 mbpd in 2020 to 97.7 mbpd next year, reach 99.8 mbpd in 2022 – above the 2019 level – and grow to 102.6 mbpd by 2024. Over the long term, it foresaw the oil demand to reach 107.2 mbpd in 2030 before peaking at 109.3 mbpd in 2040 and decline slightly to 109.1 mbpd by 2045. While conceding the impact of the demand reducing measures such as WFH, EVs, efficiency improvements etc, it asserted that in its reference case, “Oil will continue to account for the largest share of the energy mix by 2045.” The OPEC peak oil forecast is much rosier than by some major oil companies. For instance, BP’s report in September claimed that the global oil demand may have already peaked in 2019. Within a week of WOO, OPEC’s optimism about rising oil demand was put in doubt by a resurgence of Covid-19 pandemic in major oil-consuming regions such as the US and Europe. As an afterthought, OPEC+ stated on Oct 19 pledging to support the oil market in case demand falls again due to the second wave of the pandemic. 

Oil-Related Developments in Individual WANA Countries:

According to a Reuters report on Oct 7, Saudi Aramco was planning to raise its oil production capacity by one mbpd to 13 mbpd to monetise its hydrocarbon assets before they lose value due to receding demand. The Kingdom has nearly 20% of global oil reserves with extraction cost as low as $4 per barrel. This strategy seems contrary to those followed by most oil majors aimed at diversifying into renewables, etc.

Following the improved politico-security situation in Libya, the National Oil Company gradually lifted force majeure on oil production and export facilities, culminating in the resumption of production on Oct 26 at the el-Feel oilfield. NOC plans to jack up production to 800,000 bpd within two weeks and 1 mbpd by year end. The return of Libyan oil exports, which remained negligible since January 2020 due to oil blockade by LNA was likely to worsen the oversupplied oil market.

Turkey revised upwards the proven reserves of natural gas recently discovered off its Black Sea coast to 405 bcm, These were located 100 kms off the seashore at an average depth of 4775 meters. Turkey plans to begin the gas extraction from 2023 reaching a steady rate of 15 bcm annually by 2025. 

Other Country-Specific Economic Developments:

Turkish Lira continued to depreciate during the month, ending with a value of 8.2560 against the US Dollar on Oct 28, having fallen by 28% in 2020.

On Oct 11, NCB and SAMBA, two Saudi banks, agreed to merge to create GCC’s third-largest bank with a total asset value of $223 bn. The merger was aimed at overcoming economic adversities rooted in the oil price slump and Covid-19 pandemic. 

On Oct 4 the head of Saudi Chambers of Commerce called for a boycott of Turkish products due to Ankara’s alleged adversarial posture. In Q2/20, Turkey was Saudi Arabia’s 12th largest trade partner by total import value.

Several large businesses in the UAE reported significant losses during the month. On Oct 2, shareholders of Arabtec, one of the biggest construction companies based in Dubai, authorised its board to wind up the firm due to ‘untenable financial situation.’ Unsustainable debt burden led to the bankruptcy of another Dubai-based construction firm, Drake & Scull. Similarly, Abu Dhabi-based Al Jaber Group also struggled to service its debts caused by the real estate crisis in the UAE.

On Oct 16, Rating agency S&P cut Oman’s sovereign rating for the second time this year to ‘B+’ or four ranks below investment grade. It kept the outlook as stable. Other rating agencies have already downgraded the country citing the likelihood of bad economic numbers such as 10% decline in GDP, fiscal deficit reaching 19% of the GDP and foreign debt rising to 89% of the GDP. After a gap of one year, on Oct 21 Oman was constrained to offer to sell $1.25 bn as sovereign notes and $750 mn as 12-year securities. 

Qatari GDP contracted by 6.1% in Q2/20, its worst performance in 8 years.

III) Bilateral Developments

India observed a day’s State Mourning on Oct 4 as a mark of respect on the passing away of HH Sheikh Sabah Al-Ahmed Al-Jaber Al-Sabah, Amir of the State of Kuwait.

Seven Indians working at a construction and Oil field supplies company in Libya, who were kidnapped at Asshwerif on Sep 14 were released on Oct 11. They reached India on Oct 28. In its statement on their release, Indian Ministry of External Affairs conveyed its “sincere thanks to the Libyan authorities and the tribal elders from the region for their steadfast cooperation in securing the release of our nationals unharmed.”

The Economic Times reported on Oct 12 that UAE-based Caracal International, selected by Indian Ministry of Defence to supply over 93,000 close-quarter battle carbines, was in negotiations with prospective Indian partners to undertake production in India.

India’s crude throughput in Sep 2020 rose by 13.4% over the previous month to 4.33 mbpd. Nevertheless, the figure was 8.7% below Sep 2019 figure; it was also significantly lower than thoroughput of 5.01 mbpd in March 2020.

During the month, India’s Reliance Industries Ltd (RIL) garnered more investments from the UAE and Saudi Arabia. On Oct 1, Abu Dhabi Emirate fund Mubadala Investments agreed to invest $852.84 mn in Reliance Retail, RIL’s retail arm. On Oct 6, Abu Dhabi Investment Authority (ADIA) also announced investment over $751.13 mn in the same RIL concern. On Oct 31, RIL stated that ADIA and Saudi Arabia’s Public Investment Fund (PIF) would each invest $506 mn to acquire a total 51% in Digital Fibre Infrastructure Trust (DFIT), an InvIT established to manage Reliance Jio’s fibre optical assets.

On Oct 9, embattled UAE-based Indian billionaire B.R. Shetty, owner of NMC group,  filed a 55-page FIR with Indian authorities accusing two Indian banks, Bank of Baroda (BoB) and Federal Bank, of colluding with his former executives to embezzle funds. NMC Group, saddled with nearly $6 bn in bad debts, is currently under investigation and receivership.

(The views expressed are personal)

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