IA) Political Developments: Pan-Regional and Global Issues
Regional and International Developments
- The flux and fog about the United States (US) mediated rapprochement between Israel and Saudi Arabia persisted during the month with the stakeholders making periodic remarks swinging between the difficulties and early conclusion of the process. Thus, Reuters reported in an exclusive on Sept 29 that Saudi Arabia is determined to secure a military pact requiring the US to defend it in return for opening ties with Israel and will not hold up a deal even if Israel does not offer major concessions to Palestinians in their bid for statehood. There was no comment on this report from the three sides. US President Joe Biden and Israeli PM Benyamin Netanyahu met on Sept 20 on the sidelines of the UNGA session in New York and pledged to work for Israel’s normalisation with Saudi Arabia. This was their first meeting since Netanyahu’s return to power nearly 9 months ago. The next day, the Israeli foreign minister said that a framework of the grand bargain could be possible by early 2024. In a Fox TV interview on Sept 20, Saudi Crown Prince and PM Mohammed bin Salman said that his country was moving steadily closer to normalising relations with Israel. But he also warned that if Iran gets a nuclear weapon, “we have to get one.” However, taking a more pragmatic view were the US secretary of state (“Normalisation remains difficult”, Sept 15) and the US NSA (“Still work to do”, Sept 15).
- In his speech to the annual session of the United Nations General Assembly (UNGA) on Sept 21, Palestine Authority (PA) President Mahmoud Abbas emphasised that Middle East peace will not be achievable until the Palestinians are granted full rights. A Saudi delegation led by their Amman-based non-resident ambassador to PA paid a high-profile visit to Ramallah on Sept 24-26 during which he described a decades-old Arab “land-for-peace” offer on Tuesday as a pillar of any normalisation of ties with Israel, an apparent attempt to signal that Riyadh has not abandoned the Palestinian cause. Earlier, BBC disclosed that in their separate discussions with the American diplomatic delegation in Amman and the Saudi NSA in Riyadh during the first week of September, PA NSA had following specific demands for backing the normalisation: (i) Transferring parts of the West Bank currently under full Israeli control (known as Area C under the 1990s Oslo peace accords) to the PA; (ii) A “complete cessation” of Israeli settlement growth in the West Bank; (iii) Resuming Saudi financial support to the PA, which was stopped completely three years ago, to the tune of around $200 mn per year; (iv) Re-opening the US consulate in occupied East Jerusalem – the diplomatic mission to the Palestinians – that was shut down by President Donald Trump; (v) Resuming US-brokered negotiations between Israel and the Palestinians from where they stopped under then-Secretary of State John Kerry in 2014.
- On Sept 26, an Israeli minister became the first publicly known official of his country to land in Saudi Arabia to attend a UN tourism conference.
- The second round of trilateral negotiations on the $4.2bn Grand Ethiopian Renaissance Dam (GERD), between Ethiopia, Sudan and Egypt – three Nile riparian states – ended in Addis Ababa on Sept 25 without reaching any conclusion. Ethiopia reiterated its commitment to continue negotiating in good faith. Earlier on Sept 10, Ethiopia’s Prime Minister Abiy Ahmed announced the successful completion of the fourth and final filling of the GERD.
- The UN Human Rights Commission disclosed on Sept 19 that over 2,500 migrants had perished or were missing while trying to cross the Mediterranean Sea to the southern European coast since the beginning of 2023. According to the same source, 186,000 succeeded in making the crossing.
WANA and Ukraine Conflict:
- Turkish President Recep Tayyip Erdogan met Russian President Vladimir Putin in Sochi on Sept 4. Turkish President could not achieve his main objective of persuading Russia to reinstate the grain export deal as his Russian counterpart refused to do so because the West had failed to remove obstacles created by sanctions on its own grain and fertiliser exports. It also complained that too little of the Ukrainian grain freed by the Black Sea deal was getting to the poorest countries. As a sop of sorts to Turkey and African consumers, two days later Moscow announced that Turkey had agreed in principle to handle 1 mn tons of grain that Russia plans to send to Africa at a discounted price with financial support from Qatar.
- On Sept 19 the US issued fresh Iran-related sanctions on Tuesday, targeting seven individuals and four entities in Iran, Russia, China and Turkey in connection with Tehran’s drone and military aircraft development. Earlier, on Sept 6 several news media outfits reported that the representatives of the US, the UK and the EU had visited the UAE to jointly press the gulf country to halt shipments to Russia of proscribed goods, such as advanced computer chips, electronic components and other so-called dual-use products. The US AI hardware producers, such as Nvidia and AMD, had disclosed that the US government had imposed curbs on chips designed to speed up machine-learning tasks for customers in the Middle East. However, the Department of Commerce stated that the US “has not blocked chip sales to the Middle East” but declined to comment on whether it had imposed new requirements on specific US companies. A UAE official said the country “strictly abides by UN sanctions and has clear and robust processes in place to deal with sanctioned entities”. (Comment: The UAE’s freewheeling and well-globalised economy could be a useful conduit for procuring such advanced IT hardware for other usual suspects as well. Relevant to note that sanctions on Russia were not imposed by the US but by the US-led West. Further Reading: “Abu Dhabi throws a surprise challenger into the AI race”, The Economist 21/9.)
WANA Regional Security and Terrorism
- Israel ended the week-long ban on imports into Gaza on Sept 10. It was imposed on Sept 4 following allegedly finding 16 tons of ammonium nitrate explosive precursor hidden in goods imported from Turkey. Israel also banned entry of workers from Gaza following the escalation of tensions on the common border. 18,000 Gazans work in Israel.
- Five Israeli Arabs were killed in a shooting in their community on Sept 27. 180 persons have died in such fratricidal shootings since the beginning of 2023.
- On Sept 21, Israeli forces killed five Palestinians during a raid on Jenin refugee camp, a West Bank militancy hotspot.
- Ongoing sporadic fighting among two Palestinian factions in Ein el-Hilweh camp (in Lebanon) flared up again on Sept 7 and 13 leaving 15 dead.
- US Centcom announced the capture of two operatives of the Islami State in Syria on Sept 25 and 30 respectively.
- On Sept 29, the Netherlands announced that 120 more Dutch soldiers would be deployed in Iraq from the beginning of 2024, in addition to 145 soldiers already positioned there under the NATO alliance mission.
Pakistan and WANA Region:
- On Sept 28, Pakistan’s Interim Commerce Minister Gohar Ejaz and Gulf Cooperation Council (GCC) Secretary General Jassem Mohamed Albudaiwi concluded the final round of negotiations for a free trade agreement (FTA) at the GCC headquarters in Riyadh. A preliminary deal on the FTA was signed. In a joint statement the two parties “looked forward to the expeditious signing, ratification, and implementation of the agreement.” (Comment: If taken to the logical conclusion, this would be the first FTA signed by the GCC as a group. India, too, has been negotiating for such an FTA with the GCC since last year.)
China and WANA Region:
- President Bashar al-Assad of Syria visited China to attend the inaugural ceremony of the Asian Games on Sept 23 at Hangzhou. He met Chinese President Xi on Sept 22 who called for the lifting of the Western sanctions on Syria. The two sides also decided to upgrade their bilateral ties to a “strategic partnership.” (Comments: Although an enhanced bilateral relationship serves the interests of both countries as they face Western attempts at economic ostracisation, there were intrinsic limits to growth. Chinese companies do not wish to run the gauntlet of Western sanctions to rebuild Syria, which still has major security and economic challenges. Perhaps for this reason, China did not announce any large package of assistance to Syria after the visit.)
- On Sept 18 President of the Chinese e-commerce giant Alibaba Group Holding Ltd met President Tayyip Erdogan of Turkey on the sidelines of the UNGA session in New York. He informed that Alibaba had invested $1.4 bn in Turkey through its local unit, and it plans to invest $2 bn in facilities such as a data and logistics centre in Ankara and an export operation centre at Istanbul Airport. On Sept 15, the Energy Minister said that Turkey was closing in on an agreement with China for the construction of its second nuclear power plant, following the first, still under construction by Russia.
- On Sept. 8 the UAE Sovereign Wealth Fund Mubadala opened an office in Beijing.
WANA and Football-related Issues:
- In a TV interview on Sept 22, Saudi Crown Prince and PM Mohammed bin Salman (MbS) said he “did not care” about allegations about “sportswashing” and that he will continue funding sport if it adds to the country’s gross domestic product (GDP). This came amidst media reports claiming that Saudi club al-Ittihad had offered Liverpool football club a record $270 mn for Mohammed Saleh, an Egyptian player. According to these reports, Liverpool had rebuffed the offer.
- On Sept 20, US Secretary of State Anthony Blinken had a meeting with the Foreign Ministers of the Gulf Cooperation Council in New York on the sidelines of the UNGA session. Their joint statement urged Iran to cooperate fully with the IAEA.
- On Sept 8 at 22.11 hrs local time, a powerful earthquake of magnitude 6.8 struck Al-Haouz, the epicentre, and Taroudant provinces of Morocco’s High Atlas Mountains region, 71km southwest of Marrakesh. This calamity led to the death of 2,946 people and injuries to 5,674. While the affected area was sparsely populated its difficult terrain impeded the relief work. On Sep 20, the Moroccan government announced an $11.7 post-earthquake recovery plan over the next 42 months.
- On the night of Sept 10-11, heavy rains due to Storm Daniel caused the collapse of the two dams at Derna and Mansur, inundating much of Derna city on the Mediterranean coast in eastern Libya. The estimates of deaths and devastation varied from 6,000 to 20,000. Derna city had a population of nearly 100,000. The disaster was attributed to the lack of an early warning system and poor maintenance of the two dams built over three decades ago. (Further Reading: “The lethal negligence of politicians in Morocco and Libya” The Economist, 13/9.)
IB) Political Developments
In an interview aired by CNN on Sept 24, President Ibrahim Raisi predicted that the normalisation deals between Israel and the Arab states shall fail.
The protracted and indirect deal between Iran and the US involving an exchange of mutually held prisoners and approximately $6 bn of Iranian funds frozen in South Korea was implemented during the month with Oman, Switzerland and Qatar playing as intermediaries. On Sept 18, five of the imprisoned nationals were exchanged between the two countries at Doha. The Iranian funds were also deposited in Qatari banks, with the amount being spent on mutually agreed humanitarian purposes. The deal came to be criticised by the hardliners on both sides and the White House had to issue a statement on Sept 13 pointing out that the funds released belonged to Iran in the first place. (Comment: Though the deal implemented represented higher modus vivendi between the two long-estranged countries, most observers do not believe this to mark a bilateral transformation. The US and Iran have strongly entrenched mutually antagonist positions on nuclear, WMD, oil and other sanction and regional geopolitical issues, which are not affected by this side issue. Further Reading: “Iran’s $6bn hostage deal is part of a broader diplomatic strategy” The Economist, Sept 18.)
There was no let-up in development on Iran’s nuclear issue during the month under review. On Sept 4, the IAEA reported no progress on the issue of Iran expanding its stock of weapon-grade enriched uranium. Further Iranian decision to bar several inspectors was condemned by the IAEA Chief on Sept 16. On Sept 14, E3 countries decided to retain their existing sanctions on ballistic missiles and nuclear programmes of Iran. On Sept 18, E3 and the US issued a statement urging Iran to reverse the ban on some of the IAEA inspectors. On Sept 22, US Secretary of State Anthony Blinken described Iran as “not a responsible actor” concerning its nuclear programme.
On Sept 21, the Iranian parliament passed a bill increasing the prison term up to 10 years in jail for wearing an “inappropriate dress.” The bill needs to be endorsed by the Guardians’ Council before becoming law. (Comment: The bill was passed soon after the first anniversary of Mehsa Amini’s death in Gasht-e-Irshad custody on Sept 16 and was marked more outside Iran than inside. This showed that the months of public protests on the Hijab issue had hardened the conservative rulers of Iran.)
Russian defence minister visited Iran on Sept 19-20. In a statement, he said that his visit has taken the bilateral ties to a new level.
Iran claimed two strategic accomplishments during the month: On Sept 27, it successfully launched the Noor-3 satellite; On Sept 22 it paraded the Mohajer-10 drone with a 2000 km range (claimed to be the longest range for a drone) and capacity to carry a load of 300 kgs while staying afloat for 24 hours at one stretch.
On Sept 8, the US authorities seized 980,000 barrels of Iranian crude worth over $90 mn from super-tanker Suez Rajan for violating the unilateral sanctions on Iranian crude exports.
The Saudi ambassador-designate arrived in Iran on Sept 5, thus ending a seven-year hiatus in diplomatic ties. This was preceded by the decision of the Saudi clubs to play their Champions League games in Iran.
President Recep Tayyip Erdogan kept a hectic diplomatic profile during the month. He visited Azerbaijan (Sept 25) during the Nogorno-Karabakh crisis and made it a point to visit the Nakhchivan exclave proposed as a corridor via Armenia joining Turkey with Azerbaijan. On the sidelines of the UNGA session, he met (19/9) Israeli PM Netanyahu in New York. This was their first meeting and indicated the thawing of bilateral ties after a long spell of acrimony. The day after Erdogan claimed that both sides would soon take steps towards offshore drilling for oil and gas. He participated in the G20 Summit held in New Delhi (Sept 9-10) and met Egyptian President el-Sisi on the sidelines. On his return, he opposed the idea of India Middle East Europe Economic Corridor, saying, “There is no corridor without Turkey.” On Sept 26, he said that Turkey would back Sweden’s bid to join NATO if the US kept her promise to supply Turkey with F-16 fighters.
The foreign ministers of Greece and Turkey met in Ankara on Sept 5 indicating a revival of contacts between neighbours across the Aegean Sea often marred with dispute over territory and Cyprus.
Turkish Central Bank raised its rate by 5% to 30% to fight the annual inflation which was 59% in August.
On Sept 25, Saudi Energy Minister Prince Abdulaziz bin Salman told the IAEA’s Annual General Conference “The kingdom has recently decided to rescind its Small Quantities Protocol and to move to the implementation of a full-scope Comprehensive Safeguards Agreement,” Although Saudi Arabia’s first nuclear reactor is yet to reach criticality, media reports have suggested that the Kingdom is contemplating a Chinese proposal to build a nuclear power plant.
The Wall Street Journal (WSJ) reported on Sept 10 that the United States and Saudi Arabia were in talks to secure the mining of cobalt, lithium and other metals required in electric car batteries, laptops and smartphones. According to the WSJ report, a state-backed Saudi venture would buy stakes in mining assets worth $15 bn in African countries such as the Democratic Republic of Congo, Guinea and Namibia.
On Sept 4, Huawei announced the opening of a cloud data centre in Saudi Arabia as a part of its plan to invest $400 mn in that country over the next five years.
On Sept 12, the Israeli Supreme Court began hearing the arguments on the constitutional validity of the controversial bills passed by the Knesset earlier this year to curb the judiciary’s prerogatives.
Israeli Defence Minister accused Iran of setting up an airport capable of handling mid-size aircraft in southern Lebanon 20 kms from the Israeli border. (Comment: The said airport is more likely to accommodate large drones – some of them weaponised – built from Iranian blueprints. The drones launched from the site could be used for both internal and external operational activities. Apart from Iran’s formidable drone armoury, Hezbollah has also been investing heavily in drone technology.)
On Sept 4, Israel finally opened its Bahrain embassy in Manama. Papua New Guinea opened its embassy in Jerusalem on Sept 5, becoming the fifth country to do so. On Sept 21, the Democratic Republic of Congo (DRC) announced that it too shall open its embassy in Jerusalem; Israel is to open its embassy in Kinshasha.
On Sept 27, the US admitted Israel to its list of countries whose citizens can enter without a visa.
Sudan Armed Forces (SAF) Chief Gen Abdel Fattah al-Burhan sought to gain international acceptance by visiting South Sudan and the UNGA. In his address to the UNGA, he warned the UN that months of war in his country could spill over into Sudan’s army chief warned the United Nations that months of war in his country could spill over into the region, and he called for international pressure to be placed on the paramilitary forces he is fighting, including their designation as “terrorists”. the region. He also called for international pressure on the Rapid Support Forces (RSF) he is fighting, including their designation as “terrorists”. In an interview with al-Jazeera in New York he promised that soon after the ceasefire, a comprehensive political process towards restoring peace and preparing for elections after a short transitional period would be initiated. On his return leg from New York, he visited Qatar and was received by Emir Sheikh Tamim.
An army drone killed over 40 people in Khartoum on Sept 10. Earlier on Sept 6 over 32 civilians were killed in SAF shelling in the Ombada neighbourhood in western Omdurman. Relevant to add that the SAF-RSF conflict which began on April 15 this year, has so far caused 5,000 deaths and displaced 5 mn people as refugees including nearly a million have fled to neighbouring countries.
On Sept 6, the Sudanese government led by Gen al-Burhan formally dissolved the RSF.
On Sept 6, the US imposed sanctions on two generals of the RSF.
In a sign of a continuing boom in real estate, CBRE consultancy announced on Sept 12 that the average apartment prices in Dubai have risen by 20% y/y in August 2023.
On Sept 14, Dubai police seized 86 mn Captagon pills weighing 13 tons hidden in a furniture consignment. The recreational narcotics pills were worth nearly $1 bn in the open market. It was believed to be one of the largest seizures in the world.
After Nigeria permitted the repatriation of its profits, Emirates Airline resumed flights to West African countries on Sept 11.
The armed clashes between US-backed Self Defence Forces (SDF), a Kurdish militia effective against ISIS, and Arab tribes continued during the first week of September despite the US officials visiting Deir el-Zor to defuse tensions. Dozens of people are estimated to have been killed. Ultimately on Sept 7, the SDF chief promised to meet some of the Arab tribes’ demands.
Israel attacked several targets in Hama, Tartous and other coastal areas on Sept 13.
Iraq’s Federal Supreme Court ruled this month that a bilateral agreement regulating navigation in the Khor Abdullah waterway between Iraq and Kuwait was unconstitutional. The court said the law ratifying the accord should have been approved by two-thirds of parliament. Kuwait’s prime minister described the Iraqi court ruling as containing “historical fallacies” and called on Iraq to take “concrete, decisive and urgent measures” to address it. Reacting to the problem in a carefully worded statement on Sept 26, Iraqi PM Mohammed Shia Al-Sudani said the country wants a solution that does not conflict either with its constitution or with international law. He emphasised that Iraq respected the sovereignty and territorial integrity of Kuwait and was committed to all its bilateral agreements with countries and to the resolutions of the UN Security Council., a statement from the prime minister’s media office said on Tuesday. (Comment: Although the UN-demarcated Kuwait-Iraq land border In 1993 after Iraq’s invasion of Kuwait was undone, it did not cover their maritime boundaries. This was left for the two countries to resolve. A maritime border agreement between the two nations was reached in 2012 and ratified by each of their legislative bodies in 2013. Ten years on, Iraq’s Federal Supreme Court has scratched the old wound of Saddam Hussein’s invasion of Kuwait. The court seems to have a penchant for such disruption, already witnessed in its ruling over various issues on Kurdish autonomy.)
On Sept 19, PM al-Sudani met US Secretary of State Anthony Blinken on the sidelines of the UNGA session in New York. Blinken conveyed an invitation from President Biden for a visit to the White House “soon.”
There were several developments concerning relations between the Iraqi central government and the Kurdish Regional Government (KRG). On Sept 18, the Iraqi government announced an increase of its annual financial support to KRG to $1.6 bn. On Sept 12, Iraq started relocating anti-Iranian Kurdish fighters away from the bilateral border, meeting an Iranian demand. On Sept 3, Iraqi security forces were deployed in Kirkuk after four persons were killed in protest against an Iraqi Federal Supreme Court decision to delay a building handover by the Iraqi army to KDP. On Sept 27, a wedding fire killed over 100 persons in Mosul.
On Sept 14, a US Treasury official urged the Iraqi government to act to curb illegal transfers of US dollars to Iran by private Iraqi banks.
On Sept 26, Iraq announced that an 18 km railway line linking Basrah in Iraq with Shalamja in Iran would be completed in 18 months. This would be the first train link between the two countries and would mainly facilitate travel by the Iranian pilgrims to the Shite holy sites in Iraq.
Renegade general Khalifa Haftar, whose forces dominate eastern Libya, has held talks with Russian President Vladimir Putin and Defence Minister Sergei Shoigu in Moscow on Sept 28. It was the first meeting between the two men since 2019. (Comment: Their talks are likely to have centred on the future of hundreds of Wagner personnel remaining stationed in the areas under Haftar’s control.)
On Sept 25, the National Elections Authority announced that the vote to elect the new President of the Republic will be held on December 10-12. While a handful of politicians have already announced their bids to run for the country’s highest post, observers expect President Abdel Fattah el-Sisi to sail through the elections.
On Sept 22 U.S. prosecutors charged Senator Bob Menendez, Chairman of the Senate Foreign Relations Committee and his wife with taking bribes from three New Jersey businessmen in exchange, inter alia, to benefit the government of Egypt.
On Sept 5, Egyptian President Abdel-Fattah El-Sisi warned that a surging population is leaving the country of more than 104 million people with an increasingly unaffordable burden. The number of Egyptians has almost quadrupled since 1960 and, if unchecked, could nearly double again by 2050.
Egypt’s General Authority for Supply Commodities (GASC) bought about 480,000 metric tonnes of Russian wheat on Sept 5.
On Saudi invitation, an al-Houthi delegation visited Riyadh for discussions on the resolution of issues related to the 8-year-old Yemeni civil war. They left on Sept 19 after five days of talks that made some progress on the main sticking points, including a timeline for foreign troops exiting Yemen and a mechanism for paying public wages. The other focus points of these talks were a full reopening of Houthi-controlled ports and Sanaa airport and post-war construction. An agreement between al-Houthis and Saudi Arabia would pave the way for the United Nations to restart a broader political peace process. On Sept 20, the Saudi defence ministry reaffirmed Riyadh’s commitment to promote the dialogue in Yemen. However, an al-Houthi drone attack on Sept 25 led to the death of 4 Bahraini soldiers, putting the future of the Yemeni civil war, which has been under a relatively peaceful cease-fire for nearly a year now, in jeopardy.
Yemenia, the only airline servicing Sanaa airport for civilian flights only to Amman, announced on Sept 30 that it was closing down its operations due to the al-Houthi government refusing to release its accumulated funds of $80 mn.
On Sept 13, Bahrain’s Prime Minister and Crown Prince Salman bin Hamad al-Khalifa and US Secretary of State Antony Blinken signed the Comprehensive Security Integration and Prosperity Agreement (C-SIPA), a “new framework to promote cooperation across a range of areas, from defence and security to science, technology and trade.” (Comment: C-SIPA, a new construct in the US diplomacy, is intended to reassure the traditional allies of a deeper and wider American engagement for their security and economic interests. The need for C-SIPA has arisen to allay the suspicions about Washington’s reliability as a defence guarantor in the wake of subterranean contacts with Iran and as China looms large over the Gulf. C-SIPA is the closest Washington can offer as a formal defence treaty would require the pains of Congressional approval. C-SIPA template could be offered to Saudi Arabia to fulfil Riyadh’s requirement for a more formal defence pact as one of the conditions for rapprochement with Israel.)
On Sept 29, Rached Ghannouchi, 82, a prominent opposition leader in Tunisia and the former speaker of the country’s parliament, began a three-day hunger strike to protest against his incarceration. He has been imprisoned since last April on charges of incitement and plotting against state security.
II) Economic Developments
(a) Oil & Gas Related Developments:
Oil prices ended the month with Brent crude trading at $95.31 a barrel, up 29% during Q3/23. This was despite higher production by Nigeria (up 110,000 bpd) and Iran whose production was estimated at 3.15 mbpd, the highest since 2018. Although Reuters estimated the OPEC September output at 27.73 mbpd, up by 120,000 bpd as compared to the previous month, it was still lower than the collective OPEC ceiling by 700,000 bpd. On Sept 26, the International Energy Agency (IEA) put the global consumption in June 2023 at 103 mbpd, a new record. In an article published in the Financial Times on Sept 12, the IEA Chief predicted that the peak fossil fuel demand “will happen this decade.” The OPEC Secretariat countered this projection as “not fact-based” and its monthly bulletin published on the same day stuck to its oil demand growth projection. At a global conference on Sept 18, CEOs of both Saudi Aramco and Exxon-Mobil pushed back against the forecast of peak oil by 2030. On Sept 21 Morgan Stanley opined that the global oil market could remain undersupplied for several quarters but prices above $100/barrel seemed a bit stretched. It, nevertheless, raised its forecast for oil to average at $95/barrel during Q4/23 -up significantly from $82.5/barrel predicted earlier. Oil rose past the $90/barrel mark on Sept 5, for the first time since Nov 2022. Following their phone call on Sept 6, the Russian President and Saudi Crown Prince declared that their recent production cuts (by 300,000 b/d and 1mbpd respectively) had ensured stability in the global oil market. Later on Sept 18, the Saudi energy minister also echoed the same rationale for production cuts. The President of Cyprus hosted the prime ministers of Israel and Greece on Sept 7 in Nicosia to discuss deepening energy infrastructure cooperation in getting Israeli offshore gas to Western Europe.
Country Specific Developments:
An IMF paper published on Sept 28 detailed the ongoing diversification of the Saudi economy anchored on the implementation of reforms to reduce oil dependence, diversify income sources, and enhance competitiveness. (Comment: As the graphic illustrates, Saudi oil dependence has come down in the past decade, it is partly due to oil prices being relatively lower and production curbs.)
Saudi Arabia, the world’s biggest oil producer, is finally moving to enter the booming natural gas market. While oil is still a vital part of the Saudi economy, gas is becoming a major part of its investment plans. Saudi Aramco aims to spend $110 bn developing the Jafurah gas field that will help double output by 2030 and make the kingdom a gas exporter for the first time. On Sept 30, it also agreed to buy a stake in MidOcean Energy, marking its first investment in liquefied natural gas. MidOcean is in the process of acquiring interests in four Australian LNG projects and is also part of a consortium to buy Sydney-based Origin Energy Ltd. On Sept 15 Saudi Aramco purchased Esmax, one of the major natural gas companies in Chile. While the price of the deal was not disclosed, in 2022 Esmax had a revenue of $2.5 bn and a profit of $57.7 mn. (Comment: The Saudi strategic shift towards natural gas is an integral part of its diversification away from crude – a fuel widely expected to have a consumption peak sooner than later.) WSJ reported on Sept 1 that Saudi Aramco was considering selling $50 bn worth of shares.
On Sept 15, the Turkish minister of energy said that the Turkey – Iraq pipeline would soon be “technically” ready to resume operations. (Comment: Turkey suspended the operation of the pipeline on March 25 this year in the wake of an arbitration panel ruling involving a dispute between the Iraqi Federal Government and Kurdistan Regional Government. In normal times, it carries over 400,000 bpd of Iraqi crude to a port on Turkey’s Mediterranean coast.)
On Sept 6 Adnoc decided to proceed with the Habshan Carbon Capture project aimed at sequestering 1.5 mn tons of CO2 annually. It will triple Adnoc’s carbon capture capacity to 2.3 mn tons per year. ADNOC said in January it would allocate $15 bn to decarbonisation projects by 2030. (Comment: The UAE is to host the UN COP28 climate summit to be presided over by ADNOC CEO, in December 2023. Being on the mat by several NGOs for a contradiction between one of the largest fossil fuel producing company CEO chairing a global climate summit, the UAE is under pressure to show its sincerity.)
Bloomberg reported on Sept 26 that two new refineries in Oman (at Duqm capacity of 230,000 bpd) and Bahrain (at Sitra, capacity of ~70,000 bpd) would both produce diesel for export. Together they would correspondingly reduce the crude export from these two countries by over 300,000 bpd.
Following economy-related developments took place in WANA countries:
- The signs started emerging during the month that the Saudi economy was running out of steam mainly because of the lower oil revenues caused by the double whammy of lower oil prices and production cuts. According to an IMF paper released on Oct 1, the annual GDP growth, which recorded G20’s highest at 8.7% in 2022, was expected to rise in 2023 by only 0.03%. Similarly, after the first budgetary surplus in a decade in 2022, the kingdom was expected to return to deficits of -2% in 2023 and -1.9% in 2024. The finance ministry planned to raise $11 bn from syndicated loans, Bloomberg mentioned on Sept 15. Luxury EV company Lucid, heavily financed by Saudi Arabia, opened its first international factory in Jeddah on Sept 27 with an initial annual capacity of 5,000 units. The kingdom had contracted to buy up to 100,000 vehicles from the company over 10 years.
- Turkish depositors converted most of their $127.6 bn funds back to dollars by August 2023 by withdrawing from state depreciation-protected accounts as Ankara begins winding down the scheme launched in 2021. The World Bank announced on Sept 7 that it was planning to double its exposure to Turkey during the coming 3 years to $35 bn. (Further Reading: “Turkey sets out a tough economic path in policy turnaround”, Reuters, Sept 6.)
- The central banks of Egypt and the UAE agreed on Sept 28 to up to Dh 5 bn in a swap deal meant to help Cairo navigate through a serious forex crisis. Abu Dhabi’s Chimera Partners launched Lunate, an alternative investor fund with assets under management worth $50 bn. The public debt of Dubai Emirate was expected to go down by $7.9 bn by the end of 2023.
- On Sept 3, Kuwait’s new finance minister projected that after 8.2% growth in 2022, the emirate’s GDP was to grow only by 0.1% in 2023.
III) Bilateral Developments
- Following the conclusion of the G20 Summit, Saudi Crown Prince and PM Mohammed bin Salman (MbS) paid a day’s official bilateral visit to India on Sept 11. He co-chaired, with PM Shri Narendra Modi, the first session of the India-Saudi Strategic Partnership Council created in 2019. It was accompanied by the signing of 8 MoUs. An India-Saudi Investment Forum was also organised later with over 500 companies participating, considerable G2B and B2B interaction and the signing of several MoUs. (Comment: Although the joint statement issued after the visit mentioned several bilateral economic issues, it was sparse on specific decisions. For instance, on the long-pending Saudi decision to participate in the $50 bn West Coast Refinery, the can was kicked further down the road. There was no mention of either MbS’ 2019 commitment to invest $100 bn in India or the Saudi support for India’s bid for permanent membership of the UN Security Council even as PM Modi described Saudi Arabia as “one of the most important strategic partners of India.” MbS noted that the ties between the two countries have always been free of any differences. Among the possible reasons for Saudi lukewarmth could be China’s growing influence over Riyadh, perception of India’s growing proximity towards the UAE, sharp decline in Indian purchase of Saudi crude over cheaper Russian supplies, slowing Saudi economy and other commitments, etc.)
- On Sept 10, on the sidelines of the G20 New Delhi Summit, leaders of India, Saudi Arabia, the US and some other countries signed a preliminary MoU to launch the India-Middle East-Europe Economic Corridor (IMEEC). (Comment: While the project is expected to streamline the flow of goods and energy, it is also geopolitically significant as it links Israel with the Gulf countries and is expected to counter China’s BRI. Its economic viability and competitiveness remain to be established.)
- PM Modi launched Global Biofuel Alliance on the sidelines of the G20 Summit on Sept 10.
- On Sept 25, India permitted the export of 75,000 tons of non-basmati rice to the UAE. Economic Times reported on Sept 26 that ADIA, Abu Dhabi’s SWF, was looking at investing ~$600 mn in RIL’s retail business. On Sept 28, IHC, another of Abu Dhabi’s SWF, decided to sell its investments in two companies of the Adani Group.
- On the sidelines of the G20 Summit, PM Shri Narendra Modi also held bilateral discussions with President Erdogan of Turkey on Sept 10.
- INS Sumedha arrived at Alexandria (Egypt) on Sept 6 to take part in the Ex-Bright Star -23 exercise. It was the maiden participation by an Indian naval ship in this type of annual exercise.
- Iraq defeated India 5-4 on penalties in the semifinals of the Thai King’s Cup played at Miang Mai on Sept 7.
- Import of Russian and Iraqi crude rebounded in September at the expense of the supplies from Saudi Arabia.