IA) Political Developments: Pan-Regional and Global Issues
Gaza Conflict
Despite three rounds of negotiations during the month under review, a ceasefire betweenIsrael Defence Force (IDF) and Hamas remained elusive. The US, Qatari and Egyptian mediators met on Aug 3-4, 15-16 and 22-25. While the Israeli negotiating team participated in all of them, Hamas sent a team only to the first one and demanded on Aug 13 that the original proposal mooted by US President Joe Biden be implemented without any fresh negotiations. It, thus, stayed out of the talks but offered to be consulted after the rounds. Meanwhile, the US mooted bridging proposals to iron out the differences, while Israel accepted these, Hamas rejected them on Aug 18 as they were “too close toIsraeli demands.” On Aug 24, Reuters reported citing Israeli media as saying that PM Netanyahu had had bitter divisions with his negotiators, including Mossad Chief, whom he accused of being soft on Hamas. According to a Reuters report on Aug 19, the main sticking points between the two sides were the following:
(i) End of Hostilities: While Hamas wants an agreement that will guarantee an end to the war in Gaza and the withdrawal of all Israeli forces, PM Netanyahu has pledged “total victory” and wants the right to resume fighting in the Palestinian enclave until Hamas no longer poses any threat to Israelis.
(ii) Corridors: Israel insists on its military control of the Philadelphi corridor and Hamas seeks a complete Israeli withdrawal from the Gaza Strip, including the so-called Philadelphi Corridor (a narrow 14.5-km-long stretch of land along Gaza’s southern border with Egypt) to prevent weapon smuggling. Similarly, Israel wants control of the Netzarim Corridor slicing north and south Gaza ostensibly to control Gazans repopulating the northern part of the territory from where they can threatenIsraeli settlements. Hamas rejects the Israeli presence along these two corridors and wants no restrictions on Gazans returning to the north.
(iii) Hostage and Prisoner Exchange: The three-phased ceasefire plan includes the release of 33 hostages under a humanitarian category, alive or dead, in the first stage. PM Netanyahu has said he wants to maximise the number of living captives that will be freed at this stage. Israel also wants veto power over the identities of some of the Palestinian prisoners who would be released in return. It also insists on the released prisoners being exiled outsidePalestinian areas. These conditions are unacceptable to Hamas.
(iv) The “Day After”: While Israel wants to ensure Hamas does not return to rule in Gaza, Hamas is unwilling to have any foreign forces being deployed in Gaza.
(Comment: While the belligerents’ positions are far apart, the details of the bridging proposals have not been made public. As they do not go far enough to meet Hamas’ minimum, the stalemate is set to continue for the foreseeable future. Relevant to note that the reported Israeli offer to allow safe passage to Yahya Sinawar and others in theHamas hierarchy found no traction. Further on Aug 30, the Israeli cabinet voted to keep its troops at the Philadelphi corridor.)
On Aug 6, Hamas made the following statement:
“TheIslamic Resistance Movement Hamas announces the selection of Commander Yahya Sinwar as the head of the political bureau of the movement, succeeding the martyr Commander Ismail Haniyeh…”
(Comment:The appointment makes Yahya Sinwar, already heading the war against Israel, as the Chief negotiator for a ceasefire. The move is a two-edged sword: on one hand, as Israeli domestic policy-making undergoes various mutations, Hamas concentrates power compensating for its weakness on the ground; however, on the other hand, a decapitating blow by Israel could become a more attractive option as it would likely finish off the militia altogether. So, the high-stakes Gaza endgame gets going.)
The situation on the Gaza battleground remained attritious and fluid but inconclusive. While Hamas showed remarkable staying power, there was no doubting IDF was the dominant side chasing the remnant of the former’s elusive cadres. Most of the action centred on the southern fringes of Gaza, viz. Khan Younis, Rafah, Dar al-Balah and Nuseirat Camp. Some school buildings came in for intensive Israeli bombing as IDF accused them of being used to house Hamas militants. Thus, on Aug 10, an Israeli bombing of a Gaza City school killed over 100 people, while Israel claimed to have eliminated 19 militants holed up there.
Concerning the hostages, the developments were largely negative from an Israeli perspective. On Aug 20, IDF recovered the bodies of six hostages from a tunnel with gunshots at close quarters killed within the preceding 48 hours as Israeli units closed in. This discovery raised angst in Israel to a new level. On Aug 12, Hamas announced that one of its guards had killed an Israeli hostage and injured two others as revenge for his family deaths at the hands of the IDF. On Aug 27, IDF rescued a hostage alive from southern Gaza.
On Aug 25, the Gaza health ministry counted 40,405 deaths in the territory since Oct 7, a further 93,468 were injured and some ten thousand more were estimated buried under the collapsed buildings. According to a UN estimate, the Gaza war has resulted in 42 mn tons of debris, which would take around $700 mn to remove it. The cost of rebuilding the destroyed buildings was put at around $80 bn.
For developments in the West Bank: Please see Palestine Authority and West Bank.
For details on the flare-up between Iran and Israel: Please see Iran.
For details on the Israel-Hezbollah tensions: Please see Lebanon.
For the Houthi missile attacks on Israel and the Red Sea area: Please see Yemen.
WANA andMultilateral Diplomacy:
On Aug 23, the Prosecutor of the International Criminal Court in the Hague asked the judges to expedite their decision on his request for authorisation to issue warrants for the arrest of three Israeli and two Hamas officials for war crimes. He urged the judges to dismiss the challenges to the request raised by several governments and other parties.
(Comment: The authorisations, sought on May 20, raised a furore particularly as they targeted the Israeli PM,Defence Minister and Chief of Staff. Both Israel and Hamas have rejected the accusation of war crimes. Moreover, the US, which does not recognise the ICC’s jurisdiction, has threatened to act against the ICC and its Prosecutor. While the ICC had rushed two years ago into issuing a warrant against the Russian President for war crimes against Ukrainian children, Israeli leadership seems to be subject to a different yardstick.)
On Aug 31, BRICS allowed Algeria to join the organisation.
On Aug 31, the United NationsRelief and Works Agency (UNRWA) accused Israel of buying advertisements onGoogle to block donations to the UN body.
Reuters reported on Aug 23that to avoid the tense WANA region, some international airlines have been overflying the Afghan airspace, even as the latter has no air traffic control and is prone to surface-to-air missile risk.
Paris Olympics Games:
Following was the final medal tally of the WANA countries at the Paris Olympics:
OIC: The Jeddah-based Organisation of Islamic Countries held an extra-ordinary session of its foreign ministers on Aug 7 to Discuss the ongoing crimes by Israel, the Illegal Occupying Power, Against the Palestinian People and its Infringing on the Sovereignty of the Islamic Republic of Iran. It concluded by issuing a 15-point final communique condemning Israel. It also strongly condemned the assassination of Mr. Ismail Haniyeh, former Palestinian Prime Minister, while he was in Tehran, the capital city of Iran holding Israel, the illegal occupying power, fully responsible for this heinous attack.
WANA and the United States:
President Joe Biden on Aug 6 talked with the President of Egypt and the Emir of Qatar about the heightened regional tensions.
On Aug 18, US Secretary of State Anthony Blinken began his ninth visit to the WANA region since Oct 7. This low-key 3-day visit began with Israel where he met the President, PM, and Foreign and Defence Ministers. He also visited Egypt and Qatar where he was received by the respective Heads of States. He did not report any tangible progress on Hamas-Israel ceasefire negotiations, even as he indicated on Aug 20 that Israel had agreed to his bridging proposal and urged Hamas to do the same.
The US acted to diffuse the heightened regional tensions in the wake of Hamas leader Haniyeh’s assassination. The US Joint Chief of Staff paid a low-key visit to the region from Aug 24 during which he visited Israel, Egypt and Jordan. In a statement on Aug 27, a US NSA spokesman said that the US would come to the defence of Israel if Iran attacked. It followed up on diplomatic pressure on Iran by strengthening its military presence in the WANA region by sending more warships, a submarine and F-22 aircraft. On Aug 13, Washington also approved the sale of $20 bn in F-15 jets and other military equipment to Israel over the next few years. Earlier on Aug 9, it released $3.5 bn for Israel weapon-related requirements. In addition, on the same day, the Pentagon lifted the ban on the sale of offensive weapons to Saudi Arabia.
WANA and China:
On Aug 11, in a call to the acting Iranian Foreign Minister, Chinese Foreign Minister Wang Yi expressed support for Iran in defending its “sovereignty, security and national dignity.”, He denounced the assassination of Hamas chief Ismail Haniyeh in Tehran, saying the strike had violated Iran’s sovereignty and threatened regional stability. The killing had “directly undermined the Gaza ceasefire negotiation process and undermined regional peace and stability.” He went on to add “China supports Iran in defending its sovereignty, security and national dignity in accordance with the law, and in its efforts to maintain regional peace and stability.” (Comment: For inscrutable reasons, the reported conversation took place 11 days after Haniyeh’s assassination.)
Saudi Arabia’s $925 bn Public Investment Fund signed preliminary agreements worth $50 bn with six Chinese financial institutions on Aug 2. The deals were done to boost two-way capital flows through both debt and equity.
On Aug 8, Bloomberg quoted Saudi Aramco CEO as saying that the world’s largest crude exporting company was looking to invest in more chemical plants in China this year and next, adding to the long-term crude supply deals already clinched in the country.
WANA and Russia:
On Aug 5-6, Sergei Shoigu, Secretary of Russia’s Security Council visited Iran to deliver a message from President Putin to Supreme Leader Ali Khamenei. He also met the IRGC Commander.
On Aug 24, the UAE facilitated the exchange of 115 PoWs each between Russia and Ukraine. This was the seventh such exchange mediated by the UAE leading to the exchange of 1788 prisoners between the two belligerent countries.
On Aug 9, Reuters ran an exclusive report about Iran delivering hundreds of Fatah-360 and Ababil missiles to Russia. The Fatah-360 defence system launches missiles with a maximum range of 120 km with a warhead of 150 kg. According to the report, the deal was signed on Dec 13 2023 and Russian military personnel are being trained to operate the system. Iran and Russia have both denied the report.
WANA and Pakistan: On Aug 9, a foreign ministry spokesperson denied a Jerusalem Post report that Pakistan would supply Shaheen-III missiles to Iran.
On Aug 27, the Pakistan Central Bank Governor expressed hope of being able to get $4 bn from Middle Eastern banks to plug the financial gap during the next financial year.
A bus carrying Pakistani Shia pilgrims for Arbaeen celebrations in Najaf overturned in central Iran on Aug 20 killing 28 passengers and injuring 23.
On Aug 6, the US charged a Pakistani man with ties to Iran, with attempting to assassinate an unnamed American politician. In a separate case, on Aug 8 a Pakistani national was charged by the US with supporting Iran’s WMD programme.
Afghanistan and WANA: On Aug 22, the UAE granted its agreement to the appointment of an ambassador of Afghanistan proposed by the Taleban Emirate government. Thus, Abu Dhabi became the second country after China to break the international consensus on not recognising the Taleban regime in Kabul. (Comment: The UAE, which was one of the three governments which had diplomatic ties with the Taleban-1 regime in the 1990s, has been keen to link up with Taleban for several reasons, including competition with Qatar, business opportunities and having a conduit to Iran and Central Asia.)
Bangladesh and WANA: Student agitation and subsequent coup d’etat in Bangladesh did not evoke any official reaction among WANA countries.
IB) Political Developments
Israel:
While Israeli politics and society continued to be fragmented mostly along three axes – Likud on the centre-right, National Unity party on the centre-left and the ultra-religious fringes – a credible opinion poll by best-selling, leftist Maariv newspaper towards Aug end made two startling revelations: firstly, for the first time since Oct 7, Prime Minister Benyamin Netanyahu was the most popular choice to lead the country; secondly, when asked if they wanted their country to expand the war to take on Hezbollah in Lebanon, the answer was mostly yes.
While the street demonstrations demanding the government to negotiate a Gaza ceasefire with Hamas to facilitate the release of the hostages continued throughout the month under review, the discovery of 6 recently killed hostages, presumably by Hamas in a southern tunnel on Aug 20 poured oil over the popular frustrations in this regard. However, PM Netanyahu was unmoved and continued to maintain that IDF military pressure was necessary to make Hamas relent in its hardline negotiating position. (Further Reading: “Full Transcript of Benjamin Netanyahu’s Interview”, Time Magazine, Aug 4.)
The internal divisions within the government continue to deepen, particularly between the PM and the Defence Minister, a retired general, who on Aug 12 publicly described the former’s quest for a total victory over Hamas as “nonsense.” These divisions prevented any tangible move towards the formulation of the 2025 national budget, despite a call by the Bank of Israel governor’s call for its early formulation to align the country’s fiscal and monetary policies. Amidst this cacophony, the Chief of military intelligence resigned on Aug 21 owning responsibility for Oct 7 intelligence failure, becoming the first Israeli official to do so.
Israel’s firebrand Security Minister Itamar Ben-Gvir continued to make provocative statements about the need to allow Jews to pray at Al-Aqsa mosque, also known as Temple Mount to the Jews who believe it’s the sight for their two destroyed temples. Apart from making six such visits to the site, he also told an interviewer on Aug 28 that a new Jewish temple should be constructed there, further inflaming the regional tensions and forcing PM Netanyahu to issue a denial.
There was no let up in the security situation in Israel with sporadic attacks mostly by lone-wolf Palestinian militants, taking place. On Aug 25, a defence ministry spokesman said that the situation along the northern border with Lebanon was not sustainable due to frequent Hamas rocket and drone attacks.
Palestine Authority and West Bank:
Palestine Authority President Mahmoud Abbas visited Russia and Turkey during the month. On Aug 13, he met President Putin in Moscow who expressed Russia’s pain at the plight of Palestinians and backed their aspiration to create a full-fledged state. He visited Ankara the next day and was received by President Erdogan. He also addressed an extraordinary session of the Turkish parliament.
Despite ongoing operations in Gaza, Israeli forces continued their frequent raids in the Occupied West Bank (OWB) during the month to snuff out the centres of Palestinian militancy, particularly those belonging to Hamas and Palestinian Islamic Jihad. Such raids were noted on Aug 6 (2 strikes killing 12, including a local Hamas commander), Aug 14 (clashes with Hamas in Tamoun and Tubas) and Aug 25 (5 killed by IDF and settlers). However, the largest and most sustained Israeli incursion in the past two decades began on Aug 28 in the northern OWB cities of Jenin Tulkarem and Tubas which involved hundreds of troops and police backed by helicopters and drones. By the time the 10-day operation ended on Sept 6, 21 people, including a local Hamas commander, were killed in Jenin and a tail of destruction of houses and infrastructure was left behind. Israel claimed that its troops had killed 14 militants, arrested 30 suspects, confiscated weapons and dismantled infrastructure including an underground weapons storage depot underneath a mosque and an explosives workshop. According to the Palestinian health ministry, more than 680 Palestinians have been killed in the West Bank and East Jerusalem since October 7.
On Aug 14, Israel proposed setting up a new 60-hectare settlement near Jerusalem.
Lebanon:
Israeli Assassination of senior Hezbollah commander Fuad Shukr and its likely but unacknowledged involvement in the killing of Hamas leader Ismael Haniyeh in Tehran, both in the last week of July, raised the ante in the Hezbollah-IDF conflict during the month, even as the two sides were careful to avoid full-blown war. In the promised revenge for Fuad Shukr’s killing, Hezbollah launched over 300 missiles and drones at Israeli targets on Aug 25 morning. Israel launched pre-emptive attacks on Hezbollah’s launching pads using over 100 aircraft and subsequently claimed to thus reduced the number of Hezbollah projectiles launched. Nevertheless, this was perhaps the most intense exchange between the two warring sides. In a post-event TV speech, Hezbollah Chief Syed Hassan Nasrallah denied that Israel had managed to get prior information about the planned attack claiming that it had been a success and had largely completed the intended tasks, which included targeting the Mossad centre near Tel Aviv. He also claimed that the day’s exchanges had demonstrated the credibility of Hezbollah’s deterrence against Israel. During the month under review, Israel periodically made air-raid on the Hezbollah ammunition depots in southern Lebanon and Bekaa Valley to degrade the Lebanese Shia militia’s war-waging capability. Hezbollah responded by intensifying artillery, missile and drone attacks. Through these hostilities, a US envoy tried to reduce the tensions by mediating between the two countries.
On Aug 28, the UN Security Council renewed the mandate of the United Nations Interim Force in Lebanon (UNIFIL) for one year. Its mandate was set to expire on Aug 31.
On Aug 18, Algeria offered to immediately begin supplying Lebanon with fuel for its power plants, to prevent its electricity company from exhausting its supplies.
On Aug 22 Lebanon’s acting central bank governor said it doing everything possible to prevent being placed on a “grey list” of countries by FATF, a financial crime watchdog, during its next meeting in October. After scrutiny last year, FATF warned Lebanon to act on gaps in several categories including its anti-money laundering measures, transparency on beneficial ownership of firms and legal assistance in asset freezing and confiscation. A FATF grey-listing would further complicate Lebanon’s precarious financial crisis.
Iran:
On Aug 11, President Masoud Pezeshkian submitted a 19-member cabinet to Mejlis for approval. It was dominated by pragmatic personalities harking back to many who were in prominent positions with previous moderate administrations. For instance, Abbas Araghachi, earlier Chief Nuclear negotiator, was appointed as Foreign Minister. A former IRGC General was appointed as Interior Minister, while a former Commander of the Air Force was made the Defence Minister. The previous Intelligence Minister was retained. An energy insider was named as Minister for Oil. Only for the second time in 45 years of the Islamic Republic, a woman was appointed to the cabinet as Minister for Roads and Urban Affairs. Despite the parliament being dominated by the conservative elements, it approved the entire cabinet on Aug 21. The Atomic Energy Chief was also retained. (Comment: An early rubber-stamp by the Mejlis of the proposed cabinet seems to indicate Supreme Leader Ali Khamenei’s unambiguous and strong support.)
Among the initial indications of priorities of President Pezeshkian’s administration, was his Aug 27 statement calling subsidised fuel prices, a controversial populist holy grail of policy, as “irrational.” In a call from French President Macron on Aug 7, President Pezeshkian said that Israel must go for the Gaza truce to ease regional tensions. In his policy statement to the Mejlis as the proposed Foreign Minister, Abbas Araghachi defined China, Russia, Africa, and Central and East Asia as the priority regions for Iranian diplomacy. Iranian foreign ministry spokesman stated on Aug 5 that while Iran does not want to escalate the regional tensions, it must punish Israel for the assassination of Hamas leader Ismael Haniyeh in Tehran.
In an apparent bid to ease tensions, the Jordanian Foreign Minister visited Tehran on Aug 4. He was received by Iranian President Masoud Pezeshkian who told him that the assassination of Haniyeh was a “major mistake by the Zionist regime (Israel) that will not go unanswered.” In a similar direction, on Aug 13, Reuters quoted three unnamed Iranian officials as saying that only a ceasefire deal in Gaza would hold Iran back from the threatened direct retaliation. IRGC officials also hinted at a long wait for Iranian retaliation. The assassination was followed by intense consultations with representatives of the Axis of Resistance already present for swearing-in of President Pezeshikan in which the Supreme Leader Ali Khamenei also participated.
Iranians turned out in large numbers in Tehran on Aug 1 to bid adieu to the assassinated Hamas leader Ismael Haniyeh. The body was subsequently taken to Doha where he was buried in the presence of the Emir of Qatar. There was some confusion about the means used for the assassination of Ismael Haniyeh. While Iranian and Palestinian sources claimed that he was killed by a short-range projectile with a 7 kg warhead, a report in the New York Times said that a bomb was placed in the guest house room many months ago. (Further Reading: “Bomb Smuggled Into Tehran Guesthouse Months Ago Killed Hamas Leader”, 4/8 NYT.)
Amidst the jingoistic hyperventilation, Iran showed off its new military hardware that included a Mohajer-10 drone (2000 km range, 24-hour flying capacity and 300 kg payload) and a new cruise missile for the IGRC navy. IRGC also held a military drill in Western Iran on Aug 11.
In a write-up on Iran’s oil industry on Aug 9, Reuters revealed an upbeat picture of a sector despite being long subject to US economic sanctions. According to several knowledgeable Iranian and foreign sources, Tehran’s oil output has topped 3.2 mbpd this year, the highest since the imposition of the US sanctions in 2018. The Iranian oil exports have now reached a peak and have stabilised at around 1.5 mbpd with China being the main buyer. Iran claimed to be selling its crude to 17 countries, including those in Europe. Small and sporadic consignments have also been sold to Oman and Bangladesh.
According to an IAEA document leaked to Reuters on Aug 29, despite developments such as succession at the top, regional tensions and an adversarial resolution at the last meeting of the IAEA Board of Governors, Iran’s uranium enrichment programme had continued unabated. According to IAEA estimates, Iran now has enough uranium enriched to up to 20% purity, if enriched further, for six bombs.
Yemen:
On Aug 21 Ansar Allah (aka al-Houthis) militia attacked a Greek oil tanker Sounion in the Red Sea scoring multiple hits disabling the vessel and forcing crew evacuation. Two days later they boarded the vessel to make explosions. The potential leakage from a drifting vessel containing 1 mn barrels of crude made al-Houthis permit salvage operations that began on Sept 1. The Red Sea maritime passage insurance rates nearly doubled after the Sounion attack.
After a two-week hiatus following Israeli air raids on July 19, al-Houthis resumed their operations against international shipping in the Red Sea and Gulf of Aden. On Aug 4, they shot down a US MQ-9 drone over Saada. The US forces launched an airstrike on al-Houthi targets on Aug 8.
On Aug 18, the UN warned that parts of Yemen were facing famine conditions. Earlier on Aug 13 the UN condemned al-Houthis seizure of the UN Human Rights Organisation premises in Sana’a.
A suicide bomber of the Al-Qaeda in Arabian Peninsula killed 16 soldiers of the UAE-supported Southern Transitional Council in Abyan province in southeastern Yemen.
Turkey:
The Foreign Minister of Turkey was invited for an informal luncheon meeting with the EU member states foreign ministerial on Aug 29 in Brussels. (Comment: This was the first time in five years that the two sides have met indicating the thawing of the ties as Ankara had adopted a less bellicose nationalistic approach to bilateral and regional issues. Although Turkey is a longstanding candidate country to join the EU and the two have a customs union, they have trenchant differences on issues such as Ankara’s poor human rights record, its outlier status on issues such as the recent NATO expansion, Aegean Sea territorial dispute with Greece and the issue of Turkish Republic of Northern Cyprus. Most observers believe that while the EU may wish to engage Ankara to prepare for the post-Erdogan era, the existing deep differences would prevent any early cordiality. (Further Reading: The West Should Look Past Erdogan and Deal With Turkey, Bloomberg, Aug 30.)
On Aug 15, Turkey and Iraq held the fourth meeting of their bilateral security dialogue at the foreign ministers’ level in Ankara. They also held a meeting of the Joint Planning Group” mandated to put their cooperation within an institutional and sustainable framework. The delegations would discuss the implementation of 27 agreements signed during President Erdogan’s visit to Baghdad in April 2024, and evaluate further joint initiatives. (Comment: The two sides have a complex security relationship further complicated by Iraq’s Kurdish Region Government’s sympathy for the Kurdish Workers’ Party (PKK) which Turkey regards as a terrorist organisation. Following the Baghdad Summit, Iraq has banned PKK but has not yet declared it a terrorist organisation. Baghdad chaffs at Turkish forces’ cross-border air and drone attacks on alleged PKK bases on Iraqi territory. The two sides are also divided over the resumption of Iraqi oil exports via the Turkish pipeline which Ankara has blocked for over a year over an arbitration case.)
On Aug 1 the Turkish National Intelligence Agency (MIT) said it would coordinate an extensive prisoner swap between Russia and Belarus on one side and the US, Germany and Slovenia on the other.
On Aug 5, Turkey formally joined the ICJ case accusing Israel of genocide in Gaza.
On Aug 9 Turkish Defence Ministry announced that 12 militants of the outlawed Kurdistan Workers Party (PKK) in northern Iraq were “neutralised” by military actions.
Turkey declared a day of national mourning on Aug 2 in honour of Hamas leader Ismael Haniyeh who was assassinated in Tehran three days ago.
Sudan:
There was no significant change in civil war front lines in Sudan during the month.
US-sponsored talks under the aegis of Aligned for Advancing Lifesaving and Peace in Sudan (ALPS) Group took place in Geneva on Aug 14-23 with participation by Switzerland, Saudi Arabia, Egypt, the UAE, the AU, and the UN. Of the warring sides, while the Rapid Support Force (RSF) militia participated, the Sudan Armed Force refused to do so objecting to the presence of the UAE, which it regards as the main backer of RSF. SAF, however, sent a delegation to Cairo for virtual coordination with the proceedings. While the Geneva meeting did not have a breakthrough on national cessation of hostilities, it was able to persuade the two sides to open three access points in the east and the west for entry of humanitarian supplies and the aid trucks started entering from Chad from Aug 22 onwards. In its joint statement, the ALPS Group called for adherence to the Jeddah declaration of May 2023, the UN Security Council Resolutions No. 2724 and 2736 as well as the relevant AU documents. In a sharply worded statement on Aug 24, SAF Chief Gen al-Burhan criticised the Geneva talks for “white-washing RSF” and vowed to continue fighting against the militia. (Further Reading: (i) “A crisis in WANA that no one talks about”, by Mahesh Sachdev, The Hindu, Sept 2;(ii) “Joint Statement by the Alps Group”, US Mission to International Organizations in Geneva, Aug 23.)
A UN agency warned that Camp Zamzam in the North Darfur region with nearly half a million refugees was in a famine condition which is likely to persist till October. On the other hand, the WHO reported hundreds of deaths due to diseases such as cholera, meningitis and dengue due to unhygienic conditions and the collapse of the healthcare system.
Syria:
In an address to the newly elected Parliament on Aug 25, President Bashar Al-Assad that individual efforts to mend Syria’s ties with Turkey by Russia, Iran and Iraq had so far brought no tangible results despite the seriousness and genuine keenness of mediators. “The solution is openness,” Assad said. “Restoring a relationship requires first removing the causes that led to its destruction.” He clarified that while the withdrawal of Turkish troops from Syria was needed, it was not a precondition for talks. (Comment: At the beginning of the Arab Spring rebellion in 2011, Turkey broke ties with the al-Assad government in Syria and cast its lot with the Sunni rebels, whom it continues to render support by having 3.5 mn of them as refugees in Turkey and sustaining their exclusion zone in Idlib. At the same time, it has occupied a sliver of Syrian territory along the bilateral border to prevent Syrian Kurdish forces from supporting the PKK (Kurdish Workers’ Party) fighting for greater autonomy in Turkey. However, after over a decade of bitter civil war, President al-Assad had largely prevailed. On the other hand, with the Turkish economy in the doldrums and with an eye for post-war reconstruction opportunities in Syria, Ankara is now keen to turn a new page. But with so many bad Karma to account for, an early reconciliation looks unlikely.)
Iraq:
On Aug 15, Iraq’s foreign ministry said that while the U.S.-Iraq Higher Military Commission had discussed details of withdrawing advisers from military sites, an announcement on an end date for the U.S.-led coalition’s mission has been postponed due to the unspecified “latest developments.” It said the only remaining issues before reaching a deal on ending the coalition’s presence in Iraq were agreement on an announcement date, logistical aspects and other details. The announcement of the end of the coalition’s presence is expected in early September. (Comment: The issue of the presence of the US-led coalition troops in Iraq has long polarised Iraqis. The US has 2500 troops in Iraq ostensibly for combatting ISIS, which has long ceased to be a military threat. Iraq’s pro-Iran Shia groups consider their presence as an affront to Iraqi sovereignty and clamour for their immediate withdrawal. The Pentagon, however, see its presence as a strategic asset to deter and challenge Iranian dominance of an oil-rich Iraq. Iraqi nationalists and authorities are somewhat ambivalent about their presence. They see them as a counterpoise to Iranian presence, but are wary of them being a lightning rod for pro-Iran militias to drag Iraq into brewing Israel-Iran conflict.)
On Aug. 5, at least five U.S. personnel were injured in an attack against a military base in Iraq. Iraqi security agencies arrested 15 persons for their involvement in this attack. On Aug 30, a posse of US Centcom forces and Iraqi military units attacked an ISIS camp in Western Iraq, killing 14 fighters. Among those killed were 4 leaders including the ISIS head of operations in Iraq. Seven US troops were injured.
A Turkish drone attack killed 3 persons in Northern Iraq on Aug 23. On Aug 29 a Turkish drone was shot down over Kirkuk.
Iraqi wheat production grew by 21% y/y making the country self-sufficient for the second year running.
Iraq invited American oil companies to invest in 10 gas fields up for bidding in the near future. The previous bid round was dominated by Chinese companies.
Approximately 21 mn Shia pilgrims from several countries participated in the Arbaeen celebrations in Najaf on Aug 25.
Saudi Arabia:
By a Royal decree on Aug 8, King Salman allowed the country’s cabinet to meet without either him or the Crown Prince being in the Chair. In such a situation the eldest son of King Abdulaziz, the founder of the country, would chair the deliberations.
The United Arab Emirates:
In a seemingly sponsored report, Bloomberg reported on Aug 4 about the UAE providing extensive humanitarian relief to Gaza war victims through a large presence at el-Arish in Egypt’s Sinai. The campaign costs were put at $700 mn and involved a large number of Emirati volunteers working with hospitals, food packet drops, etc. (Comment: Since the beginning of Israel’s war on Gaza, the UAE – the initiator of Abraham Accords four years ago – has been trying to balance her ties with Israel. The instant efforts may be aimed at creating a new public image paradigm among the Palestinians to enable Abu Dhabi to play a bigger role in the post-war situation with reconstruction and politico-military stabilisation.)
Bloomberg reported on Aug 12 that Israel Aerospace Industries is planning to establish a presence in Abu Dhabi to convert 10 Emirates aircraft into freighters. This project, starting in October, starting in October highlighted how the UAE remains committed to building ties with Israel despite rising regional tensions.
On Aug 27, the UAE called upon France to provide all consular services to Pavel Durov, CEO of the social media platform Telegram who was detained in France on charges involving 12 alleged criminal violations. He is a citizen of the UAE, France, Russia, and St Kitts and Nevis.
Egypt:
On Aug 12, Egypt’s state monopoly closed its tender for wheat procurement with orders of 280,000 tons of wheat from Ukraine and Bulgaria. Egypt is among the world’s largest importers of wheat with this year’s requirement running at 3.8 mn tons.
Tunisia:
On Aug 8, President Kais Saied replaced the Prime Minister with the Social Affairs Minister. Later on Aug 26, he purged 19 members of the Cabinet hinting that the move was aimed at combatting corruption from the foreign lobbies.
On Aug 29, the judicial review of the election commission decision allowed three more candidates to participate in the next Presidential election to be held on Oct 6. (Comment: With the approaching election, the political temperature in the country has reached a feverish pitch. President Saied, having exhausted his initial popularity due to the moribund economy has resorted to autocratic decision-making and rewarding the loyalists to ensure his re-election. The harried and divided opposition, on the other hand, is trying to tap into the public disaffection to defeat the incumbent, knowing that it may be their last chance to revive the Arab Spring.)
Somalia:
The African Union’s peace and security council decided on Aug 1 to create a new peace-keeping outfit called African Union Support and Stabilization Mission in Somalia, or Aussom to replace the current unit that is to be retired at the end of the year.
On Aug 28, Egypt began delivery of military equipment to Somalia and to train its military personnel to impose control over Somaliland, a breakaway region that a landlocked Ethiopia plans to get access to the Indian Ocean. The weapons delivery and training were under the agreement reached during a bilateral summit in Cairo last month. On the other hand, Turkey – which has substantive relations with both Ethiopia and Somalia waded into the dispute. Its foreign minister visited Addis Ababa and Mogadishu in early August and subsequently, two rounds of Ethiopia-Somalia indirect talks were held in Ankara during the month. While Turkey claimed talks to be “constructive and positive”, there was no breakthrough and further rounds are to be held. (Further Reading: (i) “Why Ethiopia’s Bid for Red Sea Access Angers Somalia”, Bloomberg, Aug 30; (ii) “Turkey enters fray mediating Ethiopia and Somalia’s high-stakes dispute”; RFI, Aug 31.)
II) Economic Developments
Oil & Gas Related Developments:
Global Issues:
The Brent for October delivery was at$78.80/barrel on Aug 30, having shed nearly 2.4% during the month under review. The decline would have been far steeper but regional developments that included escalated geopolitical tensions and large production shutdowns in Libya. Rarely since the post-Covid era, the oil-watchers have coalesced around bearish sentiments about the foreseeable future of the commodity. Even OPEC, the last bastion of oil bulls fell in line when in its monthly bulletin on Aug 12 trimmed its oil growth forecast for 2024 by 135 kbpd after valiantly maintaining it would rise by 2.25 mbpd for close to a year. While OPEC+ online joint ministerial monitoring committee meeting (JMMC) on Aug 1 maintained its existing quotas and stuck to its decisions to unwind its voluntary cuts of 2.2 mbpd from Oct 1, as pre-scheduled, it added two caveats: this is to be done “gradually” and the step “could be paused or reversed, depending on market conditions.” Morgan Stanley cut the 2024 oil demand growth to 1.1 mbpd and the average barrel price during Q4/24 to $80 in 2024 and $75 in one year. Goldman Sachs put the crude price for 2024 in the range of $70 to $85 and for 2025 at $77. However, the Saudi Aramco chief still claimed on Aug 6 that oil demand was still “strong” and the market sell-off was an overreaction. His statement came two days after the company raised its Asia-bound crude prices.
There were several factors depressing crude. On the supply side, OPEC’s collective production rose by 100kpd in July to 26.70 mbpd, with Saudi and Iraqi production rising more than offsetting the decline elsewhere. Further, a significant rise in production in the US, Brazil and Guyana kept the market oversupplied. On the other side, while the demand in the US, the world’s largest consumer, rose tepidly, there was an overhang of recession and uncertainty about Federal rate cut. The oil imports by China, the world’s largest importer, went down by 2.4% y/y during the first seven months of 2024 due to economic headwinds, induction of EVs and LNG-powered trucks. Oil refineries, too, were affected by the depressed demand lowering the refining margins. Last but not least, demand for ATF also fell as air travel took a backseat in challenging economic conditions.
Country Specific Developments:
Official Saudi data revealed that Sales from shipments of crude oil and refined products fell to $17.7 bn in June, down more than 9% y/y and about 12% from May. It was the lowest level in 3 years, caused by a drop in prices and the kingdom’s decision to curb production. On Aug 6, Aramco maintained its quarterly dividend at $31 bn despite lower profit as the payout becomes increasingly crucial for revenue-short Saudi government. On Aug 7, Aramco acquired a 22.5% stake in Petro Rabigh refinery in Saudi Arabia from Japan’s Sumitomo corporation for $702 mn. On Aug 1, Saudi Arabian Basic Industries Corporation (SABIC) posted $581 mn in profit for Q2/24 an 85% y/y increase.
On Aug 1 Iraq signed a preliminary agreement with BP to develop four oil and gas fields in the Kirkuk region estimated to contain about nine billion barrels of recoverable oil. On Aug 14 Iraq signed initial deals for 13 oil and gas exploration blocks and fields, awarded during the sixth bid round held in May 2024 which Chinese companies dominated. These agreements could increase the country’s daily output by 750,000 barrels of crude and 850 mscf of gas. Iraq is keener to enhance its gas output needed for power generation to reduce its dependence on Iranian gas. Iraq has recently switched to profit-sharing contracts that offer a share of revenue after deducting royalty and cost recovery expenses. It had hitherto offered low-margin service contracts which the oil companies did not find attractive. Following a visit to Baghdad by OPEC Secretary General, Iraq assures OPEC of its intent to compensate for past over-production above its oil quota.
On Aug 2 the representatives of BP and ADNOC joint venture met Cypriot officials to explore investments to exploit the natural gas reserves in the country’s EEZ.
On Aug 26, Qatar signed a 15-year 3 mtpa LNG supply deal with Kuwait from 2025. On Aug 28, QatarEnergy was declared as the last bidder for Russian gas major Rosneft’s Germany-based assets affected by the Ukraine conflict.
On Aug 27, the UN warned that Libya faced an economic collapse as the result of a crisis in the Central Bank and the National Oil Company. The crisis was triggered by a series of separate administrative decisions by the Tripoli-based Transitional Council against the Oil Minister and the Central Bank Governor (who fled from the country to save his life). Benghazi-based government retaliated to these moves by shutting down the oilfields, most of which lie in territory under its control. By the end of the month, most Libyan oil fields had shut down. As the country normally produced 1.2 mbpd of crude, this stoppage created a local, regional as well as international supply-side conundrum. (Comment: Through over a decade of bitter civil war in Libya, the country’s Central Bank and National Oil Company had managed to stay neutral and professional in their respective domains. Both the warring sides also refrained from disturbing the delicate equilibrium. However, as the episode showed, the temptation to control one of them could disrupt the unsteady ceasefire that the country has enjoyed off late.)
Following economy-related developments took place in WANA countries:
Regional Economic Developments
Nothing of significance to report.
Economic Developments in Individual WANA Countries:
On Aug 12, the Saudi Ministry of Investment unveiled The updated investment law aiming to enhance investor rights, inter alia, by guaranteeing the rule of law, fair treatment and the freedom to transfer funds without delay. (Comment: Shortfall in oil income and ambitious Vision 2030 has left the Saudi authorities with a significant funding gap that they seek to fill with higher investment from local and foreign investors.)
Public Investment Fund (PIF), Saudi SWG, revealed in its annual report published on Aug 19 that it had had higher returns in 2023 driven by local investments and gains on its international portfolio. Thus PIF’s annualized returns since 2017 rose to 8.7%, compared with 8% a year earlier. On the other hand, the Kingdom’s holdings of the US Treasury assets rose to their highest since the Covid-19 pandemic crossing $ 140 bn. Saudi Aramco’s shares have fallen by 17% in 2024, the worst performance among the world’s 10 biggest oil companies by revenue. The decline is attributed to lower oil revenue due combined impact of production curbs, lower prices and regional geopolitical tensions.
Although Turkey’s annual inflation rate declined sharply to 61.78% in July from 71.6% in June, the Central Bank Governor asserted on Aug 8 that the bank rate would stay at 50% for the time being. Bloomberg reported on Aug 29 that with an 8.2% decline in August, the Borsa Istanbul 100 Index was the world’s worst-performing stock market. The dismal performance was due to the combination of high interest rates and inflation eroding corporate profits. Foreign investors are also pulling out more cash, selling $2.9 billion in the three months through Aug. 16, reversing the rise in FPI investments seen since March 2024.
The United Arab Emirates temporarily suspended activities at 32 gold refineries as part of an effort to curb money laundering. Abu Dhabi Global Market (ADGM) witnessed a sharp rise in activities during H1/24 as compared to the corresponding period in the previous year: the number of companies increased by 31% and licences issued to businesses grew by 20.5%. Companies setting up base in the financial centre reached a total of 2,088 as of the end of June, while assets under management rose by 226%, with 112 fund and asset managers now operating there and managing 141 funds. Abu Dhabi has seen banks, hedge funds, family offices, venture capital firms and crypto traders rushing to the UAE’s capital as they tap into a wealthy market that is home to some of the world’s biggest sovereign wealth funds such as ADIA, Mubadala and ADQ. The H1/24 profit of DP World dropped to $265 mn, down 59% y/y largely due to the Red Sea maritime crisis.
Official statistics released on Aug 18 showed that Israel’s economy grew by a dismal 1.2% in Q2/24 and by 2.5% in H1/24 y/y. The inflation mounted to 3.2%, well outside the Central Bank’s 1-3% band. Apart from Gaza war-related issues, the absence of Palestinian workers and tourists also hobbled the economic performance, particularly in the construction and hospitality sectors. The military expenses in Q4/23 were 93% higher y/y. According to a Bank of Israel estimate, the war costs during 2023-25 were likely to reach $55.6 bn. Over 60,000 Israeli companies were expected to shut down. On Aug 13, the Fitch rating agency cut Israel’s credit rating to A from A+ while keeping the rating outlook negative, meaning a further downgrade is possible. Fitch expects the Israeli government to permanently increase military spending by close to 1.5% of GDP versus pre-war levels. It projected a budget deficit of 7.8% of GDP in 2024 and debt to remain above 70% of GDP in the medium term. Necessary to add here that the US has so far provided Israel with $14.5 bn in military support over and above the perennial annual grant of $3 bn. On Aug 25, Israel passed a supplementary budget of $923 mn to defray the costs of the internal evacuees from the south and north of the country till the yearend. (Comment: The downgrades by Fitch and other rating agencies were historic firsts since the formation of Israel, showing inherent bias in favour of the Jewish state. Relevant to note that even after the downgrades, Fitch and other agencies continue to grant Israel an investible grade, much above India’s BBB- by Fitch.). Israel’s El Al airline was an honourable exception to this dismal economic picture: its revenue increased by 33% in Q2/24, largely due to several foreign airlines stopping their flights to Israel.
Inflation in Egypt declined marginally to 25.7% y/y in July.
III) Bilateral Developments
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Prime Minister Shri Narendra Modi had a telephone conversation with Israeli PM Benyamin Netanyahu on Aug 16. Israeli PM greeted Shri Modi on India’s Independence Day anniversary. The two leaders also discussed various aspects of the bilateral cooperation and ways to further strengthen the India-Israel Strategic Partnership. The two leaders discussed the prevailing situation in West Asia. PM Modi emphasized the need to de-escalate the situation. The PM reiterated India’s call for the immediate release of all hostages and the need for continued humanitarian assistance for the affected. He called for an early and peaceful resolution of the conflict through dialogue and diplomacy.
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In response to the Independence Day greetings from UAE Vice President and PM Sheikh Mohammed bin Rashed Al-Maktoum, PM Modi commended Sheikh Mohammed’s commitment to strong bilateral ties.
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EAM Dr s. Jaishankar visited Kuwait on Aug 18 where he had meetings with Crown Prince Sheikh Sabah, PM Sheikh Ahmed Abdullah and Foreign Minister Abdullah Ali al-Yahya
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PTI quoted the Indian ambassador to Oman on Aug 27 as saying that the negotiations for a bilateral Comprehensive Economic Cooperation Agreement were at an advanced stage. The bilateral trade was $8 bn in FY24.
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Direct regular shipping service between Haldiah Docks Complex and Jabel Ali Port via Chittagong is to commence from Sept 6.
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With a July average import of 2.07 mbpd, India became Russia’s largest buyer, leaving China at 1.76 mbpd. India’s import of Russian crude was up 12% y/y and 4.2% m/m. At the same time, the share of the Middle Eastern crudes also went up by 2% to 40% of total imports. Thanks to higher crude imports, India’s trade with the GCC states surged to $162 bn in FY24.
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The Enforcement Directorate attached properties in Gurugram worth Rs 834 crores belonging to a joint venture between Emaar of the UAE and MGF of India. These were allegedly acquired in violation of the relevant land laws.
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Reports in Indian media spoke of Indian authorities planning to discuss with their UAE counterparts a sudden surge in precious metal imports from the UAE exploiting some loopholes in CECA signed in 2021.
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On Aug 14 Indian oil & gas firm Swan Energy notified its plans to sell a stake in one of its LNG terminals to Turkish state energy company BOTAS in a deal worth $399 mn.
