IA) Political Developments: Covid-19 Pandemic
Regional Impact of Covid-19: At Sea with Delta Version
There was a significant surge in Covid-19 confirmed cases and fatalities in WANA countries during July 2021 reversing the ongoing trend of decline. The growth in confirmed cases in the region during the month rose to 11.64% from 6.48%, 9.5% and 44.1% in the previous three months, respectively. Similarly, the deaths went up by 7.57% from 5.79%, 11.3% and 16.0%.
The surge appears to be caused by the prevalence of the more virulent Delta strain of the virus, even as Eid al-Adha festivities could also have played a role. The rise of confirmed cases and deaths were relatively lower in countries with high vaccination rates. A surge of coronavirus cases in several Middle Eastern countries could have dire consequences, aggravated by the spread of the Delta variant and low vaccine availability, the World Health Organisation also warned on July 14. The following table provides details:
Covid-19 and the Individual WANA Countries:
- On July 30, Israel became the first country to offer booster vaccine shots to all citizens over 60 years of age.
- During the month, Saudi Arabia, the UAE and Oman took steps to their citizens from travelling to several Covid-19 affected countries, including India, Pakistan and Bangladesh. On July 27, Saudi Arabia imposed a three-year travel ban on her citizens travelling to or transiting through the Red-listed countries with high Covid-19 incidence.
- Tunisian Health Minister was sacked on July 20 as the Covid-19 cases surged. On July 12, Saudi Arabia donated one million vaccine doses to Tunisia to combat the pandemic.
- A fire in a Covid-19 hospital at Nassiriyah (Iraq) killed 92 persons and wounded over 100 others. It was likely caused by an explosion of an Oxygen cylinder.
IB) Political Developments
On July 8, Foreign Minister Javad Zarif hosted the talks between the Afghan government delegation led by former Vice President Younus Qanooni and the Taliban delegation headed by Deputy Chief negotiator Sher Mohammad Abbas Stanikzai. A joint statement released after the talks said the Afghan government and Taliban agree that “war is not the solution to the Afghanistan problem” and that all efforts must be directed toward achieving a peaceful political solution. FM Zarif called on both sides to utilise the opportunity to talk and put an end to the fighting for the benefit of the Afghan people. He stressed that Iran will always be ready to facilitate more talks.
The ongoing indirect negotiations between the US and Iran on the former’s return to the JCPOA were suspended on July 14 until the takeover by President-elect Ebrahim Raisi. However, on July 28, Supreme Leader Ali Khamenei criticised the US for failing to guarantee that it would never abandon the JCPOA again. The next day, US Secretary of State Antony Blinken asserted that the negotiations with Iran could not go on indefinitely.
On July 6, Iran informed IAEA that it had begun producing Uranium metal enriched with U235 isotope to 20% level.
On July 7, new Israeli President Issac Herzog was sworn in for a seven-year term.
On July 7, Israeli Knesset failed to renew the disputed Citizenship Law that barred citizenship or residency to the Palestinians from Occupied Territories married to Israeli nationals.
On July 8, the Israeli Supreme Court upheld the validity of the National State Law defining Israel as a national state of the Jewish people.
The Foreign Ministers of Israel and Egypt had a meeting in Brussels on July 11.
The UAE inaugurated its embassy in Tel Aviv on July 14, becoming the first Gulf country to do so.
African Union granted Observer status to Israel on July 22, 19 years after it lost it during OAU’s transition to the AU. Palestine already has a similar status. Israel has diplomatic relations with 46 of 54 AU member states.
In his report on Human Rights in the Occupied Palestinian Territories submitted on July 8, the UN Special Rapporteur Michael Lynk stated that the Israeli settlements in these territories housing 680,000 settlers amounted to a war crime. Israel has boycotted the session and neither recognised his mandate nor collaborated with his work.
Ms Navi Pillai of South Africa was appointed on July 22 by the UN Council for Human Rights as the head of an international commission of enquiry into the alleged human rights violation during the Israel Hamas conflict in May 2021. Mr Miloon Kothari, an Indian, is among its three members.
An investigation by Forbidden Stories, a Paris-based non-profit organisation, revealed in 17 global media organisations on July 18 that the mobile phones of up to 50,000 persons, mostly public figures, in 50 countries, including India, were surreptitiously hacked using Pegasus software created by NSO, an Israeli software developer. The investigation did not mention the names of the perpetrators. In response to the international uproar over the privacy violations, Israeli defence minister Benny Gantz stated that the software has been sold only to the state actors as a cyber-defence tool against terrorism and crime. However, Israel eventually appointed a senior inter-ministerial team to assess the allegation about misuse of the software. On July 31, NSO barred some government clients from using Pegasus software.
On July 30, Israel blamed Iran for a UAV-style attack on Mercer Street, an Israeli managed oil tanker in Guld of Oman. The attack killed two ship’s non-Israeli crew members. Earlier on July 3, some media reports indicated that CSAV Tyndall, a container ship previously owned by an Israeli tycoon, was attacked by a missile in Indian Ocean while travelling from Jeddah to Dubai. Iran denied her involvement in both incidents.
Sheikh Mohammed bin Zayed (MbZ), Crown Prince of Abu Dhabi and de facto ruler of the UAE, paid a day’s visit to Riyadh on July 20 to meet Crown Prince Mohammed bin Salman (MbS). It was their first meeting in three years and indicated a thaw in their relations.
Further Reading: “West Asia: The parable of two Mohammeds and what it means for India”, Hindustan Times, July 27 2021; https://www.hindustantimes.com/opinion/west-asia-the-parable-of-two-mohammeds-and-what-it-means-for-india-101627473228940.html
Saudi Foreign Minister Prince Faisal bin Farhan Al-Saud paid a day’s visit to Islamabad on July 27. It was the first high level In visit from Saudi Arabia since the land-breaking Lailat al-Qadr visit by PM Imran Khan in May 2021. For the hosts, a special focus of the visit was the return of 400,000 Pakistani expatriate-workers to Saudi Arabia from Pakistan. They have been stranded in Pakistan due to Saudi Covid-19 restrictions. Pakistan’s 2 mn expatriates in Saudi Arabia contribute nearly $7 bn in remittances, a quarter of the total received by the country. In the event, Saudi merely promised to lighten the challenges facing them. The two sides also fleshed out the functional details of the Saudi Pakistan Supreme Coordination Council (SPSCC), a body announced during their May Summit.
Prince Khaled bin Salman, the Kingdom’s Deputy Minister of Defence, began a visit to Washington on July 6. This was the first political-level visit from Saudi Arabia in Biden Presidency.
In view of the Covid-19 pandemic, Saudi Arabia restricted this year’s Hajj to 60,000 pilgrims, chosen from residents of the Kingdom. No Hajis were allowed from abroad.
On July 13 President Recep Tayyip Erdogan spoke with his new Israeli counterpart, Isaac Herzog. This move raised hopes for better bilateral ties after a frosty decade with Turkey following a strident pro-Islamic policy of supporting the Palestine Cause. Earlier on July 11, President Erdogan had also spoken with Palestinian President Mahmoud Abbas, assuring him of Turkey’s continued support.
On July 19, President Erdogan arrived in the self-declared Turkish Republic of Northern Cyprus (TRNC) for a two-day official visit to mark 47 anniversary of the Turkish invasion which divided the island.
During the month, Turkey expressed her willingness to run and guard Kabul airport after the withdrawal of the US and NATO troops from Afghanistan. Taliban militia, however, warned Turkey against such a move.
Prime Minister Mustafa al-Kadhimi met with US President Joe Biden on July 26 at the White House. After the meeting, President Biden announced that there would be no combat mission in Iraq by the US troops by the end of 2021.
In a related move, 14 rockets hit Ain al-Asad airbase in western Iraq wounding two American military personnel. While no one claimed responsibility, the pro-Iranian militia was thought to be responsible.
Comment: American troops invaded Iraq in March 2003 to topple Saddam Hussein. While their numbers have dwindled to 2,500 at present, their total withdrawal has been demanded by the Iraqi government and parliament particularly since the targeted assassination of Iranian Gen. Qassem Soleimani at Baghdad airport in January 2020. The Biden administration has its own reasons for ending its costly and longstanding military presence in Iraq. However, the total withdrawal of the US troops is likely to tilt the strategic balance within in favour of Iran which has direct as well as the indirect presence in the country through its proxy militias such as the Popular Mobilisation Force. This imbalance is also likely to impact the Iraqi legislative elections scheduled for October 10, 2021.
On July 19, a suicide bomber killed 35 persons and wounded many more pre-Eid shoppers in the predominantly Shia Sadr city suburb of Baghdad. The incident, suspected to be carried out by ISIS, broke a lull in terrorism in the Iraqi capital.
Sultan Haitham bin Tariq Al-Said paid a two-day visit to Neom, Saudi Arabia on July 11-12 during which he met King Salman and Crown Prince Mohammed bin Salman. This was the first out visit by the Sultan since coming to power last year. During the visit, Saudi Arabia and Oman signed a document to establish a joint coordination council to oversee several agreements.
Comment: In recent months, Oman and Saudi Arabia have drawn closer due to mutual need: while Muscat needs Saudi assistance for an economic bailout, Riyadh finds Oman a useful and discreet intermediary to broker peace with al-Houthis in Yemen and the Mullahs in Iran.
On July 19, Palestine President Mahmoud Abbas had a teleconversation with Israeli Defence Minister Benny Gantz. This was the first public contact between the two sides since the installation of a new government in Israel.
King Abdullah II met US President Joe Biden on July 19, becoming the first Arab head of state to be received in Biden White House. President Biden called the king a "good, loyal, decent friend" and articulated his support to the King who has recently faced a challenge from within the al-Hashemi Royal family.
The Foreign Ministers of Jordan and Israel met in Amman on July 8 amidst signs of improved ties following the departure of PM Netanyahu. They signed agreements to double the sale of Israeli water to Jordan and boost the annual ceiling of Jordanian exports to the West Bank from $160 mn to $700 mn. Israeli media also reported an unannounced meeting on June 29 in Amman between King Abdullah II and Israeli PM Neftali Bennett. If correct, this would be the first such meeting between Israeli PM and Jordanian Monarch in 5 years.
On July 12, Bassem Awadallah, former Royal Advisor and ex-Minister, was sentenced to 15 years in jail for his involvement in an alleged plot to replace King Abdullah with former Crown Prince Hamza.
The battle for oil-rich Marib and Shabwa regions of central Yemen escalated as Tim Lenderking, US Special Envoy for Yemen arrived in Riyadh on July 28.
On July 20, Thomas Barrack, a billionaire friend of Donald Trump, was arrested and charged with illegally lobbying the Trump administration on behalf of the United Arab Emirates.
Blue Nile Waters:
On July 8, the UN Security Council held an open session on Grand Ethiopian Renaissance Dam (GERD) at the request of Egypt and Sudan as Ethiopia commenced the second seasonal filling of the dam’s reservoir from July 5 to July 19. The Council considered a Tunisian draft resolution without any decision. Earlier on July 6, the UNSG’s office called on the three countries to recommit to talks on the operation of the project and urged them to avoid any unilateral action.
Comment: Egypt and Sudan, the lower riparian countries, have been pressing Ethiopia to sign a binding deal over the GERD filling and operations, while Ethiopia insists only on guidelines. The Ethiopian government, however, has maintained its intention to move ahead with reservoir-filling in the absence of a deal. The matter has defied resolution through trilateral negotiations as well as mediation by the US and the AU.
On July 29, Emir Tamim approved the legislation for holding the first elections for two-third of the 45-seat Shoura Council to be held in October. Earlier on July 11, Qatar announced the setting up of a committee to oversee the legislative elections. Qatari nationals comprise only 10% of the country’s total 2.7 mn residents.
Afghan leaders met in Doha between July 13-17 without being able to reach any agreement including on ceasefire during the Eid al-Adha holidays.
On Eid al-Adha on July 21, Emir Tamim ordered food aid worth $100 mn to Yemen.
The UN-backed 5-day talks on the proposed Libyan parliamentary elections on Dec 24 2021 were held in Switzerland. They concluded on July 2 without any breakthrough.
On July 30, the Misrata - Sirte section of the main road along the Libyan coast was reopened to civilian traffic.
On July 26, Najib Mikati, a non-political telecom tycoon, was designated as the Prime Minister following parliamentary endorsement by 72 votes out of a total of 118 members. The move cleared the way for complicated negotiations to put together a Cabinet. This development marked a forward move in the country which has been under a caretaker government for nearly one year since the Beirut port blast on August 4 last year. An attempt by ex-PM Sa’ad al-Hariri to form a government was given up after 10 months on July 15 after president Michel Aoun disapproved of the proposed cabinet.
On July 13, the European Union agreed to target some Lebanese politicians with sanctions to press them for politico-economic reforms.
On July 17, President Bashar al-Assad was sworn in for the fourth 7-year term. In a speech following his inauguration, al-Assad estimated that between $40 billion and $60 billion of Syria’s funds were frozen abroad, mostly in Lebanon, due to the Western economic sanctions. He called the situation to be the biggest impediment to the inflow of investments in the country.
On July 8, the UN Security Council agreed to a 12-month extension to a cross-border humanitarian aid operation into Syria from Turkey.
On July 29, the rebels attacked the Syrian government forces in the southern city of Dara’a, for the first time in three years. The city is known as the place where the Syrian civil war began in 2011. On July 31, Jordan closed its border with Syria to avoid the influx of refugees.
On July 25, President Kais Saied invoked emergency powers under the constitution to dismiss Prime Minister Hichem Mechichi and the Cabinet and suspend parliament for 30 days. Raising the ante further, On July 28 President Saied accused 460 persons of having stolen $4.8 bn from the state coffers. The Tunisian s were divided in their reactions: while the rule by President Saied, a non-political figure, was initially welcomed by many as necessary to drag the country out of the politico-economic mess and raging pandemic, the political elite led by Parliament Speaker Rached Ghannouchi, veteran leader of Ennahda, an Islamist party, condemned it as a “Coup” against the Revolution.
Comment: With the Presidential rule, the political clock in Tunisia, the birthplace of Arab Spring in January 2011and the only example of its peaceful democratic transition, seems to have come full circle. The action followed months of political instability in a parliament where no party had more than a quarter of the total seats. With a raging pandemic that devastated the hospitality and tourism sector – a mainstay of the economy - the socio-economic condition turned dire. The annual GDP growth averaged only 1.5% per annum 2011-19 but plummeted further into a recession of -8.6% in 2020 and -3.0% in 2021. The youth unemployment was 36% in Q4/2020 and the government debt rose to 88% of the GDP. The politico-economic freefall complicated the negotiation of a $4 bn IMF rescue package. International reactions were muted, with apprehensions that the political instability in the country could affect the fragile Maghreb region comprising of civil war-torn Libya and Islamic militancy in Maghreb and Sahel. Few Arab voices lamented the ouster of Ennahda, which was historically close to the Muslim Brotherhood of Egypt.
On July 17, Egypt’s al-Ahly football club was crowned as African Champion for the tenth time.
WANA at the Tokyo Olympics 2020
Ten WANA countries won 34 medals at the Tokyo Olympics held during July-August 2021. The details are in the table below:
II) Economic Developments
Oil Related Developments:
- On July 18 Saudi Arabia and the UAE managed to resolve their oil quota dispute paving the way to a compromise over the OPEC+ deal hanging fire since July 3 when the UAE demanded a higher baseline quota citing its rising production capacity. In the event, the OPEC+ reached a complicated compromise extending the production sharing agreement till the end of 2022 with the total cuts (introduced on April 21) being phased out by May 22. The collective quota would rise by 0.4 mbpd each month during August-December 2021. It raised the production ceilings from May 22 as follows: Saudi Arabia and Russia each shall have new ceilings of 11.5 mbpd from 11 mbpd earlier; the UAE got 3.5 mbpd instead of 3.168 mbpd; Iraq and Kuwait also got a raise of 150,000 bpd each. The quota of Nigeria and Algeria was also raised. Iran was to get a new quota as and when the economic sanctions were lifted. (Comment: while the OPEC+ compromise looked well on paper, its implementation is likely to be affected by several factors, including global demand recovery challenged by resurgent Covid-19 Delta cases, Shale production, Iran’s return to the market and consumption being dampened by the higher prices.)
- A Reuters survey released on July 30 estimated OPEC July output at 26.72 mbpd, a 15 month high and up 610,000 bpd from last month.
- A BloombergNEF report published on July 20 predicted that world road transport fuel demand would peak in 2027, four years before the last year’s estimate. This would be due to several factors, including the higher fuel efficiency, the growing popularity of electrical vehicles, relative lack of anticipated demand growth in China and India, etc. It foresaw the number of cars peaking at 1.548 bn in 2039, a 26% increased from the current number.
- On July 22, Iran opened its first oil terminal outside the Strait of Hormuz at Bandar e-Jask in the Gulf of Oman. It plans to ramp up its capacity to 1 mbpd.
- According to Refinitiv Oil Research released by Reuters on July 22, China received a daily average of 557,000 barrels of Iranian crude between November and March, or roughly 5% of its total imports, returning to levels last seen before former U.S. President Donald Trump re-imposed sanctions on Iran in 2018. A Reuters survey showed that Iran exported more than 600,000 bpd of crude in June 2021, double of 2020 average, but still less than a quarter of 2.8 mbpd in 2018. Earlier on July 19, the Wall Street Journal reported that in case JCPOA talks failed, the US was contemplating a new sanction on Iranian oil sales to China.
- Saudi Arabia’s May 2021 oil export revenue, released on July 27, was put at $16 bn, having risen by 147% y/y. 21.4% of the oil exports were to China.
- There were various reports of several oil-majors, including BP, Lukoil and Exxon Mobil, planning to sell their upstream assets in Iraq due to the tough operating conditions.
Following economy-related developments took place in individual WANA countries:
- An update on IMF’s World Economic Outlook released on July 27, expected the economic growth of WANA and the Central Asian region to decelerate to 3.7% in 2022 from 4.0% in 2021.
- On July 26, Saudi Arabia suspended the 4-year long sale of 60% stakes in Ras al-Khair desalination plant that was estimated to fetch $2 bn. India’s NTPC was one of the bidders.
- As a business promotion measure, the Abu Dhabi emirate announced a 94% reduction in new business set up fees which were lowered to Dh1000/- ($272/-).
- S&P cut Kuwait’s sovereign rating by one notch to A+ on July 17with a negative outlook. The downgrade reflected “a persistent lack of a comprehensive funding strategy despite the central government's ongoing sizeable deficits" which were expected to stay around 17% of the GDP for the next four years.
- A joint report by the UN, World Bank and the EU released on July 7 put the damages to the Gaza Strip due to 11-day conflict in May 2021 at between $290 mn to $380 mn. It put the needed amount for recovery at between $345 mn to $485 mn.
- Bank of Israel spent $3.2 bn during June 21 to keep the Israeli Shekel from rising. It has spent $25 bn since the beginning of this year for this purpose.
- Turkey’s inflation reached a two year high of 175% on July 5, jeopardising President Erdogan’s quest for lower interest rates.
- On July 5, Saudi Arabia tweaked import rules on the GCC trade agreement disallowing duty remissions on goods made with the Israeli inputs.
- Saudi Arabia announced on July 5 its intention to invest $133 bn in its transport sector till 2030 aimed at making Riyadh a trans-shipment hub instead of the UAE. Accordingly, the Kingdom would create a new international airline with vastly expanded air connectivity.
- With 130 countries approving the US proposals for minimum corporate tax of 15% on July 1, the future of the Gulf tax havens such as Dubai was in doubt.
- Kuwait’s sovereign wealth fund (Future Generation Fund) rose to a record $700 bn. Half of the fund is invested in the US economy.
- On July 7, the South Korean Container ship Ever Given was allowed to leave Suez Canal holding area on settlement of the dues owed due to it blocking the channel in March 2021.
III) Bilateral Developments
- President Ram Nath Kovind received credentials of Turkey’s new ambassador to India Mr Firat Sunel on July 7.
- On July 31, Saudi Arabia invited Prime Minister Narendra Modi to the Middle East Green Initiative Summit to be held in Riyadh in October 2021.
- Raksha Mantri Rajnath Singh had a teleconversation with Israeli Deputy PM and Defence Minister Benny Gantz on July 9.
- EAM Dr S. Jaishankar visited Tehran on July 7 to meet Iranian President-elect Ebrahim Raisi and outgoing Foreign Minister Javad Zarif.
- On July 15 The new Minister of Petroleum and Natural Gas H.S. Puri had tele-conversations with his counterparts in Saudi Arabia, the UAE and Qatar. While expressing his concern at high oil prices, he vowed to work with them to calm the international oil market.
- Air Chief Marshal RKS Bhaduria, Chief of Air Staff began a goodwill visit to the UAE on July 31.
- Indian refiners processed 4.58 mbpd of crude oil during July 21, about 1.9% higher than the previous month. Indian refiners operated at an average rate of 91.34% of capacity in July, up from 89.59% of capacity in June. On a year-on-year basis, refiners' crude oil throughput in July jumped about 9.6%, while domestic crude oil production fell about 3% to 602,000 bpd.
- On July 22 Reuters reported the Indian moves to commercialise half of its current strategic petroleum reserves (SPRs) as the nation looks to enhance private participation in the building of new storage facilities.
- Kerala Finance Minister K.N. Balagopal told Vidhan Sabha that around 14 lakh expatriates had returned to Kerala, of which about 10 lakh have cited job loss due to COVID-19 pandemic. He said that the Kerala government had sought a Special Covid package for their rehabilitation.
- On July 22, NMC founder BR Shetty, the founder of stricken UAE hospital operator NMC Health, sued auditor EY, two former top executives of his companies and two banks in a U.S. court, seeking $8 bn in damages for alleged multibillion-dollar fraud at his group.
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(The views expressed are personal)