H I G H L I G H T S

• Political Developments 
• Economic Developments
• Bilateral Developments

IA) Political Developments: Regional Issues

Impact of Omicron Covid-19 

On Jan 25, IMF First Deputy Managing Director Gita Gopinath put the total global economic losses from the pandemic at close to $13.8 trillion through 2024.

Many parts of the West Asia and North Africa (WANA) region were ravaged in January 2022 by a severe wave of the SARS-Coronavirus pandemic charged by its more infectious Omicron strain. The resurgence was manifest in new records of the daily cases in countries such as Turkey (93,586 new cases on 28/1), Israel (~16,000 on 6/1), Qatar (2487 on 6/1), Kuwait (2999 on 6/1) and Iran (29000 on 31/1). For several reasons, including high vaccinations, the rising cases did not translate into commensurate hospitalisations and fatalities. Nevertheless, there were political ramifications of the Omicron surge, including the postponement of  IMF/World Bank planned annual meeting at Marrakesh till Oct 2023, the annual Arab League Summit (for the third year running), suspension of the Iranian parliament session (as 47 of 290 members tested positive), postponement of President Raisi’s provincial tours, and Israeli Finance Minister testing positive. Apart from reinforcing the well-worn and routine preventive measures, the WANA countries put in place the following new or additional measures depending upon the extent of the Omicron pandemic:

  • The Booster Jabs (On Jan 26, Israel ordered the 4th vaccine to all adults at significant risk of exposure to the coronavirus; On Jan 18, the UAE made booster dose mandatory for all entering the country.)
  •  Travel Restrictions (On Jan 4, Israel began loosening the general entry ban in place since Dec 19; On Jan 1, the UAE banned her unvaccinated citizens from travelling abroad; from Jan15, Turkey lifted the PCR test requirement for unvaccinated before flights, etc.; On Jan 29, the UAE allows entry of passengers from the12 African countries banned last month; from Jan 16, arrivals from the UAE to Mumbai airport were no longer required 7-days home quarantine or PCR tests; However, on Jan 28, the US State Department issued a public advisory warning Americans against visiting the UAE because of Covid-19 pandemic and Houthi attacks.)
  • Other Measures: On Jan 1, - Bahrain authorized Pfizer's Paxlovid COVID-19 drug for emergency use in adults. On Jan 30, Qatar approved Pfizer/BioNtech vaccine for Children 5-11 years of age;
  • Miscellaneous: On Jan 28, Morocco began constructing a vaccine manufacturing unit in collaboration with Recipharm of Sweden. When completed in 2024, it would have an annual capacity of 116 doses; On Jan 27, the UAE gifted one mn doses of Sputnik vaccine to Gaza.

WANA and Afghanistan:

  • Iranian-Taliban Contacts: On Jan 9, Foreign Minister Hossein Amirabdollahian led the Iranian delegation for talks with the Taliban delegation, led by the group’s Foreign Minister Amir Khan Muttaqi. During this first public contact since the Taliban came to power in Afghanistan in mid-August 2021, the bilateral issues were discussed. Although the Iranian foreign ministry spokesman described the talks as “positive”, he maintained that Iran was still “not at the point of officially recognising Taliban”. He emphasised “the current condition of Afghanistan is a major concern for the Islamic Republic of Iran and the visit of the Afghan delegation was within the framework of these concerns.”  Iranian FM promised continuation of the humanitarian aid to Afghanistan. (Comment:  Iran has been dualistic about Taliban-2 in neighbouring Afghanistan. Iran’s official position has been that it will only recognise the Taliban if they form an “inclusive” government. This posture also permits Tehran to be in sync with the international community. At the same time, Hassan Kazemi-Qomi, Iran’s special envoy for Afghanistan, has made several trips to Afghanistan in recent months. Iran recalls that Taliban-1 in the 1990s, had persecuted Hazaras, which are Shias, and other minorities, forcing them to take refuge in Iran.  Iran now want the Hazaras and other minorities to be co-opted in the government set up,)
  • Doha-Kabul Flights Commence: On Jan 27, Qatar Airways began twice a week flights to Kabul. The flight resumption was preceded by intense negotiations between Qatar, Turkey and the Taliban about technical issues, including security at Kabul airport.  (Comment: The timing of flight resumption, four days before the Qatar-US Summit at the White House, was significant as it allowed Doha to encash another IOU with Washington.)

Chinese Diplomacy with WANA Countries:

Whether by coincidence or by design, three high ranking WANA delegations visited China in the middle of the month. A delegation led by Nayef al-Hajraf, Secretary-General of the Gulf Cooperation Council (GCC) and included the foreign ministers of Saudi Arabia, Kuwait, Oman and Bahrain arrived in China on Jan 11 for a five-day visit. China’s Foreign Minister Wang Yi held talks with them on Jan 12 during which the two sides agreed to expedite the GCC-China Free Trade Agreement, 9 rounds of negotiation for which have taken place in fits-an-starts since 2004. On the same day, Jan 12, Turkey’s Foreign Minister Mevlut Cavusoglu also met Chinese FM Wang Yi. Their discussions were dominated by bilateral economic issues, even as the Chinese FM stressed the need to safeguard their respective sovereignty, security and development interests, and abide by non-interference in each other's internal affairs, a basic norm governing international relations. Lastly, Iran’s Foreign Minister Hossein Amirabdollahian met with his Chinese counterpart Wang Yi on Jan 14. According to details in the public domain, during the meeting, Yi opposed unilateral US economic sanctions and backed efforts to revive the JCPOA. Iranian FM announced that the 25-year bilateral agreement for comprehensive cooperation signed in March last year is now being implemented.
10105729075?profile=RESIZE_710xComment: The three meetings, all taking place in Wuxi city in Jiangsu province of China within four days span, show China’s increasing centrality for the WANA region. China is the largest trading partner of the GCC ($161.4 bn) and Iran (thanks to large undeclared oil trade). In addition, China counts the UAE and Saudi Arabia second and third respectively as top destinations by volume for Chinese construction projects under the Belt and Road Initiative. Turkey, facing a patchy economy and tensions with regional countries and the US, wishes to revive its economic ties with China, overlooking the Uighur issue. On a different plane, the Sunni WANA countries have been dismayed with the Biden administration’s lukewarm and ambiguous stand on their security issues ranging from human rights to Iran and wish to check out the Chinese option. On other hand, Beijing has so far concentrated on fostering economic ties with the WANA region, largely sidestepping swampy regional geopolitics and gratuitously blaming the US for the mess. However, with Washington in withdrawal from the region, China, the emerging Superpower, is increasingly expected to go beyond all-pleasing rhetoric. It would be interesting to see how the Chinese diplomacy fills the void while avoiding the collateral political costs.   

IB) Political Developments

Iran:

President Ibrahim Raisi visited Moscow on Jan 19 for a summit with President Vladimir Putin. This was the first bilateral Summit since 2017 between the two countries which have often collaborated on Syria and under OPEC+. Iranian President, who also addressed Duma, was accompanied by Ministers of Foreign Affairs, Petroleum and Economy. Iran presented a proposal to renew the 20-year cooperation agreement which expired in 2021. President Putin mentioned that the two sides are considering a bilateral free trade agreement.
Comment: While there are obvious similarities in viewpoints of Russia and Iran on US unilateralism and economic sanctions, there are nuanced differences too on Syria, the Gulf situation and the JCPOA negotiations.

The eighth round of indirect talks on JCPOA between Iran and the US generated more heat than light before its conclusion in the last week of January. In the public domain, the two sides stuck to their respective maximalist positions. The US even added on Jan 24 that the deal was unlikely without the release of four Americans currently in Iranian jails.  Even as there was scant information on outlines of any eventual deal, some credible accounts spoke of tentative understanding on the sequential matching of the Iranian adherence to JCPOA with the gradual lifting of the US economic sanctions. The negotiators decided to have a week-long break to get back to their respective governments for instructions before getting down to the ninth round in early February.
Further Reading: “Will 2022 be a crunch year for West Asia?” by Mahesh Sachdev, Hindustan Times, Jan 10 2022;  https://www.hindustantimes.com/opinion/will-2022-be-a-crunch-year-for-west-asia-101641827951235.html

Yemen:

Seven-year-old Yemeni civil war saw some serious escalation during the month. Induction of the UAE-trained and supported al-Weyat al-Amaliqa (The Giants Brigades) in oil-rich Shabwah-Marib sector in the first week of January tilted the strategic balance against the Houthi militia forcing them to retreat from Shabwah after year-long fighting. They also faced an imminent rout in Marib. Al-Houthis responded to this debacle on land by attempting to hurt the UAE. They seized Rwabee, a UAE-flagged ship, off the Yemeni coast in the Red Sea alleging that it was ferrying weapons to the coalition forces. On Jan 17, it further upped the ante by launching a barrage of missiles and drones hitting an Adnoc facility at the outskirts of Abu Dhabi nearly 1400 kms away, setting fire and killing three persons, two of them Indians. It was the first time since 2019 that Houthis successfully mounted an air attack on the UAE.  The Saudi-led coalition, of which the UAE is a member, retaliated by intensifying air attacks on Sana’a, Sa’ada and other cities under Houthi control causing nearly 100 deaths. Houthi attempted to attack the al-Dafra airbase in the UAE with missiles and drones on Jan 30 but were thwarted by the UAE air defences.

10105730482?profile=RESIZE_710xThe escalation in hostilities refocused diplomatic attention to the Yemeni Civil war. A call by the UN Security Council for the release of the detained UAE ship was rejected by the Houthis. The UAE sought a UNSC meeting to consider the Houthi attack. The UN Security Council issued a statement on Jan 21 condemning “in the strongest terms the heinous terrorist attacks in Abu Dhabi, United Arab Emirates, on Monday, 17 January, as well as in other sites in Saudi Arabia.” On Jan 21, the UN Secretary-General condemned the deadly strike at Saada in Yemen. Most of the other stakeholders acted on predictable lines, expressing solidarity with the UAE. The US despatched the Special Envoy on Yemen back to the region.

On Jan 9, the Wall Street Journal published an item based on a confidential UN report that concluded that Houthis were receiving weapons of Russian, Chinese and Iranian origin through a clandestine supply chain using small boats and land routes originating from Iran’s Jask port on Sea of Oman.
Comment & Further Reading: Please see: (i) Security Council Press Statement on Terrorist Attacks in United Arab Emirates, 21 January 2022; https://www.un.org/press/en/2022/sc14771.doc.htm
(ii) “Drones across Empty Quarter: A Lot at Stake”, by Mahesh Sachdev, Economic Times, Jan 26 2022; https://economictimes.indiatimes.com/news/defence/drones-across-empty-quarter-a-lot-at-stake/articleshow/89124158.cms; (iii) “Iran Navy Port Emerges as Key to Alleged Weapons Smuggling to Yemen, U.N. Report Says”;The Wall Street Journal; Jan 9 2022; https://www.wsj.com/articles/iran-navy-port-emerges-as-key-to-alleged-weapons-smuggling-to-yemen-u-n-report-says-11641651941?mod=hp_lead_pos4;   (iv)“Explainer: Why Yemen is at war” Reuters, Jan 25, 2022; https://www.reuters.com/markets/stocks/why-yemen-is-war-2022-01-25 

Turkey: 

During the month under review, President Recep Tayyip Erdogan continued with several axes of his regional reconciliation drive. He disclosed that he would visit Saudi Arabia and the UAE, two countries with past tensions, in February. He also mentioned that President Issac Herzog of Israel, with nearly a decade of bitterness, was to visit Turkey in February. In addition, President Erdogan offered to mediate between Russia and Ukraine in their dispute.

Russia hosted reconciliation talks between Turkey and Armenia in Moscow on Jan 14 at which the two sides agreed to set in motion the process of normalisation of ties by direct flights, full diplomatic relations and opening the common border closed since 1993.
Comment: Turkey and Armenia, though neighbours with a shared border, also share a legacy of antagonism dating back to the “Armenian genocide” of 1915 during the Ottoman era and Turkish support to Azerbaijan during its conflict with Armenia in 2020 over the disputed Nagorno-Karabakh enclave. The Moscow talks were first since the 2009 peace accord and the normalisation is likely to be slow due to past sensitivities.

On Jan 19, Turkey entered into a $5 bn currency swap deal with the UAE.  On Jan 28, SOFAZ, Azerbaijan’s Sovereign Wealth Fund placed one bn Euros as a six months deposit with the Turkish Central Bank. Even before these two deals, TCB has already had entered into swap deals with China, Qatar and South Korea worth a total of $23 bn. These arrangements helped TCB to shore up the value of the Lira, the national currency.

The elements among Turkey’s 50,000 strong Uigur community expressed their anti-China sentiments during the month by filing criminal cases against Chinese officials for the persecution of Uigurs (Jan 4) and calling for a boycott of the Beijing Winter Olympics (Jan 23).

Israel:

In a briefing to a parliamentary committee on Jan 10, Prime Minister Naftali Bennett said that Israel would not be bound by any nuclear deal with Iran and would continue to consider itself free to act "with no constraints" against its arch-foe if necessary.

Israel signed a $3.4 bn deal with Germany's ThyssenKrupp Marine Systems on Jan 20 for the supply of three advanced submarines for its navy. The first of these is to be delivered within 9 years.

Reuters reported on Jan 16 that former Israeli Prime Minister Benjamin Netanyahu was negotiating a plea bargain to end his corruption trial, provided that would not bar him from politics.

In a column in the Times of London on Jan 8, the Greek Orthodox Patriarch of Jerusalem Theophilos III accused the un-named radical Israeli groups of threatening the presence of Christians in the holy city. The item, published a day after the Greek Orthodox Christmas, was rejected by the Israeli officials as baseless.

Saudi Arabia:

Thai Prime Minister Prayuth Chan-Ocha visited Saudi Arabia and was received by Crown Prince Mohammed bin Salman on Jan 25. They agreed to normalise bilateral relations turning the page over nearly three decades of hiatus caused by so-called the ‘Blue Diamond Affair” in 1989. The two sides agreed to exchange Ambassadors at an early date.
Comments:  The normalisation of Saudi-Thai ties could affect Indian interests in terms of manpower, rice exports (The Kingdom is our largest market) and tourism.
Background: The case, widely known as the “Blue Diamond Affair” initially involved a Thai janitor stealing around $20 mn worth of jewels from the palace of a prominent Saudi prince in 1989. The stolen jewels were smuggled out to Thailand and the investigations into the case were obfuscated by the Thai authorities, who were thought to be complicit. In related developments, four Saudi diplomats and a visiting Saudi businessman were assassinated in Thailand during 1989-90.
Further Reading: https://en.wikipedia.org/wiki/Blue_Diamond_Affair

Financial Times reported on Jan 9 that the Biden administration’s reluctance to replenish the Saudi air-defence stocks in the face of the escalating Houthi missile and drone attacks had left the Kingdom feeling vulnerable. The situation has pushed the Kingdom’s leadership to seek help from the neighbouring friendly countries to replenish the depleted stock of interceptor missiles for its US-made Patriot air-defence system. Further ReadingFinancial Times

On Jan 4, France opened a terror probe into an explosion on Dec 30 that damaged a vehicle in Saudi Arabia participating in the Paris-Dakar rally, seriously wounding a participant.

The UAE:

Israeli President Isaac Herzog paid a two-day visit to the United Arab Emirates on Jan 30-31. He met Sheikh Mohammed bin Zayed Al-Nahyan, de facto Head of State of the UAE, Vice President & PM Mohammed bin Rashid and visited Dubai Expo 2020. This was the first visit by an Israeli President to a Gulf country and came two months after PM Naftali Bennett visit.
Comment: The Israeli President’s visit was historic in yet another way. The visit resonated with the hosts for this being the first head of state to visit the UAE after Jan 17 Houthi drone and missile attack that exposed the country’s vulnerability. Moreover, the guests appeared unfazed by a second attack on Jan 30, thwarted by the UAE air defences, and carried on with their schedule. President Herzog’s offer of intelligence and security cooperation to stem such attacks would have been appreciated by the Emirati leadership.

Iraq:

Three months after the general elections on October 10, 2021, which rendered a hung parliament, Iraqi Majlis an-Nuwwāb had its inaugural session from Jan 8 amidst considerable confusion and tumult. On Jan 10 it managed to elect its speaker triggering a 30-day timeline for the House to elect a new President of the Iraqi Republic. He, in turn, would appoint the new Prime Minister from the largest block in the house.

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Comment: The complex process is further complicated by confessional assignments (President has to be a Kurd, PM a Shia and Speaker a Sunni). In practical terms, a vigorous and protracted round of political horse-trading appears on the anvil as the largest political ensemble, Shia cleric Moqtada al-Sadr’s group has only 22% of the total 329 seats. The wheeling-and-dealing among politicians takes place on a febrile tectonic plate made unsteady by interference by the militias with itchy fingers on the trigger, the clergymen and the foreign powers interested in this strategically located oil-rich country. Weak political institutions and youth apathy complete the dismal picture.
Further Reading: “Iraqi cleric's push to sideline Iran-backed factions risks clash”, Reuters, Jan 14, 2022; https://www.reuters.com/world/middle-east/iraqi-clerics-push-sideline-iran-backed-factions-risks-clash-2022-01-14     

The United States military formally ended its combat mission in Iraq on Jan 1 confining its role to training and advisory roles. It was unclear how many of the 2,500 US soldiers and another 1,000 coalition soldiers would remain in the country still coping with an unstable security situation emblematic of sporadic rocket attacks by militias and resurgent Daesh. The second anniversary of Iranian Gen Qassem Soleimani’s assassination was marked by several rockets and drones attacks on the US bases in Iraq. On Jan 21, 11 Iraqi soldiers were killed in their sleep in Diyala province by ISIS. More than three rockets hit Baghdad airport on Jan 28, disrupting the civilian flights. At least one foreign airline suspended flying to the Iraqi capital.

Libya:

Following the indefinite postponement of the Dec 24 elections, the Libyan internal politics returned to its default position with the institutions of Tripoli-based GNA sparring with their counterparts under Benghazi-based LNA. The status of the political structures created in the run-up to the postponed elections was contested. Thus, a parliamentary committee report submitted on Jan 24 to the Chairman of the Benghazi based House recommended that Prime Minister Abdul Hamid Dbeibah, installed last year through an UN-backed peace process, should be replaced. It also estimated that it would take at least 9 months to set up a fresh election. The only silver lining in this politics as usual was that a precarious ceasefire continues to hold among the two sides and their foreign backers. The UN Mission on Libya, too, commenced a fresh round of contacts among the various domestic stakeholders.

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Lebanon:

On the first visit from the GCC countries since tensions flared up last year, Kuwaiti Foreign Minister Sheikh Ahmed Nasser Al-Mohammed Al-Sabah visited Beirut on Jan 23. He met Prime Minister Najib Mikati to present several confidence-building measures to restore normal ties between Lebanon and the GCC countries. These largely centred upon curbing Iranian influence on Lebanon and disarming the Hezbollah Shia militia, the country’s most powerful, as per the UNSC Resolution 1559 of 2004. It also sought that Lebanon must not be a platform for hostile acts or words toward Gulf Arab states. Lebanon’s Foreign Minister Abdallah Bou Habib conveyed the official response to the GCC FMs in Kuwait on Jan 30. It reiterated Lebanon’s policy of disassociation from regional conflicts. Beirut sidestepped the demand to disarm Hezbollah, but promised that country will not be "a launchpad for activities that violate Arab countries." Earlier on Jan 3, PM Mikati distanced himself from an anti-Saudi statement by Hezbollah Chief Hassan Nasrallah.

On Jan 15, Hezbollah and Shia party Amal ended their 3-month long boycott of Cabinet sessions over a dispute concerning judicial probe into Beirut port blast last year. This allowed the passage of the draft national budget of Lebanese Pounds 5.25 tr to salvage the government revenues through tax raises and triple exchange rates. Two third of Lebanese currently live below the poverty line, thanks to the national currency losing 90% of its value in the past two years.

On Jan 24, Former Prime Minister Sa’ad al-Hariri “suspended his political role and abjured participation in the next election.

On Jan 26, Lebanon signed a deal with Jordan and Syria to buy 250 MW of electricity for the power-starved country.

On Jan 29, the US decided to re-route $67 in military aid to Lebanon to aid the country’s armed forces, many of whom have not received their salaries.

On Jan 11, a court investigating the Central Bank banned its Governor Riad Salamah from leaving the country.
Further Reading: “Factbox: How bad is Lebanon's economic meltdown?”, Reuters, Jan 23 2022; https://www.reuters.com/markets/rates-bonds/how-bad-is-lebanons-economic-meltdown-2022-01-23

Qatar:

On Jan 31, Emir Sheikh Tamim bin Hamad Al-Thani became the first Arab Head of State to be received in Biden White House. President Biden called Qatar “a good friend and reliable partner” and announced his intention to elevate the Gulf state as a “major non-NATO ally”, third such Arab state after Kuwait and Bahrain.
Comment:  The remarkable turnaround in Qatari geo-strategic fortune, owes itself to Doha’s astute diplomacy proving itself useful in pulling Washington’s chestnuts out of three ongoing fires raging in Afghanistan, Iran and Ukraine, the last as a potential substitute for the Russian gas to the EU. Relevant to recall that five years ago Qatar was ostracised for its unorthodox regional diplomacy by four Arab countries with the tacit approval of the Trump administration – a process rescinded only last year. The Qatar story seems the diplomatic equivalent of an ugly duckling becoming a white swan.

Qatar took several steps in the run-up to the Washington Summit aimed to create an auspicious context for the event. These ranged from resuming scheduled flights to Kabul (from Jan 27) to the foreign minister’s visit to Tehran on Jan 27. Three days before the Summit, Qatar Airways signed a $20 bn deal with Boeing for 34 777X freighter aircraft and at least 25 737 Max jets. The deal followed the Jan 20 cancellation of a contract signed with the Airbus Industrie for A321 in addition to an earlier court dispute over A350 jets.

On Jan 19, the sale commenced of the tickets for FIFA World Cup football matches, to be held in Qatar next year.  

Egypt:

On Jan 25, the US Defence Security Cooperation Agency notified the Congress of the possible sale of military hardware worth $2.5 bn to Egypt comprising of 12 Super Hercules C-130 transport aircraft and air defence radar systems. As an apparent afterthought, the State Department announced three days later that $130 mn of the US military aid would be denied over human rights concerns.

Sudan

Prime Minister Abdallah Hamdok, under attack from pro-democracy public demonstrators, resigned on Jan 2 after calling for a roundtable discussion to reach a new deal. While his resignation fulfilled the main demand of the demonstrators, it further polarised the polity between transitional government run by the military and the street and deepened the political deadlock. The pro-democracy demonstrations demanding the ouster of the military government continued and the death toll from their clashes with police rose to 79 by end of the month. On Jan 8 the UN Special Envoy on Sudan offered to hold talks in Sudan aimed at salvaging a fragile democratic transition. He said that all main stakeholders including military, rebel groups, political parties and protest movements would be invited to the proposed talks. Among the two main protest groups, reactions were divided: while Forces of Freedom and Change (FFC) welcomed the UN initiative, the Sudanese Professionals Association (SPA) rejected it as it legitimised the military government.

Gen. Mohammed Hamdan Daglo, the second-highest-ranking member of the ruling military junta visited Addis Ababa on Jan 21-22 to confer with Ethiopian leadership.
Comment: Sudan has two major disputes with neighbouring Ethiopia, viz. the non-demarcated border and the Nile water sharing. However, their respective existential domestic crises seemingly provide the impetus for the two governments to collaborate, at least tactically. 

Syria:

On Jan 10, the UN Security Council extended without a vote for the next six months the border crossing arrangements at Bab al-Hawa that has become the lifeline for three million people, mostly anti-government rebels and their dependents, living in the exclusion zone in Idlib province of Syria.

On Jan 20, the Daesh forces attacked the Syrian Democratic Forces (SDF) manning a large prison at Hasaka in north-eastern Syria aiming to release nearly 3,500 ISIS prisoners detained there. The SDF was able to restore control over the facility only after 6 days of intense fighting in which the US airpower was used, it left nearly 270 dead among prisoners and combatants. It was the largest attack mounted by Daesh forces since their defeat in 2018.  
Comment: Daesh or ISIS exploited anti-Kurd sentiments among the locals, mostly Sunnis, who feel discriminated by SDF, a Kurdish militia armed and supported by the US.

On Jan 13 a German court at Koblenz sentenced Anwar Raslan, a former Syrian intelligence officer to a life sentence for crimes against humanity. He was accused of 58 murders in a Damascus prison. Later on Jan 19, a Frankfurt court began a trial of a Syrian doctor accused of 18 counts of torture and one count of murder.
Comment: The two trials attracted wide public interest. These were held under the legal principle of “universal jurisdiction”, which allows countries to try people for crimes of exceptional gravity, including war crimes and genocide, even if they were committed in a different country. Some observers saw a shadow of Germany’s own Nuremberg trials of Nazi war criminals 75 years ago.

Jordan:

Israeli defence minister Benny Gantz met Jordanian King Abdullah II on Jan 5 in Amman. They discussed issues of regional stability. The bilateral ties have improved since the new Israeli government came to power.

On Jan 6, Jordan's parliament approved by 104-08 majority the government-backed constitutional reforms intended to revitalise the country's stagnant political life. These include provisions for a larger role for political parties, the leader of the largest party in parliament being appointed as the PM, wider representation to women and lowering the minimum age for political office to 25 years.

On Jan 27, the Jordanian army clashed with a group of drug smugglers across the country’s border with Syria, killing 27 of them.

Palestine:

On Jan 1, around 500 Palestinian “administrative detainees” held in Israeli jails launched a boycott of Israeli military courts. Their action sought to limit the process which is allegedly misused to indefinitely extend the detention period.

On Jan 21, Qatar signed an agreement to ensure the supply of natural gas as fuel for the Gaza power plant.

Morocco:

On Jan 6, Morocco signed up to China’s Belt and Road Initiative via a video conference.

Tunisia:

On Jan 1 Tunisia launched the national consultations process on political reforms. These would conclude by March 20 following which a new constitution would be drafted and put to national referendum planned for July 25, exactly a year after President Kais Saied sacked the government, suspended parliament and seized wide-ranging powers.

On Jan 19, a Tunisian man died in hospital allegedly from injuries inflicted by police, making it the first protest-related death since President Saied's assumption of extra powers six months ago.

II) Economic Developments

Oil Related Developments:

  • In a familiar drill, 23-member OPEC+ decided on Jan 3 to stick with its pre-scheduled monthly output rise of 400,000 bpd, ignoring the consumers’ pleas for a larger production. Its action ran contrarian to the advice of its Joint Technical Committee which expected “a mild and short-lived impact of the new Omicron variant" on the oil market. Later, on Jan 23 the IEA reported that OPEC+ compliance with the production cuts was 122% in December 2021. In other words, the actual production of the group was much lower than the collective ceiling for the month agreed to. This was due to the inability of several producers such as Nigeria, Venezuela, Libya, etc to meet their national production quotas. 

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  • OPEC members also met in Vienna on Jan 3 to elect Sheikh Haitham al-Ghais, a Kuwaiti oil industry veteran, as their new Secretary-General from August 2022 replacing Mohammed Barkindo of Nigeria.​​​​​​

Oil prices posted their biggest annual gain in 2021 since 2016. Brent benchmark went up by 50.5% to end the year at $77.78/barrel, having peaked at $86.70 in October. The crude price rally showed no sign of tapering, posting a further gain of 17% in January 2022. A Reuters survey on January 3 forecast that the Brent crude would average $73.57 a barrel in 2022. However, tensions over Ukraine and Houthi missile attacks on Abu Dhabi provide a sharp tailwind to the prices with Brent crossing $90/barrel on Jan 28, for the first time in 7 years. On Jan 19, the IEA warned that 2022 could be a potentially volatile year for the oil market citing robust post-Omicron demand recovery and past underinvestment in the sector. It pointed out that for the first time in 30 years, the global daily oil refining capacity had declined in 2021 by as much as 730,000 barrels. On Jan 18, Goldman Sachs projected oil prices crossing $100/barrel in 2022, citing that only 3 countries (Saudi Arabia, Iraq and the UAE) had significant spare production capacity.  Further Reading: “Can big oil’s bounce-back last?” The Economist 15/1/2022; https://www.economist.com/business/can-big-oils-bounce-back-last/21807153
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  • In December 2021, the US became the world’s top LNG exporter for the first time.

Following energy-related developments took place in various WANA countries:

  • On Jan 10, the Iraq government announced its intention to acquire the stakes of ExxonMobil in the West Qurna oil field.
  • On Jan 12, the Kazakistan government recalled a bill from the national parliament concerning a $6 bn renewable energy deal with the UAE’s ADQ and Taqa. While no reasons were given, the move seemed at least circumstantially linked to internal changes at the helm following violent demonstrations in that country.  On Jan 19, UAE’s investor Masdar signed green hydrogen deals with France's Engie and Fertiglobe. Separately, it also signed an agreement with TotalEnergies and Siemens for a project for sustainable aviation fuel using green hydrogen. Both these projects are to come up in the Masdar city of the UAE.
  • Addressing a mining conference in Saudi Arabia, the country’s minister of energy and minerals said that the kingdom planned to use its vast uranium resources to develop a nuclear power programme. He added that Saudi Arabia was well-placed to become the cheapest producer of green hydrogen. He also disclosed that Saudi Arabia Mining Co. (Ma'aden), the Gulf's largest miner, would create a subsidiary for investments abroad. In another strategic move, Saudi Aramco acquired downstream assets in Poland to supply 377,000 bpd, almost half of the country’s oil demand which has long been met mostly by Russia. Aramco will buy 30% of a refinery on the Baltic coast, as well as a wholesale fuel unit. It also signed a long-term delivery deal with Polish refiner PKN Orlen SA.
  • Iranian gas supplies to Turkey were disrupted in the third week of January due to technical problems. The restoration was likely to take a fortnight.

Following economy-related developments took place in WANA countries:

  • The World Bank released its Global Economic Prospects on January 1, 2022. It found that the recovery in the Middle East and North Africa (MENA) region gained momentum in the second
    half of 2021 largely due to improved oil exports and higher prices as well as lower Covid-19 cases. It also added the following: “Growth in the Middle East and North Africa region is forecast to accelerate to 4.4% in 2022, reflecting tapering oil production cuts and accelerating vaccine progress, before slowing to 3.4% in 2023. Output in 2023 is projected to remain about 5% smaller than before the pandemic. Growth prospects are uneven across the region, with risks to the outlook predominately to the downside. Further COVID-19 outbreaks, social unrest, high debt in some economies, and conflict could undermine economic activity. Delays in structural reforms or transitioning away from fossil fuels, as well as governance setbacks, could further constrain growth prospects.”
  • The IMF’s World Economic Outlook, released on Jan 25 also projected the MENA region’s growth in 2022 at 4.4% - at par with the expected global growth during the year. MENA growth projection was upgraded by 0.3% over IMF’s last projections in Oct 2021 owing to a better than expected recovery of the oil market. MENA and India were the only two major economies to have upgrades as the global growth for 2022 was downgraded from 4.9% in Oct 2021 to 4.4%. The global economy grew by 5.9% in 2021. 
  • In its annual report published on Jan 25, Transparency International gave a score of 39 out of 100 to the MENA region for the fourth consecutive year. It made the following supportive remarks: “The region is struggling to fight corruption....Systemic political misconduct and private interests overtaking the common good have allowed the region – already devastated by various conflicts – to be ravaged by corruption and human rights abuses during the COVID-19 pandemic.”
  • A Reuters poll of economists on Jan 24 projected the GCC economies to grow in 2022 at their fastest rate in multiple years. In particular, the following GDP growth rates were expected: Saudi Arabia (5.7%), Kuwait (5.3%), the UAE (4.8%); each of Qatar, Bahrain and Oman to grow at 3% to 4%.
  • Turkey’s national currency Lira continued to be volatile as the government and Central Bank continue to try to square the circle of high inflation and pro-growth monetary policy. The Lira’s dollar value fell by 44% during 2021, worst-performing currency in the Emerging Markets (EMs). The annual inflation surged to 36.1% in 2021, having gone up by 13.58% in December 2021 alone, the eighth highest in the world and the worst in 19 years of PM/President Erdogan in power. President Erdogan acted decisively on this bad news and fired the chief of the national statistical institute, TUIK, for being its harbinger. After its review meeting on Jan 20, the Central Bank left the bank rate unchanged at 14%; The differential between bank rate and inflation at (-) 22.08% was the lowest among the EMs.  However, it was not all bad news: cheaper currency made Turkey’s exports more competitive which surged by 32.8% in 2021 y/y to $225 bn and the trade deficit shrank by 7.5%.  Tourism receipts grew 103% in 2021 to $24.48 bn over the previous year as 24.7 mn tourists came to the country  
  • Saudi Arabian Investment Minister said on Jan 12 that a new investment law would be promulgated during 2022. It would apply to both domestic and foreign investors. He also disclosed plans for 8000 kms of the new railway network. On Jan 16 Saudi Arabia's benchmark index reached its highest level since July 2006 on higher oil prices.
  • The UAE announced on Jan 31 that it would introduce a 9% federal corporate tax on business profits starting from June 1, 2023. The small businesses and startups would still pay no tax on annual profits up to Dh 375,000 (~$102,000). It thus abandoned its long-standing status as a zero duty tax haven to align with the new rules agreed in Oct 2021 by the OECD and 136 countries including the UAE to ensure the MNCs pay a minimum 15% tax. It still kept the proposed rate significantly lower than the ceiling to retain its attractiveness for businesses. On Jan 2, Dubai ruler Sheikh Mohammed bin Rashid Al Maktoum approved Dubai's budget for the fiscal years 2022-2024, with a total expenditure of Dh181 bn Emirati ($49 bn). Of this amount, Dh 59.95 bn was for 2022.
  • Israeli Finance Minister said on Jan 26 that country’s Sovereign Wealth Fund was expected to be operational by September with a prescribed minimum corpus of one billion Shekels ($315 mn).
  • Egypt said on Jan 2 that the Suez Canal revenue reached $6.3 bn in 2021. These were higher than $5.6 bn in 2020 despite a 6-day disruption due to a Korean ship running aground for 6 days in March. The planned expansion of the canal is to be completed by July 2023. 
  • Kuwait’s draft budget for the financial year 2022-23 was presented to the cabinet on Jan 24. Total revenues were estimated at Kuwait Dinars 18.8 bn (of which KD 16.7 bn came from oil @ $65/barrel), while expenses were seen at KD21.9 bn. It had a deficit of KD3.1 bn ($10.26 bn), down 74.2% from the previous year. Kuwait needs an oil price of $75 per barrel to break even. The proposed budget includes KD2.9 bn in capital spending.
  • On Jan 12, the United Nations said that it needed about $3.9 bn in 2022 to help 16 mn people in war-torn Yemen.

III) Bilateral Developments

  • In a telephone conversation on Jan 18, External Affairs Minister S. Jaishankar and UAE Foreign Minister Sheikh Abdullah bin Zayed Al Nahyan exchanged condolences over the attacks that led to fuel tank explosions at the ADNOC facilities near Abu Dhabi, in which two Indians and one Pakistani were killed and six others, including two Indians, injured. EAM condemned the attack and "emphasized that in this day and age, such an attack on innocent civilians was completely unacceptable and against all civilized norms."
  • Jammu and Kashmir Lt Governor Manoj Sinha visited the UAE Dubai during the first week of the month to firm up investment plans by various Dubai-based groups in the Union Territory. These included an inland port by DP World, a mall in Srinagar by Emaar Properties and a food processing hub by the Lulu group.
  • A Reuters analysis showed India's crude imports rebounded 3.9% to 4.2 mbpd in 2021, but these remained below pre-pandemic levels in 2019. At the same time, OPEC’s share of India’s imports shrank to 70% in 2021, the lowest in at least 15 years, from a peak of 87% in 2008.
  • The preliminary official data from state refiners – which control 90% of India’s pumps – revealed a decline in petroleum product consumption during January 2022 due to Omicron related restrictions. Petrol sales were at 2.2 mn tonnes, declining by 12.3% from December and by 5.4% from a year earlier. Similarly, Diesel sales were about 5.6 mn tonnes, a decline of 12.75% from December and of 6.85% from a year earlier. The jet fuel sales also fell during the month.
  • A report published on Jan 19 by the Bank of Baroda economists estimated that a 10% increase in crude prices could directly add 40-60 bps to India’s retail prices and cause the current account deficit to shoot up by $15 bn or 0.4% of the country's GDP.
  • Domestic natural gas production increased 19.5% to 2,896.7 mscm in December on a year-on-year (y/y) basis. It was mainly due to higher production from Reliance Industries (RI Domestic natural gas production increased 19.5% to 2,896.7 mscm in December on y/y basis, mainly due to higher production from Reliance Industries (RIL) and BP’s ultra-deep-water field in the KG-D6 Block of the Krishna Godavari basin on the east coast. The production surged 36-fold in the quarter ending on Dec. 31 and is now running at 18 mcm everyday and is expected to reach 30 mcm daily in 2023. Reliance’s revenue from oil and gas production jumped to Rs25.6 bn ($343 million) in the December quarter. It represents a marked turnaround for the upstream business, which had operating losses as recently as the quarter ending September 2020 after earlier discoveries in the same area dried up faster than anticipated. RIL expects to reap a bonanza from the rising production and galloping price of natural gas    .
  • Vedanta Group is reportedly planning investments in Saudi Arabia’s mineral sector, particularly for Zinc.
  • On Jan 23, HDFC Capital reported having raised $1.8 bn from investors, lead by a unit of Abu Dhabi Investment Authority (ADIA), for its third low-cost housing fund. This figure included an upfront amount of $1.2 bn with an additional $600 mn committed towards reinvestment of the principal amount.


 

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(The views expressed are personal)
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About the author

Ambassador Mahesh Sachdev

Former Ambassador of India to Algeria, Norway and High Commissioner to Nigeria and Distinguished Fellow, Ananta Centre 

Ambassador Mahesh Sachdev retired from Indian Foreign Service in October 2013. His 35-year diplomatic career included three Ambassadorial assignments spanning 11 years to Algeria, Norway and Nigeria – all major oil exporters. Nearly half of his diplomatic career was spent dealing with the Middle East. He is fluent in Arabic and knows some French.

Amb. Sachdev is currently the President of Eco-Diplomacy & Strategies, a consultancy in Delhi. He was Founder-President of the UAE-India Business Council and a Consultant to Jamia Millia Islamia University. He has authored two well received “Business Manuals” on Nigeria (Sept 2014; second edition in Oct. 2018) and the UAE (Sept 2016). He comments on strategic, economic and cross-cultural issues in media in India, Gulf and Africa.

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