IA) Political Developments: Covid-19 Pandemic

Regional Impact of Covid-19Diverse Trends

The month saw two divergent trends: Firstly, the mass vaccination against Covid-19 began in some relatively more developed WANA countries – where the disease was better contained anyway. This raised hopes for the beginning of the end of this devastating pandemic. In a contrarian mode, the number of confirmed cases accelerated during the month – growing by over 50% during December 2020, instead of 37% in the previous month. Perplexingly enough, a higher incident of cases notwithstanding, the increase in fatalities during the month remained unchanged at 26.5%.  Nearly two-thirds of the new regional cases during the month came from Turkey alone where new cases in December were more than double the cumulative number before. The surge in cases was because the authorities reluctantly began counting the asymptotic cases in their statistics from November 25 under the WHO guidelines. The number of Covid-19 deaths reported by them, however, remained unchanged for the time being causing a disconnect between the two figures. For details, please see the table below.

Cumulative Covid-19 Cases in WANA (as of January 1 2021)

Country

No. of Confirmed Cases

No. of Deaths

Total World Wide

83,356,808 (+31.6%)

1,816,118 (+23.5%)

India

 10,266,674 (+08.5%)

148,738 (08.0%) 

Turkey

2,208,652^ 

20,881* 

Iran

1,225,142# 

55,223# 

Iraq

595,291# 

12,813 

Morocco

439,193# 

7,388# 

Israel

423,262# 

3,325# 

Saudi Arabia

362,741 

6,223 

Jordan

294,494# 

3,834* 

UAE

207,822# 

669#

Lebanon

181,503* 

1,468# 

Kuwait

150,584 

934

Qatar

143,834 

245

Tunisia

139,140# 

4,676# 

Egypt

138,062# 

7,631# 

Palestine

138,004 *

1,400** 

Oman

128,867 

1,499

Libya

100,277# 

1,478# 

Algeria

99,610# 

2,756# 

Bahrain

92,675 

352 

Sudan

23,316# 

1,468# 

Mauritania

14,364* 

347**

Syria

11,434# 

711*

Somalia

4,714 

130#

Yemen

2,099 

610

Total for WANA

7,125,080 (+50.3%)

136,061 (+26.5%)

Source: Johns Hopkins University Coronavirus Resource Center;
Legend: # Grew ~10% since last month; * Increase of over 50% since last month; ** Nearly Doubled since last month; ^ More than doubled

Covid-19 and the Individual WANA Countries

  • The mass vaccination against Covid-19 began in the following WANA countries during December 2020: the UAE (Dec 14); Saudi Arabia (Dec 17), Israel (Dec 19), Qatar (Dec 22) and Kuwait (Dec 24)
  • Israel went into its third lockdown for three weeks from Dec 27.
  • On Dec 24, the US allowed Iran an exception from its sanctions regime to transfer $244 mn from to buy Covax vaccine from a WHO facility.
  • On Dec 27, Iran announced the beginning of human trials on its own vaccine developed by Shifa pharmaceuticals. It also claimed that seven other vaccines were under development.
  • On Dec 24, the UAE Fatwa Council decided to approve Covid-19 vaccines even if they contain pork gelatine as “it served the higher need to protect the human body.”

IB) Political Developments

Iran:

Supreme Leader Ali Khamenei, 81, appeared again in public on Dec 16 after weeks of absence which fuelled rumours of his ill-health and speculation about the successor.

The great game about Iran nuclear programme continued unabated during the month. In the wake of the assassination of Dr Mohsen Fakhrizadeh, a prominent Iranian nuclear scientist in the previous week allegedly by Israeli agents, the Majles passed a strongly worded resolution on Dec 1 requiring the Iranian government to stop the IAEA nuclear inspections unless the economic sanctions were lifted within two months. It also asked for the uranium enrichment to be raised to 20% level. The Guardian Council ratified the Majles resolution the very next day. While the government maintained that the resolution was non-binding as such policy decisions can only be taken by the Supreme National Security Council, it eventually notified IAEA of its decision to raise the enrichment level to 20%. A media report on Dec 4 sourced from IAEA claimed that Iran has accelerated the enrichment process using advanced IR-2m centrifuges at its underground facilities at Natanz complex. E3 Powers (UK, France and Germany) rebuked Iran on Dec 6 for this escalation.

Under the nuclear rubric, sparring continued about the JCPOA. In an NYT interview on Dec 2, US President-elect Joe Biden reiterated that his administration would be committed to and expand the 2015 deal if Iran agrees to its strict compliance emphasising "the last goddamn thing we need in that part of the world is a build-up of nuclear capability". If optimists saw this to be a promising basis for early removal of the US economic sanctions crippling Iran, they were proved wrong. With two days, Iranian Foreign Minister Jawad Zarif shot back that the US has to rejoin the JCPOA first, without any pre-conditions. President Hassan Rouhani further emphasised on Dec 14 that Iran would agree to neither any preconditions nor negotiate the curbs on its missile or regional activities. Supreme Leader Ali Khamenei added to the cacophony by doubting if the US can be trusted on lifting sanctions. Amidst this jostling, Saudi Foreign Minister Faisal bin Farhan wanted the Biden administration to consult the Gulf countries before rejoining the JCPOA. To addle to this witches’ brew, in a press interview on Dec 17, IAEA Chief Rafael Grossi opined that a new agreement would be needed if the US was to join as the ground realities have evolved since signing of the JCPOA over five years ago. 

To muddy the Gulf waters further, the US conducted two sorties of B52 strategic bombers over the Gulf to deter Iran from any misadventure to mark the first anniversary of Gen Soleimani’s assassination. The aircraft carrier USS Nimitz was also deployed in Gulf waters. On Dec 31 Iranian FM Javad Zarif accused the Trump administration of trying to fabricate pretexts for attacking Iran.
Comment:
The intense shadowboxing and pyrotechnics during the last few weeks of Trump administration were not unexpected. At the same time these show that with various stakeholders jockeying for positions, Biden administration’s plan to affect any changes to Trump’s fait accompli would not be easy to accomplish. So, the region may be in for a roller coaster ride for a few months.
Further Reading:Towards a better nuclear deal” The Economist, Leader, Dec 5 2020;
http://go.pardot.com/e/827843/drive-a-hard-bargain-with-iran/dzyq9/146675400?h=fyAiK4-RDauB2P8K92fFo1gqjvDI-I34O5zEvPQp6eA 
and, “Back to the future: Joe Biden wants to re-enter the nuclear deal with Iran: Sounds simple, but he faces some big obstacles” The Economist, Article, Dec 5 2020; http://go.pardot.com/e/827843/ter-the-nuclear-deal-with-iran/dzyqc/146675400?h=fyAiK4-RDauB2P8K92fFo1gqjvDI-I34O5zEvPQp6eA

The Trump administration imposed two round of sanctions on Iran-related entities on Dec 3 and 8. Among them was Yousef Ali Muraj, an Iran-based Pakistani accused of supporting al-Qods Force in carrying out operations in the Middle East and the US.

The UAE:

On Dec 10 the US Congress approved $23 bn defence deal with the UAE involving state-of-the-art F35 stealth fighter jets and Reaper killer drones.
Comments:
The passage through the US Congress was noteworthy for several accounts. Firstly, this deal impinged upon US commitment to Israel to maintain the latter’s “qualitative military edge” over its Arab neighbours. Secondly, the success of the lame-duck Trump administration in cajoling the Congress into approving this deal at a fast clip, overcoming those who would have preferred more thorough  scrutiny. According to some unconfirmed reports, the UAE had insisted upon this deal being a sine qua non for the Abraham Accord to normalise relation with Israel. While it may be possible for Biden administration to review this deal, it may be difficult for them to scuttle it altogether.

SIPRI annual report released on Dec 7 ranked UAE-based EDGE Consortium as among the world’s top-25 defence entities – for the first time a middle east-based company has been included in this list.
Comment:
The UAE, one of the world’s most prolific buyer of high-end military hardware, has leveraged its procurements to set up its defence industries through the offset programme. It consolidated these diverse entities under EDGE moniker, creating world’s 22nd largest defence manufacturer – far ahead of even Israeli concerns, collectively middle east’s top defence exporters. 

On Dec 17-18 Pakistani Foreign Minister Shah Mahmood Qureshi visited the UAE which hosts 1.6 mn Pakistanis remitting more than a fifth of the total inwards remittances the country receives.  His visit came against the backdrop of the UAE last month having suddenly banned issuance of the new visa to citizens of 13 countries, including Pakistan. In his meetings with the UAE leaders including Sheikh Mohammed bin Rashid Al-Maktoum, Vice President and Prime Minister and Ruler of Dubai and Sheikh Abdullah bin Zayed Al-Nahyan, Foreign Minister, Mr Qureshi raised this issue but was told that it was a “temporary measure” without any indication of when it would be lifted. He subsequently denied some rumours in Israeli media that during the visit he had delivered a message to Israeli leadership and emphasised that Pakistan can recognise Israel only after resolution of the Palestine conflict.

The export credit agencies of the UAE and Israel signed a cooperation agreement on Dec 13.

Qatar:

Emir Tamim bin Hamad Al-Thani was formally invited by Saudi King Salman to the forthcoming summit of the Gulf Cooperation Council (GCC) in Riyadh. An invitation for the event was delivered by the GCC Secretary-General on Dec 30 to Sheikh Tamim in Doha.
Comment:
Following the boycott of Qatar by three GCC states, viz. Saudi Arabia, the UAE and Bahrain, since June 2017, Qatari Emir has not been attending the GCC Summits. The invitation for Riyadh Summit – to be held from January 5 2021 – came amidst US-brokered bids to effect a reconciliation between the two sides. While there were some positive statements from both sides in the run-up to the invitation, given their extensive differences and degree of rancour created, a return to normalcy is likely to take a long time.

The Olympic Council of Asia decided on Dec 16 that the Asian Games of 2030 and 2034 would be hosted by Doha and Riyadh respectively.

Iraq:

Sulaymaniyah and other cities in Kurdish Autonomous Region of Iraq were rocked by violent protests during the month complaining about non-payment of salaries and lack of civic amenities.  Eight demonstrators died in police firing. On Dec 9 Iraqi President Barham Salih, himself a Kurd, issued a statement urging calm while also condemning the corruption. Kurdistan Prime Minister Masrour Barzani blamed the crisis on the Baghdad government not transferring the mandated funds.

The Islamic State claimed responsibility for an attack on two oil wells in northern Iraq on Dec 9.

On Dec 20, eight rockets were fired into the Green Zone in central Baghdad housing the US embassy, which was slightly damaged without any casualties.  The incident, not claimed by anyone, broke the lull on attacks at the US installations.

On Dec 24, the outgoing US President Trump pardoned four Blackwater “Contractors” sentenced to prison terms for shooting dead 14 Iraqi civilians in 2007. The act was criticised in Iraq as well as by the United Nations.

Turkey:

In a statement on Dec 7, Turkish Foreign Minister urged the European Union to use the ‘common sense” to resolve the gas exploration related dispute in the eastern Mediterranean. He underlined Turkey’s quest for full membership of the EU. However, on the same day, President Tayyip Erdogan also said “Turkey would not bow down to threats and blackmail” from Brussels.

On Dec 17, the US imposed sanctions on SSB, the Turkish Defence industry Directorate, it’s chief and three other staffers for Ankara’s purchase of S-400 air-defence missile system from Russia. Calling the move as “a hostile act” President Erdogan said that it would not shake the country from its resolve. The sanctions, rare against a fellow NATO member, were milder than initially threatened by Washington.

Two years after withdrawing its ambassador from Israel, Turkey decided to appoint a new ambassador to Tel Aviv.
Comment:     
During the month Turkish authorities sought to project a moderate and responsible image, seeking to contain the damage from their impulsive fiery rhetoric and extreme nationalism during recent months which has antagonised many of its neighbours and important partners and imperilled the national economy. Thus after playing hide and seek with Greece and Cyprus contested waters of east Mediterranean, it sought to avoid sanctions being imposed at the EU Summit. It also sought to reduce possible friction with incoming US President Biden who was expected to take a harder line with Ankara. Interestingly, President Erdogan has declared 2021 as the year of “democratic and economic reforms” – tacitly admitting the need for improved governance.

Saudi Arabia:

In a policy statement on Dec 4, Foreign Minister Prince Faisal bin Farhan said that the normalisation with Israel required the establishment of a Palestinian state as per the Fahd Plan proposed in 1982. He also urged the Biden administration to consult the Gulf states on reviving the JCPOA with Iran. 

An address on Dec 6 by Prince Turki Al Faisal Al Saud, former Chief of Saudi Intelligence and ex-Ambassador to the UK to the Manama Dialogue took observers by surprise for its stridently anti-Israeli tenor.
Comment:
Though well regarded as a member of Al-Saud old guard, Prince Turki al-Faisal is known preference for taciturnity and elliptical delivery in his public pronouncements. Therefore his hard-hitting speech, made in his personal capacity, caused considerable surprise. It included references such as “all Israeli governments are the last of the Western colonising powers of the Middle East”, “the apartheid wall” and “incarcerated them (the Palestinians) in concentration camps.” He accused Israel of orchestrating a campaign to “denigrate and demonise Saudi Arabia” and asserted “the The Abrahamic Accords are not divine writ. If they are based on geography, then there can be no Abrahamic Accords without the inclusion of the land of Abraham, Makkah al-Mukarramah. For that to happen, the Arab Peace Initiative must be implemented with regard to Palestine.” The context of the address – at an IISS-sponsored conference in the capital of Bahrain, flush with recently normalised ties with Israel – made it highly contrarian. Many observers believed that the address had a degree of official endorsement and reflected majoritarian view in Saudi Arabia on this issue.

On Dec 17 the Gulf Cooperation Council (GCC)  General Secretariat announced that the next GCC Summit would take place in al-Ula in Saudi Arabia on January 5 2021.

On Dec 17, Pakistan returned the second tranche of one billion dollars of the $3 bn Saudi loan and indicated that the last tranche would be paid off next month. Media reports indicated that Islamabad had to borrow from China to pay the Saudis.
Comment:
While many observers have seen Saudi unwillingness to postpone the repayment as indicative of Saudi peeve at Islamabad’s bid to obtain the OIC endorsement against India’s abolition of the special status of Jammu and Kashmir state, the entire episode also betrays the economic stringency Riyadh finds itself in due to the combination of low oil prices, the pandemic and the ongoing Saudi financial commitments.  

On Dec 14 a booby-trapped boat exploded after hitting an oil tanker berthed in Jeddah port causing a minor fire and disruption

Kuwait:

The political transition in Kuwait that began with the appointments of the new Emir and the Crown Prince continued this month. Parliamentary elections held on Dec 5 for fifty seats. As per the Kuwaiti tradition, the Cabinet resigned the day after the elections, with the Prime Minister Sheikh Sabah Al-Khalid Al-Sabah being reappointed soon thereafter. On Dec 14, the PM was sworn in with a 15 member Cabinet.    
Comment:
Although the parliamentary elections saw two-third of sitting MPs being voted out, its composition was still dominated by tribal and Islamist candidates who have traditionally been sceptical about the role of the ruling dynasty. The friction between the parliament and the government has impeded the reform process in Kuwait. For instance, despite a fiscal deficit of nearly 33% of the GDP in 2020, last parliament’s refusal to pass the debt law has denied the government the possibility of borrowing to pay its commitments and offer a stimulus. Understandably the new Emir’s inaugural speech to the first session of the parliament on Dec 15 stressed the need for pursuing a comprehensive reform programme without loss of time in “fabricated disputes.”

Yemen:

Following new power-sharing arrangement on Dec 18 under the Riyadh agreement, a President Abd-Rabbu Mansour al-Hadi sworn in a new Cabinet on Dec 26 in Riyadh. It was led by reappointed PM Maeen Abdulmalik and had 24 members including five members from the UAE-backed Southern Transitional Council (STC).  

A tragedy was averted on Dec 30 when Aden airport was attacked soon after the arrival of the flight carrying new cabinet members. Although the attack killed 20 persons and wounded 50 others, the Cabinet members escaped unharmed. No faction took responsibility for the attack and al-Houthis specifically denied their involvement. Nevertheless, Saudi led coalition bombed 15 locations in Sana’a the next day in apparent retaliation.

According to the UN Office for the Coordination of Humanitarian Affairs, the conflict in Yemen has so far claimed the lives of 233,000 people.

Keeping up their mutual charade, the US and Iran blacklisted each other’s ambassadors to Yemen.

Morocco:

On 10 December 2020, US President Donald Trump announced that Israel and Morocco had agreed to establish full diplomatic relations. He also announced that the United States recognized Morocco's claim over Western Sahara and urged the parties to "negotiate a mutually acceptable solution" using Morocco's autonomy plan as the only framework. Algeria-supported Polisario liberation for the former Spanish colony vowed to continue to fight on for its liberation. The US also announced a billion dollars arms deal to supply Morocco with four drones and precision ammunition. Following President Trump’s announcement, his son-in-law Jared Kushner and Israeli NSA Meir Ben-Shabbat visited Rabat on Dec 22 to seal the deal by signing accords on financial, civil aviation, consular and water management. Israeli PM Netanyahu phoned King Mohammed VI and invited him to visit Israel.
Comment:
Unlike other three Arab states entering Abraham Accords, Morocco has long had substantive and barely concealed ties with Israel partly facilitated by France, their common mentor, in the 1950s and 60s. Morocco housed the largest Jewish community in the Arab world and Israelis of Moroccan origin number nearly 700,000.  

While outing of relations with Morocco is a win for Israel, this was an even bigger diplomatic victory for Rabat which finally succeeded in getting the US to recognise its sovereignty over Western Sahara – a sparsely populated territory half its own area.  The UN continues to regard it as a disputed territory and the African Union recognises the Sahraoui Arab Democratic Republic (SADR), the political entity created by Polisario, as its full member. In its alacrity to get the maximum number of Arab countries to normalise ties with Israel, the US became first the major country to grant Morocco the one boon that it had fervently sought since it took over Western Sahara in 1975.  It would remain to be seen if the incoming Biden administration would rescind this decision.
Further Reading: “Heat in the desert: The Israel-Morocco peace deal is roiling Western Sahara”, The Economist, Dec 16th 2020; http://go.pardot.com/e/827843/deal-is-roiling-western-sahara/dzyqf/146675400?h=fyAiK4-RDauB2P8K92fFo1gqjvDI-I34O5zEvPQp6eA

Sudan:

The US removed Sudan from the list of states sponsoring terrorism on Dec 14. As a follow up it also granted Sudan the sovereign immunity on Dec 21 except for lawsuits already filed by the American victims of terrorist violence.

On Dec 16, Sudan accused Ethiopian armed forces and militia of ambushing a Sudanese security patrol in Abu Tiour region in Kassala state bordering Tigray which suffered 4 dead and 20 injured.   This incident prompted PM Abdalla Hamdok to visit Addis Ababa to meet his Ethiopian counterpart Abiy Ahmed after which the two sides held border talks at Foreign Minister level in Khartoum on Dec 22. Sudanese FM declared on Dec 31 that his country has recovered all territories and gained full control of the border.

The UN-AU peace mission in Darfur concluded on Dec 31 after 13 years.

Israel:

After the Knesset voted against delaying the deadline for the fiscal package on Dec 21, the fourth general election was called in Israel in less than two years. Earlier on Dec 8, Prime Minister Benjamin Netanyahu suffered a setback when his cabinet colleague Gideon Saar announced his decision to leave the Likud party to form an extreme right-wing bloc.

On Dec 12 Israel and Bhutan announced their decision to set up diplomatic relations. After a hiatus of two years, Turkey decided on Dec 14 to appoint an ambassador to Israel. On Dec 24, Israeli Minister for Regional Cooperation hinted that two more countries were likely to normalise relations with Israel – one of them being a Gulf country, but not Saudi Arabia; the other being a large Muslim country in the east, but not Pakistan.

Jonathan Pollard, a US convicted Israeli spy, arrived in Israel after his release from a 30-year sentence on Dec 30 for a low key welcome personally by PM Netanyahu.

On Dec 2, Israel transferred over $1.4 bn in the backlog of taxes to the Palestine Authority. This was first such transfer since June 2020 following the rift caused by PM Netanyahu’s announcement of a plan to annex part of the West Bank. 

Bahrain:

The government of Bahrain clarified on Dec 5 that products from Israeli settlements in Occupied West Bank would not be allowed in the country as per the international commitments. Two days earlier, Bahraini Trade Minister visiting Israel was quoted as saying that his country does not distinguish between products from Israel and those from Israeli settlements in Occupied West Bank.

Egypt:

Three staffers of Egyptian Initiative for Personal Rights (EIPR), an NGO, were released on Dec 3 after a month in custody due to pressure from the Western countries, including Biden administration.

Lebanon:

On Dec 9 PM-designate Sa’ad al-Hariri submitted to the President a list of 18 Cabinet Ministers who were all non-partisan experts.

On Dec 11 an UN-backed tribunal in The Hague investigating 2005 assassination of Lebanese Prime Minister Rafiq al-Hariri and 21 others, sentenced Salim Jamil Ayyash, a Hezbollah operative, to five life terms for the crime. He remains at large.

An international conference was jointly hosted on Dec 2 by France and the UN to create a humanitarian Fund to directly help the Lebanese people.

Oman:

On Dec 5, Omani Foreign Minister announced that his country was to undertake wide-ranging socio-economic reforms, including abolishing of the Kafala system for the foreign labour and end to the longstanding subsidies.

On Dec 6, Oman announced setting up of Energy Development Oman, a new 100% government-owned company aimed at raising capital for investment in the energy sector.

Algeria:

President Abdelmadjid Tebboune, 75, returned to Algiers on Dec 30 after spending over two months in Germany on treatment for what was believed to be a Covid-19 related health problem.

Syria:

On Dec 22 the US imposed fresh sanctions on the Central Bank of Syria, two individuals and nine entities in a continued effort to cut off funds for President Bashar al-Assad’s government. The U.S. State Department also designated Asma al-Assad, wife of the Syrian president, accusing her of impeding efforts for a political resolution to the war, and several members of her family.

More than 28 persons, believed to be Syrian government soldiers, were killed when their bus was ambushed in Deir al-Zour region on Dec 31. While no one took responsibility for the act, the Islamic State was likely perpetrator.

Palestine:

Palestine Authority President Mahmoud Abbas visited Doha on Dec 15 and met Qatari Emir Sheikh Tamim bin Hamad Al-Thani who reiterated his support to the Arab Peace Plan of 2002 and the two-state solution to the Palestine-Israel dispute.

On Dec 8 Dr Hanan Ashrawi, a noted Palestinian leader, resigned from PLO Executive Committee in protest against Palestine Authority’s decision to resume coordination with Israel.

On Dec 22 Canada pledged $70 mn to the UN Relief and Works Agency (UNRWA) that has been starved of funds to undertake humanitarian work in Gaza and the West Bank.

Arab Spring – The Lost Decade?:
Comment:
The tenth anniversary the breakout of the Arab Spring in Tunisia in December 2010 was marked more by the sombre reflections than a collective sense of accomplishment. Even in Tunisia, where the revolution to overthrow non-representative regimes began, the political reforms were still a work in progress and the economic conditions were worse than under President Ben Ali. Elsewhere, the Arab Spring had either unleashed the demons of religion, tribe or sect or ideology (Libya, Syria & Yemen) or reinstalled the old guard afresh. It is arguably possible to distil the decade into two aphorisms: underlining the Arab exceptionalism; and while an authoritarian Arab regime can be overthrown, the democracy is not its successor by default. 
Further Reading: “Ten years after the Arab spring: Why democracy failed in the Middle East; And how it might, one day, succeed” The Economist, Leader, Dec 19 2020;  http://go.pardot.com/e/827843/racy-failed-in-the-middle-east/dzyqh/146675400?h=fyAiK4-RDauB2P8K92fFo1gqjvDI-I34O5zEvPQp6eA

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II) Economic Developments

Oil Related Global Developments:

Global oil price indicator Brent crude ended the year 2020 at $51.80 per barrel, down 21.5% during the year but still nearly double its record low in April.  (cf. Graphic below).

After five days of difficult negotiations, OPEC+ Oil Ministers agreed on Dec 3 to reduce their collective oil production by 7.2 mbpd during Q1/21. While Saudi Arabia had wanted the ongoing production cut of 7.7 mbpd extended for a quarter, it was opposed inter alia by the UAE, which – in a surprising move – demanded that the members which have overproduced in past must undertake compensatory cuts first. 

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Comment:
The crude market in doldrums since 2017 was upended by a sudden and an unprecedented collapse in demand by unprecedented 10% from Q2/2020 onwards due to Covid-19 pandemic. While there has been a significant recovery in demand in some parts of Asia since then, major consumers such as the US and Europe are still there with lockdowns, the collapse of air travel and a sharp decline in trade. Repeated attempts by OPEC+ to curb collective supplies notwithstanding, the overhang of oil stocks and indiscipline within producers are likely to keep the prices range-bound for the foreseeable future. The IEA projected that the current crude glut would last at least till 2021 end.

Oil Related Country Specific Developments:

In anticipation of the US sanctions being lifted, Iranian oil ministry instructed all stakeholders to plan to raise oil exports to ~3mbpd. Iran, which exported 2.8 mbpd at its peak in 2018, currently exports estimated 300,000 bpd only. Separately, on Dec 30 Iran agreed to resume gas supplies to Iraq after settling the unpaid arrears of around $6 bn. On Dec 13 main oil pipeline to Isfahan refinery was ruptured due to a landslide.

On Dec 13, Jordan disclosed a promising discovery in Risha gas field in the eastern part of the country bordering Iraq.  

Other Economic Developments:

  • Turkey signed a limited free trade agreement with the UK on Dec 29 tactically aimed at preserving the bilateral trade Turkey-EU Customs Union from Brexit. Two sides, both currently under considerable economic stress, agreed to negotiate a wider stand-alone FTA in due course. ​​​​​

Comment:
As Turkey competes with India in many of the labour-intensive industries (textile, leather, etc.), FMCGs and services for European markets, this development has significance for us. Turkey-UK annual bilateral trade is approximately $25 bn.

  • On Dec 24, Turkey’s Central Bank raised the main interest rate by 2% to a whopping 17%. Under Ankara’s recent reconversion to the inflation-fighting paradigm, the interest rate has gone up by 6.75% in a month.

Comment:  In most OECD economies the interest rates are near zero.

  • According to official statistics, Saudi Arabia’s economy contracted by 4.6% in Q3/20 y/y basis. The oil economy dropped by 8.2% while the non-oil component went down by 2.1%. Kingdom’s budget for 2021, unveiled on Dec 15, had an outlay of  $263.91bn which was 7% less than for 2020, but still left a fiscal deficit of 4.9% of the GDP (it was 12% of the GDP in 2020). After shrinking by 3.7% in 2020, the GDP was expected to grow by 3.2% in 2021. According to the IMF, Saudi Arabia needs an oil price of $67.9/barrel to be able to balance its budget. Saudi Finance Minister denied any proposal to hike taxes to cover the fiscal deficit, saying that it would be filled by the dividends from Aramco and PIF, privatisation proceeds and raising debt.
  • The UAE Central Bank reports on Dec 13 and 22 expected national economy to contract by 6% in 2020 to bounce back by positive growth of 2.5% in 2021. The decline in 2020 was despite the stimulus of $105.6 bn after the pandemic.
  • IMF forecast that Morocco’s GDP will rebound with 4.5% growth in 2021 after a projected 7.2% contraction in 2020.
  • On Dec 20, Iraq devalued Dinar, the national currency, to 1460 to a Dollar from its current official rate of 1182.

III) Bilateral Developments

  • On Dec 8 Prime Minister Narendra Modi had a teleconversation with Qatari Emir Sheikh Tamim bin Hamad Al-Thani. According to the PMO press release During the conversation, they decided to create a special Task-Force to further facilitate investments by Qatar Investment Authority into India and also resolved to explore Qatari investments in the entire energy value-chain in India.​​​​​
  • On Dec 8 also, PM Modi tweeted his congratulations to Sheikh Sabah Al-Khaled Al-Hamad Al-Sabah, on his re-appointment as the Prime Minister of Kuwait.
  • External Affairs Minister Dr S. Jaishankar paid his first official visit to Qatar on Dec 27-28 during which he delivered PM Modi’s letter to Emir Sheikh Tamim. He also met PM Sheikh Khalid bin Khalifa bin Abdulaziz Al-Thani and Foreign Minister Sheikh Sheikh Mohammed bin Abdulrahman bin Jassim Al-Thani. He also addressed a bilateral business round table.
  • Chief of Army Staff Gen Manoj Naravane paid an official visit each to the UAE (Dec 8-9) and Saudi Arabia (Dec 13-14). These were first visits by an Indian COAS to these two countries.
  • On Dec 5 Dr B.R.Shetty, founder of the troubled Abu Dhabi-based NMC Group, legally challenged the prevention order on travelling out of India in Karnataka High Court. The order was issued in connection his outstanding loan to the Bank of Baroda.
  • According to the latest RBI data, the workers’ remittances received by India during Q3/2020 showed sequential recovery but were considerably lower than last year’s corresponding figure. Thus, these were $12.66 bn in Q3/20 which were 8.3% higher than the previous quarter, but 15.78% lower than Q3/2019.

According to official Indian statistics, the country’s oil imports stood at 3.9 mbpd which were 3.3% lower than the previous month and 8.5% lower than the same month last year. While 71.6% of imports came from the OPEC countries, those sourced from the Gulf were two-third of the total. The largest five source countries were: Iraq, Saudi Arabia, the UAE, the US and Nigeria. In particular, the imports from the US saw a 49% increase over the previous month.

 

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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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