IA) Political Developments: Covid-19 Pandemic
Regional Impact of Covid-19: Delta Force Rampages WANA
The trend reversal that began in July 2021 continued to worsen. Both the confirmed Covid-19 cases and the deaths rose sharply in August 2021. Thus, the growth in confirmed cases in the region during August rose to 15.05% from 11.64%, 6.48%, 9.5% and 44.1% in the previous four months, respectively. Similarly, the Covid-19 deaths went up by 12.91% from 7.57% 5.79%, 11.3% and 16.0%. The surge, caused by the prevalence of the more virulent Delta strain of the virus, seems to defy the desperate preventive measures such as universal booster shots of vaccines (by Israel and the UAE) and strict country-wide lockdown (by Iran). The rise of confirmed cases and deaths were relatively lower in countries with high vaccination rates. The following table provides details, including confirmed cases and deaths during the past 28 days and the Percentage of the population fully vaccinated:
Covid-19 and the Individual WANA Countries:
- On August 16, Iran commenced a six-day national lockdown under which all non-essential businesses were shut down. Iran’s cumulative Covid-19 deaths crossed the 100,000 mark on August 19. With only 6% of India’s population, the country had 98% of India’s cases and 118% of Covid-19 related deaths during the past 28-day period. Some reports indicated that despite Supreme Leader’s explicit prohibition, the Iranian authorities were quietly importing the Western vaccines to fight the pandemic.
- Alarmed by growing antibody resistance of the Delta Coronavirus strain, Israel progressively lowered the age threshold for booster vaccine shots during August and by end of the month began offering it to all Israelis above 12 years of age.
- In its run down to Dubai Expo in early October, the UAE initiated gradual steps during the month to revive its vital sectors of aviation and tourism badly mauled due to the pandemic. Thus, under strict Covid-19 protocols, it lifted the transit flights ban for India and Pakistan (Aug 3) and resumed tourist visas to vaccinated travellers from August 30. In a related development, Dubai airport had 10.6 mn passengers in H1/2021, down 40.9% from H1/2020. The airport expects only around 26 mn passengers in 2021, a far cry for the world’s busiest international airport which had 86.4 mn passengers in 2019. It hopes for 56 mn passengers in 2022. Separately, the UAE authorities began rolling out Sinopharm vaccine to Children in the 3 to 17 year age group.
- On August 9, Saudi Arabia reopened the Umrah pilgrimages under strict Covid protocol after a gap of nearly 18 months.
- Kuwait also resumed flights to South Asian countries and Egypt from August 18.
- The United States supplied 500,000 vaccine doses to Iraq on August 14.
IB) Political Developments
WANA and Afghan Transition:
Following Taliban capture of Kabul on August 15, the United States exited Afghanistan on August 30 after her longest war. Several WANA countries were actively engaged with the fast-evolving politico-military situation in Afghanistan. The following WANA countries played salient roles:
- Qatar leveraged its hosting of Taliban liaison office in Doha since 2013 (headed by Mullah Abdul Ghani Baradar, the future Taliban Deputy PM) and the Afghan peace talks since 2018. On February 29 2020, Mullah Baradar and Zilmay Khalilzad, the US Afghanistan negotiator, signed an agreement in Doha paving the way for the withdrawal of the US and other NATO forces. Even in the last leg of the Taliban campaign, Mr Khalilzad was back in Doha on August 10 to persuade them to end the offensive. On August 14, the Qatari Foreign Minister appealed to the Taliban for an immediate cease-fire. Doha also hosted an Afghan Peace Conference attended by the two belligerents as well as other stakeholders, including India. The event concluded on August 12 with a call for an accelerated peace process for Afghanistan as a "matter of great urgency" and for an immediate halt to attacks on provincial capitals and cities in Afghanistan. While in retrospect many of the latest activities were doomed to fail, nearly a decade of perseverance with the Taliban facilitated Qatar to emerge as the best go-to intermediary for the new rulers in Kabul. In addition, Doha became the temporary seat of several Western embassies to Afghanistan. Following the US withdrawal, Qatar was in touch with the Taliban to manage the Kabul airport. Qatar facilitated the evacuation of over 40,000 foreign nationals and Afghans from Kabul airport.
- Iran imposed a ban on fuel exports to Afghanistan on August 6 only to revoke it two weeks later at the Taliban’s request. Its fuel exports are estimated at around 20,000 bpd or nearly 1 mn tons per annum. Between March 2020 and March 2021, Afghan imports from Iran were valued at $367 mn, mostly of fuel. Although there was a sense of relief in Tehran at the ignominious departure of the “Big Satan”, it was tinged with deep concern about unpredictability of the motley Sunni militant groups, from Taliban to IS-K and al-Qaeda – all no friends of Iran or Afghanistan’s Hazara Shias – resuming their foothold in that country.
- The UAE announced on August 18 that it has permitted deposed Afghan President Ashraf Ghani and his family to stay in the country on “humanitarian grounds.” At the American request, the UAE also temporarily hosted 5,000 Afghan nationals pending their eventual settlement in the US. It also helped evacuate 36,500 people.
- Turkey’s negotiations with the US and Taliban over providing security and technical know-how for Kabul airport after American withdrawal did not yield any tangible outcome during the month. It temporarily relocated its embassy to Kabul airport, only to return to the normal chancery a few days later. (Relevant to recall here that earlier May 2021, the Taliban had rebuffed a Turkish attempt to host an Afghan Peace Parleys in Ankara.) On a defensive plane, Turkey, saddled with nearly 3 mn Syrians, repeatedly ruled out acting as a stop-gap staging point for Afghan refugees.
Comment: While the US and NATO military withdrawal was long-anticipated, its telescoped and extreme denouement shocked the WANA region used to the Pax Americana. Moreover, the Taliban’s phoenix-like resuscitation revived the spectre of Islamic militancy spearheaded by many avatars of the erstwhile al-Qaeda that was anchored in the Taliban1.0 badlands. Conversely, the region’s motley fundamentalist groups, mostly in retreat, felt inspired and hoped for a re-dux.
Ebrahim Raisi, 60, was sworn in as eighth President of Iran on August 5 in presence of representatives of 70 countries including the Indian Minister of External Affairs. With his ascendency to the Iranian presidency, all branches of power in Iran came under anti-Western hardliners’ control. In his inaugural speech, Raisi accorded the highest foreign policy priority to boosting relations with regional neighbours. He also called for the lifting of the harsh US sanctions, imposed since 2018 adding “We will support any diplomatic plans that will achieve this goal,” he said, signalling that Iran would continue negotiations in Vienna aimed at restoring the JCPOA. Moreover, he promised that Iran’s nuclear programme is strictly peaceful and nuclear weapons “have no place in the country’s defence strategy”. In response, a spokesman for the US State Department urged Iran to “seize the opportunity." On domestic issues, Raisi said, "The new government will work to improve the economy to resolve the nation's problems" and promised to defend human rights not just in Iran but across the region.
Comment: This change at helms takes place at a particularly challenging time for Iran. Domestic issues, such as the deteriorating economy, fifth wave of Covid-19 pandemic (with current cases and deaths comparable to 16-times more populous India) and rampant corruption have eroded the credibility of the State in eyes of its citizens. The JCPOA talks seem to have reached a dead-end leading to the possible confrontation with the US and Israel. The instability in Afghanistan and lack of political settlements in Syria, Lebanon, Iraq and Yemen as well as elsewhere in the neighbourhood sap the limited Iranian resources. Moreover, with hardliners controlling all the organs of power in Iran, there is little wriggle room for domestic blame-game and increased systemic brittleness. (Further Reading: “Ebrahim Raisi takes office, as Iran and the West face off” The Economist, August 2; https://www.economist.com/middle-east-and-africa/2021/08/02/what-an-attack-on-an-oil-tanker-says-about-iran)
On August 25, the Iranian Parliament approved 18 out of 19 ministers proposed by President Raisi. The new cabinet was dominated by hardliners, many of them with IRGC background. The new Foreign Minister Hossein Amirabdollahian stated that the country’s new foreign policy would be Asia-centric.
On August 18, IAEA stated that Iran had accelerated uranium enrichment to 66% or nearer weapons-grade level of 90% even as JCPOA had restricted it to 3.67% level. The US, the UK, France and Germany expressed grave concern at this development.
On August 27, Prime Minister Neftali Bennett was received by US President Joe Biden at the White House. In their subsequent statements, the two leaders underlined their mutual amity and understanding, but nuanced their positions differently on major issues of common concern. While Israeli PM was conspicuously silent on the Palestine issue, President Biden expressed the US support for a two-state solution. Concerning the Iran nuclear deal, Biden said “We're putting diplomacy first and we'll see where that takes us. But if diplomacy fails, we're ready to turn to other options.” On other hand, Bennett added “We set up a joint team with our national security adviser and America’s, and we’re working very hard, and the cooperation is great… The president was very clear about he won’t accept Iran going nuclear, now or in the future.”
Comment: The first US-Israel Summit for both its participants was overshadowed by the haphazard withdrawal of American forces from Afghanistan, which delayed the meeting by a day. Threatening noises against Iran notwithstanding, the unceremonious exit from Kabul had its own overarching message: the logic of waging a war does not extend to its exit strategy.
Israeli Foreign Minister Yair Lapid visited Morocco on August 11. During the visit three bilateral agreements on air services, culture and foreign office consultations were signed.
Israel and Hezbollah exchanged rockets and air attacks for three days (August 4-6) without any casualties. There were indications that none of the two sides wanted an escalation.
On August 24, Deputy Defence Minister Prince Khaled bin Salman announced the signing of a Defence Cooperation Agreement with Russia. Details were not provided.
Speaking at the Aspen Security Forum on August 3, Saudi Foreign Minister Prince Faisal bin Farhan Al Saud saw “an emboldened Iran acting in a negative manner around the Middle East, endangering shipping, arming Yemen's Houthis and contributing to political deadlock in Lebanon.” He also repeated Riyadh's stance that it could live with a "longer and stronger" version of Iran's 2015 nuclear deal with world powers if it ensured Tehran never obtained nuclear arms know-how.
On August 10, Saudi authorities announced arrests of 207 persons accused of various corruption-related charges.
A drone attack at Abha airport on August 31 injured 8 persons, three of them from India.
During the month, Turkey’s drive to improve the strained relations with several Arab countries enveloped the UAE. On August 18, President Recep Tayyip Erdogan had a meeting with the UAE’s National Security Adviser Sheikh Tahnoun bin Zayed Al-Nahyan. This was followed up on August 31 with President Erdogan talking on the telephone with Sheikh Mohammed bin Zayed, de facto ruler of the UAE.
Iraqi Prime Minister Mustafa al-Kadhimi and French President Emanuel Macron jointly hosted Baghdad Summit on August 25-28 to calm the regional tensions. Among the prominent participants were Egyptian President Abdel Fattah al-Sisi, King Abdullah of Jordan and Qatari Emir Sheikh Tamim bin Hamad al-Thani. In addition, the Head of Governments from Kuwait and the UAE as well as the Foreign Ministers of Turkey, Iran and Saudi Arabia also attended.
Comment: The summit, intended to showcase Iraq’s return to proactive regional diplomacy, served its limited purpose. The event being maiden outing by the newly inducted Iranian Foreign Minister Hossein Amirabdollahian, a Gulf expert, and the aftershock of the US withdrawal from Afghanistan also acted as its main USPs.
On August 27, the populist Shia Cleric and political maverick Moqtada al-Sadr reversed his last month’s decision and declared his intention to take part in the general elections scheduled in October 2021.
On August 29, President Mahmoud Abbas met with Israeli Defence Minister Benny Gantz in Ramallah. After the meeting, Israel announced a loan of $155 mn to the Palestine Authority to help it carry out its vital functions. The loan would be paid back in 2022 from the tax receipts collected by Israel.
Comment: It was the highest level public bilateral meeting of its kind since 2014 and first public contact at political level since the new Israeli government. It was also contextually significant to have taken place two days after Israeli PM Bennett met with the US President Biden, who reiterated his support for a two-state solution of the Israel-Palestine problem. The ruling Israeli coalition has cited its internal incoherence to undertake any major peace initiative on Palestine issue. At the same time, it is keen to strengthen Abbas’ al-Fateh faction so as to weaken Hamas with which it fought an 11-day conflict in May 2021. Further Reading: “Managing the conflict: Israel’s foreign policy has changed in tone but not in substance” The Economist, Sep 2nd 2021; https://www.economist.com/middle-east-and-africa/2021/09/02/israels-foreign-policy-has-changed-in-tone-but-not-in-substance
On August 1, Ismail Haniyyeh was re-elected as Hamas Chief for his second term. He is currently based in Turkey and Qatar.
Relations between Israel and Hamas in Gaza continued to be in a flux during the month. Gazans staged violent protest on the border with Israel against its crippling economic blockade – leading to some causalities. Eventually on August 26 (on eve of the White House Summit), Israel relented to allow some goods and project equipment into Gaza and permit Gaza’s businessmen to enter Israel. Egypt also relaxed its own blockade at the al-Rafah crossing. However, two days earlier, Israeli planes bombed alleged weapons factories in Gaza in retaliation to fire-balloons being launched.
Over 30 government soldiers were killed and nearly 60 wounded in a rocket strike at Anad base north of Aden on August 29. Al-Houthis were suspected of involvement.
On August 9, the United States announced $165 mn in humanitarian aid for Yemen.
On August 31 the UAE announced measures to enhance the powers of the federal public prosecutor to investigate issues concerning accountability of the ministers and senior officials.
The second unit of the al-Barakah nuclear power plant attained criticality on August 27.
Comment: al-Barakah, the Arab world’s first nuclear power plant, comprises of four units of 1400 MW each. It is being built by a South Korean consortium. When completed, it would meet a quarter of the UAE’s power demand.
On August 26, Emir Tamim bin Hamad Al-Thani received the UAE NSA Sheikh Tahnoun bin Zayed Al-Nahyan.
Comment: Sheikh Tahnoun’s visit to Doha indicated the beginning of the end of the UAE-Qatar tensions which contributed to the boycott of Qatar by four Arab countries since 2017. Though Qatar was re-invited into the GCC at al-Ula Summit last January, a full normalisation with the UAE is likely to be a long haul. Relevant to note that while Emir Tamim met Egyptian President al-Sisi on August 26 on the sidelines of the Baghdad Summit, Bahrain is yet to bury the hatchet with Qatar.
On August 22, Qatar issued a decree fixing October 2 2021 as the date for the first elections to elect 2/3rd of the Shoura Council (the parliament).
On August 26, Amnesty International issued an investigative report titled “In the Prime of Their Lives” (https://www.amnesty.org/en/wp-content/uploads/2021/08/MDE2246142021ENGLISH.pdf) documenting Qatar’s Failure to Investigate, Remedy and Prevent Migrant Workers’ Deaths. It alleged that most of the deaths of 15,021 immigrant workers in Qatar during 2010-19 were only cursorily investigated and routine medical certificates issued showing that death was due to natural causes to avoid any compensatory liability. In response, a Qatari spokesperson stated that the country’s “injury and mortality statistics are in line with international best practice and set new standards for the region”.
During the month there were persistent signs of the national reconciliation process in Libya was facing headwinds. On August 27, Prime Minister Abdelhamid Dbeibeh criticised the east-based Parliament for putting difficult pre-conditions for the passing of the country’s budget. On August 31, Foreign Minister Najla el-Mangoush mentioned the possibility of the postponement of Dec 24 polls in Libya if the east-based parliament further delayed the ratification of the electoral law.
Following the swearing-in of President Bashar al-Assad last month, Prime Minister Hussein Arnous formed a new Cabinet on August 10.
Following two months-long seige, the Syrian army and Iran-backed militias resumed bombarding anti-government Sunni rebels in the southern city of Dera’a al-Bilad on August 23. Meanwhile, Russian army police units commenced patrolling the region to contain the situation.
Comment: Syria’s chronology of Arab Spring seems to have come a full circle: it began in Dera’a province in 2011 and the southern region has largely been in government forces’ control since 2018 when most of the rebel forces were allowed safe passage to de-escalation zones near Idlib. In a classic “good cop, bad cop” routine, Russians are trying to arrange similar safe-passage to the remaining rebels mostly confined to Dera’a al-Bilad area. However, many of the militants are sceptical about migrating to the de-escalation zones in the Idlib area and are determined to make a last stand in Dera’a. If relocation is successful, the al-Assad regime would have total control of the strategically significant region bordering the Israeli occupied Golan Heights and Jordan. Russia is also understood to have promised Israel and the US to prevent pro-Iranian militias from being deployed in this region.
On August 24, President Kais Saied indefinitely extended the suspension of the parliament and its members’ immunities. Earlier on August 9, he also ordered 12 officials facing corruption charges to be banned from travelling abroad.
On August 18, President Abdel Fattah el-Sisi invited Israeli PM Neftali Bennett for an official visit.
A roadside IED blast killed 8 Egyptian troops on August 12 in restive northern Sinai. ISIL claimed responsibility.
After a visit by International Criminal Court’s Chief Prosecutor to Khartoum, the Sudanese Foreign Minister indicated on August 12 the civilian cabinet’s willingness to hand over former President Omar al-Bashir and two others to face charges concerning violation of human rights during the Darfur conflict. The Cabinet decision has still to be ratified by the country’s Supreme Council under Gen al-Burhan.
On August 24 Algerian Foreign Minister announced the severance of diplomatic relations with Morocco even as the consulates would be maintained. The Minister cited, without offering any evidence, Rabat’s hostile actions such as involvement in wildfires in which 90 persons died and support to MAK, a Kabylie separatist group. Morocco regretted the decision. The Arab League and the OIC called for a dialogue between the two sides.
In a rare initiative of its kind, Algeria organised a regional summit of neighbouring countries in Algiers on August 30-31 with the participation of the foreign ministers of Libya, Egypt, Tunisia, Sudan, Chad and Niger.
Comment: The recent diplomatic simultaneous breakthroughs of Rabat in establishing diplomatic relations with Israel and persuading the US to recognise Moroccan sovereignty over the contested Western Sahara region has queered the pitch for Algeria. Even without diplomatic ties, Israel has long helped Morocco secure contested Western Sahara against the Algeria-supported Polisario liberation movement. The US has now become the first P-5 country to recognise Moroccan sovereignty over the territory. Moreover, after two tumultuous years since Bouteflika’s exit, “le pouvoir” has managed the domestic transition. It is anxious to avoid any reversals, particularly as there are unsettled conditions in neighbouring countries, including Libya, Tunisia, Mali and Chad.
II) Economic Developments
Oil Related Developments:
- OPEC output averaged 26.93 mbpd in August, up 210,000 bpd from July. It is slated to increase by 253,000 bpd each month (400,000 bpd for OPEC+) till the end of this year. The Brent crude was priced at $72.99/barrel on August 31, making the month as first to register a decline in price since March 2021.
- OPEC and IEA offered different nuanced views over the global oil demand in 2021 and 2022. OPEC’s Monthly Bulletin, released on August 12 stuck to its prediction of a strong recovery in world oil demand in 2021 and further growth next year, despite concerns about the spread of the Delta coronavirus variant that has weighed on prices. It projected the global oil demand to rise by 5.95 mbpd this year, or 6.6%, unchanged from last month's forecast. In 2022, it saw fuel use expand by 3.28 mbpd, also unchanged. However, the IEA’s oil market report issued on the same day saw “abruptly reversed course in July” due to the worsening delta variant of the pandemic in China and elsewhere in Asia, forcing a sharp downgrading of the outlook for the remainder of 2021. The IEA saw global oil demand rising this year by 5.3 mbpd on average to 96.2 mbpd, and by a further 3.2 mbpd in 2022. Thus, the IEA demand forecast was 0.65 mbpd lower than OPEC’s for 2021 and 2.73 mbpd lower for 2022. This pessimistic IEA forecast further depressed the oil prices.
- In a statement on August 16, the US NSA criticised “big drilling nations” for insufficient crude production. However, his plea was largely ignored by OPEC+.
- On August 4, Saudi Arabia raised the September official selling prices for the flagship Arab light crude to $3 a barrel above the Oman/Dubai average for Asia.
- Saudi Aramco declared Q2/2021 profits at $25.46 bn, having risen fourfold over the similar figure for last year.
- With the closure of production in Algeria during the month-end, the world stopped producing the leaded petrol.
Following economy-related developments took place in individual WANA countries:
- On August 4, World Bank expected the GCC economies to grow by nearly 2.2% in 2021, rising to 3.3% in each of 2022 and 2023.
- On Aug 9, Saudi Arabia posted a deficit of 4.6 bn riyals ($1.23 bn) for the Q2/2021, a huge drop from 109.2 bn riyals reported in the same quarter a year ago. The improvement was due to larger oil income, lower spending and tripling of the VAT rate to 15%.
- On August 7, Kuwait disclosed its budget deficit for the financial year 2020-21 to have increased by 175% to $35.5 bn, a new record. Later on August 16, the Kuwaiti cabinet ordered all the ministries to reduce their budgetary outlay for 2021-22 by at least 10%.
- On August 12, Oman stated its year-to-date deficit to be $2.86 bn. Saudi Investment Minister Khalid al-Falih visited Oman on August 29 to discuss investment opportunities, particularly in a bilateral industrial zone. He was accompanied by officials from government agencies and private sector representatives.
- Turkish economy’s spectacular performance (Q2/2021 GDP growth rate: 21.7% y/y; projected GDP growth for 2021: ~8% y/y) was blighted by high annual inflation of 19.25% in August 2021. After its MPC meeting on August 12, the Turkish Central Bank left the bank Repo rate unchanged at 19%.
- Egypt received $28.5 bn as remittances from her overseas workers during 11 months to May 21, up 13% y/y.
- 400 MW capacity wind farm, largest in the region, located at Dumat al-Jandal in Saudi Arabia, was connected to the grid on August 8.
III) Bilateral Developments
- EAM Dr S. Jaishankar visited Qatar on August 20 and met with his counterpart Mohammed bin Abdulrahman Al-Thani. Earlier, Qatari special envoy for conflict resolution Mutlaq bin Majed Al-Qahtani visited India during which he met EAM and Foreign Secretary.
- Responding to the reference to the statement made by the General Secretariat of the Organization of Islamic Cooperation (OIC) on the second anniversary of the abolition of the special status of Jammu and Kashmir, the Official Spokesperson of Indian Ministry of External Affairs, said the following: "We categorically reject yet another unacceptable reference to the Union Territory of Jammu and Kashmir issued by the General Secretariat of OIC. OIC has no locus standi in matters relating to the Union Territory of Jammu and Kashmir, which is an integral part of India. It is reiterated that the OIC General Secretariat should refrain from allowing vested interests to exploit its platform for comments on internal affairs of India.”
- During the month the various Indian navy units held naval exercises with the navies of the UAE (Aug 7), Saudi Arabia (Aug 10) and Algeria (Aug 29)
- A Bloomberg report on August 14 claimed progress in RIL-Aramco deal under which the Saudi company would acquire nearly 20% of Reliance’s Oil-to-Chemicals business for around $25 bn with a due diligence exercise being underway. It also mentioned the possibility of the two companies cross-holding each other’s assets, RIL giving 20% stakes to Aramco in return for a 1% stake in the latter. (Further Reading: “Aramco Is in Advanced Talks on Up to $25 Billion Reliance Deal” Bloomberg August 16, 2021; https://www.bloombergquint.com/business/aramco-said-in-advanced-talks-on-up-to-25-billion-reliance-deal)
- 1.9 mn Indian passengers used Dubai airport in H1/2021 making them the top nationality among the 10.6 mn total users.
- India's August 2021 diesel consumption declined from July and stayed below pre-COVID 2019 levels as monsoon rains hit mobility and industrial activity, preliminary sales data from state fuel-retailers showed. For instance, Indian state retailers last month sold about 4.9 MT of diesel, up 16% from August 2020 but still down about 10% from August 2019. It fell by 9.3% from the previous month due to floods in some parts of the country. However, petrol consumption stayed above the pre-COVID level at 2.4 MT as people opted for personal vehicles over public transport. Cooking gas consumption expanded 2% year-on-year but contracted 2.4% compared to August 2019. Although Jet fuel sales grew 42% year-on-year but were still 44.5% less than in August 2019, mainly due to the restrictions on international travel. Further, Petronet reported on August 14 that some of its Indian buyers had deferred imports of spot liquefied natural gas (LNG) due to high prices.
- The UAE hospital operator NMC, owned by Dr B.R. Shetty, said on August 11 that its companies would begin the process of exiting the administration process in Abu Dhabi, following its strong first-half revenue.
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(The views expressed are personal)