Day: June 15, 2024

According to the first official and public assessment by US intelligence officials on the economic impact of Yemen’s Iran-backed Houthi rebel activities, attacks by them on commercial ships in the Red Sea led to a 90% drop in container shipping in the area between December and February, reports Al-Monitor.

The Pentagon’s Defense Intelligence Agency (DIA) discovered that the attacks affected at least 65 countries and caused at least 29 major energy and shipping companies to change their routes. British Petroleum, Evergreen, CMA CGM, Maersk, Qatar Energy and Shell are some companies that have felt the heat.

Many ships decided to travel around South Africa’s Cape of Good Hope, which added about 20,000 kilometres (11,000 nautical miles) and at least 10 extra days to each trip. This detour increased fuel costs by roughly ₹8.2 crore ($1 million) per voyage. The DIA stated that threats to Red Sea shipping were adding more pressure to global maritime shipping, which was already facing disruptions at the Panama Canal due to drought.

The report mentioned that shipping insurance premiums for travelling through the Red Sea had significantly increased. By mid-February, premiums had risen to 0.7-1% of a ship’s total value, compared to less than 0.1% before December 2023. Shipping through the Red Sea usually made up 10-15% of global trade. The report also stated that the attacks in the Red Sea had affected humanitarian efforts, causing weeks-long delays in aid to Sudan and Yemen.

The Houthis began increasing their attacks on commercial ships in the Red Sea in mid-November, initially claiming they were targeting vessels going to and from Israel because of Israel’s war in Gaza against Hamas. However, the Houthi attacks soon included commercial ships from other countries, including Israeli allies, such as the US and UK.

To prevent the attacks, both these countries launched a series of airstrikes against rebel targets in Yemen and imposed sanctions. Washington also created Operation Prosperity Guardian, a naval coalition of 20 countries, to protect international navigation in the Red Sea. However, these efforts have not stopped the rebels and the attacks continue.

Impact on India’s Trade

Roughly 80% of India’s merchandise trade with Europe passes through the Red Sea. Key products, such as crude oil, auto parts, chemicals, textiles and iron and steel are affected. Higher freight costs, insurance premiums and longer travel times could make imported goods much more expensive. Ongoing disruptions in trade routes could impact the capital goods sector, causing unwanted inventory build-up, according to an economic review citing a CRISIL report, says Mint.

The conflict has also affected the Middle East’s fertilizer exports to India, particularly the import of muriate of potash from Jordan and Israel.

Panama Canal Shipping

Bloomberg reports that the Panama Canal avoided a shipping crisis that could have disrupted $270 billion in global trade each year. This was achieved through careful water management and a stroke of luck. Last year, due to dry conditions in the Central American country, the Panama Canal Authority (PCA) put restrictions on the number of ships allowed to pass each day, cutting it down to 22—or about 60% of the usual traffic. To skip the long wait times, which extended over two weeks, shippers paid millions of dollars to move up in the queue.

Recently, as water levels have increased, the PCA has begun raising the limit on daily ship crossings. On Tuesday, they announced that, starting in late-July, 34 ships would be allowed to pass through each day, nearing the pre-drought limit of 38. Shippers now have to wait fewer than two days to get across the canal. If rainfall continues as expected, the canal could return to full capacity next year, according to a written statement from the authority.

War always commands its own appeal.; It has its own frazzled laurels, the calling of its own worn poets tenured in propaganda.; In battle, the poets keep writing, and keep glorifying.; The chattering diplomats are kept in the cooler, biding their time.; The soldiers die, as do civilians.; The politicians are permitted to behave badly.

With Ukraine looking desperately bloodied at the hands of their Russian counterparts, the horizon of the conflict had seemingly shrunk of late.; Fatigue and desperation had set in.; Washington seemed more interested in sending such musically illiterate types as the Secretary of State Antony Blinken to Kyiv for moral cuddling rather than suitably murderous military hardware. ;

Russian President Vladimir Putin, mindful of the losses inflicted on his own side in the conflict, thought it opportune to spring the question of peace talks.; On June 14, while speaking with members of the Russian Foreign Ministry, he floated the idea that Russia would cease combat operations “immediately” if Ukraine abandoned any aspirations of joining NATO and withdrew its troops from the regions of Donetsk, Luhansk, Kherson and Zaporizhzhia.

Rather than refrigerate the conflict into its previous frozen phase, Putin went further.; It would end provided that Kyiv accepted Moscow’s sovereign control over the four regions as “new territorial realities”.; Russian-speaking citizens in Ukraine would also be afforded protections; sanctions imposed by Western states would be lifted.; “Today,” he stated, “we have put forward another concrete, genuine peace proposal.; If Kyiv and Western capitals reject it as they have in the past, they will bear political and moral responsibility of the ‘continuation of the bloodshed.’”

He further added that, as soon as Ukraine began withdrawing its military personnel from Donbas and Novorossiya, with an undertaking not to join NATO, “the Russian Federation will cease fire and be ready for negotiations.; I don’t think it will take long.”

Length and duration, however, remain the signal attributes of this murderous gambit.; Ukraine’s defeat and humbling is unacceptable for the armchair strategists in the US imperium, along with their various satellites.; NATO’s obsessive expansion cannot be thwarted, nor can the projection of Washington’s influence eastwards from Europe.; And as for the defence contractors and companies keen to make a killing on the killings, they must also be considered. ;

This was unpardonable for the interests of the Biden administration.; The Washington War Gaming Set must continue.; Empires need their fill, their sullied pound of flesh.; Preponderance of power comes in various forms: direct assault against adversaries (potentially unpopular for the voters), proxy enlistment, or the one degree removed sponsorship of a national state or entity as a convenient hitman.; Ukraine, in this sense, has become the latter, a repurposed, tragic henchman for US interests, shedding blood in patriotic gore.

In keeping with that gore, US President Joe Biden, in announcing a funding package for Ukraine from the G7 group, promised that “democracies can deliver”.; The amount on the ledger: $US50 billion.; “We are putting our money to work for Ukraine, and giving another reminder to Putin that we are not backing down.”; That particular amount is derived from frozen Russian assets outside Russian territory, most of it from the Russian Central Bank amounting to US$280 billion.; The circumstances of such freezing will, in future, be the subject of numerous dissertations and legal challenges, but that very fact suggests that Ukraine’s allies are tiring from drawing from their own budgets.; We support you, but we also hate to see the money of our taxpayers continually splurged on the enterprise.

Biden’s remarks from the Hotel Masseria San Domenico in Fasano have a haunting quality of repetition when it comes to US support for doomed causes and misguided goals.; The fig leaf, when offered, can be withdrawn at any given movement: South Vietnam, doomed to conquest at the hands of North Vietnam; Afghanistan, almost inevitably destined to be recaptured by the Taliban; Kurds the Marsh Arabs, pet projects for US strategists encouraged to revolt only to be slaughtered in betrayal. ;

Thus goes Biden: “A lasting peace for Ukraine must be underwritten by Ukraine’s own ability to defend itself now and to deter future aggression anytime […] in the future,” Biden explains, drawing from the echo of Vietnamisation and any such exultation of an indigenous cause against a wicked enemy. ; The idea here: strengthen Ukrainian defence and deterrence while not sending US troops.; In other words, we pay you to die.

The NATO disease, poxy and draining, rears its head.; Weapons and ammunition are to be provided to Ukraine along with the expansion of “intelligence-sharing” and training while “enhancing interoperability between our militaries in line with NATO standards”.; Money is to be put into Ukraine’s own defence industry so that they can duly “supply their own weapons and munitions”.; In the floral bouquet, a cautionary note is appended.; “In terms of longer range of weapons into the interior of Russia we are not changing our positions.”; Killing is always a matter of quantum, and calculation.; The note for Kyiv is clear: use the weapons but do so carefully. ;

As for the logistics of finance, US national security adviser Jake Sullivan is already voicing concerns about the complexity of the funding venture.; “The simple proposition is we got to put these assets to work.; The complex proposition is how you do that specifically.”

While Putin has turned his nose up at the UN Charter in its solemn affirmation of the sovereignty of states, Washington has taken its own wrecking ball to the text.; It has meddled, fiddled and tampered with the internal affairs of states while accusing Russia of the very same thing.; Spiteful of history and its bitter lessons, it has employed such saboteurs as former Assistant Secretary of State Victoria Nuland to undertake such tasks, poking the Russian Bear while courting and seducing the Ukrainian establishment.; The horror is evident for all to see, and unlikely to halt.

Don’t be fooled by the myth that people are paid what they’re “worth” — that the rich;deserve;their ever-increasing incomes and wealth because they’re worth far more to the economy;now;than years ago (when the incomes and wealth of those at the top were more modest relative to everyone else’s).;

The distribution of income and wealth increasingly depend on who has the power to set the rules of the game.

Those at the top are raking in record income and wealth compared to everyone else because:

1. CEOs have linked their pay to the stock market through stock options.;They then use corporate stock buybacks to increase stock prices and time the sale of their options to those increases.

2. They get inside information about corporate profits and losses before the rest of the public and trade on that insider information.;This is especially true of hedge fund managers, who specialize in getting insider information before other investors.;

3. They create or work for companies that have monopolized their markets.;This enables them to charge consumers higher prices than if they had to compete for those consumers. And it lets them keep wages low, because workers have fewer options of whom to work for.;

4. They use their political influence to get changes in laws, regulations, and taxes that benefit themselves and their corporations,;while harming those without this kind of influence — especially smaller competitors, consumers, and workers.

5. They were born into (or married into) wealth.;These days, the most important predictor of someone’s future income and wealth in America is the income and wealth of their parents.;Sixty;percent;of all wealth is inherited. And we’re on the cusp of the biggest intergenerational transfer of wealth in history, from rich boomers to their children.

None of these reasons for the explosion of incomes and wealth at the top has anything to do with;worth;or;merit.;They have to do with power — or the power of one’s parents.

Meanwhile, the pay of average workers has stagnated because they have lost economic power and the political influence that goes with it. Corporations have kept a lid on wages by outsourcing work abroad, replacing workers with software, and preventing workers from unionizing.;

Bottom line: Wealth doesn’t measure how hard someone has worked or what they deserve. It measures how well our economic system has worked for them. 

• This article was published at Robert Reich’s Substack

During this past week the market lost ground in the first two days amidst rumors about potential increases in the Capital Gains Tax (CGT) due to which KSE100 index stayed bearish and the index hit 72,589 level before showing signs of recovery on Wednesday. Market recovered swiftly after the announcement of Federal Budget for FY25. The taxation measures introduced in the budget weren’t as adverse as originally anticipated. On Thursday the index gained 3,410 points, most in a single day and closed at 76,706 level on Friday reaching the highest ever closing, with a gain of 2,952 points, up 4%WoW.;

Despite initial jitters over proposed tax changes, the market recovered, reflecting investors’ confidence amidst pre-budget uncertainty. The week also saw the State Bank of Pakistan (SBP) announcing a first token rate-cut of 150 bps, adding further to the positivity.

As inflation outlook eases, the cut-off yields in the latest T-Bills auction dropped.

Overall, average trading volumes decreased by 3.8%WoW to 409.6 million shares as compared to 423.3 million shares a week ago.

On the currency front, PPR depreciated by 0.11%WoW to close at 278.51/US$.;

Other major news of the week included: 1) RPK9 billion approved for clearing OMCs’ PDCs, 2) ECC allowed conditional export of 0.15 million tons sugar, 3) In FY25 Budget government announced to raise tax to GDP ratio to 13%, 3) government also announced to float US$1 billion bonds and obtain US$4 billion loans from the foreign banks, 4) FY25 Budget aimed raising PKR3.8 trillion new taxes and , 5) World Bank projected Pakistan’s GDP growth at 2.3%.

According to AKD Securities Commercial Banks, Pharmaceuticals, Oil & Gas Exploration Companies, Oil & Gas marketing companies and Paper & Board were amongst the top performing sectors, while laggards included Textile composite, Woollen, Leasing companies, Food & Personal Care Products and Textile Spinning.

Major net selling was recorded by Individuals with a net sell of US$8.9 million. Mutual funds absorbed most of the selling with a net buy of US$11.1 million.;

Top performing scrips of the week were: BAFL, MCB, NCPL, UBL and KOHC, while laggards included: ILP, PTC, YOUW, COLG and 5) PGLC.

The post-budget market has attained some certainty, particularly in sectors that benefitted from budgetary measures. With the start of monetary easing, optimism is expected to rise, particularly in cyclical sectors.

Furthermore, the approval of the budget paves the way for the upcoming IMF program, which will likely become a significant market catalyst going forward.

Baku opens the Zangazur Corridor

The collective West considers the possibility of the economic and commercial route connecting Europe and Asia passing through Iran as a geostrategic threat. In response, Western political circles have begun emphasizing the importance of opening the Zangazur Corridor to avoid this threat. This development is part of the new geopolitical order in the South Caucasus, where Azerbaijan has emerged as a dominant regional power.

Azerbaijan’s emergence as a geopolitical power

The geopolitical dynamics in the South Caucasus have undergone significant changes. Azerbaijan has positioned itself as a central player, with Baku being the epicenter of political will in the region. Consequently, major global powers must now align their strategies with Azerbaijan’s interests to engage in the region. Neither the USA, the West, Russia, nor Iran can effectively implement plans that counter Azerbaijan’s interests without facing significant obstacles.

France, for instance, failed to recognize Azerbaijan’s geopolitical leadership in the South Caucasus for an extended period. Persistently taking a pro-Armenian stance, Paris hoped to establish a hegemonic position in the region through its support for Armenia. However, this strategy backfired, resulting in France’s exclusion from regional processes. Official Baku blocked France from participating in geopolitical, geoeconomic, or geostrategic activities in the South Caucasus, reducing France’s influence in the area.

The United States and the European Union are now experiencing similar consequences due to their pro-Armenian behaviors. Official Baku remains firm in defending its interests and does not make concessions to external powers. A few months ago, the USA and the EU issued joint messages advocating for the opening of the Zangazur Corridor under Armenia’s conditions. However, this approach conflicted with the tripartite agreements between Azerbaijan, Armenia, and Russia, which define the conditions for the corridor’s opening.

The Zangazur Corridor & western strategy

Official Baku did not succumb to the pressure from the USA and the EU, emphasizing its right to determine transport and communication routes independently. As a result, Western political circles have had to acknowledge Azerbaijan’s principled stance. There is now a noticeable shift in the position of the USA and the West regarding the Zangazur Corridor. They recognize the necessity of establishing a major economic-commercial transport route connecting Europe and Asia, as this aligns with the demands of the global economy. However, they oppose this route passing through Iran.

To prevent the route from passing through Iran, Western political circles have recently started pressuring Armenia to open the Zangazur Corridor. Reports indicate that the Pashinyan government has been informed about the inadmissibility of blocking the corridor and has received serious recommendations to enable the project’s implementation.

Azerbaijan’s strategic advantage

Azerbaijan is on the verge of achieving its goal, as the USA and the West have begun pressuring Armenia to open the Zangazur Corridor. This also aligns with Armenia’s interests, as the corridor’s opening would allow Armenia to participate in a significant geo-economic project and secure substantial transit income. The official Yerevan now recognizes the need for the Zangazur Corridor to break its blockade and generate new revenue sources.

This situation underscores Azerbaijan’s growing influence in the region. By gaining the support of international stakeholders, Azerbaijan can dictate the conditions for opening and operating the Zangazur Corridor according to its interests. This development marks another geopolitical victory for Baku, reinforcing its leadership in the South Caucasus.

France’s exclusion from the South Caucasus serves as a cautionary tale for other global powers. Official Baku has demonstrated its ability to exclude countries that do not align with its interests. The USA and the EU must now consider Azerbaijan’s position when formulating their policies for the region. The shift in Western political circles regarding the Zangazur Corridor illustrates Azerbaijan’s strategic advantage and its ability to shape regional dynamics.

Iran’s strategic position within BRICS & regional transit

The first meeting of BRICS ministers of transport was held in St. Petersburg, Russia, on June 6, 2024, with Iran’s Minister of Roads and Urban Development Mehrdad Bazrpash attending via video conference. Iran officially joined BRICS along with Egypt, Ethiopia, and the United Arab Emirates on January 1, 2024. Bazrpash viewed Iran’s BRICS membership as a historic success of Iran’s foreign policy, enhancing its communication in transport, trade, and economy with BRICS members.

Bazrpash highlighted Iran’s strategic geographical location and transit capabilities, positioning it as a crucial connector for regional and international trade networks. Transit through Iran increased by over 60% in the last 12 months, showcasing the reliability and cost-effectiveness of its routes. Iran proposed forming an international organization for the International North-South Transport Corridor (INSTC) to improve coordination and integration, promoting trade and transit among BRICS members.

The Aras Corridor & Iran-Azerbaijan cooperation

Iran has initiated a transit strategy with Azerbaijan, aiming to develop joint transport projects and resolve tensions in the South Caucasus. The Aras Corridor, a new transport link connecting the Eastern Zangazur economic region of Azerbaijan and the Nakhchivan Autonomous Republic through Iran, exemplifies this strategy. The project includes road and rail transit projects and is expected to be completed in 36 months. The Aghband road bridge over the Aras River, a significant component of the corridor, was inaugurated in October 2023.

Iran and Azerbaijan have also collaborated on other infrastructure projects, such as the Xudafarin Dam and the Astarachay border bridge, enhancing connectivity and facilitating trade. These projects highlight the importance of the INSTC and the role of Iran-Azerbaijan cooperation in regional transit development.

Conclusion: Azerbaijan’s geopolitical victory

Azerbaijan’s determination to open the Zangazur Corridor on its terms has reshaped the geopolitical landscape of the South Caucasus. By effectively excluding France and compelling the USA and the EU to consider its position, Baku has solidified its role as a key regional power.

The ongoing efforts to open the Zangazur Corridor reflect Azerbaijan’s strategic vision and its ability to influence regional and global economic dynamics. As the geopolitical order in the South Caucasus continues to evolve, Azerbaijan’s leadership and strategic decisions will play a crucial role in shaping the region’s future.

The integration of Iran into BRICS and the development of the Aras Corridor further underscore the importance of regional cooperation and strategic alliances. These developments enhance connectivity and trade, benefiting all involved parties. Azerbaijan’s ability to navigate these complex geopolitical dynamics highlights its growing influence and strategic acumen, positioning it as a central player in the South Caucasus and beyond.