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Implications of the oil price crash on the Arab world



Oil prices have hit zero. Yes, oil was “sold” this week with producers only asking buyers to pay for transporting it to its final destination. This is the worst collapse in oil markets in history; it is unprecedented for oil to lose 94 per cent of its value in just one day.

It is important to mention, though, that this price fall was related to US Texas crude oil for May contracts only. Prices for other contracts are still higher, but that does not mean that they are immune from collapse. There is still plenty of time before they are due and the price can go up or down.

The causes of the collapse can be summed up thus: there is a market share crisis that has led to a price war and the flooding of markets by oil producers. The agreement to reduce production will be effective from the beginning of next month. The previous agreement ended on 31 March, leaving a gap throughout April which has been enough to flood the markets with oil. Demand, meanwhile, has fallen due to the coronavirus crisis.

Indeed, the pandemic has caused a global recession, which is likely to mean continued low demand for oil. Hence, the OPEC agreement to reduce production by 9.7 million barrels per day (bpd) will be worthless, as the International Monetary Fund expects the global demand for oil to decrease by 29 million bpd. Even taking the production cut into account, there will still be a surplus in supply by 20 million bpd.

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Moreover, another crisis is looming on the horizon concerning the storage of all this oil. The world’s oil producers do not have the capacity to store their surplus production. This has pushed producers to sell their oil at any price, simply because the cost of storage is higher than the price of oil on the market. Reports already mention some producers renting giant oil tankers at sea to use for temporary storage, which is very expensive.

Hence, the prices have tumbled and may continue to do so during the coming days, leading to the disruption of production in many OPEC countries. They may find that the cost of production is higher than the market price, and so could suspend production voluntarily and lay off thousands of workers across the sector.

Hence, the prices have tumbled and may continue to do so during the coming days, leading to the disruption of production in many OPEC countries. They may find that the cost of production is higher than the market price, and so could suspend production voluntarily and lay off thousands of workers across the sector.

___Mohammad Ayesh

What impact will all of this have on the Arab world, especially the oil-producing Gulf States? The answer is simple: the Arab world is heading towards the worst economic crisis since independence. Saudi Arabia, for example, is the largest and most important Arab economy, but may still find itself facing its biggest budget deficit in almost 100 years. So too could other Gulf countries, because economies across the Arab world have also been hit by the coronavirus crisis.


Riyadh-based Jadwa Investment Company predicted just before the collapse of oil prices that the Saudi budget will register a deficit of 422 billion riyals, which is 40 per cent of the budget, and 15.7 per cent of the Kingdom’s GDP. It is easy to imagine how these figures could get worse after the collapse in oil prices registered on 20 April.

During the past few weeks, Saudi Arabia has had to borrow $7 billion, as has the UAE. In Bahrain the government borrowed $1bn, the Sultanate of Oman decided to reduce its public spending by $1.3bn and Jordan announced that it was looking for someone to lend it $640 million. Kuwait, meanwhile, appears to be the most stable country in the Arab world at the moment, thanks to its reserves built up in its Al-Ajyal (Generations) Fund and its conservative financial policies.

If the Gulf States go into a great depression, millions of Arab expatriate workers will have to return to their home countries, creating the perhaps even bigger problem of mass unemployment. In the middle of the coronavirus pandemic, God alone knows what sort of future we will have.

Translated from Arabi21

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Consul General of Liberaland in Pakistan Faisal Butt hails Imran Khan’s strategy that reduced Covid-19 Cases in Pakistan .



Lahore: Consul General of Liberland in Pakistan Faisal Butt has appreciated the strategy of the Pakistani government in view of the reduction of corona cases in Pakistan. In his statement, he said that Pakistan has taken better steps to control the spread of corona in comparison to the neighbouring countries .

As a result of these measures , Pakistan is rated amongst the lowest covid 19 cases reported countries . Not only the cases but also the death toll is much less than other countries.

He said that there was no doubt that Pakistan was making progress even in conditions like corona. All the credit goes to the government of Prime Minister Imran Khan.

Today, other Asian countries, including Europe, also appreciating Imran Khan’s strategy. He further said that the day is not far when the people of Pakistan will be vaccinated and declared a Corona free country.

Referring to the relations between Pakistan and Liberland, he said that Corona has enveloped the whole world, which has hampered relations, imports and exports with many countries. As soon as the situation improves, not only diplomatic but also trade relations between Pakistan and Liberals will be restored.

The Consul General said we are planing to sign the agreements between the Liberland Chamber of Commerce and the Lahore Chamber of Commerce. A plan of action will be announced soon.

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What will the post-COVID world look like?



Although virologists have been warning of the risks of a global pandemic since the SARS outbreak in 2003, the world was still mostly unprepared when confronted with the COVID-19 crisis. However, it was also unlucky.

It was unfortunate that the pandemic came in the run-up to a US presidential election that has created an environment as politically polarized as any the country has experienced. As a result, much of the US media coverage of, and debate about, the virus and the global policies needed to deal with its effects have been more about the presidential race rather than the pandemic.

This has obviously had a clear effect on international politics because of the importance of the role of the US and its global leadership.

It was also bad luck that the health crisis came at a time of high tensions between the US and the second largest global power, China, where the virus originated. This further complicated any potential global unified response.

As a result of the global uncertainty, it is difficult to forecast how critical aspects of the crisis, which seems likely to continue for at least another 12 months, will play out in the Middle East, and also what a post-COVID world might look like.

One certainty is that most countries will be forced to shift their focus and resources to domestic matters rather than regional issues.

The virus and the resultant shutdowns imposed to “flatten the curve” of infections have had, and will continue to have, devastating consequences on economies and national budgets. It seems that despite the soft reopening of parts of economies around the world, the current health concerns will prevent a full restoration of business activities for some time, especially if the number of infections and deaths start to rise again after governments relax precautionary measures.

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In our increasingly interconnected world, it is difficult to determine whether any country will come out on top economically, and consequently geopolitically, especially given mounting levels of debt.

Countries able to borrow in their own currency seem to be at an advantage; this applies mainly to the US and the EU (if the European countries can unify their policies), and indirectly also explains the current debate in the Gulf about the unpegging of currencies.

Another certainty is that with less money available, wars and proxy wars will become prohibitively expensive and all parties will be forced to scale down their ambitions. As a result, aggression will be reduced and consensus and agreement might be more readily reached. Countries and their allies or proxies who have refused to sit at the negotiation table might now change their minds and mellow, or perhaps even be forced to completely withdraw from conflict zones.

Take Iran, for instance, which has been targeted recently by a successful US policy of maximum pressure. The country is facing problems domestically and, with the added pressure of low oil prices, it will be less able to maintain its financial support to the Houthis in Yemen, the militias in Iraq, and Hezbollah.

Does that mean Tehran will cease its meddling? Nothing is certain but domestic turmoil might force it to do so.

As Iran’s problems have grown, the region has witnessed during the COVID-19 pandemic the emergence of a more assertive Turkey. This has happened despite the fact the country is also suffering economically.

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It has been a long time in the making. Turkish involvement has spread to many regional issues beyond its normal national security zone. Its involvement in neighboring Syria is understandable, given that the conflict there directly threatens Turkey’s security. More interesting is the Turkish interest in Libya, where Ankara is pushing for a continued presence with no apparent direct threat or rationale to explain this. This is happening while it also increases political rhetoric that promises continued interference in the domestic affairs of Arab countries in the years to come.

A closer look at the issues reveals that Turkey is focusing its involvement on key points on Europe’s energy routes. This is not surprising, as Europe remains Ankara’s main and constant focus. So, Turkey is now directly competing with Russia — the biggest supplier of gas to Europe — in Syria, where Iran is also strongly entrenched as the country is a key Mediterranean access point for its gas and energy deliveries to Europe.

Turkey is challenging Russia for control of the tap that provides Europe with its energy stability, and this explains its involvement in Libya and other countries. The same logic explains Ankara’s negative reaction to the Israeli-Greek-Cypriot gas-pipeline project, EastMed. This motivates its strategy, as it hopes to leverage it to make more gains in the region.

Therefore, we can expect an increased Turkish focus on the Mediterranean and on supply-chain routes and access points for energy, as well as merchandise being shipped from the East to Europe.

On that point, the land routes of China’s Belt and Road Initiative include one that goes through Russia and another that passes through Turkey. This massive project is also something Turkey is well aware of, and Ankara is striving to ensure it has a presence on key points along the BRI’s Maritime Silk Road. Once again, it is being guided not by national security concerns but a desire to increase its regional clout.

It is difficult to forecast how critical aspects of the corona crisis will play out in the Middle East. 

Khaled Abou Zahr

While Russia and Turkey face off on the ground over an increasing number of issues, it is interesting to note the apparent lack of any direct involvement by the US or China, the two biggest global powers, and, surprisingly, the total absence of European nations, which should be the most concerned about what is happening.

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In weighing how global and regional powers will direct their foreign policies and manage existing conflict zones, their own domestic political, economic and social stability will play an important role.

Yet, apparent weaknesses might invite bold moves and dangerous power-grab attempts. This delicate balance will be the key driver for international policies in the coming years. One might say that uncertainty and volatility have spread from the stock-markets to the geopolitical arena.

  • Khaled Abou Zahr is the CEO of Eurabia, a media and tech company. He is also the editor of Al-Watan Al-Arabi.

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US warns of ‘consequences’ if China abandons trade deal



US Treasury Secretary Steven Mnuchin said on Monday he expects China to uphold a trade deal reached with Washington this year, and warned of “consequences” if the country did not.

The comments come amid a sharp drop in global trade caused by the coronavirus pandemic as well as a dispute between the two powers over fault for the spread of the virus, which first broke out in Wuhan, China.

The US and China in January signed an agreement to end a nearly two year-long trade war, that included a commitment by Beijing to buy an additional $200 billion in American goods over the next two years.

“I’m expecting them to meet their obligations,” Mnuchin said on Fox Business Network.

“I have every reason to expect that they honour this agreement and if they don’t, there would be very significant consequences in the relationship and in the global economy as to how people would do business with them.”

Ties strained

However, relations between Washington and Beijing have soured in recent weeks, with US President Donald Trump blaming China for the pandemic, and threatening tariffs.

The US has been hit with tens of millions of layoffs as the virus has spread, significantly weakening the previously solid economy, which Trump was counting on to win re-election in November.

The trade agreement signed in January includes $77.7 billion in additional purchases from the manufacturing sector, $52.4 billion from the energy sector and $32 billion in agricultural products.

The US currently runs a trade deficit with China, and the objective is to realign the trade balance between the two countries.

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