CLICK HERE TO DOWNLOAD A PDF OF THIS MONTH'S BOARD REPORT
1. US raises the trade war spectre with metal tariffs
President Donald Trump’s imposition of 25 per cent and 10 per cent tariffs on steel and aluminium imports, respectively, has ignited fears that retaliation by China or the EU could spark an international trade war and expose global equities to the risk of loss.
If other markets were to adopt a protectionist stance, it could lead to lower demand for exports, impacting the logistics segments in the Gulf, and the UAE in particular, with its large share of the market.
A trade war would also threaten global economic health more broadly, and diminish the palatability of investment opportunities in the Middle East.
- 25% - Tariff on steel imports to the US introduced by President Trump
- 10% - Tariff on aluminium imports to the US
2. Rising crude output from US exerts pressure on oil prices
Oil prices faced steady headwinds in March from increased drilling in the US, raising concerns about a return of global oversupply. Brent crude futures were at $65.85 a barrel, down 0.5 per cent.
On a supply versus demand basis, however, oil markets are facing the possibility of a renewed glut after being in a slight deficit for much of 2017.
US drillers added four oil rigs in March, bringing the total count to 800, according to the Baker Hughes drilling report. The US rig count, an early indicator of future output, is much higher than a year ago as energy companies have boosted spending.
3. Riyadh to curb production and export of crude oil
Saudi Arabia is planning to keep its crude exports below 7 million barrels a day (b/d) and production below 10 million b/d in April, according to the energy ministry.
“Despite nominations coming in at 100,000 b/d higher than the previous month, allocations were maintained on par with their March levels,” the ministry said.
Saudi Arabia has been pumping below its Opec target since January and reducing its crude shipments, particularly to the US, as it turns its focus to cutting exports in an attempt to drain global oil stocks.
In November, Opec and its 12 non-Opec oil-producing allies agreed to extend their oil production cuts deal until the end of 2018. Together, the 24 countries control 60 per cent of global production.
- 7 million b/d - Saudi energy ministry’s crude export limit for April
- 10 million b/d - April’s crude oil production cap for Saudi Arabia
4. Military offensive in Eastern Ghouta forces civilian exodus
Thousands of civilians have abandoned the besieged, rebel-held Eastern Ghouta region outside Syria’s capital Damascus, as government forces advanced to retake control of the area last month.
State television showed pictures of men, women and children leaving the town of Hamouria, which has come under intense bombardment. It is the largest exodus from the enclave since the military stepped up an offensive to reclaim it in February.
Syria’s civil war has entered its eighth year. The conflict has left more than 350,000 people dead, 1.5 million others with permanent disabilities, and displaced 11 million both inside Syria and abroad.
More than 1,100 people have been killed since the government and its allies intensified their bombardment of Eastern Ghouta on 18 February.
5. Turkey seizes Afrin from the Kurds after protracted siege
The Turkish army and Free Syrian Army units entered the city of Afrin in northwestern Syria on 18 March as part of an operation to displace the YPG, a Kurdish Syrian group Ankara is opposed to due to its links with the outlawed Kurdistan Workers’ Party.
The offensive began on 20 January, a week after President Donald Trump let slip that the US plans to help the militia form a 30,000-strong border security force in the region.
Turkey claims it is eliminating a “nest of terror”, but the ongoing campaign against the Kurds risks placing the Turks in direct conflict with their Nato ally.
6. Middle East policy to shift following Tillerson sacking
US foreign policy in the region is expected to shift as US President Donald Trump appoints Central Intelligence Agency (CIA) director Mike Pompeo as secretary of state, replacing Rex Tillerson who was sacked on 13 March.
Trump announced on Twitter that Pompeo would replace Tillerson, and that Gina Haspel will be the new director of the CIA. Trump later said he had disagreed with Tillerson over Iran.
“We disagreed on things. When you look at the Iran deal, I think it’s a terrible deal, I guess he thought it was OK. I wanted to either break it or do something different and he felt a little bit differently,” said Trump.
Middle East foreign policy is widely expected to shift because Pompeo is more likely to be aligned to Trump’s firmer stance on critical regional issues such as Iran and Qatar.
Tillerson not only favoured a more conciliatory approach to dealing with Iran, he had also called on Saudi Arabia, the UAE, Bahrain and Egypt to ease sanctions on Qatar.
7. Riyadh will develop nuclear deterrent if Iran does
Saudi Arabia will develop a nuclear weapon if its arch-rival Iran does, the kingdom’s Crown Prince and Minister of Defence Mohammed bin Salman told US television network CBS.
“Saudi Arabia does not want to acquire any nuclear bomb, but without a doubt if Iran developed a nuclear bomb, we would follow suit as soon as possible,” he said.
The kingdom has previously said it wants to develop its nuclear capabilities for peaceful purposes only and is developing its nuclear energy capability as part of reforms led by Prince Mohammed to reduce the economy’s dependence on oil.
In March, the Saudi government approved a nuclear programme proposed by the King Abdullah City for Atomic & Renewable Energy.
8. Top court upholds Red Sea islands transfer to Saudi Arabia
Egypt’s Supreme Court has dismissed all outstanding legal challenges to a deal transferring the two Red Sea islands of Tiran and Sanafir to Saudi Arabia. The plan to cede the islands to Riyadh was announced in 2016.
The Supreme Court ruled that no other court had jurisdiction over the matter, blocking two opposing verdicts by the Supreme Administrative Court, which was against ceding control of the islands, and the other by the Court of Urgent Matters, which looked to void that decision.
“The signature of the representative of the Egyptian state on the maritime borders agreement between the governments of Egypt and Saudi Arabia is undoubtedly an act of sovereignty,” the Supreme Court said.
9. Amman suspends free trade agreement with Turkey
Jordan has suspended its free trade agreement with Turkey because of challenges facing Jordan’s industrial sector, which has been affected by the closure of several border crossings and the decline of traditional export markets.
The decision, which was backed by industrialists but condemned by traders, cited “unfair competition”, favouring Turkey more than Jordan in trade exchange volumes between the two countries.
The suspension of the agreement, which had been in force since 2011, was based on recommendations by Jordan’s Ministry of Industry & Trade.
In 2016, trade exchange between the two countries reached its peak at $742m, of which $664m was Turkish exports to Jordan.
- $742m - Trade exchange between Jordan and Turkey at its peak in 2016
- 89% - Share of trade exchange between the two countries comprised of Turkish exports to Jordan in 2016
- 2011 - The year that the free trade agreement between Jordan and Turkey was signed
The UAE has overtaken Kuwait to become the biggest investor in oil infrastructure after announcing plans for a new refinery as it looks to boost downstream capacity. The total value of oil projects either planned or in progress in the UAE has increased by 20.2 per cent, rising from $52.9bn in August 2017 to $63.6bn in March 2018.
Financial support for a $12m solar project in the Palestinian Authority territory of Gaza is being offered by the International Finance Corporation, the Multilateral Investment Guarantee Agency and the International Bank for Reconstruction & Development.
UK construction companies have been the most active international players in the UAE’s construction and transport sectors over the past five years, but the influence of Chinese and Indian firms is growing as UK contractors withdraw from the market. Since 2013, UK firms have been awarded $5.2bn of construction and transport contracts.
US-based Virgin Hyperloop One is in exploratory talks with global investment firms over financing the initial route of Dubai’s planned hyperloop transport project. The firm is understood to be looking to obtain potential funding commitments for the project before it enters the construction phase.
|This article has been unlocked to allow non-subscribers to sample MEED’s content for FREE. MEED provides exclusive news, data and analysis about the Middle East every day. Subscribe to MEED to have full access to Middle East business intelligence. Click here|
You might also like...
A MEED Subscription...
Subscribe or upgrade your current MEED.com package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.