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US-Iran Conflict in Historical Perspective

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The US-Iran conflict has become critical in wake of US Drone Strike that assassinated Iranian top general Qassem Suleimani since the US considered him the imminent threat to the United States but Trump administration has been heavily criticized by Political Circles.

The political analysts and foreign policy experts are of the view that Donald Trump has committed the extrajudicial killing of General Suleimani and has deliberately escalated the situation with Iran to escape impeachment which is likely to commence as Nancy Pelosi has announced the impeachment managers. The Impeachment Process has already begun.

In a historic perspective, the US has always meddled in the affairs of Iran. The 45 years of hostility towards Iran has sowed the seed of hatred when US and UK agencies orchestrated a plan against a democratically elected secular Prime Minister Mohammad Mossadeq to overthrow his Government since he tried to nationalize Iran’s Oil Industry.

Oil has been the alluring industry for the US and Mossadeq’s attempt to nationalize Iranian Oil cost him his Premiership in 1953.  The Political Analysts call it a historical blunder to meddle in the affairs of Iran.

Later, the US-backed the dictatorial ruler Shah of Iran- Mohammad Reza Pahlavi despite being aware that his regime was incompetent and the rising autocratic Governance model has been weakening.

The streets started flooding with protesters against Shah of Iran’s Regime and he was forcibly ousted by secular and religious forces in 1979, known as the Islamic Revolution.

This growing dissent and turmoil in Iran paved the way for the return of the exiled Islamic Religious leader Ayatollah Khomeini. The referendum was held and Iran was formally proclaimed as the Islamic Republic of Iran on 1s April 1971.

US backing to Shah of Iran resulted in growing hatred and antagonism against America. The angry protesters ransacked the US Embassy in Tehran and made the whole staff as a hostage in 1979. After President Ronald Reagan took the office, the 52 hostages were released by Iran after 444 days in 1981.

US-Iran relations witnessed another Setback when the US secretly shipped arms as the exchange of Iran’s help in the release of US hostages held by Hezbollah militants in Lebanon. This Iran-contra scandal-hit US hard when the benefit such as arms supply channelled to rebellion group in Nicaragua that caused a severe political crisis for American President Ronald Reagan.

Similarly, as Iran has mistakenly downed Ukrainian Passenger jetliner in which 176 passengers were killed, American warship had also shot down an Iranian Passenger plane killing all 290 passengers on board.

Most of the victims were Iranian pilgrims bound for Makkah. Unlike Iran, the US had made a similar statement that the Airbus A300 was downed by mistake considering it a fighter Jet.

This incident had also increased antagonism and hatred against America in Iran.

In the aftermath of the 9/11 incident, in 2001, the US carried out strikes against Taliban in Afghanistan terming Osama bin laden as a most wanted terrorist and for the regime change in Afghanistan.

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Meanwhile, the Iranian opposition group revealed that Iran has been engaged in nuclear Program having set up Uranium enrichment Plan, however, the Iranian Government denied such charges.

American President George W Bush during his union address denounced Iran as part of an “Axis of Evil” along with Iraq and North Korea, thus opening another chapter of conflict.

The UN Watchdog IAEA inspected Iran’s Nuclear Program. Consequently, tough sanctions were imposed on Iran by the US, EU and UN that crippled its economy during the regime of President Mehmood Ahmed Nejad. The economic sanctions devalued Iranian currency that caused abrupt inflation and economic condition became volatile.

The relations between US and Iran grew closer as the moderate and secular president Hassan Rouhani took office and after decades of stiff relations, the ice started melting when US president Barak Obama phoned Hassan Rouhani after three decades.

Following such gesture from the US, the diplomatic channels worked for Iran prompting to sign a long-time nuclear deal in 2015 with great power group containing  US, UK, France, China, Russia and Germany.

Through the deal, Iran agreed to limit its nuclear programme allowing International Inspectors. In return, the crippling economic sanctions were lifted that had affected the country very hard especially its Oil exports -the main source of income for the country to strengthen its economy.

Trump administration has become a great headache for Iran since Iran’s nuclear deal was abandoned by President Donald Trump and threatened to impose economic sanctions against Iran and against those who intend to buy oil from Iran.

Such a hard attitude instigated the conflict even further since the Iranian Economy was already under heavy recession.

As a result of above the statement, US President Donald Trump re-imposed tough economic sanctions on Iranian Oil in May 2019 while Iran started a pressure campaign against the US.

The series of Incidents happened thereafter such as Explosions hitting tankers in Gulf of Oman and Iran’s shooting down a US drone hovering over Strait of Hormuz. The US claimed the drone was over International waters whereas Iran said that it was over their Territory.

Given the US Sanctions and blame game, Iran started rolling back from its commitments as reflected in the nuclear deal and started Uranium enrichment.

Finally, when US Drone strike assassinated Iranian Top General Qassem Suleimani in Iraq, the Iranian people became united.

Millions of people attended the funeral prayers of General Qassem Suleimani and protested against America in Iraq and Iran.

The analysts said that it was the biggest protest after the 1979 Islamic Revolution in Iran as millions of people participated in the last rituals of General Qassem Suleimani.

Iran announced to take revenge to shun angry protesters that demanded retaliation against US aggression.

Under-Pressure Iran’s Supreme Leader Ayatollah Khamenei approved targeting US Military basis in Iraq by firing dozen Cruise Missiles but there were no casualties.

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Since then, Donald Trump has been heavily criticized for the extrajudicial killing of General Qassem Suleimani. Even Middle East crisis worsened following the Iraqi Parliament resolution demanding US Troops and Allies for leaving Iraq after Qassem Suleimani’s  Assassination. The Iranian Proxies may attack US military basis since Iran has a strong network of proxies in Iraq, Yemen, Syria and Palestine.

Now the Questions arises that will it be a world war-III the answer is “No” since, after strikes, both countries have shown sensibility and restraint as plane tragedy has spread shocking tremors after Iranian Revolutionary Guards claimed the responsibility of mistakenly downing a Passenger Jet carrying 174 passengers in the limits of Tehran’s International Airport. Iran, at first, denied the incident, but after international pressure accepted that the passenger jet was downed by mistake.

Iran has publicly apologized for the mistake and announced compensation for the bereaved families but the Ukrainian and Canadian Governments have demanded a thorough investigation and apologize through diplomatic channels.

Mike Pompeo has also sought help from Pakistan for de-escalation as both countries do not want war. All the world powers have urged both the US and Iran to de-escalate tensions and resolve the conflict through negotiations.

The European Union, UK, Russia, China and other NATO members have started diplomatic efforts to prevent both countries going to all-out war as War will bring miseries and destruction for humanity since both nations are nuclear capacious though Iran has not announced its nuclear capability.

UN and European Union must play their role to engage both parties in negotiation so that Possibilities of World War-III may be averted to save humanity falling prey to destruction, hunger, Economic crisis, homelessness and disease. Negotiations will also pave the way for the lifting of tough economic sanctions against Iran that have crippled the fragile Iranian Economy causing Inflation and Price hike.

Moreover, US-Iran conflict may jeopardize US-Taliban talks for which Pakistan has played a key role to make the deal Possible as Afghan Peace will be beneficial to the whole region including Pakistan. Terrorism emanating from Afghanistan has affected Pakistan very badly especially Economy that has also been volatile owing to corrupt practices of politico regimes and rising debts.

The world must wake up from the slumber to play their role to de-escalate the tensions between US –Iran so that diplomatic relations stalemate may be scrapped and the new chapter of Economic cooperation and relations may be written that will benefit the people of both beleaguered Nations having tumultuous and alienated history causing the existing crisis that has made the Middle East and Gulf Crisis even worse.

Given the situation in Lebanon, Syria and Iraq, world leaders especially EU and UN must come forward to save the humanity falling prey to World War III that will be disastrous and destructive owing  Nuclear Technology. The world cannot afford to see tragedies like Hiroshima and Nagasaki

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Economy

The End of U.S. Dollar Dominance? Not So Fast

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With the outbreak of the war in Ukraine, Western countries have imposed all-rounded sanctions on Russia. This, in turn, has had an impact on the global economic, trade, and financial systems, raising concerns in the market and academic circles about the adjustment of the global financial system. One of the main issues being debated is the status of the U.S. dollar.

Gita Gopinath, First Deputy Managing Director of the International Monetary Fund (IMF) warned that financial sanctions against Russia by the West could gradually weaken the U.S. dollar’s role in the world, leading to further fragmentation of the international monetary system. Analysts such as Goldman Sachs economist Cristina Tessari said the actions of the United States and its allies to freeze Russia’s central bank’s foreign exchange reserves have sparked fears that countries may begin to ditch the dollar due to concerns about the power that the United States could muster thanks to the dominance of the currency.

Kenneth Rogoff, a Harvard University economics professor, said in an interview with Bloomberg that the dominance of the dollar could end within 20 years. The reason is that the U.S. and its allies have launched sanctions due to the Russia-Ukraine war, restricting Russia’s access to the dollar-dominated global financial system. This “weaponization of the dollar” will instead stimulate the acceleration of alternative solutions. Rogoff believes that the U.S. blockade or freezing of the foreign exchange reserves of the Russian central bank is undoubtedly a historic development. The preeminence of financial sanctions on Russia by the U.S.-led Western world could accelerate changes in the international financial system to compete with the U.S. dollar. While this certainly would not happen overnight, what could have taken 50 years may now only take 20 years to realize, said Rogoff.

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This narrative appears to be supported by data changes in the dollar’s position in global markets. According to the IMF’s most recent Currency Composition of Official Foreign Exchange Reserves (COFER) data, the American currency’s global dollar-denominated foreign exchange reserves were USD 7,087 billion in the fourth quarter of 2021, with a market share of 59.15% in the third quarter, which had dropped to 58.81%. The dollar’s share of the global reserve currency was as high as 72% around the turn of the century. According to SWIFT’s worldwide payment data, the payment share of the U.S. dollar has declined to 38.85% in 2022.

Is the outlook for the dollar’s prospect as pessimistic as these academics and institutions predict?

ANBOUND’s founder Chan Kung holds the exact opposite view. He believes that if the global situation continues with the current development trend, the U.S. dollar will stand out in the world. If there are no exchange rate swings caused by inflation or emergency, the U.S. dollar will be in a unique position when compared to the world’s major currencies.

This begs the question, why would the future of the U.S. currency be diametrically opposed to what many feels is happening while a significant game-changing geopolitical event, especially the conflict in Ukraine, is ongoing?

The difference lies mainly in the variety of opinions on the impact of the geopolitical event of the war in Ukraine. Professor Rogoff believes that the dollar has been reduced in terms of market scale, and new currency substitutes will emerge, thereby weakening the dollar’s status. However, Chan Kung believes that the alternatives to the U.S. dollar cannot succeed, because the market of these alternatives is weak, while their social economy is turbulent, and some are even still in war zones. For these reasons, the U.S. dollar will remain strong, even becoming the sole stable international currency in circulation. All in all, geopolitical factors play an important role in global currencies, and the dollar will be supported by it.

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Chan Kung noted in his article Bracing the Era of Economic Shortage, that during a period of economic uncertainty, the Anglo-American axis countries might be safer havens in the face of geopolitical turbulence. He believes that once the geopolitical war in Europe is resolved, the maritime countries and economy of the American continent would re-emerge. From the perspective of the world’s spatial pattern, conflicts and competitions are most intense in the continental region of the world, that is, the continental region where Europe, Russia, the Middle East, Central Asia, China and India are located. It would be difficult to establish buffer zones between them, hence there are direct collisions with each other. Conflicts and competitions are unavoidable and often have existed since time immemorial. The deep mutual hostility has long been recorded in the chapters of history, and the only thing lacking is often a reason for the actual friction to take place in reality.

In contrast, the geographical location of the Anglo-American axis is in the middle of the ocean. The Atlantic and Pacific routes connect the American continent and a large number of island countries and regions of different sizes, and there are often oceanic divisions between them. Historically and relatively speaking lesser enmities exist between these parts of the world, and they are mutually dependent in trade relations. Therefore, while the continental regions are experiencing violent upheaval, the Anglo-American axis, the maritime states, and the Americas have more prominent opportunities for development and enjoy greater prosperity than before.

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Ahsan Iqbal reviews the Ministry of Planning, Development and Special Initiatives Work on Projects

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Federal Minister for Planning Development & Special Initiatives Professor Ahsan Iqbal directed to hold Turn Around Pakistan (TAP) Conference in order to address key challenges of the country and to find their solutions through short-term and mid-term measures. The decision was taken on Wednesday while chairing a first ministerial meeting which was attended by Deputy Chairman, Planning Commission, Secretary, Additional Secretary, Members and all Chiefs of the sections.

“Invite all the stakeholders from across the Pakistan in TAP Conference to find ways to kick off the economy by taking immediate remedial measures,” said newly-appointed minister for Planning Development & Special Initiatives while chairing a high level meeting. “The prime objective of the conference is to engage all the relevant stakeholders from across the country and take their input in order to put the country’s economy on track which unfortunately has been thrown in dire condition, said the minister.

While referring to the stakeholders Conference held in 2013 for preparation of vision 2025, the minister said that no policy can be successful without stakeholders ownership. There is rich talent in academia and private sector which must be harnessed. “There is a dire need to develop the economy on cluster based approach and Planning Commission must play its role as development think tank of the country,” he added.

The minister further said that every section chief should be a knowledge leader in his/her field, while stressing the government officials to take the decisions with confidence as (he) will stand behind them. “Your work is not just to clear PC-1s of the projects but to develop and shape development agenda of the country and to implement it,” said the minister. The minister further said that in 2013 Planning Commission was part of the Finance Division and nobody knew about it but it was granted autonomous status by PMLN government and it developed and implemented 2025 vision very successfully.

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During 2013-18 more than Rs 700 billion were saved through rationalisation and scrutiny of development schemes by Planning Commission. Same spirit and professionalism should be revived. Prime Minister wants to see Pakistan Speed in every sector, he added. During the meeting, officials of various section shared their opinion which was appreciated by the minister and reiterated that it will be taken in TAP Conference to be held soon.

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Economy

Pakistan’s trading partners

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There have been questions raised on the extent to which foreign policy of Pakistan should reflect its trading relationships with individual countries, regions, and groups of countries which are members of international organizations? This requires determination of which are the major destinations of the country’s exports, and which are the major origins of our imports? What is the regional and country-wise pattern of our trade surpluses and deficits? And which are the major countries to which our exports have shown faster growth?

The analysis has been undertaken with trade data made available by the SBP in its economic data website. For earlier years, the relevant information has been obtained from the SBP publication, Handbook of Statistics on Pakistan Economy.

The top four export markets of Pakistan in 2020-21 are the EU countries combined, the USA, UK, and China. It is significant that the major destinations of Pakistan’s exports are mostly in Europe and North America. Pakistan has been granted GSP plus status by the European Union with some preferential tariff treatment. Pakistan also has a free trade agreement with China which has been implemented in steps from 2006 onwards.

The combined exports to the 27 EU countries aggregated to $6.4 billion in 2020-21. This represents a share of 25 percent of Pakistan’s total exports. The second largest value of exports is to the USA of $5.0 billion, equivalent to 20 percent of total exports of Pakistan.

The other two relatively large destinations of the country’s exports are the UK and China. Combined, the share of Pakistan’s four major export markets is over 62 percent of total global exports. This highlights the extreme regional concentration of the country’s exports. The share of SAARC countries is only 8 percent, despite presence of the SAFTA free trade agreement. It was somewhat higher when there was trade directly with India.

Turning to the regional distribution of the country’s imports, the sources are more diversified. China is by far the dominant exporter to Pakistan. Imports from China aggregated to $13.2 billion in 2020-21, equivalent to over 25 percent of total imports. The other major exporting countries to Pakistan include the OPEC countries with a share of 24 percent, followed by the EU countries and the USA. Overall, the combined share of these countries is close to 55 percent in total imports of Pakistan.

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What has been the growth rate of exports to the major destinations? Between 2012-13 and 2018-19, the fastest cumulative increase over the six years is to the UK of 33 percent, followed by a 32 percent increase to Germany and of 11 percent to the USA. The big declines are to China of 27 percent, to Afghanistan of 37 percent and to the UAE of as much as 57 percent.

By far the largest increase in imports has been from China, which has taken full advantage of the free trade agreement with Pakistan. Between 2012-13 and 2018-19, the cumulative increase has been as much as 133 percent. Now China alone accounts for 30 percent of total imports of Pakistan.

The overall trade deficit of Pakistan was very large in 2020-21 at $26.5 billion, with imports over twice the level of exports. Therefore, the likelihood is high that Pakistan will carry a significant deficit with most of its major trading partners. The country-wise balance of trade is given in the table below.

========================================================================
                                   Table 1
========================================================================
       Pakistan's Trade Balance with Major Trading Partners, 2020-21
                                                             ($ billion)
========================================================================
                        Exports to    Imports from      Balance of Trade
========================================================================
China                       2.0         13.2                       -11.2
USA                         5.0          2.4                         3.6
EU Countries                6.5          3.7                         2.8
Major OPEC Countries        1.9          9.4                        -7.5
Others                     10.2         28.7                       -18.5
========================================================================
Total                      25.6         52.1                       -26.5
========================================================================

Pakistan has a very large trade deficit with China, equivalent to 42 percent of its global deficit. The deficit has been growing rapidly. Pakistan’s exports to China have been declining while imports have shown fast growth. Today, China’s exports to Pakistan are six times its imports from Pakistan. The time has come for a review of the implementation of the 2006 Trade Agreement between Pakistan and China. Pakistan needs to seek more quid pro quo from China.

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The trade surplus with two major trading partners – the USA and the EU countries – is of $3.6 billion and $2.8 billion, respectively. These are the bigger markets, especially for textile products. The trading relationship with these countries needs to be preserved and built upon.

Pakistan has preferential access to the EU market through the GSP plus programme since 2014. This allows a large share of Pakistan’s exports to enter EU countries free of duty. Two criteria must be met for continuation of this facility. First, GSP-covered imports should be less than 2 percent of EU’s imports from all GSP beneficiaries. The share currently of Pakistan is 1.6 percent. Second, the seven largest GSP covered products must account for at least 75 percent of Pakistan’s total GSP covered exports to the EU. The share currently of these products is 94 percent.

Further, Pakistan has had to ratify 27 core international conventions and subscribe to binding commitments to implement them effectively. These are mainly UN and ILO conventions and other conventions on environment. The GSP status of Pakistan is periodically reviewed by the EU. Weak areas of implementation by Pakistan relate to gender inequality, workers’ rights, and the presence of child workers.

There has been some focus recently on Pakistan’s trading relationship with Russia. The current volume of trade between the two countries is small with $163 million of exports and $593 million of imports. The imports are largely of wheat. Now with the international trade sanctions on Russia following the invasion of Ukraine, new sources of wheat will have to be found when the quantity required could rise to almost 5 million tons given the failure of the current wheat crop.

Via BR

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