Tag: Kuwait

Russian Sources Signal Possible End to Oil Production Cuts

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With oil prices nearing their highest since early March, Kirill Dmitriev, one of Russia’s top oil negotiators  signaled his will to draw down production cuts on Friday June 19. Dmitriev is one of the key players leading negotiations with the Organization of Petroleum Exporting Countries (OPEC). Agreements between OPEC and the Russian-led alliance of non-OPEC countries, called OPEC+, have been one of the primary factors in the efforts to stabilize the oil market.

With demand for oil increasing as economies reopen, Russia appears to see no point in further extending production cuts. The existing agreement calls for a global production cut of 7.7 million barrels per day, from August to December. From January 2021, production cuts would drop to 5.8 million barrels per day, lasting until April 2022 when the agreement expires.

Price uptick

In April, oil prices hit their lowest price since the turn of the millennium as high global supply met an unprecedented dip in demand when flights were grounded, citizens faced lockdowns, and non-essential economic activity dissipated. In April prices hit $16 per barrel, with WTI briefly dipping into historic negative territory amid a scramble to offload futures before their expiry.

The extreme fluctuations in the already volatile oil market prompted most of the world’s oil producing countries to come together to establish painful, but necessary, production cuts in order to ease over supply that led to oil storage running out, with tankers and oil bunkers used as temporary storage to accommodate for a lack of buyers.

OPEC+

Ever since, any news around negotiations over production cuts between OPEC and the OPEC+ groups has led to swings in global oil prices. Now that demand is increasing and most OPEC members report compliance with the agreed upon cuts, meetings have revolved more around suring up lagging countries like Iraq and Kazachstan.

The current oil price hovers around $40, sufficient for Russia to balance its budgets. For many higher-cost oil producers however, the current price means losses, involuntary production cuts and even bankruptcies. The US shale gas industry, Canadian tar-sand extraction and Brazilian off-shore oil all struggle to survive at current prices, while countries like Saudi Arabia would be able to live with “lower for longer.”

OPEC

But while many OPEC members in the Gulf could make a profit on current prices, their national budgets have been based on much higher prices, leaving major gaps. A country like Iraq, that has some of the cheapest oil to extract, still needs oil prices to be at $56 per barrel in order to fund the $135 billion in estimated state revenue. The country has struggled to comply with OPEC’s agreed cuts as most of its oil production is done by foreign supermajors, leading to difficult negotiations.

Many countries of the Gulf Cooperation Council (GCC) similarly presented ambitious budgets for 2020, expecting much higher revenues than those that materialized due to the COVID-19 crisis. For these countries production cuts remain one of the few tools to drive prices up further, but it appears that major players like Russia and Saudi Arabia would prefer oil prices to not increase too rapidly, in order to prevent a resurgence in its higher-cost competitors like shale gas.

Diverging forecasts

Saudi Arabia and Russia are expected to have a much larger market-share in the near future. After a decade of losing market-share to US producers, Saudi Arabia is expected to have the largest market-share since the 1980s. With production down significantly and demand slowly returning, prices are likely to go up in the long run.

Investment bank JP Morgan Chase in early March predicted oil to hit $190 per barrel due to a “supercycle” where a downward swing in prices is followed by equally dramatic upswing. The bank’s predictions were squashed by the COVID-19 related drop in demand, but its experts remain confident that a “bullish supercycle is on the horizon,” according to CNN.

“The reality is the chances of oil going toward $100 at this point are higher than three months ago,” JP morgan’s Christyan Malek. However, uncertainty remains as economic results are highly dependent on public health successes in containing the spread of the coronavirus. BP has slashed its forecast, expecting COVID-19 to have an “enduring impact on the global economy.”

Bahrain Kuwait COVID-19 Apps Deemed Invasive

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On June 16, Amnesty International released a report by its Security Lab after testing eleven contact-tracing apps intended to assist governments in finding COVID-19 infections. Three countries stood out as having produced “alarming mass surveillance tools”: Bahrain, Kuwait, and Norway all used methods that the NGO considers “dangerous for human rights.”

“Bahrain, Kuwait and Norway have run roughshod over people’s privacy, with highly invasive surveillance tools which go far beyond what is justified in efforts to tackle COVID-19,” the head of Amnesty’s Security Lab stated. “Privacy must not be another casualty as governments rush to roll out apps.”

Norway stops app

Out of the three countries, one has already halted the use of its app. The Norwegian government made the decision hours after Amnesty International published the report. “The Norwegian app was highly invasive and the decision to go back to the drawing board is the right one,” Amnesty stated on their website.

The Norwegian app, Smittestopp, had not yet seen wide implementation but the invasive nature of the app’s design had prompted Norwegian data agency Datatilsynet to issue a warning. The agency said it would no longer allow Norway’s Institute of Public Health to access data generated by the app.

Camilla Stoltenberg, director of Norway’s public health institute, disputed the privacy claims and warned that the contact tracing app was needed in order to halt the local spread of coronavirus. “The pandemic is not over,” Stoltenberg stressed. The director’s concerns did not stop the government from halting the app and removing the data of its 600,000 users.

Privacy issues

The central issue with the Norwegian app is similar to those regarding Bahrain and Kuwait’s apps, as well as those of apps in development for the governments of France and the UK. The apps feature a constant stream of data reported on users and uploaded to a national database, allowing the government to know where its citizens are at all times.

A similar issue arose with Qatar’s contact-tracing app, which similarly captured and shared GPS data. Outside sources could have accessed this data as a security vulnerability had the potential to expose the information to over one million Qataris. Qatari officials say they have since fixed the issue.

The Bahraini and Kuwaiti apps both record GPS data into a centralized database instead of using a method based on Bluetooth, which would only activate when the user is in close proximity with an infected person. But Bluetooth is far from a flawless technology, prompting countries like France and the UK to opt for a similar method to that of Bahrain and Kuwait.

Surveillance

Amnesty International fears that governments could misuse the wealth of data recorded by the apps. Bahrain attempted to provide a positive incentive to stay home by using its app’s data to produce “Are You Home?” The national television show would offer families  prizes for staying home during Ramadan, verified using data from the BeAware Bahrain contact-tracing app.

While the show’s idea to provide positive incentives for COVID-19 adherence is commendable, the use of a public health database for such entertainment is not. Allowing anyone but the most qualified public health experts to access the recorded data highlights the potential for abuse.

Bahrain also published online data that revealed much about the demographics and personal details of people infected by COVID-19.

The Kuwaiti app used similarly centrally recorded data with vulnerabilities for potential abuse. The Kuwaiti app even used proximity reports between phones and Bluetooth bracelets to ensure people carried their phones with them.

After Norway’s quick response to Amnesty International’s analysis, the question remains as to what action Bahrain and Kuwait will take to prevent misuse of their contact-tracing apps.

Astronomer Predicts Eid al-Adha Will Fall on July 31

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Astronomer Ibrahim al-Jarwan from the Arab Union for Astronomy and Space Sciences said he predicts Eid al-Adha, the Islamic holiday to celebrate the end of the Hajj pilgrimage, is likely to fall on July 31 this year.  

“The crescent of the lunar month of Dhu Al Hijjah 1441 is to be spotted on Monday, July 20, 2020, at 9.33 p.m. UAE time,” Al Jarwan said on June 14. 

“July 22 will mark the first day of Dhu Al Hijjah month and Friday, July 31, shall be the first day of Eid Al Adha, according to astronomical calculations,” he continued. 

Families that can afford it mark the second of Islam’s two biggest holidays by sacrificing an acceptable animal such as a sheep, goat, cow, or camel. The animal is then divided into three portions: One third for family, one third for friends and neighbors, and one third for the poor. 

UAE-bound sheep stranded in Australia 

Across the Gulf, thousands of live sheep arrive from countries like Australia in the lead up to Eid. One ship bound for the UAE, the “Al Kuwait,” has been stuck in Australia since May 22 after 21 of the 48 crew members tested positive for COVID-19 after docking in Fremantle, Western Australia—putting its 56,000 cargo of live sheep in limbo.  

On June 13, the Australian Department of Agriculture approved an application for an alternative ship to leave with 50,000 of the 56,000 sheep originally supposed to be transported by the “Al Kuwait.” Australia has a moratorium on live sheep exports to the Gulf from June to September to protect animal welfare from the area’s extreme summer temperatures. 

Kuwait renewed a plea to the Australian government to waive its moratorium on live export in the wake of a drop in international freight, which has significantly impacted fresh meat imports and supply in the Gulf state. 

Kuwait’s Minister of Trade and Industry Khalid Nassir Alrowdan asked Australia’s Agriculture Minister David Littleproud to “reconsider the Australian livestock export ban during the hemisphere summer…to enhance our national food security and the Australian national economy.”

The latest request comes after the CEO of the state-run Kuwait Livestock Transport and Trading, Osama Boodai, wrote to the Australian government on April 2 asking it to “reconsider” the June to September ban.

“The current COVID-19 outbreak around the world has placed increased pressure on food supplies into the Middle East region,” Boodai said in his letter to Littleproud.

“The revered Eid Al Adha festival falls in late July and live animals are of critical importance to that occasion and we fear there will also be shortages then,” Boodai continued.

“Restricting the trade of Australian sheep puts the region’s sovereign food security at risk and damages very long time trading relationships,” Bodai warned.

It appears that the combined economic opportunity and the food insecurity issues raised by the Kuwait government forced the Australian government’s hand and pushed it to permit the one-off shipment. 

Eid preparations begin

Morocco, like many Middle Eastern and North African countries, started preparing for Eid al-Adha just a few days after celebrating Eid al-Fitr. Over the past month, local authorities in Morocco tagged 4.5 million livestock, including sheep and goats ahead of the major religious holiday—a phenomenon playing out across the region. 

On May 26, Moroccan Agriculture Minister Aziz Akhannouch announced some 2.6 million sheep had been selected and vaccinated in preparation for what is known in English as the “sacrifice holiday.” 

“The COVID-19 pandemic did not stop us from celebrating Eid al-Fitr, but the Eid al-Adha celebration poses logistical challenges and requires good planning and organization,” Akhannouch said.

Moroccan authorities have also agreed to subside stock feed this year given the dry season and COVID-19 economic difficulties to ensure stock are in good condition for slaughter and to prevent high feed costs from impacting consumer prices. 

Hajj could be canceled 

In Saudi Arabia, it is shaping up to be a very different Eid al-Adha in 2020, and authorities are still considering whether or not to cancel the annual hajj pilgrimage. 

In late July, some two million pilgrims usually flock to Saudi Arabia to complete what for many is a once-in-a-lifetime religious journey in the Muslim Holy Land, which ends in Eid al-Adha. Canceling the pilgrimage would be a first since the Gulf kingdom was founded in 1932 and could cost Saudi Arabia millions in visitor revenue.

Saudi Arabia has a high number of COVID-19 cases, and with the ongoing worldwide travel restrictions, the Saudi government said it will make a decision within the week about cancelling the 2020 hajj. 

“The issue has been carefully studied and different scenarios are being considered. An official decision will be made within one week,” a senior official from Saudi Arabia’s Ministry of the Hajj and Umrah told the Financial Times on June 12.

One idea the ministry is considering is allowing a small number of local Saudi pilgrims, around 20% of the usual number, to complete the hajj.

“All options are on the table but the priority is for the health and safety of pilgrims,” the official said.

Read also: COVID-19 Found in Crew of Kuwait Ship Docked in Australia

Kuwait Announces Ambitions to Decrease Reliance on Migrant Workers

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Kuwaiti Prime Minister Sabah Al-Khalid Al-Sabah has announced that the country will aim to drastically change the country’s demographics in the coming years. The prime minister, who assumed the position as an appointee in November 2019, said “we have a future challenge to redress this imbalance,” referring to the country’s large population of foreign workers.

Migrants in Kuwait

Kuwait currently hosts millions of expatriates, making up 70% of a total population of over 4.5 million. The country has announced similar plans before, deporting thousands since 2016, but continues to depend heavily on cheap foreign laborers that benefit from the country’s low tax rate to save or send remittances home.

Migrant workers in Kuwait mainly perform low-skilled labor in occupations that Kuwaitis themselves avoid. Domestic help, construction, and lower-level public sector jobs have been filled by nationals from other Middle Eastern states and Asia more broadly.

Kuwait has previously considered imposing quota systems on immigration and is now proposing similar ideas, but the small native population would be hard-pressed to fill the gap left by the departure of millions.

Pandemic reveals risks

Poor living conditions and housing for unskilled laborers has become a major source of risk for Kuwait and many other Gulf states. While the country implemented COVID-19 measures early and general adherence was maintained, the migrant population in most Gulf countries allowed the virus to spread because of the cramped conditions of expatriate housing.

For Kuwait, the crisis appears to have renewed a drive to reduce its expatriate population and work toward a state of self-reliance. Like many Gulf states, Kuwait is facing increased tensions due to protests from foreign workers packed together in COVID-19 containment camps, and has seen a worrying rise in xenophobia towards migrants.

As the concept of shrinking populations is becoming more common in highly developed economies such as Japan and several European states, Kuwait’s plans would produce a unique experiment in rapid population decline.

Growing tensions

Kuwait has faced a challenge for years in how it could to reduce its population while continuing to grow its GDP and further develop the state.

Migrants who contributed to Kuwait’s development could suffer if it indeed “purifies the country,” as Kuwaiti parliamentarian Safaa Al-Hashem phrased it in Kuwait City-based newspaper Al Qabas.

Kuwaiti actress Hayat al-Fahad told a local television channel that immigrants who tested positive for COVID-19 should be “put in the desert” in order to save hospital beds for nationals while journalist Mubarak Albugaily called Egyptians workers in Kuwait a “burden on the state” in a public call for mass deportation.

Future growth

If the state of Kuwait is to find a solution to its dilemma of producing growth with a shrunken population, its officials could benefit from a cooling of tempers regarding immigrants.

If Kuwaiti officials and public figures continue to accuse migrants of exploiting the system, and migrants continue to live under poor conditions, the country might get its wish prematurely.

By prioritizing a deportation process and quota system that provides non-coercive incentives for departure and a recognition of foreign workers’ human rights, Kuwait could slowly wean itself of its reliance on migrant workers. However, the question of what would replace the labor of millions remains.

The country could copy strategies employed by Japan where automation, digital innovation, and the use of artificial intelligence are rapidly replacing low-skilled work. But getting to that point would require much time and work, during which foreign workers would remain an important part of Kuwait’s economy.

IIF: Gulf Countries Facing Historic Economic Crisis

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The six nations that comprise the Gulf Cooperation Council (GCC) are facing heavy impacts from the coronavirus pandemic and a drop in oil prices amid a sudden demand slump. Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates are in for a difficult period according to the International Institute for Finance (IIF), a global association of financial institutions.

The Institute had already announced that emerging markets are facing an “unparalleled sudden stop,” with capital leaving the economies of developing nations at never-before-seen rates. Capital is flowing from emerging markets to developed ones at over five times the rate at the worst point of the 2008 global financial crisis.

Triple threat

For the six GCC countries, local economies are suffering from a trifecta of bad news. Capital flows are moving to developed nations and oil revenues have cratered while tourism, hospitality, retail, and travel sectors are all facing unprecedented difficulties due to stringent COVID-19 measures.

Despite the overall relatively successful containment of the coronavirus, GCC countries are set to see a contraction in real gross domestic product (GDP) of 4.4% according to IIF predictions. The World Bank in 2019 had predicted GDP growth between 1% and 4% for most GCC countries, an improvement over the previous year. Oman was considered one of the Council’s members most likely to grow, with an increase estimated at 3.7% due to increased natural gas production.

Oil revenue and state budgets

But the coronavirus and an international “war” over oil prices means the region is now in for a contraction in GDP. The IIF is cheering on unpopular austerity measures as a means to stop deficits from growing as cuts in public spending “could more than offset losses stemming from reduced oil exports.” Even with unpopular and painful spending cuts, the Gulf Council’s aggregate deficits are expected to increase to 10.3% of GDP.

Oman, which the World Bank touted as the GCC country most likely to grow significantly in 2020, is now considered “an increasingly vulnerable spot in the region in light of its mounting debt.” The country could face an economic contraction of 5.3% while its deficit is likely to widen to 16.1%, according to the IIF.

Opportunity to reform?

The crisis also poses an opportunity to build up resilience according to Alain Bejjani, CEO of Emirati retail operator Majid al Futtaim. “In the coming two to three years, we’re going to see, certainly, a very, very large impact that’s going to be asymmetric, depending on the readiness of countries,” Bejjani told CNBC on May 5.

“I think this is a golden opportunity to really change, to reform and to transform our economies into more resilient economies that have (the) ability to bounce back faster,” Bejjani stated. The current crisis could easily accelate reforms and diversification that have resulted in broader opportunities and even improved conditions for women in GCC countries.

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