Iran: Special comment. The evidence continues to pour in that the US banking sanctions are imposing large penalties on Iranian consumers. Iran can still sell its oil, but cannot get paid and cannot pay for imports of rice, palm oil, tea and other imported foodstuffs and commodities. Iranian companies are in default.
Today, Indian authorities reported Iran defaulted on a 90-day note to pay for the import of 200,000 tons of rice from India that was ordered last October and November.Iran also defaulted on payments for shipments of Indian tea and for 400,000 tons of Ukrainian wheat, some of which is aboard ships in Iranian ports. Ship owners refuse to allow the wheat to be offloaded. Iran also has defaulted in paying for imports of Indian tea. Ten ships are in Iranian ports but refuse to permit offloading because the Iranian rial is not negotiable as a medium of international exchange.
In the past week, Iran has offered to barter gold bullion in overseas vaults and filled oil tankers for basic commodities.
Comment: The collapse of the Iranian rial plus the refusal of banks and companies to deal with Iran are having serious impact. The price of everything in Iran is rising. The sanctions against Iranian banks that rely on the US dollar for international trade are proving to be devastating for everyday Iranians.
In order to meet domestic demand, Iran must import more than 1 million tons of rice, of which some 70% is purchased from India. Iran produces more than 2 million tons of rice, but still must import a million tons or so from India and other states to satisfy domestic demand. I
Iran has defaulted on payments because the Iranian rial is almost no longer convertible into internationally acceptable hard currency. Indian and UAE middle-man companies are going out of business because the Iranian currency is worthless, nonnegotiable.
Iran's customary trade partners are experimenting with barter swaps and trades paid in local currencies, such as Indian Rupees, Malaysian Ringgit and Indonesian Rupiah. Iran relies on India for 45% of its rice imports, but on Indonesia and Malaysia for all of it palm oil imports, meaning cooking oil, margarine and other industrial uses.
Iran can export but must now accept payment in currencies not traded on international markets or payment in kind. There is no predictability in the profit for traders; barter strikes at the heart of an integrated global economy, which the advanced western countries seek.
The impact on the Iranian micro-economy is serious. Imported basic commodities are becoming out of reach in price and rare. If the banking sanctions continue, the Iranian standard of living must decline. Western clothes and electronics, for example, will only be available to the wealthy elite. Their possession eventually will brand the owners as non-revolutionary and not devout Shiites.
The ayatollahs are not impervious to the plight of the people who must pay their salaries, but they have shown no movement on nuclear talks… yet. Resort to barter is a sign of growing national concern.
Banking sanctions are proving to work far more effectively than any others. Readers should expect Iran to make overtures for new talks without making promises. Iranians are not hurting enough yet. Nevertheless, urban dwelling Iranians are likely to engage in civil disobedience if prices for staple commodities continue to rise and imported goods become unavailable at any price.
Egypt: The Muslim Brotherhood called for the Supreme council of the Armed Forces to dismiss its proxy civilian government and empower a new coalition government formed by the newly elected Egyptian parliament. The Brothers and salafists hold a majority of the seats in parliament.
The Supreme Council of the Armed Forces (SCAF) will hand over authority on but not before 30 June, Egyptian Prime Minister Kamal el-Ganzouri said during an 8 February news conference. The transition period will start 10 March when the presidential candidacy registration process begins.
Comment: The Brotherhood, the military and the military-backed government held a dialogue of the deaf in the sense that the three government powers talked past each other. Each interpreted civil unrest to suit its own agenda.
Somalia: For the record. Al Shabaab announced it formal affiliation with al Qaida, which remains based on Pakistan.
Comment: When al Shabaab was strong and expansive it professed sympathy for al Qaida but never sought al Qaida's approval or a formal association. Now that Ethiopian and Kenyan forces are beating al Shabaab and it's supporting Somali clans, it now seeks outside help.
The anti-Algerian Salafists underwent the same metamorphosis, as they suffered losses. They affiliated with al Qaida as Al Qaida in the Islamic Maghreb (AQIM) only after the Algerian security forces all but destroyed them.
The obvious inference is that al Shabaab is in danger of destruction and seeks outside support. Today's announcement almost constitutes a capitulation statement by al Shabaab, as an independent jihadist force.
Greece: Greek leaders and Greek creditors reached a tentative agreement that is the first step towards obtaining a €130 billion bailout that Greece needs to avoid default in March. Greece needs bailout funds to cover a €14.5 billion bond redemption in March.
Officials from the European Union, International Monetary Fund and European Central Bank, collectively known as the troika, agreed to the last outstanding sticking point early Thursday, clearing the way for the deal to be presented at a meeting of the 17 eurozone finance ministers meeting on the 9th.
Comment: Independent financial analysts speculated that the deal is far from done. Greek unions are calling for nationwide general strikes to protest more austerity measures. The parliament has not approved the deal.
One financial blogger wrote that "in spite of denials, it is quite obvious Germany wants Greece out of the Eurozone. However, France and other countries do not. The IMF appears to be siding with Germany, and that is a big change"
"If there is a deal, don't expect it to last. Greek elections are coming up, and even if they halt those elections (quite likely if a deal is reached), Germany will simply place more and more demands on Greece as soon as Greece misses budget targets."
The German plan is to shrink the eurozone members to a more manageable and sustainable core that would not include the PIIGS - Portugal, Italy, Ireland, Greece and Spain. Thus the new bailout, if it occurs, might be Greece's last lifeline before ouster.
The game plan still apparently is to use bailout funds to buy time for a national economy to rebound. The problem is that the European Union members on the Mediterranean coast need much more than time. They appear to be out of energy, ideas, innovation and resources. The bailout is, thus, a dole that postpones the inevitable hard choices about eurozone core members.
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