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Time to invest in Russia despite sanctions threat?

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The 10 most important things you need to know on Caspian Sea Region for Thursday, June 11:

1Time to invest despite sanctions threat? “Despite this uncertainty, however, some market participants argued there were “bargains” in Russia.”There is significant opportunity here. The one thing with Russia is that it generally goes from being the worst (performing) stock market to the first stock market in a very rapid rate,” Simon Fentham-Fletcher, chief information officer of Freedom Asset Management, told CNBC Europe’s “Squawk Box” Wednesday. His company specializes in investment in emerging markets, such as Russia. Certain sectors – such as retail and real estate – were thriving, Fentham-Fletcher said, speaking from Moscow” writes Holly Ellyatt for the CNBC.

2Duqu 2.0: computer virus ‘linked to Israel’ found at Iran nuclear talks venue. “The security company Kaspersky discovered the virus, which it said was a new variant of the Duqu worm, itself a variant of the state-sponsored computer virus Stuxnet, used to attack Iran’s nuclear infrastructure in 2010. Known as Duqu 2.0, the new worm was, Kaspersky said, used to attack three European hotels where the P5+1 talks involving the US, UK, Germany, France, Russia, and China with the EU concerning Iranian nuclear capabilities were held over the last 18 months. Kaspersky did not identify the hotels or say who was behind the attack. However, Israel is thought to have deployed the original Duqu worm to carry out sensitive intelligence gathering” writes Samuel Gibbs for the guardian.

3In his opening speech at the Fifth Congress of Leaders of World and Traditional Religions Wednesday in Kazakh capital Astana, President Nazarbayev said the trust that has been built in the decades since World War II has been lost. Describing Islam as a “tolerant” religion, Nazarbayev said that it was “blasphemous” to use it as an excuse for extremism and terrorism.”The destruction of centuries-old cultural heritage sites in Iraq and Syria cannot be called anything else but anti-humane acts,” he said. Kazakhstan can be a model for religious freedom, added Nazarbayev, “The key foundation is tolerance and openness.” Attended by 80 delegations from 42 countries, the two day inter-religious meeting, which takes place once every three years, is aimed at shaping resolutions for global threats and challenges through communication among religious leaders.

4Azerbaijan blocks Amnesty visit ahead of European Games. Denis Krivosheev, Amnesty’s deputy director for Europe and Central Asia, said the crackdown by authorities “only highlighted their desperate attempts to create a criticism-free zone around the games”. He added that the legacy of the event would be to “further encourage repressive authorities around the world to view major international sporting events as a ticket to international prestige”. In its new report, the London-based group said the government’s campaign against activists had left Azerbaijan “without independent voices”.”Behind the image trumpeted by the government of a forward-looking, modern nation is a state where criticism of the authorities is routinely and increasingly met with repression,” said the report, which was released on Wednesday. [BBC]

5Kazakhstan has finished negotiating the terms of a deal to join the World Trade Organization (WTO), capping 20 years of efforts to take part in the world of mainstream commerce. The country’s WTO accession package will go for final approval before WTO members on June 22.”I congratulate WTO members and the government of the Republic of Kazakhstan on the historic step taken today,” WTO Director-General Roberto Azevedo said on June 10. “I look forward to welcoming Kazakhstan to the WTO.”Ambassador Vesa Himanen of Finland, who chaired the WTO working party that negotiated the deal with Kazakhstan, said it was “one of the most challenging negotiations in the 20-year history of the organization.” [TASS]

6Russia has no contract with Iran to import its oil, but may help resell it on the world market, according to Russian Energy Minister Alexander Novak. Already the two countries cooperate in a variety of commercial sectors. One key aspect is Russia supplying fuel for Iran’s nuclear power reactor at Bushehr in central Iran on the Persian Gulf coast. Last August’ deal could be essential for Iran, whose crude exports have plunged by more than half – from 2.5 million barrels per day to about 1 million barrels per day – since 2011, when the international community tightened sanctions. Any company trading with Iran is forbidden under the sanctions from doing business with the U.S. and Europe. Iran recently has expressed hope and even confidence that the sanctions imposed on it may be lifted soon” writes Andy Tully for the Oilprice.

7BRICS Bank Could Change the Game. “There are challenges to overcome. Researcher Wood thinks that “the bank’s short term challenges will be logistical, completing basic things like hiring staff, building internal operational procedures, and so on. Once this is completed, two larger challenges will present themselves. First, making a decision on what projects to fund, which will involve answering difficult questions on what type of projects the bank prioritizes, where it most wants to operate, and what role political priorities might play. Second, would be in building relationships with existing funders, like the World Bank and AIIB, to assure the BRICS bank doesn’t have to bear all the risk of the projects it gets involved in” writes Kester Kenn Klomegah for the Modern Diplomacy.

8Why Almaty should get the 2022 Winter Olympics. “In contrast with the grassroots opposition that scuttled Norway’s bid, Kazakhstan’s bid has overwhelming public support. Two polls were conducted to gauge national opinion on the Games. A poll that the International Olympic Committee commissioned showed 87 percent support. A poll that the Almaty 2022 organization conducted showed 79 percent support. One reason Almaty’s cost proposal is so reasonable is because it’s already built or renovated most of the facilities needed for the Olympics. A lot of the work was done for the 2011 Asian Winter Games – the building of a ski jump and the renovation of the Medeu skating rink, for example. Almaty will build additional facilities for the 2017 Winter Universiade, an Olympic-caliber event for student athletes 17 to 28” writes Hal Foster for the Tegri News.

9Iran and Azerbaijan are two neighbor countries and friends with lots of cooperation in various sectors which has grown in recent years and can go further, Jalil Eslami, deputy director of ports and special zones affairs of Iran’s Ports and Sailing Organization told Trend June 10. The official stressed that maritime cooperation can help Iran-Azerbaijan relations. There are agreements on cooperation in the maritime sector and there are sisterhood pacts between Iranian and Azerbaijani ports, he said. Eslami in particular pointed to maritime transit and tourism as one of the sectors with great development opportunities. Having in mind the growing tourism attractions, it is necessary to provide the infrastructure for transporting over 25 million passengers by 2025, and improving the quality and quantity of maritime transportation services, he noted.

10Russia’s Unending Balkan Intrigues. “Russia’s Leninst-style foreign policy egoism as well as its historical efforts to oust the West from the Balkans and create a sphere of influence there go hand in hand; together, they represent Moscow’s unending efforts to control the Balkan region. One of the most practical regional issues for Moscow is the transmission of Russian energy through the Balkans to Central Europe. Russia aims to cement a monopoly on providing this energy; yet, it neglects to do the practical things necessary to build pipelines or win local governments’ willing assent to its plans. In seeking to eliminate rivals to its regional energy strategies, Russia is obstructing Azerbaijan’s efforts to buy a 66-percent stake in the Greek gas grid operator DESFA. Moscow has long coveted not only the Greek grid but also other distribution networks throughout Europe” writes Stephen Blank for the Jamestown.

Journalist, specialized in Middle East, Russia & FSU, Terrorism and Security issues. Founder and Editor-in-chief of the Modern Diplomacy magazine.

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Energy News

IRENA and the ESA Agree to Advance Energy Transition in Space Activities

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The International Renewable Energy Agency (IRENA) and the European Space Agency (ESA) signed a Memorandum of Understanding (MoU) today to advance the global energy transition through space-based services and products. The new partnership was signed by the two Director-Generals Francesco La Camera and Josef Aschbacher in pursuit of the common goal to ensure sustainable long-term socio-economic development within planetary boundaries.

Data and images from satellites can play a significant role to help countries better assess the geographical potential of renewables, identify the best locations for projects, forecast weather patterns and support long-term planning of new renewable generation capacity and infrastructure.

Francesco la Camera, IRENA’s Director-General said: “Today’s partnership opens a new avenue of cooperation to advance the international cooperation on energy transition globally. While an energy system underpinned by renewables is key to decarbonising our world in line with climate goals, renewables bring socioeconomic benefits with economic opportunity and social equity at its heart. By combining IRENA’s knowledge on energy transition with ESA’s space research and technology, we can accelerate the low-carbon energy transition and promote sustainable growth.”

Under the agreement, IRENA and ESA will make use of space assets and data to improve renewable generation site location, access to energy, electrification modelling, renewable resource mapping and smart grid planning. Urban energy system planning with focus on local renewables may also benefit from satellite data while enhancing system resilience.

Making use of digital technologies including 5G and combining for example satellite imagery with artificial intelligence and big data provide a unique opportunity to enable a wider space economy and support energy transitions across the world.

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Environment

Why climate science is key to protecting people and planet

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This week, scientists and representatives from 195 countries are gathered at the 54th Session of the Intergovernmental Panel on Climate Change (IPCC) to review the world’s most comprehensive assessment of our climate – the Sixth Assessment Report. IPCC reports have historically underpinned global climate action and influenced the decisions to reduce greenhouse gas emissions.

We sat down with Joyce Msuya, United Nations Environment Programme (UNEP) Deputy Executive Director, to find out more about the role of climate science in decision-making and what can be done to prioritize climate action to protect people and planet.

Given the world is still grappling with a global pandemic, how urgent is the issue of climate change?

Extreme weather is the new normal. From Germany to China, to Canada or the United States – wildfires, floods, extreme heat waves – it is an ever-growing, tragic list.

And whilst climate crisis – together with biodiversity loss and pollution ­– has been underway for decades, the COVID-19 pandemic has brought this triple planetary crisis into sharp focus. It is a warning from the planet that much worse lies in store unless we change our ways. These crises threaten our collective future, and it’s time to take action.

With countries investing unprecedented amounts of resources to kick-start the global economy, we need to recover in a way that is safe, sustainable and that does not exacerbate the challenges we already face.

Is there a link between the degradation of the environment and pandemics like COVID-19?

Studies report that the majority (approximately 60 per cent) of emerging infectious diseases are of animal origin and, like COVID-19 can be transferred between animals and humans. As the world’s population edges towards 8 billion, land-use change and development put humans and animals in closer contact, making it easier for zoonotic diseases to spill over into human populations. This occurs as habitats are destroyed and specialist species in those habitats are replaced by generalist species like bats and rodents – both of which are more likely to carry zoonotic pathogens than most other mammalian groups – thus increasing the risk of zoonotic spillover. This is because the current host species for the disease are less available and hence allow diseases to transfer to other species and, in turn, humans.  In the last 50 years, meat production has also increased by 260 per cent, and today, dams, irrigation, and factory farms are linked to 25 per cent of infectious diseases.

The pandemic is a reminder of the interconnectedness between humans and the environment, and the potential impacts of the transfer of diseases between species – the risk of which is significantly increased with the degradation of the environment.

How does the IPCC contribute to our collective efforts to tackle climate change?

Fundamentally, the role of the Panel is to establish what we know about climate change – to provide the scientific basis for decision-making, policy development and international negotiations. For this reason, all IPCC publications represent a rigorous process by the global scientific community. 

Past assessments by the IPCC have helped establish human actions as a cause of global warming, prepare a pathway to the historic Paris Climate Agreement and garner commitment to limit temperature rise. Countries also look to the IPCC reports for guidance in developing their national ambitions. For example, the IPCC has made clear that each and every country in the world must commit and develop a plan to realize a net-zero future.

What do we need to know about the Sixth Assessment report currently under review?

The IPCC report is a tool for understanding past warming – how and why it has occurred, and for developing future projections, including a better understanding of how human actions have influenced extreme climate events. The first component of the full report to be released next month represents the greatest collaborative effort yet, with 234 authors, information from 14,000 scientific papers, and revisions by 750 experts and 47 governments.

The report will give us a better understanding of extreme weather events and the impacts of COVID-19 on climate change and air pollution. It will provide the momentum we need to galvanize global actions as we head towards the UN Climate Change Conference in October. And it will give us the science we need to inform the First Global Stocktake of the world’s collective progress towards achieving the Paris Agreement goals in 2023.

A Working Group is now meeting to scrutinize each and every line of the full report before its final approval by the IPCC.

Could it be too late for human actions to slow the trajectory of climate change?

A growing number of countries are committing to net-zero targets. But to remain within the 2°C limit and have a chance at the 1.5°C goal, commitments need to be translated into policies and actions.  

It’s not too late but we need to make up for lost time – particularly in three areas. First, we must put financing in place for adaptation. Second, we must place a stronger focus on nature-based solutions in updated Nationally Determined Contributions. Third, we must unite the nature and climate agendas.

We know that developing nations often bear the disproportionate burden of climate change. As countries roll out COVID-19 recovery and stimulus packages, we have a golden opportunity to chart a sustainable future. UNEP’s Emissions Gap Report 2020 found that investing in a green pandemic recovery could cut 25% off greenhouse emissions by 2030.

UNEP is supporting a landmark initiative agreed by Ministers of Environment of 54 African countries in December 2020 to support a comprehensive green recovery plan from COVID-19.

The African Green Stimulus Programme will mainstream environmental considerations across all facets of African economies. UNEP is also pleased to note that every country on the continent either already has, or is developing a national adaptation plan.

Adaptation is critical to build resilience of communities and economies to the impacts of climate change.

Indeed, 2021 will be a pivotal year for climate action. It is when much of the work to set our post-pandemic course is taking place. It is the year of the delayed UN Climate Change Conference (COP26). It is the year to agree on a global Post-2020 Biodiversity Framework. And it is the start of the UN Decade on Ecosystem Restoration.

2021 must mark the beginning of the era of action. And it must be the year where science reigns supreme.

UN Environment

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Finance

Hungary: Reforms to raise productivity would strengthen recovery from COVID-19

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Hungary’s economy is emerging from the crisis caused by COVID-19, yet sustaining the country’s robust pre-pandemic levels of growth will require reforms to foster productivity and job creation, according to a new OECD report.

The latest OECD Economic Survey of Hungary says that with labour shortages being felt as the economy picks up, it is vital to invest in vocational training, digital skills and apprenticeships to match skills with market requirements. Improving transport links and the availability of housing would make it easier for workers in low-employment areas to take up jobs elsewhere. Creating a more competitive and transparent business environment and accelerating firms’ adoption of digital technologies would also bolster the recovery.

“Hungary’s economy was doing well before the crisis, and with external demand picking up, prospects for a solid recovery are good. It is important to use this period, and the forthcoming inflow of EU funds, to raise productivity and competitiveness to ensure a strong and lasting recovery,” said OECD Director of Economic Country Studies Alvaro Pereira, presenting the report alongside Hungary’s Secretary of State for Financial Policy Gábor Gion.

The COVID-19 crisis hit Hungary’s export-oriented economy hard, ending a period of steady growth over 2016-19 that lifted incomes and brought down the unemployment rate to a 30-year low. Policy support to workers and firms, and the swift rollout of vaccines, has smoothed the path to recovery, and the Survey projects growth of 4.6% in 2021 and 5% in 2022, following a drop of 5.1% in 2020. An annual injection of EU structural and Next Generation COVID recovery funds equivalent to around 3.5% of GDP in total from 2021 will support growth if invested well.

Short-term risks remain, such as the impact of a global shortage of semiconductors on Hungarian car production. Targeted support to households and businesses should be continued as long as is needed. Once the recovery is self-sustained, the focus should return to strengthening public finances ahead of looming increases in health and pension spending from an ageing population, the Survey says, including by completing an ongoing increase in the retirement age to 65 by 2022 and linking further increases to gains in life expectancy.


The ageing and shrinking workforce makes it urgent to raise labour productivity. In addition to strengthening vocational and tertiary education, it is key to produce more of the highly skilled engineers and ICT graduates that businesses increasingly demand. In this context, the Survey recommends making high-speed mobile Internet cheaper and helping firms to rapidly adopt digital technologies. Intensifying efforts to fight corruption, including continuing to strengthen the institutional framework, and ensuring the independence and accountability of the judicial system would improve the investment climate and support business dynamism.

Worker mobility could be enhanced by improving transport connections from rural areas into cities, modernising housing regulations to expand the private rental market, and easing some of the rigid licensing and certification requirements on professional occupations. Hungary could also consider increasing the duration of unemployment benefits from the current three months.

Finally, Hungary’s economy would benefit from a more growth-friendly tax structure. The Survey suggests continuing to reduce labour taxes and phasing out distortionary taxes on turnover in sectors like energy, finance and retail which hinder new entry and investment. This could be balanced by increasing consumption, property and environmental tax revenues, while simplifying the value-added tax system by moving to a lower but broader-based VAT rate.

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