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Iran deal signals a radical shift in U.S. approach to the Mideast

Dimitris Giannakopoulos

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Welcome to the Caspian Daily, where you will find the 10 most important things you need to know on Caspian Sea Region. We appreciate ideas, reports, news and interesting articles. Send along to Caspian[at]moderndiplomacy.eu or on Twitter: @DGiannakopoulos

1At least since 9/11 and arguably for two decades before that, two propositions have informed U.S. policy in the Mideast. The first is that U.S. interests there are best served by the United States establishing a position of unquestioned preeminence. The second is that military might, wielded unilaterally if necessary, holds the key to maintaining that dominant position. Call it the Big Enchilada policy, with attitude. As implemented, however, that approach has yielded almost uniformly unfavorable results. Iraq and Afghanistan provide exhibits A and B, of course. But Libya, Somalia and Yemen don’t look much better. Even so, some hawkish types argue that trying a little harder militarily will produce better outcomes. Their ranks include a platoon of Republican presidential candidates vowing if elected to get tough on the ayatollahs, Andrew J. Bacevich for the Los Angeles Times.

2India Opens Gateway to Central Asian Gas Riches After Iran Deal. With U.S. sanctions easing, India is racing to build a port in Iran that will get around the fact that its land access to energy-rich former Soviet republics in Central Asia has been blocked by China and its ally Pakistan.“We’re seeing the latest manifestation of the Great Game in Central Asia, and India is the new player,” said Michael Kugelman, a South Asia expert at the Washington-based Woodrow Wilson International Center for Scholars. “It’s had its eyes on Central Asia for a long time.” While the world focuses on what Iran’s opening means for Israel and Arab nations, the ramifications are also critical for Asia. Closer Iran-India ties would allow New Delhi’s leaders to secure cheaper energy imports to bolster economic growth and reduce the influence of both China and Pakistan in the region. Natalie Obiko Pearson for Bloomberg.

3Turkmenistan’s government-owned TurkmenGaz will lead a consortium of the national oil companies of the four nations that will build and operate the ambitious Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline, the petroleum ministry said without clarifying whether foreign private companies can still participate in the $7.6 billion project.

4Kazakhstan will establish an energy efficiency fund, which will become a tool for supporting energy service companies by allocating them credits and loans on preferential terms, said Albert Rau, Kazakhstan’s Deputy Investment and Development Minister.”Currently, works on the establishment of an energy efficiency fund are already being conducted together with the World Bank and the United Nations Development Program,” he said. “This will give additional impetus for the development of this sector in Kazakhstan. In this regard, we should follow the example of Europe, in particular Germany, which has made significant progress in the field of energy saving.” According to the “100 concrete steps” plan voiced by President Nursultan Nazarbayev, one of the important directions of Kazakhstan’s industrial development is the reduction of energy intensity in the gross domestic product of the country.

5A sophisticated cyber-attack on an email network at the Pentagon affected 4,000 military and civilian personnel working for the Joint Chiefs of Staff, and the network was shut down for two weeks. It was a so-called spear-phishing attack in which people are tricked into opening bogus emails which then infect the network.US officials did not say whether the attack has been linked to individuals or the Russian government but said it was “sophisticated.”One official said: “It was a spear-phishing attack traced to that country (Russia),” Another told NBC News: “It was clearly the work of a state actor.” No classified information was obtained but the Pentagon decided to shut the email system down.

6S-400 Triumf missile defense systems have entered service in the Russian Armed Forces on the Kamchatka Peninsula, the head of the Defense Ministry’s press service for the Eastern Military District said Friday.“The S-300 missile defense systems that were deployed earlier reliably defended the airspace for over a quarter of a century. The capabilities of the new technology will allow for the detection of air targets at more than 600 kilometers away and are several times better than the military efficiency of anti-air defense of foreign states,” Roman Martov said. The S-400 Triumf (SA-21 Growler) is a Russia’s next-generation anti-aircraft weapon system, carrying three different types of missiles capable of destroying aerial targets at short-to-extremely long range.

7A Business Incubation Center at Mingachevir Tech Park will be created before the end of this year, says executive director of the High Tech Park Seymur Agayev. Currently, the general plan of progress for selected areas and the very structure of the Mingachevir Tech Park is under development, he said.“There are a number of measures concerning the activities of the Mingachevir technology park that will be adopted, and the business incubator is one of them. We are developing a comprehensive program that will at once launch the activity of the Tech Park. In addition, discussions are underway with potential investors and members,” Agayev said.

8Will Vladimir Putin save Russia’s ailing firms, like EkoNiva, Rosneft, Gazprom? Including the money in the sovereign wealth funds, the government has $US358 billion in foreign currency reserves and gold. So why not put some to work aiding businesses? One problem is that some banks and companies are poorly managed and deserve to go under, says Bernie Sucher, a longtime US investor in Russia who serves on the board of Moscow-based UFG Asset Management. Bailing them out only delays the day of reckoning, he says. That’s what happened in the 2008 financial crisis in Russia, when “the government sprayed liquidity all over the economy”, he says. “The big miss in 2008 was the failure to use the crisis to pursue deep structural reforms.” Carol Matlack for Sydney Morning Herald.

9Kazakhstan government has revised the decree that made many popular resorts a special border zone requiring special passes. Foreigners will no longer have to obtain permits to visit them. It greatly widened the strip of nearborder land considered a special zone not supposed to be visited by foreigners without obtaining a prior permit from the local authorities. A lot of popular destinations, including Big Almaty Lake, Medeo high altitude skating rink, Shymbulak skiing resort, Lake Alakol, Kolsay Lakes and Charyn Canyon ended up in that zone.

10An agreement to build “Wind Parks” in the vicinities of the Iranian city of Khaf has been reached. According to the agreement, the project will be implemented by LLC “Azalternativenerji”. The project will be implemented within the framework of the Memorandum of Understanding, which was held in Baku in October 2014.

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

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After stalling last year, renewable power capacity additions to hit double-digit growth in 2019

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After stalling last year, global capacity additions of renewable power are set to bounce back with double-digit growth in 2019, driven by solar PV’s strong performance, according to the International Energy Agency.

The IEA expects renewable capacity additions to grow by almost 12% this year, the fastest pace since 2015, to reach almost 200 GW, mostly thanks to solar PV and wind. Global solar PV additions are expected to increase by over 17%.

Last year was the first time since 2001 that growth in renewable power capacity failed to accelerate year on year, largely due to a Chinese government policy change. This highlights the critical role of governments for the deployment of renewables and the need to avoid sudden policy changes that can result in strong market volatility.

Renewables have a major part to play in curbing global emissions and providing universal access to affordable, secure, sustainable and modern energy. Renewable capacity additions need to grow by more than 300 GW on average each year between 2018 and 2030 to reach the goals of the Paris Agreement, according to the IEA’s Sustainable Development Scenario.

“These latest numbers give us many reasons to celebrate: Renewable electricity additions are now growing at their fastest pace in four years after a disappointing 2018,” said Dr Fatih Birol, the IEA’s Executive Director. “We are witnessing a drastic decline in the cost of solar power together with strong growth in onshore wind. And offshore wind is showing encouraging signs.”

“These technologies are the mainstays of the world’s efforts to tackle climate change, reduce air pollution and provide energy access to all,” Dr Birol said. “The stark difference between this year’s trend and last year’s demonstrates the critical ability of government policies to change the trajectory we are on.”

The cost of solar PV has plunged more than 80% since 2010, making the technology increasingly competitive in many countries. The IEA estimates that global solar PV capacity additions will increase to almost 115 GW this year, despite a slight decline in China, the world’s largest market. This is set to be the first year that solar PV additions have surpassed 100 GW and the third year in a row that they account for more than half of global renewable additions.

The softness in the Chinese solar PV market is being offset by faster expansion in the European Union, led by Spain; a new installations boom in Vietnam as developers rush to complete projects before incentive cuts; and faster growth in India and the United States. Japanese solar PV developers are also expediting the commissioning of projects to meet deadlines for higher incentives.

The pace of acceleration in the Chinese solar PV market remains the biggest uncertainty for the IEA’s 2019 estimates. China’s policy transition from feed-in tariffs to competitive auctions resulted in relatively slow solar PV deployment in the first half of 2019. But installations in the second half of the year are expected to accelerate with the completion of the first projects linked to large-scale auctions and the emergence of projects that rely far less on incentives to compete with other power sources.

The rebound in renewables is also supported by higher onshore wind growth, which is expected to rise 15% to 53 GW, the largest increase since record deployment in 2015. In the United States, project developers have accelerated deployment before the phase-out of federal production tax credits. In China, lower curtailment levels have unlocked additional growth in several provinces this year, enabling faster expansion.

Offshore wind growth is expected to be stable at around 5 GW in 2019, led by the European Union and China.

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Liquidity Crisis Weighs on An Already Strangled Palestinian Economy

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Palestinian Authority (PA) faces a financing gap that could exceed US$1.8 billion for 2019 driven by declining aid flows and the unresolved transfer of taxes and import duties collected by Israel on behalf of the PA (clearance revenues), according to a new report released today by the World Bank. 

The report highlights the financing gap that has forced the PA to accumulate debt from domestic banks, and build up arrears to employees, suppliers and the public pension fund, creating large liquidity challenges for the economy. The Palestinian economic monitoring report will be presented to the Ad Hoc Liaison Committee (AHLC) on September 26, 2019 in New York, a policy-level meeting for development assistance to the Palestinian people.

“The outlook for the Palestinian territories is worrisome as drivers of growth are diminishing and the severe liquidity squeeze has started to affect the PA’s ability to fulfill its responsibilities of paying its civil servants and providing public services,” said Kanthan Shankar, World Bank Country Director for West Bank and Gaza. “With the right actions and collaboration between the parties, the situation could be reversed and bring relief to the Palestinian people, its economy and living standards.”

Overall revenue received in the first half of 2019 was half the amount in the same period last year mainly due to a 68 percent drop in clearance revenues. The PA has rejected the transfers of all clearance revenues due to deductions by Israel of US$138 million per year. As a result, the PA has taken a number of steps to cope with the loss of liquidity including fully using its borrowing capacity from domestic banks and paying only 60 percent of salaries to its employees while protecting those that make NIS2,000 per month (US$ 550) and below.

The retroactive transfer of fuel taxes made by the Government of Israel in August 2019 is expected to enable the PA to manage till the end of 2019 with reduced spending, while continuing to accrue arrears to employees, and private sector suppliers. Transferring to the PA the responsibility for fuel taxes that comprise about a third of total clearance revenues would be a partial help, but a more comprehensive agreement needs to be reached covering the mechanism and nature of Israeli deductions from clearance revenues going forward. 

Growth in the Palestinian territories is estimated at 1.3 percent in 2019. This forecast is largely due to a slight improvement in Gaza of 1.8 percent growth, after a dramatic 7 percent decline in 2018. Reflecting the liquidity squeeze, growth in the West Bank is expected to slow in 2019 to the lowest level over the last five years at 1.2 percent.  As the PA, businesses and households exhaust their options for coping with the liquidity crisis, a recession is forecasted for subsequent years in the absence of an agreement that restores the normal flow of these revenues.

 “While the regular flow of clearance revenues is an immediate priority, for sustained economic expansion, steps need to be taken to reduce access and trade barriers. Work also needs to be done to enhance the business environment for Palestinian businesses. Coordinated efforts and support by all parties could offer better economic prospects for Palestinians,” added Shankar.

Progress can be made by expanding the pilot of door to door transport (a single movement of cargo on one mode of transport) through the West Bank crossings; completing the negotiations over electricity purchases between Palestinian and Israeli electricity companies; and revising the dual use goods system. Internally, reforms to improve the business climate are critical, including finalizing the revised Companies Law before the end of the year; and completing the institutional reform at the Palestine Land Authority to improve the efficiency and transparency of land administration. 

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New Study Offers Pathways to Climate-Smart Transport

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A two-volume study laying out a pathway to a low-carbon and climate-resilient transport sector in Vietnam was released at a workshop on Addressing Climate Change in Transport, held in Hanoi today.

This analytical work comes at a critical time when the Government of Vietnam is updating its Nationally Determined Contribution on reducing carbon emissions and set out its next medium-term public investment plan for 2021-2025.

“A resilient transport system is critical to the continued success of Vietnam’s economy, which relies heavily on external trade and seamless connectivity,” said Ousmane Dione, World Bank Country Director for Vietnam. “We hope that the findings and recommendations of this new report will help Vietnam in its efforts to achieve a resilient and sustainable transport sector.

The first volume demonstrates that by employing a mix of diverse policies and investments, Vietnam can reduce its carbon emissions in the transport sector up to 9 percent with only domestic resources by 2030, and 15-20 percent by mobilizing international support and private sector participation.

Currently, the transport sector contributes about 10.8 percent of the total CO2 emissions. In a business-as-usual scenario, these emissions are projected to grow at an annual rate of 6-7% to nearly 70 million tons CO2e. The most cost-effective measures to boost the resilience of the transport sector include shifting traffic from roads to inland waterways and coastal transport, deploying stricter vehicle fuel economy standards, and promoting electric mobility.

The second volume provides a methodological framework to analyze critical and vulnerable points of the transport network, and presents a strong economic case for investing in building the climate resilience of Vietnam’s transport networks. A vulnerability assessment looks at the potential impact of different hazards on the transport corridor or network, and the criticality assessment considers such questions as which links and routes along transport networks are the most critical for the unimpeded flow of transport across a particular transport network.

The study identifies systemic critical issues and hazard-specific, high-risk locations in Vietnam’s transport network. Considering climate change, it is estimated that 20 percent of the network is most critical in terms of its exposure to future disaster risks. Meanwhile, road failures can result in very high daily losses of up to US$1.9 million per day, while railway failures can result in losses as high as US$2.6 million per day.

To prepare for the increasing intensity and frequency of extreme hazards due to climate change, it is imperative to make investments to overhaul existing road assets to higher climate-resilient design standards.

Given the vulnerability of land-based transport, a shift to waterborne transport offers a good resilience strategy. A 10-percent shift in that direction could reduce climate risks by 25 percent, according to the report.

This report is a collaborative effort among the Vietnamese Ministry of Transport, the World Bank and Deutsche Gesellschaft für InternationaleZusammenarbeit GmbH (German Development Cooperation GIZ) under the commission by the German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU). It is sponsored by the Australian Government through the Australia-World Bank Group Strategic Partnership in Vietnam – Phase 2 (ABP2) program.

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