Iran’s oil minister warned that Opec is in danger of collapse as some nations seek to undermine their fellow members, an apparent reference to Saudi Arabia’s pledge to fill the supply gap created by US sanctions on Iranian exports.
“Iran is a member of Opec for its interests and any threat from member states won’t go unanswered,” Bijan Namdar Zanganeh said after a meeting with Opec secretary-general Mohammad Barkindo in Tehran on Thursday, according to the oil ministry’s Shana news agency.
His comments come as US President Donald Trump tries to cut the Islamic Republic’s oil exports to zero, backed by a promise from Saudi Arabia and its Gulf allies to increase production to ensure the squeeze doesn’t create a supply shortage.
Those countries boosted production last year as the first round of American sanctions hit Iran, without splitting the Organisation of Petroleum Exporting Countries. This year, however, Iran is under even greater pressure, with fewer options to keep its economy afloat.
Zanganeh had already censured “two neighbouring states” for voicing readiness to fill the gap of Iranian barrels in the market. “I told Mr Barkindo that Opec is in danger by the unilateralism of some members and the organisation faces the risk of collapse,” he said on Thursday, stopping short of naming names.
The lost barrels, along with supply disruptions in Venezuela and elsewhere, have raised the question of whether Opec’s biggest producers have a big enough supply buffer to keep the market in balance. Zanganeh last month accused Saudi Arabia and the United Arab Emirates of exaggerating their surplus oil capacity.
Discord between Opec’s Gulf members has shaken the organisation in the past year. Qatar announced its exit in December after more than five decades of membership after neighbour Saudi Arabia targeted the nation with an unjust economic blockade.
“Qatar’s departure broke the seal. Iran’s would be much more serious, but no longer unthinkable,” said Derek Brower, an analyst at RS Energy Group. “Iran thinks two members are conspiring with the US against it — a good enough reason for Tehran to consider it’s position.”
Opec negotiations in December initially ran into difficulties because of disagreement between the Saudis and Iran, but in the end there was a deal. Yet setting aside Qatar’s departure, the group has held together for almost sixty years despite a range of political quarrels and conflicts, such as the Iran-Iraq war in the 1980s and Saddam Hussein’s invasion of Kuwait the following decade.

Oil major Royal Dutch Shell Plc has asked the UK government for taxpayer subsidies for the development of underground carbon
dioxide storage, the Sunday Times reported. The support for carbon capture and storage projects would be lower than incentives
previously granted to renewable technologies, the paper cited Maarten Wetselaar (pictured), head of integrated gas and new
energies, as saying. Energy Minister Claire Perry announced a £35mn ($45mn) pledge in November to support carbon capture
technologies in the UK, the Sunday Times said last week.

The world’s leading scientists will warn the planet’s life-support systems are approaching a danger zone for humanity when they release the results of the most comprehensive study of life on Earth ever undertaken.

Up to 1m species are at risk of annihilation, many within decades, according to a leaked draft of the global assessment report, which has been compiled over three years by the UN’s leading research body on nature.

The 1,800-page study will show people living today, as well as wildlife and future generations, are at risk unless urgent action is taken to reverse the loss of plants, insects and other creatures on which humanity depends for food, pollination, clean water and a stable climate.

The final wording of the summary for policymakers is being finalised in Paris by a gathering of experts and government representatives before the launch on Monday, but the overall message is already clear, according to Robert Watson, the chair of the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).

“There is no question we are losing biodiversity at a truly unsustainable rate that will affect human wellbeing both for current and future generations,” he said. “We are in trouble if we don’t act, but there are a range of actions that can be taken to protect nature and meet human goals for health and development.”

The authors hope the first global assessment of biodiversity in almost 15 years will push the nature crisis into the global spotlight in the same way climate breakdown has surged up the political agenda since the 1.5C report last year by the UN Intergovernmental Panel on Climate Change.

Like its predecessor, the report is a compilation of reams of academic studies, in this case on subjects ranging from ocean plankton and subterranean bacteria to honey bees and Amazonian botany. Following previous findings on the decimation of wildlife, the overview of the state of the world’s nature is expected to provide evidence that the world is facing a sixth wave of extinction. Unlike the past five, this one is human-driven.

Mike Barrett, WWF’s executive director of conservation and science, said: “All of our ecosystems are in trouble. This is the most comprehensive report on the state of the environment. It irrefutably confirms that nature is in steep decline.”

Barrett said this posed an environmental emergency for humanity, which is threatened by a triple challenge of climate, nature and food production. “There is no time to despair,” he said. “We should be hopeful that we have a window of opportunity to do something about it over these two years.”

The report will sketch out possible future scenarios that will vary depending on the decisions taken by governments, businesses and individuals. The next year and a half is likely to be crucial because world leaders will agree rescue plans for nature and the climate at two big conferences at the end of 2020.

That is when China will host the UN framework convention on biodiversity gathering in Kunming, which will establish new 20-year targets to replace those agreed in Aichi, Japan, in 2010. Soon after, the UN framework convention on climate change will revise Paris agreement commitments at a meeting in either the UK, Italy, Belgium or Turkey.

Watson, a British professor who has headed both of the UN’s leading scientific panels, said the forthcoming report will delve more deeply than anything before into the causes of nature collapse, chief among which is the conversion of forests, wetlands and other wild landscapes into ploughed fields, dam reservoirs and concrete cities. Three-quarters of the world’s land surface has been severely altered, according to the leaked draft. Humanity is also decimating the living systems on which we depend by emitting carbon dioxide and spreading invasive species.

Watson said the authors have learned from attribution science, which has transformed the debate on the climate crisis by showing how much more likely hurricanes, droughts and floods have become as a result of global heating.

The goal is to persuade an audience beyond the usual green NGOs and government departments. “We need to appeal not just to environment ministers, but to those in charge of agriculture, transport and energy because they are the ones responsible for the drivers of biodiversity loss,” he said.

A focus will be to move away from protection of individual species and areas, and to look at systemic drivers of change, including consumption and trade.

The political environment is changing in some countries due to overwhelming scientific evidence and increasing public concern about the twin crises of nature and climate, which have prompted more than 1 million students to strike from school and led to street protests by Extinction Rebellion activists in more than a dozen countries.

The UK parliament declared a climate emergency this week and the government’s chief climate advisory body recommended an accelerated plan to cut carbon emissions to zero by 2050. Until now, however, the nature crisis has been treated as far less of a priority. “Where are the headlines? Where are the emergency meetings?” asked the school strike founder, Greta Thunberg, in a recent tweet on the subject.

Extinction Rebellion activists said protests that blocked several London streets last month were as much aimed at the defence of nature as stabilising the climate. “They are two sides of the same destructive coin,” said Farhana Yamin, a coordinator of the movement who is also an environmental lawyer and formerly a lead author of the IPCC report.

“The work of IPBES is as crucial as the work done by the IPCC on the 1.5-degree report. That is why Extinction Rebellion is demanding an end [to] biodiversity loss and a net-zero phaseout by 2020. We can’t save humanity by only tackling climate change or only caring about biodiversity.”

LONDON: Royal Dutch Shell is moving to sell its stake in Indonesia’s $15 billion Abadi liquefied natural gas (LNG) project, industry and banking sources said, following on from an asset disposal programme that has raised more than $30 billion.

Shell, the world’s largest buyer and seller of LNG, is raising cash to help pay for its $54 billion purchase of BG Group in 2015 and hopes to raise around $1 billion from the sale of its 35 percent stake in the project, the sources said.

Shell’s decision to sell out of the Abadi project in the Masela block, operated by Japanese oil and gas firm Inpex Corp which holds the remaining stake, highlights the difficulty Southeast Asia’s largest economy has in attracting energy investment.

Shell, Inpex and an official with Indonesia’s Energy and Mineral Resources all declined to comment.

Construction was due to start in 2018, but in 2016 was delayed until at least 2020 after Indonesian authorities instructed a switch from an offshore to an onshore facility.

Inpex and Shell are now preparing a new Plan of Development for submission this year, Shell’s annual report revealed.

The project is not expected to be operational until at least 2026, but Inpex has started preliminary front end engineering design for an LNG plant with an annual capacity of 9.5 million tonnes.

Dwi Soetjipto, chairman of Indonesian oil and gas task force SKK Migas, said in March that the government and the operators have not agreed on the cost for the project and the government has not approved the revised development plan.

LNG GROWTH

Shell sees LNG as a central pillar of the world’s transition to lower carbon energy in the coming decades. The super-chilled fuel allows easier transportation of natural gas, the least polluting fossil fuel, but is relatively expensive to develop.

The decision to sell out of Abadi comes weeks after the Anglo-Dutch company decided to exit a major Baltics LNG project led by Russian state gas giant Gazprom.

Shell last year gave the green light for the development of a $31 billion LNG export terminal in Western Canada, known as LNG Canada.

Chief Financial Officer Jessica Uhl said on Thursday that overall Shell was happy with its LNG portfolio and was confident of its ability to grow it in line with the market.

Jeremy Arbid

The years since unrest swept across the Arab world have shown that the response of partial reforms and economic measures were not sufficient. Instead, new social contracts are required to develop economies and human capital, and to emphasize political participation of proactivity over favoritism. This decade has been marked by two shocks, the first being the unrest of populations that led to unrest, revolutions, conflict and civil war in some countries, and the second being the decline of oil prices. Similar to other economies in the region, but not in form, Lebanon’s is rentier because the state largely ignores productive sectors and instead focuses its fiscal and regulatory policymaking to the benefit of the financial and real estate sectors. So while Lebanon’s situation is certainly different from its neighbors in the region its question is the same: now is the time to develop a more peaceful and prosperous society, so what should that look like? Artificial intelligence and the Internet of Things will have a great impact on countries around the world, including Lebanon. However, Lebanon’s current economic model is unfit for the digital era and not agile to adapt to economic innovation and rapid technological change. In the short term, Lebanon will need to invest in the economy by building and rehabilitating infrastructure and it will need to implement a reform agenda. By doing so, a more dynamic economy can be built.

The Current Situation

Lebanon’s economic model is not sustainable. This has been understood for years now but has been allowed to keep operating, even though it has been known that the currency peg to the USD was not designed or engineered for the long term. According to the International Monetary Fund (IMF), public debt was estimated to reach $85 billion in 2018 with GDP expected at $57 billion, for a debt-to-GDP ratio of 150 percent. Meanwhile, economic growth has slowed from 8 percent in 2010 to 0.6 percent in 2017, as measured by the Central Administration of Statistics.

For 2018, the IMF has projected GDP growth at just 1 percent. In the same period, 2010-2017, Lebanon’s spending deficit (including interest payments on debt) averaged $3.6 billion each year according to ministry of finance figures. The economic model relies on internal USD circulation, and depends on the financial and services sectors, tourism, foreign direct investment mainly in the form of real estate, and remittances.

In recent years, not enough dollars have been entering the economy to offset dollars exiting at an increasing rate. From 2000 to 2014, the average annual deficit of the current account – the flows of goods, services, primary income, and secondary income between residents and nonresidents – stood at $5.1 billion each year. By 2015, $9.1 billion more flowed out of Lebanon than in, and that figure has risen sharply since 2015. For 2018, the IMF projects a current account deficit of $14.5 billion, and $15.2 billion in 2019. For the foreseeable future, the lira-to-USD currency peg can be maintained, which the IMF recommends. This is thanks to large reserves held at Banque du Liban, Lebanon’s central bank.

According to the IMF, official reserves – foreign currencies, other assets denominated in foreign currencies, and gold reserve – stood at $36.7 billion in 2015 and rose to $40.2 billion and $40.6 billion in 2016 and 2017, respectively. The IMF calculated official reserves at $36.4 billion in late 2018, and projects reserves to decline to $31.1 billion in 2019. Public bank officials and commercial bankers insist Lebanon is not at risk of a forced devaluation because of the level of foreign currency reserves held by the central bank. The state plans for a course correction With a new government in place Lebanon may now work toward restructuring the economy. The starting point for this was in April 2018 at the CEDRE for infrastructure investment.

In Paris, Lebanon presented donors and investors with a Capital Investment Plan (CIP) to develop the country’s infrastructure and ease supply-side bottlenecks. According to state officials, the CIP was prepared to address specific economic shortcomings: tremendous challenges in public finances, monetary policy that has exhausted all options to maintain stability, low growth rates, high unemployment, increasing levels of poverty, and the balance of payments problem. Lebanon needs 5 percent growth to stabilize the economy and maintain the economic model but has been reluctant to invest in the economy and the country’s infrastructure is worn down because of years of low state investment and overstretched because of the large refugee population plus a growing national population.

To rehabilitate and expand the nation’s infrastructure, the CIP would raise debt and called for an investment need of $20.4 billion, plus land expropriation costs of $2.6 billion for 250 projects that could generate some 178.3 million labor days over three phases each lasting about four years, from now until 2030.

At CEDRE, the CIP pitch was generally well received with donor countries and multilateral institutions pledging $11.3 billion mostly in low-interest loans on the condition that Lebanon commit to reforms. The reforms promised by the state involve fiscal discipline measures – mainly through the reduction of the debt-to-GDP ratio by decreasing the deficit by one percentage point of GDP over the next five years and reducing the subsidy to the failing public electricity utility, Électricité du Liban (EdL), which averaged $1.6 billion per year between 2010 and 2017 according to figures from the ministry of finance, and by shoring up revenue to the treasury by increasing the tax base.2 In February 2019, Lebanon’s Economic and Social Council – an advisory body to the government – issued a report on fiscal measures the state should adopt to address fiscal imbalances, including: elimination of the EdL deficit over the next three years; to reduce the cost of public debt servicing by at least 10 percent through a mechanism that the government, BdL, and commercial banks agree on; and, to reform public sector pension systems and benefits, review public sector personnel and positions, and freeze hiring for the year. To spur economic productivity and enhance the private sector environment international organizations have advised Lebanon adopt an evolving list of structural and sectoral reforms and doing business measures.

The state commissioned management consulting firm McKinsey & Company to draft a vision for growing Lebanon’s current productive sectors and enhance productivity and recommend what sectors Lebanon should focus on in the future. At its core, the vision aims to channel investments to industries and productive sectors that would have a multiplier effect, create jobs, and distribute income and wealth. The elements of the report include repetition of known analysis, assessment of reform needs and priorities, improvements of productive sector performance, and supervision mechanism for achieving deliverables for the productive sectors and projects. Components of this vision require individual assessments. Addressing and adopting the measures promised at CEDRE, advised by McKinsey, and recommended by international organizations will only be a starting point in correcting for nearly 2 decades of inactivity or nondecision making by the state.

However, implementing reforms and thinking toward the future is not so simple for Lebanon. On the one hand, politicians and officials have been repeating since before CEDRE that reforms are necessary and that reforms will be painful to the political elite. If this is so, then maybe we are witnessing an alignment of politics to reality, and the adjustment of culture to support or translate into action takes a long time. On the other hand, Lebanon’s political economy of sectarianism means the political elite are only interested in maintaining the system of clientelism and patronage networks. How these reforms will serve the interests of the elite in this political economic system is unclear. Another problem is that Lebanon’s politicians and officials are thinking where the country needed to be 25 years ago. The challenge is the speed of innovation, and today when a highway or bridge is built it is not guaranteed they will be viable solutions as critical infrastructure. Why? Because of three factors: on the social side of self-reliance of urban environments and the ability of communities to produce what they need could grow exponentially, then the need to trade with neighbors and the paradigm of growth under capitalism may no longer be applicable; if global commerce continues then using non-road based technologies like information transmission to remote locations (such as 3D printers or drone transport) could actually make highways or bridges obsolete. At the current phase Lebanon is still betting on traditional transportation as our viable economic need for 20 or 30 years and beyond when we should have had them 20 or 30 years ago. Another example is the building of power plants with natural gas instead of coal. This fuel source is more efficient and less polluting, but it still exposes Lebanon to fossil fuels and commodity price increases and supply reliability.

However, this might not be the only solution to match electricity supply to need. Lebanon might find decentralized technologies (such as solar photovoltaic) and smaller scale centralized power generation as more efficient and cost productive.

Lebanon is committed to solutions that were conducive in 1999 and therefore there is too much opacity in developing and implementing solutions. There is uncertainty because no one knows what new technologies will come along; there is opacity because we do not know how diligent the CIP and other studies were conducted and whether they are or are not silo-esque; plus, the experts that have been hired to design these visions or plans are definitely not going to tell Lebanon to not buy their products. Beyond correcting the omissions of the last 20-25 years Lebanon must continuously evaluate and prioritize economic and infrastructure needs and pursue solutions aligned with the emerging digital future sure to arrive within the next decades.

Lebanon’s Socioeconomic Situation

Lebanon must be positioned for the digital era in addressing the top socio-economic challenges: that of the lack of gainful employment, rising inequality, and promoting inclusive political participation. The country has grim numbers on unemployment, poverty, income inequality and net worth. The economic bleeding that is visible at the national level in terms of almost a decade of economic stagnation pales in comparison to the situation of individuals. The downturn in Lebanon’s economic output has pushed more people into unemployment or underemployment, increased poverty rates, with income and wealth becoming increasingly concentrated. According to an International Labour Organization (ILO) model, estimates of the total unemployment rate among Lebanese nationals at just under 7 percent in 2018. Unemployment for Lebanese youth is estimated at almost 18 percent. Total labor participation for Lebanese nationals older than 15 (the proportion that is economically active) stood at 47 percent, with the number of people in the labor force above 2.2 million in 2018.

Among the nearly 1 million UNHCR-registered Syrian refugees the ILO in 2017 projected the size of the Syrian labor force in Lebanon at 384,000 and estimated that 36 percent were unemployed.7 McKinsey says Lebanon’s unemployment rate is between 15-25 percent, perhaps the consulting firm is attempting to include the informal labor market as part of its calculation. The first target of the UN Sustainable Development Goals for Lebanon is to reduce the poverty rate to zero by 2030. Lebanon is far from achieving this goal, though the available statistics are very outdated. 2008 poverty stats from a Ministry of Social Affairs and UNDP joint study showed back then that “28 per cent of the Lebanese population can be considered poor and eight per cent can be considered extremely poor”. That means that some 1 million individuals in 2008 were living on $4 per day and another 300,000 were living on less than $2.4 per day. According to a Ministry of Finance/UNDP study from 2017, income inequality in Lebanon is very high. The study analyzed tax declarations from 369,279 taxpayers who had a cumulative income of $5.5 billion, and an average yearly income of $14,846: “the top 2 percent income group accounts for a 17 percent share of total income, while the bottom 59 percent accounts for a 22 percent share”.

Wealth in Lebanon is also unequal, according to investment bank Credit Suisse. The net worth per adult was estimated to $33,726 in 2018.10 But a breakdown shows how little the majority of the population actually owns: 77% of Lebanese adults have a net wealth below $10,000.11 On the bright side, according to the World Bank, human capital constitutes the leading amount of wealth for Lebanon.12 However, estimations and projections about the size and composition of the Lebanese labor market entail much that remains uncertain as far as data accuracy. Likewise, labor policy as well as estimations of future Lebanese labor realities, needs, and opportunities in context of the rapidly evolving global digitization of work, or digital transformation of economies, leaves much to be desired. This makes it crucial to develop our human capital and preparedness for labor uncertainties of coming decades.

Addressing Current Challenges to Join the Digital Era

1. To create employment

Determinants of current and future labor markets and historically important processes such as labor unionization, collective bargaining, regulation of admission to specific labor markets, evolution of social insurance in reflection of social and human conditions (such as increasing longevity) in the past and predictable future over the lifetimes of current workforces are in need of new assessment before embarking on development of a new national labor policy. New policy, however, has to be devised and function as a cornerstone for a sustainable future of Lebanese labor if one takes into account that much of the regulatory framework governing Lebanon’s labor-related social insurance system date back to the early days of the Republic, while the framework for the social security fund and other retirement benefits date to the 1960s, and thus, by the very logic of the importance of labor in human societies, are inadequate for managing today’s radically different and rapidly changing role of human capital in our society.

To project unemployment we must know how many people reside in Lebanon. The World Bank estimated Lebanon’s population at just over 6 million in 2017, counting citizens, refugees and others residing in country,13 but Lebanon must conduct its first population census since 1932.

Job creation in the near term is important, but the concern is that Lebanon’s labor market will continue to be one where there is not much to apply to. The World Bank announced in 2018 $400 million to create up to 52,000 jobs for Lebanese over the next 15 years.14 Lebanon will need to create more – not just 370,000 “incremental jobs” in the agriculture or construction sectors by 2025, as McKinsey recommends,15 but high-quality jobs in the digital economy because as automation rises robots can take the place of lower-cost labor. However, if Lebanon manages
to be an early adopter of digital business structures among other global communities of similar size and capacity, it could become a potent supplier and competitor of high native human capital and high native marketing potential, and the trade heritage of Lebanon could be translated into an economic force for the country. Another question for the future is how to define fair profit and to control for excesses of inequality. Lebanon is not alone in the necessity to remove economic distortion in the sense of injustice, where today a huge amount of labor goes into unpaid or undervalued work (historically mostly from women), and to work that cannot or may not be desirable to automate in the future (e.g. child rearing or geriatric care). However, society would have to approve the value of “volunteer” labor and current economic paradigms do not have formulas to recognize this.

2. To relieve pressure of despondency and object poverty

To alleviate extreme poverty in the near term, Lebanon’s National Poverty Targeting Program (NPTP) must be enhanced and broadened to support more qualifying beneficiaries. NPTP provides support to households living in extreme poverty through a humanitarian asset transfer to eligible recipients in the form of $27 in cash/cash equivalent per household member per month and is partly funded by the World Bank, while the state must include funding to widen the program in the next state budget.

Combating inequality is secondary to the increasing or broadening of social and economic mobility. Lebanon has had provisions of social subsidies but has spent a lot of effort deciding on who gets them, and, unfortunately, has had a lot of experience with political clientelism.

Despite implementation challenges, Lebanon can stimulate economic mobility and redistribute wealth into broader social safety nets through such ideas as universal basic income (UBI), universal basic health (UBH), the expansion of basic provision for education and higher education and guarantees of survivability in times of difficulty. Whichever way this is done should not be discretionary or based on eligibility but universal and without a component of assessment on worthiness of aid.

According to the World Health Organization, Lebanon spent nearly 8 percent of GDP on healthcare in 2016.17 The moral hazard of UBH when the state guarantees payments is that there is no incentive by companies to control pricing, but the state can promise to pay for wellness programs and preventative care plus basic healthcare so that higher costing medical care is less common. Inflation drivers of healthcare are not in the payment for healthcare workers, and the number of workers in Lebanon and their cost is not high when compared to the cost of imported medicines and imported technologies.

3. To minimize the excesses of inequality by redistributive measures and promote inclusive political participation

Before Lebanon can do any forward thinking, it must implement the reform promises of the new government and made at CEDRE and implement the performance enhancements compiled by McKinsey and international organizations. This is a starting point in correcting for almost 2 decades of inactivity or non-decision making by the state and implementing reforms will be a first step in reducing public debt.

The priority is to have accountability of public finance from the past and moving forward, to have public and transparent discussions over fiscal and taxation policy to prioritize stimulation of the economy and improve the internal distribution of wealth, and to have an annual budget and audit in line with the Constitution and public finance rules.19 To begin, the state must fully collect taxes that are already on the books by increasing tax compliance, and it must implement measures from the 2017 tax bill such as leveling fines on built-up property on state or public lands. According to the IMF, tax collection stood at only 50 percent of capacity in 2013.20 Along with shoring up spending and revenue collection comes the need to reduce waste.

Everyone assumes corruption in Lebanon is a serious problem, but the Court of Accounts first needs to measure the problem and Parliament needs to decide what to do with the findings. The state has not conducted an audit of public accounts since at least 2003, and in reconstituting accounts from the 1990s and the 12-year period where there was no state budget, the ministry of finance has said “enormous anomalies” were found.21 So if the state’s objective is to spend and collect to meet the people’s needs then there must be confidence that taxpayers are not being swindled.

Rather than proposing any sort of administrative decentralization, electoral redistricting, or changes to the political structure, Lebanon must exercise better management of public finances to foster political inclusiveness in two ways: first, to promote ownership by the taxpayer of state decision making; and second, to minimize the power of international markets through the instrument of debt which can be greater than the voting power of citizens.

So that Lebanon can create a situation for a consistent and sustainable economy in the digital era, it must heed the recent advice that the head of the IMF, Christine Lagarde, directed to the Arab world: “We need fiscal space for spending on health, education, social protection, and public investment.”22 Lebanon’s fiscal policy, therefore, must be focused on meeting people’s needs and enhancing the connection between fiscal policy and social safety for a higher certainty of entitlement as a taxpayer, and increasing a sense of justice and mutuality between tax contributions and long-term social benefits.

Recommendations

Lebanon must position itself for the digital era by building a sustainable economy for a more peaceful and prosperous society. This requires job creation in the near term by committing the reform promises made at CEDRE to unlock promises of donor financing for the CIP. Long term planning should consider the predictable future demands of the labor market, the reduction of inequality through job creation, increased economic mobility, the designation of social safety nets, and the redistribution of taxation. To promote ownership of state decision making, and to enhance inclusivity in the political process, Lebanon must commit to sound management of the state treasury and accountability of past public finances.

Labor market and job creation

● Review the mandate of Lebanon’s National Employment Office (NEO) to boost labor participation and reduce unemployment.

● Match available labor demand with projects in the CIP for work opportunities in the near term.

● Before embarking on the creation of a new national labor policy for the digital era, Lebanon must fully assess past and present labor market conditions and workforces by setting a statistical foundation, in the form of a population census and other statistical surveys. This would require auxiliary actions such as empowering the nation’s public statistics body.

● Draft and adopt a new labor policy for the digital era by addressing such areas as: labor unionization; collective bargaining; regulation of admission to specific labor markets; health, safety and laborers’ rights; and social insurance.

Social insurance and equality

● Develop and implement a poverty reduction strategy.

● Widen the reach of the National Poverty Targeting Program (NPTP) for those living in extreme poverty, and devise and enact viable safety net programs including direct payments for those below the poverty line. Allocate state funding for the NPTP and new programs.

● Review and update legal and regulatory frameworks of social insurance systems and safety nets.

● Review and consolidate current social insurance systems. Create new social safety nets with universal access to stimulate economic mobility and redistribute wealth.

Promoting political inclusivity

● Review and adopt fiscal and state reforms and business enhancement measures promised at CEDRE, documented by McKinsey, and presented by the Economic and Social Council to reduce public spending and stimulate economic productivity.

● Implement a monitoring mechanism to oversee the deployment of CEDRE donor funds to CIP projects, and which contributes to the continuous evaluation and prioritization of economic and infrastructure needs.

● Increase tax compliance and fully collect taxes and fees already on the books to shore up state revenue. Review and commit to public discussions of taxation policies before any revision of the tax code.

● With an international auditor, audit finances from past years as per the 2005 budget law.

● Commit to an annual budget as per the Constitution and public accounting rules.

● Draft and align medium- and long-term fiscal policies to meet people’s needs and enhance the connection with social safety and increase a sense of justice and mutuality between tax and fee contributions and public spending

Cyprus calls on the Turkish drill ship “Fatih” and supporting vessels to immediately cease illegal actions in the country’s exclusive economic zone and warns with a message through Radio Cyprus that individuals and companies supporting illegal actions will face all consequences, including an international arrest warrant.

CNA obtained a copy of the message of Radio Cyprus to “Fatih” and supporting vessels, which reads as follows:

“You are conducting illegal operations in the exclusive economic zone and the continental shelf of the Republic of Cyprus. Your actions are violating the international law and maritime safety procedures and you are committing serious criminal offences under the laws of the Republic of Cyprus.

(CNA)

Laura Codruța Kövesi, the highly effective former head of Romania’s anti-corruption office and a candidate to fill a similar role at the EU level, is now the subject of a smear campaign and trumped-up criminal charges. Her case is a perfect example of why Europe needs stronger mechanisms to uphold its values.

RUSSELS – As the head of Romania’s National Anti-Corruption Directorate (DNA) between 2013 and 2018, Laura Codruța Kövesi presided over hundreds of high-profile convictions and became a darling of the international transparency movement. In a country struggling to build an honest justice system following its 2007 accession to the European Union, she stood out as a dogged advocate for the rule of law.

In July 2018, Kövesi was forced out of the DNA by Romania’s justice minister, Tudorel Toader, at the behest of Social Democratic Party (PSD) leader Liviu Dragnea, whom the DNA convicted in 2015 on charges of campaign fraud. She is now the European Parliament-endorsed candidate to lead the new European Public Prosecutor’s Office (EPPO), and yet Dragnea is doing everything he can to discredit her.

Though Dragnea is barred from holding office, his party leads Romania’s coalition government, and a PSD-run watchdog agency has indicted Kövesi on trumped-up corruption charges to prevent her from traveling outside Romania. Dragnea’s cronies claim that Kövesi has exceeded her authority, which is another way of saying that she has been too effective in pursuing corruption in the Romanian political class.

Kövesi’s ouster from the DNA outraged the Romanian public, and 100,000 signed a petition calling for her to be reinstated. Since her departure, the DNA appears to have ceased functioning, and Romania’s international standing has suffered for it. Despite Kövesi’s best efforts, Romania already ranked among the most corrupt EU member states in Transparency International’s 2017 Corruption Perceptions Index (after Bulgaria and Hungary). And now, the situation is worsening. Spurning warnings from the Council of Europe’s Venice Commission, more than 180 Romanian lawmakers have backed legislation that would protect politicians from corruption charges.

Romania’s future as a prosperous liberal democracy now lies with its people. One hopes that the rule of law will be reinstated, and that the country will return to the path of reform. But that can happen only if Romanian citizens support those standing against corruption and nepotism.

The response from the rest of the EU, first and foremost, should be to join the European Parliament in supporting Kövesi’s candidacy to lead the EPPO, which will be launched by the end of 2020. As matters stand, the European Council, whose revolving presidency is currently held by Romania, has backed another candidate. Beyond that, the European Commission must do more than merely criticize the PSD-led government’s backsliding on the rule of law. Real pressure must be brought to bear on the Romanian authorities.

After the European Parliament elections later this month, a new Commission will be formed under the leadership of a new president. One of its top priorities should be to develop a binding pact committing all EU member states and institutions to protect democracy, the rule of law, and fundamental rights.

As the past few years have shown, the EU needs more credible and effective instruments for scrutinizing breaches of its core values and holding violators to account. All of the main EU party groupings have already committed to pursuing a new arrangement for enforcing the principles enshrined in the bloc’s founding treaties. Following the elections, European citizens must keep the pressure on their elected representatives to ensure that they follow through.

Moreover, the European Council and Parliament should adopt legislation allowing for the suspension of EU subsidies to member-state governments that flout the bloc’s rules and standards. Governments that systematically undermine the rule of law and the free press should not be benefiting from cohesion funds that are intended for precisely the opposite purpose.

This is a critical moment for the EU. Donald Trump’s presidency in the United States, the chaos of Brexit in the United Kingdom, and the rise of populism across Western democracies have provided political cover for unscrupulous politicians to undercut the principles of liberal democracy. But the bill for the fanciful promises made by Europe’s so-called illiberal democrats is now coming due.

Liberal democrats have an opportunity to reverse the damage populists have wrought, but they must act fast and assertively. Pro-Europeans are too often pigeonholed as proponents of the status quo. This must change. With politicians who disdain democratic principles and the rights of their citizens coming under increasing scrutiny, liberal democrats must make it known that they are offering effective new instruments for ensuring accountability. The EU’s new anti-corruption czar is just such an instrument, and Kövesi seems certain to make the EPPO a vigorous and dynamic champion of justice.

The EU was once regarded as a bastion of hope for those living under tyranny, despotism, and kleptocracy. It is time to reclaim that mantle. Kövesi’s courageous and highly effective career fighting corruption in Romania has shown what one person, empowered by law, can accomplish. The EU must embrace her and everything she stands for. The fight against corruption in Romania and elsewhere is a battle for Europe’s soul.

The European Union’s Stability and Growth Pact, which sets fiscal rules for its member states, is like the emperor’s new clothes. Almost everyone sees it has none, yet few admit it openly. This disingenuous silence is bad economics and bad politics.
For starters, the pact’s rules are so hopelessly complex that almost no government minister, let alone member of parliament, can decipher them. There are now various reform proposals that aim to simplify things, including by a group of French and German economists to which I belong.
Most of these proposals would place less emphasis on estimating member states’ cyclically-adjusted budget deficits – a notoriously difficult calculation – and focus instead on monitoring growth in public spending. Concretely, each government would commit to expenditures consistent with the country’s economic growth outlook and expected tax receipts, and in line with a medium-term debt target. There would be less micromanagement by EU institutions, more room for national decision-making, and more responsibility for individual governments.
Ministers have so far shown no appetite for such radical reform. But there is now a second reason to overhaul the EU’s fiscal framework: today’s economic conditions are very different from those when the pact was designed over two decades ago. “When facts change, I change my mind,” John Maynard Keynes famously said. And the facts have certainly changed.
The pact entered into force in 1997. At the time, the median public debt among the 11 EU countries that would initially adopt the euro was 60% of GDP, while the forecast was 3% growth and 2% inflation. The risk-free long-term interest rate – at which most eurozone countries would soon borrow – was 5%. Stabilising the debt ratio at its prevailing 60% level therefore required governments to keep their budget deficits below 3% of GDP – or, put another way, to maintain a primary budget balance (revenues minus spending, excluding interest payments) of zero.
Such guidelines made sense. If growth faltered, revenue shrank, or markets started pricing in a default, there would be a real risk of debt spiralling out of control – as Europe’s sovereign-debt crisis of 2010-2012 later showed. The 3%-of-GDP deficit threshold that triggers the activation of a stronger policy monitoring procedure was thus a rough but reasonably calibrated benchmark. Moreover, it was wise to aim for significantly lower deficits, in order to maintain a safety margin.
In 2019, the median debt for the same 11 countries is 70% of GDP, while the International Monetary Fund currently forecasts 1.5% growth and 2% inflation (debt is a bit lower and growth a bit higher if all eurozone members are included). True, projected growth is half the level it was in 1997. Nonetheless, stabilising the debt ratio requires keeping budget deficits below 2.5% of GDP, which remains close to the pact’s 3% limit.
The big change from two decades ago, however, is the collapse in interest rates. Investors were recently willing to buy ten-year German government bonds yielding essentially nothing. Taking inflation into account, the real cost of German debt is significantly negative – as it is, to a lesser degree, for France, Spain, and most other eurozone members. Even Italy, with debt exceeding 130% of GDP and dismal growth, was able to borrow at 2.6%, or 2.4 percentage points less than Germany in 1997.
Under such conditions, a budget-deficit limit of 3% of GDP is, in fact, fairly lax. If long-term interest rates remain near zero for a few more years, governments will be able to run primary deficits greater than 2% of GDP without exceeding that limit. Many EU countries are likely to use this opportunity to finance current spending on the cheap. But should financial conditions change abruptly, they will be forced to adjust precipitously.
The European Commission insists that the 3% threshold is only an upper limit. Reforms to the pact in 2011 have tightened the screws. Eurozone countries are expected to keep their structural budget deficit (corrected for cyclical effects) close to zero, and those with a debt ratio exceeding 60% of GDP are mandated to reduce it.
However, the resulting constraints are too tight. The zero target for the structural deficit prevents governments from borrowing at today’s negative real interest rates to finance investments and reforms. And, as Olivier Blanchard of the Peterson Institute has forcefully argued, there is no compelling economic reason to cut debt when borrowing is costless.
The EU sits between a rock and a hard place. It should not let member states make a habit of financing recurring current expenditures with debt. But nor should it prevent them from taking advantage of persistently low interest rates to finance economically sound investments that will benefit future generations.
Europe should therefore reform its fiscal framework. Deficit hawks (especially in Germany) will no doubt protest, but prohibition without a rationale is politically unsustainable. Why wouldn’t EU citizens accept channelling debt-financed public investments into environmental research, renewable energy, clean transportation systems, and other efforts to contain climate change, when financial conditions would make such investments collectively profitable? Longstanding criticism of the pact for neglecting the distinction between investment and current spending is valid, to the extent that investment is defined economically rather than in accounting terms.
The EU should therefore agree on a set of goals – such as the transition to a low-carbon economy, broader access to employment, and output-enhancing economic reforms – that justify public spending temporarily in excess of the fiscal rule (unless, of course, the country is in a financially precarious state). Such an exemption should be conditional on long-term interest rates remaining exceptionally low. If rates were to rise, governments would have to trim and eventually discontinue these investments.
The need to revise the EU’s fiscal rules is clear. The main political parties competing in May’s European Parliament elections should recognise it and make the case openly. At a time when the EU’s very purpose is being questioned, economics taboos are the last thing Europe needs. – Project Syndicate
l Jean Pisani-Ferry, a professor at the Hertie School of Governance (Berlin) and Sciences Po (Paris), holds the Tommaso Padoa-Schioppa chair at the European University Institute and is a senior fellow at Bruegel, a Brussels-based think tank.

Britain’s appetite for natural gas usually declines in the summer, but this season is different with a record number of LNG tankers due to land this month.

The incoming cargoes show no sign of slowing, and will keep the pressure on benchmark prices already trading below their five-year seasonal average. That’s good news for factories and households as Brexit clouds the nation’s economic outlook.

“We can expect a significant pressure on prices this summer,” said Murray Douglas, a research director for European gas at Wood Mackenzie Ltd. “The global LNG market is strong, we will still have a lots of LNG turning from the Asian to the European markets and we still see lots of LNG deals” and approvals for new projects.

Cargoes are heading to the U.K. and other northwest European nations because thanks to the extensive infrastructure and traded hubs they can absorb any global surplus as well as handle a growing worldwide production boom. Britain is still taking imports of the super-chilled commodity even after its gas export pipeline shut for repairs this month.

LNG prices in Asia, the biggest consumer of the fuel, have also been too low to spur traders to ship cargoes east. Cooler weather is also supporting demand in the U.K.

While Asian LNG spot prices have regained their traditional premium over European hubs, Atlantic basin suppliers such as the U.S. and west Africa are still sending most of their cargoes to Europe, their nearest liquid market. Longer term, more plants are due to start producing LNG and a number of projects from Mozambique to Russia are nearing investment decisions this year.

U.S. President Donald Trump may use Europe’s increased appetite for LNG to promote his country’s fuel in the region when he visits the U.K. in June, according to Leslie Palti-Guzman, president and founder of consultant GasVista LLC in New York. In addition, the European Union and the U.S. will hold a forum in Brussels on May 2 to discuss bringing natural gas originated from shale fields in the U.S. to nations from Germany to Greece.

U.K. shipments are mainly sourced from the biggest exporter Qatar, as well as countries such as Nigeria and Norway, but the U.S. is becoming a bigger supplier. Britain is now among the top-10 importers of American LNG this year.

“This surge in U.K.-U.S. trade flow will bode well with the June visit of President Trump to the U.K., who has repeatedly used U.S. LNG as a tool in trade negotiations,” Palti-Guzman said by email. “The U.K. will be able to trumpet the increase in U.S. LNG imports to reinforce its trade relationship with the U.S., especially post-Brexit.”

Since March, Norway has reduced its overall gas shipments by about 16 percent for pipeline maintenance, cutting flows into the U.K.’s key Easington terminal by more than 80 percent. Meanwhile, the main U.K. export route, the Interconnector pipeline between England and Belgium, closed for repairs last weekend until May 1, cutting off a key transit route for flows into mainland Europe.

“April looks like being a record high import month for LNG into the U.K., and the Interconnector being offline means the U.K. market has no way of shipping gas back to the continent via pipeline,” said Alun Davies, director of Europe power and gas at IHS Markit.

— With assistance by Kevin Varley

Energy giant BP boosted its pre-tax earnings in the first three months of 2019, which it said showed “resilience” in a “volatile period”.

Pre-tax profits were £3.6bn, more than double that of the previous quarter at £1.7bn and higher the same period last year at £3bn.

However, the firm said its underlying replacement cost profits were £1.7bn, down from £1.9bn from the same period last year reflecting weaker oil prices and margin environment at the start of the quarter.

Capital expenditure was significantly lower compared to Q4 last year, which included £1.3bn as part of an asset swap agreement for ConocoPhillips’ 16.5% stake in the Clair field in the West of Shetland in December.

Upstream production was two percent higher than the previous year at 2.6billion barrels of oil equivalent per day, thanks to the acquisition of BHP Billiton’s assets.

Revenues were £52.1bn, down slightly from £53.4bn in Q1 2018.

BP said it was hit by the weaker oil price at the start of the quarter which has since recovered to around $70 a barrel.

The firm also made £463m in payments for the 2010 oil spill in the Gulf of Mexico this quarter.

One of the key events for the firm in the period was the final investment decision being taken on the Seagull development in the Central North Sea, as well at Atlantis Phase 3 in the Gulf of Mexico and Azeri Central East in Azerbaijan.

Chief executive Bob Dudley said: “BP’s performance this quarter demonstrates the strength of our strategy.

“With solid Upstream and Downstream delivery and strong trading results, we produced resilient earnings and cash flow through a volatile period that began with weak market conditions and included significant turnarounds.

“Moving through the year, we will keep our focus on disciplined growth, with efficient project execution and safe and reliable operations.”