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Hezbollah is not just Lebanon problem: Prime Minister Hariri

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Lebanon and its government are not to blame for Hezbollah and its recent attacks on Israeli territory, Lebanon’s prime minister said Tuesday.

Tensions between Lebanon and Israel spiked over the weekend after Shiite militant group Hezbollah fired rockets into Israel from southern Lebanon, an attack the group claims was in retaliation for an Israeli drone strike.

“Look, Hezbollah is not a Lebanese problem — only — it is a regional problem,” Prime Minister Saad Hariri said in a wide-ranging interview with CNBC’s Hadley Gamble. “Israel wants to have … this scenario that Lebanon is responsible, with what Netanyahu says, and if you want to buy it, buy it. But he knows and the international community knows that this is not true.”

Israeli Prime Minister Benjamin Netanyahu in a speech last week warned Hezbollah — and Lebanon — to “be careful what you say and more careful what you do.”

I am a pragmatic person, and I know my limits, and I know the limits of this region.

Saad Hariri

Prime Minister, Lebanon

Hezbollah, which operates as both a political party and paramilitary group and is designated by the U.S. as a terrorist organization, made record gains during Lebanon’s elections in May 2018. It’s widely regarded as the most powerful political group in Lebanon

The United States sanctioned Lebanon’s Jammal Trust Bank last week, saying the bank facilitates Hezbollah’s financial activities and funnels money to the families of suicide bombers. The bank denies those allegations.

Hariri expressed no sympathy for any financial institutions that run afoul of American or European rules, saying such banks “should expect the consequences” of running Hezbollah money.

Israeli soldiers stand guard in the northern Israeli town of Avivim, close to the border with Lebanon, on September 2, 2019. -Israel and Hezbollah exchanged fire along the Lebanese border after a week of rising tensions, sparking fears of an escalation and prompting concern from world powers.

Jack Guez | AFP | Getty Images

“If a bank misuses this trust, we don’t like it, definitely. We try to stop it, I try to stop it,” he said, adding that the U.S. “had to take this action, and I don’t like it and I wish this bank didn’t go through (with) what they did.”

At the same time, Hariri on Tuesday acknowledged limitations in his ability to rein in Hezbollah. The group ignores the official Lebanese policy of staying out of regional conflicts and has been active most notably in Syria in support of Syrian President Bashar Assad.

“I am a pragmatic person, and I know my limits, and I know the limits of this region. If people were serious about this issue, they would have done things 10, 15, 20, 30 years” ago, Hariri told CNBC.

His main focus, he said, is strengthening Lebanon’s institutions such as its central bank and its security forces.

Fighting over the weekend

Israeli Defense Forces (IDF) on Sunday reported that missiles from Hezbollah, which is funded by Iran, hit an IDF military outpost and an ambulance in northern Israel. The Israeli army had braced for an attack after Hezbollah leader Hassan Nasrallah warned the group would make Israel “pay a price” for its alleged drone strike.

The IDF said it responded by shelling Hezbollah positions with artillery and helicopter fire, afterward calling the operation a success.

Despite the cross-border fire, analysts watching the region say there’s little desire for further conflict ⁠— for now.

“Hezbollah has not ruled out further retaliation over Israel’s drone strikes, but [its] appetite for escalation appears limited,” Agathe Demarais, a senior analyst at the Economist Intelligence Unit, told CNBC.

Demarais said Hezbollah has political backing from within senior levels of Lebanon’s government, and therefore “is wary of compromising its recent increase in political popularity by dragging Lebanon into a new war with Israel.”

Netanyahu is unlikely to want escalation ahead of the country’s elections — which he hopes will keep him in office — later this month, Demarais said.

Netanyahu appeared to play down the seriousness of the weekend fighting in brief comments to reporters on Monday, according to Reuters.

The tensions also make things more complex for Hariri, already under strain amid competing political factions and a looming economic crisis.

‘Able to say no one was killed’

Faysal Itani, a senior fellow at the Atlantic Council, sees the latest fighting as more of a face-saving exercise than a genuine provocation.

“For now, everyone is happy. Nasrallah had his party and the Israelis were able to say no one was killed,” he said.

But there is a fundamentally unstable situation at hand when it comes to the broader context, Itani said. That context is increasing joint US-Israeli pressure on both Iran and Hezbollah, imposing mounting costs, like sanctions, unless certain conditions are met — conditions by which neither Iran nor Hezbollah are willing to abide.

“As these costs rise, Hezbollah has to figure out ways to look like it is responding without inviting a war that could devastate it,” Itani said. “Hence attacks like the border operation.”

The last all-out war between the Israel and Hezbollah was in 2006. It left more than 1,200 people dead in the span of a month, the overwhelming majority of whom were Lebanese.

—CNBC’s Emma Graham contributed to this report. Reuters contributed to this report.

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Trump says he’s in no rush to respond to the attacks on Saudi oil facilities

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President Donald Trump said Monday he’s in no rush to respond to a coordinated attack that hit Saudi Arabia’s oil industry over the weekend.

The largest oil processing facility at Abqaiq and the nearby oil field was attacked on Saturday, knocking out 5.7 million barrels of daily crude production or more than 50% of the kingdom’s oil output. The disruption sent Brent oil prices soaring, posting its biggest jump on record.

“It’s certainly looking that way at this point,” Trump responded to a question on whether Iran was responsible for the attacks. “I don’t want war with anybody but we are prepared more than anybody … We have a lot of options but we are not looking at options right now.”

“That was a very large attack and it could be met with an attack many, many times larger very easily by our country, but we are going to find out who definitively did it first,” he added.

Iranian president Hassan Rouhani said Monday the attacks on Aramco were a “reciprocal response” to the aggression against Yemen.

A Saudi-led military coalition said the attack was carried out by “Iranian weapons” and did not originate from Yemen.

The most recent comment from Trump contrasts his attitude expressed on Sunday when he said in a tweet the U.S. is “locked and loaded” after the attacks on Saudi’s oil supply.

Trump also said he was authorizing the release of oil from the Strategic Petroleum Reserve to keep the markets “well-supplied.”

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Oil prices could go higher if there’s a military escalation

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An employee walks past crude oil storage tanks at the Juaymah Tank Farm in Saudi Aramco’s Ras Tanura oil refinery and oil terminal in Ras Tanura, Saudi Arabia, on Monday, Oct. 1, 2018.

Simon Dawson | Bloomberg | Getty Images

The growth of the U.S. as both oil producer and exporter is helping cap a spike in crude prices following attacks on Saudi Arabian oil facilities, but the price could go sharply higher, depending on the duration of the disruption and whether it escalates into a military conflict.

The weekend attack on the Saudi Aramco’s Abqaiq processing facility and another plant knocked 5.7 million barrels of Saudi production off line and underscores a new realization of vulnerability in world oil production. That is 5% of global oil output and about half of Saudi’s production, but Saudi Arabia has sufficient supplies to maintain its current export level for about a month.

Oil prices initially spiked nearly 20% in trading Sunday evening but were up just about 14.5% in U.S. trading Monday, the biggest one-day move since Feburary, 2016. Brent was trading at $68.45 per barrel in late trading.

“What the market is pricing is geopolitical risk premium and tail risk. Something like this has never happened before. There have been attempts but those were foiled,” said Amarpreet Singh, Barclays energy analyst. “Something like this to Saudi supply has absolutely never happened, even during the Gulf War.”

Houthi rebels, aligned with Iran, claimed responsibility for the attack, but Secretary of State Mike Pompeo said Iran was responsible.

Saudi Arabia’s foreign ministry said an investigation into the incident shows Iranian weapons were used in the attack. President Donald Trump presided over a national security meeting at the White House Monday morning on the topic of Iran, NBC News reported from sources.

Trump told reporters Monday afternoon that he was in no rush to respond to the attacks on Saudi oil facilities.

“The more we have coming from Washington and Riyadh implicating the Iranians in this attack, there may be more pressure for Washington to back words with action,” said Helima Croft, head of global commodities research. “This is one of the most strategically important energy facilities in the world. If you do nothing, are you essentially green lighting more attacks. At what point, do you need to show some deterrence?”

Iranian President Hassan Rouhani said, at a press briefing Monday, that the attack was self-defense by Houthis and a retaliatory response for Saudi attacks on Yemen.

The attack on Aramco facilities was highly sophisticated and targeted the critical processing plants that help reduce hyrdrogen sulfur in crude. There have been numerous other attacks on Saudi Arabia, as well as on oil tankers, but none has done such extensive damage.

Analysts at Goldman Sachs said a lengthier outage could result in a sharp jump in crude prices. For instance, if the current level of production remained down for more than six weeks, there could be a quick rally in Brent to $75 per barrel, they said in a note. Brent is the international bench mark and traditionally has been more sensitive to events in the middle east.

Singh said Brent could reach $75 if the outage is extended, and in about three weeks the Saudi oil supplies would begin to run low. “If it takes that long you’ll really start seeing another leg up,” he said.

The Barclays analyst said the market has been responding to the worries of slowing economic activity from the trade war, and he said the market was already heading towards a deficit.

“What’s incremental [for oil prices] is this attack and what’s unknown is how long it’s going to take to restore production. The other unknown is what kind of escalation is going to happen here,” he said.

But oil could go even higher, depending on whether there are further attacks or a military response from Saudi Arabia, the U.S. or others. “If this escalates into a hot war, you’re looking on a $100 oil,” said John Kilduff of Again Capital.

He noted that Saudi Arabia is calling on the United Nations to investigate the attacks.

“You don’t get the sense there’s a rush to war, as spectacular as this attack was,” said Kilduff. 

For now, both U.S. West Texas Intermediate and Brent futures are trading at levels last seen in May, and have broken slightly above a range they were trapped in all summer. WTI futures settled up 14.8% at $62.90 per barrel, its best day since December, 2008.

Croft said Brent could get back to this year’s high of $75.60, and in the event of an escalation, it could reach its October, 2018 high of $86.74 per barrel. “$85 is the new $100,” said Croft. “What’s changed is you now have this resource in the U.S.”

A conflict in the Middle East could have driven oil to $200 a barrel five years ago. “If you add a war to this, maybe you would have $100,” she said.

The pressure is also on Saudi Arabia Crown Prince Mohammed bin Salman to take action. The prince, known as MBS, is in charge of Saudi Arabia’s military and leads the war in Yemen. He also is driving the kingdom’s diversification effort away from oil. The anticipated initial public offering of Aramco is a big part of that effort though some analysts said it may now be delayed.

“If they don’t do anything, they’re going to look really weak,” said Kilduff.

Croft, in an earlier note, said MBS has shown more willingness to confront the Iranians and their proxies than previous Saudi leaders.

“At a minimum, we would expect to see stepped-up Saudi bombings on Houthi targets in Yemen, but one cannot rule out a more direct retaliation on Iran if the attacks continue at the current pace,” she noted.

The U.S. said it would consider tapping its strategic oil reserves to make up for lost supply, but U.S. Energy Secretary Rick Perry said it would be premature to do so at this point.

Analysts have already been expecting the U.S. to add more export capacity. Pipelines to take crude from the Permian basin to the Gulf Coast have just come on line, and more are to follow.

According to Citigroup, the new pipelines could help grow U.S. oil exports from the current 3 million barrels a day by 1 million barrels more by year-end and another million barrels next year. Exports have already grown by an average 970,00 barrels a day this year over last year, according to Citigroup.

The U.S. is currently importing very little Saudi oil, and imports now are about 500,000 barrels a day.

“There’s actually a silver lining, if you will, to this story in the sense that had this happened five year ago, it could have absolutely brought the global economy to its knees. Today, we’re concerned about it. We need to address it, but it’s not anywhere near as devastating as it would have been five years ago,” Energy Secretary Rick Perry told CNBC.

According to Energy Department weekly data, the U.S. produced about 12.4 million barrels a day, and exported about 3.3 million barrels a day earlier this month. The U.S. was a net importer of about 3.4 million barrels of crude.

The U.S. in the past year has become the world’s largest oil producer, ahead of both Saudi Arabia and Russia. OPEC and Russia have had an agreement to reduce production in an attempt to prop up world oil prices, which have been soft on worries about weakening demand growth.

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FAA chief to test out changes to Boeing 737 Max software in simulator

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Stephen Dickson, administrator of Federal Aviation Administration (FAA) nominee, speaks during a Senate Commerce, Science & Transportation confirmation hearing in Washington D.C., May 15, 2019.

Stefani Reynolds | Bloomberg | Getty Images

The new head of the Federal Aviation Administration is planning to test out Boeing‘s software changes to its beleaguered 737 Max planes in a simulator this week, he said Monday.

The 737 Max has been grounded since mid-March after two fatal crashes within five months of one another. Investigators implicated a flight-control software that repeatedly pushed the nose of the planes down in both air disasters.

Stephen Dickson, a pilot and former Delta Air Lines executive, who was sworn in as FAA administrator last month, told CNBC he plans to travel to Seattle this week to test out the changes. Boeing’s 737 Max planes are produced in the Seattle area.

“I’m anxious to get out to Seattle later this week and look into this myself and see where we are with the certification process,” Dickson said. “I can I guarantee you that the airplane will not be flying again until I’m satisfied that it’s the safest thing out there.”

Dickson said the agency does not have a firm timeline for allowing the planes to fly again.

This is breaking news. Check back for updates.

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