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China’s economic slowdown and heavy debt load is affecting everybody in the country – even it’s “jewelry queen”, Zhou Xiaoguang, according to the Wall Street Journal.

Zhou, who went from selling trinkets on city streets to taking a seat in China’s parliament and becoming Ernst & Young‘s “Entrepreneur of the Year” was faced with the reality of being unable to pay her company’s billions of dollars in debt while in a bankruptcy court in April.

She is just one example of a massive debt burden taking its toll on China.

China has relied on borrowing to fuel its expansion for at least a generation. In 2018, the country was known for creating four billionaires a week and is number one globally in self-made fortunes. But this quick pace of growth, with many borrowing heavily in the process, also masked companies’ strategic mistakes.

Fueled by debt, many over-expanded into crowded sectors and now those mal-investments and mis-allocations of resources are coming back to bite them.

Over the past decade, the overall debt of the country has quadrupled to about three times the value of last year’s national output. Corporate debt makes up 2/3 of the total, amounting to more than $26 trillion last year. Most of the money is owed by government-run companies, but the stress is starting to surface also at private companies, who have less wiggle room with creditors and less support from the government.

For instance, Chenxi Group was decimated by lenders last year when they suddenly decide to call in loans. Earlier that year, the founder of machine maker Zhejiang Jindun Group committed suicide, leaping to his death, leaving the company to later reveal that it owed about $1.4 billion to loan sharks.

This year, Dong Wenbiao’s jet-maintenance to elder-care conglomerate, China Minsheng Investment Group, missed debt payments several times by days or weeks before making good on its obligations. In other words, the cracks in the surface of starting to show.

Joseph P.H. Fan, a professor of finance and accounting at Chinese University of Hong Kong said:

“Many Chinese entrepreneurs tend to borrow as much as possible, even if the core business doesn’t need it.”

Fan called Zhou’s company, Neoglory, a “textbook example” of the country’s misallocation of financial resources.

Neoglory fueled its evolution into a conglomerate through borrowings that ballooned to $6.8 billion even though cash was tight and profits were weak. The company took on new risks to borrow as it progressed, including tighter covenants and shorter payback schedules. When the company defaulted on a bond payment in mid September, its troubles became very evident.

Zhou commented:

 “Though winter may be tough to live through, it’s a good time to do introspection.”

Chinese courts have now ordered Zhou’s assets frozen. 

Starting in 2017, Beijing started to dial back an excess of lending by the financial sector – this became a deleveraging that caused shortages at many private companies. This crunch exposed egregious fundamental problems. At the same time, China’s broader economy was losing momentum. Its expansion maxed out at 10.6% in 2010 and now economists are hardly optimistic that the government’s bottom line 6% target will be achieved this year.

The country desperately needs companies that might lead China to a new stage of development that’s less dependent on construction and exports. The debt load is making it difficult for business owners to reinvest in the economy and the trade dispute with the United States continues to wear away at the country’s confidence.

And the cracks continue to show: last month, a government takeover of Baoshang Bank, sparked problems for other small banks and headaches for customers. It was the first bank takeover by regulators in decades and caused near panic.

The corporate bond market is a small part of the puzzle but is relatively transparent compared to lending. Chinese companies last year had $1.72 trillion in debt securities outstanding, which was the second highest after American companies, who carry $5.81 trillion.

Economists say the acceleration of the borrowing is worrisome. This acceleration has often proceeded recessions in other countries, and happened right before the 2008 crisis. Corporate bond demand weakened in 2018 and Beijing has now reversed its stance on lending and is encouraging banks to lend more. 

More than 18,000 companies filed bankruptcy petitions in Chinese courts last year, which is about twice as many as the previous year. Bankruptcy had previously been a rare action to take in China. Bond defaults also hit record numbers last year at 125, which was five times the number in 2015. Defaults are running at an even faster pace in 2019 so far.

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A few weeks ago we reported that around $1 billion worth of cocaine (15,500 kilos) was seized from a container ship at a Philadelphia port after having stopped in Colombia, Chile, Peru, Panama and the Bahamas (subsequently it turned out that it was a record $1.3 billion, or 18,000 kilos worth). 

Today we learn that the vessel, the MSC Gayane, is owned by JP Morgan, and has been seized by US authorities according to the Wall Street Journal.  The Gayane is the world’s second-largest container ship – operated by Switzerland-based Mediterranean Shipping Co, MSC. 

“A seizure of a vessel this massive is complicated and unprecedented—but it is appropriate because the circumstances here are also unprecedented,” said US Attorney William McSwain in a statement. “When a vessel brings such an outrageous amount of deadly drugs into Philadelphia waters, my office will pursue the most severe consequences possible against all involved parties in order to protect our district—and our country.” 

The Gayane was raided on June 17 by U.S. Customs and Border Protection agents who found about 20 tons of cocaine with a street value of $1.3 billion stashed in several containers. The ship had sailed from Freeport in the Bahamas and before that it called in Panama and Peru after starting its voyage in Chile. It was due to sail on to Europe after the U.S. stop.

“MSC remains grateful to the government officials in the U.S. for their proactive work and has offered its continued support, building on a longstanding track record of good cooperation with the authorities,” an MSC spokesman said in a statement. “MSC is assisting and cooperating with the authorities as required and the company is not the target of any investigation.” –Wall Street Journal

The $90 million ship that can carry around 10,000 containers remains anchored at the Delaware River near the Philadelphia port, and will stay there for quite some time according to the Journal. 

Eight crew members from Samoa and Serbia were arrested, while many others have been charged in the scheme according to those interviewed. The ship’s second officer and another crew member were also charged, and have been accused of helping to bring the contraband aboard. 

In February, Customs agents also seized 1.6 tons of cocaine on another MSC vessel, the Carlotta, upon entry into the Port of Newark, NJ. 

As a result of the two busts, MSC’s Customs-Trade Partnership certification has been temporarily suspended, meaning that the company’s cargo will be subject to enhanced scrutiny and can no longer be classified as “low risk.” MSC says it expects minimal disruption from the suspension. 

“Historically, ships involved in criminal activity are older and beaten up,” said Basil Karatzas, CEO of New-York-based Karatzas Marine Advisors & Co. “It is strange that such a modern and expensive vessel is involved in such a blatantly criminal case, like moving 20 tons of cocaine.” 

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The Trump administration was denied a request to swap out its legal team handling a lawsuit which blocked the US from adding a citizenship question to the 2020 census, according to Bloomberg. 

The request was deemed “patently deficient” by US District Judge Jesse Furman, who added that the US Government had provided “no reasons, let alone ’satisfactory reasons,’ for the substitution of counsel.”

The Trump administration has been scrambling to add the citizenship question back onto the census after it was removed by the Obama administration for the first time in US history, however their efforts were hobbled last week by the Supreme Court after Chief Justice John Roberts joined the liberal justices in a 5-4 ruling in the Dept. of Commerce v. New York. 

The Trump administration initially accepted the Supreme Court’s ruling and said it had begun printing forms without the question. But in a tweet, Trump subsequently ordered the government to re-examine the issue, prompting the Justice Department to seek alternative ways to proceed.

The Trump administration hasn’t detailed why it sought to replace the U.S. lawyers handling the lawsuit. The Washington Post, citing a person familiar with the matter, said that some of the original lawyers on the case had concerns about the way the government was handling it. –Bloomberg

According to Judge Furman, the Justice Department’s “mere expectation that withdrawal of current counsel will not cause any disruption is not good enough.” 

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Class 8 heavy duty truck orders were down for the eighth month in a row, falling a stunning 70% in June to 13,000 units, according to FTR data. The figure was up 20% sequentially, but still follows a 71% decimation in May. Jefferies’ Stephen Volkmann wrote in a note that the figures indicate a SAAR of ~178,000 Class 8 trucks and noted that the sequential growth compares to a sequential drop of 27% in May, when SAAR estimates were 139,000 units. 

Kenny Vieth, ACT’s President and Senior Analyst said: “Fraying freight market and rate conditions along with a still-large Class 8 order backlog contributed to the worst NA Class 8 net order performance since July of 2016. May saw NA Class 8 orders fall below the 15,900 units averaged through the year’s first trimester, and year-to-date Class 8 net orders have contracted 64% compared to the first five months of 2018.”

The industry has been dealing with bloated backlogs as a result of aggressive ordering in 2018, coupled with headwinds from the ongoing trade war and the onset of a recession. 

The good – and bad – news is that the backlog is starting to decline, and is expected to continue eroding until late summer. However, there is still downside risk for the industry in 2020 as a result of a slowing manufacturing, coupled with recessionary caveats.

On the medium duty market, Vieth commented: “While the US manufacturing/freight economy has been droopy since late 2018, the medium-duty market continues to benefit from the underlying strength in the consumer economy. In May, NA Classes 5-7 net orders were 19,300 units, down 21% year-over-year and 19% from April. One has to look back 22 months to find a weaker medium-duty order month on an actual basis or just 2 months when looking at the data on a seasonally adjusted basis.”

And according to a note by JP Morgan, forward looking indicators are still mixed:

According to our analysis, the New Orders component of the ISM Manufacturing Index tends to be the best leading indicator of future freight trends and truck demand. Specifically, the year-over-year change in New Orders has historically led the year-over-year change in the Cass Freight Index (our preferred broad-based indicator of freight trends) by 6-9 months. The ISM New Orders index was 50.0 in June, down 20.6% YoY. The Cass Freight Index was down 6.0% YoY in May (the latest month available). We note though that the Cass Freight Index includes rail freight and may be less of an indicator of overall freight, so we also look at the ATA Total Loads SA Index, which increased 0.8% YoY to 108.6 in May (vs. up 4.4% YoY in April). Additionally, the Cass Truckload Linehaul Index (which measures the changes in linehaul rates) was up 1.2% YoY in May.

Last month, order data from ACT Research showed that the industry booked just 10,800 units in May, down 27% sequentially, but also lower by a staggering 70% year-over-year. YTD orders are down 64% compared to the first five months of 2018.

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Authored by Simon Watkins via OilPrice.com,

Last week saw Japan’s Mitsui and Japan Oil, Gas and Metals National Corporation agree to buy a 10% stake in Novatek’s Arctic LNG (liquefied natural gas) 2 project for an officially undisclosed price, although Russia’s President Vladimir Putin independently stated that the investment would be around US$3 billion. The fact that Putin himself commented on the deal underlines how important the exploration and development of the Arctic region is for the Russian state as a source of potentially vast new oil and gas resources and the accretion of further geopolitical influence, akin to the game-changing shale industry for the U.S..

Russia’s current development of the Arctic region is centred around the Yamal Peninsula and led principally Novatek but further developments are in the offing from Gazprom and Gazprom Neft, even in the face of current and future U.S. sanctions.

Novatek’s main Arctic project, the Yamal LNG (unofficially referred to as ‘Arctic 1’) last week announced that it produced 9.0 million tons of LNG and 0.6 million tons of stable gas condensate in the first half of this year, with all three LNG trains running above the 5.5 million tons per annum (mtpa) nameplate capacity over that period. This resulted in 126 LNG tanker shipments being dispatched in the six month period via trans-shipment from the ice-class LNG carriers to conventional vessels in Norway and delivered onto the global markets, mostly to Russia’s key target markets in Asia. Overall, the Yamal LNG project consists of a 17.4 mtpa natural gas liquefaction plant comprised of three LNG trains of 5.5 mtpa each and one LNG train of 900 thousand tons per annum, utilising the hydrocarbon resources of the South-Tambeyskoye field in the Russian Arctic.

“Novatek is the exception in terms of global LNG companies in that it has always been very accurate in terms of delivering its projects on time and on budget, as it is a very Western-style operation run by a very capable CEO, Leonid Mikhleson,” Andrey Polischuk, senior oil and gas analyst from Raiffeisenbank, in Moscow, told OilPrice.com last week.

“Additionally supportive of success for further developments is that the Arctic is an absolute priority for the government, aimed at bringing Russia’s LNG standing in the world market into line with its status as a global gas superpower, as its LNG capability has always been way behind what its gas production power would warrant,” he said.

In this context, U.S. sanctions imposed after Russia took over Crimea in 2014 only made Putin more determined that the Arctic LNG program would not fail. Moscow not only initially bankrolled Yamal LNG from the beginning with money directly from the state budget but also later in 2014 supported it again by selling bonds in Yamal LNG (the program began on 24 November 2015, with a RUB75 billion 15-year issue). It further provided RUB150 billion of additional backstop funding from the National Welfare Fund. After that, and months of wrangling, April 2016 saw two Chinese state banks agree to provide US$12 billion to the Yamal LNG project in euros and roubles. The project was helped by a tumble in the rouble in late 2014 that effectively cut the cost of Russia-sourced equipment and labour at a key moment in the construction.

Having insulated itself from U.S. financial sanctions, Novatek is busy doing the same for its technology requirements. Novatek has already indigenised as much of the technology and machinery involved with the Yamal LNG project as it can and last year received a federal patent for its ‘Arctic Cascade’ natural gas liquefaction technology. This is based on a two-stage liquefaction process that capitalises on the colder ambient temperature in the Arctic climate to maximise energy efficiency during the liquefaction process and is the first patented liquefaction technology using equipment produced only by Russian manufacturers. The overall goal of Novatek, as the company itself has stated more than once, is to localise the fabrication and construction of LNG trains and modules to decrease the overall cost of liquefaction and develop a technological base within Russia, so that the Arctic LNG operations are not subject to the whims of other countries and future sanctions.

Given this backdrop, Novatek’s second Yamal LNG project – officially ‘Arctic LNG 2’ – aims for three LNG trains of 6.6 mtpa each, based around the oil and gas resources of the Utrenneye field, which has at least 1,138 billion cubic metres of natural gas and 57 million tons of liquids in reserves. Novatek plans to commission the first train in 2023, the second train in 2024, and the third train in 2025, before reaching full capacity in 2026. To this end, it has already secured three other partners in the venture, aside from the Japanese. Two are from the key target market of China itself – the China National Petroleum Corporation subsidiary China National Oil and Gas Exploration and Development, and China National Offshore Oil Corporation, with a joint 10% stake – and France’s supermajor, Total, also with 10%. Novatek has said that it plans to keep 60% for itself, with the remaining 10% likely to go shortly to Saudi Aramco, OilPrice.com understands form various Russia analysts. Novatek will make the final investment decision on the project in the third quarter of this year.

In the same vein, Russian gas giant, Gazprom, recently announced the full scale development of the giant Kharasavey gas field in the Bovanenkovo production zone on the northern Yamal peninsula. This is part of the company’s continuing shift in its production base northward, in line with Russia’s other major tangential strategy of building out the gas capacity of Yamal to compensate for reserves depletion in West Siberia. Kharasavey is estimated to hold 2 trillion cubic metres of gas and is set to produce first gas in 2023 with plateau output of 32 billion cubic metres per year. Given the outlook for gas demand in the key markets of Europe and Asia, and the geopolitical ramifications of being the major gas supplier to these regions, Gazprom’s oil producing subsidiary, Gazprom Neft, is also looking at producing its own LNG from its Arctic operations.

Monetising its gas resources in the Arctic would be a relatively straightforward task for Gazprom Neft, allowing the company to recoup more of the RUB400 billion (US$6.4 billion) that it plans to spend on developing its Novoportovskoye field (estimated to have recoverable reserves of more than 320 bcm of gas) over the next five years earlier than would otherwise be the case. Part of this development cost is planned to go on the construction of a key gas pipeline to run from Novy Port across the Gulf of Ob to Yamburg, which will carry at least 10 billion cubic metres of gas per year from the Novoportovskoye oil and gas field into Gazprom’s main gas delivery system.

This infrastructure is also likely to be utilised by the third of Novatek’s own Arctic projects – Ob LNG – which commenced development in June. Based on the resources of the Verkhnetiuteyskoye and Zapadno-Seyakhinskoye fields, located in the central part of the Yamal Peninsula, the two fields hold a total of 157 billion cubic metres of natural gas and the projected new plant will produce up to 4.8 mtpa of LNG. The main plant, built exclusively with Russian-made technology in Sabetta, will cost US$5 billion and is set to come into operation in 2023. That a key point in adding such production from this the Arctic region is to dominate the Asian markets, particularly that of China, was tacitly acknowledged by Novatek’s Mikhelson recently when he stated that he expected at least 80% of Novatek’s future LNG production to go to the Asian market. This was further highlighted by the fact that Novatek is moving forward with the trans-shipment LNG facility on the Russian Far East coast in Kamchatka, Anna Belova, senior Russia and FSU oil and gas analyst for GlobalData, in New York, told OilPrice.com.

Even more tellingly, perhaps, Mikhelson added that future sales to China denominated in renminbi is under consideration. This is in line with his recent comment that U.S. sanctions accelerate the process of Russia trying to switch away from U.S. dollar-centric oil and gas trading and the damage from potential sanctions that go with it. “This has been discussed for a while with Russia’s largest trading partners such as India and China, and even Arab countries are starting to think about it… If they do create difficulties for our Russian banks the all we have to do is replace dollars,” he said. “The trade war between the U.S. and China will only accelerate the process,” he added.

Such a strategy was tested in 2014 when Gazprom Neft tried trading cargoes of crude oil in Chinese yuan and rubles with China and Europe.

“This idea of an alternate principal trading currency for oil and gas, away from the U.S. dollar was also discussed for the BRIC [Brazil, Russia, India, and China] countries, and was work-shopped again recently by Iran, Iraq, Russia, and China, and China’s launch of the yuan-denominated Shanghai International Exchange can be seen as a move in this direction,” Mehrdad Emadi, head of risk analysis and energy derivatives markets consultancy, Betamatrix, in London, told OilPrice.com.

“The more the U.S. uses the US dollar sanction against major suppliers in the oil market, like Iran, Venezuela, and Russia, and major buyers, like China, then the more momentum will build to replace the oil market with a new currency benchmark,” he concluded.

via ZeroHedge News https://ift.tt/2XDRf0e Tyler Durden

Rep. Alexandria Ocasio-Cortez (D-NY) issued a sharp rebuke to White House counselor Kellyanne Conway, who described the ongoing spat between the Democratic Socialist and House Speaker Nancy Pelosi (D-CA) as a “catfight.” 

According to the New York Post, Conway called the dispute over border spending between Pelosi and four female freshman Democrats as a “major meow moment” and a “huge catfight.” 

AOC was incensed, resorting to semantics in order to ‘womansplain’ the sexist history of the phrase.

“‘Catfight’ is the sexist term Republicans use when two adult women happen to disagree with each other,” tweeted AOC, adding “The reason they find it so novel &exciting is bc the GOP haven’t elected enough women themselves to see that it can, in fact, be a normal occurrence in a functioning democracy.” 

“Catfight” is the sexist term Republicans use when two adult women happen to disagree with each other.

The reason they find it so novel &exciting is bc the GOP haven’t elected enough women themselves to see that it can, in fact, be a normal occurrence in a functioning democracy. https://t.co/s6eMMmvzrd

— Alexandria Ocasio-Cortez (@AOC) July 9, 2019

Looks like Sex and the City‘s Sarah Jessica Parker is a sexist Republican. Same with the Washington Times, The Telegraph, everyone involved in the production of the 2017 film Catfight  – and anyone who watched it or thought about watching it.  

 

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While the topic of Joe Biden’s financial assets is hardly as controversial as that of Donald Trump, on Tuesday it was revealed that the Democratic presidential front-runner and his wife Jill earned more than $15 million during the past two years – when they left the White House, – with the bulk of their income coming from payments for the memoirs they’ve each written since the former vice president left office in January 2017. The couple’s total income in 2017 was $11 million and nearly $4.6 million in 2018, according to filed tax returns.

Biden’s campaign said that the vast majority of that income ($10,048,739 in 2017 and $3,236,764 in 2018) was derived from payments for the writing of two books: Joe’s “Promise Me, Dad” and Jill’s “Where the Light Enters,” as well as paid speaking engagements. Biden’s first book, an account of his son Beau’s death from cancer, topped bestseller lists in 2017.

Additionally, Joe Biden’s income in both years included about $400,000 from the University of Pennsylvania for his role as Benjamin Franklin Presidential Practice Professor, while Jill Biden took in a far lower $90,000 each year for her professorship at Northern Virginia Community College.

Biden’s financial disclosure also lists 47 speaking appearances; 30 were for his 2017 book “Promise Me, Dad.“

The couple’s earnings from the books and speaking engagements were paid through so-called S-Corporations, which the campaign described as “a common method for taxpayers who have outside sources of income to consolidate their earnings and expenses.” The campaign also said Joe and Jill Biden employed staff and engaged contractors to support their work through their S-Corporations, known as “CelticCapri” and “Giacoppa”, according to Fox News.

Biden, who was never one of the wealthier members of Congress during his decades as a senator, has seen his fortunes turn considerably since the end of Obama administration. During a four-decade political career, Biden brought home little more than his government salary.

Yet despite the turn in his fortune and his generous income in the past two years, the couple’s assets are materially smaller, and excluding retirement plans, the Bidens hold between $500,000 and $1.2 million in cash and have S-corpoprations with between $1 million and $5 million, and $500,000 and $1 million.

The leading Democrat in the 2020 presidential race, who has now made public the last 21 years of tax returns, has moved into a $5 million mansion outside Washington since he left the White House.

“Middle-Class Joe” more recently has resided in a 12,000-square-foot home in McLean, Va., that came complete with “five bedrooms and 10 bathrooms, marble fireplaces, a gym and a sauna,” The Washington Post reported last month. The home was rented from multi-millionaire Mark Ein.

 

 

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Authored by James M. Dorsey via Lobe Log

A United Arab Emirates decision to withdraw the bulk of its forces from Yemen shines a spotlight on hard realities underlying Middle Eastern geopolitics.

The pullback suggests that the UAE is preparing for the possibility of a US military confrontation with Iran in which the UAE and Saudi Arabia could emerge as prime battlegrounds.

It also reflects long-standing subtle differences in the approaches of Saudi Arabia and the UAE towards Yemen. It further highlights the UAE’s long-standing concern for its international standing amid mounting criticism of the civilian toll of the war as well as a recognition that the Trump administration’s unquestioning support may not be enough to shield its allies from significant reputational damage.

The withdrawal constitutes a fine-tuning rather than a reversal of the UAE’s determination to contain Iran and thwart political Islam witness the Emirates’ involvement in the Libyan civil war and support for renegade field marshal Khalifa Belqasim Haftar as well as its support for the embattled Sudanese military and autocrats like Egyptian general-turned-president Abdel Fattah al-Sisi.

While the UAE may have withdrawn the bulk of its troops from key regions of Yemen, it leaves behind Emirati-trained local forces that will continue to do its bidding. The withdrawal, moreover, is not 100 percent with the UAE maintaining its Al-Mukalla base for counterterrorism operations.

The UAE’s commitment to assertive policies designed to ensure that the small state can continue to punch above its weight are also evident in its maintenance of a string of military and commercial port facilities in Yemen, on the African shore of the Red Sea, and in the Horn of Africa as well its hard-line towards Qatar and rivalry with Turkey.

As part of its regional and international projection, the UAE is keen to maintain its status as a model for Arab youth and preferred country of residence. The UAE’s image contrasts starkly with that of Saudi Arabia, the custodian of Mecca and Medina, Islam’s two holiest cities.

Crown Prince Mohammed bin Salman’s policies, including the clampdown on domestic critics and the Yemen war, have prompted embarrassing calls by prominent Islamic scholars for a boycott of the pilgrimage to Mecca, one of the five pillars of Islam.

Wittingly or unwittingly, the withdrawal leaves Saudi Arabia and Prince Mohammed, the instigator of the more than four-year long war that has sparked one of the world’s worst humanitarian crises, exposed.

Nonetheless, despite differing objectives in Yemen, the UAE too suffered from the reputational fallout of bombings of civilian targets that were largely carried out by the Saudi rather than the Emirati air force.

Operating primarily in the north, Saudi Arabia focused on countering Iranian-backed Houthi rebels whose stronghold borders on the kingdom while the UAE backed South Yemeni separatists and targeted Muslim-Brotherhood related groups.

With the withdrawal, the UAE may allow differences with Saudi Arabia to become more visible but will not put its alliance with the kingdom at risk.

If past differences are anything to go by, Saudi Arabia and the UAE are able to manage them. The differences were evident in recent weeks with the UAE, unlike Saudi Arabia, refraining from blaming Iran for attacks on tankers in the Gulf of Oman.

Leaked emails written by Yousef al-Otaiba, the UAE’s influential ambassador in Washington, laid bare the Emirates’ strategy of working through the Saudi court to achieve its regional objectives despite viewing the kingdom as “coo coo.”

Similarly, differences in the two countries’ concept of Islam failed to rock their alliance despite the effective excommunication in 2016 of Saudi-backed ultra-conservatism at a UAE-sponsored conference in the Chechen capital of Grozny.

The alliance is key to the two countries’ counterrevolution aimed at maintaining the region’s autocratic status quo in the face of almost a decade of popular revolts, public protests and civil wars.

The UAE-Saudi-led counterrevolution is driven by Prince Mohammed and his UAE counterpart, crown prince Mohammed bin Zayed’s desire to shape the Middle East in their mold.

The UAE rather than the kingdom was the driver behind the Qatar boycott with Saudi King Mohammed and Prince Mohammed initially reaching out to the Qatar-backed Muslim Brotherhood when they came to power in 2015.

Four years later Saudi Arabia, is unlikely to radically shift gears but could prove less intransigent towards the group than the UAE.

While preparing for possible conflict with Iran may be the main driver for the withdrawal, it is unlikely to protect the UAE from damage to its reputation as a result of its involvement in Libya and Sudan as well as its draconian clampdown on dissent at home.

Haftar’s UAE-armed forces are believed to be responsible for the recent bombing of a detention center for African migrants in the Libyan capital Tripoli that killed 40 people and wounded 80 others.

The bombing came of the heels of a discovery of US-made missiles on one of Haftar’s military bases packed in shipping containers stating they belonged to the “UAE Armed Forces.” The UAE has denied ownership.

The UAE’s withdrawal from Yemen will likely help it evade calls for Yemen-related arms embargoes. Libya, however, could prove to be the UAE’s Achilles heel.

Said Robert Menendez, the top Democrat on the Senate Foreign Relations Committee, in a letter to US Secretary of State Mike Pompeo: “You are surely aware that if these allegations prove true you may be obligated by law to terminate all arms sales to the UAE.”

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