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Oil, acid, plastic: Inside the shipping disaster gripping Sri Lanka

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Oil, acid, plastic: Inside the shipping disaster gripping Sri Lanka
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It’s visible in satellite images from just off Sri Lanka’s coast: a thin grey film that snakes three kilometres out to sea before disappearing into the waves.

This, experts say, is fuel oil leaking from the X-Press Pearl, a Singapore-flagged cargo ship that caught fire and sank off Sri Lanka’s western coast last month.

The slick is a visceral reminder of what observers say is a slow-motion environmental disaster – one of the worst in the country’s history – and of the mammoth effort that will be needed to clean it up.

“This is the biggest environmental catastrophe to hit Sri Lanka since the 2004 Indian Ocean Tsunami,” said Thummarukudyil Muraleedharan, the acting head of the disasters and conflicts branch with the United Nations Environment Programme (UNEP).

Thummarukudyil is among more than a half-dozen UNEP experts advising Sri Lanka’s government on how to contain the toxic fallout from the X-Press Pearl, which was carrying 81 containers of dangerous goods when it sank in June, according to its owner, X-Press Feeders. The ship’s cargo included 25 tonnes of nitric acid, 348 tonnes of oil and, according to independent estimates, up to 75 billion small plastic pellets known as nurdles that has created a pollution crisis—one that could plague Sri Lanka for years.

“This is a toxic ship,” said Hemantha Withanage, Executive Director of Sri Lanka’s Centre for Environmental Justice, an advocacy group. “This will be a long-running disaster.”

Fire down below

Crew members first noticed smoke coming from the X-Press Pearl’s hold on 20 May while the ship was anchored off Colombo, Sri Lanka’s capital. Over the next two weeks, fire crews battled a raging inferno punctuated by at least two major explosions. As the ship slowly sunk—it would be 17 June before it settled on the seabed—strong currents scooped up shipping containers and sprinkled them along Sri Lanka’s coast.

One container surfaced more than 100 kilometres south of the wreck, coating prime tourist beaches near the southwestern resort town of Galle with nurdles.

“It was like a cluster bomb,” said Hassan Partow, part of UNEP’s disaster response team.

Plastic pollution

For Sri Lankans, the small plastic pellets, which are about the size of a lentil, have been the most visible sign of the X-Press Pearl sinking.

Using publicly available data, Withanage estimates the ship contained 70-75 billion individual pellets. Partow said the disaster is the single-largest release of nurdles into the ocean ever reported.

The plastic has flooded onto beaches around Colombo. One, Sarukkuwa, was blanketed in meter-deep piles of plastic. The nurdles also turned up in the gills and guts of fish. Local fishers, who have been barred from the rich fishing grounds around Colombo, have blamed the nurdles for killing sea life, though that claim is still being investigated by Sri Lanka scientists. Withanage said pellets have also been found in a turtle sanctuary 300km north of Colombo.

Over time the pellets, which will take up to 1,000 years to disintegrate, may build up in the food chain, sickening fish and potentially humans, Withanage said. “When it comes to the environment, every plastic nurdle is a disaster.”

Making matters worse, many of the pellets were charred, causing them to crumble into a potentially toxic powder when disturbed.

“These weren’t just virgin pellets,” said Partow. “Around half were combusted, so the jury is out about their toxicity.”

In the immediate aftermath of the X-Press Pearl sinking, hundreds of Sri Lankan navy, air force and coast guard members were deployed in a massive clean-up operation overseen by the Marine Environment Protection Authority.  Working around the clock under strict COVID-19 lockdown restrictions, they have so far collected more than 53,000 bags of pellets, burnt plastic and other debris mixed with sand. The small size of the plastic pellets means that many had to be hand sieved.

There is no way, though, to clean plastic pellets still in the ocean.

“What is in the sea could be there for a long time,” said Thummarukudyil.

A toxic brew

It also appears likely that at least some of the highly corrosive nitric acid aboard the X-Press Pearl seeped into the ocean. Experts are worried it may have scalded sea life at a nearby coral reef. Sri Lanka’s government has recovered turtle carcases that show signs of burns, though Partow said scientists are still examining the animals and that it was too early to determine what had killed them.

While the nitric acid has likely dissipated into the ocean, concerns have now turned to another toxic chemical carried by the X-Press Pearl: epoxy resin. Around 9,800 metric tonnes of epoxy was aboard and experts worry that if it was in toxic liquid form—as opposed to solid form—that it could spread along the Sri Lankan coast.

The ship also contained a witches’ brew of other chemicals, including methanol, gear oil, brake fluid and urea, along with lead, copper and lithium batteries, according to Withanage.

The question of oil

Exactly how much toxic material remains in the ship’s hold or in containers on the ocean floor remains unknown. Sri Lanka’s annual monsoon, coupled with a country-wide COVID-19 lockdown, has hampered salvage efforts.

The ship’s owner, X-Press Feeders, said much of the cargo could have been incinerated in the fire, including the black, molasses-like fuel that powered the X-Press Pearl. But the UN team thinks that even if the oil was burnt it is unlikely to have evaporated. Instead, it would probably be transformed into a more viscous mixture.

“We should assume the oil is still there,” said Thummarukudyil. The ship, he added, was carrying enough oil to blanket Sri Lanka’s entire western coast. “The potential is there for this to be a lot worse than what we’ve already seen.”

Disaster response 

The UNEP staff working on the X-Press Pearl sinking are part of a disaster response unit jointly run by the United Nations Office for the Coordination of Humanitarian Affairs (OCHA).  The unit has helped broker an agreement between the Sri Lankan government and the X-Press Pearl’s owner to contain a potential offshore oil spill as well as clean-up the shoreline. Specialized equipment, including inflatable booms designed to trap oil, arrived in Colombo on 2 July.

“The United Nations is supporting the Government of Sri Lanka to address the disaster of the MV X-Press Pearl,” said UN Resident Coordinator in Sri Lanka Hanaa Singer-Hamdy. “We are coordinating international efforts and mobilizing partners to ensure a cohesive and coherent response to the crisis (and) ensure prevention of such disasters in the future.”

UNEP has called for the ship’s owner and insurer to hash out what Partow called a “peer-reviewed, government-approved” road map for removing the X-Press Pearl and the stray containers on the ocean floor, saying they constitute the most immediate risk of pollution.

“This plan needs to be developed now so that when the conditions allow, the ship can be removed and properly decommissioned,” said Partow.

Sri Lanka’s government is also pushing the ship’s owners and insurers to refloat the X-Press Pearl.

“The Sri Lankan government is deeply concerned about its environment and the livelihood of the vulnerable fishing communities,” said Dharshani Lahandapura, Chairperson of Sri Lanka’s Marine Environment Protection Authority. “The foremost thing that the owners and salvors, caretakers and wreck removers have to do is remove the wreckage, underwater containers and debris as soon as possible.”

For Withanage, time is of the essence. “It is a business for them,” he said of the salvage company hired to raise the ship and the vessel’s owners. “But it is our environment. As long as the ship is there contamination is there.”

UNEP will deliver a final report on the disaster to Sri Lanka’s government next week. It will contain recommendations for the clean-up and suggestions for how Sri Lanka, a country vying to become a major shipping hub, can handle future maritime disasters. Partow said UNEP will also stand by to advise Sri Lanka on longer-term environmental monitoring.

Ghostly scene

Today, the ship sits largely submerged in 21 metres of water, its castle and a few charred cranes poking up over the waves. A caretaker ship circles it 24 hours a day, keeping tabs on the oil leak.

Partow, who toured the wreck by boat and in a helicopter, saw plastic pellets mixed with oil bobbing in the waves around the vessel. Brown patches of oil surrounded by a grey sheen stretched two to three kilometres out into the sea.

He described the 186-metre-long ship, which entered service in February, as a “write off.”

Thummarukudyil has spent 18 years responding to oil spills around the world. When asked if the X-Press Pearl was the worst maritime ecological disaster he’d seen, he paused.

“There are lots of chemicals still sitting there,” he said. “This story is not yet over.”

UN Environment

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A Labour Government Should not Frighten the Horses

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The UK general election is likely to mean changes, but Gulf citizens need not be too worried.

By James Drummond

If the tension was killing you, now you know. If it wasn’t, then be aware that a general election in the United Kingdom will be held on July 4 – less than six weeks away.

For the hapless Rishi Sunak, it looks like a case of “If it were done when ’tis done, then ’twere well it were done quickly.” Polls indicate that after 14 years of conservatism, real or imagined, voters are likely to elect a new Labour government.

What does this mean for us here in the Gulf?

The six Gulf states are certainly exposed to Britain. The extent of GCC holdings in the UK is enormous, ranging from Qatari ownership of the Shard building in London, stakes in the Sainsburys supermarket chain and Barclays bank, to Sheikh Mohammed bin Rashid’s Godolphin stables in Suffolk.

Manchester City and Newcastle United football clubs are owned by Emirati and Saudi interests, respectively. Kuwait’s wealth is managed by the Kuwait Investment Office near St Pauls Cathedral.

Labour has been careful to detail very few policies (or hostages to fortune, as its strategists may see it), but last week, David Lammy, the likely new foreign secretary, outlined a further campaign against dirty money.

Britain is a “corruption services centre”, while London is a “hotbed of kleptocracy”, Mr Lammy said. He said that he wanted to reward whistleblowers and clamp down on “enablers” of financial crime.

Given the paucity of public announcements, Lammy’s speech is significant, because it implies that the incoming government is likely to act. Fighting financial crime is relatively uncontroversial and attracts cross-party support – although in the UK’s case with limited success.

British politicians have made similarly grandiose statements before. But after Russia’s invasion of Ukraine, London has moved particularly against Russian dirty money, and sanctioned individuals. It finally introduced an obligation mandating the disclosure of beneficial owners of property.

Overseas trusts are also now required to disclose their ultimate beneficial owners, and there is now greater transparency when registering entities at Companies House.

This seems to have had only limited effect, however. Last week Andrew Mitchell, the deputy foreign secretary, cited estimates that 40 percent of the world’s dirty money still passes through London.

Spotlight on Corruption, a non-governmental organisation, wrote in October last year that “major reform is needed to how lawyers and accountants, the property sector and company formation agents are regulated for money laundering.” Lammy may choose to take further action against these and other professionals.

Other so-called enablers include retired politicians, some of them in the House of Lords, who work as advisors to unsavoury actors. Labour could move to tighten disclosure, although several of its senior former members are likely to lobby against further transparency.

It is also possible that Labour will go further in taxing expatriates. In its limited public commitments, the party has promised to clamp down on “tax dodgers”.

Those with property in the UK already pay tax on rental income they receive, and worldwide assets are subject to Britain’s inheritance tax. Some Gulf Arab families with UK property have been caught by inheritance tax.

A government led by Sir Keir Starmer, the Labour leader, could go further, as the US does, in taxing worldwide income of its citizens, more than 200,000 of whom live in the UAE alone. The argument is that if you have the privilege of carrying the passport, you have an obligation to pay tax.

Another question surrounds nationalisation. Labour is committed to re-nationalising the railways for one, although the infrastructure is already under central government control.

But another target may – may – be England’s water supply network, which was privatised in 1989. Shareholders in various of the rump companies include the Qatar Investment Authority and Adia of the UAE.

The water companies have been the subject of a vociferous campaign, for allegedly paying their shareholders high dividends while neglecting maintenance and investment. It is possible that an incoming Labour government will nationalise the industry.

All that said, the primacy of the rule of law and respect for property rights remain strong in Britain.

Barratt, a mass housebuilder, reported earlier this week that London remains the top choice among world cities for UAE investors looking to buy overseas. The holdings of Gulf states and rights of Gulf citizens in the UK remain secure, even with a Labour government.

James Drummond is Editor-in-Chief of the AGBi

Courtesy: The AGBI.Com


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Kuwait’s Political Crisis Adds to Economic Uncertainty

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Kuwait’s latest standoff is deeply concerning for both the near and long term, writes Andrew Cunningham

The decision by Kuwaiti emir Sheikh Mishal Al-Ahmad to dissolve the country’s recently elected parliament just days before its inaugural session on May 14 presents overseas investors and Kuwaiti citizens with more uncertainty.

The situation raises concerns about the country’s economic prospects over both the short and long term.

Disputes and stand-offs between Kuwait’s emirs and its boisterous parliament are nothing new. Parliament has been dissolved, and the constitution suspended, numerous times over the past 40 years. The country has held four elections in the past four years.

Squabbling between the two sides is rooted in political disagreements and this most recent outbreak is no different.

A major factor behind the latest dissolution is believed to have been parliament’s objection to Sheikh Mishal’s choice of crown prince. Although the crown prince is nominated by the emir, the appointment has to be ratified by the parliament.

But these political, and sometimes personal, disputes have real consequences for Kuwait’s economy and financial system and, ultimately, for the long-term welfare of its citizens.

Kuwait is a prosperous country. If we take a snapshot today, we see it producing nearly 2.5 million barrels of oil per day (bpd), and there are plans under way to increase production capacity to 4 million bpd by 2035.

State foreign reserves are around $930 billion, according to National Bank of Kuwait, the country’s largest bank. With a population of a little over 4 million, its GDP per capita is one of the highest in the world.

Squabbling between the two sides is rooted in political disagreements and this most recent outbreak is no different.

A major factor behind the latest dissolution is believed to have been parliament’s objection to Sheikh Mishal’s choice of crown prince. Although the crown prince is nominated by the emir, the appointment has to be ratified by the parliament.

But these political, and sometimes personal, disputes have real consequences for Kuwait’s economy and financial system and, ultimately, for the long-term welfare of its citizens.

Kuwait is a prosperous country. If we take a snapshot today, we see it producing nearly 2.5 million barrels of oil per day (bpd), and there are plans under way to increase production capacity to 4 million bpd by 2035.

State foreign reserves are around $930 billion, according to National Bank of Kuwait, the country’s largest bank. With a population of a little over 4 million, its GDP per capita is one of the highest in the world.

In March this year, rating agency Fitch described Kuwait’s fiscal and external balance sheets as among the strongest of any of the governments it rates.

But when we look at long-term trends, the picture is more complex and less secure.

Kuwaiti government spending remains overwhelmingly dependent on oil and gas revenues. The government has made almost no progress, over many decades, in diversifying the economy away from oil, or in reducing the huge burden of government salaries and welfare payments.

Oil and gas revenues currently account for nearly 70 percent of total income and, according to IMF projections, will continue to do so for the rest of the decade.

These revenues have served the country well in the past, despite the volatility of oil prices, but such overwhelming dependence looks foolhardy when consumers worldwide are striving to reduce consumption of oil and gas and investors and energy firms have pivoted towards renewables.

Nearly all of the Kuwaiti government’s non-oil and gas revenue arises from overseas investments and from dividends from state-owned companies. Tax revenues account for less than 1 percent of total government income.

Looking beyond the fiscal imperative to diversify the economy is the need to provide employment opportunities for Kuwaiti citizens.

No less than 84 percent of the Kuwaiti workforce was employed by the government at the end of 2022. It is hardly surprising that nearly half of government expenditure is allocated to the salaries of public employees.

Pressure for social spending will increase in the years ahead. A World Bank report, published last year, showed that levels of obesity and Type 2 diabetes were higher in Kuwait than in any of the other GCC countries and nearly double the average in OECD countries.

Partly as a result of this, the World Bank estimated that Kuwait’s old age dependency ratio – the number of people over 65 years old in relation to those of working age – will be nearly double that of its neighbours by 2040.

Kuwait is also a country that is being significantly affected, even today, by climate change. Temperatures during the summer can exceed 50 degrees, making Kuwait one of the hottest places on earth.

These are difficult and complex challenges, both economic and social, but they are hardly unique to Kuwait. That they are, in some cases, more acute in Kuwait than elsewhere is due to decades’ long procrastination and political paralysis.

The government’s General Reserve Fund, which held most of its liquid assets, was entirely depleted in September 2020, according to Kuwait’s own ministry of finance. With AA ratings, the obvious solution was to borrow money – Kuwait’s debt-to-GDP ratio is less than 5 percent. Yet the parliament has still not passed a so-called ‘Liquidity Law‘ that would allow modest issuance of foreign currency debt.

The parliament also held up the introduction of Value Added Tax (VAT), making Kuwait one of two of the six GCC countries not to fulfil a joint commitment to implement a minimum VAT of 5 percent.

Over the past four years, all three of the big international credit rating agencies have downgraded the government of Kuwait.

In their rating reports, all agencies cited a dysfunctional and slow-moving political environment that was reducing the country’s financial flexibility and delaying much needed economic and financial reform.

Politics matters.

It is unrealistic to think that after decades of enmity the ruling family and the parliament will soon form a harmonious working relationship.

But they do need to find some common ground that will enable them to start addressing fundamental economic and social issues while the country still has large financial reserves and strong credit ratings.

Time is running out.

Andrew Cunningham writes and consults on risk and governance in Middle East and sharia-compliant banking systems


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ICD and JSC Ziraat Bank Collaborate to Boost Uzbekistan’s Private Sector

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At the 3rd Tashkent Investment Forum, the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan took a significant step forward in their partnership to empower small and medium-sized enterprises (SMEs) and foster economic growth in Uzbekistan. The forum, held in the capital city of Uzbekistan, brought together key stakeholders from the public and private sectors to discuss investment opportunities and economic development strategies for the region. The collaboration between the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan is aimed at boosting the private sector in Uzbekistan.

During the forum, ICD and JSC Ziraat Bank Uzbekistan formalized an expression of intent to collaborate on various initiatives aimed at supporting SMEs. One of the key elements of this collaboration is the provision of a Line of Financing (LoF) facility by ICD to JSC Ziraat Bank Uzbekistan. This LoF facility will enable the bank to fund private sector projects as an agent of ICD, thereby providing SMEs with access to the necessary capital to initiate and grow their businesses.

The partnership between ICD and JSC Ziraat Bank Uzbekistan is expected to have a significant impact on the SME landscape in Uzbekistan. By equipping entrepreneurs with the resources they need to succeed, this collaboration will not only support the growth of individual businesses but also contribute to the overall economic development of the country. SMEs play a crucial role in driving economic growth, creating jobs, and fostering innovation, and this partnership will help strengthen the SME ecosystem in Uzbekistan.

JSC Ziraat Bank Uzbekistan, as a strategic partner for ICD, brings a wealth of experience and expertise to the table. As a prominent commercial bank with foreign capital, JSC Ziraat Bank Uzbekistan has a strong track record of supporting SMEs and promoting economic development. The bank’s partnership with ICD further underscores its commitment to advancing the private sector in Uzbekistan and its dedication to supporting the country’s economic growth.

ICD, for its part, is a leading multilateral development financial institution that focuses on supporting the economic development of its member countries through the provision of finance and advisory services to private sector enterprises. By partnering with JSC Ziraat Bank Uzbekistan, ICD is furthering its mission of promoting economic development and fostering entrepreneurship in Uzbekistan and across the Islamic world.

The LoF facility provided by ICD to JSC Ziraat Bank Uzbekistan is just one example of the many initiatives that the two entities are undertaking to support SMEs in Uzbekistan. In addition to providing financial support, the partnership between ICD and JSC Ziraat Bank Uzbekistan will also include capacity-building initiatives and technical assistance programs to help SMEs succeed in today’s competitive business environment.

Overall, the partnership between ICD and JSC Ziraat Bank Uzbekistan represents a significant step forward in supporting SMEs and fostering economic growth in Uzbekistan. By working together, these two institutions are helping to create a more vibrant and dynamic private sector in Uzbekistan, which will ultimately benefit the country’s economy and its people. The collaboration between the Islamic Corporation for the Development of the Private Sector (ICD) and JSC Ziraat Bank Uzbekistan is expected to have a far-reaching impact on the private sector in Uzbekistan.


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