US Business

Lebanon is grappling to strike a deal with Israel over contested maritime gas fields, but even with an agreement the cash-strapped country faces multiple hurdles before tapping potential hydrocarbon riches, analysts say.

“A deal would mark one step forward but it does not mean that Lebanon has become a gas- or oil-producing country,” said Marc Ayoub, an associate fellow at the American University of Beirut’s Issam Fares Institute.

“We are talking of a timeline of five to six years… before the first gas” if commercially viable reservoirs are in fact found, the energy expert told AFP, describing the timeframe as “optimistic”.

With the demand for gas rising worldwide because of an energy crisis sparked by Russia’s invasion of Ukraine, Lebanon hopes that an offshore discovery would ease its current unprecedented financial downturn.

But more than a decade since it declared its maritime boundaries and an Exclusive Economic Zone, it still has no proven natural gas reserves.

One well drilled in 2020 by a consortium of energy giants TotalEnergies, Eni and Novatek showed only traces but no commercially viable gas deposits.

Further test drilling, in a block near the border, has been hampered by the maritime border dispute between Lebanon and Israel, which are technically still at war.

Following years of US-mediated negotiations, a draft proposal from Washington at the weekend was welcomed by both sides.

But Israel on Thursday said it would reject amendments to the proposal requested by Lebanon this week, further prolonging a final agreement.

A final deal, however, would allow “offshore exploration activities to continue,” off Lebanon’s coast, Ayoub said.

“But that doesn’t mean that Lebanon has become rich… or that its crisis has been solved.” 

– ‘First gas’ –

A 2012 seismic study of a limited offshore area by the British firm Spectrum estimated recoverable gas reserves in Lebanon at 25.4 trillion cubic feet.

The authorities in Lebanon have announced higher estimates.

Block 9 near the border with Israel contains the so-called Qana field or Sidon reservoir, and will be a major zone for offshore exploration by TotalEnergies and Eni that were awarded a contract in 2018.

“This time next year, we should know if there is a commercial discovery in Qana or not,” Ayoub said.

“If we have a discovery, it will take… no less than three to five years after exploration” before production could start.

This time frame, according to Ayoub, assumes there are no delays by Lebanese authorities who are widely blamed for the corruption and mismanagement behind the country’s financial crash.

It took months for the Lebanese Petroleum Administration (LPA) regulatory body to name its board after it was formed in 2012, because of political disputes over nominations.

Several bidding rounds for offshore gas and oil licences have been hit by delays since they began in 2013.

Already, Lebanon lags far behind Israel which has been investing in the offshore Karish field for years and is expecting its first gas within weeks.

– Risky investment –

Roudi Baroudi, an energy consultant, said that gas or oil production could start within three years if commercially viable reservoirs are found.

But to attract energy firms and benefit from potential discoveries, Lebanon desperately needs to undergo changes, he told AFP.

“Lebanon is not a good investment unless the government implements reforms,” the energy expert said.

Reforms would provide “the basic assurances that international companies need to work with less risk”.

State institutions in Lebanon have collapsed under the weight of the crisis, with strikes by civil servants adding to the paralysis.

An economic recovery plan has yet to take off more than three years since the financial downturn began, despite mounting pressures from foreign donors and the International Monetary Fund.

And political gridlock has caused a months-long delay in forming a new government amid fears of a presidential vacuum after Michel Aoun’s mandate expires at the end of October.

With a bankrupt state unable to deliver more than an hour or two of mains electricity a day, energy firms may choose to work on their Lebanon projects out of Cyprus, according to Baroudi.

“With no rule of law, Lebanon is a jungle,” he said.  “It’s absolute chaos, whether judicially, financially or in terms of regulatory” bodies.

Equity markets mostly fell Thursday and the pound retreated once more against the dollar on lingering recession fears despite hopes that the US Federal Reserve will tame the pace of aggressive interest rate hikes.

Oil prices also dropped, failing to power ahead after OPEC and other major producers led by Russia decided to slash output by two million barrels per day.

The cut, the biggest since the pandemic struck, was viewed by traders as an attempt to boost prices.

The Kremlin on Thursday said the OPEC+ decision was designed to stabilise global oil markets.

And Washington said it was a concession to Moscow. The United States has been lobbying to hold down fuel prices and isolate Russia over its Ukraine aggression.

The European Union has proposed introducing a price cap on Russian oil as part of new sanctions over Ukraine.

Moscow has said a price cap on its oil would have a “detrimental effect” on global markets and warned it would not supply crude to countries that introduce it.

Shares in Shell slid about 4.5 percent in Thursday trading after the British energy giant revealed that its third-quarter profit would be hit by a slump in refining margins.

“Shell enjoyed record profits in the first and second quarter spurred by a surge in underlying oil and gas prices following Russia’s invasion of Ukraine,” noted Victoria Scholar, head of investment at Interactive Investor.

“However, since June, oil has posted four consecutive months of declines, with Brent crude down by around 25 percent.”

Scholar said Shell was “grappling with a dysfunctional and volatile gas market as well as expectations of softening oil demand, particularly from China as the global economy cools”.

– Awaiting US jobs –

Markets remained on guard over the economic outlook awaiting the release of US non-farm payroll jobs Friday.

The pound was down about half-a-percent against the dollar after Fitch ratings agency lowered the outlook for British debt to negative from stable.

This after the government of new Prime Minister Liz Truss recently announced a budget packed with debt-fuelled tax cuts.

Ahead of the downgrade Wednesday, sterling had plunged more than two percent after Truss failed to reassure investors with a speech at her Conservative party conference.

The pound, however, has recovered since reaching a record-low close to parity against the dollar at the end of September.

– Key figures around 1100 GMT –

London – FTSE 100: DOWN 0.6 percent at 7,008.78 points

Frankfurt – DAX: DOWN 0.3 percent at 12,484.16

Paris – CAC 40: DOWN 0.5 percent at 5,957.14

EURO STOXX 50: DOWN 0.3 percent at 3,438.49

Tokyo – Nikkei 225: UP 0.7 percent at 27,311.30 (close)

Hong Kong – Hang Seng Index: DOWN 0.4 percent at 18,012.15 (close)

Shanghai – Composite: Closed for a holiday

New York – Dow: DOWN 0.1 percent at 30,273.87 (close)

Pound/dollar: DOWN at $1.1263 from $1.1326 on Wednesday

Euro/dollar: DOWN at $0.9887 from $0.9889

Euro/pound: UP at 87.72 pence from 87.29 pence

Dollar/yen: UP at 144.75 yen from 144.59 yen

Brent North Sea crude: DOWN 0.3 percent at $93.07 per barrel

West Texas Intermediate: DOWN 0.5 percent at $87.32 per barrel

Lebanon is grappling to strike a deal with Israel over contested maritime gas fields, but even with an agreement the cash-strapped country faces multiple hurdles before tapping potential hydrocarbon riches, analysts say.

“A deal would mark one step forward but it does not mean that Lebanon has become a gas- or oil-producing country,” said Marc Ayoub, an associate fellow at the American University of Beirut’s Issam Fares Institute.

“We are talking of a timeline of five to six years… before the first gas” if commercially viable reservoirs are in fact found, the energy expert told AFP, describing the timeframe as “optimistic”.

With the demand for gas rising worldwide because of an energy crisis sparked by Russia’s invasion of Ukraine, Lebanon hopes that an offshore discovery would ease its current unprecedented financial downturn.

But more than a decade since it declared its maritime boundaries and an Exclusive Economic Zone, it still has no proven natural gas reserves.

One well drilled in 2020 by a consortium of energy giants TotalEnergies, Eni and Novatek showed only traces but no commercially viable gas deposits.

Further test drilling, in a block near the border, has been hampered by the maritime border dispute between Lebanon and Israel, which are technically still at war.

Following years of US-mediated negotiations, a draft proposal from Washington at the weekend was welcomed by both sides.

But Israel on Thursday said it would reject amendments to the proposal requested by Lebanon this week, further prolonging a final agreement.

A final deal, however, would allow “offshore exploration activities to continue,” off Lebanon’s coast, Ayoub said.

“But that doesn’t mean that Lebanon has become rich… or that its crisis has been solved.” 

– ‘First gas’ –

A 2012 seismic study of a limited offshore area by the British firm Spectrum estimated recoverable gas reserves in Lebanon at 25.4 trillion cubic feet.

The authorities in Lebanon have announced higher estimates.

Block 9 near the border with Israel contains the so-called Qana field or Sidon reservoir, and will be a major zone for offshore exploration by TotalEnergies and Eni that were awarded a contract in 2018.

“This time next year, we should know if there is a commercial discovery in Qana or not,” Ayoub said.

“If we have a discovery, it will take… no less than three to five years after exploration” before production could start.

This time frame, according to Ayoub, assumes there are no delays by Lebanese authorities who are widely blamed for the corruption and mismanagement behind the country’s financial crash.

It took months for the Lebanese Petroleum Administration (LPA) regulatory body to name its board after it was formed in 2012, because of political disputes over nominations.

Several bidding rounds for offshore gas and oil licences have been hit by delays since they began in 2013.

Already, Lebanon lags far behind Israel which has been investing in the offshore Karish field for years and is expecting its first gas within weeks.

– Risky investment –

Roudi Baroudi, an energy consultant, said that gas or oil production could start within three years if commercially viable reservoirs are found.

But to attract energy firms and benefit from potential discoveries, Lebanon desperately needs to undergo changes, he told AFP.

“Lebanon is not a good investment unless the government implements reforms,” the energy expert said.

Reforms would provide “the basic assurances that international companies need to work with less risk”.

State institutions in Lebanon have collapsed under the weight of the crisis, with strikes by civil servants adding to the paralysis.

An economic recovery plan has yet to take off more than three years since the financial downturn began, despite mounting pressures from foreign donors and the International Monetary Fund.

And political gridlock has caused a months-long delay in forming a new government amid fears of a presidential vacuum after Michel Aoun’s mandate expires at the end of October.

With a bankrupt state unable to deliver more than an hour or two of mains electricity a day, energy firms may choose to work on their Lebanon projects out of Cyprus, according to Baroudi.

“With no rule of law, Lebanon is a jungle,” he said.  “It’s absolute chaos, whether judicially, financially or in terms of regulatory” bodies.

Equity markets rose Thursday as traders fought to extend this week’s global rally, though concerns about the impact of a huge oil output cut on inflation tempered hopes that central banks could soon ease their rate hike campaigns.

The mood on trading floors has been a little lighter this week, sending equities surging and weighing on the dollar, after weak readings on US factory activity and job openings fed speculation that the Federal Reserve’s strict tightening drive was having an effect.

But confidence took a knock Wednesday from a better-than-expected read on private jobs hiring and a report showing the key services sector holding up more than expected.

The figures highlighted the resilience of the US economy in the face of multiple rate hikes and point to the long road ahead for the Fed in fighting decades-high inflation.

Fed officials have lined up for weeks to insist that they will not budge from lifting borrowing costs until prices are tempered — even at the cost of a recession — while some have warned traders not to expect any cuts next year.

“After an increase in expectations of an imminent Fed pivot given the softer than expected US (factory data), the strength in the services (sector) not only eases concerns of an imminent US recession, it also refutes any notion that the Fed will look to take its foot off the tighten pedal any time soon,” said National Australia Bank’s Rodrigo Catril.

The latest US data came as OPEC and other major producers led by Russia decided to slash output by a massive two million barrels a day — the biggest reduction since the pandemic struck.

Moscow said a possible price cap by the European Union on Russian crude would have a “detrimental effect” on the global oil sector, saying Moscow would not sell to countries that introduced it.

The news gave already elevated oil prices another leg up, with both contracts piling on more than one percent Wednesday.

It also fuelled concerns that energy costs — a major driver of the spike in global inflation since Russia’s invasion of Ukraine — will drive higher again.

“All the developments we have seen on the supply side at this point very much sets the stage for what we believe will be higher prices into the end of this year,” Damien Courvalin, at Goldman Sachs, told Bloomberg Television.

“With this cut and the winter seasonal demand, inventories will continue to fall.”

– UK ratings warning –

Still, crude edged up only slightly in Asia, and SPI Asset Management’s Stephen Innes said: “So far, the oil market appears to be priced to post OPEC+ perfection. The current WTI move should not impact US inflation significantly nor raise eyebrows at the Fed just yet.”

All three main indexes on Wall Street ended in the red but stronger than earlier in the day but Asia fared better on Thursday.

Tokyo, Sydney, Singapore, Seoul, Taipei, Mumbai, Bangkok and Jakarta all rose again but Hong Kong dipped after blasting almost six percent higher Wednesday.

Sydney and Manila were also slightly lower. Shanghai is closed all week for a holiday.

London, Paris and Frankfurt were marginally up in the morning.

But commentators remained on guard over the outlook, with eyes now on the release of US non-farm payroll jobs on Friday, warning that an above-forecast reading could spark another major selloff.

On currency markets, the dollar, which bounced Wednesday after suffering a sell-off for most of the week, was slightly down again in Asian business.

Even sterling managed to resume its gains despite news that Fitch had lowered the outlook for British debt from stable to negative after the government of new Prime Minister Liz Truss announced a mini-budget packed with debt-fueled tax cuts.

The pound plunged more than two percent earlier as Truss failed to reassure investors with a speech at her Conservative party conference where she insisted she would stick to her fiscal plan.

– Key figures around 0810 GMT –

Tokyo – Nikkei 225: UP 0.7 percent at 27,311.30 (close)

Hong Kong – Hang Seng Index: DOWN 0.4 percent at 18,012.15 (close)

Shanghai – Composite: Closed for a holiday

London – FTSE 100: FLAT at 7,053.31

Pound/dollar: UP at $1.1350 from $1.1326 on Wednesday

Euro/dollar: UP at $0.9920 from $0.9889

Euro/pound: UP at 87.40 pence from 87.29 pence

Dollar/yen: UP at 144.61 yen from 144.59 yen

West Texas Intermediate: UP 0.3 percent at $88.05 per barrel

Brent North Sea crude: UP 0.4 percent at $93.72 per barrel

New York – Dow: DOWN 0.1 percent at 30,273.87 (close)

Dreamt up in the 1960s to attract tourists, Spain’s three-course “menu del dia”, or set lunch menu, has long been seen as the best deal in town. 

But with inflation hovering around 10 percent, its affordability is under threat as restaurants seek ways to economise.

For a starter, main course and dessert or coffee (or both), bread and a drink, the average price is around 12.8 euros ($12.60), according to figures from Hosteleria de Espana, Spain’s main hostelry association representing the hotel and restaurant industry.

Offered by almost every Spanish restaurant, its price makes it a popular option in a country where people frequently eat out. 

“Everyone chooses it,” says Sara Riballo, who is in her 30s, sitting on a terrace in central Madrid. 

“We eat out several times a week and we usually go for the set menu because it’s better value for money, it’s quicker and it’s quite varied,” agrees her colleague Estefania Hervas.

Spanish restaurants serve up on average four million “menus del dia” every day in the country of 47 million people, the hostelry association says. 

The idea was first cooked up nearly six decades ago when Spain was under the dictatorship of Francisco Franco.

A ministerial order was issued that all restaurants must offer a “tourist menu” to cater to the growing waves of foreign visitors to the Spanish coast. 

The decree was written into Spain’s official state bulletin, stating that the menu must from August 1, 1964 include, as a “minimum”, a soup, a main course, a dessert, a glass of wine and some bread. 

– ‘Extremely worried’ –

The tradition has lasted until today, where it acts as a sort of barometer for the Spanish economy, says Emilio Gallego, secretary-general of the hostelry association. 

“It’s a very, very popular way of eating lunch with millions sold every day across the country. It’s something we are constantly tracking,” he said.

Describing itself as “extremely worried by the effects of inflation and the price rises of recent months,” the association found three-quarters of its restaurants had raised the price of their menu del dia between November 2021 and April 2022. 

And that was before inflation peaked in July at 10.8 percent. 

In recent months, the price of olive oil has risen by 42.5 percent alongside the cost of bread, milk, eggs, meat and pasta, not to mention the spiralling bills for electricity, refrigeration or gas for stoves and ovens. 

With the industry “badly hit by rising energy and raw material costs at a time when it was still recovering from the health crisis”, it has had little choice but to raise prices, Gallego said. 

In most cases, restaurants have raised the price of their menu del dia by 10 to 15 percent, an increase of between 1.0 and 1.5 euros.

– ‘We won’t survive’ –

At Cafe Gijon, a landmark restaurant on Madrid’s central Castellana boulevard, they serve up 250 set meals a day, priced at 15 euros each. 

But manager Jose Manuel Escamilla said the prices are likely to rise in the coming weeks. 

“Everything’s going up: the price of electricity and mortgage costs have shot through the roof. If things carry on like this, we won’t survive.”

“It’s difficult because it will affect our customers but at the end of the day, if we don’t do it, we won’t be able to function,” he said.

Many restaurants are searching for other ways to save money and protect their margins. 

At a restaurant in one of Madrid’s chic neighbourhoods, they are now ordering meat in bulk and whole fish rather than pre-cut portions because the price is lower, admitted one of its buyers, speaking on condition of anonymity.

Gallego believes other restaurants will adapt by creating other formats, such as a two-course option of a main course with either a starter or dessert.

At Valgame Dios in Madrid’s Chueca neighbourhood, the number of dishes on offer has already been slimmed down.

“Instead of three or four starters, we have two,” explains waitress Laura Rubio, who says she’s just “waiting to see what will happen” and whether it will put off diners.

Like other customers, 47-year-old scriptwriter Helio Mira is putting a brave face on things. 

“It’s not only the price of the menu del dia that is going up but the price of life in general but what can we do?” he said.

“We just have to ride out the storm.”

Lebanon is nearing agreement with Israel over a maritime dispute involving offshore gas fields, but the cash-strapped country still faces an uphill struggle towards unlocking potential hydrocarbon riches, analysts say.

“A deal would mark one step forward but it does not mean that Lebanon has become a gas- or oil-producing country,” said Marc Ayoub, an associate fellow at the American University of Beirut’s Issam Fares Institute.

“We are talking of a timeline of five to six years… before the first gas” if commercially viable reservoirs are in fact found, the energy expert told AFP, describing the timeframe as “optimistic”.

With the demand for gas rising worldwide because of an energy crisis sparked by Russia’s invasion of Ukraine, Lebanon hopes that an offshore discovery would ease its current unprecedented financial downturn.

But more than a decade since it declared its maritime boundaries and an Exclusive Economic Zone, it still has no proven natural gas reserves.

One well drilled in 2020 by a consortium of energy giants TotalEnergies, Eni and Novatek showed only traces but no commercially viable gas deposits.

Further test drilling, in a block near the border, has been hampered by the maritime border dispute between Lebanon and Israel, which are technically still at war.

Following years of US-mediated negotiations, the rival states now appear to be nearing agreement after a draft proposal from Washington at the weekend was welcomed by both sides.

A deal would allow “offshore exploration activities to continue, but that doesn’t mean that Lebanon has become rich… or that its crisis has been solved”, Ayoub said. 

– ‘First gas’ –

A 2012 seismic study of a limited offshore area by the British firm Spectrum estimated recoverable gas reserves in Lebanon at 25.4 trillion cubic feet (tcf).

The authorities in Lebanon have announced higher estimates.

Block 9 near the border with Israel contains the so-called Qana field or Sidon reservoir, and will be a major zone for offshore exploration by TotalEnergies and Eni that were awarded a contract in 2018.

After being partly claimed by Israel, the Qana field is expected to fall entirely to Lebanon as part of the maritime border agreement, according to Lebanese officials.

“This time next year, we should know if there is a commercial discovery in Qana or not,” Ayoub said.

“If we have a discovery, it will take… no less than three to five years after exploration” before production could start.

This time frame, according to Ayoub, assumes there are no delays by Lebanese authorities who are widely blamed for the corruption and mismanagement behind the country’s financial crash.

It took months for the Lebanese Petroleum Administration (LPA) regulatory body to name its board after it was formed in 2012, because of political disputes over nominations.

Several bidding rounds for offshore gas and oil licences have been hit by delays since they began in 2013.

Already, Lebanon lags far behind Israel which has been investing in the offshore Karish field for years and is expecting its first gas within weeks.

Cyprus and Egypt have also started to discover major reservoirs.

– Risky investment –

Roudi Baroudi, an energy consultant, said that gas or oil production could start within three years if commercially viable reservoirs are found.

But to attract energy firms and benefit from potential discoveries, Lebanon desperately needs to undergo reforms, he told AFP.

“Lebanon is not a good investment unless the government implements reforms,” the energy expert said.

Reforms would provide “the basic assurances that international companies need to work with less risk”.

State institutions in Lebanon have collapsed under the weight of the crisis, with strikes by civil servants adding to the paralysis.

An economic recovery plan has yet to take off more than three years since the financial downturn began, despite mounting pressures from foreign donors and the International Monetary Fund.

And political gridlock has caused a months-long delay in forming a new government amid fears of a presidential vacuum after Michel Aoun’s mandate expires at the end of October.

With a bankrupt state unable to deliver more than an hour or two of mains electricity a day, energy firms may choose to work on their Lebanon projects out of Cyprus, according to Baroudi.

“With no rule of law, Lebanon is a jungle,” he said. 

“It’s absolute chaos, whether judicially, financially or in terms of regulatory” bodies.

Dreamt up in the 1960s to attract tourists, Spain’s three-course “menu del dia”, or set lunch menu, has long been seen as the best deal in town. 

But with inflation hovering around 10 percent, its affordability is under threat as restaurants seek ways to economise.

For a starter, main course and dessert or coffee (or both), bread and a drink, the average price is around 12.8 euros ($12.60), according to figures from Hosteleria de Espana, Spain’s main hostelry association representing the hotel and restaurant industry.

Offered by almost every Spanish restaurant, its price makes it a popular option in a country where people frequently eat out. 

“Everyone chooses it,” says Sara Riballo, who is in her 30s, sitting on a terrace in central Madrid. 

“We eat out several times a week and we usually go for the set menu because it’s better value for money, it’s quicker and it’s quite varied,” agrees her colleague Estefania Hervas.

Spanish restaurants serve up on average four million “menus del dia” every day in the country of 47 million people, the hostelry association says. 

The idea was first cooked up nearly six decades ago when Spain was under the dictatorship of Francisco Franco.

A ministerial order was issued that all restaurants must offer a “tourist menu” to cater to the growing waves of foreign visitors to the Spanish coast. 

The decree was written into Spain’s official state bulletin, stating that the menu must from August 1, 1964 include, as a “minimum”, a soup, a main course, a dessert, a glass of wine and some bread. 

– ‘Extremely worried’ –

The tradition has lasted until today, where it acts as a sort of barometer for the Spanish economy, says Emilio Gallego, secretary-general of the hostelry association. 

“It’s a very, very popular way of eating lunch with millions sold every day across the country. It’s something we are constantly tracking,” he said.

Describing itself as “extremely worried by the effects of inflation and the price rises of recent months,” the association found three-quarters of its restaurants had raised the price of their menu del dia between November 2021 and April 2022. 

And that was before inflation peaked in July at 10.8 percent. 

In recent months, the price of olive oil has risen by 42.5 percent alongside the cost of bread, milk, eggs, meat and pasta, not to mention the spiralling bills for electricity, refrigeration or gas for stoves and ovens. 

With the industry “badly hit by rising energy and raw material costs at a time when it was still recovering from the health crisis”, it has had little choice but to raise prices, Gallego said. 

In most cases, restaurants have raised the price of their menu del dia by 10 to 15 percent, an increase of between 1.0 and 1.5 euros.

– ‘We won’t survive’ –

At Cafe Gijon, a landmark restaurant on Madrid’s central Castellana boulevard, they serve up 250 set meals a day, priced at 15 euros each. 

But manager Jose Manuel Escamilla said the prices are likely to rise in the coming weeks. 

“Everything’s going up: the price of electricity and mortgage costs have shot through the roof. If things carry on like this, we won’t survive.”

“It’s difficult because it will affect our customers but at the end of the day, if we don’t do it, we won’t be able to function,” he said.

Many restaurants are searching for other ways to save money and protect their margins. 

At a restaurant in one of Madrid’s chic neighbourhoods, they are now ordering meat in bulk and whole fish rather than pre-cut portions because the price is lower, admitted one of its buyers, speaking on condition of anonymity.

Gallego believes other restaurants will adapt by creating other formats, such as a two-course option of a main course with either a starter or dessert.

At Valgame Dios in Madrid’s Chueca neighbourhood, the number of dishes on offer has already been slimmed down.

“Instead of three or four starters, we have two,” explains waitress Laura Rubio, who says she’s just “waiting to see what will happen” and whether it will put off diners.

Like other customers, 47-year-old scriptwriter Helio Mira is putting a brave face on things. 

“It’s not only the price of the menu del dia that is going up but the price of life in general but what can we do?” he said.

“We just have to ride out the storm.”

As a teenager in rural China, Zeng Jiajun used his internet know-how to watch a banned documentary on the bloody military crackdown in Tiananmen Square.

A decade later, he was part of the sprawling censorship machine that suffocates China’s cyberspace, tasked with stopping the spread of anything the Communist Party does not want its people to know about.

“At first when I worked on this I didn’t think much bigger because a job is a job,” he said.

“But deep inside I knew it was not aligned with my ethical standards. And once you work in this field for too long… the conflicts become stronger and stronger.”

Now living in the heart of California’s Silicon Valley, Zeng is an affable 29-year-old who wears the weight of his past experience lightly.

Few people who have worked inside China’s propaganda apparatus have told their stories. Even fewer are prepared to do so openly.

– Profoundly shocking –

Zeng came of age with the internet.

Born in 1993 in southern Guangdong province, his first experience of computing was during elementary school, when his father brought home a PC.

What he found when he went online was astounding.

“There was just like a whole new world that was waiting for me to explore,” he told AFP.

The Chinese government’s early attempts at web censorship were imperfect; VPNs provided access to subjects and information not discussed publicly.

In amongst the forbidden fruit was “The Gate of Heavenly Peace”, a three-hour documentary on student protests in Tiananmen Square in June 1989.

What Zeng saw — tanks and semi-automatic weapons wielded against unarmed students in a violent crackdown that left hundreds, perhaps thousands, dead — was profoundly shocking.

“It’s such a huge, significant, historic event, but nobody ever told us about it, and you cannot search for it on the Chinese internet; that content is all erased,” he said.

“I just felt like there was a huge lie. A lot of history is covered up.”

– TikTok –

Like other bright Chinese of his generation, Zeng spent his undergraduate years abroad, and returned to China with a degree in business administration from Estonia.

His tech savvy ultimately made him an attractive prospect for ByteDance, an upstart Chinese social media company whose global-facing TikTok and inward-facing Douyin were taking on the might of Twitter and Facebook.

“At first I was very excited because ByteDance is the only company that had a successful business outside of China,” he said.

“They have TikTok, which ruled the internet in the US and in Europe, so we were very proud of that. Most of the time only US internet companies ruled the world.”

And it was a good job. Intellectually stimulating work with a $4,000 monthly salary that was well above the average in Beijing.

– Off limits –

Zeng said he was part of a team that developed automated systems to filter content the company did not want on its platform.

These systems incorporated artificial intelligence to look at images, and to examine the sound that accompanied them, transcribing commentary and scouring for off-limits language.

If the system flagged a problem, Zeng said it would be passed to one of the thousands of human operatives who could delete the video or halt the livestream.

Mostly they were looking for the kind of thing any social media company might balk at — self-harm, pornography, unauthorized advertising — but also anything politically sensitive.

Some imagery was always off limits: pictures of tanks, candles or yellow umbrellas — a symbol of protest in Hong Kong — along with any criticism of President Xi Jinping and other Communist Party leaders, according to Zeng.

He said guidance was handed down to ByteDance from the Cyberspace Administration of China, but supplemented by the company itself, ever wary of overstepping purposefully vague rules.

“In China the line is blurred. You don’t know specifically what will offend the government, so sometimes you will go beyond and censor more harshly,” Zeng said, describing the company’s position as “like walking a tightrope”.

But the censor’s list was fluid, and specific events would trigger an update.

– Covid-19 –

In early 2020, that update included Dr Li Wenliang, an ophthalmologist in Wuhan who was trying to raise the alarm about a deadly new disease.

Li was silenced by authorities anxious to suppress early reports of what we now know as Covid-19.

“When Dr Li Wenliang posted the news, this information got censored, and propagandists came out (on television) and said this doctor was spreading misinformation,” said Zeng.

But when Li himself contracted Covid, Chinese internet users were incensed.

“Everybody was refreshing Twitter or their Weibo feed to check the latest news,” Zeng said, explaining they were seeking the truth between rumors and official denials.

“Many tweets or Weibo got deleted,” he said.

“I posted something like ‘we want news freedom. No more censorship’, and then my Weibo account also got censored.

“At that moment, I felt like… I was a part of this ecosystem.”

Li’s death — now one of more than 6.5 million worldwide — was the final straw.

“The night that Doctor Li Wenliang died, I felt that I couldn’t do this any more,” Zeng said.

He quit his job and moved back to his hometown, where he brushed up on his coding skills and applied to become a graduate student at the Silicon Valley campus of Northeastern University.

– Brave idealist –

Zeng feels safe in California, and does not believe the Chinese government would try to silence him on US soil.

His parents, who remain in China, are more circumspect about the risks he faces for speaking out.

“They just want me to be careful about what I say. They’re worried that things might go wrong or I will be manipulated by the foreign media. But I’m not listening to them on this issue,” he said.

“I assume I won’t be able to go back to China for at least 10 years.”

But that cost is worth paying for Zeng, who describes the battle against censorship as a “struggle of the people.”

“I think this is a huge issue (and we) should raise awareness of what’s going on in China.”

As Xi Jinping readies to be anointed for a record third term as president of an increasingly nationalist and strident Chinese government, Zeng feels gloomy.

“In the short run, everybody is pessimistic. But I think everybody is optimistic in the long run for the future of China.

“I think if you go back to our history, there are always some very brave idealists who will make the change when the moment comes.”