Tuesday, December 16, 2014

Saudi Arabia Handles US Foreign Policy Better than Obama

Today, the news is filled with two topics : the continuing fall of oil prices and the near-collapse of the ruble, the Russian currency. But few commentators have pointed out is that The Kingdom of Saudi Arabia controls oil prices and, therefore, to a great extent, the ruble's value, too. Saudi Arabia began the oil price war when it convinced the OPEC oil producer cartel not to lower production when the effect of rapidly increasing US shale oil production had reduced America's dependence on Saudi Arabian and other OPEC oil, thus beginning the downward movement of oil prices. Saudi Arabia had a simple plan -- flood the world market with cheap oil, thereby driving high-cost oil producers, that is American shale oil producers, to halt oil production and go back to buying low-cost Saudi oil. Saudi Arabia made the calculated bet that it could, if necessary, subsidize its low-cost production until the high-cost producers were forced to shut down. The bet is working. Oil has fallen from $110 to $60 and the highest-cost shale oil producers are shutting in production facilities. Saudi Arabia is winning its economic bet. ~~~~~ But, the side effects of the Saudi game plan are as much political as economic. Let's focus on this aspect of the current Saudi Arabia oil price war. If oil prices remain low into the first half of 2015, the effect on rogue governments, such as Russia and Venezuela, will be devastating, while western economies and China will benefit. Cheap oil may even push Europe out of its stagnating economic doldrums. While Saudi Arabia’s actions address the shale oil rush in America, both the US and Canada, the Kingdom's greater political motivation is elsewhere. ~~~~~ IRAN. Saudi Arabia is the leader of sunni Islam. Its oil bet was surely also meant to break the economic back of Iran, the dangerous rogue shiite leader. The Saudis must believe, based on six years of unhappy experience, that they cannot rely on the US to contain the imminent threat that Iran poses, and so Saudi Arabia has quietly taken up the leadership role of containing Iran, something US-backed weak sanctions couldn’t do. Iran reportedly needs oil prices at $130 to $140 per barrel to meet its economic needs. At $60, Iran's economy begins to teeter and it may be forced to do several things -- reduce social services, get out of Iraq and drastically reduce its support for the shiite Iraqi government, and/or go to the nuclear negotiating table ready to comply with worldwide demands that it abandon its nuclear enrichment program -- all good outcomes from both Saudi Arabia's and Western viewpoints. ~~~~~ RUSSIA. As a long term supporter of both Iran and Syria, Russia is no friend of Saudi Arabia. The Saudis want the al-Assad regime in Syria to go. Moscow props up al-Assad, but for how long if Russia's currency continues to feel the two-pronged attack of low oil prices forced by Saudi Arabia and the sanctions imposed because of Russian President Putin's aggression in Ukraine and Crimea. Saudi's continued flooding of the oil market with low-cost oil has driven Russia's income, 1/3 of which is based on sales of its own oil, to a level that makes any aggressive action by Putin less likely -- but, of course, we must remember that Putin could always surprise the world by striking out in Ukraine or shutting off gas to Europe. The ruble has fallen from 35 to 1 US Dollar in June to 70 to 1 today - a disastrous six-month fall that is extraordinary in currency valuations. The ruble actually fell to 80 to 1 early today before the Russian Central Bank raised from 10% to 17% the interest it is willing to pay to anyone willing to deposit funds with it. Russia must now decide, much like Iran, how to survive with much less money in its coffers. And we must ask how Putin will maintain the pricing in his energy sales contracts with China when China can easily buy much less expensive oil and gas on the world market. Indeed, will Putin be able to afford the pipelines he has committed to build for deliveries both to China and customers in southeast Europe. ~~~~~ Dear readers, it seems that Saudi Arabia has taken charge of a large chunk of Obama's failed foreign policy initiatives. The Kingdom may, through the simple plan of driving down oil prices, accomplish what Barack Obama has never been able to do -- contain Iran's terrorist support and force it to shut down its nuclear enrichment program, as well as force Vladimir Putin to behave in a more civilized manner. AND, in the process, if it succeeds, Saudi Arabia will have made Israel safer than it has been in many years. So, the next time you're buying cheaper gasoline, give a nod and thank-you to the Kingdom of Saudi Arabia.

7 comments:

  1. There are two (2) countries in the Middle East region that want to desperately change the “whys & wherefores” of what is occurring there.

    Relationships between Arabs and between Arabs & Jews are at an all-time low. Various established financial sectors of business are stained. Outside investments are drying up because of the feuding religious sects. Car bombings, terrorists attacks, kidnappings, and women being molested is ramped.

    And the 2 countries that are quietly and behind the scene working for order and possible new “friendships of sorts” are Saudi Arabia and Israel.

    Outside involvement should cease and well intentioned activity needs to be supportive verses pro-active with the likes of Secretary of State John Kerry.

    ReplyDelete
  2. One of the more significant flaws in a Foreign Policy for arming the “moderate” opposition in the Middle East (mostly Syria right now) is that supporters of this measure have always taken for granted that the U.S. simply has to throw money and weapons at anti-regime forces on the off chance that they will become effective. There is no real reason to expect that this will happen, and helping to stoke another country’s civil war is an appalling way to put this theory to the test.

    In the absence of any remotely persuasive case for backing “moderate” rebel groups, U.S. support has been very limited and slow in coming, but the extraordinary thing is that the U.S. has provided any support in the first place.

    That doesn’t mean that the U.S. should cast its lot with the regime, which would also be a profound error, and it certainly doesn’t mean rushing to “make up” for lost time by throwing even more weapons and money down the drain. It suggests that the U.S. should not have entangled itself in the Syrian conflict or any other Middle East conflict to begin with.

    ReplyDelete
  3. Amazing what a barrel of oil can do...

    ReplyDelete
    Replies
    1. Oil prices are falling because of increased U.S. production made possible by fracking. Fracking has not only lowered prices for U.S. consumers – it’s had a huge impact on global oil prices. And as the global economy benefits from lower prices, the U.S. economy enjoys even more growth, more jobs, and more prosperity. It’s time for the anti-fracking mob to admit what’s obvious to the rest of us: the shale revolution is real, and its benefits are enormous. Without the growth from “fracking” Obama’s so called recovery would have as dead has his (and his advisors) economic plans would have been.

      The real question is what would have happened in the absence of North American fracking. Without the additional supplies coming on the market, today’s prices would almost certainly be above $100 per barrel, and quite possibly closer to $120. Those prices are enough to undermine global growth. The U.S. would not have escaped the effects of a global recession.

      Both the EU and Japan have been plagued by low or negative growth for decades because of high energy cost. Both economies have been slipping back into a low level recession… manageable, but none the less a recessionary effect overall.

      The geopolitical consequences of this action are unpredictable. Destabilizing Putin or the leadership in Iran is a dangerous game that could result either in more internal repression or in external threats to the neighbors of these regimes.

      All risks are real enough, but they are offset by the advantages of cheap oil to the global economy. Without fracking, the world’s major economies would already have slipped back into recession or worse. The U.S. would not have been immune.

      Delete
  4. Certainly nearly everything ends up being about money. And for the economic continuation of the life style that the revenue from oil produces in many Arab countries oil needs to be at a certain level - Supply & Demand. And being able to force a competitor or two (in this case countries) out of business is nothing more that a "business advantage" that all the better - It's Business.

    But this "RUMORED" association that Casey Pops alludes to is much more that money, oil, or power. If true it speaks of a fundamental change in the attitude in a region that has the (or soon will have with the advent of nuclear armament via Iran) ability to most stop the human race.

    That is Change spelled with a capital 'C'. Change never thought possible. If that is what is occurring between the Saudi's & Israeli - then please let everyone stay clear and allow the process to take on a public life.

    Man may not come this way again for a very long time. And what a great time of the year for it to happen. T be able to look back at Christmas 2014 in a few years and say ..."I witnessed true History in the making"

    ReplyDelete
  5. The implications of the confluence of interests between Riyadh and Jerusalem should not be overstated. Saudi Arabia is not about to give up its position in the Islamic world by forming an alliance with Israel, the perceived enemy of Islam. Yet quiet cooperation should not be ruled out. In the event of an Israeli attack on Iran, Saudi Arabia could stand down its radar. It could offer refueling and search and rescue backup for Israeli pilots. Above all, it could step up intelligence sharing with Jerusalem. In the future, the US could mediate possible cooperation in missile defense between Israel, Saudi Arabia, and other countries of the GCC. Theoretically, there is no reason that an anti-ballistic missile battery based in Saudi Arabia or Qatar could not intercept a missile launched at Israel from Iran. But such cooperation is extremely risky for the regime and would require a greater degree of trust in Israel by Riyadh.

    When it comes to Israel, the Saudis will continue to balance their national security considerations with their internal and regional legitimacy concerns. The political cost of improving relations with Israel is much higher than improving relations with Iran. Even though the Saudi Wahhabis have no love for Iranian Shiites, the latter are at least Muslims. A bit of bandwagoning with Iran will therefore most likely be the order of the day. In any case, the Kingdom knows that the US, for its own reasons, will have its back.

    As for the Israelis, the public diplomacy and psychological operations value of leaking meetings with the Saudis is limited and counter-productive. Israeli leaders would we well advised to keep these arrangements under the tightest of wraps, lest the Saudis ditch them entirely.

    ReplyDelete
  6. Former President Ronald Reagan’s the fortieth president was known for loud bold rhetoric against communist aggression, it’s easy to miss one of his most successful strategies with the Soviets: quiet diplomacy. America’s leaders today can learn a lot from the Great Communicator’s style, but they can also learn a lot from his secret legacy. President Reagan loved America. He was a Christian, a real American and a man with a great sense of humor. He brought significance, respect, grace and dignity to the office of the president of the United States.

    “I just don’t happen to think that it’s wise to always stand up and put quotation marks in front of the world what your foreign policy is,” Reagan wrote a friend in 1981. “I am a believer in quiet diplomacy and so far we’ve had several quite triumphant experiences by using that method. The problem is, you can’t talk about it afterward or then you can’t do it again.”

    President Reagan would have been a quiet asset to the quiet diplomacy between Saudi Arabia and Israel – not a photo op destroyer.

    President Reagan represented his country and his people on the world stage very well. He had the ability and the wisdom to be the leader of the free world. Something we are sorrowfully lacking today in our Foreign Policy people, and our President.

    It was never about Reagan – it’s always about Obama.

    ReplyDelete