Save The Oil And The Wine (Revelation 6:6)



After just over 10 years of debate, amendment and repeated rejection in Parliament, Iraq’s landmark oil bill is no closer to passing. The Cabinet first introduced the draft law in February 2007 to revamp and jump-start the country’s crucial oil and gas sector after the fall of longtime leader Saddam Hussein. And though the intervening decade has done little to address the underlying factors that paralyzed Baghdad’s attempt at reforming the energy industry, that hasn’t stopped the country’s leaders from trying. Since taking office in August, for instance, Oil Minister Jabbar al-Luaibi has steered Iraq’s energy policy in a more pragmatic direction. The legislature will soon debate the latest iteration of a bill to reinstate a national oil company to oversee the country’s smaller, regional firms, and al-Luaibi recently announced that Baghdad is exploring new contract models for foreign investors. Leaders such as Shiite National Alliance head Ammar al-Hakim, meanwhile, have proposed various plans to reconcile Iraq’s different stakeholders to end the country’s political gridlock. Even so, the differences between and within Iraq’s Sunni Arab, Shiite Arab and Kurdish communities will continue to undermine progress in the oil and gas sector, particularly with elections looming on the horizon.  

Mapping Iraq’s Discord

If a picture is worth a thousand words, a map is just as valuable in assessing the challenges facing the Iraqi government. The country’s oil production, which even at today’s depressed oil prices generates roughly 30 percent of its gross domestic product, is concentrated in just a handful of areas. In southern Iraq, the predominantly Shiite province of Basra alone accounts for roughly two-thirds of the country’s oil production; were it a country, Basra would be among the world’s top 10 oil producers. The Kurdistan Regional Government (KRG) in northern Iraq, along with the nearby disputed territories under Kurdish control, produces another 13 percent of the country’s oil. And the Sunni-majority regions in central and western Iraq produce little oil to speak of.
The uneven distribution has made oil a perennially contentious issue among the country’s three major ethno-sectarian groups. Following the United States’ invasion, however, the situation deteriorated. Iraq’s Shiite and Kurdish communities, newly empowered after decades under Hussein’s Sunni Baathist administration, intimidated Sunni Arabs out of politics. The ruling coalition then drafted the 2005 Constitution with minimal input from the Sunni community — and without clarifying which powers fell to which regions under Iraq’s new federalist model of government.
For the oil and gas industry, this oversight has proved a critical problem. The Constitution grants the federal government control of oil fields already producing oil. But it makes no mention of fields not yet in production, beyond stipulating that Baghdad must work with regional and provincial governments to devise a strategy for developing Iraq’s oil industry. Consequently, many Kurds argue that the KRG rightfully controls production in the region under the oil and gas law it passed in 2007, since several of the fields there were not yet producing when the Constitution was enacted. Baghdad, on the other hand, maintains that under the Constitution, the Kurdish oil and gas law needed approval from the Iraqi federal government to take effect. All the while, the country’s Sunni Arabs have advocated centralized control and even distribution of the country’s oil and gas revenue, hardly a surprising stance given their dearth of energy resources.
As troublesome as the dispute between Arbil and Baghdad has been for Iraq’s oil sector, divisions in the country’s Shiite Arab community are perhaps even more difficult to overcome. Iraq’s various Shiite parties have always held diverse views on a range of issues, including oil. Having won most of the Shiite vote in the first provincial elections after Hussein’s ouster, for example, the Islamic Supreme Council of Iraq (ISCI) called for the creation of a nine-province Shiite region, modeled after the KRG. The proposal aimed to give Iraq’s Shiites greater control of production in their oil-rich provinces. But it interfered with the plans of then-Prime Minister Nouri al-Maliki, leader of the Shiite Dawa Party, who needed a tighter grip on Iraq’s oil revenues to effectively rule. To make matters even more complicated, Basra has at times proposed forming its own region, a move that would cut the rest of Iraq’s Shiite population off from the province’s substantial oil production.
Iraq’s sectarian and political divisions have led to a decadelong political stalemate over the oil reforms. And though the country’s energy sector currently has other problems to contend with — such as the KRG seizure of two oil fields previously under Baghdad’s control during the battle for Mosul — the legislation is no less important. The Constitution grandfathered in existing oil and gas laws when it took effect, meaning that Baghdad is still offering foreign investors outdated contract terms put in place when it nationalized its energy sector. Without passing a new upstream oil and gas law, Iraq will struggle to entice more foreign companies to invest into its oil and gas industry (a contentious issue in itself).

A Reformed Strategy

This reality has become more glaring for Iraq’s politicians over the past few years, especially as tumbling oil prices strained the federal and regional governments’ finances. Combined with the Islamic State’s rise, which brought the country’s competing factions together against a common enemy, and the fall of al-Maliki, who had steadily increased his control over oil revenues, the price drop encouraged Iraq’s leaders to reconsider their approach.
Prime Minister Haider al-Abadi has had to prioritize more inclusive reforms to preserve the country’s fragile unity against the Islamic State. Along the way, Iraq’s provinces have gained autonomy, however slight, in some aspects of governance, and the federal government has slowly relaxed its hold on the oil and gas industry. In early 2016, Baghdad approved a measure to split the country’s South Oil Company into two entities, the Dhi Qar Oil Company and the Basra Oil Company, each of which would oversee oil operations in its respective province. The prime minister, facing pressure from Shiite leaders such as Muqtada al-Sadr, also reshuffled his Cabinet in favor of a more technocratic administration last year to combat the rampant corruption plaguing Iraq’s government. As part of the shake-up, al-Abadi considered appointing a Kurd as oil minister — perhaps the most powerful position in Iraq’s oil industry — before settling on al-Luaibi, the ISCI’s nominee.
His final choice for the post has so far continued the trend toward reform. Prior to taking over the Oil Ministry, al-Luaibi was known as a technocrat who had guided the South Oil Company from 2003 to 2008, its first years working with international oil companies after Hussein’s government collapsed. (Rumor has it that al-Maliki removed al-Luaibi as head of the company to reassert central control over it.) He is also the first Basrawi oil minister in recent years. But more important, al-Luaibi has acted pragmatically since assuming the post. He announced shortly after taking office that he intended to broker a deal with the KRG; within a month, Arbil and Baghdad arranged to jointly export oil produced in Kirkuk through the North Oil Company, splitting the proceeds. More recently, he finalized the South Oil Company’s split and advanced the measure to reinstate the Iraqi National Oil Company.
Relative to other proposed reforms, the national oil company bill may be the least contentious. Iraq has not had a unified national oil company since 1987, and its regionally focused oil firms, such as the North Oil Company, currently fall under the Oil Ministry’s purview. Resurrecting the Iraqi National Oil Company would likely distance the ministry from the country’s oil firms, enabling it to focus on regulation; beyond that, the change would not be terribly dramatic. Nevertheless, the last time Iraq debated a draft of the legislation, in March 2016, Kurdish politicians opposed the measure because of the number of oil fields it would turn over to the national company’s control.
Furthermore, whether Iraq’s political groups share the prime minister and oil minister’s zest for energy reform is unclear. The country’s Kurdish, Sunni and Shiite populations are still divided, not only among but also within themselves. And their differences often play out on the national stage. In March, for example, the Patriotic Union of Kurdistan tried to stymie the rival Kurdistan Democratic Party’s cooperation with Baghdad over energy production and increase its share of revenues by seizing control of oil facilities in Kirkuk. The degree to which Iraq should be federalized, moreover, is a subject of fierce debate between Iraq’s Kurdish and Sunni Arab communities.

More of the Same

Still, some politicians seem to be on board with change. Al-Hakim, leader of Iraq’s National Alliance as well as the ISCI, announced a framework in October, proposing a dialogue to reconcile Iraq’s various groups. One of the main components of his plan, dubbed the “historic settlement,” is to discuss expanding and formalizing federalism in Iraq, something he and the ISCI have long advocated. Al-Hakim has reached out to Kurdish leaders to drum up support for his dialogue, leading a high-level delegation to the KRG earlier this month to meet with its president, Masoud Barzani. Not to be outdone, al-Sadr — an ideological rival — released his own framework in February. Compared with al-Hakim’s proposal, al-Sadr’s plan envisions a solution more in line with the Sunnis’ interests, including a more centralized government and the disbanding of the Shiite-majority Popular Mobilization Forces.
Notwithstanding their stated goal of national reconciliation, both leaders devised their frameworks with Iraq’s upcoming legislative elections in mind. The country’s Shiite groups lack cohesion. (They will retain the most important positions in government regardless, however, if only because Iraq is a Shiite-majority country.) Besides al-Sadr and al-Hakim, al-Maliki also has strong support in predominantly Shiite areas, even though he is a divisive figure. As the vote approaches, and the fight to retake Mosul winds down, each leader is trying to influence the country in a way that will best serve his political goals. They’re not alone, either. Foreign powers such as the United States, Iran, Turkey and Saudi Arabia are also working to shape Iraq’s future to suit their own agendas, further complicating the country’s reconciliation process.
Iraq’s political gridlock looks sure to continue. For the country’s oil and gas sector, this means more of the same: The energy reform that has eluded Baghdad for the past decade will stay at bay, even if Parliament manages to pass the national oil company bill. And the country’s leaders will have to keep relying on executive and ministerial authority to try to make piecemeal reforms in the meantime.

Save The Oil And The Wine (Revelation 6)

By Patrick Dele Cole | 07 March 2017 | 3:04 am  
The role of the U.S. in Iraq is rather unedifying. President Bush encouraged Saddam Hussein’s Iraq to attack Iran in a bitter war. He invited hundreds of Iraqi scientists to the U.S. to train and research in nuclear technology.
When Secretary of State, Kerry said, “we can’t let politics and mythology cloud reality,” what did he mean? Kissinger said that for major oil producer to pursue policy such as trans-nuclear energy was a wasteful use of resources. But was it the place of the U.S. to dictate how a nation runs its economy? The U.S. position, followed slavishly by the west, was a smokescreen. Moreover, these were materials that a decade or generation before were being openly offered in the Middle East.
U.S. actively encouraged these countries, despite the 1968 nuclear nonproliferation treaty, to acquire nuclear power technology. U.S. had a policy named “Atoms for Peace” which allowed its participation in the International Atomic Pool and thus gave friendly governments access to 40,000 kilograms of Uranium – 235 for nonmilitary research.
For 30 years the U.S. and indeed all western countries were sharing nuclear technology, components and materials with countries in the Middle East. It was a centre point in U.S. policy so long as that country, enjoying the nuclear sharing privilege, would oppose USSR. For example, the U.S. supports the Shah of Iran, Rezah Pahlavi, who needed nuclear power.
In 1974, U.S. sold two reactors to Iran. It also sold enriched Uranium to Iran. This agreement was extended in 1975 with a new US$ 15 billion trade deal which included the purchase of eight nuclear reactors for US$ 6.4 billion with a processing facility that would extract plutonium from nuclear reactor fuel, thus enabling Iran to operate a nuclear fuel cycle. From that to nuclear weapons was but a small step.
Both Iraq and Iran had major nuclear programmes. They sent scores of Iranians and Iraqis worldwide for nuclear training!! 1975, work began in Bashihr with the aid of a West German company, Craftwork union AG, to provide internal nuclear fuel load and reloading for 10 years.
Eight more reactors were to be provided by Brown Boveri and Framatome. Contracts were signed for France to undertake and to reprocess Uranium for Iran.
Iraq had a plan to build six nuclear bombs a year and sought co-operation from France, Italy, and Canada. France built the Osiris reactor. All this was done under the watchful eye of the Israeli who had begun to feel that they may be sold out of this race to get nuclear bomb in Iraq. They should know because their own bombs were obtained through clandestine research and help from outside Israel. It became Israeli policy to sabotage nuclear programmes in the rest of the Middle East.
The U.S. tried to dissuade Pakistan from pursuing its own nuclear project by promising Pakistan that it could benefit from the facility being built in Iran under a scheme devised by no other than Dick Cheney, for the plant to serve as hub for energy needs in the area.
In Pakistan’s case, their nuclear activity was built so deep underground in the 1970’s and thus was able, covertly, to test its nuclear programme. Ultimately a successful detonation was carried out. Its programme went unchecked. They built five tunnels each capable of withstanding 20 kethon detonation. The West believed that an under-developed country like Pakistan could never master nuclear bomb technology, and “yet Western countries sold everything to us;” “literally begged us to buy their equipment,” according to Chief Pakistani nuclear sources. Double standards were the name of the game. France, UK and U.S. refused inspection of their facilities by the Atomic Energy Agency. They, however, would insist that other nations be subject to inspection. But the real hypocrisy, in the cold light of day, lay in the enthusiasm with which the developed world rushed to earn hard cash or gain access to cheap oil. In 1976, Kissinger advised Pakistan to wind down its reprocessing project and rely instead on a Dick Cheney-devised U.S. facility in Iran.
Since the Second World War, resources had been poured into Iran and neighbouring countries. Leaders had been courted, indulged and those who would not play, were deposed. Syria and Iraq looked to USSR. The net result of the arms race was that everybody lost, but the Middle East lost most, emerging as an endemically, unstable place.
Nevertheless, India built its own nuclear arsenal. Pakistan turned to the U.S. But as Ayatollah Khomeini put it “All our problems come from America.” The fall of the Shah produced major panic in U.S; and corresponding hope in USSR that they would soon take over influence in Iran.
To balance the influence of the West in the Middle East, the USSR invaded Afghanistan. Under the USSR, Afghanistan was en route to modernity. It expanded education, male and female. New schools, hospitals increase tremendously, so did the literacy level which broke the feudal structure of tribal system, ending ethnic discrimination. Job security, women’s rights were promoted, regardless of the latter-day propaganda epitomised by Miss Malalla. After the ousting of Dawud in 1973 by Taraki who was himself overthrown by Hafianllas Aminu, thought to have been recruited by the CIA, this was the beginning of the widely held belief that Al Qaeda was a CIA creation.
Oil was and is abundant. There was a rising demand between 1940s – 80s ushering in a fundamental rebalancing of power; or at least it ought to. For example, during the Yom Kippur war, Algeria and Libya which provided 30 per cent of Europe’s oil needs suspended shipments to Britain and United States. In 1970, Iraq’s attitude stiffened further to the West, when Prime Minister Qasim was ousted from power and publicly executed on television “for the whole world to see.” The Iraqi war led to a broader struggle to free the Arab nations from the domination of western imperialism and from exploitation by oil monopolists. Khomeini is reported to have said: “The American President is the most repellent member of the human race”. British and American oil men were equated with “blood suckers”. Now, such strong statements were a clear sign that the West had to respond to such rhetoric by the only way they knew how – by regime change.
Is there continuity in West’s Policy in Middle East and Africa? I hope this dive into history emphasizes the theses that the Middle East and Africa are doomed to failure because of the unhinged policy of the U.S. and the West, China and Russia. How about Arab instability? This has been stoked by a continuity of the policy of exploitation – and a result of U.S. policy in 1950s and later. The West has treated Saudi Arabia and Kuwait with Kid cloves. Why is the West not pressing on Arab countries such as Saudi Arabia and Kuwait and more Arab nations apart from Jordan to take Arab Immigrants? Is it that they do not want to antagonise Saudi Arabia and Kuwait?

Save The Oil And The Wine (Revelation 6)

In this photograph taken on August 29, 2016, Afghan workers fill fuel containers from fuel tankers at a oil depot on the outskirts of Kabul.
Tax-exempt military fuel imported into Afghanistan is being sold on the open market, industry officials and a new anti-corruption report reveal, causing the government huge revenue losses as Kabul struggles to wean itself off foreign aid. PHOTO: WAKIL KOHSAR / AFP
President Dwight Eisenhower called the Middle East “the most strategically important area in the world” “a stupendous source of strategic power and probably the richest economic prize in the world in the field of foreign investment.” State Department declared the Middle East “a prize that U.S. intended to keep for itself and its allies in the unfolding new world order of the day.” Delano Roosevelt’s adviser, Adolf Berle, said control of the incomparable energy reserves of the Middle East would yield substantial control of the world. Loss of control would threaten America and world domination” – a policy that has not changed since 1945.
Oil changed the whole dynamic of power in the world: the Middle East had the oil; the world needed the oil and was willing to do anything to get the oil. USSR, also for strategic reasons would not leave the West alone in the Middle East. As the western economy tottered because of the increase in oil prices, they needed to check the influence of USSR, while rebuilding its economy. For this, both blocks, the West and the USSR, did all in their power in the Middle East to keep their respective influence, while check-mating each other.
Any arms wanted by countries in the Middle East, they got. From Atoll and Styx missiles, MIGs, 17, 19, 21, and 29 planes were sold to them. Three quarters of military material of India were supplied by USSR; India was licensed to produce military Soviet MIG fighter aircraft while the USSR had denied China from production of this plane.
The USSR signed a 25-year treaty of peace, friendship and cooperation with India and agreed to provide economic, technical and military support. If India went one way, Pakistan would go the other way; hence Pakistan went to the United States.
Saddam Hussein emphasizing the importance of oil said “the real moment when Iraq became independent was when it nationalised its oil industries and oil companies began to pay a fair price for the oil.” The Middle East was, at that time, characterised by what was described as an unimpeded unprecedented inflow of cash.
1970s – 1972 – 73, Iran’s oil revenue rose eight-fold; Iraq revenue rose 50-fold from 26 billion USD to 575 billion USD. The more money that flowed into the Middle East the more Islamic it became. In 1973, Syria and Egypt became one country and attacked Israel in Operation Badr. Not only did they become more Islamic they also became dynastic.
1973 was in some ways a seminal year for the United States; that year saw the Yom Kippur war and this fundamentally changed U.S. attitude to the whole of the Middle East because of the Middle East use of oil supplies as a weapon of war. By restricting output it pushed the price of oil up by at least 400 per cent. But more fundamentally it showed a major weak point in Europe and America.
In November 1973, Richard Nixon spoke to Americans on television telling them that the United State was consuming too much oil and had to cut back. He cut the speed limit to 55mph: heating of home and offices was pegged at the maximum 68°F, air conditioners were to be turned off or down, power plants were to be reconverted back to coal from oil, aviation fuel to be restricted; and all Americans were to lower their thermostat by at least 6°.
The United States, President Nixon insisted, must meet its energy needs. These measures saved 150,000 barrels per day; road accidents were reduced by over 15 per cent – partly as a result lowering speed limits.
The new political issue was energy, forcing President Nixon to produce a new energy policy which included solar power, nuclear power and many other theories blossomed.
The rising prices of oil justified prospect for oil in difficult places for example in the Gulf of Mexico, North Sea, Alaska and so on in an effort to reduce dependency on oil from the Middle East. As usual the West saw a problem and found ways to deal with it. The Middle East on the other hand, saw an opportunity and failed to exploit it to the maximum. Instead they spent money foolishly, lavishly and saved money in western banks which used their money to dig the West out of a hole. The West did what it always did best: promoted discords and instability in the region to their own advantage.
In six months, oil prices had risen from US$ 3 to US$ 12. The West suffered the effects of rising oil prices. But in the Middle East there was a construction boom. The ruling classes were subject to increasing demographic selfishness. The result was a slowdown towards pluralistic democracy. The rise of liberal democracy was stunted giving way in the Middle East to increasing dynastic rule. Liberal democracy virtually, disappeared everywhere in the Middle East. In fact, some intellectual experts have argued that the U.S. actually preferred autocratic dictators and did not want liberal democracy in the Middle East. Each time a nation moved towards democracy the U.S. scuttled that government in favour of a dictatorship.
The 1970s saw decades of opulence in the Middle East: Iran Air ordered Concorde, but could not fly it because countries in Europe would not allow it to fly over them claiming noise pollution. Lavish spending knew no limits. The Arms Race began in earnest. Spending was massive, lavish and even reckless.
The Western nations lobbied aggressively to sell arms to Middle East. In Iran the defence expenditure rose 100 per cent in six years, orders to U.S. companies for military materiel was US$ 20 billion. Which surface to air missile will they buy? The U.S. or the French or the British or that of USSR? Between 1975-1978, Iran spent 40 per cent of its budget on arms.
Iran ordered hundreds of chieftain tanks; the Israelis ordered large number Mirage fighter jets. MIGs – 21, 23, 25 and 29 were ordered by Syria, Soviet 772 tanks and U.S. 5 jets were ordered by Iraq. U.S. sold F5 and F16s to Saudi Arabia. The Middle East arms race was truly on, to the benefit of the economies of Britain, France, the USSR and USA. The up shoot of all these war materiel, the pampering of Saudi Arabia, Kuwait by the U.S. started in the 1970s and still continues today, resulting in the endemic instability of the area which continues today.
A few years ago, Iran wanted to become a nuclear power. Today this is a big issue. It may be said that the handling of the Iranian pursuit of nuclear power defined President Obama’s administration. But it was not so earlier. Western countries were falling over themselves to provide nuclear technology and knowhow to the Middle East.
Iraq’s nuclear potential and the inability of the Atomic Energy Commission (AEC) to locate them led to war and were used by President Bush as a deliberate policy to hoodwink the United Nations (UN). In 2003 the U.S. declared war against Iraq: citing the laboratories for weapons of Mass Destruction, and the facilities, the centrifuges for nuclear weapons. President Bush and Prime Minister Blair gave these facts as a justification for war. Hans Blix, the UN inspector’s team leader could not find any.
Iran’s desire to have nuclear power has provoked similar questions. If Iraq or Israel were to have nuclear weapons, the Iranians did not understand why they should be denied. Moreover, some have argued that Iran’s pursuit of nuclear weapons was essentially defensive and as a deterrent.

Save The Oil And The Wine (Revelation 6:3)

Mike Stone / Reuters
For a moment, it looked like Donald Trump might have lost heart. On Saturday, well-sourced reporters were indicating that the president-elect’s appointment of Rex Tillerson as secretary of state was imminent. But then things went quiet. Trump tweeted noncommittal praise but made no announcement. Meanwhile, some leading Republicans began voicing concerns about the Exxon CEO’s relationship with Russian President Vladimir Putin. Had the Saturday reports been a trial balloon that was shot down?
Apparently not. Early on Tuesday, Trump announced Tillerson as his nominee for secretary of state. The pick sets up a battle between the Trump administration and Republicans in the Senate—likely the biggest showdown so far, with ramifications that include not just the conduct of American foreign policy but also the shape of Trump’s relationship with the GOP-led Congress for the foreseeable future.Like many of Trump’s picks, Tillerson has stunned observers, though not necessarily for the same reasons. He has no history of wild-eyed statements, like National Security Adviser-designate Michael Flynn, nor a declared agenda against his intended agency, like EPA Administrator-nominee Scott Pruitt, nor a self-declared inability to run a department and a total lack of experience in it, like Ben Carson, nominated to lead Housing and Urban Development. Tillerson is judged to be supremely competent, even by his harshest critics—too competent, they might say. But he also has no experience in diplomacy or government, a resume without precedent in the history of secretaries of state. (The closest analogue might be Bainbridge Colby, a close friend of Woodrow Wilson’s handed the job in 1920; his appointment “ran the gamut from puzzlement to outrage,” a Wilson biographer wrote, and Colby’s single year in office was undistinguished.)

Like many of Trump’s most interesting stances and allies, the Tillerson nomination cuts across typical coalitions and ideological lines. Many Democrats will instinctively oppose him, in part because he’s a Trump pick and the head of Exxon, a liberal bogeyman. But others may back him, calculating that a successful business executive is not a soft political target. But the Senate has a rhythm of its own and can move unpredictably. Depending on how tightly Democrats whip their votes, a few Republicans defecting could sink a Tillerson nomination. And that’s where things get interesting.
Tillerson has a long history of business with Russia, and in particular with the Putin regime. A lifelong Exxon employee, he managed the oil giant’s Russia business before ascending to the corner office, in part on the strength of his ties in Russia. The company inked a major deal with Rosneft, the Russian state petroleum company, and it has been critical of sanctions levied on Moscow by the Obama administration, as they cost Exxon dearly. In 2013, Putin awarded Tillerson the Order of Friendship, a special if eccentric national prize.Although Trump won the election while promising improved relations with Russia—even calling on the country to hack Hillary Clinton’s emails and saying he might recognize the annexation of Crimea—many Republicans remain more hawkish on Russia, and they have expressed hesitations of varying degrees about Tillerson. To a certain extent, their concerns are amplified by the ongoing story of Russian hacking into the presidential election, which the CIA says was intended to help elect Trump. On Sunday, Senator Marco Rubio of Florida tweeted, referring to the Order of Friendship:

Being a “friend of Vladimir” is not an attribute I am hoping for from a  – MR
On Tuesday, Rubio followed up with a statement:
While Rex Tillerson is a respected businessman, I have serious concerns about his nomination. The next secretary of state must be someone who views the world with moral clarity, is free of potential conflicts of interest, has a clear sense of America’s interests, and will be a forceful advocate for America’s foreign policy goals to the president, within the administration, and on the world stage. I look forward to learning more about his record and his views.
Senator John McCain, who has been outspoken in his concerns about Russian electoral interference, also expressed reservations on Sunday. “I don’t know what Mr. Tillerson’s relationship with Vladimir Putin was, but I’ll tell you it is a matter of concern to me,” he said on Fox News. “You want to give the president of the United States the benefit of the doubt because the people have spoken. But Vladimir Putin is a thug, a bully and a murderer, and anybody else who describes him as anything else is lying.”
McCain’s friend Lindsey Graham took a similar line. “Based upon his extensive business dealings with the Putin government and his previous opposition of efforts to impose sanctions on the Russian government, there are many questions which must be answered,” the South Carolinian said in a statement. “I expect the U.S.-Russian relationship to be front and center in his confirmation process.”A spokesman for Ben Sasse, the Nebraskan who has been a staunch critic of Trump, tweeted that “Mr. Tillerson is a man of tremendous accomplishment, but U.S. policy toward Russia’s Soviet-style aggression demands rigorous oversight.” Iowa’s Chuck Grassley, in his trademark inscrutable Twitter pidgin, seemed to voice similar concerns, asking that Trump and Tillerson read Wall Street Journalcolumn critical of Putin.

Trump spokesman Jason Miller told CNN, without providing examples, that Tillerson had stood up to Putin.
Sitting somewhat to the side of the debate, as often, is Senator Rand Paul. It’s been reported, though not confirmed, that Trump will buttress Tillerson’s lack of experience by appointing John Bolton, the superhawk and former ambassador to the United Nations, as deputy secretary of state. The Kentuckian says he’s an “automatic no” on Bolton.
On the other hand, plenty of Republicans are already on board. Majority Leader Mitch McConnell says he’ll support Tillerson’s nomination. And even Jeff Flake, an Arizona senator who was a noisy critic of Trump, seemed positive:
The fact that Condi Rice, James Baker and Bob Gates are recommending Tillerson carries considerable weight. I look forward to the hearings.
That support from respected former Republican Cabinet secretaries is indeed interesting and notable. All three were critical of Trump during the campaign, and all three hail from rather different foreign-policy lineages than Trump. It is impossible to tell how they might overlap or diverge from Tillerson, who has articulated only a limited sort of diplomatic worldview.
But just as a Secretary Tillerson might have an incentive to be friendly to Russia, Rice, Baker, and Gates might have some incentive to boost Tillerson. As Isaac Arnsdorf lays out, Baker’s law firm represents Exxon and Rosneft, as well as Gazprom, the Russian state natural-gas concern. Rice and Gates, meanwhile, run a consulting firm that does business with Exxon.Hill-watchers see the Tillerson nomination as Trump’s most audacious pick, because of the risks. Not since 1989, when Democrats blocked John Tower’s nomination as secretary of defense, has a Cabinet nominee been rejected, and the president at the time came from a different party. But several nominees have been withdrawn when their confirmation chances ran into difficulty, most of them in the last 25 years.

The critics of the Tillerson nomination all left the door open to backing Tillerson, essentially pleading with him to make so unequivocal a condemnation of Putin that he they can confidently support him. But what if they don’t? Or what if he won’t? What would have led Trump to take that chance, despite the warning shots over the weekend?
Perhaps Trump is willing to risk dying on this hill because his affinity for Russia is truly strong. There’s ample evidence to suggest that: His praise for Putin, his disdain for NATO, his steadfast refusal to even countenance the idea that Russia might have been behind hacks in the election. Selecting Tillerson reinforces his desire to reach an understanding with the Kremlin. Or perhaps Trump sees in Tillerson some sort of foreign-policy brilliance not yet revealed to the public.
But who knows? While there’s probably no single answer, a central factor may be that Trump just doesn’t think the Senate is a threat. Consider the track record. Republican leaders in the House and Senate criticized Trump for his policy ideas, called his statements racist, and otherwise distanced themselves from him for months. In the end, they split into two main camps. There were those, like Sasse and Flake, who never wavered, and while their stand was courageous, Trump can look back now and see it didn’t come near stopping him. Then there were those, like McConnell and Speaker Paul Ryan, who choked back their reservations and endorsed Trump. The president-elect has learned his lesson: There’s nothing Republicans in Congress can or will to slow him down, whether it’s his extensive conflicts of interest or his Cabinet nominations. Until they prove him wrong, why would he believe otherwise?

The Saudi Arabian Nuclear Horn (Daniel 7)

But for Nuclear Option Saudi Arms Purchases Increasing

Analysis by Emad Mekay

CAIRO (IDN) – Though nuclear blustering has remained hollow, Saudi Arabia has again increased its weapons imports and stood as the main catalyst for a climb of 10 percent (or $6.6 billion) in global weapons sales in 2015, according to a recent defence report. The rise is the latest sign betraying the level of anxiety in the conservative kingdom over what Saudi officials say is a threat from Iran.
The Saudis have recently been particularly rattled by the advances of Iranian foreign policy in the Middle East. Especially worrisome were the successes of Iranian-backed militias in Iraq and Syria.
That coupled with the sentiment that the Saudis are being let down by the United States, their traditional protectors, explain a spate of moves the Saudis are making to protect their backyard in some Arab countries.

Many experts in the Middle East say the measures include Riyadh preparing for the worst case scenario of a war with the more powerful Iran through such massive arms purchases.

According to the annual Global Defence Trade Report by IHS Inc., based in Englewood, Colorado in the U.S., Saudi Arabia and UAE bought $11.4 billion (17.5% of the global total) worth of war systems in 2015, up from $8.6 billion the year before.

The combined value of Saudi Arabia and the UAE’s defence imports is more than all of Western Europe’s defence imports combined,” said Ben Moores, senior analyst at IHS.

Saudi Arabia’s arms imports grew from $6 billion to $9.3 billion; an increase that is three times that of the entire sub-Saharan Africa market, according to the report. Riyadh’s arms purchases are forecast to rise to $10 billion by the end of 2016.

Global arms markets overall rose $6.6 billion, bringing the value of the global defence market in 2015 to $65 billion. Of those, the Middle East, now the scene for several wars and military operations where Saudi Arabia plays a crucial role, was the largest importing region, with a total of $21.6 billion in deliveries of weapons.

“The global defence trade market has never seen an increase as large as the one we saw between 2014 and 2015,” said Moores. “2015 was a record-breaking year.”

Among the top five importing countries in 2014, Taiwan, China and Indonesia left their positions for Australia, Egypt and South Korea in 2015. Egypt, another Middle Eastern nation, came in as the world’s fourth largest weapons importer mostly due to the largesse of its deep-pocketed backers – Saudi Arabia and the UAE.

Stemming Iranian influence

Riyadh is giving Egypt’s military rulers unprecedented aid. Sunni Egypt is seen by the Saudi leadership as another layer, albeit untested, of protection of the Gulf Arabs against the possible re-emergence of a Shiite Persian empire in Iran.

Riyadh has recently taken a proactive foreign policy elsewhere in the region as well and has not hesitated to engage in military action or fund armed operations.

To stem Iranian influence, Saudi Arabia is widely believed to be channelling weapons to Syrian Sunni rebels who are fighting Shiite government in Syria, a close ally of Tehran. Riyadh is engaged in the proxy war to dislodge Syria’s Bashar al-Assad, who belongs to the small Alawite Shiite minority subsect.

Saudi Arabia was quick to use military power to bolster a Sunni ruling Al-Khalifa family in Bahrain against a popular uprising that was part of the initial phase of the Arab Spring.

While Bahrain has largely quieted, the oil-rich kingdom is still active in a costly air war in Yemen against Iran-backed Shiite Houthi forces. The Saudi military adventure has only produced mixed results and failed to roll back Houthis who could control the southern Red Sea entry point. Iranian influence is increasing among Houthis leading to further strain on Saudi military and further enflaming Saudi apprehension.

Saudi nervousness continued to be in full display in the second half of July as it was seen seeking anti-Iran allies, even in previously unbelievable relations.

News broke July 22 that a Saudi delegation, headed by a former army general, made an unprecedented visit to Israel. This was a major development for risk-averse Saudis. While no Saudi official was included, it is widely believed that the visit would never have happened without official approval.

The message Riyadh was sending is that it is willing to change how it holds contacts with Israel, which is technically at war with Arab nations for its occupation of Arab and Palestinian land. Riyadh had previously used multilateral forms as a vehicle for contacts with the Jewish State.
Israel and Saudi Arabia are the two countries who favour a U.S. military action against Iran’s nuclear facilities and both fear Iran building nuclear weapons.

Nuclear weapons a security option?

As early as the beginning of 2016, Riyadh was still floating ideas it may seek nuclear weapons if it is left alone to face Iranian military might as one of its many security options.

A further sign of Saudi regional activism is that Riyadh and the UAE are pushing other countries in the Gulf Cooperation Council – Kuwait, Qatar, Bahrain and Oman – to take a more unified security position against Iran.

Saudi Arabia is also working to diversify security relationships as hedges against perceived U.S. decline and weakening commitment. The country is moving towards France, for example, as a major weapons supplier.

The country whose leaders have long bragged about a strategic alliance with Washington has been more vocal in terms of foreign policy and often now speaks against the U.S. when they do not agree on the Iran policy as they did in the past.

This new-found activism accelerated under the leadership of Saudi King Salman, who came to office in 2015. The proactive measures taken by his ambitious son and heir-apparent, 30-year old Prince Mohammed bin Salman, mean that these are unlikely to ebb any time soon.

The changes were not lost on Santa Monica-based Rand Corporation. The influential U.S. organization however said in a recent report that the Saudi moves were not designed for a real and fundamental shift in policy away from its strategic alliance with the U.S. but were more to press Washington to play a greater role in the security of the Gulf Arab countries versus Iran.

Saudi doubt of U.S. commitment turned acute after U.S.–Iranian cooperation following the nuclear agreement. Saudi Arabia feels threatened by the increasing restlessness among Shiite populations throughout the Gulf and see that a sanctions-free Iran will have enough cash and resources to comfortably stir those minorities as it did in neighbouring Iraq.

Riyadh now routinely points to Tehran for inciting sectarian tension. Saudi TV stations host pundits non-stop who say that Iran wants to see a repeat of Shiite ethnic cleansing against Sunnis in Iraq. Riyadh has bankrolled several media outlets that criticize Shiites and Tehran on similar grounds.
Yet, the most concrete sign of worry remains the billions of dollars the country invests in weapons systems. [IDN-InDepthNews – 02 August 2016]

Obama Helped Create The Saudi Nuclear Horn (Daniel 7:7)

Barack Obama has nobody to blame but himself for alienating Saudi Arabia
Con Coughlin
19 April 2016 • 6:07pm

The fierce criticism President Barack Obama has attracted over suggestions he wants Britain to remain in the EU seems pretty tame when compared with the ear-bashing he is set to receive from Arab leaders when he arrives in Saudi Arabia today.

US officials have been at pains to stress it will be for the British people to decide whether they leave or remain in the EU in June’s referendum. But the fact the White House has indicated a preference for Britain’s continued membership has nevertheless prompted Brexit campaigners to accuse Mr Obama, who is visiting the UK this week, of hypocrisy and double standards.

Before Air Force One touches down in London tomorrow, though, Mr Obama will first travel to Saudi Arabia for a summit with Gulf leaders, where he is likely to face far stronger criticism than that voiced by disgruntled Brexiteers.

In common with his predecessors, Mr Obama is anxious to secure his foreign policy legacy as he enters the twilight of his presidency. Bill Clinton spent his final year in office trying to negotiate an Israeli-Palestinian peace deal (it failed), while George W. Bush sought to bring some semblance of order to war-torn Iraq by limiting the extent of the sectarian violence.

Mr Obama, too, would like to be remembered for making his mark on the treacherous politics of the Middle East. He did, after all, make the region one of his foreign policy priorities when, shortly after taking office, he delivered his ground-breaking Cairo speech in April 2009, in which he sought a “new beginning” between Washington and the Arab world.

Seven years later, and the naivety of those sentiments have been laid bare. For, far from enjoying a more constructive dialogue with Arab leaders, Washington now finds itself desperately trying to repair relations with them.

Moreover, Mr Obama has no one but himself to blame for causing this dangerous rift. It began when he gave his enthusiastic backing to pro-democracy demonstrators at the start of the so-called Arab Spring in 2011, not realising that by so doing he was supporting the removal of long-standing Sunni Muslim allies such as Egypt’s President Hosni Mubarak and Bahrain’s ruling family.

Much of the turmoil now afflicting the region, with Islamic State (Isil) fanatics seeking to establish fiefdoms in Iraq, Syria and Libya, has its origins in Mr Obama’s enthusiasm for overturning the Arab world’s status quo.

This has been further compounded by Mr Obama’s pursuit of a deal to end Iran’s long-standing obsession with acquiring nuclear weapons. The reason leaders of Iran’s Shia Muslim Islamic revolution sought to become a nuclear superpower in the first place was so that they could dominate their Sunni Muslim rivals in Gulf states such as Saudi Arabia.

Thus, by bending over backwards to seal a deal with the ayatollahs, Mr Obama has succeeded in alienating long-standing regional allies such as the Saudis and Egypt. When he invited Arab leaders to Camp David last year to offer assurances about the Iran deal, most of them made their excuses and stayed home.

Mr Obama’s hopes of repairing relations during what is likely to be his final presidential visit to the kingdom will not have been helped by his recent comments in an interview for The Atlantic that the Saudis need to find a way “to share the neighbourhood” with Iran. Nothing could be further from Saudi minds. On the contrary, everywhere you look in the Middle East today, from Syria to Yemen, the Saudis are actively resisting Iranian attempts to further extend their influence.

For what Mr Obama fails to understand is that, for all Tehran’s claims that, following the successful conclusion of the nuclear talks, it would seek better relations with the outside world, the deal appears to have had the opposite effect.

Buoyed by the knowledge it is set to receive a $150 billion bonanza with the removal of economic sanctions, as well as being able to recommence exporting its vast oil wealth, Iran is now seeking to intimidate, rather than reassure, its regional rivals.

Apart from test-firing nuclear-capable ballistic missiles, the ayatollahs have been caught red-handed shipping weapons to their Shia allies in Bahrain and Yemen. In Syria, pro-Iranian militias are exploiting the ceasefire to consolidate President Bashar al-Assad’s position, while in Iraq the Iranian-backed radical cleric Muqtada al-Sadr is trying to overthrow the pro-Western government of Prime Minister Haider al-Abadi. So much for Tehran’s promises of good behaviour.

In short, Mr Obama’s nuclear deal has encouraged more trouble-making by Iran, rather than ending it – a point his Saudi hosts will be keen to reiterate when they meet in Riyadh.

Furthermore, Mr Obama’s failure on the Iran issue should have a bearing on any thoughts he has on the EU campaign. For, if the leader of the free world can get it so wrong on a vital issue like Iran, then why would anyone in Britain take seriously any advice he has to offer on how we should vote in June’s referendum?

Apart from test-firing nuclear-capable ballistic missiles, the ayatollahs have been caught red-handed shipping weapons to their Shia allies in Bahrain and Yemen. In Syria, pro-Iranian militias are exploiting the ceasefire to consolidate President Bashar al-Assad’s position, while in Iraq the Iranian-backed radical cleric Muqtada al-Sadr is trying to overthrow the pro-Western government of Prime Minister Haider al-Abadi. So much for Tehran’s promises of good behaviour.

In short, Mr Obama’s nuclear deal has encouraged more trouble-making by Iran, rather than ending it – a point his Saudi hosts will be keen to reiterate when they meet in Riyadh.

Furthermore, Mr Obama’s failure on the Iran issue should have a bearing on any thoughts he has on the EU campaign. For, if the leader of the free world can get it so wrong on a vital issue like Iran, then why would anyone in Britain take seriously any advice he has to offer on how we should vote in June’s referendum?

The Weakening Sunni Hegemony of the Saudis (Daniel 7)

Obama to visit a Saudi Arabia deep in turmoil


RIYADH, Saudi Arabia >> The images of the past year have been deeply unsettling for the people of Saudi Arabia, long accustomed to oil-fueled prosperity and regional clout: militants firing at communities along the country’s southern border; protesters storming the Saudi Embassy in Tehran; civil wars raging in three nearby states.

The view from Riyadh has become increasingly bleak as stubbornly low oil prices constrain the government’s ability to respond to crises and as the kingdom’s regional rival, Iran, moves aggressively to expand its influence at Saudi Arabia’s expense.

Under huge stress, the Saudis have responded in unpredictable ways, often at odds with Washington’s interests. They have launched a costly military offensive in neighboring Yemen that has failed to defeat the Houthi rebels and has empowered the al-Qaida affiliate there. They have executed dozens of men on terrorism charges, including a prominent dissident Shiite cleric. And they have largely walked away from Lebanon, suspending billions of dollars in promised aid as Iranian influence there grows.

This is the Saudi Arabia that will greet President Barack Obama, who is scheduled to arrive in Riyadh on Wednesday and who is the source of no small share of this nation’s anxiety. Policymakers across the kingdom have long said that they feel Obama does not share the country’s regional interests. And after he criticized the Saudis as “free riders” last month, those suspicions have hardened into fears that he may be actively undermining them.

Obama may try to use his visit to mend relations, but it remains unclear how badly the ties that have long bound the United States and the Saudi monarchy have weakened, and whether the damage can be repaired.

“It is a concerning factor for us if America pulls back,” said Prince Turki al-Faisal, an outspoken member of the Saudi royal family, a former head of intelligence and a former ambassador to the United States. “America has changed, we have changed and definitely we need to realign and readjust our understandings of each other.”

The moment is a perilous one for the Saudis as they face economic and demographic challenges as well as strategic and security concerns.

Domestically, a growing cohort of young Saudis is entering the job market as low oil prices constrain economic opportunities and undermine the welfare system. Regionally, Iran has outflanked and outmaneuvered Saudi Arabia in crucial countries as the Arab Spring and the war in Syria have upset the local order. Globally, the drift of the United States away from the monarchy’s side has made the Saudis realize how much they have relied on the world’s most powerful nation.

“A large number of factors have come together, both in the region and at home, to create a very challenging threat environment for the Saudis,” said Lori Plotkin Boghardt, a fellow at the Washington Institute for Near East Policy. “The Saudis feel under siege.”

For decades, the kings and princes who rule Saudi Arabia wielded their oil wealth and religious clout as the controllers of Islam’s holiest sites to pull strings and fund proxies across the Arab world and beyond.

Since the kingdom has never had the military might to protect itself, its alliance with the United States has been essential, and hugely beneficial to both sides. Saudi Arabia knew that in exchange for a steady flow of oil and billions of dollars for the American arms industry, the U.S. would come to the rescue if its ally faced an external threat — and that it would never speak out too loudly about the kingdom’s closed political system or its poor human rights record.

That relationship was unsettled by the Arab uprisings of 2011, when Saudi officials saw the U.S. cut loose another Arab ally, President Hosni Mubarak of Egypt, amid popular protests. Since then, frustration among Saudi officials has grown as Obama limited American engagement in later crises, in Libya, Syria and elsewhere, and as he made a deal with Iran to lift sanctions in exchange for the reining-in of its nuclear program.

In Syria, the Saudis saw the uprising against President Bashar Assad as an opportunity to replace an Iranian ally who was killing his own people. The hope was that a government more amenable to Riyadh’s influence, and less to Iran’s, would come to power. But that hope dwindled when the U.S. backed away from military action after Assad crossed Obama’s “red line” against the use of chemical weapons.

Over time, it became clear that Obama had prioritized combating the Islamic State over ousting Assad. This infuriated Riyadh, which wanted to marry the two causes. Privately, Saudi officials blame Obama for prolonging the war by barring Saudi Arabia and other countries from giving Syrian rebels more powerful arms, like anti-aircraft missiles, which Obama feared could be used outside Syria by terrorists.

The mounting frustration has led Saudi Arabia, under a new monarch, King Salman, to abandon its quiet checkbook diplomacy and lash out. In January, it executed 47 men on terrorism charges, including al-Qaida militants and the Shiite cleric — sending what it thought was a message to deter jihadis and Iran from trying to destabilize the kingdom.

Analysts have begun speaking of a “Salman Doctrine,” although it is mostly associated with the king’s son Mohammed bin Salman, 30, who is the defense minister and is second in line to the throne. The doctrine calls for increased self-reliance and more assertiveness in regional affairs.
Last month, Saudi Arabia suspended $4 billion in aid promised to the Lebanese army and security forces, saying that Hezbollah, the Iranian-backed Shiite militant organization in Lebanon, had become too powerful. The Saudis and their Persian Gulf allies also issued travel warnings, depriving Lebanon of Gulf tourism dollars.

Those moves surprised U.S. officials, who have reported no change in the security situation in Lebanon and who continue to support the Lebanese army as a counterbalance to Hezbollah.
Saudi Arabia has also shown a growing willingness to use direct force. Last year, its military spending grew to $87.2 billion, as the country passed Russia to become the world’s third-highest military spender. Last month, it opened a new arms factory, and it has proposed building a military base in Djibouti, on the Horn of Africa, to project power abroad. Mohammed has also spearheaded the creation of an international alliance of Muslim countries to combat terrorism, although it is unclear when — if ever — it will begin operations.
Diplomats who track the kingdom question whether Saudi Arabia has the strategic capabilities to match its new ambitions.

One test case is Yemen, where the kingdom and its allies have carried out a bombing campaign for more than a year, trying to oust the Houthi Shiite militant group from the capital and restore the government — at tremendous cost to the people of Yemen. An estimated 6,400 people have been killed, more than half of them civilians; nearly half the country’s provinces are on the verge of famine; and al-Qaida has expanded its control in the south.

The Saudis defend the war as essential to their national security. “It is a war of necessity,” said Abdulaziz Sager, a Saudi political scientist and the chairman of the Gulf Research Center. “You can’t let a failing state with a violent nonstate actor be your neighbor.”

Domestically, the fall in oil prices has echoed through the Saudi economy, forcing the government to run a large deficit, impose spending limits and ponder steps that were once unthinkable, like imposing taxes on citizens and privatizing parts of Saudi Aramco, the state oil giant.
Fitch Ratings and Standard & Poor’s have downgraded the country’s credit rating this year, and companies that depend on government contracts have struggled to pay workers, creating problems for citizens and for the kingdom’s many foreign workers.

“These are really uncharted waters,” said Plotkin Boghardt, the Washington Institute fellow. “The oil income has been like the superglue between the Saudi government and the Saudi citizens. With this glue beginning to melt away, it opens up a whole situation that we’ve never seen before and they’ve never been in before.”

It is not all dire news for the kingdom. Saudi Arabia still has the world’s largest reported reserves of oil, which remains essential to the global economy. The country also has low debt and large cash reserves.

And although Iran has increased its influence in Lebanon, Syria and Iraq, it has done so at great cost, financially and militarily. “The Saudis took the region for granted while Iran put a strategy in place back in the ’80s, and has been implementing it year by year and dollar by dollar,” said Randa Slim, an analyst at the Middle East Institute.

But the kingdom maintains strong ties with many other countries — including Egypt, Britain and Pakistan — and as a leading Sunni nation, it has the demographic upper hand against Shiite Iran. “The score is still in their favor because it is a majority Sunni Arab region,” Slim said.

Officials involved in the Saudi-U.S. relationship acknowledge the chill, but say that it has not filtered down to the operational level, and that cooperation remains robust on issues like security, counterterrorism and business. And many Saudis realize that Obama’s days in the White House are almost over and that his successor may engage differently with the kingdom.

“I’ve read so many accounts over the years predicting the demise of the House of Saud, and each time they’ve managed to survive,” said Robert W. Jordan, a former U.S. ambassador to Saudi Arabia. “They have an enormous survival instinct.”

Antichrist Stipulates Demands From Iraq Government

Sadr wants Iraqis to get a share from country’s oil revenues

Iraqi Shiite cleric Moqtada al-Sadr speaking at an event (File Photo: Reuters)
Influential Iraqi Shiite Muslim cleric Moqtada al-Sadr, leading protests to demand a technocrat government to fight graft, urged authorities on Monday to give every Iraqi a direct share from the nation’s oil revenues.

Iraq, with crude oil reserves among the largest in the world, ranks 161 out of 168 in Transparency International’s Corruption Perceptions Index in 2015.

“Allocate a share for each Iraqi citizen from the oil revenues,” he said in a speech detailing proposals to end graft, improve public services and revive the economy. He gave no detail on how this might be done.

Sadr’s followers have been staging protests for about a month demanding a new government be formed with technocrats not affiliated with political parties in order to fight rampant corruption.
The cleric didn’t specify if his demand on distribution of oil revenue to the population was a condition to end the protests.

Save The Oil And The Wine (Revelation 6:6)


Last week Saudi Arabia, Venezuela, Qatar, and Russia reached an historic agreement to cap oil production at mid-January levels.

Absent an improbable cut in global production, oil prices will stay low as the current glut lingers on.
One of the reasons Saudi Arabia orchestrated a drop in prices was to challenge the nascent U.S. shale revolution.

Coupled with sanctions wreaking havoc on the Kremlin’s budget, the longer Saudi Arabia can keep prices down, the more it will compound Russia’s economic pain.

Saudi Arabia is also using low oil prices as a means of upending on its traditional rival, Iran.

Last week Saudi Arabia, Venezuela, Qatar, and Russia reached an historic agreement to cap oil production at mid-January levels. The pact – the first between OPEC and a non-OPEC member in 15 years – aims to halt the precipitous fall in oil prices that has wreaked havoc around the world.
While news of the deal sparked some optimism, any bullishness quickly faded as reality began to set in: the deal will not take a single barrel off the market. Absent an improbable cut in global production, oil prices will stay low as the current glut lingers on.
The decision to freeze rather than cut production seems counterintuitive; producers have been under incredible financial strain, with some seeking assistance in a bid to keep their economies afloat. But for Saudi Arabia, the chief architect of the current crisis, there are several reasons for keeping prices low. These include: halting the U.S. shale revolution, making Russia pay for its Syria incursion, and undercutting Iran and Iraq.
With these strategies now beginning to bear fruit, Riyadh will resist calls to cut production. Moreover, without OPEC cooperation, other producers will also pump at near record levels, desperate not to concede market share. Low oil prices will therefore continue, at least for the foreseeable future.

Countering the U.S. shale revolution

One of the reasons Saudi Arabia orchestrated a drop in prices was to challenge the nascent U.S. shale revolution. The next few years will see the U.S. set to become the world’s largest producer, while reports also suggest its shale output could double from 4 to 8 million barrels per day by 2035.
This may seem insignificant; the IAE forecasts worldwide demand at around 96 million barrels this year. But analysts claim that even a 5% cut in global output – around 4.8 million barrels – would raise prices by between 50 to 100% today. So, shale will almost certainly heap downward pressure on prices in the long term.
Just as important, the limited time and money needed to construct wells mean they can be capped on and off relatively easily. This provides Washington a flexible lever to balance price shocks and weakens Saudi Arabia’s influence as a “swing” producer.
Not surprisingly, Saudi Arabia has plotted shale’s downfall. With the high costs of shale production, Riyadh figured a dramatic fall in prices would drive these new players out of business, thereby preserving the status quo.
The strategy has produced mixed results. Despite dozens of companies going bust, many have proved resistant, tightening belts and digging in their heels. Slowly, however, these companies are succumbing to market forces, with a wave of bankruptcies expected this year.
While many doubt Saudi Arabia’s ability to hold off the shale revolution indefinitely – especially since procuring shale is becoming much cheaper – the House of Saud is unlikely to cut production soon, given the relief it would offer its U.S competitors.

Reacting to Russia’s incursion into Syria

Vladimir Putin’s incursion into Syria in September last year has changed the facts on the ground, entrenching Bashar al-Assad’s regime and diminishing the influence of Saudi Arabia and other Gulf nations. Whereas Assad’s rule had looked shaky at the war’s start, Moscow’s involvement now all but ensures his survival.
Furthermore, as Russia continues to strike at opposition rebels, many of them sponsored by Saudi Arabia, Riyadh’s clout is beginning to fade. Moreover, as its influence in Syria wanes, so too will its role in further peace talks and discussions about the country’s future.
Dismayed at what they perceive as U.S. inaction in the face of Russian aggression in Aleppo and other flash points in the north, Saudi officials are becoming increasingly frustrated. Though the de facto OPEC leader is unlikely to get involved militarily without Washington’s consent, keeping prices low is one way to hurt Moscow’s fragile economy.
Coupled with sanctions wreaking havoc on the Kremlin’s budget, the longer Saudi Arabia can keep prices down, the more it will compound Russia’s economic pain. In fact, Russia’s finance minister, Anton Siluanov, recently claimed that the country needs $82 oil to balance the budget, with many analysts claiming that a default is now a possibility.
That might not change Putin’s calculations in Syria, but low oil prices will at least serve a costly reminder that Russia’s actions come with consequences.

Undercutting Iran and Iraq

Saudi Arabia is also using low oil prices as a means of upending on its traditional rival, Iran. True, the Saudi economy is heavily reliant on oil, with shipments accounting for 90 percent of its export earnings and 80 percent of government revenues. But it still enjoys a favorable financial position over its adversary across the Persian Gulf, with greater reserves and a smaller debt ratio. Meanwhile, Iran needs higher oil prices to break even.
•3612 Schiiten
In terms of regional influence, therefore, Saudi Arabia is likely to keep oil prices low in a bid to outlast Iran. Eventually, Riyadh hopes the financial pressure will mean Iran is unable to maintain its proxies in Syria, Yemen and elsewhere.
Having made huge military and diplomatic strides recently, which includes a recent nuclear deal with the U.S., Tehran may be forced to adopt a less expansive foreign policy, allowing the Saudis to reconfigure alliances in the region and regain much of their lost influence.
Similarly, Riyadh sees low prices as a means of further destabilizing the impotent Shia regime in Iraq, which has been an Iranian ally since the overthrow of Saddam. The alliance between the two has stoked Saudi fears of a coming “Shia Crescent”, with Saudi Arabia’s rulers keen to ensure Iran’s neighbor remains bitterly fragmented. As an added bonus, in the longer term, continued instability may also mean Iraq is unable to develop its remaining oil reserves.

Man Refuses To Save The Oil And The Wine (Rev 6:6)

From Venezuela to Iraq to Russia, Oil Price Drops Raise Fears of Unrest

AUGUST 24, 2015

Oil, the lifeblood of many countries that produce and sell it, appears to be rapidly turning into an ever-cheaper economic curse.

A year ago, the international price per barrel of oil was about $103. By Monday, the price was about $42, roughly 6 percent lower than on Friday.

In oil-endowed Iraq, where an Islamic State insurgency and fractious sectarian politics are growing threats, a new source of instability erupted this month with violent protests over the government’s failure to provide reliable electricity and explain what has been done with all the promised petroleum money. In Russia, a leading oil producer, consumers are now paying far more for imports, largely because of their currency’s plummeting value. In Nigeria and Venezuela, which rely almost completely on oil exports, fears of unrest and economic instability are building. In Ecuador, where oil revenue has fallen by nearly half since last year, tens of thousands of demonstrators pour into the streets every week, angered by the government’s economic policies.

Even in wealthy Saudi Arabia, where the ruling family spends oil money lavishly to preserve its legitimacy, the government has been burning through roughly $10 billion a month in foreign exchange holdings to help pay expenses, and it is borrowing in the financial markets for the first time since 2007. Other Arab countries in the Persian Gulf that are dependent on oil exports, including Kuwait, Oman and Bahrain, are facing fiscal deficits for the first time in two decades.
While the price has been declining for months, forecasts have always been hedged with the assumption that oil would eventually stabilize or at least not stay low for long. But new anxieties about frailties in China, the world’s most voracious consumer of energy, have raised fears that the price of oil, now 30 percent lower than it was just a few months ago, could remain depressed far longer than even the most pessimistic projections, and do even deeper damage to oil exporters.
“The pain is very hard for these countries,” said René G. Ortiz, former secretary general of the Organization of Petroleum Exporting Countries and former energy minister of Ecuador. “These countries dreamed that these low prices would be very temporary.”

Mr. Ortiz estimated that all major oil exporting countries had lost a total of $1 trillion in oil sales because of the price decline over the last year.

The apparent weakness in the Chinese economy is radiating out into the world,” said Daniel Yergin, the vice chairman of IHS, a leading provider of market information, and the author of two seminal books on the history of the oil industry, “The Prize” and “The Quest.”

“An awful lot of producers who enjoyed good times were more dependent on Chinese economic growth than they recognized,” Mr. Yergin said. “This is an oil shock.”

Although the price drop has most directly hurt oil exporters, it also may signal a new period of global economic fragility that could hurt all countries — an anxiety that already has been evident in the gyrating stock markets.

The price drop also has become an indirect element in the course of Syria’s civil war and other points of global tension. Countries that once could use their oil wealth as leverage, like Russia, Iran and Saudi Arabia, may no longer have as much influence, some political analysts said. Iran, which once asserted it could withstand the antinuclear embargo of its oil by the West, appeared to have rethought that calculation in reaching an agreement on its nuclear activities last month.

Of course, lower oil prices confer economic benefits, too. The average American household, for instance, buys 1,200 gallons of gasoline every year. And gasoline, on average, has sold for most of this year by roughly a dollar a gallon less than in 2014.

But even while lower oil prices stimulate economies of consuming countries, a protracted decline carries many unanticipated consequences — starting with the economic weakness in developing countries that buy increasing amounts of goods from the United States and others in the industrialized world.

A supply glut has been evident for some time, driven partly by a vast increase in Saudi production and a growing energy self-sufficiency in the United States, which was once heavily reliant on Middle East oil.

Saudi Arabia not only is producing a record amount, but also is increasing the number of rigs drilling for future production. And its Gulf allies, the United Arab Emirates and Kuwait, are following suit. Even with the turmoil wrought by the Islamic State, Iraq’s production has jumped nearly 20 percent since the beginning of the year.

The surge in production may seem counterintuitive, since lower prices can cause self-inflicted economic wounds and potentially incite more political and social trouble. But all the exporters in the Middle East are struggling with each other to protect Asian markets, now that the United States is using much less of their oil.

The Gulf states, said Sadad I. Al-Husseini, former executive vice president of the Saudi Aramco oil company, “don’t want to take on the role of oil price regulators because the market is far too big and too political for them to manage it.”

Had these producers curtailed their production late last year, he said, “a flood of new oil supplies from the U.S., Canada, the deep offshore and other basins would have continued to undermine the oil markets, and prices would have collapsed to where they are now in any case.”

The global glut is likely to worsen if the nuclear deal with Iran is approved, potentially releasing as much as one million more barrels onto the 94-million-barrel-a-day global market in a year or so.
Iran’s oil minister, Bijan Namdar Zanganeh, has made no secret about his country’s intentions. “We will be raising our oil production at any cost, and we have no other alternative,” he was quoted Sunday in Iran’s state-run news media as saying.

The big change in recent years has been the surge of United States oil production, adding more than four million barrels a day to global supplies. But in recent months the oversupply has been driven primarily by the Saudis, who have flooded the market in what economists regard as a deliberate attempt to drive down the price so that other high-cost producers can no longer compete — most notably the Americans.

Still, production in the United States has not declined as much as foreseen by the Saudis, who thought the price of oil would stabilize at about $50 a barrel. Now it may be headed to $30, the lowest level since the 2008 global economic recession.

The Saudis, the most important member of OPEC, have resisted calls by other members to reduce output. The result is that nearly all OPEC members, who together control much less of the global market than they once did, are pumping more oil.

“We are witnessing competition between member states over market share, and most of these countries are dependent on oil as a primary source of income,” said Luay Al-Khatteeb, a nonresident fellow in foreign policy at the Brookings Doha Center. If prices do not recover to the $60 a barrel level, he said, “and countries in the Arab region continue to rely on oil revenue heavily, we could see decades of decline.”

David L. Goldwyn, who was the State Department special envoy and coordinator for international energy affairs in the first Obama administration, said that if the Brent global oil benchmark price stays below $45 a barrel, that is “a red flag for stability issues across the oil producing world.”
“The hemorrhaging of government budgets reliant on oil will force dramatic cuts in spending or dangerous increases in borrowing, if not both,” Mr. Goldwyn said. “The countries without significant foreign exchange reserves are most at risk, and they include Nigeria, Angola, Algeria, Venezuela and Iraq. The countries which need to sustain investment to maintain political legitimacy need to be worried, and that’s Brazil, Russia and even Iran.”

Meghan L. O’Sullivan, director of the Geopolitics of Energy program at Harvard’s Kennedy School, said she was most immediately concerned about the impact of extended low oil prices on Iraq.
“Not only is fighting ISIS an expensive endeavor, but many of the political deals that need to be done to keep different groups supportive of the Iraqi government require money to sustain,” she said.
But Ms. O’Sullivan expressed a longer-term worry about possible miscalculations by Saudi Arabia, on both the duration and magnitude of the oil price drop.

“With a burgeoning population looking for jobs, education and health care every day,” she said, “the expensive social contract between the royal family and Saudi citizens will get more difficult, and eventually impossible, to sustain if oil prices do not recover.”