Saudi Arabia Could Influence The Events In The Middle East By Manipulating Oil Prices

By Sal Bommarito

Bloomberg Quick stated, “Oil is so much more than a fuel. It’s a force even bigger than its $3.4 trillion market. It’s a weapon, a strategic asset, a curse. It’s a maker and spoiler of fortunes, a leading indicator and an echo chamber . . . ”

The price of oil was specially volatile in 2014 on the downside. The price per barrel decreased from $107.73/ barrel in June to $53.27 by year end, a 48% decline, even as Americans and Europeans drove less in more efficient cars. Today the price of oil is approximately $48. The volatility of oil prices prior to the current precipitous drop was always affected by world affairs, economics, supply and demand and OPEC, which is dominated by Saudi Arabia.

Saudi Arabia has a new leader, King Salman. Will he adopt new policies towards the U.S. and other Arab countries, or will he follow in the path of his predecessor? The answer to this question could have a dramatic impact on events in the Middle East and regions surrounding it.

The world is closely monitoring the actions and comments of the Saudis relative to oil prices. The price of this commodity and the commodity itself represents the power of this Sunni state. For years, Saudi Arabia impacted the price of oil to its benefit. Vast accumulation of wealth has enabled the kingdom to maintain domestic tranquility in the face of increasing religious fanaticism and influence. The Saudis bribe other nations to do their bidding. They unleashed insurgents to Shiite controlled nations to create instability. And now, they have a unique opportunity to dramatically impact three very important countries involved in the ISIS conflict.

There are some very interesting oil conspiracy theories floating around the marketplace. It should be noted that Saudi Arabia is the largest producer of oil in the Middle East, and it has experienced a huge drop off of revenues because of declining prices. Yet, the Saudis have resisted the urge to cut back production and create an artificial shortage, which would drive prices up. While prices and revenues are low, the country can draw upon very significant monetary resources.

The Saudis have stated that if they cut back production, other producers will step in,  fill the vacuum and prices will not increase. Additionally, they say that oil prices should be established by supply and demand, not on the whim of one producer or another.

Back to conspiracies. One is that the Saudis are not increasing prices because they want to deter the production of oil in the U.S. Production in the U.S. has increased from 5 million barrels in 2008 to 8.5 million barrels in 2014 spurred principally by hydraulic fracking in shale deposits. This has enabled the U.S. to dramatically decrease its dependence on foreign oil and made it a producer equal in size to Saudi Arabia. Some say that the Saudis are keeping prices low to discourage  new production in the U.S. High cost producers in this country are currently shutting down operations rather than producing oil and selling it a loss.

Another theory is that Saudi Arabia is reveling in the problems facing both Russia and Iran. Both are large producers who are highly dependent on  oil revenues. Russia and Iran are also dealing with economic sanctions imposed by the U.S.

Russia is being punished because it annexed Crimea  and continues to support rebels who are destabilizing Ukraine. Iran is being sanctioned because it has continued its nuclear program.

Saudi Arabia is in a position that is very familiar to it. By manipulating oil prices, it can significantly impact other nations. In the case of Russia, the Saudis want it to encourage Bashar al-Assad of Syria to abdicate. Russia has been supportive of Assad and has given him military assistance as he fights with ISIS and moderate rebels. Most believe Vladimir Putin will not cave to these demands.

Iran is Saudi Arabia’s principal antagonist in the region. It is the leader of the Shiite world;  Saudi Arabia leads the Sunni world. They regularly are at loggerheads when one supports a regime and the other works to destabilize it. Iran is having serious financial problems because of oil prices and sanctions. Its ability to create unrest in Sunni nations will be diminished if revenues are squeezed. Exacerbating its relationship with Iran is Saudi Arabia’s concern about the ability of Iran to develop a nuclear weapon. Like Israel, the Saudis believe that this contingency is an existential threat. It is highly probable that the Saudis are conferring with the U.S. to maintain sanctions and not permit the Iranians to move forward in their nuclear program, while the Saudis keep oil prices low.

Saudi Arabia is in the driver’s seat relating to several important situations. We can be sure that they will use their influence and money to take advantage of these situations.

Middle East Predictions: ISIS, Civil War, Terrorism

By Sal Bommarito

The prospects for peace in the Middle East are not favorable in the near future. The ISIS conflict and several other ongoing problems will continue to plague the Arab world during the next year. This essay will examine some of the more pressing issues and their effect on the geopolitical landscape.

 

The ISIS caliphate will begin to take shape as hostilities wane between ISIS and its enemies. It will be a monumental achievement for the interlopers to establish a new nation on stolen ground. The brutality of ISIS will not subside. In an effort to solidify its dominance, ISIS will execute opponents as well as non-Sunni Arabs. These actions will serve to exacerbate the refugee crisis and increase the number of displaced Arabs.

 

The immigration of refugees to countries neighboring Syria, including Turkey, Jordan and Lebanon, will create dire circumstances for the lost souls and for the countries that have been so receptive to those in need. Refugees will encounter worsening living conditions and be ostracized by citizens of countries to which they immigrated. It is likely that thousands will perish from starvation, cold weather, unsanitary conditions and genocide.

 

The coalition’s plan to train and arm Iraqi soldiers and moderate rebels in Syria will be unsuccessful. This contingency will create a stalemate if the U.S. does not send ground troops. Ground force support of bombing operations is critical as ISIS fighters fortify their positions in populated areas. Pilots have not been able to identify and destroy targets without experienced controllers on the ground.

 

At some point, the U.S. will be forced to abandon its objective to destroy ISIS. There is no reason to expect that President Obama will change his battle plan during the final two years of his administration, even if Congress petitions him to do so.

 

The extraction of U.S. forces from the region is a significant goal of the Obama administration. This coupled with resistance of Americans against ground troop utilization should ensure another unsuccessful American military escapade.

 

Iraq will continue to be a battleground where Shiite government forces encounter persistent Sunni opposition and ISIS fighters. The current leader of Iraq will eventually cave into hard line pressure and increase the oppression of Sunnis not under the control of the ISIS caliphate.

 

The Shiite/Sunni feud will escalate throughout the region as each sect employs insurgents to destabilize nations governed by the other sect. Yemen is the latest victim, where Shiite fighters have deposed Sunni leadership.

 

The consensus among nations determined to dethrone Bashar al-Assad of Syria will dissipate as domestic conditions in each Arab country worsen. The U.S. has already deferred its earlier objective to topple Assad, so he will survive for the time being. Iran must deal with western sanctions and oil-inspired economic instability, so it will be diverted. Turkey has a gargantuan refugee problem that is taxing its financial condition and a growing Kurdish push for independence. The only state that will likely pressure Assad is Saudi Arabia. Nevertheless, Syria will continue to be a killing field as ISIS protects its gains and Syrian rebels battle against Assad.

 

Iran will not be able to negotiate a deal with the U.S. to produce a nuclear weapon. The U.S. Congress is going to resist any inane deal that would make the Middle East more dangerous and encourage others to develop or buy a nuclear weapon.

 

Saudi Arabia will be the only country with relatively stable conditions. Low oil prices will decrease its revenues, but it has significant monetary assets on hand. The inability of Iran to develop a nuclear weapon will be a great relief to the Saudis. The new king will attempt to increase his country’s influence by bribing other nations and unleashing Sunni insurgents into Shiite countries.

 

The big question relates to terrorism. Will all the upheaval in the Middle East create new problems for the west? Will ISIS encourage new lone wolf atrocities throughout the world? Is global terror on the rise and being encouraged by ISIS’ success? Will ISIS refocus on building a new nation based upon terror, cruelty and fanatical religious ideology?

 

Recent Issues Exacerbating Middle East Problems

By Sal Bommarito

The bad news emanating from the Middle East and neighboring countries has been non-stop for quite some time. At first glance, the events seem unrelated and pose little risk to those of us who live thousands of miles away. Recently, there have been new developments, which demand closer scrutiny because they could destabilize the Middle East further along with many nations throughout the world.

 

Essays published by this blog have analyzed every conceivable issue relating to the ISIS conflict. For those of you, who need background, please click here to access Softball Politics. You may read earlier articles of interest to you.

 

It’s time to once again reconsider the implications of the ISIS conflict from a global perspective. Initially, a group of unorganized bandits ravaged large tracts of land in Iraq and Syria. The leaders indicated their objective is to establish an Islamic caliphate. In fact, the group immediately began to murder innocent people who were not Arab, were Shiites or did not ascribe to the most fundamental precepts of Islam.

 

During their reign of terror, the renegades absconded more and more land along with oil reserves and antiquities, which they sold to finance their fighting force. ISIS uses social media to broadcast their propaganda and to recruit new fighters. Yet, most world leaders did not consider ISIS a great threat, including President Obama. Soon, the president changed his perspective and initiated a bombing program intended to stem the tide of ISIS.

 

ISIS has held its own while fighting against an inferior Iraq army, “moderate” rebels in Syria and Kurds near the border of Syria and Turkey. The latter group has had the most success to this point. American bombing sorties have been relatively unproductive, as many planes return to base with all their munitions because the pilots have not been able to find suitable targets, or they could not obtain permission to drop their loads.

 

ISIS has been fortifying its position in populated areas. This will hamper the current bombing tactics, as the U.S. is concerned with collateral damage. The need for qualified ground forces has never been direr. Most experts believe that the Iraqi army will never be able to effectively deal with the ISIS force embedded in cities and towns, even after the U.S. trains them.

 

More importantly is the fact that the ideology of ISIS is becoming more popular every day. The rebels have been boasting about their ability to withstand American assaults, made possible because assaults are exclusively from the sky. Recruits have been streaming in, as disenfranchised young people want to become affiliated with a winning group that defies the international establishment.

 

An outgrowth of this phenomenon is the continuing lone wolf threats popping up around the world, such as the attack on Charlie Hebdo in Paris, and more recently bomb threats to commercial airlines. A global destructive revolutionary spirit is growing rapidly, which is so diverse and widespread that it will be difficult to fend off.

 

After following events in the Middle East for an extended period of time, many have concluded that the hostilities between the two major sects of Islam (personified by Iran and Saudi Arabia) are the most perverse cause of conflict in the region. This is not a new development, however, three issues have caused the relationship between Shiites and Sunnis to deteriorate even further.

 

The first relates to ISIS and Syria. Even though Iran and Saudi Arabia are fighting ISIS, Iran continues to support the Bashar al-Assad regime in Syria, while the Saudis are dead set against it. This is a part of a growing and continuous indirect confrontation between the two most important countries in the Middle East that represent opposing Islamic perspectives. Further, fighters backed by Iran have just toppled Yemen and the Saudi-backed (and U.S. backed) government has been deposed. Iran and Saudi Arabia are forever supporting provocateurs in countries that are Sunni and Shiite, respectively.

 

Another development is the decline in oil prices. Saudi Arabia in effect controls the lion’s share of oil exported out of the Middle East. Its policy is to maintain current levels of production even if they foster lower oil prices. This has a serious impact on all of the oil producing countries around the world, especially Iran.

 

Some are speculating that the Saudi strategy is to severely damage Iran economically by keeping prices low. This will ultimately affect the ability of Iran to buy the loyalty of other Arab nations and conduct covert operations in Sunni controlled states. The Saudis are in a much better financial condition and can easily weather lower oil revenues.

 

Exacerbating the oil issue is Iran’s obsession with producing a nuclear weapon. This ambition causes great consternation in Saudi Arabia. It is likely that Iran will bully other Arab countries, including Saudi Arabia, when and if it can deliver a nuclear device.

 

On the other side of the coin, the Saudi’s are certainly pressuring the U.S. to maintain sanctions against Iran and to not allow the Iranians any flexibility in their nuclear program. The sanctions will weaken Iran.

 

The dynamics of the Middle East are becoming more complicated every day. There are many similar, but less strategic issues facing other Arab nations, most notably are Egypt, and its new secular government, and Turkey, which has been tepid in its response to ISIS. Other problems have been caused by U.S. policies.