Category Archives: OPEC

Rouhani in Europe: Economic Irony, Mullahs as Princes………..

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KuwaitCox2 ا

As I read (and watch) the news, I notice that Iran’s Hassan Rouhani is signing tens of billions of dollars worth of contracts in Europe. It is as if he is some Saudi or Qatari or UAE prince or potentate. I realize that there is an irony here, somewhere (if I can explain it).

The Gulf GCC states are allegedly reportedly presumably perhaps maybe cutting back their purchases in Europe. Mainly non-military and non-security purchases. A result of lower revenues. The Iranians are busy signing new trade deals and purchasing tens of billions of new goods (and services). A result of increased revenues.

Oil revenues of most oil producers, including Gulf GCC, have gone down significantly. Iranian oil revenues are increasing sharply now, because of the lifting of sanctions. So will other non-oil revenues increase now given that their economy is diverse. It is too soon and too absurd to say that the mullahs are the “new” oil princes. Of course t is only like a windfall being used, but is it?
Who would have thunk it only months ago. How long would this trend last? How long could it last? Ich weiss nicht………..

Mohammed Haider Ghuloum
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Sad Economic Dances: From Tango Argentino to Saudi Arabian Ardha………

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“من حفر حفرة لأخيه وقع فيها :Whoever digs a hole for his brother, he himself shall fall into itAn Arabic saying against treachery, based on a Hadith quote from the Prophet.

” Saudi Arabia, the world’s largest oil producer, needs to sell oil at around $106 to balance its budget, according to IMF estimates. The kingdom barely has enough fiscal buffers to survive five years of $50 oil, the IMF said. That’s why Saudi Arabia is moving fast to preserve cash. The kingdom not only raised $4 billion by selling bonds earlier this year, but its central bank has yanked up to $70 billion from asset management firms like BlackRock (BLK) over the past six months. After years of huge surpluses, Saudi Arabia’s current account deficit is projected to soar to 20% of gross domestic product this year, Capital Economics estimates. Saudi Arabia’s war chest of cash is still humungous at nearly $700 billion, but it’s shrinking fast…………”

Argentina evokes images of tango, soccer, gauchos…and an awful economy — one of the world’s worst. Its economy is projected to show little or negative growth this year. Argentina is still indebted to American hedge funds, affectionately known as “vultures” in the country. And it remains the poster child of nations that default on their loans. But there’s new optimism in Argentina, mainly driven by presidential elections coming later this year…………….”

In Argentina, the ruling party could win another term in run-off elections. But the Tango Argentino goes on.

Now to Saudi Arabia, where the princes like to force their Western visitors to mimic the native all-male Ardha dance for the cameras. From George W Bush to Prince Chuck of England they have all pretended t enjoy this dance. Only the Frenchmen, Sarkozy and Hollande, could not bring themselves to pretend that they want anything to do with it.

There is a great Arabic saying from the Hadith that ” من حفر حفرة لأخيه وقع فيها   whoever digs a hole for his brother, he himself shall fall into it“.

As I have opined recently, the Saudi princes had bought the fantasy that they can “control” crude oil markets. They thought they could engineer limited lower prices for political strategic goals. To punish the mullahs in Iran, Putin in Russia, and the North American shale industry. It worked well beyond their expectations, to the extent that Saudi Arabia faces economic disaster in a few years.  They probably never dreamed that prices will collapse to less than $50 (apparently the Saudis need oil prices to hover around $100/barrel).  Other Gulf GCC states can live with much lower oil prices than $100, but not the Saudis.


If you look at the IMF chart, you’ll notice that the most corrupt most repressive of the Persian Gulf states require a higher price for crude oil to break even. These are the two countries to the right. Of course that could be just a coincidence, some may say “there is no correlation”.

However, the princes are fine. They take their cut first, from oil production and from huge military and civilian contracts. They keep on sucking the resources of the country and its people. Whatever reduction in their loot results from reduced oil prices they make up with commissions and kickbacks on even larger weapons contracts with the West.

Hopefully their reckless policies do not doom the economies of the other Gulf states.
Mohammed Haider Ghuloum

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Crude Oil Prices and Legitimacy in a Tribal Oligarchy………

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Several years ago, after one of Iraq’s convoluted elections, more foreign Arab Jihadis were flowing into that country, killing and maiming civilians, especially those of the Shi’a denomination. So did Wahhabi and Salafi money and weapons flow into Iraq, which was seen by the Wahhabis and their royal tribal potentates to have been “usurped” by the wrong people.

Some Saudi spokesmen, one of them worked at the time for the ambassador/prince/kleptocrat in Washington (he later moved on to Harvard), issued dire warnings, nay threats, via the Washington Post. They warned that they can roll back the growing Iranian influence in Iraq by destroying the Iranian (and presumably the Iraqi) economy. The method suggested was by flooding the world market with crude oil. At that time oil prices were high and Persian Gulf producers’ treasuries were flush with surplus cash. I wrote at the time on this site pointing out that the Saudi economy could not afford a sustained increase in crude production and lower prices.

They did not listen to me. In the past couple of years the princes took up the wrong advice: they started a deliberate policy of lowering crude oil prices, aimed at crushing the besieged Iranian economy and weakening the Russian economy (both allies of the Syrian regime, both supporters of Iraq). Like everybody else, they used oil as a political weapon. They probably also had the additional aim of weakening the shale industry in North America. Saudi production of crude oil increased and prices plummeted to much lower levels than they had expected (much lower than most observers expected).

They all waited with baited breath for the low price and the long Western economic blockade to bring the Iranian economy to its knees, for the Iranian Ayatollah to call the Saudi king and cry “uncle”. For Brig. Qassem Suleimani to be sent packing home and maybe for Iraq to be handed back to the former Baathists. Neither happened, but there is now an economic backlash, and possibly a political backlash brewing in the kingdom of no legal breweries.
The Saudi foreign exchange reserves are being depleted and they have now been forced to cut domestic spending (the princes still keep their cut of the oil revenues). Most Saudi citizens work for the state, in effect they are employed by the princes. There are no elections that would legitimize anyone in Saudi Arabia: so, money and patronage are the price of continued absolute one-family tribal rule. With revenues plummeting and foreign reserves being depleted, the main tool of legitimizing the avaricious ruling family has weakened for the second time since the 1990s.
Of course the security services are as strong as ever, in fact they are stronger than ever. That is how the princes have stimulated the economy: by hiring  tens of thousands of tribal members for the security services. The tame Wahhabi clerical establishment also toes the line and tries to do its part.

Now the Saudis face their second inevitable defeat in their adventure in Yemen (sooner or later). As the new quagmire in Yemen continues, with Saudi warplanes daily bombing civilian and other targets, the Western powers turn a blind eye to human rights violations as they compete to sell more weapons. The cost of the war also goes up: using and servicing and replacing state-of-the-art Western weapons is very costly. But it is one way of recycling the dwindling oil revenues and jiggling the balance of trade with the large industrial countries.

Tightening the belt may be wise economic policy, but it reduces the “legitimacy” of the ruling princes in the eyes of the tribes and many other citizens.

Expect more domestic trouble in the Arabian landmass that stretches north of Yemen and extends to humorless Jordan and western Iraq.

Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter

Crude Oil Price as a Two-Edged Sword for the GCC……….

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KuwaitCox2     ChristmasPeanuts

Have Yourself a Merry Little——-> Kenny G. Holiday 

“Additionally, the Saudis get a chance to deal Russia, Bashar al-Assad’s stalwart ally, a bloody nose, by driving down the cost of oil and hurting Moscow’s hydrocarbon revenue streams, which prop up a shaky domestic economy. As oil prices have fallen so has the value of Russia’s Rouble, plummeting 35% since June. Killing two birds with one stone would seem a smart policy, especially since it is highly unlikely to result in the sort of military escalation the Saudis wish to avoid. How long can the Saudis keep this game up? Realistically a few months, but if the price of oil keeps falling the Saudis may have to rethink their strategy……………”

Oil prices normally rise during times of economic growth in the USA and especially during periods of geopolitical turmoil as is happening in Eastern Europe and across the Middle East and Libya. But oil prices have been going down for some time now in spite of speeding US growth and turmoil in producing regions.

Some have predicted that the oil price decline may come to bite those who engineered them for political reasons, such as Saudi Arabia and the United Arab Emirates. It was also argued that the Persian Gulf Arab producers have huge sovereign funds that can cushion the domestic economic impact.
Fine and dandy, but we must consider the impact on the sovereign funds and on local GCC Gulf financial markets and on the public finances: (a) The Gulf sovereign funds are invested mainly in the world markets and are losing value as American and other markets decline with the price of crude; (b) Domestic GCC markets are now also tanking, from Saudi Arabia to Dubai, which will bring political pressure on the princes, shaikhs and potentates to support the stock markets. Many middle class families in the GCC are suffering huge market losses, estimated in many billions of dollars. In the Gulf, princes and potentates from Abu Dhabi to Riyadh rely on patronage as well as a ruthless mercenary security apparatus to keep absolute political power. Now there will be clamor for some more patronage to help market investors: you want to keep absolute political power, you gotta pay for it (from the people’s money, of course). Which in turn will create more pressure on the domestic budgets and on the value of sovereign funds.

In addition, now the oil price decline is beginning to be seen as a negative for the US economy. Odd, after decades of blaming the rise of the same variable for slow growth.
Given the shale fuel industry and the huge investments in it, as well as the importance of the major oil companies and their credit standing, the US economy now shares one thing with the Iranian and Russian economies. Some market ‘analysts’ now stress that the U.S. financial markets need oil prices to move up for the markets to rebound from recent losses. But does Main Street America need high oil prices back? That is unlikely.

Interesting: the USA, Iran, and Russia all ‘need’ higher oil and gas prices now. 
Mohammed Haider Ghuloum                          Follow ArabiaDeserta on Twitter

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Oil Weapon Redux: Saudi Oil Policy vs. Iranian Regional Policy vs. Ebola vs. Obama Sanctions……..

_9OJik4N_normal Sharqeya-Baneen-15    DennyCreek2

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There is new speculation about the ‘oil weapon’ in Arab media, in independent Arab media that is not owned by the Saudi or UAE or Qatari princes and potentates. This speculation has now also spilled into some Western media outlets. It claims that the Saudis, the usual crude oil ‘swing producers‘ of OPEC, are not playing their usual role these days. And they attribute this to regional strategic reasons.
The speculation is that the Saudis want to apply some economic pressure on their Iranian rivals (and perhaps on the Russians as well). Not the kind of direct crude type of economic pressure in the form of the blockades used by the Obama administration, but a more genteel ‘market’ type of pressure. If oil prices are low enough, this theory seems to go, then the Iranians will feel the economic pinch and reduce their support for Al Assad in Syria, Hezbollah in Lebanon, and perhaps reduce their involvement in Iraq and other places.

The idea is not new: it was expressed by the Saudis after they lost out in Iraq a few years ago. At the time, some minion at the Saudi Embassy in Washington opined in American media (the Washington Post?) that his country can drown the market in oil and hurt the Iranians. I wrote then (presciently?) that this may be a delusion, that the Saudis themselves cannot afford very low oil prices, given population growth and emerging political pressures at home.
The reduction in oil prices also coincided with the initial Ebola panic which impacted the travel outlook and hence the demand for fuel.

As if responding to this policy, or speculation about it, the Iranians have just announced a huge offer of weapons for the Lebanese military (which is secular but represents the sectarian and confessional divisions within that country). They seem to be in a race with the Saudis (who earlier announced a conditional $3-4 billion of French weapons) and the Americans to arm the (so far multi-sectarian) Lebanese military.


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Remember When the Oil Weapon Was Blackmail and Evil?……….

_9OJik4N_normal Sharqeya-Baneen-15    DennyCreek2

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“Now time has abruptly run out. The Arabs, who control nearly 60% of the world’s proven deposits, are slowing down the flow. Through this strategy of squeeze, they hope to pressure the industrial nations into forcing Israel to make peace on terms favorable to the Arabs. Moreover, they are steadily intensifying their oil shakedown. Originally they planned to reduce production by at least 5% each month. Later they embargoed all oil shipments to the U.S. and The Netherlands, in punishment for their support of Israel. Last week, showing new unity and clout, ten Arab countries announced that production for November will be slashed a minimum of 25% below the September total of 20.5 million bbl. per day. Though there has been promising progress toward a lasting settlement in the Middle East, the Arabs vow that they will continue their cutbacks and embargoes until Israel withdraws behind its 1967 borders………….”

That was during the Yom Kippur War of October 1973. The Arabs, at least the regimes and media, still claim that war was won. Initially the first round of the “Ramadan War” was won, but the military tide had turned decisively before the ceasefire that was engineered by the Nixon administration. But official celebrations and/or commemorations are held in Egypt every year on this occasion, sometime twice a year: once in October and again during the Islamic Hijri month of Ramadan (usually the two don’t coincide, although they did in 1973).
That Arab oil embargo of 1973 was widely denounced as blackmail and evil in Europe and North America. Looking back, the Arabs got a bum rap on that one: it is not the act of blackmail itself, but who does it that makes the difference. Something must have happened since then. Now it is the Western powers that impose oil and gas embargoes: against Russia, Iran, Syria, Iraq (in the past) and others who do not comply. Countries that break any Western embargo or blockade are punished, and embargoed themselves. And it is not blackmail anymore: it is cool now. It is considered as part of a wise clever strategy to “shake down” other countries, just as the Arabs were perceived as “shaking down” the West in 1973. The only difference is that the Western powers have the upper hand now, economically speaking. The shoe is on the other foot. Speaking of change………..
Not all blackmails, or shakedowns, are equal.
Mohammed Haider Ghuloum

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The IS Caliphate and Kurdistan, Jihadist Enclave Facing Two Fronts………

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“Russia is asking the U.N. Security Council to condemn the illegal sale of Syrian oil by terrorist groups and encourage all countries to take “necessary measures” to prevent it. A draft presidential statement circulated to council members and obtained Monday by The Associated Press expresses “grave concern” at the seizure of oilfields in Syria by the Islamic State of Iraq and the Levant or ISIL and Jabhat al-Nusra and stresses that any export or import of crude oil without authorization of a sovereign state is illegal………….”

“Militants, who declared an Islamic caliphate in the Middle East, now claimed to have seized Syria’s largest oilfield. Fighters of the Islamic State, previously known as Islamic State in Iraq and the Levant (Isis), said they took over the al-Omar oil field in the eastern Deir al-Zour province from rival rebel groups. Video footage uploaded online showed armed Islamic State jihadist standing in front of the entrance of the field as the group’s flag flew over a sign reading “Euphrates Oil Company – al-Omar field…………….”

The Wahhabi Jihadists are nowhere near Iraq’s major oil fields, but they have grabbed some Syrian oil fields. Apparently there is worry that they will soon start shipping Syrian oil to buyers. There is a precedent for this: already foreign buyers are eager to buy oil controlled by Kurdish separatists in Iraqi Kurdistan. The Turks and among those mentioned in reports. Already Benyamin Netanyahu, sensing a future opportunity, has blessed the Kurdish ‘enterprise’ when he opined (without being asked) that they should be able to go independent. Netanyahu, who is not known to observe international legal niceties anymore than his neighbors, would not accept the same independent ‘fate’ for Palestinians.

Would an Islamic State be in the future of OPEC? Fortunately not: the Jihadists may harass the vast border region between Syria and Iraq for a few more years, but they may have reached their peak during the last week of June 2014. From now on, it may be the period of pushback in both Iraq and Syria. The hairy ones are likely to get squeezed on two fronts now, with their ‘realm’ getting smaller. If the tribes turn against them, they may be fighting on three fronts. That would be an untenable situation if their suppliers and enablers in Turkey and some Arab states tighten the squeeze on the flow of supplies and fighters. Even the mighty Wehrmacht could not withstand a multi-front war for long.


Mohammed Haider Ghuloum

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O Canada: is it Oily and Imperialistic with a Pusher for Prime Minister?………


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Canada spied on communications at Brazil’s Mining and Energy Ministry, according to Canadian intelligence documents revealed Sunday by Globo television. The documents were leaked by former U.S. intelligence contractor Edward Snowden. His disclosures including that the United States spied on the same ministry, on President Dilma Rousseff and her aides, have greatly strained US-Brazilian ties. In the disclosures broadcast on Globo, documents purportedly from the Canadian Security Intelligence Service leaked by Snowden show a detailed outline of the Brazilian ministry’s communications including phone calls, emails and Internet traffic. Canada does have interests in Brazil, particularly in mining, Mining and Energy Minister Edilson Lobao told Globo, calling the development “serious.”……………..”

““But a dark secret lurks in the northern forests. Over the last decade, Canada has not so quietly become an international mining center and a rogue petrostate. It’s no longer America’s better half, but a dystopian vision of the continent’s energy-soaked future. That’s right: The good neighbor has banked its economy on the cursed elixir of political dysfunction — oil. Flush with visions of becoming a global energy superpower, Canada’s government has taken up with pipeline evangelists, petroleum bullies, and climate change skeptics. Turns out the Boy Scout’s not just hooked on junk crude — he’s become a pusher………………….”

Apparently I discovered
that I have been paying a lot of attention to Canada over the past year
or so. More than, say, I have been paying to more important countries
like Brazil or Argentina or India or China:

Here is what I wrote on this a few weeks ago: Okay. Stephen Harper is the son of an Imperial Oil loyal senior accountant/pencil pusher and a fundamentalist evangelist (a Christian not a Muslim one). An evangelical Likud-nik Salafi, of the sort that Sarah Palin pretends to be (but certainly is not). When Canadians elected him, they probably did not realize they were voting the oil-industry fox into their beautiful environmental hen house. That explains it all, including his ‘more royal than the king’ attitude toward the Middle East.

For example I also wrote this in another posting here.

Before that I wrote in an earlier posting right here.

Before all that, I tried to write seriously in a posting here. You can see why that was difficult.

I also wrote before that on this strange Canadian episode in another posting here.

I even wrote this next hasty posting linked here.

Okay, I might as well throw in this last one, a bonus, but not my favorite.


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Iranian Rain in Spain: Oil Boycotts and Oil Deals, Beauty Queens…….


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She Was More Like A Beauty Queen From A Movie Scene
I Said Don’t Mind, But What Do You Mean I Am The One
Who Will Dance On The Floor In The Round
She Said I Am The One Who Will Dance On The Floor In The Round

She Told Me Her Name Was Billie Jean, As She Caused A Scene

Then Every Head Turned With Eyes That Dreamed Of Being The One
Who Will Dance On The Floor In The Round
……... Billie Jean (Michael Jackson)

Iran has signed a 1.6 billion euro contract with a Spanish company to manufacture high-tech equipment and components for its oil and gas industry. Iran’s Society of Iranian Petroleum Industries Equipment Manufacturers (SIPIEM) signed the contract with the Spanish company. Kayhandokht Kavianpour, an SIPIEM member, confirmed the deal in interview with the Mehr News Agency and said, “Certain Western countries imagine that with sanctions the engine of the development of Iran’s oil industry will stop functioning.” The SIPIEM also signed another contract with a Chinese company to transfer technology to Iranian oil industry, the report added. ……….

This is weird. The EU voted to boycott Iranian oil starting next July. Iran voted to cut off oil to the EU members, including Spain last month. Now Iran and Spain have signed a deal to supply high-tech oil equipment to Iran’s oil industry. Presumably the equipment will be produced inside Iran. Is it a way to go around American and European sanctions? Another Iranian official later stated that soon his country will be manufacturing oilfield equipment.
Any why are Spaniards of all people producing oilfield equipment and machinery? Spain has olive oil. This is like having Oman or the UAE produce beauty queens instead of Venezuela (just an example, just an example). The plot thickens.


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Plan B? Western Sanctions Tighten, Iran Launches Huge New Oil Tankers……..


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Iran has procured a new oil tanker with a capacity of 2.2 million barrels, one of the world’s largest. The tanker, which is valued at around $300 million, will join the Iranian fleet within the next few days. The oil tanker is a ‘floating storage and unload vessel’, said Managing Director of Iranian Offshore Oil Company Mahmoud Zirakchianzadeh. The National Iranian Tanker Company (NITC), Iran’s oil shipping operator, is expanding its tanker fleet with the first of 12 supertankers to be delivered from China in May, fortuitous timing for the OPEC member as Western sanctions force Tehran to rely more on its ships to export oil, Reuters reported. The new tankers, each capable of carrying 2 million barrels of crude, add much-needed capacity to NITC’s fleet at a time when the number of maritime firms willing to transport Iranian crude has dwindled significantly amid European sanctions. The EU will prohibit European insurers and reinsurers from indemnifying tankers carrying Iranian crude oil anywhere in the world from July, threatening to curtail shipments and raise costs for major buyers like China, India, Japan and South Korea. The NITC managing director announced in December 2011 that 21 new tankers will be added to the national fleet by the end of 2013…………

Either the Iranians are optimistic about an end to Western sanctions soon or they have one hell of a Plan B. Since I know for certain that Western sanctions will not be lifted or even eased this year, then there must be a Plan B.

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