Tag Archives: Petroleum

Arabian Peninsula, Economics, Genocide, Saudi Arabia, Technology

Comparing Cool Apple and a Genocidal Petroleum Oligarchy………

Shuwaikh-school1 Hiking Sharqeya-Baneen-15

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Reports say that Apple Corporation (AAPL) has about $207 billions in cash (that was before the latest good results came out on Tuesday). All these beautiful useful gadgets, some necessary and some not so necessary, and some American technical ingenuity/creativity have made a lot of money for Apple during the past decade. They may use it to buy back shares, pay more dividends, expand into new products, or acquire subsidiaries.

Reports also claim that Saudi Arabia used to have over $700 billion in foreign exchange (Forex) reserves (its Sovereign Fund managed by its monetary agency SAMA).  All of it from oil revenues. These have probably been depleted by somewhere over $100 billion over the past two years, since the new regime of His Majesty King Salman Bin Abdulaziz and His Royal Highness the Crown Prince to the Crown Prince (and Minister of Defense) Mohammed Bin Salman came to power. The latter is the putative conqueror of Yemen: he has been pouring Saudi money and American (and British) bombs (cluster bombs and otherwise) all over the poor country of Yemen for seven months. With the goal of establishing a government to his liking in Sana’a.

Too much power and money can make even the most impotent of potentates blind to past history. All it takes is a tablespoon of foolish vanity, and the rich young Arab princes have plenty of that. Hence this new quagmire in Yemen, which promises to go on long after former president Hadi (Bin Zombie) evacuates his Riyadh hotel suite for wherever the hell he’ll end up. Long after Al Qaeda (the Saudi-led AQAP) expand their newly acquired territory in the South beyond Al Mukalla. Long after the Caliphate of ISIS expand their current use of the porous border to attack civilian Ismailite (quasi-Shi’a) inhabitants of Najran and Jazan.

Hence the new barely-veiled threats by Saudi officials of sending newly hired Arab and African (and Western?) mercenaries into Syria.

The IMF has noted that Saudi reserves could vanish within five years. That is possible if the funds are used at current rates and crude oil prices remain near current low levels. Especially if the need arises to buy public approval with new royal handouts. Especially if the princes continue their costly genocidal war on Yemen and expand their intrusion in Syria into an official military confrontation with their Iranian and Lebanese rivals, even if the “boots on the ground” are rented foreign mercenaries.

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

Cheers
Mohammed Haider Ghuloum

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Economics, GCC, IMF, Latin America, OPEC, Petroleum, Saudi Arabia, Uncategorized, Weapons deals

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

Shuwaikh-school1 Hiking Sharqeya-Baneen-15

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“من حفر حفرة لأخيه وقع فيها :Whoever digs a hole for his brother, he himself shall fall into it” An 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.

GulfOil

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.
Cheers
Mohammed Haider Ghuloum

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Economics, Iran, OPEC, Petroleum, Saudi Arabia, U.S. Foreign Policy

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.

Cheers
MHG 

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Economics, OPEC, Petroleum, Sanctions, U.S. Foreign Policy

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.
Cheers
Mohammed Haider Ghuloum

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Caliphate, Jihadis, Petroleum, Syria, Turkey, U.S. Foreign Policy

ISIS Oil: About the Erdogan Trail………….

_9OJik4N_normal Sharqeya-Baneen-15    DennyCreek2

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“U.S.-led coalition warplanes bombed oil installations and other facilities in territory controlled by Islamic State militants in eastern Syria on Friday, taking aim for a second consecutive day at a key source of financing that has swelled the extremist group’s coffers, activists said. The strikes hit two oil areas in Deir el-Zour province a day after the United States and its Arab allies pummeled a dozen makeshift oil producing facilities in the same area near Syria’s border with Iraq. The raids aim to cripple one of the militants’ primary sources of cash — black market oil sales that the U.S. says generate up to $2 million a day…………”

It is well to hit the oil wells they have occupied in Syria (and Iraq). But there is a cheaper more efficient way to throttle their oil revenues: a bomb-less way. How do they sell the oil? To whom do they sell the oil? More important: by which route is that oil shipped?

That last question, the route, is the gorilla in the war room. Dealing with it requires some neighborly cooperation from one particular country.There is no sea outlet for the oil since the terrorists don’t control any ports or even any coastal regions. Their only route seems to be through NATO member Turkey. Across the border into Turkey and into the markets. Get Mr. Erdogan to shut the ISIS oil route, if he can. Get him to be less vague, less vague and tentative, about his ties to the Jihadis in Syria (and by extension in Iraq). 

Unless there is another route I am not aware of through which the Caliphate petroleum is shipped.

Then there is that other money route, the one we know that leads “north” into Syria and Iraq.

Cheers
Mohammed Haider Ghuloum

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