Saudi Arabia Pumps It Up


In a very informative article over at www.foreignpolicy.com by Steve Levine entitled The Coming Oil Crash he details the problems petro states like Russia, Iran, and Venezuela among others face with the recent fall in oil prices.  The article gives estimates on what each state needs the price of a barrel of oil to be to balance their budgets.  Russia, for example, is said to require a price of $110 per barrel to stay in the black, oil was going for around $96 a barrel on Monday.  In fact many of the other petro states are in a similar position to Russia, so our gain is their pain so to speak.  Many analysts expect the pain to go up for the petro states for the obvious reasons: global economic slowdown reducing demand, US and Canadian shale oil deposits, and Saudi Arabia insisting on producing 10 million barrels a day when all they appear to be doing is hurting themselves by producing so much.

  All of the reasons seem to make sense except for the Saudis, why on earth would they purposely drive down the price of oil when all it does is take money out their own pockets?  Well, that is where it gets interesting.  According to the article the Saudis are intentionally trying to drive the price of oil down for several different reasons.  First, they believe cheaper oil will help the global economy weather this rough patch.  They also apparently liked all the prestige they gained by driving down the price of oil in the late 90’s during the Asian financial crisis.  Second, they feel threatened(the original article used the word terrified to describe how they felt) by the shale oil deposits in the US and Canada.  They recognize that shale oil is harder and more expensive to obtain than normal liquefied deposits.  Because of that oil has to be at a certain price to make going after shale oil worth it.  Last but certainly not least, the Saudis are trying to impose their will on both Russia and Iran on two key issues.  The first would be Iran’s attempt to get the bomb.  The Saudis and Iran are natural competitors because one is Sunni and the other is Shia.  The Saudis feel that a nuclear armed Iran would be unacceptable so they are purposely driving down the price of oil to put the squeeze on Iran to force them to give up the pursuit of the bomb.  The second issue is with Russia blocking a deal being made on Syria.  The Saudis once again feel they can pressure Russia into playing ball on Syria by driving down the price of oil.  It will be interesting to see how long and how painful the Saudis are willing to make this.  As the article points out they have one of the largest financial reserves in the world at around $700,000,000,000 so suffice it to say that they can keep this up for some time.  If I was Russia and Iran I would be worried.

The Coming Oil Crash

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World On The Brink


 

The world today has not been in a state of flux this great since the collapse of the Soviet Union about 20 years ago.  The difference between now and then was unquestioned American power militarily, economically, and politically.  Today that is no longer the case and the world is worse off for it.  In reality the danger to the world has not been this great since the Cuban Missile Crisis in 1963. 

Threats Of War

1.  From the Iranian pursuit of nuclear weapons to near civil war in Syria the middle east could explode in a major war drawing in outside powers like the US that could have disastrous consequences for the entire globe.

2.  The Arab Spring has resulted in a change of leadership in key countries that have left many guessing what those nations (think Egypt) strategic direction will become.  This level of doubt has added a new twist to the problems of thinking through a potential crisis in the region.  Just like a free market economy despises uncertainty in policy so does the strategic thinker.  Uncertainty in a country’s geo-political thinking leaves its neighbors only able to guess and make assumptions with all the consequences that entails.

3.  Mexico is fighting an insurgency every bit as lethal as that in Iraq and Afghanistan.  The only difference is that we share a large unguarded border with this failed state.  The threat from the flow of illegal drugs and possible terrorist infiltration cannot be underestimated.  The www.latimes.com did a story in June of 2011 (over a year ago) that said 34,000 had already died as a result of the military crack down against drug gangs, it hasn’t gotten any better since then either.  Although the mexican economy is doing well the possibility that this violence will ultimately collapse Mexican authority over large parts of their own territory cannot be ruled out.

4.  Tensions in Asia continue to rise as China begins to flex its muscles by attempting to enforce its disputed territorial claims throughout the region.

5.  Iraq today still struggles with severe violence as the government attempts to finish off the insurgency there.

6.  Afghanistan at best can only be described as a long work in progress.  Which, oh by the way, has to be finished off by Afghans.  Who wants to wager what the outcome will be once US troops leave by 2o14.

7.  Nations like China, Russia, Iran, and Syria seem to be working in informal cooperation against the United States.  Although the US could counter each country individually or even in groups of two, when they all align against America it would be near impossible for America to impose its will on a situation like the insurgency in Syria.  Right now you have China and Russia actively working against the US administration via the UN Security Council to prevent Washington from resolving the situation.  With Europe consumed by the Euro nightmare the United States now truly stands alone against a powerful informal alliance of countries that do not share western values, and are actively working to undermine western strategic goals in the middle east and beyond. 

Economic Collapse

1.  All eyes towards Europe for in spite of continued European attempts to blame America the Europeans have managed to design and implement the biggest threat to the global economy since communism.  They did such a bad job engineering the institutions and laws governing the Euro that its collapse seems all but guaranteed, and it almost makes you wonder if they intended for this to happen from the beginning.  An outright collapse of the Euro would throw the global economy in turmoil and set off a chain of events so destructive that it would take a generation for the world to recover.

2.  Unfortuanately the problems facing the Euro also weigh on the UK, US, and Japan among others.  The difference at least for now is that these countries have the proper institutions and laws in place to attempt to deal with the problem in a reasonable manner.

3.  The entire global economy appears to slowing down all at the same time including the BRICS (Brazil, Russia, India, China, South Africa) which were partly responsible for helping to prop up the global economy during the 2008 meltdown.  If everybody slows down at once where will the help come from this time?

Conclusion

As the world hurdles towards darkness one has to wonder if this madness can be stopped?  I am sure that many of the situations can be managed to outcomes that are not so catastrophic, but the original idea in the first paragraph of massive change and imminent danger to global order should not be underestimated.  The challenges are as great as they are numerous, although some challenges (perhaps Afghanistan) will appear as less important if others play out in dire fashion.  The two that I feel are the most worrisome; the Euro, and Iran are also the two most likely to come to a head in the near future.  Both of these situations are real and will be resolved one way or another.  The Euro will either collapse dragging down the world economy with it or the Europeans will take the necessary steps in fixing the Euro.  Iran will either get the bomb and begin to act even more belligerent, or the US and Israel will strike Iran to try to prevent this.  The problem is that a strike will only delay Iran, the only way to prevent them from getting the bomb is to end the regime.  Unfortunately after the debacle in Iraq no one has the stomach for that kind of action so it will be interesting to see what happens.  Either way both of these issues will be resolved in the near future for better or worse.  

How many have died in Mexico’s drug war? – latimes.com

 

Democrats And Republicans Tired Of Leaks From White House


At a joint press conference Friday members from both sides of the aisle came together to denounce what they described as a cascade of leaks about national security issues to the press.  Ranging from details about the special operations raid that killed Bin Laden to the Stuxnet Virus used to slow Iranian progress on a nuclear bomb the leaks seem to just keep coming.  Some republican lawmakers are suggesting the leaks have been made to make the administration look tough on national security issues, a traditional weakness of democrats in the eyes of voters.  So far the white house has been able to resist calls for an independent investigator to be appointed but it remains to be seen how much longer they will be able to do this as pressure grows.  Right now it is just republicans like Sen. John McCain who have raised the idea of the independent prosecutor but democratic Sen. Diane Feinstein did say that she would not rule the possibility out.  This is a serious issue for the Obama team for two reasons.  First, it’s not just republicans saying this but also democrats who have used some fairly tough language in denouncing the leaks.  Second, if an independent prosecutor would be assigned it would be a disaster for the Obama administration, any veteran of the Bush or Clinton white house staffs would tell you that no administration wants an outsider going through their dirty laundry.  P.S.  Look at that picture above from their press conference, those are some serious scowls on their faces, they are really mad.

Top lawmakers pledge to crack down on leaks

US Quietly Deployed Air Assets To Gulf


 The US Airforce has recently deployed both F-22 and F-15 fighter aircraft to undisclosed locations in the Persian Gulf region.  The move is likely a precaution against Iranian retaliation attempts if Israel decides to strike Iran.  I see this as a significant deployment for several reasons.  First, the US navy currently does not have any stealth capability so the addition of the F-22 is a significant upgrade to US capabilities in the region.  Second, this demonstrates how serious the situation with Iran is deemed by the pentagon because this marks the first time F-22’s, the US Airforce’s most advanced fighter jet, have ever deployed for a possible real world mission.  It appears many of the pieces required for war with Iran are already in position, lets hope they don’t have to be used.  Link to story below.

U.S. Amasses Stealth Jet Armada Near Iran

The Aircraft Carrier In The 21st Century


There is no greater symbol of American power and our ability to impose our will on other nations than the aircraft carrier.  It has been this way since World War II when the carrier replaced the battleship as the dominant force in naval warfare.  In a stroke of good fortune, or divine intervention, carrier dominance rose out of the ashes of America’s wrecked battleship fleet at Pearl Harbor on Dec. 7, 1941.   America was forced out of necessity to emphasize carrier borne operations in the fight against Japan.  Fortunately for us the carrier had already become the supreme power of the seas it was just prior to Pearl Harbor no one yet realized it.  Since that time America has used the carrier and its ability to provide a mobile, deep strike capability to police the globe, but will that still be the case in the future?  Robert Haddick points out in an article written for www.foreignpolicy.com that the cost of buying these ever more expensive ships is becoming hard to maintain for the US Navy.  The article entitled Does the U.S. really need more $15 billion boats? acknowledges the fact that US commanders still rely heavily on carriers to signal US resolve to potential adversaries, but he calls for the other services to give commanders more options than just parking $15 billion boats off the coast of threat countries.  The author pushes for the air force to more quickly develop a long-range bomber.  He asks if the army couldn’t develop longer range missiles, the technology is there but up to this point the army hasn’t pursued it because carriers always seemed to make more sense.  Unfortunately that last statement may no longer be the case.  It’s not just the cost of a modern carrier,  they have also become more vulnerable.  Case in point, China’s new “carrier killer missile” could alter the balance of power in the Pacific if it works as advertised.  This is because unlike previous Chinese anti-ship missiles this one can actually hit a moving target from extreme distances.  Perhaps turning Americas vaunted carriers into large floating coffins.  So as the author points out the cost factor, and others point out the vulnerability factor, it’s time America began looking for alternatives to the carrier before it is too late.

China has carrier-killer missile, U.S. admiral says – Washington …

Quote Of The Day


“Don’t worry — I, you, we can sell them everything, even if we are worried by an Iranian nuclear bomb,” Aznar quoted Putin as saying. “Because at the end of the day, Israel will take care of it.”

Vladimir Putin responding to former Spanish Prime Minister Jose Maria Aznar when Aznar cautioned the Russian prsedent against selling more weapons to the Iranians.  Link to the story below.

What Iran’s Rulers Want