What game is the House of Saud playing?

Pepe-EscobarPepe Escobar is the roving correspondent for Asia Times/Hong Kong, an analyst for RT and TomDispatch, and a frequent contributor to websites and radio shows ranging from the US to East Asia.

 

 

Published time: January 16, 2015 12:29

 

33.si

Reuters / Lucy Nicholson

The House of Saud now finds itself in times of extreme trouble. Their risky oil price war may eventually backfire. The succession of King Abdullah may turn into a bloodbath. And the American protector may be musing a change of heart.

Let’s start with oil – and some background. As much as US supply has increased by a couple of million barrels a day, enough oil from Iran, Kirkuk in Iraq, Libya and Syria has gone out of production; and that offsets extra US oil on the market. Essentially, the global economy – at least for the moment – is not searching for more oil because of European stagnation/recession and the relative China slowdown.

Reuters / Todd Korol

Reuters / Todd Korol

Since 2011, Saudi Arabia has been flooding the market to offset the decrease in Iran exports caused by the US economic war, a.k.a. sanctions. Riyadh, moreover, prevented OPEC from reducing country production quotas. The House of Saud believes it can play the waiting game – as fracked oil, mostly American, is inexorably driven out of the market because it is too expensive. After that, the Saudis believe they will regain market share.

In parallel, the House of Saud is obviously enjoying “punishing” Iran and Russia for their support of Bashar Assad in Damascus. Moreover, the House of Saud is absolutely terrified of a nuclear deal essentially between the US and Iran (although that’s still a major “if”) – leading to a long-term détente.

Tehran, though, remains defiant. Russia brushed off the attack because the lower ruble meant state revenues remained unchanged – so there will be no budget deficit. As for oil-thirsty East Asia – including top Saudi customer China – it’s enjoying the bonanza while it lasts.

Oil prices will remain very low for the time being. This week Goldman Sachs lowered their 2015 WTI and Brent Crude forecasts; Brent was slashed from $83.75 a barrel to $50.40, WTI was cut from $73.75 to $47.15 a barrel. Prices per barrel could soon drop as low as $42 and $40.50. But then, there will be an inevitable “U-shaped recovery.”

Nomura bets that oil will be back to $80 a barrel by the end of 2015.

Punish Russia or bust

US President Barack Obama, in this interview, openly admitted that he wanted “disruptions” in the “price of oil” because he figured Russian President Vladimir Putin would have “enormous difficulty managing it.” So that settles the argument about hurting Russia and US-Saudi collusion, after US Secretary of State John Kerry allowed/endorsed King Abdullah in Jeddah to simultaneously raise oil production and embark on a cut price strategy.

Whether Kerry sold out the US shale gas industry out of ignorance or incompetence – probably both – is irrelevant. What matters is if the House of Saud were ordered to back off, they would have to do it in a flash; the ‘Empire of Chaos’ dominates the Persian Gulf vassals, who can’t even breathe without at least an implicit US green light.

What is way more troubling is that the current bunch in Washington does not seem to be defending US national and industrial interests. If humongous trade deficits based on currency rigging were not enough, now virtually the entire US oil industry runs the risk of being destroyed by an oil price racket. Any sane analyst would interpret it as contrary to US national interests.

Anyway, the Riyadh deal was music for the House of Saud’s ears. Their official policy has always been to slash the development of all potential substitutes for oil, including US shale gas. So why not depress oil prices and keep them there long enough to make investments in shale gas a lunatic proposal?

But there’s a huge problem. The House of Saud simply won’t get enough in oil revenues to support their annual budget with oil at below $90 a barrel. So as much as hurting Iran and Russia may be appealing, hurting their own golden pocketbooks is not.

The long-term outlook spells out higher oil prices. Oil may be replaced in many instances; but there isn’t a replacement – yet – for the internal combustion engine. So whatever OPEC is doing, it is actually preserving demand for oil vs. oil substitutes, and maximizing the return on a limited resource. The bottom-line: yes, this is predatory pricing.

Once again, there’s an immense, crucial, complicating vector. We may have the House of Saud and other Persian Gulf producers flooding the market – but its Goldman Sachs, JP Morgan and Citigroup who are doing the shadow, nasty work via leveraged derivative short futures.

Oil prices are such an opaque racket that only major oil trading banks such as Goldman Sachs or Morgan Stanley have some idea who is buying and who is selling oil futures or derivative contracts – what is called “paper oil.” The non-rules of this multi-billion casino spell out “speculative bubble” – with a little help from those friends at the Gulf oil pumps. With oil futures trading and the two major London and New York exchanges monopolizing oil futures contracts, OPEC really does not control oil prices anymore; Wall Street does. This is the big secret. The House of Saud may entertain the illusion they are in control. They’re not.

 

U.S. President Barack Obama

U.S. President Barack Obama – (Reuters / Kevin Lamarque)

That dysfunctional marriage

As if this was not messy enough, the crucial succession of the House of Saud is propelled to the forefront. King Abdullah, 91, was diagnosed with pneumonia, hospitalized in Riyadh on New Year’s Eve, and was breathing with a tube. He may – or may not, this being the secretive House of Saud – have lung cancer. He won’t last long. The fact that he is hailed as a “progressive reformer” tells everything one needs to know about Saudi Arabia. “Freedom of expression”? You must be joking.

So who’ll be next? The first in the line of succession should be Crown Prince Salman, 79, also defense minister. He was governor of Riyadh province for a hefty 48 years. It was this certified falcon who supervised the wealth of private “donations” to the Afghan mujahedeen in the 1980s jihad, in tandem with hardcore Wahhabi preachers. Salman’s sons include the governor of Medina, Prince Faisal. Needless to add, the Salman family controls virtually all of Saudi media.

To get to the Holy Grail Salman must be proven fit. That’s not a given; and on top of it Abdullah, a tough nut to crack, already survived two of his crown princes, Sultan and Nayef. Salman’s prospects look bleak; he has had spinal surgery, a stroke and may be suffering from – how appropriate – dementia.

It also does not bode well that when Salman was promoted to Deputy Defense Minister, soon enough he was shown the door – as he got himself mixed up with Bandar Bush’s atrocious jihadi game in Syria.

Anyway, Salman already has a successor; second Deputy Prime Minister Prince Muqrin, former governor of Medina province and then head of Saudi intelligence. Muqrin is very, very close to Abdullah. Muqrin seems to be the last “capable” son of Ibn Saud; “capable” here is a figure of speech. The real problem though starts when Muqrin becomes Crown Prince. Because then the next in line will be picked from the grandsons of Ibn Saud.

Enter the so-called third generation princes – a pretty nasty bunch. Chief among them is none other than Mitab bin Abdullah, 62, the son of the king; cries of nepotism do proceed. Like a warlord, Mitab controls his own posse in the National Guard. Sources told me Riyadh is awash in rumors that Abdullah and Muqrin have made a deal: Abdullah gets Muqrin to become king, and Muqrin makes Mitab crown prince. Once again, this being the “secretive” House of Saud, the Hollywood mantra applies: no one knows anything.

28

Saudi Arabia’s Foreign Minister Prince Saud al-Faisal.(Reuters / Brendan Smialowski)

Abdullah’s sons are all over the place; governor of Mecca, deputy governor of Riyadh, deputy foreign minister, president of the Saudi Red Crescent. Same for Salman’s sons. But then there’s Muhammad bin Nayif, son of the late Crown Prince Nayif, who became Interior Minister in 2012, in charge of ultra-sensitive internal security, as in cracking down on virtually anything. He is the top competitor against Mitab among the third-generation princes.

So forget about family “unity” when such juicy loot as an oil hacienda impersonating a whole country is in play. And yet whoever inherits the loot will have to face the abyss, and the same litany of distress; rising unemployment; abysmal inequality; horrendous sectarian divide; jihadism in all its forms – not least the fake Ibrahim Caliphate in “Syraq”, already threatening to march towards Mecca and Medina; the unspeakably medieval Council of Ulemas (the lashing/amputating/beheading-loving bunch); total dependency on oil; unbounded paranoia towards Iran; and a wobbly relationship with His Masters Voice, the US.

When will they call the cavalry?

And it so happens that the real ‘Masters of the Universe’ in the Washington-New York axis are debating exactly the erosion of this relationship; as in the House of Saud having no one to talk to but the “puppets”, from Bush Two minions to Kerry at most on occasion. This analysis contends that any promises made by Kerry over the House of Saud “cooperation” to damage Russia’s economy really mean nothing.

Rumbles from ‘Masters of the Universe’ territory indicate that the CIA sooner or later might move against the House of Saud. In this case the only way for the House of Saud to secure its survival would be to become friendly with none other than Moscow. This exposes once more the House of Saud’s suicidal present course of trying to hurt Russia’s economy.

As everyone is inexorably an outsider when faced with the totally opaque House of Saud, there’s an analytical current that swears they know what they’re doing. Not necessarily. The House of Saud seems to believe that pleasing US neocons will improve their status in Washington. That simply won’t happen. The neocons remain obsessed about the House of Saud helping Pakistan to develop its nuclear missiles; some of them – once again, that’s open to speculation – might even be deployed inside Saudi Arabia for “defensive purposes” against that mythical Iranian “threat.”

Messy? That doesn’t even begin to describe it. But one thing is certain; whatever game Riyadh thinks it’s playing, they’d better start seriously talking to Moscow. But please, don’t send Bandar Bush on another Russian mission.

Pepe Escobar’s latest book is Empire of Chaos. Follow him on Facebook.

 

‘Washington, the Hollywood of politics’: story behind Hagel’s exit

U.S. President Barack Obama (R) and Defense Secretary Chuck Hagel after the president announced Hagel's resignation at the White House in Washington, November 24, 2014 (Reuters / Kevin Lamarque)

U.S. President Barack Obama (R) and Defense Secretary Chuck Hagel after the president announced Hagel’s resignation at the White House in Washington, November 24, 2014 (Reuters / Kevin Lamarque)

RT NEWS

Regardless who is the US Secretary of Defense, there will always be Washington’s basic policy strategy around the desire to control the whole map and use the military to shape the entire world, anti-war activist Eugene Puryear, told RT.

U.S. President Barack Obama (L) listens to Defense Secretary Chuck Hagel after the president announced Hagel's resignation at the White House in Washington, November 24, 2014 (Reuters / Kevin Lamarque)

U.S. President Barack Obama (L) listens to Defense Secretary Chuck Hagel after the president announced Hagel’s resignation at the White House in Washington, November 24, 2014 (Reuters / Kevin Lamarque)

RT: You’ve seen this machine at work from the inside. What do you think is behind Chuck Hagel’s resignation?

Matthew Hoh:I think, of course, there is much more to this story than simply “Chuck Hagel no longer worked well with the administration.” I think you could tell by how quickly and how viciously the White House anonymously attacked Chuck Hagel as soon he announced his resignation. There were a lot of personal attacks against Hagel: he didn’t have leadership, he couldn’t do the job, he wasn’t up to the task, and I think any time you see the administration or the White House so quickly denouncing somebody, you know automatically there is another story to this. And what I believe to be case is that Chuck Hagel does not agree with the Obama Administration involving American troops in the middle of the Iraqi and the Syrian civil wars. And he is in disagreement with the American re-escalation of the war in Afghanistan that was just announced this past weekend.

RT: Judging by yesterday’s warm hugs between Obama and Hagel, the personal relationship between the two is quite friendly. How sincere were those smiles and handshakes?

MH: It’s Washington DC; it’s the Hollywood of politics. So, absolutely. I think may be in earlier time it could be described there is how cordial relations were among politicians, among elected leaders, among our senior people. But now it’s just as you described – it was a show.

RT: Recently Chuck Hagel became quite critical of the administration’s policy in Syria and Iraq. Do you think this made him an outcast in the White House?

MH: I think for the administration not to expect Secretary Hagel to be vocal or to speak up would have been be a very big mistake for them in their understanding of Secretary Chuck Hagel. Chuck Hagel earned the national reputation in the United States about 10 years ago or so for going against the Iraqi war. Chuck Hagel is a republican and member of President George Bush’s party and he very famously went against the Iraq war. So for the Obama Administration to have thought that Chuck Hagel was pliable, someone who was just going to go along with whatever decision they made and not to offer disagreements whether in private or in public, I think that was a huge mistake on their part. And so I think as I said as the story unfolds and as we get more perspectives on it, we’ll see the level of disagreement that was within the administration, within Obama’s Cabinet between Secretary Hagel and more hawkish members.

RT: Chuck Hagel is known for his anti-militaristic approach to U.S. foreign policy. Now that he’s going does it mean the Pentagon will become more aggressive?

MH: I think, unfortunately, the administration has bowed to pressure from both within the administration, from those in the administration who are beholding to a pro-intervention or a “military-first” policy as well as to very hawkish or warmongering senators on Capitol Hill. So I think the Obama Administration has made a commitment to expand America’s role in the Iraqi and Syrian civil wars. I think that is a cycle that will only worsen and deepen. Case in point – Afghanistan – where the United States escalated the war in 2009.Five years later, there is no end in sight for the war, the Afghan people continue to suffer, the government remains incredibly corrupt, the Taliban are stronger and the drug trade is the only industry in the country. I think what’s happening with American re-escalation of the war – sending American troops back into combat – is that President Obama is bowing to pressure, feeling stoned by abusing criticism that he is not tough enough. He is recommitting American troops to the war in Afghanistan, so that he cannot be criticized for ending the war prematurely. [But] they have been there for 13 years and that war, according to polls it has an 83 percent unfavorability rating in the United States, and is most unpopular war in American history, even more unpopular than the wars in Iraq or Vietnam.

General Dempsy

General Dempsy – Chairman of the Joint Chiefs, U.S. Army General Martin Dempsey (Reuters / Larry Downing)

Chairman of the Joint Chiefs, U.S. Army General Martin Dempsey (Reuters / Larry Downing)

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of UH.

‘How Ukraine was turned into a failed state in a year’

A Ukrainian anti-government protester throws a Molotov cocktail during clashes with riot police in central Kiev early on January 25, 2014. (AFP Photo / Dmitry Serebryakov)

A Ukrainian anti-government protester throws a Molotov cocktail during clashes with riot police in central Kiev early on January 25, 2014. (AFP Photo / Dmitry Serebryakov)

As a country with few socio-economic and political problems Ukraine has turned into a failed state torn by civil war and sectarian violence, with a lack of constitutional order and a destroyed economy, foreign affairs expert Nebojsa Malic told RT.

Malic added that there has been a lot of talk about financial assistance for Ukraine but none of that has actually materialized.

“The only people that the US is actually funding are activists and all sorts of interested organizations that are at the business of perpetuating outrage but not really helping the society or the state get better,” he said.

RT: American and European officials have made numerous trips to Ukraine over the past year, making tempting promises regarding the bright future for the country alongside the Western states. Were they fulfilled?

Nebojsa Malic: None of the promises were fulfilled. In fact, Ukraine is far worse off than a year ago in unimaginable ways. From a country that was having problems financially, socially and politically, it has basically transited to a failed state torn apart by a civil war, sectarian violence, oligarchs, private armies, Nazis, a coup government, complete lack of constitutional order, and on top economic problems that get much worse.

RT: Mr. Biden, who’s visiting Kiev today, has promised to deliver a “strong message” supporting the Ukrainian government and people. Will he be heard and/or believed?

NM: I’m sure that the people in power in Kiev will believe anything that they are told because their entire rule rests on perception management, that they are a legitimate government backed by the West which they equate with the entire world. As for the people, I’m not sure that Biden’s words will keep anybody warm or fed this winter. Biden, wherever he goes, things don’t turn out particularly well. Likewise these biscuits that Victoria Nuland handed out last December are the thing of the past at this point. Press people are wondering where the next meal is going to come from. Essentially the entire message from the US is “You people go on and do your thing, we will back you up,” and the backup is never there. There has been no financial support for Ukraine’s debts or economic recovery. There has been a lot of talk of assistance but none of that has actually materialized. The only people that the US is actually funding are activists and all sorts of interested organizations that are at the business of perpetuating outrage but not really helping the society or the state get better.

RT: Victoria Nuland is set to join Mr. Biden. We remember the famous leaked remark of hers when speaking of Europe’s hesitant policy towards the protests on Maidan, showing how strongly the US controls the decision-making in terms of the Ukrainian crisis. Do you think Washington is happy with the results?

NM: It depends on what actual objectives of the intervention were. If the objective was to create intractable hostility between Kiev and Moscow, then yes, Washington has every right to be happy. If the objective is to create a normal functioning European-civilized Ukrainian state then no that has been a complete disaster from day one. Personally I think the objective was to create the conflict, to create the chaos, to create disorder, suffering and misery, so that the US government and the EU could bow in as liberators or knights in shining arms rescuing people, except there hasn’t been any rescue as they are neither capable of it, nor do they actually intend to perform it. If I was in charge of US foreign policy, I would chalk it up as a massive failure, if the objectives were, as officially stated, to create order and stability. But I’m not in charge and the objectives are not what they were officially stated.

Protesters carry a wounded protester during clashes with poliсe, after gaining new positions near the Independence square in Kiev on February 20, 2014. (AFP PHhoto / Louisa Gouliamaki)

Protesters carry a wounded protester during clashes with poliсe, after gaining new positions near the Independence square in Kiev on February 20, 2014. (AFP PHhoto / Louisa Gouliamaki)

RT: According to the UN figures, over 4,300 people were killed in the conflict in Ukraine. Where do you believe it is heading?

NM: Right now there is a ceasefire that is holding on paper and is not holding in practice. People are still dying every day; we have the President of Ukraine declaring that children of the rebels will be hunkering down in basements forever. There was hope in September when the Minsk accord was signed that it might create preconditions for a dialogue and a possible political solution. Unfortunately, so long as Kiev believes that it has unconditional support of the West to do whatever it wants, including what it rightly classified as war crimes, they will continue being aggressive and belligerent, refusing any sort of compromise or dialogue. They believe their rights are absolute, they believe they can do whatever they want and they will continue behaving accordingly. This is not a prescription for peace; this is a prescription for further conflict. I don’t know whether the war will continue throughout the winter, what sort of intensity, depending on how bad the winter is, but I’m certain that there are people in Kiev who have said so that they will resume hostilities at the first possible opportunity with the goal of taking the rebel regions and expelling the population that refuses to accept the current government.

Security analyst Charles Shoebridge on Ukraine: “It has been a disastrous year of very little progress. Different people have different perspectives. For example, some people in the west of Ukraine are very happy that the government of Yanukovich was overthrown by the street protests that took place in Kiev. If one looks at the eastern regions, it’s a disaster time – we are talking about some 4,500 deaths, many of those, if not the majority, are civilians. And also Ukraine forces and rebel fighters themselves are suffering terrible causalities. Maybe 450,000 have fled Ukraine to go to Russia, some another 400,000 people are internally displaced. The country continues to stagnate if not decline economically as a result of this.”

Security analyst Charles Shoebridge on Ukraine: “I think that the influence of external players is also important because until now it doesn’t appear that there has been a lot of pressure placed on the Poroshenko government and Poroshenko himself by his Western supporters, particularly NATO, the EU and the US, to seek out peace instead of seeking out victory. That peace, even as a Minsk agreement itself implicitly recognized a few weeks ago, does need some form of compromise and negotiation between the parties. That simply isn’t taking place in any meaningful way at the moment.”

Security analyst Charles Shoebridge on Ukraine: “There is a division in Ukraine society, not just between those of Russian-speaking or ethnically Russian descent, but even within those communities. The same in the west of Ukraine – you have Ukrainians, some are sick of the war, but there are also a strong nationalist and far-right elements that are prevalent in much of the west of Ukraine who are really not even in any mood to negotiate or give any way to what they describe as terrorists in the east, the rebel fighters, and who want this war prosecuted to a victory rather to any form of compromise.”