How Saudi Arabia Turned Its Greatest Weapon on Itself
"The oil wars of the 21st century are underway.
In recent years, the Saudis have made clear that they regard the oil markets as a critical front line in the Sunni Muslim-majority kingdom’s battle against its Shiite-dominated rival, Iran. Their favored tactic of “flooding,” pumping surplus crude into a soft market, is tantamount to war by economic means: the oil trade’s equivalent of dropping the bomb on a rival.
In 2006, Nawaf Obaid, a Saudi security adviser, warned that Riyadh was prepared to force prices down to “strangle” Iran’s economy. Two years later, the Saudis did just that, with the aim of hampering Tehran’s ability to support Shiite militia groups in Iraq, Lebanon and elsewhere."
This is a comedy routine, the House of Saud has no substantive economy outside of oil, while Iran does, and is already rebuilding that economy after the elimination of international sanctions.
". . . [I]n 2011, Prince Turki al-Faisal, the former chief of Saudi intelligence, told NATO officials that Riyadh was prepared to flood the market to stir unrest inside Iran. Three years later, the Saudis struck again, turning on the spigot.
But this time, they overplayed their hand.
When Saudi officials made their move in the fall of 2014, taking advantage of an already glutted market, they no doubt hoped that lower prices would undercut the American shale industry, which was challenging the kingdom’s market dominance. But their main purpose was to make life difficult for Tehran: “Iran will come under unprecedented economic and financial pressure as it tries to sustain an economy already battered by international sanctions,” argued Mr. Obaid."
There is a reason Lawrence of Arabia was necessary, it is not because the Arabs are great strategists. The elimination of the international sanctions allow Iran to begin quickly rebuilding their economy. The House of Saud, on the other hand is faced with oil prices which do not pay the bills. The Saudi's are in talks with various business consultants on developing and building their economy, to create an economy outside of oil. This is far too little, far too late. And who will be manning these industries, Saudis? What a joke. Saudis only want a position of authority in the company, the actual work must be done by others. It was not Iran which came under "unprecedented economic and financial pressure," but Saudi Arabia.
"And then there is Saudi Arabia itself.
All the evidence suggests that Saudi officials never expected oil prices to fall below $60 a barrel. But then they never expected to lose their sway as the swing producer within the Organization of the Petroleum Exporting Countries, or OPEC. Despite wishful statements from Saudi ministers, the kingdom’s efforts last month to make a deal with Russia, Venezuela and Qatar to restrict supply and push up prices collapsed.
The I.M.F. has warned that if government spending is not reined in, the Saudis will be bankrupt by 2020. Suddenly, the world’s reserve bank of black gold is looking to borrow billions of dollars from foreign lenders. King Salman’s response has been to promise austerity, higher taxes and subsidy cuts to a people who have grown used to state largess and handouts. That raises questions about the kingdom’s internal cohesion — even as the king decided to shoulder the burden of regional security in the Middle East, fighting wars on two fronts. Has there ever been an oil state as overleveraged at home and overextended abroad?
Meanwhile, by concluding the historic nuclear agreement, Iran is getting out from under the burden of economic sanctions. It will not be lost on Riyadh that this adds another oil producer to the world market that it can no longer control.
The instability and economic misery for smaller oil-producing states like Nigeria and Azerbaijan look set to continue. But that’s collateral damage. The real story is how the Saudis have been hurt by their own weapon."
This article is a primer on how low oil prices are helping peace loving democracies, and throttling the more malignant oil tyrants. The author makes a serious foot fault early in the article writing, "In the West, we have largely forgotten the lessons of 1974, partly because our economies have changed and are less vulnerable, but mainly because we are not the Saudis’ principal target." This misunderstands the relationship between the House of Saud and Wahhabism. The US, and the West are the target, the principal target. Iran is only a regional target, and is considered only a religious pretender, which the House of Saud believes it can swat like a fly.
The House of Saud is not an ally, just as the USSR was not an ally during, and then after WWII. After we gave the USSR massive support of food, weapons, train cars, fuel, airplanes, trucks, jeeps, pretty much everything but tanks, rifles, bullets, and men, Stalin turned agains the US, and the West, and opened a new front, the Cold War. If the House of Saud ever though the US were weak enough, it would do something similar. It is not an ally.
While Iran is also not an ally, it could be, if we cultivate economic prosperity, and adopt a more rational Middle East policy. I am not holding my breath on either.
For now, our primary policy in the Middle East needs to be the continuation of low oil prices. The House of Saud needs to be broken, and the Islamic Reformation needs to move apace. This will only happen if the House of Saud is placed under serious economic pressure to the point it fracture sufficiently to separate from the canker of Wahhabism/Salafism. The resulting loss of funding for Wahhabism/Salafism would impoverish this terror funding entity, and allow the Shia to pressure for actual reformation. Just as the Catholic Church needed reformation prior to 1500, so does the Wahhabist/Salafist Islam.
This is not a war we need be involved in, but it is a war we should monitor closely. It would be nice if we were not saddled with the worst political class in history, but we are, and we will need to force them to do what is necessary, not what is expedient, nor what is most beneficial to the political class.
The destruction of the cancerous oil tyrannies, and the Islamic Reformation will be built on the back of low oil prices, which is in major part due to shale oil, and fracking. We should be expanding this not limit available, drillable reserves. This will ensure low oil prices for a very long time, perhaps well past the time we leave oil as a primary energy source.