Archive for April 30th, 2016

The Islamic Vortex (Note-10)

According to the geo-economic logic of the dying status quo, the Islamic Vortex supported oil prices by injecting menace into the supply chain. Peaks of turbulence were associated with oil shocks. ‘Middle East peace initiatives’ (or more drastic interventions) were so deeply entwined with oil supply security imperatives as to be scarcely distinguishable.

Not anymore:

Many energy analysts became convinced that Doha would prove the decisive moment when Riyadh … would agree to a formula allowing Iran some [production] increase before a freeze. … But then something happened. According to people familiar with the sequence of events, Saudi Arabia’s Deputy Crown Prince and key oil strategist, Mohammed bin Salman, called the Saudi delegation in Doha at 3:00 a.m. on April 17th and instructed them to spurn a deal that provided leeway of any sort for Iran. When the Iranians — who chose not to attend the meeting — signaled that they had no intention of freezing their output to satisfy their rivals, the Saudis rejected the draft agreement it had helped negotiate and the assembly ended in disarray. […] … Most analysts have since suggested that the Saudi royals simply considered punishing Iran more important than raising oil prices. No matter the cost to them, in other words, they could not bring themselves to help Iran pursue its geopolitical objectives, including giving yet more support to Shiite forces in Iraq, Syria, Yemen, and Lebanon. Already feeling pressured by Tehran and ever less confident of Washington’s support, they were ready to use any means available to weaken the Iranians, whatever the danger to themselves.

With ‘Peak oil demand‘ in prospect, and a brutal zero-sum struggle beginning for shares in a market tending to secular shrinkage, the deepening Sunni-Shia has become an engine of systematic oil price suppression. According to plausible Saudi calculations, the Iranian enemy will simply use oil revenues to pursue their geopolitical objectives more competently than the Saudis can themselves. A higher oil price, therefore, is comparatively advantageous to the Shia bloc (at least in the eyes of the Saudis, whose perceptions in this regard uniquely matter, due to their status as sole swing-producer). Any rise in revenues is overwhelmed by the quantity of additional military challenge it brings with it. This holds true whatever the level of social stress a low price inflicts on the Sunni side.

It’s quite a box the Saudis find themselves in. There’s no way out of it that doesn’t require winning a religious war.

April 30, 2016admin 12 Comments »
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