Sunday, November 23, 2014

Today's Links

1--Why Oil Is Plunging: The Other Part Of The "Secret Deal" Between The US And Saudi Arabia, zero hedge

Saudi Arabia to pressure Russia, Iran with price of oil

Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.

Saudi Arabia plans to sell oil cheap for political reasons, one analyst says. 

To pressure Iran to limit its nuclear program, and to change Russia's position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy. 

With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.

The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won't be able to affect Saudi Arabia's decision, Abanmy maintained.

The organization's decisions are only recommendations and are not binding for the member oil producing countries, he explained.

2--Russia, oil, Bloomberg

They certainly were a quarter of a century ago. Plunging oil prices in the latter half of the 1980s helped pave the way for the breakup of the Soviet Union by robbing it of revenue it needed to survive. The depressed market also may have influenced Iraqi leader Saddam Hussein’s decision to invade fellow producer Kuwait in 1990, triggering the first Gulf War

Russia again looks likely to suffer from the fallout in oil markets, along with Iran and Venezuela, while the U.S. and China come out ahead.

‘Geopolitically Important’

Oil is “the most geopolitically important commodity,” said Reva Bhalla, vice president of global analysis at Stratfor, an advisory company in Austin, Texas. “It drives economies around the world” and is located in some “usually very volatile places.”

3---Saudi oil – the secret weapon against Russian encroachment, CapX

Much more credible – although impossible to prove – is that the US and Saudi Arabia have indeed agreed to depress oil prices to rein in Russia. This theory has lately become a staple of Russian state media, which generally depicts the West as a conspiracy of evil capitalists and fascists bent on destroying Russia along with running dogs such as Ukraine and Estonia. The irony is that in this specific instance, they may be spot on.
For the Saudis this is more than quid pro quo for help dealing with ISIS. Russia has also become a domestic pest in the Middle East, where it gives extensive direct military assistance to the Syrian regime and does what it can to prop up Iran. Iran too is vulnerable to low oil prices, and the sensitive juncture in nuclear negotiations is a good time to apply leverage: the IMF calculates that Iran needs an oil price of $153.40/barrel for its budget to break even

4---Mexico on the Brink, wolf street

The sheer extent of U.S-Mexican security cooperation was confirmed today (Sat. Nov. 22) by revelations from the Wall Street Journal that agents of the U.S. Justice Department are disguising themselves as Mexican Marines to take part in armed raids against drug suspects in Mexico. Naturally, almost all the emphasis was placed on the “significant risk” to U.S. personnel; much less mention was made of the blatant infringement on Mexican sovereignty.

Despite its glaring failures and countless innocent victims, the U.S.’s War on Drugs continues to expand, with the Mérida Initiative now including signatories from across Central America and the Caribbean. For the U.S., the War on Drugs has served as a means of expanding its influence over the governments, police forces and armies of Latin American countries. For Mexico, by contrast, the War on Drugs, together with endemnic corruption, rampant poverty and political impunity, has brought society to the very edge of the abyss.

Whether it is able to bring itself back from the brink will depend on the extent to which its deeply divided society can unite behind a common agenda of peaceful resistance against the heavily armed forces of a corrupt, failing state and ruthless drug cartels, often in league with one another. The challenge is immense, the stakes immeasurably high but change is no longer an option; it is a necessity

5---High yield madness signals end of stock rally?, zero hedge

Why should 'equity' investors care? The last few years' gains in stocks have been thanks massively to record amounts of buybacks (juicing EPS and also providing a non-economic bid to the market no matter what happens). This financial engineering - for even the worst of the worst credit -  has been enabled by massive inflows into high-yield and leveraged loan funds, lowering funding costs and allowing CFOs to destroy/releverage their firms all in the goal of raising the share price.
Simply put - equity prices cannot rally for long without the support of high-yield credit markets - never have, never will

6--Meixo's disappeared students , WSWS

7--Endgame: Pettis on Spain  mish

8--High yield blinking red, macronomy

Time to pay attention to the warning signs

9--Why has Riyadh deployed an oil weapon?, press tv

As the world learned in 1986 when oil prices plunged over 50 percent, if Saudi Arabia wants to start a price war to affirm its ascendency, it has both the resources and infrastructure to do just that.
The 1986 oil price freefall engineered by the Saudis was simply to increase their share of the market, but this time, Riyadh’s price war could make fracking and deepwater drilling as well as alternative energy sources such as solar and wind power economically unfeasible in America.  But does Riyadh really intend to strike a blow at the US economy?

Saudi Arabia has the fiscal reserves to tolerate oil prices as low as $70 a barrel for two years without undue hardship.  With reserves of almost $750 billion—double the amount held five years ago—Riyadh is clearly in a position to test the resolve of the world’s largest importer of oil, the United States, in maintaining its shale oil production at the current levels despite prices well below the $100 a barrel profit benchmark. 

And if the Saudis hold oil prices below $90 a barrel, shale oil extraction in the US will be rendered unprofitable, which would lead to production cutbacks and greater reliance on imported oil.
It is no secret that Washington and Riyadh have been at odds over a number of issues recently, among them the Saudi perception of a lack of political will in the US administration to topple the Assad government, exasperation due to the US refusal to either strike Iran directly or back an Israeli assault, and utter dismay over President Barack Obama administration’s efforts to reach an agreement on Iran’s peaceful nuclear program. 

10--What Really Happened in Beijing: Putin, Obama, Xi And The Back Story The Media Won’t Tell You" Patrick L. Smith, info clearinghouse

Less than a week after the Minsk Protocol was signed, Kerry made a little-noted trip to Jeddah to see King Abdullah at his summer residence. When it was reported at all, this was put across as part of Kerry’s campaign to secure Arab support in the fight against the Islamic State. Stop right there. That is not all there was to the visit, my trustworthy sources tell me. The other half of the visit had to do with Washington’s unabated desire to ruin the Russian economy. To do this, Kerry told the Saudis 1) to raise production and 2) to cut its crude price. Keep in mind these pertinent numbers: The Saudis produce a barrel of oil for less than $30 as break-even in the national budget; the Russians need $105.

         Shortly after Kerry’s visit, the Saudis began increasing production, sure enough — by more than 100,000 barrels daily during the rest of September, more apparently to come. Last week they dropped the price of Arab Light by 45 cents a barrel, Bloomberg News just reported. This has proven a market mover, sending prices to $78 a barrel at writing. Think about this. Winter is coming, there are serious production outages now in Iraq, Nigeria, Venezuela and Libya, other OPEC members are screaming for relief, and the Saudis make back-to-back moves certain to push falling prices still lower? You do the math, with Kerry’s unreported itinerary in mind, and to help you along I offer this from an extremely well-positioned source in the commodities markets: “There are very big hands pushing oil into global supply now,” this source wrote in an e-mail note the other day.

The Russians, meantime, are reported to be sending soldiers and artillery back across, or maybe just across, the Ukrainian border. This we read, but we read nothing as to why this may be so, assuming for argument’s sake it is. We are invited to accept that there is no reason worth reporting."  What Really Happened in Beijing: Putin, Obama, Xi And The Back Story The Media Won’t Tell You" Patrick L. Smith

11--Stakes are high as US plays the oil card against Iran and Russia , Larry Eliot, Guardian

That, though, is not the whole story. The fourfold increase in oil prices triggered by the embargo on exports organised by Saudi Arabia in response to the Yom Kippur war in 1973 showed how crude could be used as a diplomatic and economic weapon. History is repeating itself.
Think about how the Obama administration sees the state of the world. It wants Tehran to come to heel over its nuclear programme. It wants Vladimir Putin to back off in eastern Ukraine. But after recent experiences in Iraq and Afghanistan, the White House has no desire to put American boots on the ground. Instead, with the help of its Saudi ally, Washington is trying to drive down the oil price by flooding an already weak market with crude. As the Russians and the Iranians are heavily dependent on oil exports, the assumption is that they will become easier to deal with.
John Kerry, the US secretary of state, allegedly struck a deal with King Abdullah in September under which the Saudis would sell crude at below the prevailing market price. That would help explain why the price has been falling at a time when, given the turmoil in Iraq and
Syria caused by Islamic State, it would normally have been rising.

12--Pipeline Geopolitics: The Russia German Nord Stream Strategic Gas Pipeline, Dmitry Minin, Global Research
 The parts of Syrian territory where detachments of rebels are operating with the support of the U.S., Qatar and Turkey, that is, the north, Homs and the environs of Damascus, coincide with the route that the pipeline is to follow to Turkey and Tripoli, Lebanon.

the rebellion in Syria began to grow two years ago, almost at the same time as the signing of a memorandum in Bushehr on June 25, 2011 regarding the construction of a new Iran-Iraq-Syria gas pipeline… It is to stretch 1500 km from Asaluyeh on the largest gas field in the world, North Dome/South Pars (shared between Qatar and Iran) to Damascus. The length of pipeline on the territory of Iran will be 225 km, in Iraq 500 km, and in Syria 500-700 km. Later it may be extended along the bottom of the Mediterranean Sea to Greece. The possibility of supplying liquefied gas to Europe via Syria’s Mediterranean ports is also under consideration. Investments in this project equal 10 billion dollars

It was planned to run the Nabucco pipeline from Iraq, Azerbaijan and Turkmenistan through the territory of Turkey. At first Iran was also considered as a resource base, but later it was excluded from the project. After the signing of the memorandum on the Islamic Pipeline, the head of the National Iranian Gas Company (NIGC), Javad Oji, stated that South Pars, with recoverable reserves of 16 trillion cubic meters of gas, is a «reliable source of gas, which is a prerequisite for the building of a pipeline which Nabucco does not have».It is easy to observe that about 20 billion cubic meters per year will remain from this pipeline for Europe, which would be able to compete with Nabucco’s 30 billion, but not the 63 billion from the South Stream.

A gas pipeline from Iran would be highly profitable for Syria. Europe would gain from it as well, but clearly someone in the West didn’t like it. The West’s gas-supplying allies in the Persian Gulf weren’t happy with it either, nor was would-be no. 1 gas transporter Turkey, as it would then be out of the game. The new «unholy alliance» which formed between them shamelessly declared its goal to be «protecting democratic values» in the Middle East, although logically speaking the U.S. and its allies ought to begin this with their own partners in the coalition against Syria from among the monarchies of the Persian Gulf, which are questionable in this regard.

Qatar, in Engdahl’s opinion, has other plans for its share in the South Pars gas field and is not eager to join efforts with Iran, Syria and Iraq. It is not at all interested in the success of an Iran-Iraq-Syria pipeline, which would be completely independent of the transit routes of Qatar or Turkey leading to Europe. In fact, Qatar is doing all it can to thwart the construction of the pipeline, including arming the «opposition» fighters in Syria, many of whom come from Saudi Arabia, Pakistan and Libya. (2)

Qatar’s resolve is fed by the discovery by Syrian geological exploration companies in 2011 of Syria’s own large gas-producing area near the Lebanese border, not far from the Mediterranean port of Tartus which Russia leases, and the detection of a significant gas field near Homs. According to preliminary estimates, these discoveries should substantially increase the country’s gas reserves, which previously amounted to 284 billion cubic meters. The fact that the export of Syrian or Iranian gas to the European Union could take place through the port of Tartus, which has ties to Russia, is unsatisfactory to Qatar and its Western patrons as well. (3)

The Arabic newspaper Al-Akhbar cites information according to which there is a plan approved by the U.S. government to create a new pipeline for transporting gas from Qatar to Europe involving Turkey and Israel. The capacity of such a pipeline is not mentioned, but considering the resources of the Persian Gulf and Eastern Mediterranean region, it could exceed that of both the Islamic Pipeline and Nabucco, directly challenging Russia’s South Stream. The main developer of this project is Frederick Hoff, who is «in charge of gas issues in the Levant» and a member of the U.S. «Syrian Crisis Committee». This new pipeline is to begin in Qatar, cross Saudi territory and then the territory of Jordan, thus bypassing Shiite Iraq, and reach Syria. Near Homs the pipeline is to branch in three directions: to Latakia, Tripoli in northern Lebanon, and Turkey. Homs, where there are also hydrocarbon reserves, is the «project’s main crossroads», and it is not surprising that it is in the vicinity of this city and its «key», Al-Qusayr, that the fiercest fighting is taking place. Here the fate of Syria is being decided. The parts of Syrian territory where detachments of rebels are operating with the support of the U.S., Qatar and Turkey, that is, the north, Homs and the environs of Damascus, coincide with the route that the pipeline is to follow to Turkey and Tripoli, Lebanon....

Qatar’s allies are trying to accomplish three goals: «to break Russia’s gas monopoly in Europe; to free Turkey from its dependence on Iranian gas; and to give Israel the chance to export its gas to Europe by land at less cost». ...

in February 2013 Iraq declared its readiness to sign a framework agreement which would enable the construction of the pipeline

Washington has put major pressure on EU countries as well as Turkey to build an alternative to Russia’s South Stream gas line, called Nabucco, that would eliminate Russia. To date Nabucco has little backing in the EU and insufficient sources of gas to fill the pipeline.
Completion of South Stream would weld a major geopolitical bond between the countries of the EU, Central Europe and Russia, something that would represent for Washington a geopolitical nightmare. US policy since World War II has been to dominate western Europe first by fanning the Cold War with the Soviet Union, and after 1990, by extending NATO eastwards to the borders of Russia. An increasingly independent western Europe turning east rather than across the Atlantic, could spell a major defeat for continued US “sole Superpower” domination

Putin gave the neo cons a good taste of Russian realpolitik.  By reclaiming Crimea, he blocked the whitestream pipeline, acquired hundreds of billions in offshore Natgas and Oil, and gave Russia dominance over the black sea.  Then the stupid Ukies, following state department diktat, attacked the Donbass, and got their asses kicked by the novorossiyans. Losing billions of dollars and thousands of soldiers, the  Ukraine lost its domestic supply of coal and nat gas, and is now reduced to a bankrupt rump state. Better yet, Ukie terrorism against the Donbass gave Putin the perfect excuse to crush the traitorous russian fifth columnists, who were supporting the Ukraine and were trying to trigger a color revolution. With 88% domestic approval, based in part on endless headline stories showing murdered russians killed by ukie fascists armed by the west, Putin has destroyed his opposition, and has united Russia against the west. In China, 92% of the population admires him while less than 20% respect Obama. After this fuck up, Nuland/Nudelman deserves a major promotion, as befits the peter principle


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