OPEC, Allied Nations Extend Nearly 10M Oil Barrel Cut by A Month

OPEC, Allied Nations Extend Nearly 10M Oil Barrel Cut by A Month

By Staff, Agencies

The Organization of the Petroleum Exporting Countries [OPEC] along with its allied nations agreed Saturday to extend a production cut of nearly 10 million barrels of oil a day through the end of July, hoping to boost energy prices hard-hit by the coronavirus pandemic.

Ministers of the cartel and outside nations like Russia met via video conference to adopt the measure, aimed at cutting out the excess production depressing prices as global aviation remains largely grounded due to the pandemic. It represents some 10 percent of the world’s overall supply.

However, danger still lurks for the market.

The decision came in a unanimous vote, UAE Energy Minister Suhail al-Mazrouei wrote on Twitter. He called it a “a courageous decision and a collective effort deserving praise from all participating producing countries.”

Crude oil prices have been gaining in recent days, in part on hopes OPEC would continue the cut. International benchmark Brent crude traded Saturday over $42 a barrel. Brent had crashed below $20 a barrel in April.

The oil market was already oversupplied when Russia and OPEC failed to agree on output cuts in early March. Analysts say Russia refused to back even a moderate cut because it would have only served to help US energy companies that were pumping at full capacity. Stalling would hurt American shale-oil producers and protect market share.

Russia’s move enraged Saudi Arabia, which not only said it would not cut production on its own but said it would increase output instead and reduce its selling prices in what became effectively a global pricing war.

Prices collapsed as the coronavirus and the COVID-19 illness it causes largely halted global travel.

Under a deal reached in April, OPEC and allied countries were to cut nearly 10 million barrels per day until July, then 8 million barrels per day through the end of the year, and 6 million a day for 16 months beginning in 2021.

The 2020 Oil Crash’s Unlikely Winner: Saudi Arabia

Source
 2020-05-06

It’s a year of carnage for oil nations. But at least one will emerge from the pandemic both economically and geopolitically stronger. 

With 4 billion people around the world under lockdown as the coronavirus pandemic grows, demand for gasoline, jet fuel, and other petroleum products is in freefall, as are oil prices. The price of a barrel of crude has been so low in the United States that sellers recently had to pay people to take it off their hands. As a result, oil-dependent economies are reeling. In the United States, the largest oil producer in the world, the number of rigs drilling for oil has plummeted 50 percent in just two months, almost 40 percent of oil and gas producers could be insolvent within the year, and 220,000 oil workers are projected to lose their jobs. Around the world, petrostates from Nigeria to Iraq to Kazakhstan are struggling and their currencies tanking. Some, like Venezuela, face an economic and social abyss.

While 2020 will be remembered as a year of carnage for oil nations, however, at least one will most likely emerge from the pandemic stronger, both economically and geopolitically: Saudi Arabia.

First, Saudi Arabia is proving that its finances can weather a storm such as this.
 

 Low oil prices are, of course, painful for a country that needs around $80 per barrel to balance its public budget, which is why Moody’s cut Saudi Arabia’s financial outlook last Friday. Saudi Arabia ran a $9 billion deficit in the first quarter of 2020. Like other nations, the kingdom has also seen tax revenues fall as it imposes economic restrictions to halt the pandemic’s spread. Last week, the Saudi finance minister said that government spending would need to be “cut deeply” and some parts of the kingdom’s Vision 2030 economic diversification plan would be delayed.
 

Yet unlike most other oil producers, Saudi Arabia has not only plump fiscal reserves but also the demonstrated capacity to borrow. On April 22, the finance minister announced the kingdom could borrow as much as $58 billion in 2020. Compared to most other economies, it has a relatively low debt-to-GDP ratio: 24 percent as of the end of 2019, although lately that figure has been rising. The finance minister also said Saudi Arabia would draw down up to $32 billion from its fiscal reserves. With $474 billion held by the central bank in foreign exchange reserves, Saudi Arabia remains comfortably above the level of around $300 billion, which many consider the minimum to defend its currency, the riyal, which is pegged to the dollar.
 

Second, Saudi Arabia will end up with higher oil revenues and a bigger share of the oil market once the market stabilizes, thanks to production cuts and shutdowns forced by the global economic collapse. The current oil bust lays the groundwork for a price boom in the years ahead—and burgeoning revenues for Saudi Arabia. While the outlook for future oil demand is highly uncertain, once you look beyond the immediate crisis, demand is likely to grow faster than supply.
 

The U.S. Energy Information Administration projects world oil demand to return to its pre-pandemic levels by the end of 2020. The International Energy Agency is almost as optimistic, projecting demand to be only 2 to 3 percent below its 2019 average of 100 million barrels per day by the end of the year. If measures to contain the pathogen last longer than expected or there is a second wave of the virus, the recovery will take longer, but most scenarios still expect demand to eventually recover.
 

Lifestyle changes could lower future oil demand, but the data suggests one should be skeptical of predictions of permanent shifts. In China, for example, car travel and shipping by truck is already nearly back to last year’s level, although air travel—which together with air freight accounts for 8 percent of world oil demand—remains down sharply. Oil demand could actually get a boost if more people decide private cars make them feel safer than crowded mass transit. Expectations that oil demand would be throttled by climate policy will likely be disappointed. The economic distress imposed by the pandemic risks undermining environmental policy ambition, as does the current shift to isolationism and away from the kind of global cooperation required for effective climate policy.
 

Oil supply, by contrast, will take longer to return as shut-in production is lost, investment in new supply is scrapped, and the U.S. shale revolution slows. With the oil glut pushing global oil storage to the limits—land-based storage will be full as soon as this month—an unprecedented number of producing oil wells will need to be shut off. Doing so risks damaging the reservoirs. Some of that supply will never come back, and some will take substantial time and investment to bring back online. Energy Aspects, an oil consultancy, projects 4 million barrels per day of supply could be at risk of semipermanent damage.
 

Major oil companies such as Chevron and Exxon Mobil have also slashed their capital expenditures in response to the price collapse. Even without any growth in oil demand, around 6 million barrels per day of new oil supply must be brought online each year just to offset natural production declines. Moreover, oil is already out of favor with investors concerned with the industry’s poor returns and rising political and social pressures.
 

U.S. shale oil, in particular, will take years to return to its pre-coronavirus levels. Depending on how long oil demand remains depressed, U.S. oil production is projected to decline by 30 percent from its pre-coronavirus peak of around 13 million barrels per day. To be sure, recovering oil prices will raise U.S. production again. Shale oil production remains economical, especially for the better-capitalized companies that will emerge once the assets of bankrupt companies change hands and the industry is consolidated.
 

Yet shale’s heady growth in recent years (with production growing by about 1 million to 1.5 million barrels per day each year) also reflected irrational exuberance in financial markets: Many U.S. companies struggling with uneconomical production only managed to stay afloat with infusions of cheap debt. One-quarter of U.S. shale oil production may have been uneconomical even before prices crashed, according to Citigroup’s Ed Morse. Without that froth, shale will grow more slowly, if at all. Former Goldman Sachs analyst Arjun Murti estimates that even with U.S. oil prices recovering to around $50 per barrel, annual U.S. output growth will be somewhere between zero and 500,000 barrels per day, a shadow of its former self.

Even if the United States, Saudi Arabia, and Russia make a historic show of cooperation, any respite for the oil industry will be short-lived.
 

The oil price collapse has sent shockwaves through financial markets. But the geopolitical earthquake could reach even farther.
 

Indeed, as COVID-19 sets the stage for tighter oil markets and higher prices, Saudi Arabia, along with a few other Gulf states and Russia, will not only benefit from higher prices but actually find opportunities to grow market share and sell more oil. Even now, with prices severely depressed, Saudi Arabia and Kuwait are discussing bringing more oil to market from a jointly held field straddling their border. More economically vulnerable OPEC members may find it harder to invest in restarting and maintaining (let alone increasing) supply and will thus see output growth slow. This is exactly what happened in Iran, Iraq, Nigeria, and Venezuela following the 1998-1999 oil crash.
 

Finally, by shoring up its fraying alliance with the United States and reestablishing itself as the global oil market’s swing producer, Saudi Arabia has strengthened its geopolitical position. As the major producers and consumers scrambled to prevent the oversupply of oil from overwhelming the world’s storage facilities, they finally turned to Saudi Arabia to lead OPEC and other key producers in a historic production cut. For all the talk of oil production quotas in Texas or creating a new global oil cartel through the G-20, calling Riyadh was the only real option available to policymakers at the end of the day—as it has long been. That is because Saudi Arabia has long been the only country willing to hold, at significant cost, a meaningful amount of spare production capacity that allows it to add or subtract supply to or from the market quickly. This singular position—which it just made plain once again to the world—gives the kingdom not only power over the global oil market but also significant geopolitical influence. In a global market, that will remain true until nations use much less oil, which continues to be an important goal of climate policy.
 

By leading the effort to craft an OPEC+ production cut, Saudi Arabia also reminded Moscow that Russia cannot go it alone, as it attempted to do when it walked out of OPEC+ negotiations in March and set off the price war. Moscow is more dependent on Riyadh in managing the oil market than vice versa, strengthening Saudi Arabia’s hand in their relationship—with likely repercussions in the Middle East, where Moscow has a growing military presence and cultivates allies including Syria and the Saudis’ archenemy, Iran.
 

Additionally, Saudi Arabia has improved its standing in Washington. Following intense pressure from the White House and powerful senators, Saudi Arabia’s willingness to oblige by cutting production will reverse some of the damage done when Saudi Arabia was blamed for the oil crash after it surged production in March. Saudi Arabia may also have undermined U.S. lawmakers’ plans for anti-OPEC legislation—it’s difficult to argue OPEC is a harmful cartel when both ends of Pennsylvania Avenue just begged it to act like one. U.S. vitriol will flare up again in the coming weeks, when a flotilla of Saudi tankers sent off during the price war two months ago will dump triple the normal level of deliveries onto an already saturated U.S. market. But this only means that U.S. politicians will once again have to beseech Riyadh to extend or deepen supply cuts at the next OPEC+ meeting in June.
 

Only a few weeks ago, the outlook for Saudi Arabia seemed bleak. But looking out a few years, it’s difficult to see the kingdom in anything other than a strengthened position. COVID-19 may end up doing what Saudi leaders failed to do once before, when they let oil prices crash in late 2014 in a misguided attempt to debilitate U.S. shale. Beyond the immediate crisis, the pandemic will end up bolstering Saudi Arabia’s geopolitical position, reinforcing its pivotal role in oil markets, and sowing the seeds for higher market share and oil revenues in the years ahead.

Source: U-feed

Saudi Arabia: What Happens When the Oil Stops

Saudi Arabia: What Happens When the Oil Stops
https://www.english.alahednews.com.lb/52702/499

By David Hearst, MEE

Saudi Arabia’s Crown Prince Mohammed bin Salman [MBS] can no longer plead youth or inexperience.

That time has passed.

What you see is what you get. The misrule, blunders and war associated with him as crown prince will only continue with him as king.

The full repertoire of the crown prince’s statecraft was on display in a stormy telephone call he made to Russian President Vladimir Putin on the eve of an OPEC meeting last month which ended in a calamitous price war between Saudi Arabia and Russia.

A big mistake

Mohammed bin Salman can see for himself just how big a mistake that call was. The price of oil has collapsed, storage will rapidly run out, and oil companies face the real prospect of having to cap wells. The oil and gas sector accounts for up to 50 percent of the kingdom’s gross domestic product and 70 percent of its export earnings. This has just disappeared.

As anyone who has met Putin will tell you, you can bargain as hard as you like with the Russian president. You can even be on opposing sides of two regional wars, in Syria and Libya, and still maintain a working relationship, as the Turkish President Recep Tayyip Erdogan continues to do.

But what you must not do is back Putin into a corner. This is what the Saudi crown prince did by giving Putin ultimatums and shouting at him. Putin just shouts back, knowing that the Russian balance of payments is in better shape to play that game of poker than the Saudi one is.

Report: Jared Kushner and Saudi Crown Prince communicated via ...

MBS is finding out now how weak his cards are. To be fair, before he made that call, he took advice from someone as arrogant and unthinking as he is. US President Donald Trump’s son-in-law and Middle East advisor Jared Kushner listened to what the Saudi crown prince was about to do and did not object.

This explains why Trump’s first reaction was to welcome the oil crash. Trump thought for every cent cut from the price of oil, a billion dollars of consumer spending power would be released at home. That was until his attention turned to what the oil price collapse was doing to his own oil industry.

Saudi Arabia without oil

With the price of Brent Crude less than $20, Mohammed bin Salman is about to find out what happens when the world does not need his oil. In the past, the standard response to that hypothesis was condescending looks. Not anymore. The prospect of Saudi becoming a debtor nation is real.

Saudi Arabia’s financial decline has been in the works for some time. When his father Salman took over as king on 23 January 2015, foreign reserves totaled $732bn. In December last year they had depleted to $499bn, a loss of $233bn in four years, according to the Saudi Arabian Monetary Authority [SAMA].

The kingdom’s GDP per capita has also declined, from $25,243 in 2012 to $23,338 in 2018, according to the World Bank. The nest egg has been diminished with speed. The IMF has calculated that net debt will hit 19 percent of GDP this year, 27 percent next year, while coronavirus and the oil crisis could push borrowing to 50 percent by 2022.

The war in Yemen, a coup in Egypt and interventions across the Arab world, outsized arms purchases from America, vanity projects like the building of a futuristic city NEOM, not to mention his own three yachts, paintings and palaces, each play a part in draining Saudi coffers.

Saudi’s economy was already struggling before coronavirus took hold with a growth rate of just 0.3 percent and a drop of 25 percent in construction since 2017. Add to that the lockdown imposed by coronavirus and the cancellation of the Umrah and Hajj, which attract up to 10 million pilgrims a year, and a further $8bn is wiped off the balance sheet.

But it isn’t just what the Saudi crown prince spent his money on that caused the problem. It was also what he put his money in that went bad.

Bad investments

One indication of bad investments is the decline in the relative value of sovereign wealth funds. Big brother Saudi Arabia now finds itself dwarfed by its much smaller Gulf neighbors on that score.

The chief sovereign wealth fund, Public Investment Fund [PIF], ranks at 11th in the world, behind Abu Dhabi Investment Authority, Kuwait Investment Authority and Qatar Investment Authority. When sovereign funds are pooled by nation, UAE comes first with funds worth $1.213 trillion then Kuwait with $522bn, Qatar with the $328bn and Saudi with $320bn.

Even before the coronavirus pandemic took hold, the IMF thought that plans to increase PIF to a trillion dollars would not be enough to generate the income needed if Saudi diversified from oil. If “Saudi Arabia were to grow its PIF from its current $300bn to this scale, financial returns alone would not constitute adequate income replacement in a post-oil world. Oil production of 10 million barrels per day, valued at $65 per barrel, translates to annual oil revenues of about $11,000 per Saudi at present,” the IMF wrote.

Another measure of decline is what has happened to the investments themselves. Masayoshi Son, the CEO of Japan’s Softbank, recalled how he got $45bn after spending just 45 minutes with MBS for his $100bn Vision Fund. “One billion dollars per minute,” Son said. Softbank announced last week it expects its Vision Fund to book a loss of $16.5bn.

PIF paid almost $49 a share for a stake in Uber Technologies Inc. in 2017. Uber shares have dived since. It sold almost of all its $2bn stake in Tesla toward the end of 2019, just before Tesla stock went through the roof, with an 80 percent rally this year. At this rate the PIF stake in Newcastle United is looking like a solid bet in comparison.

The oil crash comes less than two weeks after PIF splashed another $1bn on stakes in four European oil companies and the Carnival cruise liner – all of which casts in doubt the strategy of PIF diversifying away from oil. “I don’t understand why the PIF is doing what they are doing now when their country is going to need every penny,” one Middle Eastern banker told the Financial Times.

“It very much reminds me of the QIA [Qatar Investment Authority] in its early years. There’s a strategy, but they are not adhering to a strategy. They want high visibility but they also want to make money. They want to diversify the economy, but want to be opportunistic.”

No financial stimulus

Saudi Arabia today cannot afford the financial stimulus to cushion the impact of the pandemic that its Gulf neighbors are making. The kingdom is spending one percent of GDP on supporting its economy during the lockdown, while Qatar is spending 5.5 percent, Bahrain 3.9, UAE 1.8.

There are many examples of money running out. The king decreed that the state would pay 60 percent of salaries during the coronavirus shutdown.

But employees of the Saudi’s biggest telecoms company STC are only getting 10 percent of their salaries, I am told, because the government is not paying STC the money for the furloughed staff.

The Saudi Ministry of Health has been requisitioning hotels to run as hospitals. Instead of compensating hotel owners for the temporary loss of their property or paying them a cost price, they are forcing them to pay the running costs in addition to the costs of disinfecting the rooms.

Or take the paycut Egyptian doctors working in the Saudi private health sector are being forced to take. Those who are on annual leave, are not being paid. Those who are instructed to work from home on shifts by their hospitals to lessen the risk of infection, either have to take that time from their annual leave or work for free.

So, as Bloomberg reported, the prospect of Saudi becoming a net debtor nation is real. The question is how soon that happens.

The IMF calculated that with oil prices of $50 to $55 a barrel, Saudi Arabia’s international reserves would fall to about five months import coverage in 2024. With oil at zero, a once unthinkable balance of payments crisis and abandonment of the dollar peg is now all too likely.

Regional effect

Both pillars of Mohammed bin Salman’s plan to modernize and reform his country are crumbling. His plan to generate foreign investment by selling off five percent of Aramco on foreign stock exchanges has gone and now PIF, the main vehicle for diversifying his economy away from oil, is in chaos too.

Many in the region would cheer MBS’s demise. He has simply done so much harm to so many people, particularly in Egypt. In a post-oil era, MBS would lose his power of patronage, the power of an oligarch who can spend a billion pounds a minute and not blink.

But the collapse of Saudi Arabia’s economy, which for decades has been the engine room of the economy of the whole region, would quickly be felt in Egypt, Sudan, Jordan, Lebanon, Syria, Tunisia – all of which send millions of their workers and professionals to the kingdom and whose economies have grown to depend on their remittances.

This is not a prospect anyone should welcome.

هل هناك خلاف فعليّ بين الأميركيين وآل سعود؟

د. وفيق إبراهيم

يثير التهديد الأميركي لآل سعود بقطع التعاون معهم على مستويات التغطية السياسية والاستراتيجية والتسليح والتدريب والرعاية وسحب المستشارين والعسكريين الاميركيين المنتشرين في الخليج، الدهشة لأنه لا يتصل بأي توتر سابق بين الطرفين ولا يعكس تاريخاً طويلاً ومتواصلاً من الولاء السعودي الكامل للسياسة الاميركية في كل بقاع الارض.

فهذه العلاقات تطورت بعد توقيع معاهدة كوينسي في 1945 بين الرئيس الاميركي روزفلت والعاهل السعودي عبد العزيز على اساس التغطية الكاملة مقابل الولاء والتسهيلات النفطية والتبعية الاقتصادية بما جعل هذا التاريخ رمزاً لانصياع سعودي كامل وعلني وضع كامل الإمكانات الاقتصادية والدينية في خدمة الجيوبوليتيك الاميركي متيحاً بدوره للسعودية فرصة حيازة ادوار في كبيرة في الخليج والتأثير في جوارهما المباشر في العراق واليمن والعالمين العربي والاسلامي.

على هذا الاساس قامت معادلة القطبية الاميركية التي تشكل السعودية جناحها في محوريها العربي والاسلامي مع أهمية دولية نسبية.

اللافت هنا ان هذا الوضع لا يزال معتمداً حتى هذا التاريخ ويبدو منفصلاً الى درجة غريبة من نوعين من التهديد الأميركي.

الاول اطلقه الرئيس دونالد ترامب محذراً صديقته السعودية ومنافسته روسيا من الاستمرار في رفع انتاجيهما النفطي وإلا فإنه متجه الى فرض ضرائب ورسوم على صادراتهما من البترول.

اما الثاني فكان أشد عنفاً واطلقه الحزب الجمهوري الاميركي الذي ينتمي اليه ترامب معلناً فيه استعداد الدولة الاميركية قطع كامل علاقاتها مع السعودية اذا لم تتراجع عن رفع انتاجها النفطي الى مستويات اقل مما كان عليه قبل شهرين فقط.

وهذا يعني إعادته من 13 مليون برميل يومياً كما هو الآن الى تسعة ملايين كما كان في كانون الثاني الماضي… مع امل على خفضه اضافياً في اطار خفض جماعي لدول منظمة اوبيك يتعادل مع التراجعات الاقتصادية التي فرضها انتشار جائحة الكورونا المتواصل حتى الآن.

المدهش هنا أن الاميركيين يصرون على هذا الخفض رافضين تحديد سقف لإنتاجهم من النفط الصخري الشديد الكلفة والبترول العادي ويبررون بأن نفوطهم تراجعت في الآونة الأخيرة بسبب تراجع اسعار البترول الى 23 دولاراً للبرميل بعد الرفع السعودي – الروسي لإنتاجيهما فكان ان توقفت شركات النفط الصخري عن العمل، لأن كلفة استخراج البرميل الواحد من هذا النوع تتعدى الأربعين دولاراً، ما ادى الى تدهور كبير في اقتصاديات هذه الشركات الاميركية وتريد خفض الاسعار العالمية لإعادة انعاش الشركات الاميركية التي تؤمن وظائف لعشرات آلاف العمال وتؤدي دوراً مركزياً في التفاعلات الاقتصادية الكبرى، لذلك فإن هذه التطورات تدعو الى التساؤل عن اسباب صمت الاميركيين عن رفع السعودية لإنتاجها النفطي في تاريخ رفعه قبل أشهر عدة، ولماذا يعترضون الآن؟

الواضح أنهم في المرحلة الأولى اعتقدوا ان رفع الإنتاج السعودي يؤدي فوراً الى ضرب الاقتصاد الروسي المعتمد على النفط والغاز بمعدل اربعين في المئة من موازناتهم ويضاعف مصاعب ايران التي يقاطعها الاميركيون ويحاصرونها مع نفر كبير من دول تؤيدهم او تخشاهم.

لكن انتشار الكورونا والشلل الاقتصادي في العام احدث شللاً كبيراً وخطيراً وعاماً في الاقتصاد الاميركي وشركات النفط الصخري وذلك عشية انتخابات رئاسية واصبح المشروع الاميركي بضرب روسيا عبر استخدام النفط السعودي كارثة على الاميركيين ايضاً.

وإذا كان إقناع السعوديين بخفض إنتاجهم عملاً ممكناً بسهولة، فإن إقناع الروس هو المشكلة الفعلية لانهم سارعوا الى رفض الطلب الاميركي مصرين على خفض متواز بين دول «اوبيك +» اي اوبيك زائد روسيا مع النفط الأميركي.

في حين أن الأميركيين يريدون خفضاً عالمياً يسمح لشركاتهم بالعودة الى الإنتاج والتوظيف بقوة ما يسمح لترامب بكسب أصوات الفئات الشعبية في الانتخابات المقبلة.

الموضوع اذاً بالنسبة للبيت الابيض هو اقتصادي في جانبه المتعلق بإنتاج النفط وتحديد اسعاره، وهو أيضاً سياسي لعلاقته بالانتخابات الرئاسية في تشرين الثاني المقبل، وهو أيضاً استراتيجي جيوبوليتيكي لتعاطفه مع حالة التنافس الشديد مع روسيا، وتحالفاتها في ايران والصين.

الأمر الذي يوضح ان رفع الانتاج السعودي هو قرار اميركي لكن العودة عنه لم تعد كذلك بل اصبحت معادلة تحتاج الى موافقة روسيا ومنظمة الاوبيك وهناك تكمن المشكلة، لان الروس يقبلون بالخفض بمعدل يواكب تداعيات كورونا على تراجع الاقتصاد العالمي لكنهم يشترطون ان يسري هذا الخفض على النفط الاميركي ايضاً بما يؤدي الى عرقلة عودة النشاط النفطي الى الاقتصاد الاميركي.

لذلك فإن اقتصار هذا الخفض على السعوديين لن يؤدي الى النتائج الاميركية المطلوبة، فجاء التهديدان الاميركيان للسعودية بمثابة إنذار لروسيا لحلحلة تصلبها وخطاباً عاطفياً للناخبين الاميركيين بأن الحزب الجمهوري الاميركي لن يتورع عن معاقبة صديقة بلاده الاساسية اي السعودية اذا اكملت سياسة رفع انتاجها الموازية لشركات النفط الصخري وآلاف الاميركيين العاملين فيها، الامر الذي يكشف انهما ليسا اكثر من دبلجة لغوية غير قابلة للتطبيق العملي لان السعودية هي البقرة الاميركية الحلوب التي تنعش الاقتصاد الاميركي وتؤمن للسياسة الاميركية مدى اسلامياً واسعاً يزداد انصياعاً لواشنطن عندما يستعمل آل سعود أهمية بلادهم الدينية والتغطية في خدمته.

اما على المقلب الآخر الذي يذهب الى التساؤل حول امكانية آل سعود مقاومة الاميركيين بطلب خفض انتاج نفطهم فيثير الضحك لان آل سعود لم يبنوا دولة متماسكة تؤمن بشعبها وتعمل على رفع مستويات النمو والتقدم، بل عملوا على مفهوم من القرون الوسطى يعتبر ان الارض والناس والثروات والمياه هي ملك للسلطان يوزعها على من يشاء ويمنعها عما يريد، فهو ولي الامر واحكامه مطبقة على السمع والطاعة.

هناك نقطة اضافية وهي ان الحكم السعودي لم يؤسس منظومة تحالفات عربية واقليمية تعينه في اوقات الشدة، فهو يعادي ايران معتمداً على اميركا لاسقاط جمهوريتها ويعبث بالامن الاجتماعي والسياسي للعراق متلاعباً بمكوناته وطوائفه ويرتكب مجازر في اليمن تطال مئات الآلاف في هجوم مستمر من خمس سنوات ويدعم الارهاب في سورية ويعادي قطر متدخلاً في ليبيا والسودان والجزائر ومتعاوناً مع «اسرائيل».

فكيف يمكن لبلد من هذا النوع يفتقد لتأييد شعبه مثيراً كراهية جواره السياسي ان يقاوم الاوامر الاميركية وهي اصلاً غير موجودة حتى الآن؟

يتبين ان السعودية لا تزال حاجة ماسة للاميركيين بوضعيتها السياسية الحالية، وهذا يعني ان آل سعود مرتاحون ويواصلون سياسة الاسترخاء السياسي مع خنق شعبهم بأساليب القرون الوسطى.

OPEC’S STILLBORN DEAL AND COVID-19’S OVERESTIMATIONS

South Front

OPEC's Stillborn Deal And COVID-19's Overestimations
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On April 7th, Rystad Energy, a Norwegian independent energy consulting company released the 5th edition of its COVID-19 report. [pdf]

In it, several noteworthy factors are underlined.

As it’s quite apparent, and known for a while, but somehow entirely disregarded by both governments and media, the number of actual COVID-19 cases is much, much larger than the official one.

OPEC's Stillborn Deal And COVID-19's Overestimations
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Reported cases are only a fraction of the number of actual infected people:

  • Many infected people are asymptomatic. They are unaware of being infected and are never tested or registered.
  • Most sick people stay at home, and given the limited testing capacity in most countries, they are not registered as having been sick.

In populations where large groups have been tested, the following figures have been registered:

  • Infection mortality rates (IFR) of 0.3%-1.0%, averaging 0.66%
  • IFR appears stable across regions when adjusted for age.
  • Thus, IFR is a better indicator of actual infected people, rather than reported cases. However, as the time from onset to fatality is, on average, 18 days, number of fatalities is giving a rather precise figure for «true infected» 18 days earlier.

The number of critical cases could potentially be another indicator of true cases because:

  • 33% of all cases will need intensive care, according to our analysis as published earlier.
  • However, critical case reporting practices vary from country to country, and cannot be trusted in all countries.
  • Also, limited ICU capacity could lead to lower figures because people with a real need for ICU beds still do not get it.
  • The time from onset to the critical phase is typically 12 days
  • Still, the number of critical cases will also be used as an indicator to find the true number of Covid-19 cases.

Reported fatalities is currently 5.4%, or about 8 times higher than expected IFR. This is due to underreporting of actual cases.

For example, some countries tested 0.48% of the population, and of these 5% were tested positive (250 people per million, whereas the requirement for an epidemic, according to WHO is 100 sick people per 100,000).

“We can assume that primarily sick people were tested positive, but also some without symptoms. If theoretically these countries tested another 2% of the population (4x more than already tested), and 1.5% (30% of current intensity) of those were positive, total number of infected people would grow by 300 per million to 550 per million. IFR would then be 2788/(550*748) = 0.68%, i.e. close to our assumed true IFR.”

Additionally, there were, and still are, several scenarios for the pandemic, with their respective results on the economy and the moral of the general population.

Naturally, the most economically viable course of action would be for a country (or all countries together) to do nothing, the relatively low actual mortality rate would put some strain on healthcare systems, but still, demand of oil and other commodities would remain relatively high, some loved ones will pass, but what are a few lives for the good of capitalism.

The three general options of coping with the COVID-19 pandemic are presented below, and it is very apparent which course of action the countries in Europe have chosen.

The “very sudden market collapse” is likely meant in a manner that a drop in prices, margins, profits and so on would be very sudden and sharp, but then a normalization would follow, at lower, re-evaluated growth. And, as it can be seen, many (if not all) of the European countries are attempting a sort of double-sided approach, focused on both managing the virus and effective prevention.

The market collapse, however, wouldn’t effectively be “short term” since it will not return to its high levels prior to 2020 anytime soon.

OPEC's Stillborn Deal And COVID-19's Overestimations
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The “negative moral impact” means that, the propagation of the COVID-19 hype in media would mean that any government, or large business, that undertakes no actions to curb the spread of the deadly diseases is faced with a very real threat of being sent into oblivion. This is also seen from various celebrities who are churning out content, calling for people to stay home, and so on. Any action to the contrary currently has no hope of public approval (or at least very limited such approval that, in the long and even short term would lead to no benefit to the government or business).

Now, economically GDPs are going to shrink, there is no avoiding it at this part, the question is by how much.

Rystad Energy provides several graphs presented how GDP growth compares to oil demand, in thousands of barrels per day per year.

OPEC's Stillborn Deal And COVID-19's Overestimations
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Global oil demand growth is strongly related to GDP growth. The relationship is given by oil demand intensity, which gradually decreases with improved fuel efficiency and – going forward – electric vehicle market penetration. The correlation is not fully linear due to demand elasticities.

“Our research indicates that pre-virus global oil demand in 2020 would be flat if GDP growth was to slow down to 2% (IMF: “global recession”), while oil demand growth would be 1 million bpd if global GDP was to expand by 3%. However, based on the latest reporting on the spread of Covid-19 and the state of the stock markets, some macro analysts now see global GDP contracting.”

Thus, it is expected that a contraction of 4 million barrels per day in oil demand is possible in the current scenario.

“We now estimate that oil demand destruction in April could amount to 27 million barrels per day, of which nearly 5 million barrels per day will come from the three largest consumers; China, Japan and India. As a result we caution that the world may run out of storage capacity, causing refineries to shut-in and crude oil prices to reach extreme lows. With the very low oil prices expected in 2020, and high prices expected in 2022, oil companies might see a business case to close down fields today and reopen in 2022.”

And, now, to return to the OPEC+ deal, to reduce production by 10 million barrels per day in May and June would be too little too late, it is, also questionable if it would have been effective if it happened on March 6th, as well.

The deal was essentially stillborn, if the forecast of a 27-million-barrel oil demand destruction, the deal is approximately 3 times too little for it to cope, simply because there’s not enough storage capacity.

And the deal led to some increase in price, but this is simply a short-term effect and it is unlikely that it would last, or there would be a significant increase, rather, even still a decrease is expected.

Currently, Saudi Arabia aside (since a massive decrease in demand would lead the Kingdom possibly to near-bankrupt), Russia is the one most under threat of economic turmoil due to the situation.

For Russia, reducing production will require well conservation, which is associated with high costs. For example, in 2019, 7,861 new wells were commissioned in Russia, of which only 6% fell to the share of fountain wells (510 units), the operation of which is not as expensive as the wells for which sucker rod and centrifugal pumps are used (91% of the wells commissioned last year, 7,150 units).

Subsequent re-commissioning of wells will also require additional costs from companies.

But, for example, in March, Lukoil announced its intention to cut costs by $ 1.5 billion, i.e. 19% compared to 2019’s capital expenditures.

The deal was also opposed by Mexico, which only agreed to reduce production by 100,000 bpd, instead of 400,000.

At the same time, Norway did not join the agreement, which participated in the negotiations only as an observer and which, according to OPEC forecast, this year will increase production by 300,000 bps (up to 2.04 million bps). Despite OPEC calls, the United States did not coordinate production cuts.

According to Wood Mackenzie, with an average annual Brent price of $ 35 per barrel (versus $ 64 in 2019, according to the World Bank), production capacities of 4 million bpd will become unprofitable, and with a price of $ 25, the volume of lost production will increase to 10 million bpd.

The US is currently trying to benefit from this, as it will likely not reduce anything, despite US President Donald Trump saying that he would cooperate with Saudi Arabia and Russia, and praised the deal.

The other party that benefits much from this is China – as it is already, more or less, free of the COVID-19 it can begin importing cheap crude oil and fuel its recovery and further growth.

Reduced oil production could reach 20 million barrels per day by early June (compared with the announced 9.7 million), taking into account possible reductions in countries such as Brazil and Norway, as well as natural decline in production in the US and Canada, S&P Global Platts reported.

Energy Intelligence analysts add that even after a decline in production, global oil reserves in storage will increase this year by 730 million barrels and exceed the record of last August by 8%. The cuts are aimed at restraining further overstocking of the market, Energy Intelligence notes, predicting that oil prices will remain in the range of $30–40 in the next few months.

It also should be noted that while Canada formally welcomed the OPEC+ deal, it did not formally agree to a curtailment policy. Canada is the world’s fourth-largest oil producer. In February, its output was some 4.9 million barrels per day.

This paints a very clear picture of how the COVID-19 pandemic is heavily exploited for a purely economic purpose, and to pressure certain countries, who’s using the situation comes down to speculation (and possibly conspiracy theories).

At the same time, Russia, with its overly-conservative measures, supposed mistakes in estimating the situation, as well as unclarity in applying the decided measures is undermining itself, with public support for the leadership fading away.

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أوبك تخسر حربها على روسيا وإيران

د. وفيق إبراهيم

بدأت منظمة اوبك المحور الأساس للنفط على مستوى الإنتاج والسعر العالمي برحلة العودة الى اوبيك بعد أربعة اشهر تقريباً من صراعات كادت تدفع بأسعار البترول الى هاوية الخمسة دولارات للبرميل الواحد بتراجع قدره أربعون دولاراً تقريباً.

بداية يجب الإقرار بأن لا اقتصاد بلا سياسة تروّضه من أجل مصالحها الداخلية او الخارجية.

وبناء عليه، فإن السؤال هو حول الأسباب التي دعت السعودية الى رفع إنتاجها النفطي من تسعة ملايين برميل يومياً الى اثني عشرة مليوناً ونصف ينتظر الإجابة عليه لانه أدى الى خفض سعر البرميل من 45 دولاراً الى ثلاثة وعشرين فقط.

فبدا هذا الأمر كمن يطلق النار على نفسه.

فماذا جرى؟

للتنويه فإن الاتفاق الروسي السعودي منذ 2014 حول ضرورة تأمين الاستقرار لأسواق النفط أدّى عملياً الى تحالف روسي مع منظمة اوبيك التي تقودها فعلياً السعودية صاحبة الإنتاج الأكبر والاحتياطات الأضخم وهذا أنتج معادلة جديدة اطلق عليها المتخصصون اوبيك + بزيادة روسيا على اوبيك الأصلية. فنعمت اسواق النفط ابتداء باستقرار استفاد منه طرفان الروس من جهة والسعودية من جهة ثانية. انتفع الروس من تثبيت سعر البرميل في إطار 45 دولاراً للبرميل الواحد، علماً أن موارد النفط والغاز لديهم تشكل نحو 35 في المئة من موازنتهم.

اما آل سعود فاستفادوا من ابتعاد الروس عن مجابهتهم سياسياً واستراتيجياً في حروبهم وتدخلاتهم في اليمن والعراق ومجمل العالم الإسلامي باستثناء سورية طبعاً التي تربطها بروسيا علاقات تاريخيّة لم تنقطع حتى بعد انهيار الاتحاد السوفياتيّ بدليل بقاء قاعدة عسكريّة لها عند الساحل السوري على البحر الأبيض المتوسط.

لذلك فإن البحث عن المستجدّات التي حكمت الموقف السعودي برفع الإنتاج لا وجود لها في الداخل السعودي. فتبين بالتعمق أن شركات النفط الصخري الأميركي متعثرة وتخضع لديون تزيد عن 86 مليار دولار، أي أنها بحاجة إلى أسواق جديدة لبيع متزايد لنفطها مع أسعار أعلى، بذلك فقط يستطيع الرئيس الأميركي ترامب كسب هذه الشركات الصخريّة والعاملين فيها ومنع تدهور عموم الاقتصاد الأميركي خصوصاً في هذه السنة التي تشهد في خواتيمها انتخابات رئاسية أميركية يريد ترامب الفوز بها؛ ولما لا ومحمد بن سلمان مطية رائعة تتحكم باحتياطات بلاده من دون حسيب أو رقيب وبإمكانه تبديد أموالها لفرض حمايته أميركياً في مشروعه ليصبح ملكاً على السعودية.

هذه هي الاعتبارات التي أملت على إبن سلمان عقد اجتماعات طويلة مع الروس بهدف خفض الإنتاج بذريعة أن كورونا قلّص الاقتصاد العالمي بمعدلات كبيرة قابلة للمزيد من التراجع، لكن قيادة الرئيس الروسي بوتين توغّلت في تفسير الجديد السعودي وربطته بثمانينيات القرن الماضي عندما ضخت السعودية كميات كبيرة من النفط في الأسواق العالمية أدّت الى التعجيل في انهيار الاتحاد السوفياتي الذي كان يعاني أصلاً من صعوبات اقتصادية جراء منازلته الأميركيين وحيداً في حروب الفضاء والتسلّح.

واعتبروا أن هذا المشروع السعودي يبدو وكأنه مزيد من العقوبات الأميركية المفروضة عليهم والتي تكاد تحاصر كل ما يتعلق بعلاقة روسيا بالاقتصاد وأسواق الطاقة أي تماماً كمعظم العقوبات الأميركية الأوروبية الخليجية التي تخنق إيران.

لذلك رفض الروس المساعي السعودية لخفض الإنتاج لأنهم أدركوا اهدافها المزدوجة متأكدين من أنها خدمة من محمد بن سلمان لوليه ترامب على حساب الاقتصاد السعودي.

فاندفعوا بكل إمكاناتهم لمجابهة التحدّي الأميركي السعودي بالمحافظة على مستوى إنتاجهم والإصرار والضغط باتجاه خفض العقوبات على إيران ومجمل الدول المصابة بعقوبات مماثلة في سورية واليمن وفنزويلا وكوبا.

لقد اتضح للروس أن هذه العقوبات الأميركية تستهدف دولاً نفطية أساساً، وذلك لغرض وحيد وهو توفير المساحات الدولية الكبيرة لتسويق النفط الصخريّ الأميركيّ، وذلك لان استخراج هذا النوع من البترول كلفته تصل الى اربعين دولاراً أي أكثر بثلاثين دولاراً من النفوط السعودية والايرانية والروس بما يتطلب المحافظة على سعر فوق الـ 45 دولاراً للبرميل. وهذا يفترض تقليل الإنتاج لرفع السعر بالمعادلة الطبيعيّة للسوق فكانت العقوبات التي تحدّ من تسويق النفوط الإيرانية والفنزويلية وممارسة ضغط سعودي على روسيا لتخفيض إنتاجها.

اما المستفيد الوحيد هنا هو الأميركيون الذين يصبح بمقدورهم بيع نفطهم العالي الكلفة في أسواق مرحّبة به ومن دون منافسة.

فإذا كانت الدول الخاضعة للعقوبات هي الخاسر هنا، فإن السعودية أيضاً خاسرة بدورها، لأن رفعها إنتاجها يؤدي دائماً الى انخفاض الأسعار. وهذا ما تتلقاه منذ أربعة أشهر من بيع إنتاجها المتضخّم بسعر 22 دولاراً للبرميل الواحد.

ما هو واضح هنا أن الضغط الاميركي السعودي على روسيا بقذف كميات كبيرة من النفط في الأسواق أدى الى تراجع السعر، لكنه لم يكسر الموقف الروسي لذلك أصيب المخططون الأميركيون والسعوديون بيأس، لأن هذا الضغط أصاب شركات النفط الصخري الاميركي بتراجع دراماتيكي أكبر يدفعها نحو انهيار نهائيّ وشيك.

وبما أن السعودية هي الأداة الأميركية التي تهرول عند الطلب فأسرعت لنجدة وليها وحاميها وعادت لمفاوضة الروس حول إعادة إحياء أوبك + على قاعدة خفض الإنتاج نحو 35 في المئة إنما بشرط وضعه الروس وهو ان يسري هذا الخفض على النفط الأميركي أيضاً.

بذلك تتعادل القوى النفطية في الربح والخسارة على السواء بما لا يتيح لأصحاب الرؤوس الحامية في الادارة الاميركية احتكار القسم الأكبر من الأسواق بذرائع واهية منها على سبيل المثال ان الأميركيين اصحاب اكبر نفط احتياطاً وبيعاً، وهذا مردود لأن فنزويلا والسعودية هما اكبر اصحاب الاحتياطات وتليهما إيران وروسيا، فيما تتصدر روسيا رأس لائحة منتجي الغاز، لكنها لا تبيع منه أكثر من قطر صاحبة الموقع الثالث.

المشهد إذاً يكشف عن المعركة الأميركية السعودية الحالية على كل من روسيا وإيران بما يفترض استقرار اسواق النفط على أسعاره السابقة حول الـ 45 دولاراً.

لكن هذه معركة في حرب تكمن تارة وتندلع مرات أخرى فإذا كانت معركة الأسعار توقفت حالياً فإن معارك تحرير النفط الفنزويلي والإيراني والسعودي والآبار الممنوع استثمارها في اليمن بقرار أميركي سعودي هي معارك مقبلة قابلة للالتهاب في كل مرحلة تشعر فيها الأطراف العالمية أنها قادرة على تمرير سياساتها على حساب تراجع سياسات منافسيها في الفريق الآخر.

US allegedly threatens withdraw military, air defenses from Saudi Arabia over oil prices: media

By News Desk -2020-04-08

BEIRUT, LEBANON (4:30 P.M.) – The United States may withdraw its military and air defense systems from Saudi Arabia if Riyadh and Moscow do not reach an agreement on stabilizing oil prices, the Russian news site Top War reported, citing U.S. media sources.

“A bill providing for the withdrawal of the U.S. Army and air defense systems from Saudi Arabia was prepared by Republican Senators Kevin Kramer and Dan Sullivan,” Top War reported.

“According to the new law, if Riyadh and Moscow do not agree to lower oil production to stabilize world oil prices, the United States will withdraw from the kingdom its U.S. Army personnel, Patriot anti-aircraft missile systems and THAAD anti-ballistic missile systems. It is emphasized that the withdrawn equipment and army units can be deployed on the territory of another country in the region,” they continued.

The publication reported that Saudi and U.S. officials plan to hold a conversation regarding the oil prices after the planned meeting of OPEC.

During the OPEC meeting, Russia and Saudi Arabia will negotiate to stabilize the world oil markets, which witnessed an increase in output after Riyadh and Moscow’s spat.

Russia, Saudi ‘Very Close’ to Deal Despite Earlier Reports of Delaying Meeting on Oil Output Cuts

Russia, Saudi ‘Very Close’ to Deal Despite Earlier Reports of Delaying Meeting on Oil Output Cuts

By Staff, Agencies

Saudi Arabia and Russia are “very, very close” to a deal on oil production cuts, CNBC cited Head of Russia’s Sovereign Wealth Fund, Kirill Dmitriev, as saying on Monday.

The two countries were initially set to meet Monday to discuss output cuts, but that has now been pushed back to April 9, as oil prices continue to come under pressure.

“I think the whole market understands that this deal is important and it will bring lots of stability, so much important stability to the market, and we are very close,” Dmitriev, also one of Moscow’s top negotiators, told CNBC.

Dmitriev was first to make a public declaration of the need for an enlarged supply pact, potentially involving producers outside the OPEC+ group that currently consists of the Organization of Petroleum Exporting Countries [OPEC] and some other oil producers led by Moscow.

A previous three-year deal to stabilize oil prices collapsed a month ago, with Saudi Arabia and Russia trading blames for failure to find a compromise at an OPEC+ meeting in Vienna on March 6.

Meanwhile, the G20 energy ministers and members of some other international organizations will hold a video conference to be hosted by Saudi Arabia on April 10, a senior Russian source told Reuters Monday, as part of the efforts to get the United States involved in a new deal on production cuts.

هل يستفيد اليمن من الصراع الروسيّ ـ السعوديّ؟

د. وفيق إبراهيم

لا بدّ في المنطلق من الإشارة الى ان هذا الصراع الروسي – السعودي يندلع بعد علاقات جيدة بين البلدين ابتدأت قبل نحو خمس سنوات، كما أنه يتضمن دوراً أميركياً كبيراً يقف وراء التصعيد السعودي.

لذلك فهو قتال شرس بأسلحة النفط والغاز، من شأنه الانسحاب على مجمل مواقف هذه البلدان الثلاثة في اسواق الطاقة والاقتصاد والعلاقات السياسية، ويتطلب حشد أكبر كمية ممكنة من التحالفات والمؤيدين.

ضمن هذه المعطيات يجوز السؤال عن مدى الاستفادة الممكنة لليمن من تراجع العلاقات بين السعودية وروسيا واتجاهها الى تصعيد أكبر.

لمزيد من التوضيح، فإن موسكو والرياض نسجتا قبل خمس سنوات تحالفاً في اسواق النفط ادى الى نشوء حلف بين منظمة اوبيك وروسيا اسمه «اوبيك» منجزاً استقراراً في اسعار النفط حول 68 دولاراً للبرميل على اساس محاصصات دقيقة بين دول الانتاج.

لقد انعكس هذا الوضع بتحسن كبير في العلاقات السياسية بين موسكو والرياض، فكانت السياسة الروسية تؤيد ما يتعلق بآل سعود مباشرة وتبتعد عما يضايقهم بشكل غير مباشر.

لكن سورية شكلت استثناء على هذه القاعدة بدليل ان هذين البلدين كانا في مواقع متنافسة حتى تاريخ انكفاء الدور السعودي في سورية قبل أكثر من سنة.

اما ما يتعلق باليمن، فإن روسيا قبل خمس سنوات أيّدت في مجلس الأمن الدولي تدخلاً سعودياً – إماراتياً في اليمن لمواجهة ما أسماه القرار «انقلاباً حوثياً» على السلطة الشرعيّة فيه.

وظلت موسكو مصرّة حتى قبل شهر تقريباً أن «دولة صنعاء» مشروع انقلابيّ صرف لا يمكن التعاون معه، هذا على الرغم من الانتصارات الكبيرة التي أنجزتها هذه الدولة اليمنية في وجه قوات سعودية – إماراتية وحشد كبير من المرتزقة السودانيين واليمنيين والباكستانيين ودعم بحري وجوي اميركي – بريطاني – اسرائيلي ومصري ومتنوّع.

ان انكشاف هذه الهجمات التي اتضح انها تندرج في اطار الهيمنة القطبية الاميركية مع مصالح مباشرة للسعودية في اليمن ومصالح إماراتية ايضاً، واتضاح مدى ضعف القوى اليمنية المؤيدة لهذه الهجمات، لم ترغم موسكو على تغيير مواقفها بشكل بدا فيه التنسيق النفطي بينها وبين الرياض اكثر اهمية من تداعيات حرب اليمن. هنا ظهرت روسيا دولة براجماتية لكنها لم تشارك على الاقل في الهجوم الخليجي على اليمن واكتفت بتصريحات انما عند اللزوم فقط.

إلا أن هناك مستجدات تدفع نحو خروج روسيا عن صمتها في الحرب الاميركية – السعودية على اليمن وصولاً الى حدود دعمها لدولة صنعاء اذا اقتضى الامر.

ما هو هذا الجديد؟

يندرج في إطار عاملين مستجدين: الاول هو انفجار حلف «اوبيك» لخلاف على الحصص الإنتاجية وبالتالي على تحديد الاسعار.

والثاني صمود دولة صنعاء ونجاحها في الوصول على مقربة من حدود السعودية من ناحية محافظة الجوف.

بالنسبة لانفجار حلف اوبيك مع روسيا، فسببه إصرار سعودي على خفض حصص دول هذا التحالف نحو مليوني برميل يومياً يضاف الى خفض كان قد حدث قبل بضعة اشهر.

هنا تذرّعت السعودية بضرورات الخفض للمحافظة على السعر.

فلم تقبل روسيا بهذه الذريعة وفهمت انها لإنقاذ صناعة النفط الصخري الأميركي الشديد الكلفة، فأميركا تحتاج الى اكثر من 45 دولاراً لإنتاج البرميل الواحد. وهذا ليس ممكناً في ظل المحافظة على وتيرة الإنتاج نفسها في وقت تراجع فيه الإنتاج العالمي بمعدل 40 في المئة بسبب الذعر الذي يجتاح العالم من انتشار وباء الكورونا، لكن روسيا رفضت خفض إنتاجها لأنها اعتبرت ان تداعيات كورونا لن تكون طويلة الأمد بما لا يستدعي خفض الانتاج. وحافظت على معدل إنتاجها، وذهبت ردة الفعل السعودية المنسّقة مع السياسة الاميركية نحو الاعلان عن وقف التنسيق النفطي مع روسيا ورفع انتاجها من9.5 ملايين برميل الى 13 مليون برميل يومياً في موقف تحدّ لافت للروس وفعلت مثلها الإمارات التي اعلنت عن رفع انتاجها بمعدل مليون برميل يومياً.

هنا ظهر الاميركيون علناً معلنين ان خفض الاسعار الذي اوصل سعر البرميل الى 33 دولاراً مفيد جداً للطبقة الشعبية الاميركية التي اصبح باستطاعتها شراء الوقود بأسعار رخيصة.

هنا ظهر تناقض عند الاميركيين الذين بدوا كمن يحاول الاستفادة السياسية من حركة اسعار النفط صعوداً ونزولاً، فإذا ارتفع زعموا أنه لحماية النفط الصخري الذي يتطلب استخراجه كلفة عالية، زاعمين أنهم يحمون بذلك الشركات الاميركية وعمالتها، اما اذا انخفض فيدعون على الفور انه لصالح شراء الفئات الشعبية وقوداً رخيصاً.

إلا انهم يفضلون بالحقيقة خفض الإنتاج لدعم آلاف شركات النفط الصخري ذات التأثير الكبير على التفاعلات السياسية الاميركية.

لجهة العامل الثاني، فإن دعم مجلس الأمن للهجوم السعودي على اليمن لم يؤد الى حسم المعركة، بل كشف عن نجاح دولة صنعاء بصد الهجوم عن مناطقها واستدارتها نحو هجمات مضادة وصلت الى الحدود السعوديّة بمعارك برية مع تمكّنها من الوصول الى وسط السعودية بهجمات صاروخية وأخرى بالطائرات المسيرة.

فانقلبت المعركة الى محاولات سعودية لإبعاد قوات صنعاء عن بعض انحاء محافظة الجوف حيث توجد آبار نفطية وغازية.

فأين هي مصلحة روسيا؟

اصبحت التفاهمات مع السعودية صعبة وتتجه الى مزيد من التصعيد بسبب الاصرار الاميركي على قطع العلاقات السعودية مع كل من روسيا والصين باستغلال حاجة ولي العهد السعودي محمد بن سلمان لهم في معركته الداخلية في السعودية لمحاصرة إيران بشكل دائم.

كما ان الحلف السعودي العاجز عن تحقيق انتصار في اليمن اتضح أنه أضعف من مشروع السيطرة على صنعاء، لذلك فإن روسيا المنتصرة في سورية ترى تقدمها الاقليمي رهن بمدى انسجامها مع تحالفات الدولة السورية في العراق واليمن وضرورة نسجها لعلاقات معهما في اطار استراتيجي يجمع بين السياسة والاقتصاد، علماً ان اليمن يحتوي على اهم معابر عالمية وكثير من النفط والغاز والرجال.

TRUMP IS BEING PUSHED TO CONFLICT WITH RUSSIA AMID ESCALATING OIL WAR

South Front

Trump Is Being Pushed To Conflict With Russia Amid Escalating Oil War
ILLUSTRATIVE IMAGE
On March 10th, Kuwait and Iraq, as well as the UAE joined Saudi Arabia in reducing oil prices. Iraq cut the official selling price for its Basrah Light crude for buyers in Asia by $5 a barrel for April shipments.
That’s less than the $6 reduction for Aramco’s comparable Arab Medium grade. Kuwait reduced its selling price to Asian customers by the same as the Saudis.
The UAE, the only major producer that still sets prices retroactively, lowered the cost of its four grades for February sales by $1.63 a barrel from January.
“Any price war to acquire the largest market share does not serve the interests of the producing countries,” Iraqi Oil Ministry spokesman Asim Jihad said. His country is trying to bridge oil producers’ viewpoints to reach a deal to stabilize and rebalance markets, he said in a statement.
Iraq’s state oil-marketing company, SOMO, plans to increase exports in April, according to an unnamed person, cited by Bloomberg.
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Kuwait set its April Export Crude OSP for Asian customers at a $4.65 a barrel discount to the regional benchmark, according to a price list seen by Bloomberg. That’s 60 cents lower than Aramco’s Arab Medium and $1.45 below than Iraq’s Basrah Light to the region. Kuwait’s exports to Northwest Europe were set at a record-low of a $12.60 discount.
Meanwhile, Riyadh is continuing on its “warpath” and is about to flood Europe with crude oil at a price of about $25 per barrel. The Saudi shipments, coupled with unprecedented discounts, are turning the European oil market into a major price battlefield.
Diplomatic and OPEC sources quoted by mainstream media directly say that the ongoing Saudi-led effort to crush the oil market is a pre-planned ‘agressive campaign’ against Russia. One of the main targets is the Russian ability to sale oil to Europe. The fall of oil prices allready caused a major fall of the Russian ruble and impacted negatively the Russian economy.
Trump Is Being Pushed To Conflict With Russia Amid Escalating Oil War
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European refiners including Royal Dutch Shell Plc, BP Plc, Total SA, OMV AG, Repsol SA and Cepsa SA have all received crude allocations from state-owned Saudi Aramco significantly above their normal levels, according to sources cited by Bloomberg.

The increase in volumes, known in the industry as nominations, was confirmed by Aramco to the European oil companies on Wednesday, the same people said, asking not to be named discussing private information. One of Europe’s major refiners got double its normal allocation, an unnamed source said.

Aramco cut its official selling prices by the biggest amount in more than three decades. The company made its biggest cuts for buyers in northwest Europe. An $8 a barrel reduction in most grades amounts to a direct challenge to Russia, which sells a large chunk of its flagship Urals crude in the same region.

Aramco will sell Arab Light at an unprecedented $10.25 a barrel discount to Brent in Europe.
Discounts for Russian crude immediately ballooned. Vitol Group and Trafigura Group Ltd. failed to find buyers on March 9th when they offered to sell Urals crude at the deepest discounts to a regional benchmark in almost two months.
Currently, the two countries who are suffering most from the oil war are Russia and Iran, both are also under heavy sanctions by the US. Iran’s oil sector is especially crippled owing to Washington’s “maximum pressure” campaign.
In Iraq, which as above mentioned is a major oil producer, a camp housing US-led coalition troops was hit by more than a dozen Katyusha rockets. The Taji base was hit and two US marines, as well as a British soldier were killed in the attack.
“Three Coalition personnel were killed during a rocket attack on Camp Taji, Iraq, March 11. The names of the personnel are withheld pending next of kin notification, in accordance with national policies,” the statement said.
“Approximately 12 additional personnel were wounded during the attack. The attack is under investigation by the Coalition and Iraqi Security Forces. Camp Taji is an Iraqi base that hosts Coalition personnel for training and advising missions,” it added.
A spokesperson for the UK Ministry of Defense said, “We can confirm we are aware of an incident involving UK service personnel at Camp Taji, Iraq. An investigation is underway, it would be inappropriate to comment further at this time.”
Iraq is a hot point in tensions between the US and Iran.

Furthermore, on March 11th, the US House of Representatives approved War Powers resolution, which would require US President Donald Trump receive Congressional approvement for any attacks launched against Iran. He is, however, likely to veto it.

Regardless, this means that if, for example, Yemen’s Houthis strike Aramco’s infrastructure again, and both Riyadh and Washington blame Iran, Trump will have less options in the military sphere and face much more political pressure if he opts such a move. So, one could say that the Washington political establishment is limiting the freedom of actions of the Trump administration against Iran, but, at the same time, keeps the window of opportunities for anti-Russian actions open.

Taking into account that recentl US threatened Russia with more sanctions (this time over the situation in Idlib) and the US mainstream media is in the state of constant anti-Russian hysteria, US ‘experts and analysis’ will easily find the ‘Russian trace’ in any escalation in the Middle East or any other place around the world. They already found that the Kremlin should be blamed for the ongoing oil prices collapse, despite Russia being one of the most affected parties. This happens amid the ongoing consitutional reform in Russia itself. Pro-Western forces inside Russia and the neo-liberal part of the Russian elites are actively trying to use this reform to destabilize the situation in the country and turn its course in what they call the ‘right direction’ (the surrender of the national interests to the global capital). These forces as well as their foreign backers are openly interested in the escalation of tensions between the United States and Russia.

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How black swans are shaping planet panic

March 11, 2020

by Pepe Escobar – posted with permission

Is the planet under the spell of a pair of black swans – a Wall Street meltdown, caused by an alleged oil war between Russia and the House of Saud, plus the uncontrolled spread of Covid-19 – leading to an all-out “cross-asset pandemonium” as billed by Nomura?

Or, as German analyst Peter Spengler suggests, whatever the averted climax in the Strait of Hormuz has not brought about so far “might now come through market forces”?

Let’s start with what really happened after five hours of relatively polite discussions last Friday in Vienna. What turned into a de facto OPEC+ meltdown was quite the game-changing plot twist.

OPEC+ includes Russia, Kazakhstan and Azerbaijan. Essentially, after enduring years of OPEC price-fixing – the result of relentless US pressure over Saudi Arabia – while patiently rebuilding its foreign exchange reserves, Moscow saw the perfect window of opportunity to strike, targeting the US shale industry.

Shares of some of these US producers plunged as much as 50% on “Black Monday.” They simply cannot survive with a barrel of oil in the $30s – and that’s where this is going. After all these companies are drowning in debt.

A $30 barrel of oil has to be seen as a precious gift/stimulus package for a global economy in turmoil – especially from the point of view of oil importers and consumers. This is what Russia made possible.

And the stimulus may last for a while. Russia’s National Wealth Fund has made it clear it has enough reserves (over $150 billion) to cover a budget deficit from six to ten years – even with oil at $25 a barrel. Goldman Sachs has already gamed a possible Brent crude at $20 a barrel.

As Persian Gulf traders stress, the key to what is perceived in the US as an “oil war” between Moscow and Riyadh is mostly about derivatives. Essentially, banks won’t be able to pay those speculators who hold derivative insurance against a steep decline in the price of oil. Added stress comes from traders panicking with Covid-19 spreading across nations that are visibly unprepared to deal with it.

Watch the Russian game

Moscow must have gamed beforehand that Russian stocks traded in London – such as Gazprom, Rosneft, Novatek and Gazprom Neft – would collapse. According to Lukoil’s co-owner Leonid Fedun, Russia may lose up to $150 million a day from now on. The question is for how long this will be acceptable.

Still, from the beginning Rosneft’s position was that for Russia, the deal with OPEC+ was “meaningless” and only “cleared the way” for American shale oil.

The consensus among Russian energy giants was that the current market setup – massive “negative oil demand,”positive “supply shock” and no swing producer – inevitably had to crash the price of oil. They were watching, helplessly, as the US was already selling oil for a lower price than OPEC.

Moscow’s move against the US fracking industry was payback for the Trump administration messing with Nord Stream 2. The inevitable, steep devaluation of the ruble was gamed.

Still, what happened post-Vienna essentially has little to do with a Russia-Saudi trade war. The Russian Energy Ministry is phlegmatic: Move on, nothing to see here. Riyadh, significantly, has been emitting signs the OPEC+ deal may be back in the cards in the near future. A feasible scenario is that this sort of shock therapy will go on until 2022, and then Russia and OPEC will be back to the table to work out a new deal.

There are no definitive numbers, but the oil market accounts for less than 10% of Russia’s GDP (it used to be 16% in 2012). Iran’s oil exports in 2019 plunged by a whopping 70 %, and still Tehran was able to adapt. Yet oil accounts for over 50% of Saudi GDP. Riyadh needs oil at no less than $85 a barrel to pay its bills. The 2020 budget, with crude priced at $62-63 a barrel, still has a $ 50 billion deficit.

Aramco says it will be offering no fewer than 300,000 barrels of oil a day beyond its “maximum sustained capacity” starting April 1. It says it will be able to produce a whopping 12.3 million barrels a day.

Persian Gulf traders say openly that this is unsustainable. It is. But the House of Saud, in desperation, will be digging into its strategic reserves to dump as much crude as possible as soon as possible – and keep the price war full tilt. The (oily) irony is that the top price war victims are an industry belonging to the American protector.

Saudi-occupied Arabia is a mess. King Salman is in a coma. Every grain of sand in the Nefud desert knows Jared of Arabia Kushner’s whatsapp pal MBS has been de facto ruler for the past five years, but the timing of his new purge in Riyadh speaks volumes. Princes Mohammed bin Nayef, the king’s nephew, and Ahmed bin Abdulaziz, his younger brother, are now really in detention.

The CIA is fuming: Nayef was and remains Langley’s top asset. When Saudi regime spin denounced “Americans” as partners in a possible coup against MBS, that word needed to be read as “CIA.” It’s just a matter of time before the US Deep State, in conjunction with disgruntled National Guard elements, comes for MBS’s head – even as he articulates taking over total power before the G-20 in Riyadh next November.

Black Hawk down?

So what happens next? Amid a tsunami of scenarios, from New York to all points Asia, the most optimistic say that China is about to win the “people’s war” against Covid-19 – and the latest figures confirm it. In this case, global oil demand may increase by at least 480,000 barrels a day.

Well, that’s way more complicated.

The game now points to a confluence of Wall Street in panic; Covid-19 mass hysteria; lingering, myriad aftershocks of Trump’s global trade mess; the US election circus; total political instability in Europe. These interlocked crises do spell Perfect Storm. Yet the market angle is easily explained: that may be the beginning of the end of Wall Street artificially inflated by tens of trillions of US dollars pumped by the Fed through quantitative easings and repos since 2008. Call it the calling of the central bankers’ bluff.

A case can be made that the current financial panic will only subside when the ultimate black swan – Covid-19 – is contained. Borrowing from the famous Hollywood adage, “No one knows anything,” all bets are off. Amid thick fog, and discounting the usual amount of disinformation, a Rabobank analyst, among others, came up with four plausible Covid-19 scenarios. He now reckons it’s getting “ugly” and the fourth scenario – the “unthinkable” – is not far-fetched anymore.

This implies a global economic crisis of, yes, unthinkable magnitude.

To a great extent it will all depend on how fast China – the inescapable crucial link in the global just-in-time supply chain – gets back to a new normal, offsetting interminable weeks of serial lockdowns.

Despised, discriminated against, demonized 24/7 by the “system leader,” China has gone full Nietzsche – about to prove that whatever does not kill you makes you stronger when it comes to a “people’s war” against Covid-19. On the US front, there’s scant hope that the gleaming Black “helicopter money” Hawk will crash down for good. The ultimate Black Swan will have the last word.

Saudi-Initiated All-Out Oil War Could Lead To Collapse Of Kingdom Itself

South Front

Saudi Arabia launched an all-out oil war offering unprecedented discounts and flooding the market in an attempt to capture a larger share and defeat other oil producers. This “scorched earth” approach caused the biggest oil price fall since the war in the Persian Gulf in 1991.

It all began on March 8 when Riyadh cut its April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by $7 a barrel. The Kingdom expanded the discount for its flagship Arab Light crude to refiners in northwest Europe by $8 a barrel offering it at $10.25 a barrel under the Brent benchmark. In comparison, Russia’s Urals crude trades at a discount of about $2 a barrel under Brent. These actions became an attack at the ability of Russia to sell crude in Europe. The Russian ruble immediately plummeted almost 10% falling to its lowest level in more than four years.

Another side that suffered from Saudi actions is Iran. The Islamic country is facing a strong US sanctions pressure and often selling its oil via complex schemes and with notable discounts already.

Saudi Arabia is planning to increase its output above 10 million barrel per day. Currently, it pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day. According to OPEC and Saudi sources of The Wall Street Journal, Riyadh’s actions are part of an “aggressive campaign” against Moscow.

The formal pretext of this campaign became the inability of the OPEC+ (a meeting of representatives of member states of the Organization of the Petroleum Exporting Countries and non-OPEC members) to extend output agreements.

Saudi Arabia was seeking up to 1.5 million b/d in further oil production cuts, but this proposal was rejected by Russia. After the inability to reach the new OPEC+ deal, Saudi Arabia became the frist and only power that took aggressive actions on the market. However, it is hard to imagine that Saudi Arabia would go for such an escalation without at least an order or approval from Washington.

This came amid the detention of two senior members of the Saudi royal family – Prince Ahmed bin Abdulaziz, the younger brother of King Salman, and Mohammed bin Nayef, the king’s nephew – on March 7. This development took place just ahead of the Saudi offensive on the oil market, and was likely a tip of the ongoing undercover struggle between the pro-US and pro-national factions of the Saudi elites; and the pro-US bloc seems to have the upper hand in this conflict.

In this case, the real goal of the Saudi campaign is not only to secure larger share of the oil market and punish Moscow for its unwillingness to accept the proposed OPEC+ deal, but to deliver a powerful blow to Washington’s geopolitical opponents: Russia and Iran. Pro-Western and anti-government forces existing in both Russia and Iran would try to exploit this situation to destabilize the internal situation in the countries.

On the other hand, Saudi Arabia may soon find out that its actions have backfired. Such economic and geopolitical games amid the acute conflict with Iran, military setbacks in Yemen and the increasing regional standoff with the UAE could cost too much for the Kingdom itself.

If the oil prices fall any further and reach $20 per barrel, this will lead to unacceptable economic losses for Russia and Iran, and they could and will likely opt to use nonmarket tools of influencing the Saudi behavior. These options include the increasing support to Yemen’s Houthis with intelligence, weapons, money, and even military advisers, that will lead to the resumption of Houthi strikes on Saudi oil infrastructure.

On top of these, the Saudi leadership may suddenly find that the internal situation in the Kingdom is being worsened by large-scale protests rapidly turning into an open civil conflict.

Such a scenario is no secret for international financial analysts. On March 8, shares of Saudi state oil company Aramco slumped below their initial public offering (IPO) and closed 9.1% lower. On March 9, it continued the fall plunging another 10%.  There appears to be a lack of buyers. The risks are too obvious.

At the same time, the range of possible US actions in support of Saudi Arabia in the event of such an escalation is limited by the ongoing presidential campaign. Earlier, President Donald Trump demonstrated that a US military base could become a target of direct missile strike and Washington will not order a direct military action in response. Taking into account other examples of the US current approach towards non-Israeli allies, Riyadh should not expect any real support from its American allies in this standoff.

Political Maneuver or Economic Move: What Caused the Oil Price Collapse?

Sputnik

10.03.2020

On 9 March, oil prices plunged by over 30 percent after OPEC member states failed to agree on production cuts. Analysts are now seeking to take stock of the situation, determine what factors caused the crash, and forecast the impact of the downswing on the global economy.

A three-year pact between OPEC and Russia ended on Friday after Moscow refused to support an additional 1.5 million barrels per day cut to oil production to cope with the outbreak of coronavirus. OPEC, led by key swing producer Saudi Arabia,  responded by removing all limits on its own production, leading oil prices to plummet.

The Shale Sector

Goran Radosavljevic, Secretary General of the National Petroleum Committee of Serbia, argued that Russia’s move essentially means that Moscow “no longer wants to subsidize US shale oil production”.

“That’s what was happening de facto during the last several years, when we witnessed the United States pumping more and more oil, reaching its maximum capacity due to oil market stabilization and the decrease of oil production in OPEC+”, he explained.

Dr Huang Xiaoyong, Director of the Center for International Energy Security Studies of the Chinese Academy of Social Sciences, also mentioned the situation in the shale sector as one of the possible reasons for the current collapse of oil prices (with other possible factors being the effect of the ongoing coronavirus outbreak and a possible conflict of interests between Russia and Saudi Arabia).

“Saudi Arabia announced that they’re investing $100 billion in the launch of projects related to shale oil and gas extraction. The United States not only controls a significant share of that market, but (shale) also has high oil extraction expenses. Therefore, lower oil prices might contribute to the US being ‘pushed out’ of the market”, he suggested.

Deja Vu

Energy analyst Jeloca Putnikovic  argued that a similar situation already occurred during the past decade, when “Saudi Arabia was responsible for oil becoming cheaper”.

“As you may recall, Saudi Arabia and the United States made a deal in a bid to halt Russia’s economic growth via crude oil prices – back then, the price of oil fell to nearly $30 per barrel”, she claimed, noting that Russia and other major oil producing countries eventually agreed to coordinate on output levels with the “Saudi cartel”, in order to maintain oil prices at a level that would be acceptable to all.

Putnikovic argued that the decision made by Saudi Arabia to ramp up oil production seems to be a political rather than economic move given that Riyadh previously spoke of $80 per barrel as an acceptable price.

The MISSING Six Million BARRELS

Augusto Tandazo, an oil industry analyst from Ecuador, posed the following question in order to try and explain the current state of affairs at the oil market: if the global demand for crude oil is 100 million barrels per day, and the non-OPEC countries produce 64 million barrels per day while OPEC countries officially account for 30 million barrels per day, where do the “missing” six million barrels per day come from?

According to Tandazo, there’s a “hidden excess supply of oil from certain states, such as Saudi Arabia, Kuwait and Iraq, that is aligned with the developed countries”.

“The oil price is being manipulated and controlled by the developed countries. They present themselves as fearless defenders of the free market, but they manipulate the price via excessive supply”, he postulated.

Future Prospects

And Rafael Quiroz, a professor at the Central University of Venezuela and an oil industry expert, warned that we may witness an even bigger oil price tumble, “especially if Saudi Arabia keeps its word and opens its taps even more”.

“This would lead to excessive supply of oil that would be greater that the global demand for energy resources, and therefore would lead to an immediate and devastating collapse of oil prices”, Quiroz said.

He also dismissed earlier claims made by US President Donald Trump, who blamed the current state of affairs on disagreements between Russia and Saudi Arabia, with Prof. Quiroz arguing that Trump simply regards OPEC as an enemy of the free market and open economy, and therefore tries to meddle in the organization’s affairs.

© REUTERS / BRYAN R SMITHUS Stock Market Closes With Record 2,000-Plus Loss Amid Coronavirus Panic

On 9 March, oil prices fell by over 30 percent after OPEC member states failed to agree on production cuts amid the ongoing coronavirus outbreak.

Earlier, the organization and its non-member allies, known collectively as OPEC+, convened in Vienna to discuss a potential cut of another 1.5 million barrels per day in addition to their existing pact to reduce oil production.

The views and opinions expressed in the article do not necessarily reflect those of Sputnik.

SAUDI-INITIATED ALL-OUT OIL WAR COULD LEAD TO COLLAPSE OF KINGDOM ITSELF

Saudi Arabia launched an all-out oil war offering unprecedented discounts and flooding the market in an attempt to capture a larger share and defeat other oil producers. This scorched earth approach caused the biggest oil price fall since the war in the Persian Gulf in 1991. On March 9, Brent crude plunged over 28.5% to $32 per barrel, while WTI fell 31.5% to $28.27 a barrel. The crisis erupted as the economic fallout from the coronavirus hysteria continued to reverberate throughout the financial markets.

It all began on March 8 when Riyadh cut its April pricing for crude sales to Asia by $4-$6 a barrel and to the U.S. by $7 a barrel. The Kingdom expanded the discount for its flagship Arab Light crude to refiners in northwest Europe by $8 a barrel offering it at $10.25 a barrel under the Brent benchmark. In comparison, Russia’s Urals crude trades at a discount of about $2 a barrel under Brent. These actions became an attack at the ability of Russia to sell crude in Europe. The Russian ruble immediately plummeted almost 10% falling to its lowest level in more than four years.

Another side that suffered from Saudi actions is Iran. The Islamic country is facing a strong US sanction pressure and often selling its oil via complex schemes and with notable discounts already.

Saudi Arabia is planning to increase its output above 10 million barrel per day. Currently, it pumps 9.7 million barrels per day, but has the capacity to ramp up to 12.5 million barrels per day. According to OPEC and Saudi sources of The Wall Street Journal, Riyadh’s actions are part of an “aggressive campaign” against Moscow.

The formal pretext of this campaign became the inability of the OPEC+ (a meeting of representatives of member states of the Organization of the Petroleum Exporting Countries and non-OPEC members) to extend output agreements.

Saudi Arabia was seeking up to 1.5 million b/d in further oil production cuts, but this proposal was rejected by Russia. Despite the inability to reach the new OPEC+ deal, Saudi Arabia became the only power that took aggressive actions on the market. However, it is hard to imagine that Saudi Arabia would go for such an escalation without at least an order or approval from Washington.

This came amid the detention of two senior members of the Saudi royal family – Prince Ahmed bin Abdulaziz, the younger brother of King Salman, and Mohammed bin Nayef, the king’s nephew – on March 7. This development took place just ahead of the Saudi offensive on the oil market, and was likely a tip of the ongoing undercover struggle between the pro-US and pro-national factions of the Saudi elites; and the pro-US bloc seems to have the upper hand in this conflict.

In this case, the real goal of the Saudi campaign is not only to secure larger share of the oil market and punish Moscow for its unwillingness to accept the proposed OPEC+ deal, but to deliver a powerful blow to Washington’s geopolitical opponents: Russia and Iran. Pro-Western and anti-government forces existing in both Russia and Iran would try to exploit this situation to destabilize the internal situation in the countries.

On the other hand, Saudi Arabia may soon find out that its actions have backfired. Such economic and geopolitical games amid the acute conflict with Iran, military setbacks in Yemen and the increasing regional standoff with the UAE could cost too much for the Kingdom itself.

If the oil prices fall any further and reach $20 per barrel, this will lead to unacceptable economic losses for Russia and Iran, and they could and will likely opt to use nonmarket tools of influencing the Saudi behavior. These options include the increasing support to Yemen’s Houthis (Ansar Allah) with intelligence, weapons, money, and even military advisers, and the resumption of strikes on Saudi oil infrastructure (by the hands of the Houthis for sure).

On top of these, the Saudi leadership may suddenly find that the internal situation in the Kingdom is being worsened by large-scale protests rapidly turning into an open civil conflict.

Such a scenario is no secret for international financial analysts. On March 8, shares of Saudi state oil company Aramco slumped below their initial public offering (IPO) and closed 9.1% lower. On March 9, it continued the fall plunging another 10%.  There appears to be a lack of buyers. The risks are too obvious.

At the same time, the range of possible US actions in support of Saudi Arabia in the event of such an escalation is limited by the ongoing presidential campaign. Earlier, President Donald Trump demonstrated that a US military base could become a target of direct missile strike and Washington will not order a direct military action in response. Taking into account other examples of the US current approach towards non-Israeli allies, Riyadh should not expect any real support from its American allies in this standoff.

Related

US TO GRANT $35 MILLION TO PROMOTE ITS FAKE NEWS BUBBLE IN SYRIA & CONTROL LOCAL MEDIA

Fake News Media

January 24, 2020, RT.comAlthough Western media has a shoddy track record of lying on Syria (and Libya, Iraq…), the US State Department will pump $35 million more into future war propaganda on Syria, under the guise of promoting honest reporting. 

A US State Department grant, “Support for Independent Media in Syria,” is unabashed in stating one of its main goals is “to advance U.S. Government policy objectives in Syria.”

That is probably the sole honest clause in the grant description: that it is in the end about US self-serving, hegemonic objectives in Syria.

The description goes on to claim these goals include the defeat of ISIS—although the illegal US-led coalition has attacked Syrian army positions on numerous occasions, ensuring the advance (not defeat) of ISIS in those areas. One of the most glaring instances being the September 2016 repeated attacks on the Syrian army in Deir ez-Zor province, which saw ISIS take over the region.

The US assassination of Iranian General Qasem Soleimani, recognized in the region as the man responsible for the near-defeat of ISIS, is another notable example of the US goals being to prolong, not defeat, ISIS in the region.

With their grant, the US plans to “advance human rights and promote tolerance and dialogue between ethnic and religious communities,” which is again morbidly laughable given that the US has been supporting wahhabi and other extremists whose human rights track records include caging, torturing, raping, and starving civilians, and public executions.

It wouldn’t be American policy if the State Department grant didn’t include mention of countering “Russian disinformation” and ending the presence of “Iranian forces and proxies in Syria.”

However, removing Iranian forces isn’t within America’s right to do; Syria invited Iran, Russia and other allies to actually fight terrorism in Syria, as opposed to the US-led occupation forces. And as discussed, it isn’t Russia that has the track record of disinfo on Syria, that honour goes to America and allies.

Western outlets in chorus promoted the accusations of Syria/Russia preventing food and aid into eastern Aleppo (even Reuters reported“rebels” had stockpiled aid) and Madaya and eastern Ghouta (none was true).

Western media sold the story of Russia/Syria bombing the home of Omran Daqneesh (didn’t happen), of the al-Quds hospital being “reduced to rubble” by Russian/Syrian bombing (didn’t happen), and a litany of other grotesque war propaganda stories.

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[READ: MintPress Meets The Father Of Iconic Aleppo Boy, Who Says Media Lied About His Son ]

[READ: Absurdities of Syrian war propaganda ]

Suddenly we’re meant to find credible journalists who embed with al-Qaeda and whitewash their crimes, and media which have on many occasions used photos not even in Syria to accompany sensationalist war propaganda stories. 

CNN and western media got it wrong about Omran Daqneesh, but I haven’t even seen any retractions for this lie.

And yet the US wants people to believe that the independent voices and Russian and Syrian media who actually reported factually and honestly on these and other issues…are not credible. 

The US wants people to live in a fake news bubble, where the narratives are controlled by the war mongers. And, strangely, America seemingly wants Syrians to be subjected to media that reports opposite of the reality they are living. As if after nine years of enduring Western (and Gulf) media’s lies Syrians will suddenly believe them and decide to overthrow the president they elected (and support)? America is grasping at straws…

The OPCW Truth Bombs

Western nations accuse Russia of disinformation around whether Syria used a chemical weapon in Douma, eastern Ghouta.

In April 2018, Western media pounced on and promoted the White Helmets’ lies, shedding crocodile tears over civilians allegedly exposed to a chemical agent, at the same time ignoring or mocking the testimonies of 17 Syrians from Douma (including the boy starring in the White Helmets’ hoax video). 

Turns out the body tasked to examine this accusation omitted from its final report key findings that poke massive holes in the (West’s) official narrative around Douma. Not one, but many revelations have been leaked about the critical omissions of the OPCW  report. 

The only ones taking this seriously are mainly Russia, Syria and independent researchers. In the face of these recent revelations, most Western media have largely thus far been silent.

Similarly, Western media didn’t cover the December 2018 panel detailing damning findings on the White Helmets’ association (and membership) with terrorist groups in Syria, and their involvement in staging chemical attacks and in organ harvesting…

[READ: Organ theft, staged attacks: UN panel details White Helmets’ criminal activities, media yawns ]

In the State Department’s quest for truthful reporting, one of the issues to be protected seemingly at all costs is of course the White Helmets (and the chemical hoaxes they help stage).

Anyone who has seriously researched the White Helmets, much less bothered to interview Syrian civilians about the fake rescue group, knows their footage and claims are as credible as the words of nurse Nayirah, Colin Powell, or the entries of Wikipedia.

Journalists who bothered to interview medical staff in Douma following the chemical hoax were told that doctors were treating patients with normal wartime injuries when “strangers” (including White Helmets members) entered yelling about a chemical attack, creating a panic (and demonstrating a lack of medical skills), and filming the scene with then 11 year old Hassan Diab.

[READ: Syrian civilians from ground zero expose chemical hoax ]

Diab was one of the Syrians dismissed by western media when he testified to the OPCW that he had not been subject to a chemical attack but had been used by the White Helmets. For Western media, only some children are credible (exploited)…when it suits their narrative.

One such youth, Muhammad, gained notoriety when eastern Ghouta was being liberated. Like the Aleppo child Bana before him, the Ghouta teen had an account in his name on Twitter (the dodgy logistics of which I raised in my last article) and was busy parroting the accusations.

Incidentally, Ghouta (to the silence of media which claimed concern in 2018) is rebuilding, in peace.

In any case, I get the feeling people are tired of lying Western media, chemical hoaxes and the antics of the White Helmets. I certainly see propaganda apologists getting called out on Twitter more than prior, and people are extremely skeptical of chemical weapons accusations.

As Vassily Nebenzia said of the OPCW official report on Douma: “Humpty-Dumpty, as we know, “sat on a wall, had a great fall and all the king’s horses, all the king’s men, couldn’t put Humpty together again”. I mean, that is exactly what happened to FFM report. Exactly.”

RELATED:

‘Truth is the 1st casualty of war’: Syria’s East Ghouta battleground distorted by MSM propaganda 

‘Brazen disinformation’: Syria narrative managers defend Douma chemical weapon hoax as OPCW comes under attack

Torture, starvation, executions: Eastern Ghouta civilians talk of life under terrorist rule 

America Escalates its “Democratic” Oil War in the Near East

January 05, 2020

by Michael Hudson exclusively for the Saker Blog

The mainstream media are carefully sidestepping the method behind America’s seeming madness in assassinating Islamic Revolutionary Guard general Qassim Suleimani to start the New Year. The logic behind the assassination this was a long-standing application of U.S. global policy, not just a personality quirk of Donald Trump’s impulsive action. His assassination of Iranian military leader Suleimani was indeed a unilateral act of war in violation of international law, but it was a logical step in a long-standing U.S. strategy. It was explicitly authorized by the Senate in the funding bill for the Pentagon that it passed last year.

The assassination was intended to escalate America’s presence in Iraq to keep control the region’s oil reserves, and to back Saudi Arabia’s Wahabi troops (Isis, Al Quaeda in Iraq, Al Nusra and other divisions of what are actually America’s foreign legion) to support U.S. control o Near Eastern oil as a buttress o the U.S. dollar. That remains the key to understanding this policy, and why it is in the process of escalating, not dying down.

I sat in on discussions of this policy as it was formulated nearly fifty years ago when I worked at the Hudson Institute and attended meetings at the White House, met with generals at various armed forces think tanks and with diplomats at the United Nations. My role was as a balance-of-payments economist having specialized for a decade at Chase Manhattan, Arthur Andersen and oil companies in the oil industry and military spending. These were two of the three main dynamic of American foreign policy and diplomacy. (The third concern was how to wage war in a democracy where voters rejected the draft in the wake of the Vietnam War.)

The media and public discussion have diverted attention from this strategy by floundering speculation that President Trump did it, except to counter the (non-)threat of impeachment with a wag-the-dog attack, or to back Israeli lebensraum drives, or simply to surrender the White House to neocon hate-Iran syndrome. The actual context for the neocon’s action was the balance of payments, and the role of oil and energy as a long-term lever of American diplomacy.

The balance of payments dimension

The major deficit in the U.S. balance of payments has long been military spending abroad. The entire payments deficit, beginning with the Korean War in 1950-51 and extending through the Vietnam War of the 1960s, was responsible for forcing the dollar off gold in 1971. The problem facing America’s military strategists was how to continue supporting the 800 U.S. military bases around the world and allied troop support without losing America’s financial leverage.

The solution turned out to be to replace gold with U.S. Treasury securities (IOUs) as the basis of foreign central bank reserves. After 1971, foreign central banks had little option for what to do with their continuing dollar inflows except to recycle them to the U.S. economy by buying U.S. Treasury securities. The effect of U.S. foreign military spending thus did not undercut the dollar’s exchange rate, and did not even force the Treasury and Federal Reserve to raise interest rates to attract foreign exchange to offset the dollar outflows on military account. In fact, U.S. foreign military spending helped finance the domestic U.S. federal budget deficit.

Saudi Arabia and other Near Eastern OPEC countries quickly became a buttress of the dollar. After these countries quadrupled the price of oil (in retaliation for the United States quadrupling the price of its grain exports, a mainstay of the U.S. trade balance), U.S. banks were swamped with an inflow of much foreign deposits – which were lent out to Third World countries in an explosion of bad loans that blew up in 1972 with Mexico’s insolvency, and destroyed Third World government credit for a decade, forcing it into dependence on the United States via the IMF and World Bank).

To top matters, of course, what Saudi Arabia does not save in dollarized assets with its oil-export earnings is spent on buying hundreds of billion of dollars of U.S. arms exports. This locks them into dependence on U.S. supply o replacement parts and repairs, and enables the United States to turn off Saudi military hardware at any point of time, in the event that the Saudis may try to act independently of U.S. foreign policy.

So maintaining the dollar as the world’s reserve currency became a mainstay of U.S. military spending. Foreign countries to not have to pay the Pentagon directly for this spending. They simply finance the U.S. Treasury and U.S. banking system.

Fear of this development was a major reason why the United States moved against Libya, whose foreign reserves were held in gold, not dollars, an which was urging other African countries to follow suit in order to free themselves from “Dollar Diplomacy.” Hillary and Obama invaded, grabbed their gold supplies (we still have no idea who ended up with these billions of dollars worth of gold) and destroyed Libya’s government, its public education system, its public infrastructure and other non-neoliberal policies.

The great threat to this is dedollarization as China, Russia and other countries seek to avoid recycling dollars. Without the dollar’s function as the vehicle for world saving – in effect, without the Pentagon’s role in creating the Treasury debt that is the vehicle for world central bank reserves – the U.S. would find itself constrained militarily and hence diplomatically constrained, as it was under the gold exchange standard.

That is the same strategy that the U.S. has followed in Syria and Iraq. Iran was threatening this dollarization strategy and its buttress in U.S. oil diplomacy.

The oil industry as buttress of the U.S. balance of payments and foreign diplomacy

The trade balance is buttressed by oil and farm surpluses. Oil is the key, because it is imported by U.S. companies at almost no balance-of-payments cost (the payments end up in the oil industry’s head offices here as profits and payments to management), while profits on U.S. oil company sales to other countries are remitted to the United States (via offshore tax-avoidance centers, mainly Liberia and Panama for many years). And as noted above, OPEC countries have been told to keep their official reserves in the form of U.S. securities (stocks and bonds as well as Treasury IOUs, but not direct purchase of U.S. companies being deemed economically important). Financially, OPEC countries are client slates of the Dollar Area.

America’s attempt to maintain this buttress explains U.S. opposition to any foreign government steps to reverse global warming and the extreme weather caused by the world’s U.S.-sponsored dependence on oil. Any such moves by Europe and other countries would reduce dependence on U.S. oil sales, and hence on U.S. ability to control the global oil spigot as a means of control and coercion, are viewed as hostile acts.

Oil also explains U.S. opposition to Russian oil exports via Nordstream. U.S. strategists want to treat energy as a U.S. national monopoly. Other countries can benefit in the way that Saudi Arabia has done – by sending their surpluses to the U.S. economy – but not to support their own economic growth and diplomacy. Control of oil thus implies support for continued global warming as an inherent part of U.S. strategy.

How a “democratic” nation can wage international war and terrorism

The Vietnam War showed that modern democracies cannot field armies for any major military conflict, because this would require a draft of its citizens. That would lead any government attempting such a draft to be voted out of power. And without troops, it is not possible to invade a country to take it over.

The corollary of this perception is that democracies have only two choices when it comes to military strategy: They can only wage airpower, bombing opponents; or they can create a foreign legion, that is, hire mercenaries or back foreign governments that provide this military service.

Here once again Saudi Arabia plays a critical role, through its control of Wahabi Sunnis turned into terrorist jihadis willing to sabotage, bomb, assassinate, blow up and otherwise fight any target designated as an enemy of “Islam,” the euphemism for Saudi Arabia acting as U.S. client state. (Religion really is not the key; I know of no ISIS or similar Wahabi attack on Israeli targets.) The United States needs the Saudis to supply or finance Wahabi crazies. So in addition to playing a key role in the U.S. balance of payments by recycling its oil-export earnings are into U.S. stocks, bonds and other investments, Saudi Arabia provides manpower by supporting the Wahabi members of America’s foreign legion, ISIS and Al-Nusra/Al-Qaeda. Terrorism has become the “democratic” mode of today U.S. military policy.

What makes America’s oil war in the Near East “democratic” is that this is the only kind of war a democracy can fight – an air war, followed by a vicious terrorist army that makes up for the fact that no democracy can field its own army in today’s world. The corollary is that, terrorism has become the “democratic” mode of warfare.

From the U.S. vantage point, what is a “democracy”? In today’s Orwellian vocabulary, it means any country supporting U.S. foreign policy. Bolivia and Honduras have become “democracies” since their coups, along with Brazil. Chile under Pinochet was a Chicago-style free market democracy. So was Iran under the Shah, and Russia under Yeltsin – but not since it elected Vladimir Putin president, any more than is China under President Xi.

The antonym to “democracy” is “terrorist.” That simply means a nation willing to fight to become independent from U.S. neoliberal democracy. It does not include America’s proxy armies.

Iran’s role as U.S. nemesis

What stands in the way of U.S. dollarization, oil and military strategy? Obviously, Russia and China have been targeted as long-term strategic enemies for seeking their own independent economic policies and diplomacy. But next to them, Iran has been in America’s gun sights for nearly seventy years.

America’s hatred of Iran is starts with its attempt to control its own oil production, exports and earnings. It goes back to 1953, when Mossadegh was overthrown because he wanted domestic sovereignty over Anglo-Persian oil. The CIA-MI6 coup replaced him with the pliant Shah, who imposed a police state to prevent Iranian independence from U.S. policy. The only physical places free from the police were the mosques. That made the Islamic Republic the path of least resistance to overthrowing the Shah and re-asserting Iranian sovereignty.

The United States came to terms with OPEC oil independence by 1974, but the antagonism toward Iran extends to demographic and religious considerations. Iranian support its Shi’ite population an those of Iraq and other countries – emphasizing support for the poor and for quasi-socialist policies instead of neoliberalism – has made it the main religious rival to Saudi Arabia’s Sunni sectarianism and its role as America’s Wahabi foreign legion.

America opposed General Suleimani above all because he was fighting against ISIS and other U.S.-backed terrorists in their attempt to break up Syria and replace Assad’s regime with a set of U.S.-compliant local leaders – the old British “divide and conquer” ploy. On occasion, Suleimani had cooperated with U.S. troops in fighting ISIS groups that got “out of line” meaning the U.S. party line. But every indication is that he was in Iraq to work with that government seeking to regain control of the oil fields that President Trump has bragged so loudly about grabbing.

Already in early 2018, President Trump asked Iraq to reimburse America for the cost of “saving its democracy” by bombing the remainder of Saddam’s economy. The reimbursement was to take the form of Iraqi Oil. More recently, in 2019, President Trump asked, why not simply grab Iraqi oil. The giant oil field has become the prize of the Bush-Cheney post 9-11 Oil War. “‘It was a very run-of-the-mill, low-key, meeting in general,” a source who was in the room told Axios.’ And then right at the end, Trump says something to the effect of, he gets a little smirk on his face and he says, ‘So what are we going to do about the oil?’”[1]

Trump’s idea that America should “get something” out of its military expenditure in destroying the Iraqi and Syrian economies simply reflects U.S. policy.

In late October, 2019, The New York Times reported that: “In recent days, Mr. Trump has settled on Syria’s oil reserves as a new rationale for appearing to reverse course and deploy hundreds of additional troops to the war-ravaged country. He has declared that the United States has “secured” oil fields in the country’s chaotic northeast and suggested that the seizure of the country’s main natural resource justifies America further extending its military presence there. ‘We have taken it and secured it,’ Mr. Trump said of Syria’s oil during remarks at the White House on Sunday, after announcing the killing of the Islamic State leader, Abu Bakr al-Baghdadi.” [2] A CIA official reminded the journalist that taking Iraq’s oil was a Trump campaign pledge.

That explains the invasion of Iraq for oil in 2003, and again this year, as President Trump has said: “Why don’t we simply take their oil?” It also explains the Obama-Hillary attack on Libya – not only for its oil, but for its investing its foreign reserves in gold instead of recycling its oil surplus revenue to the U.S. Treasury – and of course, for promoting a secular socialist state.

It explains why U.S. neocons feared Suleimani’s plan to help Iraq assert control of its oil and withstand the terrorist attacks supported by U.S. and Saudi’s on Iraq. That is what made his assassination an immediate drive.

American politicians have discredited themselves by starting off their condemnation of Trump by saying, as Elizabeth Warren did, how “bad” a person Suleimani was, how he had killed U.S. troops by masterminding the Iraqi defense of roadside bombing and other policies trying to repel the U.S. invasion to grab its oil. She was simply parroting the U.S. media’s depiction of Suleimani as a monster, diverting attention from the policy issue that explains why he was assassinated now.

The counter-strategy to U.S. oil, and dollar and global-warming diplomacy

This strategy will continue, until foreign countries reject it. If Europe and other regions fail to do so, they will suffer the consequences of this U.S. strategy in the form of a rising U.S.-sponsored war via terrorism, the flow of refugees, and accelerated global warming and extreme weather.

Russia, China and its allies already have been leading the way to dedollarization as a means to contain the balance-of-payments buttress of U.S. global military policy. But everyone now is speculating over what Iran’s response should be.

The pretense – or more accurately, the diversion – by the U.S. news media over the weekend has been to depict the United States as being under imminent attack. Mayor de Blasio has positioned policemen at conspicuous key intersections to let us know how imminent Iranian terrorism is – as if it were Iran, not Saudi Arabia that mounted 9/11, and as if Iran in fact has taken any forceful action against the United States. The media and talking heads on television have saturated the air waves with warnings of Islamic terrorism. Television anchors are suggesting just where the attacks are most likely to occur.

The message is that the assassination of General Soleimani was to protect us. As Donald Trump and various military spokesmen have said, he had killed Americans – and now they must be planning an enormous attack that will injure and kill many more innocent Americans. That stance has become America’s posture in the world: weak and threatened, requiring a strong defense – in the form of a strong offense.

But what is Iran’s actual interest? If it is indeed to undercut U.S. dollar and oil strategy, the first policy must be to get U.S. military forces out of the Near East, including U.S. occupation of its oil fields. It turns out that President Trump’s rash act has acted as a catalyst, bringing about just the opposite of what he wanted. On January 5 the Iraqi parliament met to insist that the United States leave. General Suleimani was an invited guest, not an Iranian invader. It is U.S. troops that are in Iraq in violation of international law. If they leave, Trump and the neocons lose control of oil – and also of their ability to interfere with Iranian-Iraqi-Syrian-Lebanese mutual defense.

Beyond Iraq looms Saudi Arabia. It has become the Great Satan, the supporter of Wahabi extremism, the terrorist legion of U.S. mercenary armies fighting to maintain control of Near Eastern oil and foreign exchange reserves, the cause of the great exodus of refugees to Turkey, Europe and wherever else it can flee from the arms and money provided by the U.S. backers of Isis, Al Qaeda in Iraq and their allied Saudi Wahabi legions.

The logical ideal, in principle, would be to destroy Saudi power. That power lies in its oil fields. They already have fallen under attack by modest Yemeni bombs. If U.S. neocons seriously threaten Iran, its response would be the wholesale bombing and destruction of Saudi oil fields, along with those of Kuwait and allied Near Eastern oil sheikhdoms. It would end the Saudi support for Wahabi terrorists, as well as for the U.S. dollar.

Such an act no doubt would be coordinated with a call for the Palestinian and other foreign workers in Saudi Arabia to rise up and drive out the monarchy and its thousands of family retainers.

Beyond Saudi Arabia, Iran and other advocates of a multilateral diplomatic break with U.S. neoliberal and neocon unilateralism should bring pressure on Europe to withdraw from NATO, inasmuch as that organization functions mainly as a U.S.-centric military tool of American dollar and oil diplomacy and hence opposing the climate change and military confrontation policies that threaten to make Europe part of the U.S. maelstrom.

Finally, what can U.S. anti-war opponents do to resist the neocon attempt to destroy any part of the world that resists U.S. neoliberal autocracy? This has been the most disappointing response over the weekend. They are flailing. It has not been helpful for Warren, Buttigieg and others to accuse Trump of acting rashly without thinking through the consequences of his actions. That approach shies away from recognizing that his action did indeed have a rationale—do draw a line in the sand, to say that yes, America WILL go to war, will fight Iran, will do anything at all to defend its control of Near Eastern oil and to dictate OPEC central bank policy, to defend its ISIS legions as if any opposition to this policy is an attack on the United States itself.

I can understand the emotional response or yet new calls for impeachment of Donald Trump. But that is an obvious non-starter, partly because it has been so obviously a partisan move by the Democratic Party. More important is the false and self-serving accusation that President Trump has overstepped his constitutional limit by committing an act of war against Iran by assassinating Soleimani.

Congress endorsed Trump’s assassination and is fully as guilty as he is for having approved the Pentagon’s budget with the Senate’s removal of the amendment to the 2019 National Defense Authorization Act that Bernie Sanders, Tom Udall and Ro Khanna inserted an amendment in the House of Representatives version, explicitly not authorizing the Pentagon to wage war against Iran or assassinate its officials. When this budget was sent to the Senate, the White House and Pentagon (a.k.a. the military-industrial complex and neoconservatives) removed that constraint. That was a red flag announcing that the Pentagon and White House did indeed intend to wage war against Iran and/or assassinate its officials. Congress lacked the courage to argue this point at the forefront of public discussion.

Behind all this is the Saudi-inspired 9/11 act taking away Congress’s sole power to wage war – its 2002 Authorization for Use of Military Force, pulled out of the drawer ostensibly against Al Qaeda but actually the first step in America’s long support of the very group that was responsible for 9/11, the Saudi airplane hijackers.

The question is, how to get the world’s politicians – U.S., European and Asians – to see how America’s all-or-nothing policy is threatening new waves of war, refugees, disruption of the oil trade in the Strait of Hormuz, and ultimately global warming and neoliberal dollarization imposed on all countries. It is a sign of how little power exists in the United Nations that no countries are calling for a new Nurenberg-style war crimes trial, no threat to withdraw from NATO or even to avoid holding reserves in the form of money lent to the U.S. Treasury to fund America’s military budget.

Michael Hudson

  1. https://www.axios.com/trump-to-iraqi-pm-how-about-that-oil-1a31cbfa-f20c-4767-8d18-d518ed9a6543.html. The article adds: “In the March meeting, the Iraqi prime minister replied, ‘What do you mean?’ according to the source in the room. And Trump’s like, ‘Well, we did a lot, we did a lot over there, we spent trillions over there, and a lot of people have been talking about the oil.’” 
  2. Michael Crowly, “‘Keep the Oil’: Trump Revives Charged Slogan for new Syria Troop Mission,” The New York Times, October 26, 2019. https://www.nytimes.com/2019/10/26/us/politics/trump-syria-oil-fields.html. The article adds: “‘I said keep the oil,’ Mr. Trump recounted. ‘If they are going into Iraq, keep the oil. They never did. They never did.’” 

Aramco Operation Costs Saudi Arabia $2bn Worth Of Oil Output

Aramco Operation Costs Saudi Arabia $2bn Worth Of Oil Output

By Staff, Agencies

Saudi Arabia has lost $2 billion worth of its oil production after Yemen’s retaliatory operations on the kingdom’s vital energy infrastructure last month, according to a report by the Financial Times.

The kingdom’s output fell by nearly 1.3mn barrels a day in September, from the previous month, according to data submitted to the Organization of Petroleum Exporting Countries [OPEC] by analysts and consultants, which is used by the cartel to set official production targets.

Saudi Arabia claimed to OPEC’s research arm that production was only hit by 660,000 bpd, according to a monthly oil market report published on Thursday.

Riyadh has sought to emphasize its ability to bring production back to normal levels and the resiliency of the state energy group Saudi Aramco, FT reported Thursday.

The country has tried to maintain its exports using oil in storage. However, energy consultants, analysts and industry executives have questioned the ability of the country’s production and exports to recover to above 9mn bpd within weeks.

It is also unclear how Saudi officials are going to stop such attacks from happening again.

The operation by Yemeni Ansarullah revolutionary movement last month shut down 5.7 million bpd of Saudi Arabia’s oil production, which represents more than half or five percent of the kingdom’s of global output.

Energy analysts have said the raid was akin to a massive heart attack for the oil market and global economy. It has already plunged OPEC’s oil production to the lowest level since 2011.

The attacks would also cause a decline in Saudi Arabia’s economic growth this year, the World Bank said in a report.

The report published on Thursday revised forecast about Saudi Arabia’s yearly growth of gross domestic product [GDP] from an earlier 1.7% announced in April to 0.8%, saying the decline was mainly due to oil production cuts caused by September 14 attacks as well as a worsening global outlook.

“The attacks on Saudi oil facilities in September led to a significant supply disruption which is also expected to impact 2019 growth,” said the report about the operation launched by Ansarullah who are targeting oil facilities run by state-run Aramco Company in eastern Saudi Arabia.

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DONALD TRUMP: ‘FUTURE BELONGS TO PATRIOTS NOT GLOBALISTS’

Donald Trump: 'Future Belongs To Patriots Not Globalists'

South Front

On September 24, US President Donald Trump made his third address to the United Nations. Many said that the adress was ‘ordinary’ for Trump. Some parts of the adress are inspiring, while others raise concerns.

Donald Trump at the United Nations General Assembly (full transcript):

Madam President, Mr. Secretary General, world leaders, ambassadors, and distinguished delegates:

One year ago, I stood before you for the first time in this grand hall. I addressed the threats facing our world, and I presented a vision to achieve a brighter future for all of humanity. Today, I stand before the United Nations General Assembly to share the extraordinary progress we have made.

In less than two years, my administration has accomplished more than almost any administration in the history of our country. America is so thrilled. [Laughter] I did not expect that reaction, but that’s okay. [Applause] America’s economy is booming like never before. Since my election, we have added $10 trillion in wealth. The stock market is at an all-time high in history, and jobless claims are at a 50-year low.

Comment: Mr. Trump is right and his ill-wishers cannot deny this. It is important to note that the successes of the US economy took place amid the decline of the global economy. The economic strategy of the Trump administration was designed to support the US national industry and demonstrated own effectiveness. The US nation is lucky that in the current condition the US leader is patriot Trump rather than some creature of the global capital.

African American, Hispanic American, and Asian American unemployment have all achieved their lowest levels ever recorded. We have added more than 4 million new jobs, including half a million manufacturing jobs. We have passed the biggest tax cuts and reforms in American history. We have started the construction of a major border wall, and we have greatly strengthened border security. We have secured record funding for our military, $700 billion this year and $716 billion next year. Our military will soon be more powerful than it has ever been before. In other words, the United States is stronger, safer, and a richer country than it was when I assumed office less than two years ago. We are standing up for America and the American people.

We are also standing up for the world. This is great news for our citizens and for peace-loving people everywhere. We believe that when nations respect the rights of their neighbors and defend the interests of their people, they can better work together to secure the blessings of safety, prosperity, and peace. Each of us here today is the emissary of a distinct culture, a rich history, and a people bound together by ties of memory, tradition, and the values that make our homelands like nowhere else on Earth. That is why America will always choose independence and cooperation over global governance, control, and domination. I honor the right of every nation in this room to pursue its own customs, beliefs, and traditions. The United States will not tell you how to live or work or worship. We only ask that you honor our sovereignty in return.

Comment: Since the very start of the presidency, Mr. Trump has demonstrated that for him such words are not just a colorful rhetoric needed to cover destructive US actions towards other states. However, the life is not rainbows and unicorns. Washington has been demonstrating double standards in its foreign policy for a very long time.

From Warsaw to Brussels to Tokyo to Singapore, it has been my highest honor to represent the United States abroad. I have forged close relationships and friendships and strong partnerships with the leaders of many nations in this room.

Our approach has always yielded incredible change. With support from many countries here today, we have engaged with North Korea to replace the specter of conflict with a bold and new push for peace. In June, I traveled to Singapore to meet face-to-face with North Korea’s leader, Kim Jong Un. We had highly productive conversations and meetings. We agreed that it was in both countries’ interest to pursue the denuclearization of the Korean peninsula. Since that meeting, we have seen a number of encouraging measures that few could have imagined a short time ago. The missiles and rockets are no longer flying in every direction. Nuclear testing has stopped. Some military facilities are already being dismantled. Our hostages have been released. And as promised, the remains of our fallen heroes are being returned home, to lay at rest in American soil. I would like to thank Chairman Kim for his courage and for the steps he has taken, though much work remains to be done. The sanctions will stay in place until denuclearization occurs. I also want to thank the many member states who helped us reach this moment, a moment that is actually far greater than people would understand—far great. But for, also, their support and the critical support that we will all need going forward, a special thanks for President Moon of South Korea, the Prime Minister Abe of Japan, and President Xi of China.

In the Middle East, our new approach is yielding great strides and very historic change. Following my trip to Saudi Arabia last year, the Gulf countries opened a new center to target terrorist financing. They are enforcing new sanctions, working with us to identify and track terrorist networks, and taking more responsibility for fighting terrorism and extremism in their own region. The UAE, Saudi Arabia, and Qatar have pledged billions of dollars to aid the people of Syria and Yemen, and they are pursuing multiple avenues to ending Yemen’s horrible, horrific civil war.

Ultimately, it is up to the nations of the region to decide what kind of future they want for themselves and their children. For that reason, the United States is working with the Gulf Cooperation Council, Jordan, and Egypt to establish a regional strategic alliance so that Middle Eastern nations can advance prosperity, stability, and security across their home region.

Comment: These remarks once again demonstrate that the US president is supporter of the traditional system of the international relations. At the same time, the colorful phrase about the right of “the nations of the region to decide what kind of future they want for themselves and their children” is used to hide anti-Iranian intentions and efforts to create and strengthen an anti-Iranian coalition that would include Jordan and Egypt. The goal of this coalition would be to counter Iranian influence and in some cases even to meddle the Iranian internal political situation.

Thanks to the United States military, and our partnership with many of your nations, I am pleased to report that the bloodthirsty killers known as isis have been driven out from the territory they once held in Iraq and Syria. We will continue to work with friends and allies to deny radical Islamic terrorists funding, territory, or support or any means of infiltrating our borders.

The ongoing tragedy in Syria is heartbreaking. Our shared goals must be the de-escalation of military conflict along with a political solution that honors the will of the Syrian people. In this vein, we urge the United Nations–led peace process to be reinvigorated. But rest assured, the United States will respond if chemical weapons are deployed by the Assad regime.

Comment: Mr. Trump demonstrates a dramatic shift of the US position towards the conflict in Syria. He does not repeat the ‘Assad must go’ mantra and says that the conflict should be settled through “political solutions”. The President also avoids to mention the supposed US support to the Syrian opposition. Even, the cornerstone of the US public agenda in the Syrian conflict, “chemical weapons”, is used just as a warning in for the case if such weapons “are deployed”. This stance is in contrary to the stance of the Obama administration and the Trump administration during its first two years.

I commend the people of Jordan and other neighboring countries for hosting refugees from this very brutal civil war. As we see in Jordan, the most compassionate policy is to place refugees as close to their homes as possible, to ease their eventual return to be part of the rebuilding process. This approach also stretches finite resources to help far more people, increasing the impact of every dollar spent.

Every solution to the humanitarian crisis in Syria must also include a strategy to address the brutal regime that is fueled and financed in the corrupt dictatorship in Iran. Iran’s leaders sow chaos, death, and disruption. They do not respect their neighbors or borders, or the sovereign rights of nations. Instead, Iran’s leaders plunder the nation’s resources to enrich themselves and to spread mayhem across the Middle East and far beyond. The Iranian people are rightly outraged that their leaders have embezzled billions of dollars from Iran’s treasury, seized valuable portions of the economy, and looted the religious endowments, all to line their own pockets and send their proxies to wage war. Not good. Iran’s neighbors have paid a heavy toll for the regime’s agenda of aggression and expansion. That is why so many countries in the Middle East strongly supported my decision to withdraw the United States from the horrible 2015 Iran nuclear deal and reimpose nuclear sanctions.

The Iran deal was a windfall for Iran’s leaders. In the year since the deal has been reached, the military budget grew nearly 40 percent. The dictatorship used the funds to build nuclear-capable missiles, increase internal repression, finance terrorism, and fund havoc and slaughter in Syria and Yemen. The United States has launched a campaign of economic pressure to deny the regime the funds it needs to advance its bloody agenda. Last month, we began reimposing hard-hitting nuclear sanctions that have been lifted under the Iran deal. Additional sanctions will resume November 5, and more will follow. We are working with countries that import Iranian crude oil to cut their purchases substantially. We cannot allow the world’s leading sponsor of terrorism to possess the planet’s most dangerous weapons. We cannot allow a regime that chants “Death to America” and that threatens Israel with annihilation to possess the means to deliver a nuclear warhead to any city on Earth. We just cannot do it. We ask all nations to isolate Iran’s regime as long as its aggression continues, and we ask all nations to support Iran’s people as they struggle to reclaim their religious and righteous destiny.

This year, we took another significant step forward in the Middle East in recognition of every sovereign state to determine its own capital. I moved the U.S. Embassy in Israel to Jerusalem. The United States is committed to a future of peace and stability in the region, including peace between the Israelis and the Palestinians. That aim is advanced, not harmed, by acknowledging the obvious facts. America’s policy of principled realism means that we will not be held hostage to old dogmas, discredited ideologies, and so-called experts who have been proven wrong, over the years, time and time again.

Comment: These remarks were expected. They were based on Trump’s vision of Israel as the key US ally in the Middle east. However, attempts to link the relocation of the US embassy to Jerusalem with the commitment to the “future of peace and stability in the region, including peace between the Israelis and the Palestinians” are surprising. It is unclear how the peace and stability could be achieved through these actions. Nonetheless, Trump once again demonstrated himself as the supporter of hard realpolitik principles and direct actions.

This is true, not only in matters of peace, but in matters of prosperity. We believe that trade must be fair and reciprocal. The United States will not be taken advantage of any longer. For decades, the United States opened its economy, the largest by far on Earth, with few conditions. We allowed foreign goods from all over the world to flow freely across our borders. Yet other countries did not grant us free and reciprocal access to their markets in return. Even worse, some countries abused their openness to dump their products, subsidize their goods, target our industries, and manipulate their currencies to gain unfair advantage over our country. As a result, our trade deficit ballooned to nearly $800 billion a year. For this reason, we are systematically renegotiating broken and bad trade deals. Last month, we announced a groundbreaking U.S.-Mexico trade agreement.

Comment: The strengthening of protectionism policies is generally consistent with Trump’s economic doctrine. Trump focuses on the revision of unfair, “broken and bad” trade deals. If Trump is re-elected, further protectionist measures in the field of the US foreign trade should be expected.

Just yesterday, I stood with President Moon to announce the successful completion of the brand-new U.S.-Korea trade deal. This is just the beginning. Many nations in this hall will agree that the world trading system is in dire need of change. For example, countries were admitted to the World Trade Organization that violate every single principle on which the organization is based.

Comment: The fact that the World Trade Organization does not work is an open secret. The organization de-facto does not pursues goals declared during its creation. Trump is right that the WTO violates “every single principle on which the organization is based.” It is important to note that the WTO gained its current form thanks to actions and policy of the previous US administrations, which were shaped by supporters of the globalists. These very powers were interested in the current state of the WTO. However, the US president that demonstrates different approaches, focusing on protectionism, the national economic development and the rationale nationalism, is not interested in such a state of the WTO.

While the United States and many other nations played by the rules, these countries use government-run industrial planning and state-owned enterprises to rig the system in their favor. They engaged in relentless product dumping, forced technology transfer, and the theft of intellectual property. The United States lost over 3 million manufacturing jobs, nearly a quarter of all steel jobs, and 60,000 factories after China joined the WTO. We have racked up $13 trillion in trade deficits over the last two decades.

But those days are over. We will no longer tolerate such abuse. We will no longer allow our workers to be victimized, our companies to be cheated, and our wealth to be plundered and transferred. America will never apologize for protecting its citizens. The United States has just announced tariffs on another $200 billion in Chinese-made goods, for a total so far of $250 billion. I have great respect and affection for my friend President Xi, but I have made clear that our trade imbalance is just not acceptable. China’s market distortions and the way they deal cannot be tolerated.

As my administration has demonstrated, America will always act in our national interests. I spoke before this body last year and warned that the UN Human Rights Council had become a grave embarrassment to this institution, shielding egregious human-rights abusers while bashing America and its many friends. Our ambassador to the United Nations, Nikki Haley, laid out a clear agenda for reform, but despite reported and repeated warnings, no action at all was taken. So the United States took the only responsible course: We withdrew from the Human Rights Council and we will not return until real reform is enacted.

For similar reasons, the United States will provide no support and recognition to the International Criminal Court. As far as America is concerned, the ICC has no jurisdiction, no legitimacy, and no authority. The ICC claims near-universal jurisdiction over the citizens of every country, violating all principles of justice, fairness, and due process.

Comment: Trump once again declares his vision of the United States as an independent sovereign state, which should be governed exclusively by the people of the United States through democratic procedures. He rejects the globalism and demonstrates that he is well aware of the nature and specifics of the processes that take place in a number of international bodies – for example, in the Human Rights Council and the International Criminal Court. He names the forces that dominate these organizations – the global bureaucracy and the associated global capital – the globalists aiming to establish the so-called New World Order. Trump makes it clear that he is a fierce opponent of this concept.

WE WILL NEVER SURRENDER AMERICA’S SOVEREIGNTY TO AN UNELECTED, UNACCOUNTABLE GLOBAL BUREAUCRACY. AMERICA IS GOVERNED BY AMERICANS. WE REJECT THE IDEOLOGY OF GLOBALISM, AND WE EMBRACE THE DOCTRINE OF PATRIOTISM. AROUND THE WORLD, RESPONSIBLE NATIONS MUST DEFEND AGAINST THREATS TO SOVEREIGNTY NOT JUST FROM GLOBAL GOVERNANCE, BUT ALSO FROM NEW FORMS OF COERCION AND DOMINATION.

Comment: These words are the culmination and the very essence of the address. Globalists will not forgive this. The next US presidential race is expected to be even tenser than the previous one. Trump could be described as a controversial person. But in this very case, he seems to be an island of sanity and a clear vision surrounded by oligarchic clans advocating globalism and the New World Order.

In America, we believe in energy security for ourselves and for our allies. We have become the largest energy producer anywhere on the face of the Earth. The United States stands ready to export our abundant, affordable supply of oil, clean coal, and natural gas. OPEC and OPEC nations are, as usual, ripping off the rest of the world, and I don’t like it. Nobody should like it. We defend many of these nations for nothing, and then they take advantage of us by giving us high oil prices. Not good. We want them to stop raising prices; we want them to start lowering prices. They must contribute substantially to military protection from now on. We are not going to put up with it, these horrible prices, much longer. Reliance on a single foreign supplier can leave a nation vulnerable to extortion and intimidation. That is why we congratulate European states such as Poland for leading the construction of a Baltic pipeline so that nations are not dependent on Russia to meet their energy needs. Germany will become totally dependent on Russian energy if it does not immediately change course.

Here in the Western Hemisphere, we are committed to maintaining our independence from the encroachment of expansionist foreign powers. It has been the formal policy of our country since President Monroe that we reject the interference of foreign nations in this hemisphere and in our own affairs. The United States has recently strengthened our laws to better screen foreign investments in our country for national-security threats. We welcome cooperation with countries in this region and around the world that wish to do the same. You need to do it for your own protection.

The United States is also working with partners in Latin America to confront threats to sovereignty from uncontrolled migration. Tolerance for human struggling and human smuggling and trafficking is not humane. It is a horrible thing that is going on, at levels that nobody has ever seen before. It is very, very cruel. Illegal immigration funds criminal networks, ruthless gangs, and the flow of deadly drugs. Illegal immigration exploits vulnerable populations and hurts hardworking citizens and has produced a vicious cycle of crime, violence, and poverty. Only by upholding national borders, destroying criminal gangs can we break the cycle and establish a real foundation for prosperity.

We recognize the right of every nation in this room to set its own immigration policy in accordance with its national interests, just as we ask other countries to respect our own right to do the same, which we are doing. That is one reason the United States will not participate in the new Global Compact on Migration. Migration should not be governed by an international body, unaccountable to our own citizens. Ultimately, the only long-term solution to the migration crisis is to help people build more hopeful futures in their home countries. Make their countries great again.

Comment: Trump’s United States would continue demonstrate the rationale protectionism and isolationism and defend the right of the nation to decide what kind of future it wants for itself.

Currently, we are witnessing a human tragedy as an example in Venezuela. More than 2 million people have fled the anguish inflicted by the socialist Maduro regime and its Cuban sponsors. Not long ago, Venezuela was one of the richest countries on earth. Today, socialism has bankrupted the oil-rich nation and driven its people into abject poverty. Virtually everywhere, socialism or communism has been tried. It has produced suffering, corruption, and decay. Socialism’s thirst for power leads to expansion, incursion, and oppression. All nations of the world should resist socialism and the misery that it brings to everyone. In that spirit, we ask the nations gathered here to join us in calling for the restoration of democracy in Venezuela. Today, we are announcing additional sanctions against the repressive regime, targeting Maduro’s inner circle and close advisers.

We are grateful for all of the work the United Nations does around the world to help people build better lives for themselves and their families. The United States is the world’s largest giver in the world by far of foreign aid. But few give anything to us. That is why we are taking a hard look at U.S. foreign assistance. That will be headed up by Secretary of State Mike Pompeo. We will examine what is working, what is not working, and whether the countries who receive our dollars and our protection also have our interests at heart. Moving forward, we are only going to give foreign aid to those who respect us and, frankly, are our friends. We expect other countries to pay their fair share for the cost of their defense.

The United States is committed to making the United Nations more effective and accountable. I have said many times that the United Nations has unlimited potential. As part of our reform effort, I have told our negotiators that the United States will not pay more than 25 percent of the UN peacekeeping budget.

Comment: The US president just mocked international bodies in his unique style. He declared support to their actions, but said that he would not give them money.

This will encourage other countries to step up, get involved, and also share in this very large burden. We are working to shift more of our funding from assessed contributions to voluntary so that we can target American resources to the programs with the best record of success. Only when we each of us does our part and contributes our share can we realize the United Nations’ highest aspirations. We must pursue peace without fear, hope without despair, and security without apology.

Looking around this hall, where so much history has transpired, we think of the many before us who have come here to address the challenges of their nations and of their times. Our thoughts turn to the same question that ran through all of their speeches and resolutions, through every word and every hope. It is the question of, what kind of world will we leave for our children and what kind of nations they will inherit. The dreams that fill this hall today are as diverse as the people who have stood at this podium, and as varied as the countries represented right here, in this body, are. It really is something. It really is great, great history.

There is India, a free society over a billion people, successfully lifting countless millions out of poverty and into the middle class. There is Saudi Arabia, where King Salman and the crown prince are pursuing bold new reforms. There is Israel, proudly celebrating its 70th anniversary as a thriving democracy in the Holy Land. In Poland, the great people are standing up for their independence, their security, and their sovereignty.

Comment: The list of ‘successful and democratic’ nations named by Mr. Trump is especially interesting and funny. He said that India is “a free society over a billion people, successfully lifting countless millions out of poverty and into the middle class”. But he somehow forgot to mention that India is the state with one of the highest levels of social inequality. In fact, India is in the list because it’s the main regional competitor of China, the US is draining brains from the Indian nation, and India is a prospective market for the US industry, mainly the military industrial complex.

Saudi Arabia and Israel are the united Middle Eastern family of the traditional US allies. Their economies are incorporated into the US economy.

As to Poland, this state is currently one of the main political and economic competitors of Germany within the EU and thus the US ally. At the same time, Washington sees Poland as a deterrent force against Russia. Besides this, Poland has been acting as an agent working in interests of the Anglo-Saxon world in Europe.

Many countries are pursuing their own unique visions, building their own hopeful futures, and chasing their own wonderful dreams of destiny, of legacy, and of a home. The whole world is richer. Humanity is better because of this beautiful constellation of nations, each very special, each very unique, each shining brightly in its part of the world. In each one, we see also promise of a people bound together by a shared past and working toward a common future.

As for Americans, we know what kind of future we want for ourselves. We know what kind of a nation America must always be. In America, we believe in the majesty of freedom and the dignity of the individual. We believe in self-government and the rule of law. We prize the culture that sustains our liberty, a culture built on strong families, deep faith, and fierce independence. We celebrate our heroes, we treasure our traditions, and, above all, we love our country. Inside everyone in this great chamber today, and everyone listening all around the globe, there is the heart of a patriot that feels the same powerful love for your nation, the same intense loyalty to your homeland, the passion that burns in the hearts of patriots and the souls of nations has inspired reform and revolution, sacrifice and selflessness, scientific breakthroughs and magnificent works of art.

Our task is not to erase it, but to embrace it—to build with it, to draw on its ancient wisdom, and to find within it the will to make our nations greater, our regions safer, and the world better. To unleash this incredible potential in our people, we must defend the foundations that make it all possible. Sovereign and independent nations are the only vehicle where freedom has ever survived, democracy has ever endured, or peace has ever prospered. And so we must protect our sovereignty and our cherished independence above all. When we do, we will find new avenues for cooperation unfolding before us. We will find new passion for peacemaking rising within us. We will find new purpose, new resolve, and new spirit flourishing all around us, and making this a more beautiful world in which to live.

Together, let us choose a future of patriotism, prosperity, and pride. Let us choose peace and freedom over domination and defeat. Let us come here to this place to stand for our people and their nations.

Comment: These are great words. Nonetheless, we kindly ask Mr. Trump to reveal the list of nations that would have a right able to achieve this “future of patriotism, prosperity, and pride”, according to his vision.

Forever strong, forever sovereign, forever just. Forever thankful for the grace and the goodness and the glory of God. Thank you, God bless you, and God bless the nations of the world. Thank you very much.

***

In the end, it is also interesting to note that Mr. Trump has almost fully ignored the so-called ‘Russian threat’ in his address. He mentioned Russia once when talked about the US interests in the European energy market and the German-Russian relations. However, there was no criticism aimed against Russia in general. Furthermore, the US President fully ignored the Ukraine question demonstrating his real stance towards the conflict.

Over the past days, the Trump administration has sent signals that it is not going to fund Ukraine just because it’s allegedly engaged in the “war with Russia”. Furthermore, Washington demonstrates that it is not interested in the further escalation of the situation in the region.

The Oil Crisis Saudi Arabia Can’t Solve

27 June 2019

Middle East

Saudi Arabia’s CEO Amin Nasr’s message to the press that oil flows to the market are guaranteed, should be taken with a pinch of salt.

Looking at the current volatility in the Persian/Arabian Gulf and the possibility of a temporary closure of the Strait of Hormuz, the Aramco CEO’s message might be a bit overoptimistic. In reality, Aramco will not be able to keep the necessary crude oil and products volumes flowing to Asian and European markets in the case of a full Strait of Hormuz blockade. Even that Aramco owns and operates a crude oil pipeline with a capacity of 5 million bpd, carrying crude 1,200 kilometers between the Arabian Gulf and Red Sea, much more is needed to keep the oil market stable.

Nasr’s move to stabilize the market is praiseworthy but should be seen as an attempt to quell fears of traders and financial analysts, especially just before the OPEC+ meeting in Vienna next week. Nasr reiterated that Aramco (aka the Kingdom) is able to supply sufficient crude through the Red Sea, reiterating that the necessary pipeline and terminal infrastructure is there. However, what analysts tend to forget, Nasr’s statement is only linked to Saudi’s oil export volumes, which will likely be not higher this summer than around the level this pipeline can support. The real issue, if it comes to a full-blown conflict, is that not only Saudi oil is being threatened.

At present, between 20-21 million bpd of crude and petroleum products are transported via the Strait of Hormuz. Saudi exports are a vast part of it, but also the UAE, Iraq, Kuwait, Bahrain, Qatar and Iran, will have to look at additional routes. A closure or military action in the region will cause a temporary disruption for all maritime traffic. Besides the options that are the already on the table, such as the Saudi onshore pipeline and the UAE’s Fujairah pipeline,  no other real alternatives are available, as overland trucking or rail transport is minimal. Transferring volumes via the Saudi and UAE’s pipelines is not an option at all, as the total capacity of the two is less than 10 million bpd, representing not even 50% of the current maritime flows through Hormuz. Another thing that should be noted is that pipelines can’t ship crude and crude products at the same time.Related: $4.5-Trillion: The Price Tag of A Fossil Fuel-Free U.S.

(Click to enlarge)

Another consequence of a blockade would be that most available VLCCs and other tankers will either be in the Persian Gulf (and blocked) or will not be able to be rerouted. Before the market will have found a solution for this, days and probably weeks will have gone by, and a price spike for all products is to be expected.  This will likely also be the case for LNG and other commodity flows.

Few analysts are talking about oilfield security and pipeline availability. Any military advisor will put these options as part of his or her 1st phase military action plan. If Iran were to be attacked, or faces a surgical strike by an opponent, all Arab oil and gas infrastructure will become a legitimate offensive target (at least in the eyes of Tehran and its proxies). Geographically seen, Tehran has been dealt the best cards. Looking at the majority of oil and gas production assets and infrastructure in the Arab world, especially in Saudi Arabia, UAE or even Iraq, everything is in reach of short-distance missiles, fighter jets and even drones. Any move against Iran will result in a full-scale attack on Saudi’s Eastern Province (which produces 80% of all its oil and gas), Abu Dhabi’s offshore oil infrastructure and the regional pipelines. Looking at history, denying energy access and diminishing the opponents stability is a no-brainer in military strategy.Related: Shale Executive Sees “Another Round Of Bankruptcies” Looming

It can be taken for granted that Iran, the Houthis, Hezbollah and others, already have prepared their oil and gas infrastructure strategy. Washington, Riyadh, Abu Dhabi and even Manama, will be frantically looking for answers, but the geographical situation is disastrous.

Quelling fears in the market is the right thing to do, but reality also needs to be addressed. Nasr’s message is that of an oil company CEO, taking all precautions to deal with a calamity. ADNOC’s Sultan will be doing the same. Still, the oil market is at present a victim of geopolitical power projections of emotional leaders superseding rationality. This confrontation is one of a possibly unprecedented order, not for oil (as sceptics again will state) but with oil as a weapon for defeat or survival. The continuing reference to the Iran-Iraq tanker war during 1980-1988 is out of touch with reality. At this time, it is not going to be Iran denying support or trade with Iraq, but a possible Arab-Iranian confrontation, led by the USA if no countermeasures are being implemented.

Asian consumers will need to prepare for severe price hikes in the most optimistic scenario, but also for a shutdown of vast parts of their economy. Hormuz will not be standing on its own, more is to be taken into account, especially proxy reactions in Yemen (Gulf of Aden) or East Med (Hezbollah).  Negative repercussions for Europeans are also in the picture. Saudi Arabia can do a lot, but saving the global economy if the Gulf explodes is not one of their capabilities.

More Top Reads From Oilprice.com:

The Financial Times’s Interview with President Putin

July 03, 2019

Ahead of the G20 Osaka Summit, Russian President Vladimir Putin spoke with The Financial Times Editor Lionel Barber and Moscow Bureau Chief Henry Foy, The Kremlin, Moscow, June 27, 2019.

WATCH PART 1

WATCH PART 2

http://en.kremlin.ru/events/president/news/60836

Lionel Barber: Mr President, you head for Osaka shortly as the senior statesman at the G20. Nobody has been to so many international meetings of this grouping and the G7 over the last 20 years while you have been in charge of Russia. Before we talk about the G20 agenda and what you hope to achieve, we know that there are rising tensions between America and China in trade, the risk of conflict in the Gulf. I would be very grateful if you could talk a bit about how you have seen the world change over the last 20 years while you have been in power.

President of Russia Vladimir Putin: First, I have not been in power for all these 20 years. As you may know, I was Prime Minister for four years, and that is not the highest authority in the Russian Federation. But nevertheless, I have been around for a long time in government and in the upper echelons, so I can judge what is changing and how. In fact, you just said it yourself, asking what has changed and how. You mentioned the trade wars and the Persian Gulf developments. I would cautiously say the situation has not changed for the better, but I remain optimistic to a certain extent. But, to put it bluntly, the situation has definitely become more dramatic and explosive.

Lionel Barber: Do you believe that the world now has become more fragmented?

Vladimir Putin: Of course, because during the Cold War, the bad thing was the Cold War. It is true. But there were at least some rules that all participants in international communication more or less adhered to or tried to follow. Now, it seems that there are no rules at all. In this sense, the world has become more fragmented and less predictable, which is the most important and regrettable thing.

Lionel Barber: We will return to this theme of the world without rules, fragmentation, more transactional. But first, Mr President, tell us what you want to achieve in Osaka, in terms of your relationships with these other parties? What are your main goals for the summit?

Vladimir Putin: I would very much like all the participants in this event, and the G20, in my opinion, is a key international economic development forum today, so I would like all the G20 members to reaffirm their intention – at least an intention – to work out some general rules that everyone would follow, and show their commitment and dedication to strengthening international financial and trade institutions.

Everything else is details that complement the main topics one way or another. We certainly support Japan’s Presidency. As for the development of modern technology, the information world, the information economy, as well as our Japanese colleagues’ attention to matters such as longevity and the environment – all this is extremely important, and we will certainly support it and will take part in all these discussions. Even though it is hard to expect any breakthroughs or landmark decisions in the current conditions; we can hardly count on it today. But in any case, there is hope at least that during these general discussions and bilateral meetings we will be able to smooth out the existing disagreements and lay a foundation, a basis for positive movement forward.

Lionel Barber: You will have a meeting with Mohammad bin Salman in Osaka. Can we expect an extension of the current agreement on oil production? Limitations?

Vladimir Putin: As you know, Russia is not an OPEC member, even though it is among the world’s largest producers. Our daily production is estimated at 11.3 million barrels, I believe. The United States has surged ahead of us, though. However, we believe that our production stabilisation agreements with Saudi Arabia and OPEC in general have had a positive effect on market stabilisation and forecasting.

I believe both energy producers, in this case, oil producing countries, and consumers are interested in this, because stability is definitely in short supply at present. And our agreements with Saudi Arabia and other OPEC members undoubtedly strengthen stability.

As for whether we will extend the agreement, you will find out in the next few days. I had a meeting on this issue with the top executives of our largest oil companies and Government members right before this interview.

Lionel Barber: They are a little bit frustrated. They would like to produce more. Is that correct?

Vladimir Putin: They have a smart policy. It is not about increasing production, although that is a major component in the work of large oil companies. It is about the market situation. They take a comprehensive view of the situation, as well as of their revenues and expenses. Of course, they are also thinking about boosting the industry, timely investments, ways to attract and use modern technology, as well as about making this vital industry more attractive for investors.

However, dramatic price hikes or slumps will not contribute to market stability and will not encourage investment. This is why we discussed all these issues in their totality today.

Lionel Barber: Mr President, you have observed four American presidents at close quarters and will maybe five, you have had direct experience. So, how is Mr Trump different?

Vladimir Putin: We are all different. No two people are the same, just like there are no identical sets of fingerprints. Anyone has his or her own advantages, and let the voters judge their shortcomings. On the whole, I maintained sufficiently good-natured and stable relations with all the leaders of the United States. I had an opportunity to communicate more actively with some of them.

The first US President I came into contact with was Bill Clinton. Generally, I viewed this as a positive experience. We established sufficiently stable and business-like ties for a short period of time because his tenure was already coming to an end. I was only a very young president then who had just started working. I continue to recall how he established partner-like relations with me. I remain very grateful to him for this.

There have been different times, and we had to address various problems with all other colleagues. Unfortunately, this often involved debates, and our opinions did not coincide on some matters that, in my opinion, can be called key aspects for Russia, the United States and the entire world. For example, this includes the unilateral US withdrawal from the Anti-Ballistic Missile Treaty that, as we have always believed, and as I am still convinced, was the cornerstone of the entire international security system.

We debated this matter for a long time, argued and suggested various solutions. In any event, I made very energetic attempts to convince our US partners not to withdraw from the Treaty. And, if the US side still wanted to withdraw from the Treaty, it should have done so in such a way as to guarantee international security for a long historical period. I suggested this, I have already discussed this in public, and I repeat that I did this because I consider this matter to be very important. I suggested working jointly on missile-defence projects that should have involved the United States, Russia and Europe. They stipulated specific parameters of this cooperation, determined dangerous missile approaches and envisioned technology exchanges, the elaboration of decision-making mechanisms, etc. Those were absolutely specific proposals.

I am convinced that the world would be a different place today, had our US partners accepted this proposal. Unfortunately, this did not happen. We can see that the situation is developing in another direction; new weapons and cutting-edge military technology are coming to the fore. Well, this is not our choice. But, today, we should at least do everything so as to not aggravate the situation.

Lionel Barber: Mr President, you are a student of history. You have had many hours of conversation with Henry Kissinger. You almost certainly read his book, World Order. With Mr Trump, we have seen something new, something much more transactional. He is very critical of alliances and allies in Europe. Is this something that is to Russia’s advantage?

Vladimir Putin: It would be better to ask what would be to America’s advantage in this case. Mr Trump is not a career politician. He has a distinct world outlook and vision of US national interests. I do not accept many of his methods when it comes to addressing problems. But do you know what I think? I think that he is a talented person. He knows very well what his voters expect from him.

Russia has been accused, and, strange as it may seem, it is still being accused, despite the Mueller report, of mythical interference in the US election. What happened in reality? Mr Trump looked into his opponents’ attitude to him and saw changes in American society, and he took advantage of this.

You and I are talking ahead of the G20 meeting. It is an economic forum, and it will undoubtedly have discussions on globalisation, global trade and international finance.

Has anyone ever given a thought to who actually benefited and what benefits were gained from globalisation, the development of which we have been observing and participating in over the past 25 years, since the 1990s?

China has made use of globalisation, in particular, to pull millions of Chinese out of poverty.

What happened in the United States, and how did it happen? In the United States, the leading US companies –the companies, their managers, shareholders and partners – made use of these benefits. The middle class hardly benefitted from globalisation. The take-home pay in the US (we are likely to talk later about real incomes in Russia, which need special attention from the Government). The middle class in the United States has not benefited from globalisation; it was left out when this pie was divided up.

The Trump team sensed this very keenly and clearly, and they used this in the election campaign. It is where you should look for reasons behind Trump’s victory, rather than in any alleged foreign interference. This is what we should be talking about here, including when it comes to the global economy.

I believe this may explain his seemingly extravagant economic decisions and even his relations with his partners and allies. He believes that the distribution of resources and benefits of globalisation in the past decade was unfair to the United States.

I am not going to discuss whether it was fair or not, and I will not say if what he is doing is right or wrong. I would like to understand his motives, which is what you asked me about. Maybe this could explain his unusual behaviour.

Lionel Barber: I definitely want to come back to the Russian economy. But what you said is absolutely fascinating. Here you are, the President of Russia, defending globalisation along with President Xi whereas Mr Trump is attacking globalisation and talking about America First. How do you explain this paradox?

Vladimir Putin: I don’t think that his desire to make America first is a paradox. I want Russia to be first, and that is not perceived as a paradox; there is nothing unusual there. As for the fact that he is attacking some manifestations of globalisation, I made that point earlier. He seems to believe that the results of globalisation could have been much better for the United States than they are. These globalisation results are not producing the desired effect for the United States, and he is beginning this campaign against certain elements of globalisation. This concerns everyone, primarily major participants in the system of international economic collaboration, including allies.

Lionel Barber: Mr President, you have had many meetings with President Xi, and Russia and China have definitely come closer. Are you putting too many eggs in the China basket? Because Russian foreign policy, including under your leadership, has always made a virtue of talking to everybody.

Vladimir Putin: First of all, we have enough eggs, but there are not that many baskets where these eggs can be placed. This is the first point.

Secondly, we always assess risks.

Thirdly, our relations with China are not motivated by timeserving political any other considerations. Let me point out that the Friendship Treaty with China was signed in 2001, if memory serves, long before the current situation and long before the current economic disagreements, to put it mildly, between the United States and China.

We do not have to join anything, and we do not have to direct our policy against anyone. In fact, Russia and China are not directing their policy against anyone. We are just consistently implementing our plans for expanding cooperation. We have been doing this since 2001, and we are just consistently implementing these plans.

Take a look at what is written there. We have not done anything that transcends the framework of these accords. So there is nothing unusual here, and you should not search for any implications of the Chinese-Russian rapprochement. Of course, we assess the current global developments; our positions coincide on a number of matters on the current global agenda, including our attitude towards compliance with generally accepted rules in trade, the international financial system, payments and settlements.

The G20 has played a very tangible role. Since its inception in 2008, when the financial crisis flared up, the G20 has accomplished many useful things for stabilising the global financial system, for developing global trade and ensuring its stabilisation. I am talking about the tax aspect of the global agenda, the fight against corruption, and so on. Both China and Russia adhere to this concept.

The G20 has accomplished a lot by advocating quota changes at the International Monetary Fund and the World Bank. Both Russia and China share this approach. Considering the major increase in the global economic share of emerging markets, this is fair and right, and we have been voicing this position from the very beginning. And we are glad that this continues to develop and to proceed in line with changes in global trade.

Over the past 25 years or so (25, I believe), the share of G7 countries in the global GDP has declined from 58 percent to 40 percent. This should also be reflected in international institutions in some way. That is the common position of Russia and China. This is fair, and there is nothing special about this.

Yes, Russia and China have many coinciding interests, this is true. This is what motivates our frequent contacts with President Xi Jinping. Of course, we have also established very warm personal relations, and this is natural.

Therefore, we are moving in line with our mainstream bilateral agenda that was formulated as far back as 2001, but we quickly respond to global developments. We never direct our bilateral relations against anyone. We are not against anyone, we are for ourselves.

Lionel Barber: I am relieved that this egg supply is strong. But the serious point, Mr President, is, you are familiar with Graham Allison‘s book, The Thucydides’s Trap. The danger of tensions or a military conflict risk between a dominant power and a rising power, America and China. Do you think that there is a risk of a military conflict in your time between you, America and China?

Vladimir Putin: You know, the entire history of mankind has always been full of military conflicts, but since the appearance of nuclear weapons the risk of global conflicts has decreased due to the potential global tragic consequences for the entire population of the planet in case such a conflict happens between two nuclear states. I hope it will not come to this.

However, of course, we have to admit that it is not only about China’s industrial subsidies on the one hand or the tariff policy of the United States on the other. First of all, we are talking about different development platforms, so to speak, in China and in the United States. They are different and you, being a historian, probably will agree with me. They have different philosophies in both foreign and domestic policies, probably.

But I would like to share some personal observations with you. They are not about allied relations with one country or a confrontation with the other; I am just observing what is going on at the moment. China is showing loyalty and flexibility to both its partners and opponents. Maybe this is related to the historical features of Chinese philosophy, their approach to building relations.

Therefore I do not think that there would be some such threats from China. I cannot imagine that, really. But it is hard to say whether the United States would have enough patience not to make any rash decisions, but to respect its partners even if there are disagreements. But I hope, I would like to repeat this again, I hope that there would not be any military confrontation.

Lionel Barber: Arms control. We know that the INF agreement is in grave jeopardy. Is there any place, from Russia’s point of view, for future arms control agreements or are we in a new phase when we are likely to see a new nuclear arms race?

Vladimir Putin: I believe there is such a risk.

As I said already, the United States unilaterally withdrew from the ABM Treaty, and has recently quit the Intermediate-Range Nuclear Forces Treaty as well. But this time, it did not just quit but found a reason to quit, and this reason was Russia. I do not think Russia means anything to them in this case, because this war theatre, the war theatre in Europe is unlikely to be interesting to the US, despite the expansion of NATO and NATO’s contingent near our borders. The fact remains, the US has withdrawn from the treaty. Now the agenda is focused on theStrategic Arms Reduction Treaty (New START). I hope that I will be able to talk about it with Donald if we happen to meet in Osaka.

We said that we are ready to hold talks and to extend this treaty between the United States and Russia, but we have not seen any relevant initiative from our American partners. They keep silent, while the treaty expires in 2021. If we do not begin talks now, it would be over because there would be no time even for formalities.

Our previous conversation with Donald showed that the Americans seem to be interested in this, but still they are not making any practical steps. So if this treaty ceases to exist, then there would be no instrument in the world to curtail the arms race. And this is bad.

Lionel Barber: Exactly, the gloves are off. Is there any chance of a triangular agreement between China, Russia and America on intermediate nuclear forces or is that a dream, pie in the sky? Would you support such an end?

Vladimir Putin: As I said at the very beginning, we will support any agreement that can advance our cause, that is, help us contain the arms race.

It should be said that so far, the level and the development scale of China’s nuclear forces are much lower than in the United States and Russia. China is a huge power that has the capability to build up its nuclear potential. This will likely happen in the future, but so far our capabilities are hardly comparable. Russia and the United States are the leading nuclear powers, which is why the agreement was signed between them. As for whether China will join these efforts, you can ask our Chinese friends.

Lionel Barber: Russia is a Pacific power as well as a European and Asian power. It is a Pacific power. You have seen what the Chinese are doing in terms of their buildup of their Navy and their maritime strength. How do you deal with those potential security problems, territorial disputes in the Pacific? Does Russia have a role to play in a new security arrangement?

Vladimir Putin: You mentioned the build-up of naval forces in China. China’s total defence spending is $117 billion, if memory serves. The US defence spending is over $700 billion. And you are trying to scare the world with the build-up of China’s military might? It does not work with this scale of military spending. No, it does not.

As for Russia, we will continue to develop our Pacific Fleet as planned. Of course, we also respond to global developments and to what happens in relations between other countries. We can see all of this, but it does not affect our defence development plans, including those in the Russian Far East.

We are self-sufficient, and we are confident. Russia is the largest continental power. But we have a nuclear submarine base in the Far East, where we are developing our defence potential in accordance with our plans, including so that we can ensure safety on the Northern Sea Route, which we are planning to develop.

We intend to attract many partners to this effort, including our Chinese partners. We may even reach an agreement with American shippers and with India, which has also indicated its interest in the Northern Sea Route.

I would say that we are also primed for cooperation in the Asia Pacific region, and I have grounds to believe that Russia can make a considerable, tangible and positive contribution to stabilising the situation.

Lionel Barber: Can we just turn to North Korea? How do you assess the current situation and do you believe that in the end, any deal or agreement will have to accept the fact that North Korea has nuclear weapons and that total dismantling is just not possible? If I could just add, Mr President, I ask you this because Russia has a fairly small but still a land border with North Korea.

Vladimir Putin: You know, whether we recognise North Korea as a nuclear power or not, the number of nuclear charges it has will not decrease. We must proceed from modern realities, which are that nuclear weapons pose a threat to international peace and security.

Another pertinent question is where this problem stems from. The tragedies of Libya and Iraq have inspired many countries to ensure their security at all costs.

What we should be talking about is not how to make North Korea disarm, but how to ensure the unconditional security of North Korea and how to make any country, including North Korea feel safe and protected by international law that is strictly honoured by all members of the international community. This is what we should be thinking about.

We should think about guarantees, which we should use as the basis for talks with North Korea. We must be patient, respect it and, at the same time, take into account the dangers arising from this, the dangers of the nuclear status and the presence of nuclear weapons.

Of course, the current situation is fraught with unpredictable scenarios, which we must avoid.

Lionel Barber: You have obviously thought of this as an experienced foreign policy and security analyst and a strategist. How do you see the North Asia security situation over the next five to ten years, given you have Russia, you have China, you have Korea and Japan?

Vladimir Putin: You have said correctly that we have a common border, even if a short one, with North Korea, therefore, this problem has a direct bearing on us. The United States is located across the ocean, and the UK is located far away, while we are right here, in this region, and the North Korean nuclear range is not far away from our border. This why this concerns us directly, and we never stop thinking about it.

I would like to return to my answer to your previous question. We must respect North Korea’s legitimate security concerns. We must show it respect, and we must find a way of ensuring its security that will satisfy North Korea. If we do this, the situation may take a turn nobody can imagine today.

Do you remember what turn the situation took after the Soviet Union adopted the policy of détente? Do I need to say anything else?

Lionel Barber: Mr President, you have been in power or very close to power. I think in Davos I said to you when we met – you were not in power but still calling all the shots. After 20 years at the top or near the top, has your appetite for risk increased?

Vladimir Putin: It did not increase or decrease.Risk must always be well-justified. But this is not the case when one can use the popular Russian phrase: “He who doesn’t take risks, never drinks champagne.” This is not the case. Quite possibly, risks are inevitable when one has to make certain decisions. Depending on the scale of any decision, risks can be small or serious.

Any decision-making process is accompanied by risk. Before taking one’s chances, one has to meticulously assess everything. Therefore, risk based on an assessment of the situation and the possible consequences of the decisions is possible and even inevitable. Foolish risks overlooking the real situation and failing to clearly comprehend the consequences are unacceptable because they can jeopardise the interests of a great number of people.

Lionel Barber: How big was this Syria risk in terms of your decision to intervene?

Vladimir Putin: It was sufficiently high. However, of course, I thought carefully about this well in advance, and I considered all the circumstances and all the pros and cons. I considered how the situation around Russia would develop and the possible consequences. I discussed this matter with my aides and ministers, including those in charge of law enforcement agencies and other senior officials. In the long run, I decided that the positive effect from our active involvement in Syrian affairs for Russia and the interests of the Russian Federation would far outweigh non-interference and passive observation of how an international terrorist organisation grows ever stronger near our borders.

Lionel Barber: What has the return been like on the risk taken in Syria?

Vladimir Putin: I believe that it has been a good and positive return. We have accomplished even more than I had expected. First of all, many militants planning to return to Russia were eliminated. This implies several thousand people. They were planning to return to Russia or neighbouring countries with which we do not maintain any visa regime. Both aspects are equally dangerous for us. This is the first thing.

Secondly, we have managed to stabilise the situation in a nearby region, one way or another. This is also highly important. Therefore, we have directly strengthened Russia’s domestic security. This is the third thing.

Fourthly, we have established sufficiently good business-like relations with all regional countries, and our positions in the Middle East region have become more stable. Indeed, we have established very good, business-like, partner-like and largely allied relations with many regional countries, including Iran, Turkey and other countries.

Primarily, this concerns Syria, we have managed to preserve Syrian statehood, no matter what, and we have prevented Libya-style chaos there. And a worst-case scenario would spell out negative consequences for Russia.

Besides, I would like to openly speak of the mobilisation of the Russian Armed Forces. Our Armed Forces have received such practical experience that they could not have obtained during any peace-time exercises.

Lionel Barber: Are you committed to Mr al-Assad remaining in power or can we see, at some point, the transition in Syria that Russia would support, which would not be Libya?

Vladimir Putin: I believe that the Syrian people should be free to choose their own future. At the same time, I would like the actions of external players to be substantiated and, just as in the case of the risks you have mentioned, predictable and understandable, so that we can consider at least our next moves.

When we discussed this matter only recently with the previous US administration, we said, suppose Assad steps down today, what will happen tomorrow?

Your colleague did well to laugh, because the answer we got was very amusing. You cannot even imagine how funny it was. They said, “We don’t know.” But when you do not know what happens tomorrow, why shoot from the hip today? This may sound primitive, but this is how it is.

Therefore, we prefer to look at problems thoroughly from all possible angles and not to be in any hurry. Of course, we are perfectly aware of what is happening in Syria. There are internal reasons for the conflict, and they should be dealt with. But both sides should do their bit. I am referring to the conflicting parties.

Lionel Barber: Mr President, does that same argument apply to Venezuela? In other words, you are not prepared to see a transition in Venezuela and you are absolutely committed to President Maduro.

Vladimir Putin: Oh, and it seemed we had started so well. Please do not take offence to what I am going to say next. You won’t, will you? We were off to such a terrific start, talking seriously, and now you have moved back to the stereotype views on Russia.

We have no nothing to do with what is happening in Venezuela, if you know what I mean.

Lionel Barber: What are those advisors doing then in Caracas?

Vladimir Putin: I will say this now, if you just let me finish. There is no problem with that.

Back under [President] Chavez we sold weapons to Venezuela, without any limits and problems. We did this absolutely legally just as it is done all around the world and as every country does, including the United States, the UK, China and France. We did this too – we sold weapons to Venezuela.

We signed contracts, which say what we have to do when it comes to servicing this military equipment, that we must train local specialists, ensure that this equipment is maintained in combat readiness, and so on. We provide maintenance services for this equipment. I have already said this many times, including to our American partners: there are no Russian troops there. Do you understand? Yes, there are Russian specialists and instructors there. Yes, they are working there. Only recently, I believe it was a week ago, a group of our advisers and specialists left the country. But they can return.

We have an agreement that our aircraft fly there from time to time to take part in exercises. And this is it. Are we regulating the rebels’ actions as some of our partners are doing, or the actions of President Maduro? He is the president, why should we control his actions? He is in control. Whether he is doing well or not, this is another matter altogether. We do not make any judgments.

I believe that many things could have been done differently there when it comes to the economy. But we do not meddle in things; it is none of our business. We have invested billions of dollars there, mostly in the oil sector. So what? Other countries are doing the same as well.

It looks like everything is preserved only by Russian weapons. This is not true. It has nothing in common with reality. Where are the self-proclaimed presidents and opposition leaders? Some of them have taken refuge in foreign embassies and others are in hiding. What do we have to do with this? This problem should be sorted out by the Venezuelan people themselves. This is all.

Lionel Barber: I was just applying your theory and your experience of seeing what happened in Libya and Iraq to Venezuela. And therefore, logically, you would say, “We are committed to Mr Maduro because we do not want to see regime change from outside.” Is that the Russian position? Or might you be willing to say, “We will support Guaido because we have important oil interests in Venezuela”?

Vladimir Putin: We are prepared for any developments in any country, including Venezuela, if they are taking place in accordance with internal rules and the country’s legislation, its Constitution, and in line with the people’s will.

I do not think that Libyan or Iraqi statehood would have been wrecked if there had been no intervention there. It would not have happened in Libya, the situation was absolutely different there. Indeed, Gaddafi wrote his books there, set forth his theories, and so on, which did not meet specific standards, and his practical work did not meet European or American perceptions of democracy.

Incidentally, the President of France said recently that the American democratic model differs greatly from the European model. So there are no common democratic standards. And do you, well, not you, but our Western partners want a region such as Libya to have the same democratic standards as Europe and the United States? The region has only monarchies or countries with a system similar to the one that existed in Libya.

But I am sure that, as a historian, you will agree with me at heart. I do not know whether you will publicly agree with this or not, but it is impossible to impose current and viable French or Swiss democratic standards on North African residents who have never lived in conditions of French or Swiss democratic institutions. Impossible, isn’t it? And they tried to impose something like that on them. Or they tried to impose something that they had never known or even heard of. All this led to conflict and inter-tribal discord. In fact, a war continues in Libya.

So why should we do the same in Venezuela? Do we want to revert to gunboat diplomacy? What do we need it for? Is it necessary to humiliate Latin American nations so much in the modern world and impose forms of government or leaders from the outside?

By the way, we worked with President Chavez because he was president. We did not work with President Chavez as an individual, but we worked with Venezuela. That is why we channelled investments in the oil sector.

And where did we plan to deliver Venezuelan oil while investing in the oil sector? As you know, Venezuela has unique oil that is mostly delivered to US refineries. What is so bad about that? We wanted the Venezuelan oil and gas sector to operate steadily, predictably and confidently and to make deliveries to those US refineries. I do not understand what is so wrong with this.

First, they faced economic problems, followed by domestic political problems. Let them sort things out by themselves, and these leaders will come to power by democratic means. But when a person enters a square, raises his eyes to the sky and proclaims himself president? Let us do the same in Japan, the United States or Germany. What will happen? Do you understand that this will cause chaos all over the world? It is impossible to disagree with this. There will be pure chaos. How could they act like this? But no, they started supporting that person from the very outset.

He may be a very good person. He may be just wonderful, and his plans are good. But is it enough that he entered a square and proclaimed himself president? Is the entire world supposed to support him as president? We should tell him to take part in elections and win them, and then we would work with him as the state leader.

Lionel Barber: Let us talk about another democracy in Europe, my own country. You are going to have a meeting with Mrs May, which is going to be one of her last meetings before she steps down as Prime Minister. Do you think that there is a possibility of some improvement in Anglo-Russian relations and that we can move on from some of these issues that are obviously of great sensitivity, like the Skripal affair? Or do you think that we are going to stay in a deep freeze for the next three or five years?

Vladimir Putin: Listen,all this fuss about spies and counter-spies, it is not worth serious interstate relations. This spy story, as we say, it is not worth five kopecks. Or even five pounds, for that matter. And the issues concerning interstate relations, they are measured in billions and the fate of millions of people. How can we compare one with the other?

The list of accusations and allegations against one another could go on and on. They say, “You poisoned the Skripals.” Firstly, this must be proved.

Secondly, the average person listens and says, “Who are these Skripals?” And it turns out that Skripal was engaged in espionage against us [Russia]. So this person asks the next question, “Why did you spy on us using Skripal? Maybe you should not have done that?” You know, these questions are infinite. We need to just leave it alone and let security agencies deal with it.

But we know that businesses in the United Kingdom (by the way, I had a meeting with our British colleagues in this same room), they want to work with us, they are working with us and intend to continue doing so. And we support this intent.

I think that Mrs May, despite her resignation, could not help but be concerned that these spy scandals made our relations reach a deadlock so we could not develop our ties normally and support business people, who are doing what? They do not only earn money, this is what is on the outside. They create jobs and added value, plus they provide revenue at all levels of the tax system of their countries. This is a serious and multifaceted job, with the same risks you mentioned, including risks related to business operations. And if we add an unpredictable political situation, they will not be able to work at all.

I think that both Russia and the United Kingdom are interested in fully restoring our relations. At least I hope that a few preliminary steps will be made. I think it would be easier for Mrs May, maybe, because she is leaving and is free to do what she thinks is right, important and necessary and not to bother about some domestic political consequences.

Lionel Barber: Some people might say that a human life is worth more than five pennies. But do you believe, Mr President that whatever happened…

Vladimir Putin: Did anybody die?

Lionel Barber: Oh yes. The gentleman who had a drug problem and he died after touching the Novichok in the car park. I mean somebody did that because of the perfume. It was more than one person that died, not the Skripals. I am just…

Vladimir Putin: And you think this is absolutely Russia’s fault?

Lionel Barber: I did not say that. I said somebody died.

Vladimir Putin: You did not say that, but if it has nothing to do with Russia… Yes, a man died, and that is a tragedy, I agree. But what do we have to do with it?

Lionel Barber: Let me just ask this and I really want to talk about the Russian economy. Do you believe that what happened in Salisbury sent an unambiguous message to anyone who is thinking of betraying the Russian state that it is fair game?

Vladimir Putin: As a matter of fact, treason is the gravest crime possible and traitors must be punished. I am not saying that the Salisbury incident is the way to do it. Not at all. But traitors must be punished.

This gentleman, Skripal, had already been punished. He was arrested, sentenced and then served time in prison. He received his punishment. For that matter, he was off the radar. Why would anybody be interested in him? He got punished. He was detained, arrested, sentenced and then spent five years in prison. Then he was released and that was it.

As concerns treason, of course, it must be punishable. It is the most despicable crime that one can imagine.

Lionel Barber: The Russian economy. You spoke the other day about decline in the real wages in the Russian workforce and Russian growth has been less than expected. But at the same time, Mr President, you have been accumulating foreign exchange reserves and international reserves at some 460 billion. What are you saving for? What is the purpose? Can’t you use some of this money to ease up on the fiscal side?

Vladimir Putin: Let me correct a few very small details. Real wages are not in decline in Russia. On the contrary, they are starting to pick up. It is the real household disposable income that is falling.

Wages and income are two slightly different things. Income is determined by many parameters, including loan servicing costs. People in Russia take out a lot of consumer loans and interest payments are counted towards expenses, which drags down real income indicators. Also, the shadow economy is undergoing legalisation. A substantial part of self-employed people – I believe, 100,000 or 200,000, have already legalised their business. This, too, affects real incomes of the population, disposable incomes.

This tendency has persisted for the past four years. Last year we recorded a small increase of 0.1 percent. It is not enough. It is still within the margin of error. But it is one of the serious problems that we need to deal with and we are dealing with it.

Real wages started to grow recently. Last year there was an 8.5-percent increase. This year, the growth rate of real wages has significantly decreased due to a whole range of circumstances. I mean that last year we saw a recovery growth and there are some other factors involved. However, it continues. And we really expect that it will have an effect on real household disposable incomes.

Even more so because lately we have adopted a number of measures to speed up the growth of retirement pensions. Last year the inflation rate was 4.3 percent and, based on these results, in the beginning of this year pensions were adjusted for inflation by 7.05 percent. And we set ourselves a goal, a task – which, I am certain, will be achieved – to adjust pensions by a percentage that is above the inflation rate.

Now, real incomes were also affected because we had to increase VAT from 18 to 20 percent, which affected people’s purchasing power because the inflation rate exceeded 5 percent.

In other words, we expected that the negative impact of the VAT increase would be short-term, which is exactly what happened. Fortunately, it worked out and our calculations proved right. Now the inflation rate is going down, the macroeconomic situation is improving; investment is rising slightly. We can see that the economy has overcome those difficulties that were caused by internal and external shocks. The external shocks were related to restrictions and slumping prices on our traditional export products. The economy has stabilised.

The macroeconomic situation in the country is stable. It is not accidental and all rating agencies registered it. The three major agencies raised our investment rating. Economic growth last year was 2.3 percent. We do not think it was enough but we will, of course, work on speeding up the pace. The growth rate in industrial production was 2.9 percent and even higher, up to 13 percent in some industries (light industry, processing and garment industries and several others). Therefore, overall, our economy is stable.

But the most important task we need to achieve is to change the structure of the economy and secure a substantial growth of labour productivity through modern technologies, Artificial Intelligence, robotics and so on. This is exactly why we increased VAT, to raise budget funds for performing a certain part of this job that is the state’s responsibility, in order to create conditions for private investment. Let us take transport and other infrastructure development. Hardly anybody besides the state is involved in it. There are other factors related to education and healthcare. A person who has health problems or has no training cannot be efficient in the modern economy. The list goes on.

We really hope that by starting this work on key development areas, we will be able to increase labour productivity and use this basis for ensuring an increase in the incomes and prosperity of our people.

As concerns the reserves, you are not exactly correct here, either. We have over 500 billion in gold and foreign currency reserves, rather than 460 billion. But the understanding is that we need to create a safety net that would let us feel confident and use the interest on our existing resources. If we have 7 percent more, we can spend those 7 percent.

This is what we plan for the next year and there is a high probability that we will succeed. Do not think that this money is just sitting on the shelf. No, it creates certain guarantees for Russia’s economic stability in the midterm.

Lionel Barber: The Central Bank has done a very good job in helping to secure macroeconomic stability even if some of the oligarchs complain about banks being closed.

Vladimir Putin: You know, first of all, we do not have oligarchs anymore. Oligarchs are those who use their proximity to the authorities to receive super profits. We have large companies, private ones, or with government participation. But I do not know of any large companies that get preferential treatment from being close to the authorities, these are practically non-existent.

As for the Central Bank, yes, it is engaged in a gradual improvement of our financial system: inefficient and small-capacity companies, as well as semi-criminal financial organisations are leaving the market, and this is large-scale and complicated work.

It is not about oligarchs or large companies; the thing is that it affects, unfortunately, the interests of the depositor, the average person. We have relevant regulatory acts that minimise people’s financial losses and create a certain safety net for them. But each case should be considered individually, of course.

In general, the work of the Central Bank, in my opinion, deserves support. It is related to both the improvement of the financial system and the calibrated policy regarding the key interest rate.

Lionel Barber: Mr President, I would like to go back to President Xi and China. As you know, he has pursued a rigorous anticorruption campaign in order to clean up the party, maintain the legitimacy and strengthen the party. He has also read the history of the Soviet Union, where Mr Gorbachev essentially abandoned the party and helped to destroy the country – the Soviet Union. Do you think that Mr Xi is right in his approach that the party is absolutely crucial? And what lessons do you draw for Russia? If I can just add, you said something interesting a few years ago about the breakup of the Soviet Union being the greatest geopolitical tragedy of the 20th century.

Vladimir Putin: These two issues are not connected. As for the tragedy related to the dissolution of the Soviet Union, this is something obvious. I meant, first of all, the humanitarian aspect of it. It appears that 25 million ethnic Russians were living abroad when they learned from the television and radio that the Soviet Union had ceased to exist. Nobody asked their opinion. The decision was simply made.

You know, these are issues of democracy. Was there an opinion poll, a referendum? Most (over 70 percent) of the citizens of the USSR spoke in favour of retaining it. Then the decision was made to dissolve the USSR, but nobody asked the people, and 25 million ethnic Russians found themselves living outside the Russian Federation. Listen, is this not a tragedy? A huge one! And family relations? Jobs? Travel? It was nothing but a disaster.

I was surprised to see the later comments on what I said, in particular, in the Western media. They should try to live through seeing their father, brother or any other close relative finding themselves living in a different country, where a whole new life has started. I assure you.

As for the party and the party state building in China, this is for the Chinese people to decide; we do not interfere. Today’s Russia has its own principles and rules of life, and China with its 1.35 billion people has its own. You try to rule a country with such a population. This is not Luxembourg, with all due respect to this wonderful country. Therefore, it is necessary to give the Chinese people the opportunity to decide how to organise their lives.

Lionel Barber: Again a big picture question. I talked at the beginning of our conversation about fragmentation. Another phenomenon today is that there is a popular backlash against elites and against the establishment and you have seen that – Brexit in Britain. Perhaps you were speaking about Trump’s America. You have seen it with the AFD in Germany; you have seen it in Turkey; and you have seen it in the Arab world. How long do you think that Russia can remain immune to this global movement of backlash against the establishment?

Vladimir Putin: You should look at the realities in each particular case. Of course, there are some trends, but they are only general. In each particular case, when looking at the situation and how it unfolds, you should take into account the history of the given country, its traditions and realities.

How long will Russia remain a stable country? The longer the better. Because very many other things and its position in the world depend on stability, on internal political stability. Ultimately, the wellbeing of the people depends, possibly primarily, on stability.

One of the reasons, the internal reason for the Soviet Union’s collapse was that life was difficult for the people, whose take-home wages were very small. The shops were empty, and the people lost the intrinsic desire to preserve the state.

They thought that it could not get worse no matter what happened. It turned out that life became worse for very many people, especially at the beginning of the 1990s when the social protection and healthcare systems collapsed and industry was crumbling. It could be ineffective, but at least people had jobs. After the collapse, they lost them. Therefore, you should look at each particular case separately.

What is happening in the West? What is the reason for the Trump phenomenon, as you said, in the United States? What is happening in Europe as well? The ruling elites have broken away from the people. The obvious problem is the gap between the interests of the elites and the overwhelming majority of the people.

Of course, we must always bear this in mind. One of the things we must do in Russia is never to forget that the purpose of the operation and existence of any government is to create a stable, normal, safe and predictable life for the people and to work towards a better future.

There is also the so-called liberal idea, which has outlived its purpose. Our Western partners have admitted that some elements of the liberal idea, such as multiculturalism, are no longer tenable.

When the migration problem came to a head, many people admitted that the policy of multiculturalism is not effective and that the interests of the core population should be considered. Although those who have run into difficulties because of political problems in their home countries need our assistance as well. That is great, but what about the interests of their own population when the number of migrants heading to Western Europe is not just a handful of people but thousands or hundreds of thousands?

Lionel Barber: Did Angela Merkel make a mistake?

Vladimir Putin: Cardinal mistake. One can criticise Trump for his intention to build a wall between Mexico and the United States. It could be going too far. Yes, maybe so. I am not arguing about this point. But he had to do something about the huge inflow of migrants and narcotics.

Nobody is doing anything. They say this is bad and that is bad as well. Tell me, what is good then? What should be done? Nobody has proposed anything. I do not mean that a wall must be built or tariffs raised by 5 percent annually in the economic relations with Mexico. This is not what I am saying, yet something must be done. He is at least looking for a solution.

What am I driving at? Those who are concerned about this, ordinary Americans, they look at this and say, Good for him, at least he is doing something, suggesting ideas and looking for a solution.

As for the liberal idea, its proponents are not doing anything. They say that all is well, that everything is as it should be. But is it? They are sitting in their cosy offices, while those who are facing the problem every day in Texas or Florida are not happy, they will soon have problems of their own. Does anyone think about them?

The same is happening in Europe. I discussed this with many of my colleagues, but nobody has the answer. The say they cannot pursue a hard-line policy for various reasons. Why exactly? Just because. We have the law, they say. Well, then change the law!

We have quite a few problems of our own in this sphere as well. We have open borders with the former Soviet republics, but their people at least speak Russian. Do you see what I mean? And besides, we in Russia have taken steps to streamline the situation in this sphere. We are now working in the countries from which the migrants come, teaching Russian at their schools, and we are also working with them here. We have toughened the legislation to show that migrants must respect the laws, customs and culture of the country.

In other words, the situation is not simple in Russia either, but we have started working to improve it. Whereas the liberal idea presupposes that nothing needs to be done. The migrants can kill, plunder and rape with impunity because their rights as migrants must be protected. What rights are these? Every crime must have its punishment.

So, the liberal idea has become obsolete. It has come into conflict with the interests of the overwhelming majority of the population. Or take the traditional values. I am not trying to insult anyone, because we have been condemned for our alleged homophobia as it is. But we have no problems with LGBT persons. God forbid, let them live as they wish. But some things do appear excessive to us.

They claim now that children can play five or six gender roles. I cannot even say exactly what genders these are, I have no notion. Let everyone be happy, we have no problem with that. But this must not be allowed to overshadow the culture, traditions and traditional family values of millions of people making up the core population.

Lionel Barber: Does that include – this is very important, like you say – the end of this liberal idea, because – what else did you say – uncontrolled immigration, open borders, definitely, as you say, diversity as an organizing principle in society? What else do you think is just finished over in terms of the liberal idea? And would you say – if I could just add – that religion therefore must play an important role in terms of national culture and cohesiveness?

Vladimir Putin: It should play its current role.It [religion] cannot be pushed out of this cultural space. We should not abuse anything.

Russia is an Orthodox Christian nation, and there have always been problems between Orthodox Christianity and the Catholic world. This is exactly why I will now say a few words about Catholics. Are there any problems there? Yes, there are, but they cannot be over-exaggerated and used for destroying the Roman Catholic Church itself. This is what cannot be done.

Sometimes, I get the feeling that these liberal circles are beginning to use certain elements and problems of the Catholic Church as a tool for destroying the Church itself. This is what I consider to be incorrect and dangerous.

All right, have we forgotten that all of us live in a world based on Biblical values? Even atheists and everyone else live in this world. We do not have to think about this every day, attend church and pray, thereby showing that we are devout Christians or Muslims or Jews. However, deep inside, there must be some fundamental human rules and moral values. In this sense, traditional values are more stable and more important for millions of people than this liberal idea, which, in my opinion, is really ceasing to exist.

Lionel Barber: So religion, religion is not the opium of the masses?

Vladimir Putin: No, it is not. But I get the impression that you are detached from religion because it is already 12.45 am Moscow Time, and you continue to torture me. As we say here, there is no fear of God in you, is there? (Laughter)

Lionel Barber: This is history. I have waited a long time for this. I have got one last question. And thank you for your – go on please.

Vladimir Putin: Please, go ahead.

Henry Foy: Mr President, would you say – I was reflecting on what you just said: some of the themes you were referring to would echo in people such as Steve Bannon, and Mr Trump himself, and the groups in Europe who have come to power. Do you think if the end of the liberal idea is over, is now the time of the ‘illiberals’? And do you see more and more allies growing around the world to your way of seeing the human existence at the moment?

Vladimir Putin: You know, it seems to me that purely liberal or purely traditional ideas have never existed. Probably, they did once exist in the history of humankind, but everything very quickly ends in a deadlock if there is no diversity. Everything starts to become extreme one way or another.

Various ideas and various opinions should have a chance to exist and manifest themselves, but at the same time interests of the general public, those millions of people and their lives, should never be forgotten. This is something that should not be overlooked.

Then, it seems to me, we would be able to avoid major political upheavals and troubles. This applies to the liberal idea as well. It does not mean (I think, this is ceasing to be a dominating factor) that it must be immediately destroyed. This point of view, this position should also be treated with respect.

They cannot simply dictate anything to anyone just like they have been attempting to do over the recent decades. Diktat can be seen everywhere: both in the media and in real life. It is deemed unbecoming even to mention some topics. But why?

For this reason, I am not a fan of quickly shutting, tying, closing, disbanding everything, arresting everybody or dispersing everybody. Of course, not. The liberal idea cannot be destroyed either; it has the right to exist and it should even be supported in some things. But you should not think that it has the right to be the absolute dominating factor. That is the point.

Please.

Lionel Barber: You really are on the same page as Donald Trump. Mr President, you have been in power for almost 20 years.

Vladimir Putin: For eighteen years.

Lionel Barber: You have seen many world leaders. Who do you most admire?

Vladimir Putin: Peter the Great.

Lionel Barber: But he is dead.

Vladimir Putin: He will live as long as his cause is alive just as the cause of each of us. (Laughter). We will live until our cause is alive.

If you mean any present-day leaders from different countries and states, of the persons that I could communicate with, I was most seriously impressed by former President of France Mr Chirac. He is a true intellectual, a real professor, a very level-headed man as well as very interesting. When he was President, he had his own opinion on every issue, he knew how to defend it and he always respected his partners’ opinions.

In modern-day history, taking a broader view, there are many good and very interesting people.

Lionel Barber: Peter the Great, the creator of the Greater Russia. Need I say any more? My last question, Mr President. Great leaders always prepare succession. Lee Kuan Yew prepared succession. So please share with us what would the process be by which your successor will be chosen.

Vladimir Putin: I can tell you without exaggeration that I have always been thinking about this, since 2000. The situation changes and certain demands on people change, too. In the end, and I will say this without theatrics or exaggeration, in the end the decision must be made by the people of Russia. No matter what and how the current leader does, no matter who or how he represents, it is the voter that has the final word, the citizen of the Russian Federation.

Lionel Barber: So the choice will be approved by the Russian people in a vote? Or through the Duma?

Vladimir Putin: Why through the Duma? By means of direct secret ballot, universal direct secret ballot. Of course, it is different from what you have in Great Britain. We are a democratic country. (Laughter)

In your country, one leader has left, and the second leader, who is for all intents and purposes the top figure in the state, is not elected by a direct vote of the people, but by the ruling party.

It is different in Russia, as we are a democratic country. If our top officials leave for some reason, because they want to retire from politics like Boris Yeltsin, or because their term ends, we hold an election through universal direct secret ballot.

The same will happen in this case. Of course, the current leader always supports someone, and this support can be substantive if the person supported has the respect and trust of the people, but in the end, the choice is always made by the Russian people.

Lionel Barber: I cannot resist pointing out that you did take over as president before the election.

Vladimir Putin: Yes, this is true. So what? I was acting president, and in order to be elected and become the head of state, I had to take part in an election, which I did.

I am grateful to the Russian people for their trust back then, and after that, in the following elections. It is a great honour to be the leader of Russia.

Lionel Barber: Mr President, thank you for spending time with the Financial Times in Moscow, in the Kremlin.

Vladimir Putin: Thank you for your interest in the events in Russia and your interest in what Russia thinks about the current international affairs. And thank you for our interesting conversation today. I believe it was really interesting.

Thank you very much.

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