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.

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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.

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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.

$0 in Iran oil sales? Anything to stop Muslim democracy… but they won’t stop it

April 27, 2019

by Ramin Mazaheri for The Saker Blog

If 7,000 Greeks can stop the Persian empire at the narrow pass at Thermopylae, I think it’s absurd to think Iran can’t stop 20-30% of global oil traffic at the 3 kilometer-wide shipping lane in the Strait of Hormuz. That would, of course provoke a global crisis and economic disaster.

That’s the “nuclear option” for Iran. It is reportedly part of a military plan called “Ghadir”, which evokes the alpha letter of modern Iranian Islamic history – Ghadir Khumm is the location where Prophet Mohammad anointed Imam Ali his successor, but (those who came to be called) Sunnis amazingly rejected the Prophet’s wishes. Shia – which means “partisans of Ali” – did not.

The US has severely overestimated their military capability to defend this attempt to politicise oil and get Iranian oil exports to zero. Mining the strait, mini-subs, kamikaze speedboats – all of these will be hugely effective against anything the US Navy has. For all the US drones and satellites and aircraft carriers, there is no way they can protect the Straits of Hormuz long-term, not any more than they could hold any of a thousand Afghan mountain passes long-term. Should we trust history or the sales pitches of corrupt Pentagon contractors?

No military can stop endless kamikazes. But who wants to be a kamikaze? What could produce the desire to be a kamikaze?

$0 in oil sales may do it.

There is undoubtedly a part of the Iranian psyche which now wants a final showdown. The years of talking, talking, talking about the JCPOA pact on Iran’s nuclear energy program… and then its failure, thanks to US unilateralism and spineless European hypocrisy, has created a lot of existential angst for Iranians. How can Iranian diplomacy work when the opponents refuse diplomacy and honor?

That is an existential and philosophical question, but there is also a lot of undeniable frustration since the inhumanly effective 2012 Triple Sanctions (US, UN, EU). Iranian society has been forced to become perceptibly more desperate, more coarse, less warm, less Iranian – it is difficult to admit this.

Iran cannot be forced into starvation indefinitely. That is why blocking the Strait of Hormuz – if it ever happens – will certainly be accompanied with an ultimatum: the West must end Iran’s isolation and finally accept the Iranian Islamic Revolution of 1979. The world must live with us, finally, because it cannot live without us in the 21st century.

Unfortunately, due to Islamophobia, even more so than 40 years of media-led Iranophobia, nobody in the West is going to burn a draft card for Iran. The opposition to the obviously immoral war on Iraq produced just a day of street protests in the US – hardly worth the effort. Neither is Iran in the position of the USSR, meaning it has no chance to save the West from racist fascists – after all, the West supports the racist fascists (Taliban in the 1980s, ISIL today, et al).

Because nobody in the West will put any pressure on the governments to stop the oppression of Iran, perhaps Iran has to force the issue by closing the Strait of Hormuz? Is Iran backed into a corner?

I say no, because Iran is not going to sell $0 in oil in month of May.

Firstly, should Iran be worried? Answer: no. The world needs Iranian oil (and revolutionary culture)

When is the last time the US policy worked out in the Middle East? Afghanistan, Iraq, Syria, Yemen – all have had their growth retarded, but are not destroyed… just like Iran.

As Pepe Escobar pointed out, it’s much easier to retard the Colombian dream of Eurasian integration by attacking its weakest major point – Iran, as opposed to China and Russia.

The bottom line is: can the US do what it claims – reduce Iranian oil sales to $0. No, they cannot.

It certainly seems like the US is foolishly believing self-aggrandising and duplicitous claims from Gulf princes, who are overestimating their oil production abilities.

However, we must first remember that Saudi hatred for Iran is not based on religion – even though “Saudis are not Muslims – they are Wahhabis,” as the regional saying goes – it is based on politics: they hate Iran for proving that all monarchies are immoral, ineffective, undemocratic and a hindrance to the type of democracy Muslims want (Islamic socialist). Their animosity is based on Iran’s ability to make Muslims aware of their modern Islamic socialist rights, and to show how acquiring these rights does not – as the West insists – require the exclusion of their culture, history and religion. Iran, in the manner of all true revolutionaries, insists on constantly couching it in these drastic but honest terms, thus continually flouting their rebellion and their success in the face of the horrific Gulf monarchs.

But the Gulf monarchs, shockingly, are liars: They will NOT be able to give China and India enough replacement oil.

Saudi production peaked at 11 million bpd (barrels per day) last November, which was the system’s maximum stress level, but is now down below 10 million. Offsetting Iranian production – getting up to at least 12 million bpd – thus seems impossible: “A 2-million-bpd Saudi production increase would move the Kingdom’s oil production into unchartered territory and would wipe out completely the kingdom’s spare capacity,” according to Gary Ross, head of global oil analytics at S&P global, via Reuters.

Anyway, Saudi Arabia is not going to increase oil production in May despite the sanctions – they want higher prices to continue bankrupting shale oil / fracking. Because the Saudi state full of disorganised and egotistical princes, they are also full of conflicting agendas.

As far as the UAE, they produce only 3 million bpd, so they aren’t capable of tipping the output scales drastically.

Furthermore, OPEC is at its lowest production since 2015, and Venezuela and Libya show no signs of regaining former glories anytime soon. Even if slow increases from the Saudis and UAE arrive, there are other drains on oil inventories to offset even before cutting off Iran.

So why should Iran feel like we aren’t needed anymore?

Only an administration as filled with incompetents as the Trump administration is could take such lies and mixed signals seriously. But the US is about Israel first, corporations second and everyone else last, therefore any attempt to foment regional stability and higher oil prices makes their constituents happy. Of course, it also advances capitalism-imperialism.

Iran – still no retreat, no surrender… still no big deal

Even just moderately-intelligent Westerners know that “Iran sanctions aren’t a realistic path to peace”, because the sanctions are not designed for peace, but for fomenting internal civil war and to support regional US imperialism.

There is another way Iran could decisively end Western antagonism: simply accede to Western demands, as encapsulated by US Secretary of State Mike Pompeo’s totally-absurd 12 demands. All Iran has to do is – just like the North Vietnamese, North Koreans, Cubans and Chinese – is renounce their revolution entirely, like Egypt, post-Sankara Burkina Faso and now, to a lesser extent, Julian Assange-betraying Ecuador.

I examined what steps Iran would have to actually take in order to get the Cold War called off in this article, Iran detente after Trump’s JCPOA pull out? We can wait 2 more years, or 6, or…., which caps my upcoming book on Iran.

Beyond Pompeo’s fatheaded nonsense, it all comes down solely to capitalist-imperialist logic: Iran must sell off a controlling chunk of the nation into Western hands. There is no way Iran will do that – there are just too many people who are too committed to upholding the 1979 Revolution, the Constitution and Iranian sovereignty.

It’s not as if Iran’s politicians are as out-of-touch, arrogant and stupid as a Persian Gulf prince: the current budget is based on only exporting just 1.5 billion barrels per day with a price of only $54 per barrel (or $83 million per day) because we all knew back in early 2016 that a Trump presidency would hit Iran, Cuba and Palestine the hardest. The price is already around $70. If we assume that things really progress badly, we must also assume the price of oil will rise – a price of $80 means Iran needs to sell just 1 million barrels per day ($80 million per day) to stay under budget. Last month, with some countries already instituting cutbacks, Iran sold 1 million barrels.

The reality is that it is all about China and India for Iran – they sell 3 times more oil to them than even Iran’s #3 customer. Reports are conflicting, negotiations are ongoing – we can’t truly say with 100% confidence what will happen in Beijing and New Delhi.

But… India is the more compliant nation, and they are reportedly going to reduce sales to 100,000 bpd using a rupee payment system. The links are going to remain open, and that is all that matters – the numbers will certainly be fudged. Long-term, Iran is quite happy to sell oil in non-dollar denominations and be the pioneer in that move away from the petrodollar.

Regarding China: Some reports say China will actually increase imports from Iran up to 1 million bpd, totally sabotaging the US. I would hold out absolute certainty until the US and China signs their trade deal next month. However, I highly doubt China is going to sabotage the key node – and the absolutely key energy node – in their Belt and Road Project. China might sell out Iran for a couple years, perhaps during the Trump administration, but long-term? No way. China is not an island, and Iran is the only country which has proven to be revolutionary enough for Red China to trust, which is why they have such serious multi-decade plans already signed. Hard to predict the future, but there’s always both short- and long-term considerations, and long-term China and Iran are united, firmly.

Beyond the two big customers, Turkey says they will flout sanctions, but Turkey also talks a much better game than they punch.

Regardless, Iran will still sell oil “illegally”. Iran, as Foreign Minister Javad Zarif recently joked, has a “PhD in that area” of sanctions-busting. Iran was the first modern nation to barter oil for something other than US dollars, and they will be the first nation (I predict) to successfully implement a national crypto-currency.

Iran will obviously send oil to places like Turkey (and India, as Iraq is a top-3 supplier for them) through friendly Iraq. Will Iran lose some profit as a result? Yes, but it’s not like Iranian oil is going to be sold for pennies on the dollar to Iraqis – we are talking minor losses of 10-20%, I’d guess. Over decades that’s significant, but if we are talking about enduring 2 or 6 years more of Trump, then it’s certainly not enough to bankrupt Iran, which is the goal of the illegal US tactic. Crucially, it is certainly fair to assume that now-higher oil costs will offset this new surcharge for sanctions-busting via Iraq.

Regarding bankruptcy: It’s hard to say exactly how much hard currency reserves Iran has, but the IMF said $100 billion in 2017. What reduced oil sales really means – again, $0 won’t happen – is a cutback in new projects.

What does that mean? It means cutting out future infrastructure projects, as well as savings into the National Development Fund. Just as Cuba prioritises their far, far fewer pesos for health, education and food, so will Iran – neither country will starve, neither country will relent… and Iran will still make billions selling oil, unlike Cuba. The years of worsened sanctions has meant things like: Iran have to postpone record breaking projects, like Niayesh Tunnel, the 2nd-largest urban tunnel in the world, finished in 2013, or the Sadr double-decker Expressway, also finished in 2013… but only for a few years. It has meant things like: Iran will get all the global infrastructure in place and start broadcasting PTV Français, and even tap yours truly as its Paris correspondant, but a lack of money means that all the journalism is done solely in Tehran for now. But someday I’ll be reporting in French, Inshallah.

Of course, sanctions do more than retard Iranian growth – the existential angst leads to unnecessary inflation, reluctance for private domestic investment in the “real economy”, and major cutbacks in quality of life for the average Iranian. But, as I’ll point out later – Iran is not Yemen, which is what the US mistakenly thinks they can achieve.

People on the left and the right in Iran actually welcome each new tough sanction with a Persian carpet rollout – it necessarily fuels the “Resistance Economy” championed by Leader Ali Khamenei and others. There is no doubt that a sanctioned people do not just throw up their arms and quit – domestic capacities, initiatives and genius must be honed and further created. In 1995 Iran produced almost no cars – by 2010 they were 14th in the world and the undisputed Middle East leader. These are the types of things I am talking about, but which are not possible without socialist-inspired central planning and central control over industries.

Iran also has recent experience instituting a true War Economy, with rations and coupons to enforce economic egalitarianism, and that is another counterpunch to the US. It also creates countless future economic and cultural benefits.

The Iranian government are not Yemeni rebels, who have no factories, no bureaucracy, no refineries – and thus they are starving, sadly. The Iranian government is the stable status quo, and the status quo always has a million levers to pull before things get hairy… but because they are socialist-inspired, Iran’s government has three million levers. As I have repeatedly demonstrated over the years, the Iranian government controls essentially 100% of the non-Black Market and non-carpet economy. So, far beyond oil, the government actually has the power to completely mobilise the economy in favor of the People, which is something that Eurozone nations no longer have.

The end for US unipolar dominance will arrive swiftly. Iran’s reversal of isolation will also be swift, just as – all of a sudden – the US made detente with China in 1971 after decades of the same sanctions and exclusion Iran deals with. But detente certainly cannot happen during Trump’s first term, given how the US Deep State has so effectively mobilised against him to neuter his once-diplomatic foreign policy plans.

There is no long-term game plan for ending the phobia of Islamic democracy – in 2019, only Iran’s continued determination and success is the answer. Giving up in order to sell oil “legally” is not an answer, nor necessary. Iran has domestic levers to pull for years, and the experience to pull the right ones.

Maybe someday Iran will finally strike back and play their “now the talk really starts” exterior lever – closing the Straits of Hormuz? Iran is all about “neither East nor West but the Iranian Republic”, but I still don’t think that will happen until China feels secure enough to give the signal that they back Iran to the hilt, and that won’t come until the Belt and Road Initiative is further along.

As far as “more sanctions” – certainly disagreeable, but never terminal for Iran.

Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of I’ll Ruin Everything You Are: Ending Western Propaganda on Red China. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.

Moscow’s Strategy: To Win Everywhere, Every Time

Moscow’s Strategy: To Win Everywhere, Every Time

Moscow’s Strategy: To Win Everywhere, Every Time

Important events have occurred in the Middle East and North Africa in recent weeks that underline how the overall political reconfiguration of the region is in full swing. The Shia axis (Axis of Resistance) continues its diplomatic relations and, following Rouhani’s meeting in Baghdad, it was the turn of Adil Abdul-Mahdi to be received in Tehran by the highest government and religious authorities. Among the many statements released, two in particular reveal the high level of cooperation between the two countries, as well as demonstrating how the Shia axis (Axis of Resistance) is in full bloom, carrying significant prospects for the region. Abdul-Mahdi also reiterated that Iraq will not allow itself to be used as a platform from which to attack Iran:

“Iraqi soil will not be allowed to be used by foreign troops to launch any attacks against Iran. The plan is to export electricity and gas for other countries in the region.”

Considering that these two countries were mortal enemies during Saddam Hussein’s time, their rapprochement is quite a (geo)political miracle, owing much of its success to Russia’s involvement in the region. The 4+1 coalition (Russia, Iran, Iraq, Syria plus Hezbollah) and the anti-terrorism center in Baghdad came about as a result of Russia’s desire to coordinate all the allied parties in a single front. Russia’s military support of Syria, Iraq and Hezbollah (together with China’s economic support) has allowed Iran to begin to transform the region such that the Shia axis (Axis of Resistance) can effectively counteract the destabilizing chaos unleashed by the trio of the US, Saudi Arabia and Israel.

One of the gaps to be filled in the Shia axis (Axis of Resistance) lies in Lebanon, which has long experienced an internal conflict between the many religious and political currents in the country. The decision by Washington to recognize the Golan Heights as part of Israel pushed the Lebanese president, Michel Aoun, to make an important symbolic visit to Moscow to meet with President Putin.

Once again, the destabilizing efforts of the Saudis, Israelis and Americans are having the unintended effect of strengthening the Shia axis (Axis of Resistance). It seems that this trio fails to understood how such acts as murdering Khashoggi, using civilian planes to hide behind in order to conduct bombing runs in Syria, recognizing the occupied territories like the Golan Heights – how these produce the opposite effects to the ones desired.

The supply of S-300 systems to Syria after the downing of the Russian reconnaissance plane took place as a result of Tel Aviv failing to think ahead and anticipate how Russia may respond.

What is surprising in Moscow’s actions is the versatility of its diplomacy, from the deployment of the S-300s in Syria, or the bombers in Iran, to the prompt meetings with Netanyahu in Moscow and Mohammad bin Salman at the G20. The ability of the Russian Federation to mediate and be present in almost every conflict on the globe restores to the country the international stature that is indispensable in counterbalancing the belligerence of the United States.

The main feature of Moscow’s approach is to find areas of common interest with its interlocutor and to favor the creation of trade or knowledge exchange. Another military and economic example can be found in a third axis; not the Shia or Saudi-Israeli-US one but the Turkish-Qatari one. In Syria, Erdogan started from positions that were exactly opposite to those of Putin and Assad. But with decisive military action and skilled diplomacy, the creation of the Astana format between Iran, Turkey and Russia made Turkey and Qatar publicly take the defense of Islamist takfiris and criminals in Idlib. Qatar for its part has a two-way connection with Turkey, but it is also in open conflict with the Saudi-Israeli axis, with the prospect of abandoning OPEC within a few weeks. This situation has allowed Moscow to open a series of negotiations with Doha on the topic of LNG, with these two players controlling most of the LNG on the planet. It is evident that also the Turkish-Qatari axis is strongly conditioned by Moscow and by the potential military agreements between Turkey and Russia (sale of S-400) and economic and energy agreements between Moscow and Doha.

America’s actions in the region risks combining the Qatari-Turkish front with the Shia axis (Axis of Resistance) , again thanks to Moscow’s skilful diplomatic work. The recent sale of nuclear technology to Saudi Arabia, together with the withdrawal from the JCPOA (the Iranian nuclear agreement), has created concern and bewilderment in the region and among Washington’s allies. The act of recognizing the occupied Golan Heights as belonging to Israel has brought together the Arab world as few events have done in recent times. Added to this, Trump’s open complaints about OPEC’s high pricing of oil has forced Riyadh to start wondering out aloud whether to start selling oil in a currency other than the dollar. This rumination was quickly denied, but it had already been aired. Such a decision would have grave implications for the petrodollar and most of the financial and economic power of the United States.

If the Shia axis (Axis of Resistance), with Russian protection, is strengthened throughout the Middle East, the Saudi-Israel-American triad loses momentum and falls apart, as seen in Libya, with Haftar now one step closer in unifying the country thanks to the support of Saudi Arabia, the United Arab Emirates, France and Russia, with Fayez al-Sarraj now abandoned by the Italians and Americans awaiting his final defeat.

While the globe continues its multipolar transformation, the delicate balancing role played by Russia in the Middle East and North Africa is emphasized. The Venezuelan foreign minister’s recent visit to Syria shows how the front opposed to US imperialist bullying is not confined to the Middle East, with countries in direct or indirect conflict with Washington gathering together under the same protective Sino-Russian umbrella.

Trump’s “America First” policy, coupled with the conviction of American exceptionalism, is driving international relations towards two poles rather than multipolar ones, pushing China, Russia and all other countries opposed to the US to unite in order to collectively resist US diktats.

India Stops Buying Venezuelan Oil At US ZOG’s Request, Proving Its Status As An ‘Israeli’-American Vassal Yet Again

 

by Jonathan Azaziah

Search for “India” on Mouqawamah Music or Mask of Zion, read just a piece or two, and it won’t take you long to figure out just how much of a devil-regime Hindustan truly is. Especially with the likes of the Hindutvadi BJP and Narendra “Butcher of Gujarat” Modi at the helm. From its aggression against Pakistan to its ruthless occupation and oppression of Kashmir, its always-deepening relationship with the usurping Jewish entity to its brutal war on the Naxalites, all India does is prostitute itself in the name of Global Zionism. Considering this, that there are so many Indian leftists and “anti-imperialists” who think their nation is “resistant” or even “nonaligned”, is mind-boggling. India is an American-‘Israeli’ vassal and true-indeed, it has always been one. And its decisions vis-a-vis Venezuela over the last several weeks drive this point so far and so hard home, that any attempt to deny it in the slightest should lead to one being checked into the funny-farm.

On March 10th, Elliot Abrams, the leader of the coup in Venezuela, told Reuters in an interview that he is “arguing, cajoling, urging” India to cut off ties with the democratically elected, wholly legitimate Maduro government. He told New Delhi outright, “We say you should not be helping this regime. You should be on the side of the Venezuelan people.” As Reuters notes in its piece, “The Indian market is crucial for Venezuela’s economy because it has historically been the second-largest cash-paying customer for the OPEC country’s crude.” Second behind whom you ask? Only the American ZOG. Which means if Venezuela doesn’t have access to the Indian market, total financial collapse very well may be right around the corner.

Just about 48 hours later on March 12th, Bolton and Pompeo joined the threats-party and the Hindu supremacist regime decided to start abiding by Abrams’ orders, issuing warnings against Indian oil companies to stop importing Venezuelan crude. These firms would face “undisclosed consequences” if they didn’t listen to the Modi ZOG.

Information in the media, both in the West and South Asia, was scant over the next 10 days. But then, on March 22nd, the big news came in from Oil Price, the world’s top energy news website: India and all Venezuelan-connected Indian private energy outfits were no longer taking in Venezuelan petrol.

And for the big finish, just about a week following the revelation, Elliot Abrams was back in the news, grinning ear to ear and declaring, “We are very happy to see” the “very considerable amount of cooperation” from India and Indian companies with relation to Venezuela. The Jewish supremacist war criminal was all but in an orgasmic state.

New Delhi has sold Caracas down the river. It cannot be read any other way. And noting just how much money was at stake at this critical juncture for the Venezuelan people, government and economy–tens of billions of dollars at least, perhaps upwards of $100 billion plus–we can rightly say that India is now a party to the US-EU-Zionist war on the Bolivarian Revolution. Just as India is a party to the economic war on Iran. Indeed, India can’t and won’t buy oil from the Islamic Revolution unless it gets a go-ahead from Washington.Thus, if, or better still, WHEN the American ZOG tells Hindutva to break ties with the Iranian nation completely, Modi and the rest of his BJP-RSS-VHP gang most certainly will.

Prior to closing, it must be noted that while India was allowing itself to be commanded like a show-dog is commanded by its trainer, its representatives were laying a heaping dose of praise upon the fake Jewish “state” at the AIPAC conference and inaugurating Indian-‘Israeli’ initiatives in the fields of medicine and artificial intelligence. Obeying the American wing of the Rothschild Imperium on the one hand and increasing friendship with the ‘Israeli’ crown of the Rothschild Imperium on the other. This is India. Now Venezuela, a long-time target of the Hindutvadis’ Zionist partner-in-crime, feels the betrayal that Kashmiris, Dalits, Indian Muslims, Indian Christians, Indian Sikhs, the Naxalites, Pakistanis, Palestinians, Nepalese, Sri Lankans, Bangladeshis and others have been reeling from for decades. Shameful isn’t even the word. To be honest though… What else is to really be expected from a bunch of fanatics who drink cow urine and hold festivals centered around the throwing of cow dung? Absolutely despicable.

Why Would the US Want Venezuela’s Oil When It Already Buys 41% of Its Total Exports?

January 26, 2019

The prevailing Alt-Media narrative that Washington wants to impose a pro-US puppet regime on Venezuela in order to control all of the country’s oil doesn’t make much sense when considering that it already buys 41% of the Bolivarian Republic’s total exports, meaning that another more nuanced explanation needs to be offered in order to account for this narrative double-think.

The Alt-Media Community is full of commentary about how the US wants to impose a puppet regime on Venezuela in order to control the country’s oil, but that doesn’t make much sense because it already buys 41% of the Bolivarian Republic’s total exports as evidenced by the Energy Information Agency’s executive summary of the energy trade between the two as of 7 January, 2019. The US is Venezuela’s top customer whereas Venezuela is the US’ third-largest supplier of crude oil imports according to the report, so Washington is already getting all that it needs from Caracas as it is. Given this ironic dynamic between the two geopolitical and ideological foes, it could be expected that the US would also obtain access to the resources of the world’s largest oil reserves in the Orinoco Belt one day too, once again contradicting the simplistic narrative that Washington is only waging this Hybrid War for the oil.

Nevertheless, the truth of the matter is that control over Venezuela’s oil is indeed one of the motivations behind this conflict, though not in the way that it’s being portrayed. Alongside ensuring full geopolitical control over the Caribbean Basin and ideologically confronting socialism, the US wants to obtain predominant influence over Venezuela in order to incorporate it into a parallel OPEC-like structure for challenging the joint Russian-Saudi OPEC+ arrangement per the author’s late-2016 prediction about the formation of a “North American-South American Petroleum Exporting Countries” (NASAPEC) cartel. This entity would function as “Fortress America’s” energy component and have the potential to exert powerful long-term pressure on the international oil market at Russia and Saudi Arabia’s expense. When coupled with the US and Qatar’s joint LNG investment plans, it’s clear to see that the US is making a global power play for control over the world’s energy industry, which could very adversely affect Russia.

The multipolar Eurasian Great Power relies on its energy exports to advance its financial and geopolitical interests, though that might be more difficult to do despite its oil and gas partnerships with Saudi Arabia and Iran respectively (which are part of the country’s “balancing” strategy) in the event that the US’ Western Hemispheric-wide NASAPEC and its LNG alliance with Qatar are able to potently compete with it across this domain. The potential risk is that Russia could stand to lose out on a lot of long-term revenue if the US is able to manipulatively keep oil and gas prices low, which could combine with the increased costs associated with the New Arms Race brought about by Washington’s withdrawal from the INF Treaty to put immense pressure on Moscow to “compromise” with its chief geopolitical rival per the stratagem described by the author in his April 2018 piece about “What The US Really Wants From Russia”.

President Putin’s ultimate legacy rests on his ability to deliver on the many socio-economic promises that he made to his compatriots during his re-election campaign last year, though these were all predicated on the assumption that the future oil and LNG markets would remain stable and largely under Russia’s controlling influence, as well as the expectation that the country’s hypersonic missile advancements could deter the onset of a costly New Arms Race. The US’ aforementioned energy and military moves shattered those presumptions and could throw the Russian leader’s carefully crafted plans to improve the overall livelihood of all of his countrymen (especially the majority of the population that lives outside of its most developed cities of Moscow and St. Petersburg) into jeopardy, though right now this worst-case scenario is still far from certain pending the outcome of the Venezuelan Crisis, thus explaining why Russia is so eager to “mediate” between the government and “opposition”.

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This article was originally published on Eurasia Future.

Andrew Korybko is an American Moscow-based political analyst specializing in the relationship between the US strategy in Afro-Eurasia, China’s One Belt One Road global vision of New Silk Road connectivity, and Hybrid Warfare. He is a frequent contributor to Global Research.

The Untouchable US-Saudi Relation Is a Core Element of US Imperialism

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By Frederico Pierccini
Source

Nixon’s decision in 1971 to withdraw the United States from the gold standard greatly influenced the future direction of humanity. The US dollar rose in importance from the mid-1950s to become the world reserve currency as a result of the need for countries to use the dollar in trade. One of the most consumed commodities in the world is oil, and as is well known, the price is set by OPEC in US dollars, with this organization being strongly influenced by Saudi Arabia.

It is therefore towards Riyadh that we must look in order to understand the workings of the petrodollar. After the dollar was withdrawn from the gold standard, Washington made an arrangement with Riyadh to price oil solely in dollars. In return, the Saudis received protection and were granted a free hand in the region. This decision forced the rest of the world to hold a high amount of US dollars in their currency reserves, requiring the purchase of US treasuries. The relationship between the US dollar and oil breathed new life to this currency, placing it at the centre of the global financial and economic system. This privileged role enjoyed by the dollar allowed the United States to finance its economy through the simple process of printing its fiat currency, relying on its credibility and supported by the petrodollar that required other countries to store reserves of US treasuries in their basket of currencies.

This arrangement continued to sustain itself in spite of numerous wars (the Balkans, Iraq, Afghanistan), financial crises (the Black Monday of 1987, the Dotcom bubble of 2000, and Lehman Brothers’ subprime crisis of 2008), and the bankruptcies of sovereign states (Argentina in 1998). The explanation is to be found in the credibility of the US dollar and the US itself, with its ability to repay buyers of treasury bonds. In other words, as long as the US continues to maintain its dominance of the global financial and economic system, thanks to the dollar, its supremacy as a world superpower is hardly questioned. To maintain this influence on the currency markets and the special-drawing rights (SDR) basket, the pricing of oil in US dollars is crucial. This explains, at least partially, the impossibility of scaling down the relationship between Washington and Riyadh. Nobody should delude themselves into believing that this is the only reason why Saudi-US relations are important. Washington is swimming in the money showered by Saudi lobbies, and it is doubtful that those on the receiving end of such largesse will want to make the party stop.

The agreement made between Washington and Riyadh guaranteed that the latter would receive protection from the former and Washington would look the other way regarding Riyadh’s behavior within its kingdom and in the region – so long as Saudi Arabia sold its black gold in US dollars alone. This agreement was clearly a controversial one and has been kept away from the general public, even in the light of Khashoggi’s death and the liberal mainstream media’s piling on the Kingdom. Yet this is not the only reason why US-Saudi ties are so close. The initial agreements between the Saudis and the Americans concerned the petrodollar; but after the Islamic revolution in Iran in 1979 (Iran’s nationalist prime minister, Mohammad Mosaddegh, had been previously overthrown by the US and UK in 1953), Riyadh and Washington decided to declare war on their common enemy, with the hearty approval of Israel. The cooperation between Riyadh and Washington became even closer in the 1980s, through the common campaign against the USSR in Afghanistan through the use of jihadists recruited, trained and armed by the Pakistan, Saudi Arabia, and the US secret services. The use of jihadist terrorism as a geopolitical weapon has been a main feature of Riyadh’s statecraft.

The relationship between Saudi Arabia and the US evolved from a mere economic and protection agreement, to a full-fledged collaboration against the shared enemies of Washington, Tel Aviv and Riyadh, expanding on the existing cooperation since the 1980s of using jihadism to advance strategic objectives. The situation with Iran became of primary importance for US strategy in the region. Riyadh, with the passage of time, assumed a triple role, namely, that of being the guarantor of the petrodollar, a facilitator in the use of Islamic terrorism as a geopolitical weapon, and a regional opponent of Iran.

This relationship has been mutually beneficial. The House of Saud has been free to run its country according to the strict strictures of Wahhabism without Western interference; and Washington enjoys a capacity for unlimited military spending (especially after the 2008 crisis and the beginning of quantitative easing) simply through the printing of debt in the form of government bonds that are immediately acquired by other countries. Washington has effectively been printing waste paper and obtaining consumer goods in return, a state of affairs that has allowed the United States to squander six trillion dollars in wars in Iraq and Afghanistan without suffering significant economic consequences.

Ever since Donald Trump took over the White House, the process of de-dollarization that begun during the Obama era has only accelerated. With the unprecedented move in 2012 to remove Iran from the SWIFT international banking system, a dangerous precedent had been set that acted as a warning to the rest of the world. The United States revealed itself as willing to abuse its dominant position by wielding the dollar as a weapon against geopolitical adversaries.

The consequences of that action continue to be felt today. Many within the Western elite have come to recognize this mistake and are regretting it. Russia and China understood that they were next on the chopping block and set about creating alternative payment systems like CIPS that would serve to act as a backup system in case Washington tried to exclude Moscow and Beijing from the SWIFT system.

Trump contributed more than any of his predecessors towards further pushing the world in the direction of de-dollarization. Sanctions and tariffs have weakened confidence amongst US allies and forced the rest of the world to start looking for alternatives. The cases of Iran and Russia are instructive, with commercial exchanges being undertaken in currencies other than the dollar for a number of years now. There are dozens of other examples where the use of the dollar in commercial transactions has been abandoned. More complicated, however, is the financing of debt for private or public companies that often takes place in dollars. This exposes industries to a difficult situation in the event that their national currencies devalue against the dollar, making it more expensive to find the US dollars needed to repay creditors, leaving what are major national companies with the prospect of facing bankruptcy. As Russia learned in 2014 with the attack on its Ruble, exposure of potentially strategic sectors of the country to the economic influence of a foreign adversary should be avoided.

The push to renounce the use of the dollar in financial transactions also stems from the fear that the next financial crisis may affect global debt as expressed in dollars; not only destroying the US economy, but dragging down with it countries that are large holders of US treasuries. This is not speculation or conspiracy theory but simple deduction from observing the economic situation over the last 10 years. The global economy was saved in 2008 as a result of the confidence held by citizens following the intervention of central banks. The corrosive mechanism laid out by the Fed and its partners became evident months later. Central banks started printing unlimited amounts of money at 0% interest rates and furnishing it to banks and financial institutions to cover the debts left by the bursting of speculative bubbles like the one involving subprime mortgages.

The average citizen, seeing Bernanke and Draghi on TV talking about “unprecedented actions to save the system”, felt reassured, and therefore felt their money remained safe, in banks or in US dollars. The next financial crisis – potentially the worst ever – is likely to be caused by either the raising of interest rates by the Fed and other central banks, or from the popping of one of the numerous debt bubbles around. The central point is that the citizens’ belief in the system will be put to the test because, as Draghi said, “[this weapon of QE] can be used only once”. There is no protection for banks and speculative entities that could be in debt to the tune of many billions of dollars with no chance of survival.

With a view of to the possible collapse of the dollar-based financial system, several countries are selling their US government bonds, reducing their exposure and accumulating gold. This involves not just China and Russia, but even the European Union.

In such a situation, a crisis in relations with Saudi Arabia is unthinkable for Washington, especially when the region now seems to be guided by an axis that starts from Tehran and ends in Beirut, including Baghdad and Damascus. Riyadh is necessary for the Israeli strategy in the region, and Washington follows in tow for reasons related to the US dollar. Factoring the importance of Riyadh in supporting the petrodollar and in countering Iran in the region, it is not surprising why the Israeli lobby in Washington is doing its utmost to calm US senators down intent on punishing Riyadh for the Khashoggi affair.

If Saudi Arabia were really convinced of the innocence of MBS in the Khashoggi affair, it could use this situation to its advantage by reducing the role of Washington in its foreign policy. Turning to the east and increasing partnerships with China and Russia would have beneficial effects on the whole region, as well as reducing the importance of the United States in the world. Saudi Arabia is governed by a large family riven with divisions and feuds spanning decades. MBS has no interest in his kingdom and is occupied with his survival alone. He is aware that Netanyahu and Trump are his best bet for continuing to reign. Trump is equally aware of the importance of MBS in his communication strategy in the US, with a view to the midterm and the 2020 elections. MBS is for Trump the golden goose that finances the MAGA project, thanks apparently to Trump’s mesmerizing negotiation skills with the Saudis. Of course this is far from the truth, but what matters is the spin that Trump gives to this alliance.

Israel is the primary ally of MBS, given that the crown prince is the first Saudi monarch openly willing to establish diplomatic relations with the Jewish State and bring relations between the two countries out into the open. The upper level of the US government, the so-called deep state, tried for a few weeks to use MBS against Trump. But this strategy came to an end after the Israelis, together with some elements of the US deep state, saw the risk of downsizing the global relationship between Saudi Arabia and the US. MBS will hardly be pushed aside, and within the Kingdom his position seems firmer than many expected, as seen at the Davos in the Desert conference. Breaking up with MBS would have had unimaginable repercussions for the US’s hegemonic position, and this is something Washington can ill afford at the moment.

The use of jihadism and petrodollars as political and financial weapon against Washington’s adversaries is reason enough to quickly forget Jamal Khashoggi and go back to ignoring the various abuses committed by Saudi Arabia. In this phase of the transition from a unipolar to a multipolar world, the US cannot afford to renounce some of the most potent weapons in its arsenal to wield against its geopolitical foes.

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