We Live In A New World And The Saudis Are The First To Get It
by Raul Ilargi Meijer via The Automatic Earth blog
There are many things I don’t understand these days, and some are undoubtedly due to the limits of my brain power. But at the same time some are not. I’m the kind of person who can no longer believe that anyone would get excited over a 5% American GDP growth number. Not even with any other details thrown in, just simply a print like that. It’s so completely out of left field and out of proportion that you would think by now at least a few more people understand what’s really going on.
And Tyler Durden breaks it down well enough in Here Is The Reason For The “Surge” In Q3 GDP (delayed health-care spending stats make up for 2/3 of the 5%), but still. I would have hoped that more Americans had clued in to the nonsense that has been behind such numbers for many years now. The US has been buying whatever growth politicians can squeeze out of the data and their manipulation, for many years. The entire world has.
The 5% stat is portrayed as being due to increased consumer spending. But most of that is health-care related. And economies don’t grow because people increase spending on not being sick and/or miserable. That’s just an accounting trick. The economy doesn’t get better if we all drive our cars into a tree, even if GDP numbers would say otherwise.
All the MSM headlines about consumer confidence and comfort and all that, it doesn’t square with the 43 million US citizens condemned to living on food stamps. I remember Halloween spending (I know, that’s Q4) was down an atrocious -11%, but the Q3 GDP print was +5%? Why would anyone volunteer to believe that? Do they all feel so bad any sliver of ‘good news’ helps? Are we really that desperate?
We already saw the other day that Texas is ramming its way right into a recession, and North Dakota is not far behind (training to be a driller is not great career choice going forward), and T. Boone Pickens of all people confirmed today at CNBC what we already knew: the number of oil rigs in the US is about to do a Wile E. cliff act. And oil prices fall because global demand is down, as much as because supply is up. A crucial point that few seem to grasp; the Saudis do though. Good for US GDP, you say?
What I see more than anything in the 5% print is a set-up for a Fed rate hike, through a variation on the completion backward principle, i.e. have the message fit the purpose, set up a narrative that makes it make total sense for Yellen to hike that rate. And Wall Street banks (that’s not just the American ones) will be ready to reap the rewards of the ensuing chaos.
And I also don’t understand why nobody seems to understand what Saudi Arabia and OPEC have consistently been saying for ever now. They’re not going to cut their oil production. Not going to happen. The Saudis, probably more than anyone, are the guys who know what demand is really like out there (they see it and track it on a daily basis), and that’s why they’ll let oil drop as far as it will go. There’s no other way out anymore, no use calling a bottom anywhere.
In the two largest markets, US demand is down through far less miles driven for a number of years now, while domestic supply is way up; at the same time, real Chinese demand is way below what anybody projects, and oil is just one of many industries that have set their – corporate – strategies to fit expected China growth numbers that never materialized. Just you watch what other – industrial – commodities fields are going to do and show in 2015. Or simply look at prices for iron ore, copper etc. today.
OPEC Leader Vows Not To Cut Oil Output Even If Price Hits $20
In an unusually frank interview, Ali al-Naimi, the Saudi oil minister, tore up OPEC’s traditional strategy of keeping prices high by limiting oil output and replaced it with a new policy of defending the cartel’s market share at all costs. “It is not in the interest of OPEC producers to cut their production, whatever the price is,” he told the Middle East Economic Survey. “Whether it goes down to $20, $40, $50, $60, it is irrelevant.” He said the world may never see $100 a barrel oil again.
The comments, from a man who is often described as the most influential figure in the energy industry, marked the first time that Mr Naimi has explained the strategy shift in detail. They represent a “fundamental change” in OPEC policy that is more far-reaching than any seen since the 1970s, said Jamie Webster, oil analyst at IHS Energy. “We have entered a scary time for the oil market and for the next several years we are going to be dealing with a lot of volatility,” he said. “Just about everything will be touched by this.”
Saudi Arabia is desperate alright, but not nearly as much as most other producers: they have seen this coming, they’ve been tracking it hour by hour, and then made their move. And they have some room to move yet. Many other producers don’t. Not inside OPEC, and certainly not outside of it. Russia should be relatively okay, they’re smart enough to see these things coming too, and adapt accordingly. Many other nations don’t and haven’t, perhaps simply because they have no room left. Anatole Kaletsky makes quite a bit of sense at Reuters:
The Reason Oil Could Drop As Low As $20 Per Barrel
… the global oil market will move toward normal competitive conditions in which prices are set by the marginal production costs, rather than Saudi or OPEC monopoly power. This may seem like a far-fetched scenario, but it is more or less how the oil market worked for two decades from 1986 to 2004.
Whichever outcome finally puts a floor under prices, we can be confident that the process will take a long time to unfold. It is inconceivable that just a few months of falling prices will be enough time for the Saudis to either break the Iranian-Russian axis or reverse the growth of shale oil production in the United States. It is equally inconceivable that the oil market could quickly transition from OPEC domination to a normal competitive one.
The many bullish oil investors who still expect prices to rebound quickly to their pre-slump trading range are likely to be disappointed. The best that oil bulls can hope for is that a new, and substantially lower, trading range may be established as the multi-year battles over Middle East dominance and oil-market share play out. The key question is whether the present price of around $55 will prove closer to the floor or the ceiling of this new range. [..]
… the demarcation line between the monopolistic and competitive regimes at a little below $50 a barrel seems a reasonable estimate of where one boundary of the new long-term trading range might end up. But will $50 be a floor or a ceiling for the oil price in the years ahead?
There are several reasons to expect a new trading range as low as $20 to $50, as in the period from 1986 to 2004. Technological and environmental pressures are reducing long-term oil demand and threatening to turn much of the high-cost oil outside the Middle East into a “stranded asset” similar to the earth’s vast unwanted coal reserves. [..]
The U.S. shale revolution is perhaps the strongest argument for a return to competitive pricing instead of the OPEC-dominated monopoly regimes of 1974-85 and 2005-14. Although shale oil is relatively costly, production can be turned on and off much more easily – and cheaply – than from conventional oilfields. This means that shale prospectors should now be the “swing producers” in global oil markets instead of the Saudis.
In a truly competitive market, the Saudis and other low-cost producers would always be pumping at maximum output, while shale shuts off when demand is weak and ramps up when demand is strong. This competitive logic suggests that marginal costs of U.S. shale oil, generally estimated at $40 to $50, should in the future be a ceiling for global oil prices, not a floor.
As Kaletsky also suggests, there is the option of a return to an OPEC monopoly and much higher prices, but I personally don’t see that. It would need to mean a return to prolific global economic growth numbers, and I simply can’t see where that would come from.
Meanwhile, there’s the issue of ‘anti-Putin’ sanctions hurting western companies, with an asset swap between Gazprom and German chemical giant BASF that went south, and a failed deal between Morgan Stanley and Rosneft as just two examples, and that leads me to think pressure to lift or ease these sanctions will rise considerably in 2015. Why Angela Merkel is so set on punishing her (former?) friend Putin, I don’t know, but I can’t see how she can ignore domestic corporate pressure to wind down much longer. Russia is part of the global economic system, and excluding it – on flimsy charges to boot – is damaging for Germany and the rest of Europe.
Finally, still on the topic of oil and gas, Wolf Richter provides another excellent analysis and breakdown of US shale.
First Oil, Now US Natural Gas Plunges off the Chart
It’s showing up everywhere. Take Samson Resources. As is typical in that space, there is a Wall Street angle to it. One of the largest closely-held exploration and production companies, Samson was acquired for $7.2 billion in 2011 by private-equity firms KKR, Itochu Corp., Crestview Partners, and NGP Energy Capital Management. They ponied up $4.1 billion. For the rest of the acquisition costs, they loaded up the company with $3.6 billion in new debt. In addition to the interest expense on this debt, Samson is paying “management fees” to these PE firms, starting at $20 million per year and increasing by 5% every year.
KKR is famous for leading the largest LBO in history in 2007 at the cusp of the Financial Crisis. The buyout of a Texas utility, now called Energy Future Holdings Corp., was a bet that NG prices would rise forevermore, thus giving the coal-focused utility a leg up. But NG prices soon collapsed. And in April 2014, the company filed for bankruptcy. Now KKR is stuck with Samson. Being focused on NG, the company is another bet that NG prices would rise forevermore. But in 2011, they went on to collapse further. In 2014 through September, the company lost $471 million, the Wall Street Journal reported, bringing the total loss since acquisition to over $3 billion. This is what happens when the cost of production exceeds the price of NG for years.
Samson has used up almost all of its available credit. In order to stay afloat a while longer, it is selling off a good part of its oil-and-gas fields in Oklahoma, North Dakota, Wyoming, and Colorado. It’s shedding workers. Production will decline with the asset sales – the reverse of what investors in its bonds had been promised. Samson’s junk bonds have been eviscerated. In early August, the $2.25 billion of 9.75% bonds due in 2020 still traded at 103.5 cents on the dollar. By December 1, they were down to 56 cents on the dollar. Now they trade for 43.5 cents on the dollar. They’d plunged 58% in four months.
The collapse of oil and gas prices hasn’t rubbed off on the enthusiasm that PE firms portray in order to attract new money from pension funds and the like. “We see this as a real opportunity,” explained KKR co-founder Henry Kravis at a conference in November. KKR, Apollo Global Management, Carlyle, Warburg Pincus, Blackstone and many other PE firms traipsed all over the oil patch, buying or investing in E&P companies, stripping out whatever equity was in them, and loading them up with piles of what was not long ago very cheap junk bonds and even more toxic leveraged loans.This is how Wall Street fired up the fracking boom.
PE firms gathered over $100 billion in their energy funds since 2011. The nine publicly traded E&P companies that represent the largest holdings have cost PE firms at least $12.7 billion, the Wall Street Journal figured. This doesn’t include their losses on the smaller holdings. Nor does it include losses from companies like Samson that are not publicly traded. And it doesn’t include losses pocketed by bondholders and leveraged loan holders or all the millions of stockholders out there.
Undeterred, Blackstone is raising its second energy-focused fund; it has a $4.5 billion target, Bloomberg reported. The plunge in oil and gas prices “has not created a lot of difficulties for us,” CEO Schwarzman explained at a conference on December 10. KKR’s Kravis said at the same conference that he welcomed the collapse as an opportunity. Carlyle co-CEO Rubenstein expected the next 5 to 10 years to be “one of the greatest times” to invest in the oil patch.
The problem? “If you have an asset you already own, it’s probably going to go down in value,” Rubenstein admitted. But if you’ve got money to invest, in Carlyle’s case about $7 billion, “it’s a great time to buy.” They all agree: opportunities will be bountiful for those folks who refused to believe the hype about fracking over the past few years and who haven’t sunk their money into energy companies. Or those who got out in time.
We live in a new world, and the Saudis are either the only or the first ones to understand that. Because they are so early to notice, and adapt, I would expect them to come out relatively well. But I would fear for many of the others. And that includes a real fear of pretty extreme reactions, and violence, in quite a few oil-producing nations that have kept a lid on their potential domestic unrest to date. It would also include a lot of ugliness in the US shale patch, with a great loss of jobs (something it will have in common with North Sea oil, among others), but perhaps even more with profound mayhem for many investors in US energy. And then we’re right back to your pension plans.
ISIL attacked Saudi Arabia
11.11.2014 Author: Viktor Titov
Saudi Arabia has recently witnessed the aggression that should have happened sooner or later due to its short-sighted policy in Syria, Iraq and Iran. As an old saying goes: “If you dig a hole for others, you’re sure to fall in it yourself.”
A few days ago the Saudi town of Dalva, situated in the oil-rich Eastern Province, suffered an attack of a group of armed Sunni terrorists, which resulted in seven civilian deaths. Most of the attackers were citizens of the Kingdom. The promt response of the local security forces allowed the servicemen to detain 20 members of an underground terrorist group, consisting mainly of those who had previously fought under the black banner of ISIL in Iraq and Syria. Law enforcement agencies of Saudi Arabia have managed to capture the head of the armed group, his name is kept secret. The only information that has become available to journalists is that this commander has recently returned from Syria where he was fighting against the pro-Assad forces.
Riyadh is now facing a harsh dilemma: on the one hand, the House of Saud is actively oppressing its Shia citizens, on the pretext of their disloyalty and their alleged attempts to undermine the national security of the kingdom due to the “evil Iranian influence.” On the other – Sunni terrorists, that Saudi Arabia is fighting today alongside with its closest ally – the US, have assaulted Shia civilians on the Saudi soil, and those were virtually enjoying the same rights as the rest of the population, including the right for protection. It is now official: Saudi citizens motivated by religious hatred are commiting manslaughter of their fellow citizens.
The only question is how Riyadh may react when the Sunni terrorists that it had trained and funded will unleash a wave of terror against the Shia population of KSA? A similar course of events has already taken place in the neighboring Bahrain back in 2011, but Saudi regular troops were fast to cross the border in an attempt to prevent the violence from spreading.
It is no coincidence that the events in the city of Dalva are completely ignored by the international media. Should this fact become widely known then the Saudi authorities will be forced to recognize the threat ISIL poses to Saudi Arabia along with acknowledging the underlying instability of Saudi society that can endanger the ruling Wahhabi regime.
Now that the Shia population of the Eastern Province is buzzing with discontent, the House of Saud has found itself in a tight corner. Should the authorities fail to prosecute the terrorists a violent unrest of the Shia population, similar the one that shook Saudi Arabia in 2011 -2012, in the wake of the above mentioned events in Bahrain, will be quick to follow. But if the terrorists are to be punished to the fullest extent of the Sharia law, then the Wahhabis and Salafis will accuse the royal family of “betrayal” of the Sunnis. This course of events will end no better, with a massive wave of violent terror attacks, carried out by ISIL militants all across Saudi Arabia. Now that ISIL thugs have faced harsh resistance in Syria and Iraq, they will be eager to move south to start a “sacred struggle against the corrupt pro-American reign of Al Saud family“. As for the Iraqi Shia population, they can only welcome this U-turn in their ongoing struggle against Islamists. Moreover, it is possible that the indignation of the Saudi Shia population of the Eastern Province will find some form of support in Tehran and Baghdad. This means that the fate of the kingdom’s territorial integrity will be put to the test. The nightmares of the Saudi ruling family seems to be coming true — Saudi Arabia can be split into several parts, which had been joined together to create the kingdom back in 1929. This trend can be accelerated by the fact that a couple of weeks ago the Shia Houthis rebels seized power in Yemen, on the south-western borders of the KSA.
When Riyadh joined the US “anti-terrorist” coalition back in October, along with a number of NATO and GCC countries, political predicted the imminent revenge of ISIL.
So the events of November 4 may only be the first steps. On top of all, Saudi authorities have yielded to the US demands of dumping oil prices in an attempt to undermine Russia’s economy. This led to the narrowing scope of social initiatives being implemented in the Kingdom, since money became scarce in the royal treasury.
By agreeing to support the US global ambitions, the House of Saud has clearly shot itself in the foot. Especially now, when Washington has displayed its willingness to sign an agreement on Iran’s nuclear program in two weeks time. This step will force Saudi Arabia to kiss it oil monopoly goodbye along with the role of the main strategic partner of the US in the region. At this point Riyadh couldn’t care less about the US military adventures in Iraq and Syria, it going to try to save its skin
It is clear that the coming days will put the Al-Saud dynasty’s survival skills to the test. Should the KSA authorities fail to keep the situation in the Eastern Province under control — the Kingdom is doomed. With each passing day the Shiite arc becomes more apparent on the political horizon of the Middle East, just like the US miscalculations.
As soon as Washington is trying to project its influence in the region, the Arab regimes are beginning to crumble and fall apart. One can recall the revolutions in Egypt, Libya, Yemen, along with the civil wars in Syria and Iraq to illustrate this statement.
It is now safe to say that Obama has screwed everything up again by putting its strategic partner in danger. It seems that the defeat in the US midterm elections was a failure all right, yet he never stops to surprise his followers. And it is unlikely that the Republicans will be fascinated by the sight of Saudi Arabia going down in flames.
Viktor Titov, Ph.D in Historical Sciences and political commentator on the Middle East, exclusively for the online magazine New Eastern Outlook
Why Oil Is Plunging: The Other Part Of The “Secret Deal” Between The US And Saudi Arabia
10/11/2014 by Tyler Durden
Two weeks ago, we revealed one part of the “Secret Deal” between the US and Saudi Arabia: namely what the US ‘brought to the table’ as part of its grand alliance strategy in the middle east, which proudly revealed Saudi Arabia to be “aligned” with the US against ISIS, when in reality John Kerry was merely doing Saudi Arabia’s will when the WSJ reported that “the process gave the Saudis leverage to extract a fresh U.S. commitment to beef up training for rebels fighting Mr. Assad, whose demise the Saudis still see as a top priority.”
What was not clear is what was the other part: what did the Saudis bring to the table, or said otherwise, how exactly it was that Saudi Arabia would compensate the US for bombing the Assad infrastructure until the hated Syrian leader was toppled, creating a power vacuum in his wake that would allow Syria, Qatar, Jordan and/or Turkey to divide the spoils of war as they saw fit.
A glimpse of the answer was provided earlier in the article “The Oil Weapon: A New Way To Wage War“, because at the end of the day it is always about oil, and leverage.
The full answer comes courtesy of Anadolu Agency, which explains not only the big picture involving Saudi Arabia and its biggest asset, oil, but also the latest fracturing of OPEC at the behest of Saudi Arabia…
… which however is merely using “the oil weapon” to target the old slash new Cold War foe #1: Vladimir Putin.
Saudi Arabia to pressure Russia, Iran with price of oil
Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.
Saudi Arabia plans to sell oil cheap for political reasons, one analyst says.
To pressure Iran to limit its nuclear program, and to change Russia’s position on Syria, Riyadh will sell oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, says Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The marked decrease in the price of oil in the last three months, to $92 from $115 per barrel, was caused by Saudi Arabia, according to Abanmy.
With oil demand declining, the ostensible reason for the price drop is to attract new clients, Abanmy said, but the real reason is political. Saudi Arabia wants to get Iran to limit its nuclear energy expansion, and to make Russia change its position of support for the Assad Regime in Syria. Both countries depend heavily on petroleum exports for revenue, and a lower oil price means less money coming in, Abanmy pointed out. The Gulf states will be less affected by the price drop, he added.
The Organization of the Petroleum Exporting Countries, which is the technical arbiter of the price of oil for Saudi Arabia and the 11 other countries that make up the group, won’t be able to affect Saudi Arabia’s decision, Abanmy maintained.
The organization’s decisions are only recommendations and are not binding for the member oil producing countries, he explained.
Today’s Brent closing price: $90. Russia’s oil price budget for the period 2015-2017? $100. Which means much more “forced Brent liquidation” is in the cards in the coming weeks as America’s suddenly once again very strategic ally, Saudi Arabia, does everything in its power to break Putin.
Anti-Obama Global Uprising
( Another worthy piece analyzing Obama’s world-wide collapse. – JW )
President Obama finds himself in the unenviable position of battling US Congress on a variety of issues while simultaneously having to confront 35 US allies and foreign leaders outraged over his policies whether on Syria and Iran or on the NSA eavesdropping on their personal and private conversations.
There is a silent anti-Obama uprising taking place around the world thanks to his lack of leadership and to the inexperience of the advisers around him.
In the case of the often-reserved Saudi Arabia, the chastising was particularly harsh given the patience the Kingdom exercised in its attempts to resolve the Syrian tragedy using US help, to no avail. Thanks to the incompetency of the team Obama, Syria is now the favorite global destination for Sunni and Shia Islamist pilgrims sporting suicide vests and specialized sniper rifles to kill pregnant women and children.
Recent US polls show Mr. Obama hitting new lows in popularity as his domestic agenda unravels on Obamacare (Wonder if Gallup or Rasmussen are able to conduct a global poll on Obama’s popularity). Mass cancellations by insurance companies against the self-insured (Usually small business owners) is shaking things up for the White House and no amount of spin will pay the difference millions of Americans will have to assume as they begin their journey towards carrying the burden of the biggest welfare state system ever engineered by the far-left. Senators Ted Cruz and Mike Lee look better by the day for their marathon filibuster to defund Obamacare.
It took five years of severe drought, but no umbrella will protect Mr. Obama from the cats and dogs raining on him and the people around him today.
While Mr. Obama feigns ignorance on the NSA eavesdropping (As he did with all the other scandals), the storm brewing overseas is gathering momentum. For sure, the 35 foreign leaders are exchanging opinions and ideas, as I write this, on what it would take to send the right message to the US and it is a question of time before many band together to confront the White House as one voice. It is a political bonanza they are not about to miss even though many spy as much against the US and many have sat on the sidelines when it comes to Syria.
Is the White House aware of this global anti-Obama uprising? Apparently not.
Wednesday night, the Israeli Air Force allegedly bombed two sites in Latakya and Damascus to interrupt the delivery of Russian-made SA-8 mobile missile batteries to Hezbollah. To add insult to injury, a US official leaked the information to the press by claiming the Obama Administration did not want to appear having condoned the operations during sensitive talks with Iran.
I really must be experiencing a re-run of Get Smart.
Has that official leaking the information lost his/her mind? Does he/she not know that with such public explanation the Iranians will seek certain guarantees against other attacks before they proceed with negotiations? Maybe the White House is praying for the Iranians to demand these guarantees that would compel this President to freeze Israeli capabilities from protecting its citizenry under the guise of its peace-loving initiative with a mass murderer like Khamenei. I am telling you, Maxwell Smart really works at the White House today.
On the other hand, this US not-so-smart official who leaked the information just fell in his/her own trap. Possibly, Israel may have figured a way to sabotage the US-Iranian talks the country knows it could only lead to disastrous results by making it a habit to hit the Assad regime every few days or so. Of course, I am not saying this is probable because the Israeli leadership is too wise to let the Iranians create a wedge between them and the US.
Too much elitism in the crowd surrounding Mr. Obama is fogging their perception of what is coming down the pike. Instead of looking at themselves in the mirror, they are doubling down on an agenda already causing an uprising against the policies of Mr. Obama on a worldwide scale.
Maybe First Lady Michelle Obama’s invitation to Prince George’s first birthday celebration will have to be lost in Her Majesty’s mail for this crowd to realize how unpopular the Obama Administration has become.
Nothing like banality to shock their nervous system.
via Anti-Obama Global Uprising | Farid Ghadry | Ops & Blogs | The Times of Israel.
Saudi Arabia in diplomatic shift away from old ally US
A bitter diplomatic row between US and Saudi Arabia has burst into the open in a development that could threaten one of the Middle East’s core alliances and Washington’s leadership in the region
BST 22 Oct 2013 By Peter Foster, in Washington, Ruth Sherlock in Beirut and Alex Spillius
The public rupture saw the head of Saudi intelligence declare that the kingdom was “scaling back” co-operation with the CIA over arming and training Syrian rebels and seeking alternate weapons suppliers to the United States.
The unprecedented rebuke by Prince Bandar Bin Sultan al-Saud came after Saudi Arabia stunned diplomats by rejecting a prized seat on the UN Security Council.
The decision to reject the seat, Prince Bandar reportedly told diplomats, was intended as “a message for the US” about Saudi frustration with the Obama administration’s long-running failure to arm rebels in Syria and the rising prospect of a nuclear deal that would favour Riyadh’s arch-foe, Iran.
John Kerry, the US Secretary of State, yesterday confirmed that he had been forced to defend US policy at lengthy meetings with Prince Saud Al-Faisal, the Saudi foreign minister, in Paris.
Mr Kerry said Mr Obama agreed to the meetings, held on the sidelines of a gathering to discuss the progress of the Middle East peace talks.
He described a “very frank conversation” that covered “every one of these things” – Egypt, Middle East Peace, Iran and Syria.
“I explained exactly where the US is coming from and will continue to consult with our Saudi friends as we always have in the past,” said Mr Kerry.
On Iran, Saudi Arabian alarm was such that he felt obliged to “reaffirm President Obama’s commitment that he will not allow Iran to have a nuclear weapon”.
Referring to Washington’s decision to back down from missile strikes against the Damascus regime, Mr Kerry admitted that “the Saudis were obviously disappointed the strikes didn’t take place, and have questions about some other things that may be happening in the region”.
But he added that “the United States and Saudi Arabia will continue to be the close and important friends and allies that we have been”.
Analysts and diplomats in Washington were divided over whether the row, first reported in the Wall Street Journal, presented a serious threat of divorce or was merely a ‘marital tiff’ in an 80-year relationship founded on the mutual interests of Saudi Arabian oil and the US ability to provide security guarantees.
Michael Doran, a Middle East expert with the Brookings Institution who served on the National Security Council during the George W Bush administration, said relations were at an all-time low.
‘I’ve worked in this field for a long time, and I’ve studied the history. I know of no analogous period. I’ve never seen so many disagreements on so many key fronts all at once. And I’ve never seen such a willingness on the part of the Saudis to publicly express their frustration,” he said.
“Iran is the number one issue — the only issue for Saudi policy makers.
When you add up the whole Middle Eastern map — Syria, Iraq, Iran — it looks to the Saudis as if the US is throwing Sunni allies under the bus by trying to cut a deal with Iran and its allies.”
Saudi frustration with Mr Obama’s failure to carry out air strikes last month appears to have boiled over amid fears that the US is backing a peace deal, with Russian and Iranian support, that would leave much of the infrastructure of the Assad regime in place.
“The reason the Saudis are furious is because of the deal between Russia and the US, and Iran and the US,” Dr Kamal Labwani, a member of the opposition Coalition who has recently left Syria, told The Telegraph.
“The deal for Geneva, they believe, is that they will change Bashar, but keep the base of the regime active: they feel it will be Iran-led change – that Iran will get the bigger share of the pie in Syria in terms of deciding who leads next”.
Senior European diplomats in Washington told The Telegraph yesterday they were still trying to assess whether the Saudi move represented a real shift in relations or was part of a factional struggle in which Prince Bandar was seeking to influence the top decision-maker king Abdullah bin Abdulaziz al Saud.
Noting that Saudi Arabia had already been “tricky” over Syria, the diplomat said their remained an assumption that the core US-Saudi Relationship would remain intact. “If they are going to beat their own path, that would be more worrying, but it’s really too early to tell,” the source said.
Frederic Wehrey, a senior Middle East expert, with the Carnegie Endowment for International Peace, also judged that ructions with Saudi Arabia were more likely a reflection of domestic political tensions.
“I take a long view of these things. These developments are unsettling, but they’re not catastrophic. The Saudis need us more than we need them,” he said. “This could be a power-play by [Prince] Bandar. When states are consumed with domestic facitonal struggles they tend to behave erratically.”
Those who are sanguine about a possible split and talk of Riyadh seeking alternate weapons suppliers point to a Pentagon announcement last week of plans to sell Saudi Arabia and the United Arab Emirates $10.8 billion (£6.7bn] worth of missiles and advanced munitions, including “bunker-buster” bombs.
However, other analysts like Mr Doran argue that America’s ability to influence events in the Middle East has already been fundamentally undermined by the tensions between Riyadh and Washington.
He pointed to Saudi Arabia’s decision to give billions of dollars to the Egyptian military leadership last July, which fatally undercut American calls for restraint that had been backed by the threat of removing financial support to the regime.
“The gumming up of US-Saudi relations causes a cumulative but significant lack of influence by the United States in the Middle East,” concluded Mr Doran, “That influence can only be achieved by a coalition which we don’t have because we’re racing after enemies and dispensing with the interests of our allies.”
Former Joint Chiefs chairman: Obama plotted to destabilize regimes in Bahrain, Egypt
A former leading U.S. military commander asserted that the administration of President Barack Obama worked to destabilize the regimes of Bahrain and Egypt.
[Ret.] Gen. Hugh Shelton, former chairman of the Joint Chiefs of Staff, said the administration’s drive against Bahrain, wracked by a Shi’ite revolt, was led by the intelligence community.
“America thought Bahrain was an easy prey that will serve as key to the collapse of the GCC [Gulf Cooperation Council] regime and lead to giant oil companies controlling oil in the Gulf,” Shelton said.
In an interview on the U.S. network Fox News, Shelton said the administration plot was foiled by Bahraini King Hamad in 2011. He said Hamad agreed to a Saudi-sponsored decision by the GCC to send thousands of troops to Bahrain to help quell the Shi’ite revolt, attributed to Iran.
Shelton, who met Hamad during his assignment to the U.S. Navy Fifth Fleet, based in Manama, said the administration plot harmed relations with both Bahrain as well as neighboring Saudi Arabia. He said Riyad ended any trust in Washington after it was found to have helped the Shi’ites in Bahrain.
The former Joint Chiefs chairman, who served under President Bill Clinton and President George W. Bush, said Egypt stopped a drive by Obama to destabilize Egypt in 2013. Shelton said Egyptian Defense Minister Abdul Fatah Sisi, a former intelligence chief, also detected a U.S. plot to support the ruling Muslim Brotherhood amid unprecedented unrest. On July 3, Sisi led a coup that overthrew Egypt’s first Islamist president, Mohammed Morsi.
“Had Gen. Al Sisi not deposed Morsi, Egypt would have today become another Syria and its military would have been destroyed,” Shelton said.
Shelton, who did not disclose his sources of information, said Arab allies of the United States have moved away from Washington. He cited the new alliance between Egypt, Saudi Arabia and the United Arab Emirates against the Brotherhood.
“I expect calm to be restored in Egypt,” Shelton said. “Gen. Al Sisi has put an end to the new Middle East project.”
Saudi Arabia “warned the United States IN WRITING about Boston Bomber Tamerlan Tsarnaev in 2012”
By David Martosko and The American Media Institute
- Saudis developed intelligence separately from Russia, which also warned the U.S. about the accused Boston bomber
- A letter to the Department of Homeland Security allegedly named Tsarnaev and three Pakistanis as potential jihadis worthy of U.S. investigation
- Red flags from Saudi Arabia to have included Tsarnaev’s name and information about a planned explosive attack on a major U.S. city
- Saudi foreign minister, national security chief both met with Obama in the oval office in early 2013The Kingdom of Saudi Arabia sent a written warning about accused Boston Marathon bomber Tamerlan Tsarnaev to the U.S. Department of Homeland Security in 2012, long before pressure-cooker blasts killed three and injured hundreds, according to a senior Saudi government official with direct knowledge of the document.The Saudi warning, the official told MailOnline, was separate from the multiple red flags raised by Russian intelligence in 2011, and was based on human intelligence developed independently in Yemen.
Citing security concerns, the Saudi government also denied an entry visa to the elder Tsarnaev brother in December 2011, when he hoped to make a pilgrimage to Mecca, the source said. Tsarnaev’s plans to visit Saudi Arabia have not been previously disclosed.
The Saudis’ warning to the U.S. government was also shared with the British government. ‘It was very specific’ and warned that ‘something was going to happen in a major U.S. city,’ the Saudi official said during an extensive interview.
It ‘did name Tamerlan specifically,’ he added. The ‘government-to-government’ letter, which he said was sent to the Department of Homeland Security at the highest level, did not name Boston or suggest a date for his planned attack.
If true, the account will produce added pressure on the Homeland Security department and the White House to explain their collective inaction after similar warnings were offered about Tsarnaev by the Russian government.
A DHS official denied, however, that the agency received any such warning from Saudi intelligence about Tamerlan Tsarnaev.
‘DHS has no knowledge of any communication from the Saudi government regarding information on the suspects in the Boston Marathon Bombing prior to the attack,’ MailOnline learned from one Homeland Security official who declined to be named in this report.
The White House took a similar view. ‘We and other relevant U.S. government agencies have no record of such a letter being received,’ said Caitlin Hayden, a spokesperson for the president’s National Security Council.
The letter likely came to DHS via the Saudi Ministry of Interior, the agency tasked with protecting the Saudi kingdom’s homeland.
A Homeland Security official confirmed Tuesday evening on the condition of anonymity that the 2012 letter exists, saying he had heard of the Saudi communication before MailOnline inquired about it.
An aide to a Republican member of the House Homeland Security Committee speculated Tuesday about why the Obama administration contradicted the knowledgeable Saudi official.
‘It is possible the Department of Homeland Security received the information from the Saudi government but never passed it on to the White House,’ the GOP staffer said. ‘Communication between DHS and the White House’s national security apparatus isn’t always what it should be.’
‘I can easily see it happening where one hand didn’t know what the other was doing because of a turf war.’
‘Just like the different agencies in the Boston JTTF [Joint Terrorism Task Force] want credit for breaking the Tsarnaev case,’ the aide added, ‘they sometimes jealously guard the very intel they should be sharing the most freely. Sometimes it makes no sense at all.’
House Homeland Security Committee chairman Mike McCaul plans to announce on Wednesday an investigative hearing to probe what U.S. intelligence knew prior to the Boston attacks, two senior Republican sources told MailOnline.
Separately, President Obama announced Tuesday that the U.S. government will launch a wide-ranging inquiry into the sharing of information among the Federal Bureau of Investigation, the Department of Homeland Security and other intelligence and law-enforcement agencies of the federal government.
‘We want to leave no stone unturned,’ the president said in a rare White House press conference.
The internal review will be led by Director of National Intelligence James Clapper and several inspectors general.
‘This is not an investigation,’ Clapper’s spokesman Shawn Turner said in a prepared statement. ‘This is an independent review of information-sharing procedures. It is limited to the handling of information related to the suspects prior to the attack.’
It is not yet clear whether information from Saudi Arabia will be involved in Clapper’s inter-agency review.
Utah Republican Rep. Jason Chaffetz appeared on CNN Tuesday afternoon, upbraiding the Obama administration for presuming that the federal government’s handling of intelligence prior to the Boston bombings was appropriate and effective.
‘As soon as the bombing happened we had officials, locally and from the feds, saying, “Oh, this was an isolated case, there was just one person involved.” We didn’t know that,’ Chaffetz said.
The ‘starting point’ for a federal investigation, he said, must be, ‘This is unacceptable, we will not stand for it, we will get to the bottom of it, and we will not rest until we figure it out.’
‘Mr. President,’ he said, addressing Obama, ‘the starting point should be an intolerance that this thing happened.’
The high-ranking Saudi official whom MailOnlne interviewed at length provided a wealth of detail about the warning he says his government sent to the United States. He spoke on condition of anonymity because he is not authorized to talk publicly about foreign intelligence, or about Saudi Arabia’s diplomatic relationship with the United States.
He suggested that the Saudi Ministry of Interior sent the letter out of an abundance of caution in order to be helpful to the United States, even though its intelligence on Tsarnaev wasn’t yet fully developed.
‘With Saudi Arabia it’s always code red,’ he said. ‘There’s no code orange, or code yellow. Always red.’
The Saudi government, he added, alerted the U.S. in part because it believed American authorities should be inspecting packages that came to Tsarnaev in the mail in order to search for bomb-making components.
The written warning also allegedly named three Pakistanis who may be of interest to British authorities. The official declined to provide more details about the warning to the UK, but said the two governments received the same information.
The Ministry of Interior, he said, sent the letters in 2012, likely after Tsarnaev returned from Russia to the United States in July.
President Barack Obama’s published schedule indicates that he met in the Oval Office with Prince Mohammed bin Naif bin Abdulaziz, the Saudi Interior minister, on January 14, 2013.
The Saudis denied Tsarnaev entry to the kingdom when he sought to travel to Mecca in December 2011 for a pilgrimage known as an Umrah – one that is undertaken during months that don’t fall within the regular Hajj period of the year.
That rejected application came one month before he traveled to Russia, where U.S. intelligence sources believe he acquired training enabling him to construct and detonate the bombs that he and his younger brother placed hear the Boston Marathon’s finish line.
The younger brother, Dzhokhar Tsarnaev, is in federal custody at a prison medical facility.
The Saudi official speculated that Tsarnaev’s residence in the United States might have made it more difficult for him to gain entry into the kingdom.
‘U.S.-based Muslims who become radicalized and want to visit Mecca create an unusual problem,’ he said, compelling the Saudi government ‘to carefully examine applications.’
In the wake of the April 15 Boston Marathon bombings, Saudi Foreign Minister Prince Saud al-Faisal met with Secretary of State John Kerry on April 16, and then had an unscheduled meeting with President Obama on April 17.
‘This is the DNA of the Saudi government,’ said the Saudi official, referring to officials in the royal court in Riyadh. ‘This is how they work. They sent the letter, but that wasn’t enough. They then sent the top guy to meet personally with the president.’
He dismissed the idea that Tamerlan Tsarnaev was likely trained by al Qaeda while he was outside the United States last year.
The Saudis’ Yemen-based sources, he explained, said militants referred to Tamerlan dismissively as ‘the volunteer.’
‘He was a gung-ho, self motivated jihadi who wasn’t tasked by a larger group,’ he said.
‘There is no reason for anyone in Afghanistan to have in his thinking a scenario like this,’ the official added, referring to pressure-cooker bombs at the Boston Marathon. ‘He took the initiative. That’s why they call him “the volunteer.”‘
‘The Boston thing is beneath them,’ he said of al Qaeda. ‘They don’t think like this. This is like a firecracker to them. They want something big.’
Tamerlan may have boasted about his plans online, the Saudi official said, offering an explanation for how Yemen-based sources first learned of him. Islamist militants have well-developed social networks that can enable news to migrate quickly across vast distances.
The Saudi government sometimes tracks such radicals by launching fake jihadi websites to attract extremists. The Ministry of Interior then tracks them electronically, often across the world, and shares information with governments it considers friendly, including the United States.
‘The Saudi Arabian government is doing everything it can to wipe out these people and treat America as a true friend,’ the official said.
The Saudi intelligence services have a long history of providing credible information to America and Great Britain about looming threats.
‘This is the fourth time the Saudi Arabian government has given the U.S. specific intel’ about a possible terror plot, the official said, citing prior warnings about Richard Reid, the so-called shoe bomber who repeatedly tried to light a fuse in his shoe to bring down American Airlines flight 63 bound for Miami in December 2001.
He also cited the 300-gram ‘ink-cartridge bombs’ planted on two cargo planes headed for the United States from Yemen in October 2010. Those explosives were intercepted in Dubai, and at an East Midlands airport in Great Britain.
Tamerlan Tsarnaev’s namesake was a 15-century Central Asian warlord who referred to himself as ‘the sword of Islam.’ Sometimes spelled ‘Tamerlane’ in English, he was known for his cruelty.
When he conquered Baghdad, he reportedly made a pyramid of human skulls from unfortunate residents of that city.
Although still revered in Chechnya and throughout Central Asia, the original Tamerlane is sometimes vilified in modern-day Saudi textbooks.
The U.S. is Blocking Energy Wealth and Jobs
By Alan Caruba
What if I told you that the government was blocking America’s prosperity in the form of enormous untapped energy reserves that represent wealth and jobs that would once again put America on the path to fiscal security and growth?
Recently, Matt Vespa, on CNS.com reported that the International Energy Agency released a report that said the United States has the capacity to outpace Saudi Arabia as one of the world’s leading producers of oil. It projected that the U.S. could become a net oil exporter around 2020. It could become entirely self-sufficient.
Even so, the Obama administration just moved to cordon off 1.6 million acres estimated to represent one trillion barrels worth of oil in the name of conservation. At the same time, the Environmental Protection Agency is moving to so encumber hydraulic fracturing—fracking—with so many regulations it will thwart increased use of this extraction technology that has been safely in use for decades.
As Dan Kish, Senior Vice President for Policy at the Institute for Energy Research, warns, there is a major government effort “to federalize hydraulic fracturing regulation” which is already being done by states “in a very professional and knowledgeable way. Take fracking away, the oil and gas production drops.”
For years, through many administrations, the federal government has been doing everything in its power to restrict drilling domestically and off-shore where billions of barrels of oil remains untapped. In October, a Wall Street Journal editorial noted that “The latest example is the Interior Department’s little-noticed August decision to close off from drilling nearly half of the 23.5 million acre National Petroleum Reserve in Alaska.”
As far back as 1976, Congress designated the Reserve a strategic oil and gas stockpile to meet the “energy needs of the nation”, but oil and gas that is not extracted meets no needs. It keeps the nation dependent on imported oil and gas. In an August 22 letter to Interior Secretary Ken Salazar from the entire Alaska delegation in Congress called it “the largest wholesale land withdrawal and blocking of access to an energy resource by the federal government in decades.”
Noting that “Most of the other 11.5 million acres are almost indistinguishable from the acreage owned by the state that is being drilled safely nearby” the Journal pointed out that drilling on privately owned land has seen North Dakota pass Alaska as the second highest oil-producing state behind Texas.”
According to the Congressional Research Service, “The federal government owns roughly 635-640 million acres of the land in the United States. Four agencies administer 609 million acres of this land; the Forest Service in the Department of Agriculture, and the National Park Service, Bureau of Land Management, and Fish and Wildlife Service, all in the Department of the Interior.” The Bureau of Land Management manages 248 million acres and is responsible for 700 million acres of subsurface mineral resources.
Mostly by stealth, more and more privately owned land is being purchased by the federal government. In September 2011, Audrey Hudson, writing for Human Events, reported that “The Obama administration is spending $35 million to buy 30,000 acres of private property across the U.S. this year to make permanent homes for mice, fairy shrimp, mussels, prairie bushes and beetles. Those are just some of the 70 critters and plants to benefit from the land purchases in a dozen states as part of the government’s habitat conservation plans for endangered species.”
Quoting Rob Gordon of The Heritage Foundation, Hudson reported that “The federal government already owns more land than Germany, France, the United Kingdom, Spain, Italy, and Poland combined.” The Endangered Species Act is just an excuse to secure ownership of more land and, in particular, to restrict development of every description from housing to hospitals.
Instead of a future in which our oil and gas reserves could unleash all manner of economic growth and the generation of thousands of new jobs, Ben Wolfgang, reporting in the November 22 edition of The Washington Times, “The drilling process that has brought the U.S. energy independence within reach faces renewed scrutiny from the Obama administration and an uncertain future in many states.”
“Next month, the Environmental Protection Agency is expected to release a draft of its long-awaited report on suspected links between water pollution and fracking, which uses huge amounts of water, combined with sand and chemical mixtures, to crack underground rock and release trapped oil and gas.” Fracking, however, occurs well below underground water levels and has been shown to have no effect on it.
What we are witnessing is the deliberate effort by the Obama administration, in concert with earlier administrations, to deny the economic benefit of tapping the nation’s vast reserves of oil and gas domestically and off-shore. This was evident, as well, in the President’s decision about the XL Keystone pipeline on the grounds that it threatened aquifers if allowed to proceed. Thousands of jobs were lost in that single decision with no evidence of the truth of the assertion.
As the nation sinks further into economic decline and default, it is obvious that the nation’s energy sector is being thwarted at a time when it holds the promise of lifting it out of growing unemployment, higher energy costs, and the drumbeat of utterly false environmental claims about greenhouse gas emissions.
© Alan Caruba, 2012
Alan Caruba’s commentaries are posted daily at “Warning Signs” and shared on dozens of news and opinion websites. His blog recently passed more than 2 million page views. If you love to read, visit his monthly report on new books at Bookviews. For information on his professional skills, Caruba Editorial Services is the place to go! You can find Alan Caruba on both Facebook and Twitter as well.
- Noble Energy Makes Oil Discovery at Big Bend Prospect in U.S. Gulf (mb50.wordpress.com)
- China planning ‘huge fracking industry’ (guardian.co.uk)
- The Poisonous Presidency (papundits.wordpress.com)
- Edwards: Drilling bills are expected this session (times-news.com)