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Ed Webb

OPEC Is in its Death Throes | Foreign Policy - 0 views

  • In February, OPEC called for an oil production “freeze” to raise crude prices in conjunction with Russia. But this effort collapsed at a meeting in Doha, Qatar, in April when Iran refused to join any freeze in order to regain the pre-2012 production levels of close to 4 mbpd it enjoyed before U.S. and European Union nuclear sanctions were imposed, following the removal of certain sanctions after the 2015 nuclear deal. A similar proposal failed at the OPEC meeting in June, again following Iran’s refusal, despite outreach by the Qataris.
  • OPEC again called for a form of output cut on Sept. 28 at an extraordinary meeting in Algiers. Markets bit on the news, with Brent prices rising sharply by about 15 percent in the following week, from $46 to $52 per barrel.
  • Can action by the cartel sustain higher crude prices over the long term? Probably not. Like a desert mirage, the image of an OPEC resurrection vanishes when approached.
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  • The massive fall in oil prices from over $100 per barrel in early 2014 to under $30 by January 2016 was caused primarily by then-Saudi Minister of Petroleum Ali al-Naimi’s strategy to gain market share for the kingdom and hurt the U.S. tight oil (or “shale”) industry by allowing the market, not OPEC interventions, to set prices.
  • While Riyadh has cranked up its production from mid-2014 to today by over a million barrels a day (to a peak of 10.7 mbpd in August this year), its fiscal position has taken a serious blow, with the budget deficit rising from 3 percent of GDP to 16 percent in 2015
  • The resilience of U.S. shale makes the argument that OPEC has experienced a resurrection a fragile claim. The cartel can probably raise prices in the short term through an output cut, but it will only be so long, perhaps already by mid-2017, before the U.S. shale industry revives and grabs any market share conceded by OPEC in a higher price environment. This will ultimately bring prices lower again, all else being equal.
  • Within OPEC, while other Gulf Co-Operation states, namely Kuwait and the United Arab Emirates, may be prepared to make a small cut to their production, key producers like Iraq and Venezuela are in too difficult a fiscal position to agree to any major cut.
  • Outside OPEC, Russia reached a production record of 11.1 mbpd in August, eclipsing Soviet levels. Being so close to the maximum anyway, Russia has little to lose by supporting the OPEC output cut and agreeing not to raise production further. Yet the Kremlin is unlikely to impose actual cuts on the range of oil companies that operate in the country.

  • In the short term, it seems Riyadh’s fiscal position was under such pressure from low oil prices that something had to give. While the kingdom has eased the fiscal pressure by starting to issue sovereign debt, the burn rate through its foreign reserves has been relentless (from about $740 billion in mid-2014 to $550 billion today) as it has attempted to defend the currency in the face of substantial capital flight from the country since the oil price crash in 2014.
  • Climate change will plainly be a major problem of the 21st century, and the world is moving away from fossil fuels: game over for an unreformed Saudi Arabia.
  • Saudi Arabia will face hard years ahead as the oil market increasingly looks to U.S. shale, not OPEC, as a handrail to oil prices on the supply side. However, this might well be the jolt that Salman needs to push through painful but necessary reforms
Ed Webb

To Iranian eyes, Kurdish unrest spells Saudi incitement | Reuters - 0 views

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    States in the region have long used Kurds and other minorities to weaken rivals. That doesn't confirm the truth of Iran's claims here, but does make them plausible.
Ed Webb

Is Iran becoming a major regional arms producer? - Al-Monitor: the Pulse of the Middle ... - 0 views

  • during the past few years, in spite of extensive sanctions on exports of conventional military equipment, Iran has managed to become self-sufficient in the production of a vast range of weapons and military equipment. Indeed, a large portion of Iran’s military equipment is presently met by domestic production. Given this capacity, Iran appears now ready to establish a serious and effective presence in the international armament market.
  • deliveries of weapons to Iraq have increased so much that all semi-heavy artillery equipment, sniper weapons and many other types of personal and armored weapons presently used by Iraqi paramilitary forces are Iranian-made. In addition, over the past year, Iran has also started sending the T-72S main battle tank to Iraq.
  • Iranian-made military equipment is officially and extensively now in use in Lebanon, Iraq and Syria. Since Iranian-made arms and equipment have yet to be tested, it is not possible to compare them with the originals they’re modeled after. However, the expansion of terrorism in the region has given Iran an opportunity to test its military equipment in action and learn about possible defects
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  • The JCPOA, and the prospect of the lifting of conventional arms-related sanctions in the next five years, have resulted in the Iranian armed forces seeking a way to expand their domestic military industrial capabilities and become part of the international arms market. For instance, Iran’s minister of defense participates in most military exhibitions in the region. He is also constantly in contact with countries such as China and Russia regarding the transfer of the most advanced military equipment technology to Iran. In this vein, it appears that the sanctions related to conventional weapons trade are already being dropped, and that in the near future Iran will become a serious rival of both Western and Eastern arms firms that are presently providing conventional weapons to regional states
  • if the current trajectory of arms deliveries continues, it appears that countries such as Iran, Russia and China are set to become the Middle East’s main weapons suppliers.
Ed Webb

Widespread Iraqi anger threatens Saudi ties - Al-Monitor: the Pulse of the Middle East - 0 views

  • In light of this commotion on the streets, the Iraqi government has distanced itself from the strained Saudi-Iranian ties following the execution of Nimr and other developments, such as the storming of the Saudi Embassy in Tehran on Jan. 2 and the rupture of ties between the two countries. The government also turned a deaf ear to Iraqi Shiite forces close to Iran that demanded that ties be cut with Saudi Arabia.
  • The official Iraqi position was incomprehensible to some extremist circles. Although it has condemned the execution of Nimr, Iraq also supported the Saudi position against Iran in the closing statement of the Arab League meeting on Jan. 10. This statement condemned the attack against the Saudi Embassy in Tehran and supported the Saudi position against Iran, demanding that Iran stop interfering in Saudi affairs.
  • Iraq’s situation is currently complicated by the war against IS and the economic crisis caused by declining oil prices. Abadi seems to be looking to preserve any potential support in the fight against IS, which challenges the existence of the Iraqi state itself.
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    The three-way game between Riyadh, Tehran, and Baghdad begins to reassert itself?
Ed Webb

40 years after the oil crisis: Could it happen again? - 1 views

  • Forty years ago today, the Organization of the Petroleum Exporting Countries (OPEC) voted to raise the posted price of their oil by 70 percent.  The next day, several Arab oil producers decided to impose an embargo on oil sales to the United States to punish it for supporting Israel in the unfolding Yom Kippur War.  While the two decisions were not formally linked, policymakers have worried ever since that OPEC could again restrict the global supply of oil.

    A lot has changed since 1973.  Oil embargoes used to happen fairly frequently: There was one in 1956, and another in 1967.  Until 1973, they didn’t attract much attention.  But due to structural changes in the oil market in the early 1970s, the one in 1973 had a huge impact.  Since that time, there hasn’t been a single international embargo. (The current sanctions against Iran are an importers’ boycott, not an exporters’ embargo.)  What happened?

  • Even without an embargo, policymakers worry that OPEC manipulates the oil market. For example, James Woolsey, a former CIA director and self-proclaimed energy hawk, argues that OPEC has a grip on global oil and gasoline prices so tight that the U.S. will never be free of its influence.  Like most people, Woolsey wrongly believes that OPEC is a powerful cartel. Many economic studies cast doubt on that idea, but there are still some scholars who support the proposition.

    OPEC rarely if ever influences its members’ oil production rates.  It has almost no impact on prices.  My research looked at OPEC’s behavior since 1982, when it first adopted formal production quotas for its members.  I found that joining OPEC has little influence on new members’ oil production rates; members cheat on their quotas a whopping 96 percent of the time; changes in OPEC quotas have little impact on changes in production; and members of OPEC produce oil at about the same rate as non-members of the group, all else equal.  Any of these findings would cast doubt on OPEC’s status as a cartel; collectively they are damning.

  • Most OPEC members – from Venezuela to Nigeria to Iraq – are pumping their oil as fast as they can, with no spare capacity
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  • OPEC is a political club.  It perpetuates a “rational myth” about its cartel power to generate political benefits and prestige for its members, both at home and abroad.  As long as OPEC is viewed as powerful, its leaders can falsely claim credit at home for “managing the economy.”
  • the world would be better off if it stopped assuming that OPEC drives world energy markets.  It does not.  Most of the credit or blame for rising oil prices in recent years rests with the energy demands of Asian customers, not diabolic moves by OPEC
Ed Webb

Iraq: Iran's Economic Gateway To the World - Al-Monitor: the Pulse of the Middle East - 0 views

  • 72% of Iran’s exports go to Iraq
  • “Iran is in dire need of Iraq, particularly at this stage; not only to market its goods, but to export them to other countries, or to facilitate the movement of Iranian funds through Baghdad to Damascus and Beirut.” He said, “Iraq is Iran’s economic outlet to the world.”
Ed Webb

Iran to Start Gas Exports to Iraq Soon - Minister | World | RIA Novosti - 0 views

  • Iraq is expected to consume about 20-25 million cubic meters of Iranian gas per day.

    Iran, which has the world's second largest natural gas reserves after Russia, is also close to signing an agreement on gas supplies to Syria via Iraq

  • In the summer of 2010, Iran, Iraq and Syria signed a memorandum of understanding on building a gas pipeline across the territory of the three countries. The project to build the gas pipeline, dubbed “Islamic Gas,” is estimated at $10 billion.

    Under the project, the gas pipeline, which will be 5,600 km (3,479 miles) long, is intended to pump 110 million cubic meters of gas per day. Syria wants to purchase 20-25 million cu m per day.

    The 56-inch pipeline will run from Assaluyeh near the South Pars gas field in southern Iran.

    Some volumes of gas will be supplied to Lebanon and Jordan through the Arabian gas transportation system. Iran also has plans to start liquefied natural gas supplies to Europe via Syria’s Mediterranean ports.

Ed Webb

Is Turkey's Foreign Policy Really Sunni? - Al-Monitor: the Pulse of the Middle East - 0 views

  • it would be wrong to believe that bigoted Sunnis in Ankara embarked on an anti-Shiite mission in the Middle East that has left Turkey at odds with central governments in Syria, Iraq, and ultimately in Iran. To the contrary, Ankara has gone to great lengths to avoid the region's sectarianism, but its efforts have not been very fruitful.
  • it would be also wrong to assume that the reality of sectarianism in the Middle East isn't influencing feelings in Ankara and in Turkish society more broadly. The Alawite-Sunni conflict in Syria is creating bitterness between Turkey's Alevis and Sunnis, although violence seems highly improbable. On the other hand, Turkey is indeed beginning to be perceived as a Sunni power in the region.
Ed Webb

Humanitarian Aid Blocked As UN Imposes New Iran Sanctions | Common Dreams - 0 views

  • Food and medical exports to Iran are being blocked from that country even though they are exempt from new sanctions instituted Monday by the European Union.
  • "With Iraq, that of course ended up with 500,000 Iraqi children dead, resulted in the shortage of medicine, and other needs, and ended up ultimately to forceful invasion and war,"
  • Washington-based sanctions attorney Eric Ferrari said food and medical exports to Iran are being blocked, even though those items are technically exempt from sanctions. According to the NIAC:

    He said he has encountered numerous scenarios—an attempted export of a $250,000 of burn medicine, a multimillion dollar export of prosthetic limbs, exports of food supplies—in which goods that had a license from the U.S. government, a willing exporter, and a willing importer, still were blocked because no foreign bank was willing to take the risk to facilitate the transaction.  The reason, he said, is that the U.S. government has announced broader and broader penalties for any foreign bank dealing with Iranian financial institutions, while making no distinction between prohibited and authorized transactions with those banks.  The result is fewer and fewer channels for legal, humanitarian, food, and medical transactions.

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    Some confusion here - headine refers to UN, text refers to new EU sanctions, but also to existing US sanctions. Nevertheless, it is a matter of concern that sanctions are a blunter weapon than might appear from much media coverage and political discussion.
Ed Webb

Al Jazeera speaks with PKK rebel leader - Middle East - Al Jazeera English - 0 views

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    Note that he speaks Turkish here, not Kurdish - maybe due to who AJ has available to interpret.
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