Watching The US Become A ‘Bit’ Player In The Middle East
$OIL
The US presence in the Middle East for years provided some control over one of the world’s largest Crude Oil reserves is dissolving before our eyes.
The Bush Family’s (under GWB as President) removing Iraq’s Saddam Hussein from power removed his harsh, but stabilizing hand from the tribal turmoil that always existed in the poorly designed nation of Iraq.
Now, rather than attempting to repair the damage, US President Barack Hussein Obama along with his Secretary of State, Hillary R. Clinton created chaos and are intent on leaving what Mr. Obama terms “a Quagmire’ read stuck in the mud.
As such, the chaos is not only in Iraq, but in Syria too. The changing political landscape is pushing major regional players: Turkey, Egypt and Saudi Arabia to drastically reshuffle their assumptions and allegiances.
It is a law that Nature abhors a vacuum and that history is broadly the history of leaders.
The vacuum that is the Middle East has draw in Russian President Vladimir Putin, perhaps the boldest leader on the world stage. By drastically raising its military presence in the region, Russia is taking advantage of political confusion and paralysis in the West to create a Middle East that may be more supportive of her interests.
The focus for now is on Syria, highlighted by the surprise visit of Bashir al Assad to Moscow last week, but the real target of Russia’s move may be Saudi Arabia, which is now incurring massive military expenditures as a result of fighting in Yemen and by proxy in Syria and quickly depleting its war chest. Like Russia, Saudi Arabia is being hurt by low Crude Oil prices. Given both country’s dependency on the price of Crude Oil, they have more in common than many think, believe or expect.
Russia’s finances have been hammered by the drop in Crude Oil prices and by the US led NATO sanctions imposed for the Ukraine incursion.
To maintain its viability, Russia will seek push up the price of Crude Oil by any means. Coordinated production agreements between Russia and Saudi Arabia could offer Russia that possibility.
This is not be in the US’ interest.
Rising Crude Oil prices would add to inflation pressures and put more pressure on the US Fed to raise rates. An outcome which should raise concerns around the world, but seeing no one considering the possibility.
As a high cost producer, Russia cannot survive in a long term low price environment.
Traditionally, Saudi Arabia had agreed to align its Crude Oil production policies to the broad strategic interests of the United States in exchange for US protection against its regional rivals, in particular the Shiite state of Iran. But the Obama Administration’s courtship of Iran, its failure to support allies in Egypt, and its hesitancy to follow through with threats against Syria, is likely encouraging the Kingdom to seek new, and reliable allies.
Russia is still a military superpower, and it appears set, under President Putin, to challenge the US as part of a strategy to restore its position as a major global player. Given America’s vastly superior financial strength, the contest is only possible given Mr. Putin’s greater mastery of power politics and the realities of global statecraft.
Mr. Obama’s foreign policies show a strong leftist leaning, a stunning lack of military understanding, and a naïve belief in the benign power of organized democracy.
Mr. Putin 180 degrees out of Mr. Obama’s phase.
Rather than organizing community activists in Chicago, Mr. Putin cut his teeth as head of the KGB in former East Germany. Subsequently, his political rise was fast, illustrating a clear ability to work within power politics.
And as opposed to Mr. Obama’s discomfort with America’s military history, Mr. Putin is a patriotic Russian who strained to see the fall of the Soviet Union. He has proven to be a very calculating leader bent on restoring Russia’s influence in the Crimea, the Ukraine and the Middle East. Mr. Putin is not afraid to stand up to the United States and its allies. Thus, increasing his domestic support and international standing.
To support its ally in Syria, Russia is deploying ground troops, including tanks and heavy artillery.
Clearly, Mr. Putin is thinking in regional terms. With an airbase in Syria, his fighter-bombers can project power into and throughout the region, an opportunity that it has not enjoyed for decades. So far Russian forces have not been used to destroy ISIS, as the US hoped, but supports the Assad regime directly. Meaning the Russians are going after factions directly supported by the US, setting up a dangerous proxy war between the superpowers.
As part of his efforts to move closer to Iran, Mr. Obama appears to have put aside the US’ well-established Middle East relationships with Israel and Saudi Arabia. Causing resentment and a feeling that the US can no longer be trusted as a reliable ally.
According to an article in Brookings, Saudi Crown Prince and Defense Minister, Prince Mohammed bin Salman visited President Putin in St. Petersburg in June 2015.
The most trusted son of the Saudi King, Prince Mohammed was accompanied by the Saudi Foreign Minister, Adel Al Jubeir. Perhaps most interestingly, the delegation included the Saudi Minister of Petroleum, Ali Al Naimi, together with some senior military and intelligence officials.
The meetings went well, with reciprocal State Visit invitations offered by both parties.
It was reported that, on 3 October 2015, Russian Energy Minister Alexander Novak said in referring to the possibility of Russia’s preparedness to meet with OPEC and non-OPEC Oil producers that, “If such consultations are to happen we are ready to take part.”
Low Crude Oil prices have kept inflation down, allowing the Fed to continue stalling on a normalization of US interest rates. A rise in Crude Oil prices will result in increased inflation. This would remove a Key public excuse, enabling the Fed to justify Zero+ interest rates.
I have said in the past that the US Fed will not normalize interest rates, other than a possible token 0.25 or even 0.125%, until and when forced by market forces. A higher Crude Oil price leading to inflation may provide such pressure if not to the Fed directly, then to international bond markets.
A market triggered interest rate increase damages the credibility of the US Fed, the international monetary system and to the current prices of financial assets standing at inflated prices, including bonds, equities and, over the short-term, real estate.
As a result, the Chess Match in the Middle East, may not be as insulated from the American economy as Wall Street would like the investing public to believe. If Saudi Arabia drifts out of America’s alignment, financial collapse will be difficult to avoid.
Stay tuned…
HeffX-LTN
Paul Ebelng
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