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Saudi Arabia

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Yemen: Unintended Consequences

The Sunni Arab countries that started bombing Yemen on Wednesday night seem to think they are fighting an Iranian-backed plot to expand Shia power and influence in the Arab world. Most other countries find that hard to believe, but even if the Sunni countries are right, wars often have unintended consequences. This military intervention is likely to have results that Saudi Arabia and its friends don’t like one bit.

They’ve all shown up for this war. Saudi Arabia and the other monarchies of the Arab world (Jordan, Kuwait, Bahrain, Qatar, the United Arab Emirates and even Morocco) have all committed aircraft to bombing Yemen. Egypt, Jordan, Sudan and Pakistan have offered to send ground troops. And the United States (which just pulled the last American troops out of Yemen) promises to provide “logistical and intelligence support.”

In practice, however, this coalition of Sunni Arabs and Americans is unlikely to commit large numbers of ground troops to Yemen: the country has been the graveyard of foreign armies from the Romans to the Ottomans. But if they don’t do that, the (entirely unintended) result of their bombing may be to facilitate the take-over of most of Yemen by al-Qaeda and/or ISIS.

Sunni paranoia about the rise of Shia power has its roots in the American invasion of Iraq in 2003. So long as the Sunni minority ruled Iraq, it limited the influence of Iran, the paramount Shia power, in the Arab world. With the US overthrow of Saddam Hussein and the destruction of Sunni supremacy in Iraq, Iran’s power automatically soared – and so did its influence in Shia parts of the Arab world.

Iran didn’t have to do anything particularly aggressive for paranoia to take off in the Sunni countries of the Gulf. Of the 140 million citizens of countries that border on the Persian/Arabian Gulf, about two-thirds are Shias. With a Shia-dominated government in Baghdad, Saudi Arabia and the smaller Sunni Arab monarchies felt terribly exposed and began to see Shia plots everywhere.

They see such a plot now in Yemen. The Houthi militia, drawn from the warlike Shia tribes of northern Yemen, have taken control of all the country’s big cities and most of its thickly populated agricultural heartland in less than one year. This is not actually all that rare an event in Yemeni history, and it never required help from Iran before, but now the hand of Iran is suspected everywhere.

That’s why Sunni countries from all over the Arab world piled in so readily. They really believe they are fighting the Iranian bogeyman, although there is almost no evidence of direct Iranian support for the Houthis. (Nor is it easy to think of any strategic reason why Iran would be interested in Yemen.)

The historical pattern is that these periodic conquests of the country by the northern tribes usually recede again after a while, because Shias are only a third of the population and the northern tribes who provide the manpower for the Houthi milita are only a fraction of the Shias. But this time nobody is willing to wait for the local Sunni backlash in Houthi-occupied parts of Yemen to push the northerners out.

The “coalition” is now bombing the Houthis all over the country. How intensively and how accurately remains to be seen, but if they really succeed in breaking the Houthi grip on central and southern Yemen, they will create a power vacuum that will NOT be filled by the “legitimate” president of Yemen, Abdrabbuh Mansour Hadi, whom they are allegedly trying to restore to power.

Hadi’s forces have utterly disintegrated, and Houthi fighters now occupy the temporary capital that he established in his home city, Aden. (The real capital, Sanaa, has been in Houthi hands since September.) Hadi left Aden by boat on Tuesday, which suggests that he has left the country entirely – unless he plans to create another provisional capital on, say, the island of Socotra.

So if the coalition bombs the Houthis out of Aden, but does not commit ground troops of its own, the real winners will be the al-Qaeda forces that wait just outside the city. Much the same goes for Taiz, the third city, and even for Sanaa itself: it is al-Qaeda or ISIS jihadis who stand to profit most from a Houthi retreat.

The only other force in Yemen that could offer any opposition to the jihadis is the fighters who have rallied to the support of exiled ex-president Ali Abdullah Saleh since he returned to the country. But Saleh is allied to the Houthis and he is a Shia himself, so it’s hard to see the coalition switching its support from Hadi to him.

Yet it’s also hard to see the coalition committing a big army to Yemen. Everybody who has done that has regretted it. So while Sunni planes bomb Shia fighters, the jihadis may step in and sweep the board. An unintended outcome, of course, but not an unforeseeable one.
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To shorten to 725 words, omit paragraphs 10 and 11. (“The coalition…Socotra”)

How Long Will the Oil Stay Cheap?

I’m in Alberta, the province that produces most of Canada’s oil, and there’s only one question on everybody’s lips. How long will the oil price stay down? It has fallen by more than half in the past nine months – West Texas Intermediate is $48 per barrel today – and further falls are predicted for the coming weeks.

This hits jobs and government revenues hard in big oil-producing centres like Alberta, Texas and the British North Sea, but its effects reach farther than that. “Clean” energy producers are seeing demand for their solar panels and windmills drop as oil gets more competitive. Electric cars, which were expected to make a major market breakthrough this year, are losing out to traditional gas-guzzlers that are now cheap to run again.

Countries that have become too dependent on oil revenues are in deep trouble, like Russia (where the rouble has lost half its value in six months) and Venezuela. Countries like India, which imports most of its oil, are getting a big economic boost from the lower oil price. So how long this goes on matters to a great many people.

The answer may lie in two key numbers. Saudi Arabia has $900 billion in cash reserves, so it can afford to keep the oil price low for at least a couple of years. The “frackers” who have added 4 million barrels/day to US oil production in the past five years (and effectively flooded the market) already owe an estimated $160 billion to the banks.

They will have to borrow a lot more to stay in business while the oil price is low, because almost none of them can make a profit at the current price. Production costs in the oil world are deep, dark secrets, but nobody believes that oil produced by hydraulic fracturing (“fracking”) comes in at less than $60-$70 per barrel.

The real struggle is between the frackers and Saudi Arabia, because the latter is the “swing producer” in OPEC (the Organisation of Petroleum-Exporting Countries), the cartel that has dominated the global oil market for the past fifty years.

All oil exporters want to keep the price high, but Saudi Arabia was the one OPEC member that could and would cut its production sharply for a while when an over-supply of oil in the market was driving prices down. It could afford to do that because it has a relatively small population, very large savings – and a cost of production so low that it can make some profit on its oil at almost any price.

But even the Saudis cannot work miracles. They can aim for maximum production or maximum price; they cannot do both at the same time. Normally they would cut production temporarily to get the price back up. This time they refused to cut production and let the price collapse, despite the anguished pleas of some other OPEC members that need money NOW.

The Saudis are thinking strategically. OPEC only controls about 30 percent of world oil production, which is a very low share for a cartel that seeks to control the price. If fracking continues to expand in the United States, then OPEC’s market share will fall even further. So it has to drive the frackers out of business now.

At first glance the Saudis look like sure winners, because they can live with low prices a lot longer than the deeply indebted frackers can. The banks that have lent the frackers so much money already won’t get it back if the industry implodes in a wave of bankruptcies, but they don’t want to throw good money after bad.

The real wild card here is the US government, which wants the “energy independence” that only more domestic oil production through fracking can provide. Will it let the American fracking industry go under, or will it give it the loan guarantees and direct subsidies that would let it wait the Saudis out?

Stupid question. Of course it will do what is necessary to save the fracking industry. Ideology goes out the window in a case like this: you can get bipartisan support in Washington for protecting a key American industry from “unfair” foreign competition. That will certainly be enough to keep the frackers in the game for another two or three years.

Meanwhile, the OPEC members that depend on oil income to keep large populations well fed and at least marginally content (e.g. Iran, Nigeria and Venezuela) will be facing massive public protest, and possibly even the threat of revolution. Their governments will be putting huge pressure on Saudi Arabia to save them by cutting production and driving the price back up.

It’s impossible to say how this game will end, but it’s pretty easy to say when. Two years ought to do it. Once the outcome is clear, the price of oil will start going back up no matter which side wins, but it will go up relatively slowly. We are unlikely to see $100-a-barrel oil again before 2020 at the earliest.
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To shorten to 725 words, omit paragraphs 9 and 13. (“The Saudis…now”; and “Meanwhile…up”)

With Allies Like These…

Turkey’s Prime Minister Ahmet Davutoglu was in London last week, telling the Western media how helpful Ankara was being in the struggle against the terrorist “Islamic State” that has emerged in northern Syria and Iraq. Turkey is doing everything it can, he said – although, of course, “We cannot put troops everywhere on the border.”

Turkey’s open border has become a sore point with its Western allies, who suspect that President Recep Tayyip Erdogan is deliberately allowing a steady flow of recruits and supplies to “Islamic State” because he still wants the Sunni rebels, most of whom are jihadi extremists, to overthrow Bashar al-Assad, Syria’s Shia ruler. (Erdogan is no jihadi, but he is a devout and militant Sunni Islamist.)

But Erdogan’s motives are irrelevant, because Turkey simply cannot put troops everywhere on its 820-km. border with Syria. Or so says Ahmet Davutoglu, and only an enemy of Turkey (or somebody with a grasp of basic mathematics) would say otherwise.

I am no enemy of Turkey, but I can do basic arithmetic. If you stationed Turkish troops along the entire length of the Syrian border at ten-metre intervals – that’s enough for a machine-gun nest every fifty metres – it would take about 82,000 soldiers to cover the entire 820 km. The strength of the Turkish army (never mind the navy and air force) is 315,000 soldiers.

Maybe Turkey doesn’t have that many machine-guns, but it’s not a poor country, and machine-guns are quite cheap on the international market. Or maybe it would prefer to use some other equipment instead: a good fence and some motion-detectors would help. But the main requirement is manpower, and not very highly skilled manpower at that. The Turkish army has a few other jobs, but not any high-priority ones.

Even if you allow for frequent rotation of the soldiers manning the border, it would take much less than half the strength of the Turkish army to shut the border to foreign fighters. Maybe a few jihadis would still get through, but the vast majority wouldn’t. The only reason Ankara doesn’t shut the border is that it doesn’t really want to.

Cutting off the flow of jihadi volunteers to Syria would not greatly change the local military balance: IS uses them mostly as mere cannon-fodder. The point is that Turkey is not fully committed to the destruction of Islamic State, and indeed will give IS deniable help in order to further the goal of a Sunni victory in Syria, despite being part a “coalition of the willing” that is nominally dedicated to destroying IS.

The same goes for Saudi Arabia, although it has sent some token aircraft to bomb IS. Riyadh tries to prevent any Saudi citizens from going to fight for IS, and it certainly does not want the IS brand of radicalism to come to the kingdom. Indeed, Saudi Arabia has already started building a 900-km. high-tech wall along its border with Iraq to stop IS activists from entering the country.

But it is not a long way from the Wahhabi brand of Sunni Islam that is promoted by Saudi Arabia to the “takfiri-salafist” doctrines espoused by the IS militants. Saudi private individuals have been a major source of financing for IS, and until recently Riyadh just turned a blind eye to it. Even now Saudi Arabia doesn’t want Islamic State destroyed if that means Assad gets to stay in power in Syria.

Then there’s Iran. In Iraq, where Islamic State controls half the country’s territory and threatens a Shia-dominated regime, Iran and the United States are fighting almost side-by-side to defend Prime Minister Haidar al-Abadi’s government. (They don’t actually talk to each other, but they each tell the Iraqis where they are planning to bomb so there are no collisions over the target areas.)

But next-door, in Syria, it’s different. Iran has sent troops, weapons and money to defend Bashar al-Assad’s regime, while the United States is still pledged to overthrow it. They both see Islamic State (which controls about a third of Syria’s territory) as an enemy, but Washington still believes that it can create some other, more “moderate” army of Sunni rebels that will eventually take Assad down.

And Russia, of course, still supplies Assad with weapons, money and diplomatic support – but despite its own difficulties with jihadi rebels back home in the North Caucasus, Moscow is not participating in the military campaign against Islamic State. Its quarrel with the United States over Ukraine is too fierce to permit that degree of cooperation elsewhere.

And so on, and so forth. Not one of the major outside powers that is opposed to Islamic State in principle has a clear strategy for fighting it, nor are they willing to cooperate with one another.

So IS will survive, at least for some years to come, despite the horrors it inflicts on the innocent people under its control. It may even expand a bit more, though the end of the siege of Kobane shows that it is far from unstoppable.
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To shorten to 725 words, omit paragraphs 5 and 12. (“Maybe…ones”; and “And Russia…elsewhere”)

Oil: Blind-sided by Technology

“The price of oil will hit its floor and it will rise again,” President Nicolas Maduro assured Venezuelans, whose shaky economy depends critically on a high oil price. “Venezuela will continue with its social plans. Venezuela will move forward.”

No it won’t, and neither will Russia, Iran, or Nigeria. The only major oil exporters that are not in deep trouble are the Arab countries, whose governments have some room for manoeuvre because of low production costs, relatively small populations, and big foreign currency reserves.

Since June the cost of a barrel of Brent crude, the benchmark for world oil prices, has fallen by almost a quarter, from around $110 a barrel (where it was stuck for the past four years) to just above $80 a barrel. Last month, for the first time in decades, Nigeria exported no oil at all to the United States. Even at a big discount, Americans just don’t need it. And the main reason for all that is fracking.

American production has almost doubled in the past five years thanks to the new drilling technologies, and the United States overtook Russia last year to become the world’s largest producer of oil and gas combined. (Saudi Arabia comes a distant third.) With production soaring and world demand for oil stalling due to slow economic growth, a collapse in prices was inevitable. The question is how far they will collapse, and for how long.

The answer is probably not much further, for the moment – but they could easily stay down in the $75-$85 range for a couple of years. The reason for that is that the “swing” producers (mostly Arab), who could theoretically push prices back up by cutting their own production, have clearly decided not to do so.

Their concern is for the long-term power of the OPEC cartel, which used to be strong enough to set the price of oil. That never will be true again unless they can drive the (mainly American) frackers who are causing the over-supply of oil out of business.

Saudi Arabia and its allies are hoping that a prolonged period when the price of a barrel of oil is lower than the cost of getting that barrel out of the ground by fracking will ruin this new industry and bring back the Good Old Days. Dream on.

The Saudi strategy won’t work because some 98 percent of US crude oil and condensates has a break-even price of below $80 per barrel. Indeed, 82 percent of American production would still be turning a profit at $60 per barrel.

Even with its massive foreign currency reserves, Saudi Arabia probably cannot afford to keep the oil price low enough for long enough to break the American frackers. (Its own break-even price for conventional oil is $93 per barrel.) And the Iranians, Nigerians, Venezuelans and Russians, who depend on oil revenues for at least half of their national budgets, will be screaming for higher prices before they face riots in the streets.

So this is not a transient event; it’s a revolution. The Organisation of Petroleum-Exporting Countries (OPEC) came into its own when the United States ceased to be the dominant global producer in the early 1970s. With the re-emergence of the United States as the biggest producer, OPEC’s clout is bound to shrink – so oil prices will probably stay well below $100 a barrel for the foreseeable future.

This will be a great boon for countries that depend heavily on imported oil, like India and China. It may eventually liberate the United States from its compulsion to intervene repeatedly in Middle Eastern disputes that are really none of its business. And it may be a disaster for repressive and/or corrupt regimes in countries like Russia (break-even price $105 per barrel), Nigeria ($119), Venezuela ($121) and Iran ($140).

It also means that worries about “peak oil”, and the underlying calculation that the world had only about forty years’ worth of proven oil reserves left, can be set aside for a while. We are already up to 53 years of reserves, and we are finding new oil faster than we are using existing reserves.

Of course, a broader view of our situation would find little reason for rejoicing in all this. Our global civilisation depends on fossil fuels for 85 percent of its energy, and our annual emissions of carbon dioxide and other greenhouse gases are still rising.

Just another twenty-five years of that will deliver us to the “point of no return”: 450 parts per million of CO2 equivalent in the atmosphere. That would raise the average global temperature by 2 degrees C, and trigger natural sources of warming that it will be impossible for us to turn off again. Runaway warming is not a happy prospect, so it is unseemly to celebrate the news that we have even more oil to burn – and cheaper oil, at that.

On the other hand, it would be entirely appropriate to celebrate the news that other new technologies may open up a better escape route from fossil fuels. Solar power, wind power, nuclear fission, and hydro power all have a role to play in that task, but the Holy Grail for half a century has been fusion power. It may be much closer than we thought.
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To shorten to 725 words, omit paragraphs 11, 12 and 15. (“This will…reserves”; and “On the other…thought”)

Gwynne Dyer is an independent journalist whose articles are published in 45 countries.

THIS ARTICLE MAY ALSO BE USED AS THE FIRST OF A TWO-PART PIECE CALLED “GLOBAL ENERGY: BLIND-SIDED BY TECHNOLOGY”. In that case, this part would be sub-titled “FRACKING”, and the second part “NUCLEAR FUSION”. If you wish to use it that way, but still want the shorter length, THEN OMIT PARAGRAPHS 6, 11 AND 12 from this article..  (“Their…concern”, and “This will…reserves”