Saudi Arabia’s oil war against Iran and Russia

[2013]

This week, oil fell through the price floor of $60 a barrel and gas at my local filling station was $2.26 a gallon. That's great news for commuters and almost every business, but wonderfully bad news for our ugliest enemies. If oil prices remain low through next year, the effect on rogue governments, from the Russian Federation to Venezuela, will go from damaging to devastating.

But Western economies (and China's) stand to benefit, with cheap oil possibly tickling Europe's snoozing markets awake. Even most underdeveloped states will get a welcome break.

This price plunge has been driven by Saudi Arabia, OPEC's dominant power. While it's true that part of Riyadh's actions respond to the energy renaissance in North America, the greater motivation is breaking Iran's will.

The Saudis believe they can no longer rely on the US to contain Tehran's imminent nuclear threat, so they're out to do what our lukewarm sanctions couldn't.
There's no love lost between the Saudis and the Russians, either. The Saudis want the Assad regime in Syria to go. Moscow props it up. The Saudis aren't doing any of this to help us, but it helps us just the same. Now the key issue is: How long will prices stay low? Markets can be unpredictable, but an emerging global glut of oil, decreasing demand and greater efficiencies suggest that petroleum products should remain relatively cheap - with fluctuations - for the next few years.
That's good news for democracies and free markets, but a nightmare for dictators everywhere.

Iran
Tehran had learned to live with Western sanctions. But oil has been its lifeline. And to balance the books, oil has to sell between $135 and $140 dollars per barrel. Good luck with that, Supreme Leader.

With the barrel price at barely 40 percent of Iran's requirement, the economy's going to hemorrhage. Iran's leaders will be under far greater pressure to compromise on the nuclear weapons - unless we keep easing sanctions for nothing in return. This is the last chance for negotiations to bring results.

The fascinating angle here is that Saudi Arabia's doing more for Israel's security than the Obama administration's been willing to do. Common enemies generate unexpected - if unadmitted - alliances.

Russia
The price collapse could not have come at a worse time for Bad Vlad Putin. The Russian president needs an oil price around $100 a barrel to prop up what's become a wartime economy.

Oil and gas provide up to a third of budget revenue and compose two-thirds of exports.
Sanctions imposed over Putin's aggression have gnawed at Russia's economy, but this price drop bites deep: The ruble has crashed, Russian bonds are pathetic, and foreign reserves are bleeding.

While Russians will put up with harder times than Westerners will, Putin's made extravagant commitments (bet he'd like to have back the $50 billion he squandered on corrupt Olympic construction).

The world's fave bare-chested bully had embarked on a massive arms buildup, with a hi-tech $5 billion command center just unveiled. But Putin's visions of military resurgence are becoming unaffordable.

He also made election promises to improve Russia's wretched health-care system. Instead, he's firing health-care workers and shuttering hospitals.
He promised higher living standards, but now the average Ivan's feeling squeezed. And Putin faces enormous costs in Crimea and eastern Ukraine, two booby-prize welfare states, with the latter shot to ruins.

Putin's popularity remains high. For now. The gravest worry is that, with his back to the wall, he'll play the Mother Russia card and attack again.

The Winners

USA, USA!

Although some energy players will suffer from lower prices and we'll see a wave of corporate consolidation, the oil-price drop's great news for American consumers, businesses and even, in the longer term, our military.An economy that had begun to recover - despite Washington - is getting another vitamin shot, while working-family budgets get a break.

The Saudi strategy also aims to hurt our burgeoning energy industry, such as the shale oil extraction in North Dakota. But it won't derail it. And the overall effect on our economy will be positive.

Perhaps the greatest benefit, though, is that the oil-price plummet is doing what the Obama administration lacked the guts to do: It's smacking down our enemies.
Former Secretary of State Hillary Clinton didn't reset relations with Moscow, but bargain-basement oil prices might. Iran may have to give up its dreams of nuclear hegemony in the Middle East.

And with the exception of China, almost every major state that benefits from lower oil prices, from Japan to India, is either an ally or neutral.
Pursuing its own interests, Saudi Arabia may have rescued a US failed foreign policy.



Source: Saudi Arabia's oil war against Iran and Russia | New York Post