Listening to the opinions of experts regarding the continuing sharp decline in oil prices, one is involuntarily surprised at the naive estimates, which can be summed up like this: Saudi Arabia, Kuwait and several other OPEC members are reducing oil prices exclusively to take over new markets during the global overproduction of “black gold”, and in order to make the production of shale oil in the US unprofitable.
These expert opinions do not take into account the geopolitical factor – namely the hard line that Washington has taken to undermine the Russian and Iranian economies to the greatest extent possible. The US wants to subdue Moscow, forcing it to play by American rules and to stop Moscow from conducting an independent policy. The next phase of the process is replacement of the current regime under President Vladimir Putin with a pro-Western liberal one.
In regards to Tehran American goals are all too clear – to weaken Iran’s support for Damascus on the eve of an operation to replace Assad and extract maximum concessions from Tehran when signing a deal on Iran’s nuclear programme, and at a later stage – to replace the current “revolutionary” regime with a pro-Western one.
The objectives of the Kingdom of Saudi Arabia (KSA) are also quite clear – to influence Iran’s economy, which is Saudi Arabia’s main rival in the region, to sideline Iran in Iraq and Syria, to disrupt the formation of a Shiite arc around Iran, and with the participation of Iran, Iraq, Syria, Yemen and the Lebanese Hezbollah, if possible, to prevent the signing of the agreement on a nuclear programme, leaving Tehran under international sanctions.
In regards to Russia, Riyadh is hostile, given Russia’s support of the regimes in Syria, Iraq and Iran and Moscow’s stance on the “Muslim question” in Russia itself, especially in the North Caucasus, and the extremely negative attitude of Moscow toward Wahhabism which is the official ideology of the kingdom.
So the whole mystery of falling oil lies precisely in politics, not in economic considerations, as is persistently reiterated by oil experts. Washington and Riyadh are simply repeating the embodiment of a secret agreement on lowering oil prices in 1984 between the American president and the Saudi king, which largely contributed to the disintegration of the USSR. And the current secret deal was struck in late August this year. Before that, Obama went to Riyadh in March, and even then he managed to convince the king to effect a sharp decline in oil prices, at the king’s direction oil prices first began to smoothly decrease in summer of this year, and then fell dramatically. The Saudis needed time to increase oil production, then lower their oil prices below the global market value for dumping, and to conceal the appearance of collusion with Washington. Then everything was finalized through the Secretary of State John Kerry and his Saudi counterpart. The CIA director, previously a US resident in Riyadh, was also actively involved in this process. The full implementation of the plan began after a meeting in Jeddah between the foreign ministers of the US and KSA to build an “anti-ISIL” coalition by external appearances, but in fact an anti-Syrian, anti-Iranian and anti-Iraq coalition involving Washington with the Cooperation Council for the Arab States of the Gulf (GCC), Turkey, and Jordan.
The results of the USA and KSA’s anti-Russian and anti-Iranian conspiracy are already evident, and they represent a real threat to the national security of the Russian Federation and Iran. The cost of Brent crude oil fell below 77 USD a barrel on Nov. 14. That is, since June the price of a barrel of Brent crude has fallen by about 32%. To further throw everything into confusion, on November 13 of this year the Oil Minister of Saudi Arabia Ali al-Naimi has broken a long silence and commented on the long-lasting decline in oil prices, saying that his country was not the cause of this decline, and refuted accusations of a price war.
The Russian authorities are dependent on oil: about half of budget revenues comprise oil and gas revenues. Furthermore, the state budget of the Russian Federation in 2015 was based on the estimation that the average price of Urals oil would be 96 USD per barrel. The strengthening of the US currency on global markets, record oil production volumes in the United States and OPEC countries, combined with falling oil prices, are a threat to the Russian economy. President Obama was well aware of all this when he threatened in the spring of this year that Russia would “pay the price” for the annexation of Crimea. Incidentally, as early as in March, billionaire George Soros proposed the US administration a way to punish Russia for annexing Crimea with a decline in oil prices, which could be achieved by selling oil from the US strategic reserve. Of course, he is well aware that the issue of oil prices is in Russia not only economic, but political, and can determine the future of the Russian state. Even well-known pro-Western liberal Yegor Gaidar in his time stated that the cause of the collapse of the USSR was not its planned economy, but Saudi Arabia’s decision to lower international oil prices. “Actually, the date of the collapse of the USSR, now that history has already played out, is well known. This, of course, is not the Belavezha Accords. It is not the events of August, but those of 13 September 1985. This was the day when Saudi Oil Minister Yamani said that the policy of restraining oil production was being terminated… After which prices collapsed,” he said.
True, on November 14 of this year Russian President Vladimir Putin said in an interview with Itar-Tass that Russia is better situated to deal with the crisis caused by the drop in global oil prices than other countries. “For country like ours, it is even easier. Why? We are an oil and gas producing country, and we are very careful with our reserves – including gold reserves and foreign currency reserves. Our reserves are sufficiently large to allow us to be confident in the fact that we will completely meet all of our social obligations and retain all budgetary processes in the entire economy under these circumstances,” said the president. It is clear that the Russian leader is trying to calm the public and thereby halt further depreciation of the rouble. But in reality the Central Bank, following the Ministry of Economic Development, has started to develop a shocking scenario for the Russian economy. Although, he has gone further than his predecessors: if the Office of A. Ulyukaev predicted decline of oil in 2015 to 91 USD per barrel, then the Central Bank is preparing a forecast with a truly shocking price – 60 USD per barrel. The investment bank JPMorgan Chase has issued the general warning that oil prices in early 2015 could fall to 65 USD per barrel. “If OPEC does not make the decision to reduce quotas in November, oil prices could fall to 70 USD a barrel and even dip as low as 65 USD in early January 2015,” the bank noted.
It is, of course a good thing that Russian authorities are optimistic, but it appears that Moscow and Tehran should start to react to the oil aggression waged by the US and Saudi Arabia. The KSA is now a weak state, given that ISIL terrorism has already come to the shores of the kingdom, and armed conflicts are taking place within the country and along its borders. But for this it is necessary not only for Russia and Iran to urgently join forces, but also for other oil-producing countries affected by the fall in oil prices, such as Venezuela. Once again Riyadh is trying to inflict major damage on Russia and Iran, and Moscow and Tehran have the right to undermine the stability of the KSA and force it to stop playing by the American scenario.
Viktor Titov, Ph.D in Historical Sciences and political commentator on the Middle East, exclusively for the online magazine New Eastern Outlook