24.12.2014 Author: Petr Lvov

US is Losing its Economic War Against Russia

20005643Those who genuinely believe that the US and the West have unleashed a full scale economic war against Russia because of its position on Ukraine have no idea how much mistaken they are. In fact, it was planned much earlier, precisely a year ago, when a closed meeting between senior authorities of the US and Saudi Arabia was held. This meeting was so secret that even Prince Bandar, the Saudi intelligence services chief and the head National Security Council at the time wasn’t allowed in.

This can partially explain why the key Western political leaders, including German’s Federal Chancellor Angela Merkel and French President Francois Hollande, were not present at the opening ceremony of the Winter Sochi Olympics. Apparently, those people still have some conscience, since they knew what conspiracy was going to be launched against Moscow by the West.

So the White House representatives proposed the Saudi authorities to drop the oil prices drastically, to the level of 50 dollars a barrel, which would have supposedly undermined Iran’s influence and forced it into making serious concessions on its nuclear program, and that was just what Riyadh wanted. “Russian aspect” was not explicitly stressed, although once the crisis in Ukraine began, President Obama did mention it during his visit to the kingdom. The Saudis have shown rigidity, since the decline in oil prices must have affected the social programs of the KSA. In these circumstances, Washington had to blackmail Saudi Arabia since it had accumulated enough evidence against most members of the Saudi royal family, including facts on gross violations of human rights, immoral behavior, which could have potentially led to the prosecution of Al Saud dynasty. Additionally, the United States have provided their Saudi friends with intelligence reports on the presence of thousands of Hezbollah supporters in the Shiite-populated Eastern Province of the Kingdom, which could start armed struggle against the Wahhabi regime at any given moment. And it worked miraculously well, although the starting date of this operation was yet to be determined.

Washington had to wait for the Ukrainian crisis to begin in order to drop oil prices in time with the introduction of anti-Russian sanctions. Therefore, in January 2014 the US started taking numerous efforts to destabilize the situation in Ukraine, that ended up with a brute force scenario that was facilitated by local oligarchs. One must admit that the overthrow of Victor Yanukovych and the coup d’etat that took place in Kiev went according to Washington’s plan, but few expected that Moscow will take a tough stance on Crimea, and that the south-eastern Ukraine will be transformed in a center of tough resistance to Kiev, which took power in the country illegally due to both open and hidden support of the West.

Under these conditions Riyadh suspected that the White House could be playing a double game with Iran, while using oil prices against Russia and, at the same time, to overthrow the anti-American regime in Venezuela – the third largest oil exporter. After all, Washington has manged to extend its agreement on the Iranian nuclear program with Tehran, while mitigating economic sanctions. At this point Al Saud family members suspected that they became mere pawns in somebody else’s game.

The fall in oil prices was to begin in June, but at that time the problem of ISIL has emerged as a serious challenge for the regional security. Therefore, both the United States and the KSA had to take urgent measures to prevent the collapse of the Middle East. And Riyadh decided to postpone the crisis due to the fact that it needed all the resources it could get to prevent the Islamic State from expanding its operational area. At that point, Washington could not demand that Riyadh sacrificed it own political survival for the sake of destruction of the Russian economy, along with weakening Iran and overthrowing the legitimate government of Venezuela.

But in August, when the Islamic State was stabilized, the White House officials started to apply pressure on Saudi Arabia yet again, which resulted in the sharp decline in oil prices. The dirty game began when the Saudis started selling oil at a price lower than the market’s, which resulted in a daily price collapse. At the same time Washington announced its readiness to flood the markets with its shale oil, although these claims were false, since the actual shale reserves of the US are half as big as it was announced. Riyadh sang in tune with the US, by claiming that the increase in oil exports, has nothing to do with Russia.

It must be admitted that the Russian economic experts and financial departments have panicked for a brief while. At some point it seemed that the ruble was about to crumble as the oil prices dropped lower and lower. But then the situation changed. The United Kingdom, that was playing a part in the conspiracy Russia announced that the cost of oil production in the North Sea didn’t allow them to get more than 2 dollars of profit per barrel sold. British Petroleum has sounded the alarm by announcing that it was on the verge of stopping oil production. And there’s still Norway, which is also extracting oil in the North Sea. European allies of the US have lost all desire to pay for the political ambitions of Washington, that was eager to go after Moscow. But what’s even more important – the Saudi kingdom started to crumble. An wave of terrorist attacks spread across the Eastern Province, while the internal Shia–Sunni conflict became more tense. The local ruling elite, that had lost their revenues, have started to become increasingly frustrated with the actions of Al Saud family. A drastic drop in social security funding has caused massive unrest among the common people of the KSA. Against this background that ISIL has announced that it is expanding it operational area in Saudi Arabia. But the last drop that got on Riyadh’s nerves was the US secret plans to sign an agreement on the Iranian nuclear program in February-March 2015. And then one could kiss sanctions against Iran good-bye. What this basically means is that Saudi Arabia will lost its position of Washington’s key partner in the Middle East.

It was about time for Saudi Arabia to “give a reply”to the White House as they stopped dropping oil prices. The Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi has issued a statement on December 19, in which he stated that the cooperation within OPEC will be restored. According to Ali al-Naimi, oil prices will go up since oil the is still the primary source of energy for decades to come, so the black gold market must be reanimated. However, Washington was quick to step in and force Saudi Arabia into doing what it was told to do. That is why Ali al-Naimi had to drastically change his position in the matter of days, on December 23 he stated that: “It is not in the interest of OPEC producers to cut their production, whatever the price is. Whether it goes down to $20, $40, $50, $60, it is irrelevant, the world might not see the oil price back at $100 a barrel again.” The Saudi Arabian Minister of Petroleum and Mineral Resources believes that the budgets of the Gulf countries are able to withstand a long period of declining prices. First, according to the Minister, the offshore projects in Brazil, West Africa and the Arctic are to cut their production since the price is going to make them unprofitable. What is certain however is that high-efficiency producers will rule the market in the future,’ concluded Ali al-Naimi. What can be added to this statement since this statement is an official recognition of unfriendly Saudi actions against Russia.

But Washington has lost all the same. The pillars of Russia’s economy haven’t crumbled, therefore Barack Obama is left with nothing better to do than watch the strengthening ruble and the gradual economic stabilization in Russia. For sure, Moscow and Russian people have both paid the price for Russia’s dependence on oil and gas sales . But at this point no Russian politician will have no illusions about the nature of US actions and the actions of its European and Saudi allies. It is also clear that it’s imperative to build a different economy, that will be less dependent on the West. As for Saudi Arabia it must draw one conclusion: there’s no need to pay for the other countries’ games against Russia, especially when the King and the Crown Prince are on their last legs, while ISIL militants are planning the invasion of Saudi Arabia. As of now, Saudi Arabia is following the path that can only lead to the consequent collapse of the ruling royal regime. America is ready to sacrifice its ally only to try to hurt Russian economy just a little bit more.

Peter Lvov, Ph.D in political science, exclusively for the online magazine “New Eastern Outlook”

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