Oil Wars Between Saudi and Iran?

[Chris Henrys Dealer]

This is taken from daily summary sheet quite widespread in the trading industry, which is good bathroom reading. The author provides a daily summary of overnight Foreign Exchange / Metals / Commodities / Stocks and politics. He is a staunch Rep-ublican, based in Norfolk, Virginia.

Thought this blurb was interesting. Especially in light of the elections in Bahrain last month, where the Shia party made big advances. (Bahrain is a big gas producer and moderate oil producer, where the Sunni minority rules the Shia)

[quote]Now that we've seen two major newspapers here in the US carry letters-to-the-editor from either a presently high or former high ranking Saudi official, it seems clear to us that Saudi Arabia is greviously concerned about the influence that Iran has had, is having and potentially shall in the future have upon Iraq's Shi'ia community. The Saudi's we are told, intend to support the Sunni's in Iraq should the US withdraw it's forces and put the Sunni's at risk.

The Saudi's have two potential oil "weapons" at their disposal. They need to destabilise the Iranian regime, and they intend to do so. They can do this either through driving crude oil prices lower by flooding the global market with crude oil. Thus cutting off the Shi'ias main source of funds. It is a crude, and perhaps even an effective method; the problem is that they will bring down the wrath of other OPEC and non-OPEC oil producing nations in the process. They will incur the support of the US and perhaps even a European nation or two, but on balance, their present allies in and around the Gulf will turn on them in a moment's notice should this weapon be unsheathed. It is a weapon we think Saudi Arabia is highly, very, very highly, unlikely to use.

It's alternative is to remember that 3 out of 4 barrels of crude that Iran gets out of the ground is refined in the Middle East, and that Saudi Arabia is the major refinery. Thus Iran is beholden to Saudi Arabia in to a very great degree. The Saudi's could simply refuse to Iranian crude oil in the future, forcing the Iranian's to find refinery elsewhere in a world that is already terribly short of such facilities (CHD note: Or undertake the long term project of building their own, longer term, but not helping them in the near term) Refinery prices would rise. The Saudi's, the Kuwaitis, the Emirates...all would benefit from the higher prices, while the Iranians would gain little from the higher prices, given their increased refinery costs. Doing this, the Saudi's will force the Iranians to accept Saudi hegemony; would gain the support of the oil kingdoms and Sheikhdoms in the region, and would be the very real political power there supplanting Iran.[/quote]

Then a later bit he commented about the article by Saudi Author Nawaf Obaid, where he stated that the Saudi's would consider moving troops to Iraq to protect the Sunni's if the American troops do leave

[quote]Thus it only seems logical, that if the US moves ahead with rapid troop withdrawal from Iraq, the Saudi's will move to cut Iran off and at the same time make the moves that drive crude products higher, taking petroleum and natural gas with it. We can see this playing out rather readily. It makes sense, and clearly is not bearish of Energy. It is obviously very bullish for oil stocks[/quote]

I think the case for Saudi Arabia to make moves for higher crude oil via refinery is a good point. I'm not sure if I agree with that action being tied to a US troop withdrawal, they'll do it anyway. So the case for higher oil prices is clear.

But that point about the Saudi's sending troops in to protect the Sunni is interesting. If done, it would mean that the Saudi's would be siding and arming the same Ba'athists who were removed from power, and formed the backbone of Saddam's regime. Some people who historically the Saudi's haven't viewed with anything but disdain. (For their secular roots, and Saddam's policies) Politics really does make the strangest of bedfellows.

[Guest bengalrick]

i have been thinking about this for a good week, trying to make clear sense out of it... one thing i want to point out, is that you say that the saudis would be supporting the same bathists they supported getting taken out of power... this isn't really true though... isn't this a dramatic oversimplification? i don't claim to be an expert, but isn't the baath party only a small percentage of sunnis, and the party is banned anyway... not saying that some sunnis don't still support the baath party, but more don't support it than do support it... i don't necessary agree w/ your statement that they wuold be supporting those that they fought against in the invasion (or supported us doing so)...

as far as the saudis stepping up, this is what i've been contemplating... whether that is "good" or "bad".... my first response was "damn, it would be nice to have an arab nation defending iraq instead of us... for cultural reasons more than anything..." then i think more about it, and see the worst case scenario as a potential war between iran and the saudis... this isn't a good thing for us, b/c no matter who wins, we lose... high oil equals high inflation which equals high unemployment etc, etc.... the cycle goes on, until we get to "equals recession" or maybe depression"...

[Chris Henrys Dealer]

I think if you looked at who is leading the Sunni groups or the squads, they would all be members of the Ba'ath party, or have had links to them in the past. Just because these people are more militarily and politically connected and the party was in power for so long.

Then, across the border in Syria, you have the ruling Ba'ath party who have reigned for a long time there. Again, they are providing the support and would be pre-disposed to provide aid to people they knew or have some relations with. Not some random dude.

Also, it doesn't matter if a party is banned or people claim (after the fact) that they never supported them. Those who are part of the political process in the past find a way to stay in power. For an example of that just check out Afghanistan. While a new central government might have come into power, the regional heads / governers are all the same guys who were there during Taliban times and in most cases, were supporters of the Taliban.

[Homer_Rice]

A recipe straight from The Great Game Cookbook: "Divide and Conquer Stew."

Foment civil war in Palestine, in Iraq, in Lebanon. Pit folks who otherwise would have much common ground against each other. Use myths to manipulate and exacerbate the situation.

Bring to a simmer, cover. Periodically stir.

Come back later and pick up the pieces.

[Khatmandude]

[quote name='Homer_Rice' post='400836' date='Dec 4 2006, 04:29 PM']A recipe straight from The Great Game Cookbook: "Divide and Conquer Stew."

Foment civil war in Palestine, in Iraq, in Lebanon. Pit folks who otherwise would have much common ground against each other. Use myths to manipulate and exacerbate the situation.

Bring to a simmer, cover. Periodically stir.

Come back later and pick up the pieces.[/quote]

So true...