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Part 4
Already in a controlling position in all key countries in the Shia crescent of power in the Middle East – Lebanon, Syria, Iraq, Iran, and Yemen (via Iran) – Russia continues to work on those countries on the edges of the crescent in which it already directly or indirectly has a foothold. These include Azerbaijan (75 per cent Shia and FSU state) and Turkey (25 per cent Shia and furious at not being accepted fully into the European Union), although others remain longer-term targets, including Bahrain (75 per cent Shia), and Pakistan (up to 25 Shia and a home to sworn-U.S. enemies Al Qaeda and the Taliban).

And all of this comes at a time when the current de facto ruler of Saudi Arabia – Crown Prince Mohammad bin Salman (MbS) – is facing the most serious crisis to his authority. This was underlined only a few days ago when reports came through that Salman had ordered another round-up of his high-ranking opponents (the previous major one was at the end of 2017 in the notorious Ritz-Carlton round-up). This included Prince Ahmed bin Abdulaziz, a younger brother of King Salman, and Prince Mohammed bin Nayef, the King’s nephew and the former crown prince. According to numerous reports, the health of the 84-year old current king, Salman, is very poor, and this has prompted a jostling of senior royal Saudis for the succession.

It should be remembered that MbS was not always the natural successor to the current King: prior to June 2017 when the succession was changed in MbS’s favour, the heir-designate was the recently-arrested Prince Mohammed bin Nayef, whilst the also recently-arrested Prince Ahmed was one of three members of the Allegiance Council (the senior royal organisation that endorses the line of succession), to oppose MBS’s appointment as crown prince in place of his cousin bin Nayef in 2017. Precisely why MbS thinks that potentially bankrupting his country, spending the remainder of its dwindling foreign assets reserves, and alienating its only significant ally in the world is a mystery but whatever the reason both the U.S. and Russia will be perfectly happy to watch on the sidelines to see exactly how it all pans out for MbS.

By Simon Watkins for Oilprice.com

https://oilprice.com/Energy/Energy-General/Saudi-Arabias-Oil-War-Could-Bankrupt-The-Kingdom.html

Part 3
Three to four years, though, now looks optimistic as it has to be remembered that back in 2016, the Saudis did not expect that the U.S. shale sector would continue to grow in output capability or that the budget breakeven price for Russia would be as low as US$40 per barrel. What this means in purely empirical terms, is that the U.S. and Russia can absolutely afford to sit back for much longer than Saudi with oil prices at or below US$40 per barrel and, quite aside from the absolute level of oil price, both benefit in key broader ways as well.

For the U.S., there are economic benefits which, especially in a year in which there will be negative economic effects from the coronavirus, will mean significant political benefits too. As a rule of thumb, it is estimated that every US$10 per barrel change in the price of crude oil results in a 25-30 cent change in the price of a gallon of gasoline, and for every 1 cent that the average price per gallon of gasoline falls, more than US$1 billion per year in additional consumer spending is freed up. Politically this has enormous ramifications for a sitting president seeking re-election in the U.S., as Donald Trump is.

According to NBER statistics, since World War I the sitting U.S. president has won re-election 11 times out of 11 if the U.S. economy was not in recession within 24 months ahead of an election. However, only one president out of seven who went into a re-election campaign with the economy in recession actually won (Calvin Coolidge in 1924). The very idea that any U.S. president would allow the country’s hugely geopolitically important shale sector to be seriously damaged in any way is jejune at best, and within the last few days President Trump has stated that a raft of new measures to support the sector is being considered. These may also include the double-sided winning strategy of using lower priced oil bought from shale producers to boost the U.S.’s Strategic Petroleum Reserve.

For Russia, meanwhile, whose core foreign policy strategy under President Putin has always been ‘create chaos and then project Russian solutions and therefore power into that chaos’ Saudi Arabia’s oil price war could not be better. Firstly, if oil settles back at around the US$40 per barrel of Brent level when Chinese demand comes back in scale at the end of this month, Russia is fine from a budget perspective and its oil companies can produce as much oil as they want. Even if it does not trade around those levels, Russia is still going to benefit from the fact that twice now in the space of less than 10 years Saudi has declared economic war on its only real ally in the world – the U.S.

Part 2
Within the space of just a few months of embarking on this shale-destruction strategy, though, it became extremely clear to the Saudis that they had made a terrible mistake in underestimating the ability of the U.S. shale sector to reorganise itself into a much tighter operation than they had thought possible. It transpired that many of the best operators in the optimal regions, such as the Permian, were able to not just breakeven at price points above US$30 per barrel of Brent but also to make decent profits at points above US$35-37 per barrel area. U.S. shale players, in large part through the advancement of technology, were quickly able to drill longer laterals, manage the fracking stages closer and maintain those fracks with higher, finer, sand.

This allowed for increased recovery for the wells drilled, in conjunction with faster drill times. They also started to gain cost benefits from multi-pad drilling and worked out the optimal well spacing for efficient development, further allowing them to reduce costs. Crucially, the inexorable rise of the U.S. shale sector allowed the U.S. to reduce its energy dependence on Saudi and to broaden out the scope of its geopolitical clout even more by dint of becoming the number one oil producer in the world itself.

Given these developments, during the two years alone (2014-2016) that this Saudi strategy lasted, OPEC member states lost a collective US$450 billion in oil revenues from the lower price environment, according to the IEA. They are still dealing with trying to fill in holes in their foreign exchange reserves and budgets accrued as oil prices were pushed down from over US$100 per barrel of Brent to below US$30 per barrel.

Saudi Arabia itself moved from a budget surplus to a then-record high deficit in 2015 of US$98 billion and spent at least US$250 billion of its foreign exchange reserves over that period that even senior Saudis have said are lost forever. Even before this new oil price war was launched, Saudi Arabia was facing sizeable budget deficits every year until probably 2028 by most projections, with a budget breakeven price per barrel of Brent this year of US$84 (that does say US$84, yes).

So bad was Saudi Arabia’s economic and political situation back in 2016 that the country’s deputy economic minister, Mohamed Al Tuwaijri, stated unequivocally – and completely unprecedented criticism of government policy from a Saudi minister - in October 2016 that: “If we [Saudi Arabia] don’t take any reform measures, and if the global economy stays the same, then we’re doomed to bankruptcy in three to four years.” That is to say, that if Saudi kept overproducing to push oil prices down – just as it is doing right now, yet again - then it would be bankrupt within three to four years.

Saudi Arabia’s Oil War Could Bankrupt The Kingdom
Those with a functioning memory may have thought that last week’s decision by Saudi Arabia to maximise oil production to crash oil prices and bankrupt U.S. shale producers was an early April Fool’s Day joke. Apparently, though, it is not, and collective amnesia seems to have gripped senior Saudis and other OPEC members alike about how disastrous the last Saudi Arabia-led attempt to destroy the U.S. shale oil industry from 2014 to 2016 actually was. Appalling though the consequences were last time for Saudi and its now-much-poorer allies, this time around things are likely to be much, much, worse.

The last time the Saudis tried this exact same strategy in 2014, it had a much greater chance of success than it does now. Back then, it was widely assumed that U.S. shale producers could not produce oil on a sustained basis for a breakeven price of less than around US$70 per barrel of Brent. Saudi also had record high foreign assets reserves of US$737 billion in August 2014, allowing it real room for manoeuvre in terms of sustaining its SAR-US$-currency peg and covering the huge budget deficits that would be caused by the oil price fall caused by overproduction. In addition, Russia at that point was just an interested observer on the sidelines.

Saudi Arabia was so confident in its plan that in October 2014 during private meetings in New York between Saudi officials and other senior figures in the global oil industry, as analysed in full in my latest book on the global oil markets, the Saudis revealed that the Kingdom was willing to tolerate Brent prices ‘between US$80-90 per barrel for a period of one to two years’. This was a 180 degree turn from the previous understanding by other OPEC members that Saudi was their champion, doing its best to keep oil prices high in order to boost the prosperity of OPEC member states. Saudi, nonetheless, at the New York meeting, made it clear that it had two clear aims in pursuing its overproduction/oil price crashing strategy. The first of these was to destroy (or at least slow down progress in) the developing U.S. shale energy industry and the second was to pressure other OPEC members to contribute to supply discipline. This marked a significant divergence from the acceptable range of prices previously stated by then-Saudi Oil Minister Ali al-Naimi as being: “US$100, US$110, US$95,’ per barrel.

MEPs to Salome Zurabishvili – We appeal to you to consider exercising your legitimate constitutional powers specifically in the case of Mr Ugulava

We appeal to you to consider exercising your legitimate constitutional powers specifically in the case of Mr Ugulava, it is said in a letter sent by eleven members of the European Parliament to Georgian President Salome Zurabishvili.

“We undersigned members of the European Parliament would like to congratulate you as well as the people of Georgia on the recently achieved agreement between the Government and the opposition. his positive news has come as an encouragement that Georgia will be able to continue its progress on the road to fulfilling the European choice of its people.

“Many of Georgia’s friends and ardent supporters have expressed concern over some of the developments that led to increased polarization and antagonism in recent months in particular. one of the main triggers in this unfortunate process was the imprisonment of Gigi Ugulava, Secretary General of European Georgia.

Full implementation of the agreement in its letter and spirit will be crucial to ensure de-escalation and normalization of the political situation in Georgia in the run op to this year’s pivotal election. While the government and the opposition will continue to disagree about the merits of this and other cases, we appeal to you, as the President of Georgia, to consider exercising your legitimate constitutional powers specifically in the case of Mr Ugulava, whose release is viewed as a test for the implementation of the Joint Agreement. It is our belief that such act would be a major step towards the full normalization to which Georgia’s friends, like us, are looking forward,” the MEPs wrote.

The letter was publicized by by MEP Anna Fotyga (Poland, ECR). It is co-signed by Witold Waszczykowski, (Poland, ECR), Jacek Sariusz-Wolski (Poland, ECR), Mazaly Aguilar (Spain, ECR), Rasa Jukneviciene (Lithuania, EPP), Michael Gahler (Germany, EPP), Nacho Sánchez Amor (Spain, S&D), Juozas Olekas (Lithuania, S&D), Markéta Gregorová (Czech Republic, The Greens), Ramona Strugariu, (Romania, Renew).

https://www.interpressnews.ge/en/article/106295-meps-to-salome-zurabishvili-we-appeal-to-you-to-consider-exercising-your-legitimate-constitutional-powers-specifically-in-the-case-of-mr-ugulava

Helsinki Commission Leaders Commend Political Compromise in Georgia

After a March 8 announcement that Georgia’s political leadership reached a deal paving the way for the adoption of compromise electoral reforms ahead of the October 2020 parliamentary election, Helsinki Commission Chairman Rep. Alcee L. Hastings (FL-20) and Co-Chairman Sen. Roger Wicker (MS) released the following statements:

“Debate and compromise, two hallmarks of democracy, have rebuilt hope that Georgia’s leaders can bridge divisions and meet the demands of the people for accountability in electoral processes and outcomes,” Chairman Hastings said. “Having led an international election observation mission to Georgia, I commend the hard work it took to reach this agreement and the role of international ambassadors, particularly U.S. Ambassador Kelly Degnan, in facilitating it. As the agreement’s implementation proceeds, I hope to see the prioritization of the parties’ joint commitment to address perceptions of politically-motivated criminal charges in recent months.”

During the January 2008 presidential election in Georgia, Chairman Hastings served as head of the OSCE PA election observation mission and was appointed by the OSCE Chairman-in-Office as the Special Coordinator leading all OSCE short-term observers.

“As a longtime champion of the United States’ strategic partnership with Georgia, I am glad to see Georgia’s political leaders take the path of dialogue to resolve this months-long crisis,” said Co-Chairman Wicker. “The coming months should serve as an opportunity for the Georgian people to regain confidence in the ability of their democratic institutions to represent their voices and render independent justice.”
In December 2019, Co-Chairman Wicker sent a letter to Georgian Prime Minister Giorgi Gakharia urging the ruling Georgian Dream party to address growing public discontent with preparations for the 2020 national election and a string of decisions that undermined public confidence in the rule of law.

Since November, Georgia has been embroiled in a political crisis sparked by the surprise defeat in the parliament of constitutional amendments that would have transitioned the country to a fully proportional electoral system for 2020 parliamentary elections. In response to a political crisis last summer, Georgian Dream Party Chairman Bidzina Ivanishvili pledged his party would pass the amendments, which enjoyed broad support from Georgian political factions and international democracy advocates. Despite this pledge, a group of Georgian Dream parliamentarians voted last month to scuttle the proposal, prompting angry reactions across the Georgian political spectrum.

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