Political Observation - The Oil Price War is Political and Economic

 بسم الله الرحمن الرحيم

Political Observation - The Oil Price War is Political and Economic 

Although the aspect of the oil price war is economic, it however equally incorporates a political objective since the issue has a host of roots linked to America’s dual containment policy targeting both Russia and Europe. It is akin to an extremely delicate surgical procedure since the target is Russia’s head, downsizing her economic progress and curbing her drive to develop her war machine and broaden her foreign ambitions.

Saudi is merely a cheap weapon, or an oil station to cover the dollar and supply the US with live ammunition for the US’s political battles to subjugate her potential rivals who may threaten her unilateral dominion over the international situation. 

The sheer economic side of the oil price war is reflected in America’s endeavour to acquire a share in the European energy market at the expense of Russia. This is what she has been attempting to achieve since 2015. Her exports started from zero barrels in 2015 to 8 million barrels in 2018. And it is worth noting that the economic side is related to crude oil only and not gas since Russia’s gas exports to Europe are subject to long-term contracts and prices, i.e. 15 to 25 years, and American oil is light crude and more suitable for the European market than the American market. As for America’s impeding of Russia’s gas sales, it is part of the political pressure she is exerting on Russia rather than economic jostling.

As for the political side of the oil price war, it is related to weaning a heavily industry dependent Europe off total dependence on Russian oil and gas, lest the Russo-European understanding in the energy sector, should lead to clearing the cloud of political and security uncertainty which America has persistently endeavoured to maintain; and lest the spirit of mutual trust and friendship between Russia and Europe should be revitalised, or the state of precariousness pertinent to Russia’s threat to the continent’s security that America has been entrenching in the European psyche should dissipate, as well as the rationale for maintaining NATO should become obsolete.

This explains why US secretary of state, Mike Pompeo, pledged $1 billion at the Munich Security Conference to support the Three Seas Initiative, an effort aimed at kick-starting the European energy independence policy, especially among eastern European states that are energy-dependent on Russia. 

Moreover, since America has been aiming to maintain her security hegemony over European countries through NATO, she has endeavoured at several NATO meetings to generate the pretexts to maintain it and punish France, which called for an alternative European force and is averse to classifying Russia as an enemy to NATO member states; not only would such a narrative strip America of the most important tool in controlling European security, it would also affect America’s arms sales to Europe worth $250 billion, which Donald Trump is looking to double through pressure on European states to increase their military spending to 3% of their GDP, i.e. approximately $477 billion a year. 

Hence, America has consistently reacted to the calls for getting rid of NATO and American hegemony by plotting false flag “terrorist” operations akin to those executed by the Gladio Operation body which was linked to NATO’s intelligence to terrify the Europeans of the communist threat. Whenever France or any European country questioned the continuance of NATO or its financing, or moved towards rapprochement with Russia, “terrorism” would strike them in their own backyard to deter them and remind them of the security threats still looming and expanding, be it via the Russians or “Islamic terrorism”; this explains America’s increased spending to intensify rightwing extremism and Islamophobia in the West. 

Hence, America’s aim is to downsize Russia’s share in the European markets for political and economic designs, including the attempts to impede Russia’s pipeline projects to export oil and gas to Europe such as the Nord Stream 2 pipeline which has been delayed by America’s sanctions on Russia, and the attempts to induce competition over Middle Eastern gas as an alternative to Nord Stream 2 to diversify Europe’s energy sources. Sanctions as a weapon have been brandished against Russia by America after being expelled from Georgia, which recently joined NATO, and after America ignited the “Ukrainian Spring” and toppled Russia’s man, Victor Yankovic, from power. America succeeded in provoking Russia who dubbed the new leaders and the protestors, as well as the US-backed opposition forces as fascists. She also enticed a reaction out of Russia who was eager to maintain her control over the strategic seaport of Sevastopol which hosts a Russian naval fleet. Russia fell for the trap and annexed the Crimean Peninsula while also backing the secession of Donetsk in east Ukraine, thus giving America the chance to compel the Europeans into endorsing the sanctions that harmed them as much as Russia. The delayed Nord Stream 2 pipeline project was one of the victims of the sanctions. Moreover, Russian energy pipelines to Europe pass through Georgia and Ukraine who are no longer under Russia’s stranglehold. What complicated matters further is the US shale oil industry becoming fuel for the battle between America and Russia; the cost of producing shale oil has become the determiner of the price the US administration imposes on the energy market. These costs also compel the US administration to open the European market to American energy producers and protect them against Russian competition. 

Hence, exerting pressure on Russia to reduce her share in the European market and cut her production with the aim of raising energy prices to guarantee the viability of the US oil industry became crucial to America. 

However, Russia turned down America’s request conveyed to her via Saudi. Leaked reports revealed major rows between Saudi and Russian leaders during negotiations on cutting production; this led Saudi, inspired by America, to launch a war on oil prices to compel Russia into succumbing to America’s volition, exactly as she did in the 1980’s when US pressure led to emptying the coffers of the Soviet Union, hastening its fragmentation: oil prices between 1986 and 1989 were between $14 and $17 a barrel compared to $39 per barrel in 1981. That cratering of oil prices was the outcome of collusion between king Fahad and America to undermine Soviet economy. 

It is common knowledge that the function of an American diplomat is not to resolves crises but rather to get to grips with it and manage it in a manner that secures a benefit in the long-term even if he incurred inevitable losses. This is effectively what happened when US president Reagan decided to destroy the Soviet Union’s economy ; he increased the defence budget to a level that dashed the Soviet Union’s hopes of winning the arms race, and ordered king Fahad to launch an oil price war which consequently led to the price of a barrel plummeting to $9, without any concern for the American people who lost more 225,000 jobs in the energy sector in 1986, just for the sake of weakening the Soviet Union, defeating it in Afghanistan and dismantling it. 

It is also common knowledge that the priorities of US foreign policy are built on averting what may threaten its national security, such as losing control of oil supply routes, production volumes and prices. 

Hence, it is clear that president Donald Trump has launched the oil price war to subjugate Russia with the mentality of a businessman who realises the impacts of the crisis on the US oil industry and the collateral damage of the battle, exactly as Reagan did before. He also realises the gains from subjugating Russia to his volition in terms of oil production and prices warranted by the shale oil industry, especially as America controls the global reserve currency and is capable of protecting her companies by instructing the banks to shore them up, as she did in 2008 during the property crash. Moreover, Donald Trump’s commercial mentality helps him realise that a price fall is a natural and inevitable consequence of high supply and low demand due to the impact of coronavirus on the economy. 

Hence, we can say that Donald Trump has waged the oil price war on solid grounds due to the aforementioned reasons, unlike Putin, who has fought it with shaky hands and a frail economic and financial foundation. 

Undoubtedly, the recent agreement concluded between Russia and Saudi, supervised by the US, whom Putin had been in constant contact throughout the negotiations, will prevent the collapse of the US oil industry as a consequence of the coronavirus pandemic; it will also lead to a price rise once the pandemic and its effects on the market in terms of high supply and low demand and the confusion in speculations and futures markets, which have impacted negatively on the prices following the agreement, have been overcome. 

This means that the political aspect of the oil price war has been settled and the fall in oil prices is purely an economic issue related to the mechanisms of the market and the stagnation in air travel and industrial activity in China, Europe and America, and not related to the political aspect. 

Therefore, the notion that the crisis is a Russo-Saudi conspiracy to deal the shale oil industry a blow, based on the fall in oil prices after the agreement, is incorrect. As for the recent escalation between America and Iran, it comes also within the context of the oil crisis and the impact of the coronavirus pandemic on the global economy, coupled with low demand for energy. The aim of the escalation, however, is an attempt by the Trump administration to halt the slump in oil prices and to trigger a rise through the fear of a potential war in the Gulf, in addition to Trump’s attempt to cover his mishandling of the coronavirus pandemic after he had failed to divert attention towards China and hold her responsible for the spread of the disease. 

1 Ramadhan 1441h
24 April 2020