Coalition of the Drilling: Oil Fuels the Saudi-Led War Against ISIS

Gas Supply Hits June LowThere is a story behind the story of Saudi Arabia’s gathering 34 countries to form a coalition to fight ISIS.

The first item to note is that while all 33 countries that came to Riyadh were all Muslim, they were not all Arab. Next, we must pay attention to those who were not invited. Saudi Arabia invited Lebanon and the Palestinian Authority, but excluded Iran, Hamas and Iraq. And that is a clue to the purpose and the vision of this Saudi led group.

The coalition versus ISIS intends to also hamper and destroy Iranian hegemony. In the process, the initiative has a mission to wound several other Saudi foes, including, but not limited to, Syria’s Assad, Russia, Hezbollah and Iraq. The Saudis plan to punish the United States of America as well for handing Iran legitimacy with its recent nuclear deal.

The Saudis have largely given up on the United States. The final nail in the coffin of U.S.-Saudi relations came when Washington signed the nuclear deal, thereby bringing Iran back into the community of nations and even permitting them nuclear status in 15 years. That pact profoundly insulted and threatened the Saudis, a Sunni nation. The nuclear deal the United States both empowered and emboldened the mortal enemy of Saudi Arabia.

The balance in the region is slowly shifting and Saudi Arabia hopes to stop Iran’s ascent.

Look what Saudi Arabia has already done. It is supporting Egyptian President Abdel Fattah al Sisi against the Muslim Brotherhood. And it has lured the Sudanese leader away from Iran. In severing ties with Iran, the Sudanese have eliminated an important Iranian weapons conduit and trade route, long used to transfer arms to Hamas in Gaza and to Assad-friendly forces in Syria.

Saudi Arabia wants to hurt Russia because, like Iran, the Russians are propping up Syrian President Bashar Assad. Assad is an Allawite, and Allawites are an offshoot of Shiite Islam.

The Saudis know better than to militarily tangle with the United States and Russia. They will steer clear of Russia and the U.S. on the ground and in the air.

Instead, the Saudis will economically hurt both countries.

This coalition of 34 is most certainly not simply about fighting ISIS. It is about Saudi Arabia taking up its position as a world leader.

At the last OPEC meeting, in November, Saudi Arabia, the largest producer of oil in the organization, convinced other members to keep oil production stable. They did it despite the free fall on the price of oil. Since June, oil has fallen more than 40 percent and costs about $35 a barrel.

OPEC members had hoped to decrease production and increase the price. They had hoped to apply the simple supply and demand curve. Saudi Arabia nixed the idea because when they last tried to manipulate the market, their economy took a nose dive and it took the Saudi Empire 20 years to recover. But there was another motive to keeping the price of oil low.

The Saudi move hurt Iran, which needs capital to invest in its oil-producing infrastructure. Iraq is also trying to gain more revenue from oil. But Iraq has become a Shiite-governed nation and has needlessly attacked Sunnis and so Saudi Arabia wants to cause them pain.

Next on the Saudi enemy list is Russia, a large producer of oil. The Russians really need more money because of the sanctions placed against them after their Crimean land grab and their actions in Ukraine. Saudi Arabia wants to bring Russia to its knees.

Although they are doing it inadvertently, the country that is most helping Saudi Arabia hurt the other oil producing countries is China. Demand for oil in China has dropped, as Beijing invests in more energy-efficient systems and even alternative fuel sources, such as wind power. Most importantly, as the Chinese economy has slowed, so has its demand for oil.

And the United States will not be unscathed by Saudi action. The U.S. was bent on tapping into its own oil reserves. But private industry has either slowed, postponed or, in many cases, completely scrapped plans to produce US oil. It is no longer worth the money. In the U.S., it costs between $50 and $70 to produce a barrel of oil. It costs Saudi Arabia $30 per barrel.

The Saudis have begun to successfully remove competitors from the market. They have stopped the United States from entering the field. They are crippling their enemies. And they can withstand the drop in price which, they know, will of course bounce back.

This coalition of 34 is most certainly not simply about fighting ISIS. It is about Saudi Arabia taking up its position as a world leader. It is about Saudi Arabia showing the United States, Russia and most importantly Iran, that it has taken the role of leader of the Muslim world.

 

Coalition of the Drilling: Oil Fuels the Saudi-Led War Against ISIS