We are what we repeatedly do, and what our military repeatedly does is lose. Sending them into Ukraine or Iraq would be demented.
Read more...Yves here. Some readers took issue with our view that the Saudis, and now OPEC, decision against curbing production to support oil prices, was a classic example of predatory pricing, in which a player produces at an uneconomical cost in order to inflict damage on competitors, force them to curtail operations on a permanent basis, and then harvest higher returns later via having thinned out suppliers. As the post below indicates, it’s now increasingly recognized that the Saudis want oil prices lower, and a big reason is to weaken US shale operators (we also suggested that the Saudis also have geopolitical aims for this move, since the countries that get whacked have either been unfriended by Riyadh or are official enemies).
Analysts have taken almost entirely to discussing the Saudi “fiscal breakeven” which is the oil price it needs to raise enough revenues to funds its government, at $90 a barrel, to contend that the Saudi’s can’t afford to allow prices to remain low for all that long. But the desert kingdom has a lot of unused borrowing capacity and clearly does not see its near-term budget issues as a driving consideration. Ambrose Evans-Pritchard, based on a Citigroup analysis that has been making the rounds, argues that the Saudis have misread US shale economics and also contends that many producers have hedged their output, insulating them from the downdraft. Despite its detail, the Citigroup analysis diverges in so many respects from other accounts that I’d like to see more corroboration (recall Goldman’s similarly celebrated forecast that oil was going to over $200 a barrel).
Read more...After a testy meeting, OPEC agreed to maintain current production targets. The failure to support oil prices via reducing production led to a sharp fall in prices on Thursday, with West Texas Intermediate crude dropping by over 6% and Brent plunging over 8% before rebounding to finish the day 6.7% lower, at $72.55 a barrel. Many analysts believe that oil could continue its slide to $60 a barrel.
Read more...Yves here. This development, of Qatar potentially falling in line with Saudi Arabia, would represent a meaningful shift in Middle Eastern dynamics. But whether this is the beginning of the end of ISIS, or of the “holy oil war,” is another matter. ISIS started out as Prince Bandar’s private army, and it is not hard to imagine that the Saudis wield considerable influence. Among other things, the Saudis remain mighty unhappy over the fact that the US did not escalate in Syria in 2013, and has refused (in a rare show of wisdom) to attack Iran.
Read more...Yves here. As much as I consider myself to be reasonably jaded, I was nevertheless gobsmacked to read Andrew Bacevich’s list of “Washington assumptions” that underlie US policy-making in the Middle East. They aren’t just detached from reality, they are so wildly at odds with reality as to look deranged. I’d really like to believe that Bacevich is simply describing the all-too-common syndrome of coming to believe your own PR. But as he tells it, these “Washington assumptions” aren’t simply the undergirding talking points for key domestic and foreign constituencies; they really are policy drivers.
This thinking underlying these “Washington assumptions” is not just arrogant but has a rigidity that is almost religious in nature. The neocon vision, that the US has the right to remake the world, combined with how confidence in US virtue and exceptionalism seems to be rising even as our policy initiatives looks more and more mendacious and destructive even to our close allies (well, save the UK).
You can see another set of Washington assumptions at work in the TransPacific Partnership negotiations: that no prospective treaty member will ever question the benefits of free trade (as in they’ll never look at the fine print of what the deal is really about), that they will also want to ally themselves with the US as the better hegemon than China (if nothing else, the US is willing to act as the consumer of the last resort, a role China is not keen to assume, since that is tantamount to exporting jobs).
So this post also serves to demonstrate why Kissinger in his recent public pronouncements looks vastly more responsible than the crew in charge of our foreign affairs. As much as the deservedly-derided doctor was far too willing to team up with unsavory types to achieve what he considered to be American ends, his notion of “realpolitik” explicitly took morality out of the picture. Watching the US manage to devise even worse policies out of a warped, ideologically-driven notion of virtue is both perverse and chilling, like watching someone with a mental illness play out their delusions. And although mad leaders are sadly common in history, it’s another matter completely to see a technocratic class taking that role.
Read more...Yves here. In a bit of synchronicity, Lambert and I were discussing how bad America is at running an empire. Iraq by any standards was not doing all that well under Saddam Hussein. Growth was lousy due to Western sanctions, and he was thuggish in his methods of maintaining control. Yet he ran a secular government and hostilities between Shia and Sunni were a non-issue. After our invasion, hospitals were basically looted. Electricity barely worked in Baghdad, and wasn’t working all that well long after the US occupied Iraq. Any member of the professional classes that could leave the country did (this was well reported in Australia in 2003 and 2004). So we broke a country…as a demonstration project? For what end? The US also made a botch of the fall of the USSR, with our neoliberal reforms facilitating a plutocratic land-grab in Russia by well-placed insiders, with key Western aides participating in the plunder. OIFVet points out that, contrary to Western ideology, the lives of ordinary Bulgarians was better under the old USSR (Russia is now showing net gains; I’m told Moscow now looks to be on a par with Berlin).
The British took their imperial project far more seriously than we have ours. A big reason that they were more successful is that they built infrastructure, in the form of putting in place a British bureaucracy run by civil servants. And producing those civil servants was the top priority of the education system. C. Northcote Parkinson reports that the top Cambridge and Oxford graduates went to India. The next rank were civil servants in the UK. The ones at the bottom of the heap went into business.
Now there is a lot not to like about a British-style bureaucracy; they are stereotypically rigid and procedure-driven. The Australian Taxation Office is hugely taxpayer-unfriendly if you are a business, compared to the IRS (for instance, when I was there, you needed a receipt for every expense, and not just a credit card receipt. If you had a charge from a newsstand, they wanted to see that it really was a business periodical and not, say porn).
But the rigidity meant it was less easily corrupted, and that no one would question that the government was the paramount authority (a notion that most US regulators seem to have forgotten). Admittedly, with the rise of neoliberalism, no one seems to care about governing well any more, so there hasn’t been much thinking on how to run government in the 20th and 21st century that isn’t really about private sector profiteering.
This article looks at a symptom of the US’ misguided thinking about our imperial project: that of the role of our military bases. It isn’t much discussed in polite company, for instance, that the Saudis had repeatedly asked us to remove our base there because it was causing a lot of discord. We had ignored their request. It took 9/11 to get us to depart.
Read more...Yves here. This post, which discusses the barmy US idea that we can create an effective Iraq army having failed in two previous efforts, fails to use a key word: mercenaries. Normally, if you aren’t willing or able to have your own citizens act as soldiers, the next best solution was to hire mercenaries. History shows that does not generally work very well, even though it probably does beat doing nothing. Here, the idea of training locals to do our dirty work, out of allegiance to “Iraq,” a made-up country consisting largely of tribal and ethnic groups that don’t play well together in times of upheaval, is questionable on its face, independent of our poor history with this experiment. But the US seems to be in “if the only tool you have is a hammer, every problem will be defined to be a nail” mode.
Read more...Yves here. As oil prices have come into focus as a result of a recent Saudi decision to facilitate a reset at a lower price per barrel, they’ve come into focus yet again as a critical nexus of economic and political power, and that’s before you get to the complicating overlay of climate change considerations.
This article by Gail Tverberg takes a more sophisticated, multi-persepctive approach than the overwhelming majority of articles on this topic. One of her big messages is that there is no way the world economy is getting divorced from oil any time soon.
Even so, I have some minor points of contention. For instance, she correctly points out that oil producers, even the Saudis, need oil prices to be at a moderately high prices to sustain national budgets. But Riyadh has a very low production break even point, a large cash horde, and plenty of borrowing capacity. The desert kingdom could afford a price war, say to hurt geopolitical enemies or to forestall investment in and development of alternative energy sources. Low oil prices make other energy sources look unattractive, and volatile prices also deter investment, making it well-nigh impossible to forecast cost advantages (if any) and end user takeup.
Read more...Yves here. In yesterday’s Water Cooler, Lambert posted a link from Bloomberg that indicated that oil at $80 a barrel would pop the fracking bubble, an outcome we’d discussed previously. Some readers in comments expressed doubts.
In fact, it was already happening as oil prices were falling from over $100 a barrel through the nineties. Seasoned energy hands had warned that shale operations could be shut down rapidly, and that has started to take place. However, the author of this article argues that the shutdowns are likely to be delayed and that most US shale operations have low break-even costs, insulating them from the impact of the oil price drop. However, he misses that another driver of the shale boom has been access to super-cheap credit and an overly-bullish mentality that has not factored in the short production lives of shale wells. The junk bond market has been much less accommodating of late, and if that skittishness continues, the prognosis isn’t quite as sanguine for the industry as Cunningham suggests.
Read more...Yves here. This post presents some of the CIA’s less-than-proud moments, curiously omitted in a recently-published history of the CIA’s meddling in the Middle East, juxtaposed with some of its more recent miscues.
Read more...Yves here. This post describes, in a general way, some outcomes of our current Middle East adventurism, with the Islamic State as its current nemesis. However, at least one of Van Buren’s “worst-case outcomes” strikes me as not bad, which would be a thawing of hostilities with Iran. But I don’t see how Israel tolerates that.
But the looming issue behind all of these scenarios is that the game is being played to justify continued large budget allocations to the military-surveillance complex. The cost of defending the American is more guns in the guns versus butter tradeoff.
Read more...Asian stock markets continued to fall today, propelled at least in part by the adverse reaction to the Saudi announcement yesterday that they would let oil prices fall to $80 a barrel. And further reports indicate that the Saudis intend to keep oil prices low enough to force a realignment of prices not just among various grades of crude, but also for intermediate and long-term substitutes.
It is critical to remember that the Saudis have no compunction about imposing costs on other nations to maximize the value of their oil resource long term and hence the power they derive from it. Their oil price cut looks to be a strategic masterstroke.
Read more...Here Michael Klare argues that the use of energy as a weapon has become even more central in US foreign policy under Obama.
Read more...Yves here. One needs to read past the spin on the combatants and the hectoring of the Turks in this post. It does serve to explain why Kobani is a critical piece on the chessboard of the struggle in Kurdistan.
Read more...Yves here. This post focuses on ISIS as a symptom of what is wrong with US policy-making. One way of reading it is as an introduction to the role of Saudi Prince Bandar and the sway that the Saudis have had over US policy for decades. This obvious fact is curiously airbushed out of most […]
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