Significados

Para quienes quieran tener una visión alternativa sobre la purga saudita y sus múltiples significados, acá va una serie de tres notas sucesivas del analista económico Tom Luongo, publicadas en su sitio web Gold, Goats’n Guns a partir del 6 de Noviembre pasado. La más interesante es la última. Acá van:

Título: Saudi Purge: Desperation, Salvation or Both?

Texto: The dramatic events of the past two days in Saudi Arabia imply a whole new era in geopolitics.  The problem is trying to figure out what that new era will look like.

From the moment oil prices began falling in July of 2014, I knew something like this was possible.

Currency, Currency, Currency

The Saudi Riyal is pegged to the U.S. dollar.  This forms the backbone of the petrodollar system that has been the foundation for U.S. dollar diplomacy and dominance over the past forty-five years.  With rapidly falling oil prices thanks to record pumping levels by the Saudis, they and the U.S. attempted to break Russia by destroying the ruble and their state budget.

They ran this same playbook in the 1980’s which took oil prices down below $10 per barrel.  The Saudis sold oil down near the cost of production and put the Soviets under water, crippling the economy.

But, this time Russia survived because Putin did the unthinkable.  He took the ruble off of its soft-peg to the dollar.  Russia liked to defend the Ruble/Dollar exchange rate in a narrow band, similar to China and the Yuan. They allowed it to move with the market, but slowly so as to not cause undo domestic problem.

No one in the Washington or Riyadh though Putin would do this.  He did and he saved Russia by doing so.

But, the Saudis were intent on breaking Russia and were willing to spend hundreds of billions to achieve their goals.

And Putin called their bluff.  They kept on pressuring oil down to $28 per barrel in January of 2016. By free-floating the ruble Russia was able to survive the drop in oil prices because its oil companies pay their bills in rubles, not in dollars.

It was the state treasury that was in trouble.  So, Russia cut spending, per its auto-budgeting rules, shored up domestic firms over-exposed to the dollar and rode out the new reality of a weaker ruble.

The Saudi Conundrum

Fast forward to today and it’s the Saudis that are in trouble and Russia is on the cusp of a generational bull market.  The Saudis are the ones who cannot pay their bills, must sell off its major assets (Aramco) and rebuild its economy and political system from scratch.

Eventually the extreme pressure of the Saudi financial situation produced the predictable event, regime change.  This is what I knew would happen.  When?  No clue.  But, eventually something had to give.

The old way of doing things had to go.  This is why King Abdullah’s last major act as King was to visit, not his U.S. masters, but his Russian one, last month.

It was there that he bent the knee, kissed the ring and sued for peace.  His new Crown Prince, Mohammed bin Salman was no longer going to antagonize Russia directly.  And they would coordinate oil prices from here forward.

But, make no mistake, the Russians now produce the marginal barrel of oil in the world.  Not Saudi Arabia, not U.S. wild-catters in the Permian Basin.

Russia.

Why?  Because the Russians are very profitable selling oil at $40 per barrel.  They’ve budgeted around that number through 2020.  Again, that pesky floating ruble.  They can go as low as $20.  It wouldn’t be comfortable but it’s possible.  Saudi Arabia can’t.

The Saudis ran a 14.8% budget deficit in 2015.  212th in the world. This year the numbers are improving, why?  A rising oil price.  They still stink.  And they are the main reason why the Aramco IPO hasn’t happened yet.

Politically and economically, both Saudi Arabia and the U.S. need oil prices in the $60’s.  The Saudis for budgetary reasons the U.S. for profitability of the oil majors who are still saddled with so much over-valued property bought during the boom.

And that is only fueling the incipient Russian boom.  Once the Bank of Russia gets out of the economy’s way it will be stunning.  And itself will be the nail in the ridiculous narratives spun by U.S. and Saudi media.

For now, the situation is clear, $60-70 oil is the near future.

But, Saudi Arabia isn’t out of the woods yet.  In fact, it’s trials are just beginning.  And the consolidation of power by Mohammed bin Salman is only the first step.  So, what can we look forward to?

Desperation or Salvation?

Nothing has changed economically for the Saudis.  Bin Salman’s moves this weekend are in line with Donald Trump’s mandate to clean up the corruption of U.S. media and political institutions. The people who were purged, especially Prince Alwaleed bin Talal, who was the main vector of such corruption.

He and Trump were public enemies, sparring on Twitter.  His reach within the U.S. was long.  This purge, in my mind, was done in part as payment for Trump’s backing bin Salman’s regime.  At the same time Putin wants assurances that the Saudis will keep their adventurism to a minimum.

We’ll see if bin Salman is smart enough to see that just having Trump at his back is not enough to ensure his Kingdom’s survival.  The oil war truce is just the starting point.  Now he has to completely dismantle the regime change apparatus the Saudis had abroad if he wants to keep Putin appeased.

And it started with Lebanese Prime Minister Saad Hariri and the next step was calling for the arrest of two former Syrian separatist leaders Ahmed al-Jarba and Riad Hijab.  Now the Palestinian leader Abbas has been called to Riyadh to speak with King Abdallah and bin Salman.

It looks to me, despite the incessant sabre-rattling at Iran that the Saudis have been neutered by both Trump and Putin.  Putin started the process by winning first the price war in oil and then the ground war in Syria.

Iraq has rebuffed their entreaties and continues to edge closer to the Russia/China/Iran axis.  Turkey as well.  Syria is firmly a Russian ally.  Russia reassured Iran with a $30 billion deal with Rosneft which also brings Azerbaijan into the fold.

Putin has organized a major summit in Sochi on the 18th to begin the post-civil war political process for Syria.  Simply everyone will be there, except the usual suspects.  The writing for this was on the wall when the first peace conference was organized in Astana two years ago.  It marked the end of the Saudi/U.S. control of the diplomatic game in Geneva and the beginning of Russia’s.

If you begin to look at the game board the battle lines are clearly marked. It’s the Saudis, U.S. and Israel versus pretty much everyone else.  And with a board that lopsided, it’s time for a grand peace bargain to emerge.

The desperation of Saudi Arabia, under financial existential threat for nearly three years, has driven us towards a new reality in the Middle East. Putin played a perfect game of attrition, using Syria as the battlefield.  One where the interests of the Saudis, the Israeli and the Americans have a lot less importance than they did previously.

For the Saudis, it was either this or extinction.  It may be too early to say this, but it looks like Mohammed bin Salman chose life.  We’ll know if I’m right in a few weeks after Astana.

 ***

Título: Saudi Arabia’s Coup is the Geopolitical Feather in Trump and Putin’s Cap

Texto: Crown Prince Mohammed bin Salman’s reign in Saudi Arabia has begun.  What started as a proverbial ‘Night of the Long Knives’ has become more like a week.  And it will likely stretch on far longer than that.

His moves have been about much more than just consolidating the power handed to him by his Father King Abdallah.  It is about making massive changes to the business of the kingdom.  Bin Salman in just five days has completely remade and dismantled a status quo that goes back decades.

In my initial reaction to the purge the other day I wrote on my blog:

Nothing has changed economically for the Saudis.  Bin Salman’s moves this weekend are in line with Donald Trump’s mandate to clean up the corruption of U.S. media and political institutions. The people who were purged, especially Prince Alwaleed bin Talal, who was the main vector of such corruption.

He and Trump were public enemies, sparring on Twitter.  His reach within the U.S. was long.  This purge, in my mind, was done in part as payment for Trump’s backing bin Salman’s regime.  At the same time Putin wants assurances that the Saudis will keep their adventurism to a minimum.

I still feel that way now.  In fact, I feel more strongly that bin Salman has completely capitulated to the big players in the region, the U.S. and Russia.  The former Saudi regime was pursuing a suicidal path which, in the beginning, bin Salman was continuing.

The wars in Syria and Yemen were his operations.  So was the diplomatic isolation of Qatar in June.  These were all aggressive moves made in concert with Israel to oust Iranian influence on the Arabia peninsula and in Syria.

The problem is that these projects are both abject failures.

Failure is an Option

So was the oil price war it picked with both the U.S. and Russia.  The expectation was a continuance of the Obama/Clinton policy which would allow the Saudis to keep pressuring U.S. shale producers.  But that didn’t work because Russia emerged as the producer of the marginal barrel of oil in the world, a position wholly supported by China, who is the consumer of said marginal barrel.

Low oil prices have gutted the country’s finances because of its continued peg of its currency, the Riyal, to the U.S. dollar.  And, amidst this financial crisis that cannot abate if his kingdom wants any support from the U.S. at all bin Salman did the next best thing.

He went after the money squirreled away by his political opposition and, according to this report, in addition the $30+ billion he’s already seized there’s upwards of $800 billion in assets available.

What this says to me is that the Aramco IPO is on hold since the goal was to raise $400 billion from the sale of a stake in the company.  That is what will be used to fuel bin Salman’s Vision 2030 plan to modernize Saudi Arabia’s economy.

Whether that’s possible is beyond anyone’s guess, but the fact remains that the Aramco IPO was never going to bring in that kind of money.

It was announced today that the Saudis have lifted the embargo of the Yemeni port at Aden.  It remains to be seen what this is a prelude to, but if it is the first step towards ending the disastrous war there then it is very interesting.

Israeli Connection

These moves also bring up other issues.  In recent days the de facto, but never admitted, alliance between the Saudis and Israel was, effectively, outed by a leaked memo from the Israeli Foreign Ministry which discussed openly coordinating pro-Saudi/anti-Iranian-Lebanese talking points.

It’s also well established that deposed Prince Alaweed and former Crown Prince Nayef were the favorites of the U.S. CIA, or, at least a faction within the CIA.  Now, with them out of the picture it says two things.

- Israel now has more pull within Saudi Arabia than previously thought

- Trump’s war against the CIA has netted him a major concession.

What do I mean by point #2?  Simple.  Why did Trump push for making the JFK files public right after the Uranium One bombshell?  To force a negotiation with his enemies at our various intelligence agencies and grease the skids for what is happening in Saudi Arabia is one possible explanation.

For months I’ve held to the belief that Trump and Putin were inching towards a grand bargain for peace in the Middle East.

By isolating Qatar, the Saudis, as odious as they are, are defining the sides in this new Arab world.  And this is something that I expect Trump and Putin, behind the scenes, have been pushing for, along with, as Trump made clear in his speech two weeks ago, that terrorism and internecine fighting amongst the Arabs sects has to end.

Saudi Arabia hosting that speech tells you everything you need to know about where their future lies.  Qatar is being turned into the scapegoat for the Arab world’s crimes.  And the question remains where will they turn?  Or, more importantly, where will they be allowed to turn.

But, no matter where they turn, further support of radical Wahabi terrorism has to end.  The Saudis just told them the game is over to the West and Iran (and Russia) won’t stand for it to the east.

And that, is how the beginnings of de-escalation around the region begins.

The collapse of ISIS in Syria and Iraq set the stage for this Trump/Putin by Proxy coup of Saudi Arabia.

The Trump and Putin Show

And while Trump has spent a lot of time making overtly supportive noises for Israel, the reality on the ground is that Israel is closer to a moment where they will no longer be allowed to break all the rules and expect the U.S. to back them up than at any time in its history.

With the U.S. on one side ensuring the behavior of the wayward Saudis and Israelis and Russia on the other guaranteeing that Iran and Hezbollah don’t take advantage of their weakened positions that forms the framework for a substantive and lasting peace process in the region.

With Trump and Putin set to meet soon in Vietnam, I suspect this will be the main topic of conversation.  Trump has activated his side of the plan.  Now the next moves will come from Putin, likely to begin at the Sochi Summit on the 18th where the Syria political negotiations are set to begin.

The picture is clearing up.  The narrative that Trump colluded with Russia to steal the election was also meant to forestall these events from occurring.  Now that they have and we’re closer to a peaceful framework than we’ve ever been, it will be time for everyone to stand back and admire the chutzpah it took to pull it off.

*** 

Título: The End of “The End of History” – U.S. Mid-East Policy’s Fork in the Road

Texto: In 1989 Francis Fukayama declared that we had reached “The End of History.”  Democracy as a form of government would, in fact, be the end of the evolution of human interaction.  The West had triumphed and that the rest was ‘just a chase scene,’ to borrow a phrase from Neal Stephenson’s brilliant dystopian novel “Snow Crash.”

But, this past week’s events in the Middle East tell me that autocracy has replaced democracy and the trans-national parliamentary system of the European Union that Fukayama championed in his 2007 article in The Guardian.

The EU no longer practices representative Democracy today.  Diktats come down from unelected technocrats in Brussels. They are wholly-owned by stateless rent-seeking oligarchs (i.e. George Soros). Everyone in and around the EU is expected to obey or face tanks in the streets (Spain) or endless legal entanglements from captured international courts (Poland).

If you circumvent the rules, the EU will change them to suit its masters’ needs.  Just look at any proposed Russian pipeline into Europe over the past five years.

In the U.S. we have been subjected to the worst form of operant conditioning by an unelected Deep State and its quisling media for a year. They created the mass delusion that President Donald Trump is a secret Russian agent.

The goal was to overturn a democratic election, which itself the people had to overcome systemic voter fraud to win.

When, in fact, everyone who is involved in creating this mass delusion are covering up their collusion with Russia in ways that are espionage and treason.

So, consider me unimpressed with Fukayama’s assessment of history.  History is one of the praxeological disciplines.  Economics is another.  Any historical analysis bereft of economic imperatives is worthless.

And Fukayama’s end of history argument is the height of worthless history because it doesn’t ask the basic question “Cui Bono?”  Who benefits?

The End of Saudi Arabia as We Know it

Saudi Arabia has simply replaced one group of autocrats with another, Crown Prince (and soon to be King) Mohammed bin Salman.  There is not one democratic impulse in his body.  But he is the tip of the spear that Donald Trump and Vladimir Putin are wielding to remake the landscape in the Middle East.

Bin Salman’s moves have been stunning in their severity and swiftness.  But, if you are going to move against the most powerful people in the world, act fast or be destroyed.

There is a full-court press on to bring to light the extensive corruption of our political class from Washington to Tel Aviv, Brussels to Beirut.  And while barred from openly coordinating policy or even talk with each other, Putin and Trump are supporting each other’s moves while looking like they aren’t.

The status quo in Saudi Arabia is over.  It’s bin Salman’s country now.  Thank Putin and Trump for this.  The old alliances between it and Israel are now out in the open, creating cognitive dissonance in a whole new class of people.  It’s reach into governments around the world has been severed.

Hundreds of billions in assets frozen.  Dozens of family members jailed, many major donors to the corrupt-to-the-bone Democratic National Committee.

A major pillar of U.S. control atomized with the arrest of Prince Alaweed.

The coincidence cannot be ignored.  Everything happens in politics for a reason.

And for every pundit confused by what is happening, worried that this is a prelude to regional war I remind you that there are always multiple interpretations of the same events.  Such is the grist for history’s mill.

For example, that missile fired from Yemen at the Saudi capital conveniently had ‘proof’ of its Iranian origin.  Was this bin Salman’s false flag or someone else’s?

As Zerohedge pointed out this morning:

The narrative is familiar: just as European terrorists conveniently commit suicide and always dutifully bring along their passports so they can be identified, so Iran always makes sure it leaves identifying marks when it illegally sells its weapons to Houthi rebels in Yemen.

Lingering Questions

What if bin Salman’s purge was a reaction to a false-flag to gin up a war with Iran?

Israeli and U.S. Deep State forces have motive.  They are on the verge of losing everything? Certainly it’s as plausible as it being the opening act of bin Salman’s next foreign intervention.

Why was Donald Trump greeted by China’s leadership in a way that no foreign leader in the past 60 years was ever treated?

Could it be that despite his ham-fisted rhetoric, Premier Xi Jinping knows that Trump is, in fact, sincere in dismantling that portion of the U.S. Empire that no longer serves anyone’s interests except the very favored few who meet in Davos and Jackson Hole every year?

And that Trump will come to embrace China’s One Belt, One Road Initiative as good for the U.S. as well as the rest of the world?

Trump went out of his way to greet Russian President Vladimir Putin in Vietnam at the beginning of APEC, despite intense pressure for him not to do so.  Again, why?

Is this the behavior of a man about to go to war? Be impeached?

Multiple Ways to Drain a Swamp

The path to draining the swamp is a circuitous one but, in my mind, it’s hard to argue where things are headed.  They are not headed towards confrontation with Iran but actually the opposite.

The most rabidly anti-Iranian segment of the Saudi Royal house is impoverished and imprisoned.

CNN will be sold and go out of business to allow for the Time-Warner/AT&T merger.  Jeff Zucker is out. Add another scalp to Steve Bannon’s belt along with Harvey Weinstein, Kevin Spacey and so many to come.

Will the vestiges of the neoconservative establishment in the U.S. and Israel continue to sabre-rattle and try to undermine what is happening?  Yes.

They’ve been doing that since the day Trump was elected just over a year ago, but it hasn’t stopped the momentum.  Why?  Because Putin was on the job outmaneuvering them at every turn.

Trump made a deal with the neocons back in August to cede them control of foreign policy and, in effect, outsourced cleaning up the Middle East to Putin. But, predictably they also didn’t follow through with their end of the bargain.

Trump learned, like Putin did, the John McCain’s of the world don’t keep to their deals.  They are ‘not agreement capable.’  And, as such, since the last failure to repeal Obamacare Trump has gone after every pillar of support these people had.

It will end with Hillary Clinton’s indictment.  But in the meantime it will look like the world is on the brink of world war.

And History’s Just Fine

Eventually, Saudi Arabia looked at the game board and saw that it was alone.  King Abdallah saw the changes that had to be made.  He met with Putin, they agreed on slightly-higher oil prices.  China offered to buy an Aramco stake but that would mean cutting ties completely with the U.S.

I believe that offer was a bluff.  It was meant to send bin Salman to Trump who agreed to get the Aramco IPO done in New York but he had to take control and end the royal family’s support of evil around the world.

Pat Buchanan’s latest column laments that no one listens when the U.S. barks anymore.  But, at the same time, what the U.S. is barking hasn’t been worth the air it disturbed in more than twenty years since the End of History.

This is what happens when you ‘Cry Wolf’ too many times.  Benjamin Netanyahu is finally going to learn that lesson in the coming weeks.

The extent of bin Salman’s purge and its effects on not just the Middle East but the U.S. and the EU can only be assessed in hindsight by historians.  A future Fukayama will come along and see this and declare another end to history.