Saudi Arabia, Iran, USA and oil

One of the world’s riskiest situations is developing in one of the most volatile regions of the world, the Middle East, after oil production facilities were bombed by drones. The US has blamed Iran. The US has close ties with Saudi Arabia.

Oil production has been affected, with prices surging following the attack (but settling back a bit since).

MSN: Saudis face lengthy oil halt with few options to fill gap

The oil market is facing a prolonged disruption to Saudi Arabia’s oil production with few options for replacing such huge output losses.

The weekend attacks on the kingdom eliminated about 5% of global oil supply — and raised the risk of more conflict in the region — propelling Brent crude to a record surge on Monday. Officials at state oil company Saudi Aramco have become less optimistic on the pace of output recovery, telling a senior foreign diplomat they face a “severe” disruption measured in weeks and months and informing some customers that October shipments will be delayed.

The historic price gain underscores the unprecedented nature of the disruption caused by the drone attack on the Abqaiq crude processing plant. For decades, Saudi Arabia has been the oil market’s great stabilizer, maintaining a large cushion of spare production capacity that can be tapped in emergencies, such as the 2011 war in Libya.

The halt of 5.7 million barrels day of the kingdom’s production — the worst sudden supply loss in history — exposes the inadequacy of the rest of the world’s supply buffer.

Petrol prices have already risen in New Zealand. I don’t know why that has happened so quickly, petrol in tanks here should be the same price as it was last week. Is there any other market that changes prices based on possible future cost rises?

ABC News:  U.S. intel shows cruise missiles fired at Saudi oil facility came from Iran, officials say

The attack on a major Saudi oil facility originated geographically from Iranian territory, with a series of low-altitude cruise missiles fired from at least one location in the western region of the country, according to two U.S. officials familiar with the latest intelligence.

The intelligence assessment draws a more clear link between the attack and Iran, and it could worsen tensions between Washington and Tehran.

U.S. officials are considering possible multilateral sanctions with allies against Iran as part of the response to the attacks…

The Department of Defense has advocated for restraint. But it has provided a briefing on military options to President Donald Trump, who over the weekend tweeted that the U.S. is “locked and loaded” and ready to respond, once it officially determined who was behind the attack.

Three U.S. officials previously told NBC News there was extremely compelling evidence showing the origination point of the strikes, and one official with direct knowledge described that evidence as imagery.

That’s image based imagery, not imaginary.

A Saudi military spokesman says initial investigations show Iranian weapons were used in the attack.

Iran’s Supreme Leader Ayatollah Ali Khamenei said Tuesday no talks would take place between Iran and the U.S. “on any level…

Reuters: U.S. lawmakers blast Iran, wary of war, after Saudi oil attack

Members of the U.S. Congress blasted Iran after the attack on Saudi Arabian oil facilities, but expressed wariness about U.S. military action, especially before they have a clearer picture of who was behind it.

President Donald Trump said the United States was “locked and loaded” to hit back after Saturday’s attack, which knocked out more than half of Saudi Arabia’s oil production and damaged the world’s biggest crude processing plant.

Iran denied U.S. accusations it was to blame and said it was ready for “full-fledged war.”

U.S. lawmakers, especially Trump’s fellow Republicans, were quick to blame Tehran.

Mitch McConnell, the Senate’s Republican majority leader, called it “a brazen attack” with significant implications for the global energy market and said he welcomed Trump’s preparation to potentially release oil from the Strategic Petroleum Reserve to stabilize markets if necessary.

Many lawmakers stressed that Congress, not the president, has the right to declare war and warned against any quick military action.

Trump may not be able to initiate quick military action on his own, but he is capable of escalating tensions and the prospects of war via Twitter.

Military action would likely put oil production and supply at even more risk.

Congress, with backing from both Republicans and Democrats, has passed – but Trump has vetoed – four bills seeking to push back against Trump’s strong support for the Saudi government, despite its human rights record and steep civilian casualties in the war in Yemen.

Trump and the US say nothing against Saudi Arabia’s involvement in the Yemeni war – and supply the Saudis with arms.

Wikipedia:  2017 United States–Saudi Arabia arms deal

On May 20, 2017, U.S. President Trump and Saudi Arabia’s Salman bin Abdulaziz Al Saud signed a series of letters of intent for the Kingdom of Saudi Arabia to purchase arms from the United States totaling US$110 billion immediately, and $350 billion over 10 years. The intended purchases include tanks, combat ships, missile defense systems, as well as radar, communications and cybersecurity technology. The transfer was widely seen as a counterbalance against the influence of Iran in the region and a “significant” and “historic” expansion of United States relations with Saudi Arabia.

Saudi Arabia is a key U.S. ally in the Middle East.

Between 2011 and 2015, Saudi Arabia was the destination for nearly 10% of all U.S. arms exports

The 2017 deal was partially created with the help of Jared Kushner, son-in-law of and senior advisor to President Trump

So the attack on the Saudi oil production facilities raises tensions significantly between the US and Iran. The risks may temper responses, but I think it likely that there will be some sort of retaliation.  Economic sanctions are already in place against Iran, so that must be a limited option. If Iran is indeed responsible for the attack it may in part be an attempt to enhance the value of their own oil to compensate for sanctions.

Whatever, it’s complex and it’s a high risk game being played in the Middle East that could significantly impact on the world.

 

 

Yemeni war continues, as does the arms industry

The war in Yemen has been going for three years, but it doesn’t get much attention still. But like Syria, it is not just an internal battle, it is a battle that regional and international powers are also involved in, with little success except for feeding the arms industry.

Reuters: Saudi-led coalition conducts air strikes on Yemen’s Hodeidah airport

Houthi forces fought to keep control of the airport in Yemen’s main port city of Hodeidah on Sunday as Saudi-led coalition air strikes struck the compound, in an offensive that could be a turning point in the three-year conflict.

Losing Hodeidah would deal a serious blow to the Iran-aligned Houthis, cutting supply lines from the Red Sea to their stronghold in the capital Sanaa.

It could also give an edge to the Western-backed military alliance which, despite superior weaponry and firepower, has failed to defeat the Houthis in a war that has killed 10,000 people and created the world’s most urgent humanitarian crisis.

The coalition wants to restore an internationally recognized government in exile and thwart what Riyadh and Abu Dhabi believe are arch-foe Iran’s ambitions to dominate the region.

Riyadh is Saudi Arabia, and is Abu Dhabi is United Arab Emirates – so they are battling Irani influences in Yemen. And the US is in the mix too.

The offensive could also have ramifications further afield due to Yemen’s role in a proxy war between Saudi Arabia and Iran that has fueled instability across the Middle East.

U.S. President Donald Trump’s withdrawal from Iran’s nuclear deal and his embrace of nuclear state North Korea have added to Tehran’s isolation and put pressure on the Islamic Republic to preserve its interests in Yemen and other Arab states.

 

The United Nations says the assault on Hodeidah could trigger a famine imperiling millions of lives. Many residents are bracing for more hardship as the warring sides dig in.

Imperilling millions of lives – the collateral damage. The population of Yemen is about 28 million people.

In March US approves proposed $1bn arms sale to Saudi Arabia

The US State Department has approved a possible arms sale to Saudi Arabia worth more than $1bn.

“This proposed sale will support US foreign policy and national security objectives by improving the security of a friendly country,” the statement read.

But campaigners, including some US legislators, are urging western governments to halt or limit arms sales to Saudi Arabia because of its involvement in a devastating civil war in Yemen.

The Saudi military offensive, which began in March 2015, has killed at least 10,000, displaced more than 2 million people and pushed Yemen to the brink of famine.

US Secretary of Defence Jim Mattis, speaking ahead of a Pentagon meeting with bin Salman on Thursday, said Saudi Arabia was “part of the solution” in Yemen.

Meanwhile, Amnesty International, in a statementon Friday, said there “was extensive evidence that irresponsible arms flows to the Saudi Arabia-led coalition have resulted in enourmous harm to Yemeni civilians”.

“But this has not deterred the USA, UK, and other states, including France, Spain and Italy, from continuing transfers of billions of dollars’ worth of such arms,” it added.

Also Nearly half of US arms exports go to the Middle East

Nearly half of US arms exports over the past five years have gone to the war-stricken Middle East, with Saudi Arabia consolidating its place as the world’s second biggest importer, a report has shown.

The Stockholm International Peace Research Institute (Sipri) said on Monday that global transfer of major weapons systems between 2013 and 2017 rose by 10% compared with the five-year period before that, in a continuation of an upward trend that began two decades ago.

The US, which is the world’s biggest exporter, increased its sales between those two periods by 25%. It supplied arms to as many as 98 states worldwide, accounting for more than a third of global exports.

Russia, the world’s second biggest exporter, saw a decrease of 7.1% in its overall volume of arms exports; US exports were 58% higher than those of Russia.

France, Germany and China were also among the top five exporters. The UK is the sixth biggest weapons exporter.

Killing people and destroying stuff is big business.

Clearing bombs, clearing Kiwisaver

A couple of things came up yesterday related to bombs – the Police have indicated there is no evidence indicating that Kiwisaver funds illegally invested in arms manufacturers.

At about the same time John Key announced giving $11.5 million to Laos to help them claim old bombs.

Stuff: Prime Minister John Key pledges $11.5m to help clear unexploded munitions in Laos

New Zealand has contributed $11.5 million to help support clearing unexploded munitions in Laos.

Prime Minister John Key made the announcement in Vientiane where he is attending the East Asian Summit and met with Laos Prime Minister Thongloun Sisoulith.

“Laos is the most heavily bombed country on earth by head of population and is still clearing around 80 million pieces of unexploded munitions left over from the war in Indochina during the 1960s and 1970s,” Key said.

For 20 years New Zealand has been helping with the clean-up.

“We still have about 40 or 50 people a year being either killed or losing limbs by these bombs going off,” he said.

US President Barack Obama announced on Wednesday a further $90m over a three-year period to speed up the process of clearing Laos. 

Large areas, often including schools, currently have to be cleared in order to diffuse a bomb, which can cause a large amount of damage.

However, New Zealand technology will be trialled and used over the next couple of years to melt casings “without having to dig up or explode each piece,” Key said.

It’s good that New Zealand is helping Laos clean up, but it’s a huge long term job.

In the meantime:

Kiwisaver / Cluster Munitions Act assessment complete
Thursday, 8 September 2016, 12:34 pm
Press Release: New Zealand Police
Police and FMA complete assessment – Kiwisaver / Cluster Munitions Act
The Police, in consultation with the Financial Markets Authority (FMA), have completed an assessment into whether the Cluster Munitions Act (“Act”) is likely to have been breached by New Zealand KiwiSaver fund managers.

A feature of fund management is the fact that fund managers generally buy their securities on traded markets, so these are shares traded between shareholders as opposed to providing funds to the companies that produce these weapons.

Additionally, New Zealand fund managers also place money with offshore fund managers, who may undertake share trading on overseas markets, rather than the New Zealand fund managers investing directly.

There are significant threshold issues with regard to establishing breaches of the Act, and at this stage there is no evidence to indicate offending.

Should there be any new evidence that comes to light this will be assessed and acted on as required. 

With investment funds investing in investment funds, and with often convoluted  company ownership, it can be difficult ensuring that investments are ‘ethical’.

I certainly don’t want to be investing in cluster bomb manufacturing, or any bomb manufacturing. But it’s more of a ‘feel good’ stance than effective, if no New Zealander invested in any arms manufacturer, directly or indirectly, it would do nothing to stop man made carnage.

It also gets complicated when a company may have an association with the manufacture of arms but also manufactures things that are useful and ‘ethical’.

And it gets very complicated when you consider the reality that arms are needed to defend as well as to attack, and when bad people attack someone has to defend with something.