Monday, April 18, 2016

Obama to Visit a Saudi Arabia Deep in Turmoil

Obama to Visit a Saudi Arabia Deep in Turmoil


                  
Saudi women and men on opposite sides of a hall at the American Express Luxury Expo in Riyadh last month. Credit Sergey Ponomarev for The New York Times
RIYADH, Saudi Arabia — The images of the past year have been deeply unsettling for the people of Saudi Arabia, long accustomed to oil-fueled prosperity and regional clout: militants firing at communities along the country’s southern border; protesters storming the Saudi Embassy in Tehran; civil wars raging in three nearby states.
 
The view from Riyadh has become increasingly bleak as stubbornly low oil prices constrain the government’s ability to respond to crises and as the kingdom’s regional rival, Iran, moves aggressively to expand its influence at Saudi Arabia’s expense.
 
Under huge stress, the Saudis have responded in unpredictable ways, often at odds with Washington’s interests. They have launched a costly military offensive in neighboring Yemen that has failed to defeat the Houthi rebels and has empowered the Qaeda affiliate there. They have executed dozens of men on terrorism charges, including a prominent dissident Shiite cleric. And they have largely walked away from Lebanon, suspending billions of dollars in promised aid as Iranian influence there grows.
 
This is the Saudi Arabia that will greet President Obama, who is scheduled to arrive in Riyadh on Wednesday and who is the source of no small share of this nation’s anxiety. Policy makers across the kingdom have long said that they feel Mr. Obama does not share the country’s regional interests. And after he criticized the Saudis as “free riders” last month, those suspicions have hardened into fears that he may be actively undermining them.
 
Mr. Obama may try to use his visit to mend relations, but it remains unclear how badly the ties that have long bound the United States and the Saudi monarchy have weakened, and whether the damage can be repaired.
 
“It is a concerning factor for us if America pulls back,” said Prince Turki al-Faisal, an outspoken member of the Saudi royal family, a former head of intelligence and a former ambassador to the United States. “America has changed, we have changed and definitely we need to realign and readjust our understandings of each other.”
The moment is a perilous one for the Saudis as they face economic and demographic challenges as well as strategic and security concerns.
 
Domestically, a growing cohort of young Saudis is entering the job market as low oil prices constrain economic opportunities and undermine the welfare system. Regionally, Iran has outflanked and outmaneuvered Saudi Arabia in crucial countries as the Arab Spring and the war in Syria have upset the local order. Globally, the drift of the United States away from the monarchy’s side has made the Saudis realize how much they have relied on the world’s most powerful nation.
 
“A large number of factors have come together, both in the region and at home, to create a very challenging threat environment for the Saudis,” said Lori Plotkin Boghardt, a fellow at the Washington Institute for Near East Policy. “The Saudis feel under siege.”
For decades, the kings and princes who rule Saudi Arabia wielded their oil wealth and religious clout as the controllers of Islam’s holiest sites to pull strings and fund proxies across the Arab world and beyond.
Photo
Smoke rising from the Saudi Embassy in Tehran in January after Iranian protesters entered the building. Credit Mehdi Ghasemi/Tima Agency, via Reuters
Since the kingdom has never had the military might to protect itself, its alliance with the United States has been essential, and hugely beneficial to both sides. Saudi Arabia knew that in exchange for a steady flow of oil and billions of dollars for the American arms industry, the United States would come to the rescue if its ally faced an external threat — and that it would never speak out too loudly about the kingdom’s closed political system or its poor human rights record.
 
That relationship was unsettled by the Arab uprisings of 2011, when Saudi officials saw the United States cut loose another Arab ally, President Hosni Mubarak of Egypt, amid popular protests. Since then, frustration among Saudi officials has grown as Mr. Obama limited American engagement in later crises, in Libya, Syria and elsewhere, and as he made a deal with Iran to lift sanctions in exchange for the reining-in of its nuclear program.
In Syria, the Saudis saw the uprising against President Bashar al-Assad as an opportunity to replace an Iranian ally who was killing his own people.
 
The hope was that a government more amenable to Riyadh’s influence, and less to Iran’s, would come to power. But that hope dwindled when the United States backed away from military action after Mr. Assad crossed Mr. Obama’s “red line” against the use of chemical weapons.
 
Over time, it became clear that Mr. Obama had prioritized combating the Islamic State over ousting Mr. Assad. This infuriated Riyadh, which wanted to marry the two causes. Privately, Saudi officials blame Mr. Obama for prolonging the war by barring Saudi Arabia and other countries from giving Syrian rebels more powerful arms, like antiaircraft missiles, which Mr. Obama feared could be used outside Syria by terrorists.
 
The mounting frustration has led Saudi Arabia, under a new monarch, King Salman, to abandon its quiet checkbook diplomacy and lash out. In January, it executed 47 men on terrorism charges, including Qaeda militants and the Shiite cleric — sending what it thought was a message to deter jihadists and Iran from trying to destabilize the kingdom.
 
Analysts have begun speaking of a “Salman Doctrine,” although it is mostly associated with the king’s son Mohammed bin Salman, 30, who is the defense minister and is second in line to the throne. The doctrine calls for increased self-reliance and more assertiveness in regional affairs.
 
Last month, Saudi Arabia suspended $4 billion in aid promised to the Lebanese Army and security forces, saying that Hezbollah, the Iranian-backed Shiite militant organization in Lebanon, had become too powerful. The Saudis and their gulf allies also issued travel warnings, depriving Lebanon of gulf tourism dollars.
 
Those moves surprised American officials, who have reported no change in the security situation in Lebanon and who continue to support the Lebanese Army as a counterbalance to Hezbollah.
Saudi Arabia has also shown a growing willingness to use direct force. Last year, its military spending grew to $87.2 billion, as the country passed Russia to become the world’s third-highest military spender.
 
Last month, it opened a new arms factory, and it has proposed building a military base in Djibouti, on the Horn of Africa, to project power abroad. Prince Mohammed has also spearheaded the creation of an international alliance of Muslim countries to combat terrorism, although it is unclear when — if ever — it will begin operations.
Photo
Supporters of Ali Abdullah Saleh, the former president of Yemen, at a rally in Sana, the capital, on March 26, marking a year since the beginning of Saudi-led airstrikes in the country. Credit Khaled Abdullah/Reuters
Diplomats who track the kingdom question whether Saudi Arabia has the strategic capabilities to match its new ambitions. One test case is Yemen, where the kingdom and its allies have carried out a bombing campaign for more than a year, trying to oust the Houthi Shiite militant group from the capital and restore the government — at tremendous cost to the people of Yemen.
 
An estimated 6,400 people have been killed, more than half of them civilians; nearly half the country’s provinces are on the verge of famine; and Al Qaeda has expanded its control in the south.
Continue reading the main story
  
The Saudis defend the war as essential to their national security. “It is a war of necessity,” said Abdulaziz Sager, a Saudi political scientist and the chairman of the Gulf Research Center.
 
“You can’t let a failing state with a violent nonstate actor be your neighbor.”
Domestically, the fall in oil prices has echoed through the Saudi economy, forcing the government to run a large deficit, impose spending limits and ponder steps that were once unthinkable, like imposing taxes on citizens and privatizing parts of Saudi Aramco, the state oil giant.
 
Fitch Ratings and Standard & Poor’s have downgraded the country’s credit rating this year, and companies that depend on government contracts have struggled to pay workers, creating problems for citizens and for the kingdom’s many foreign workers.
 
 
“These are really uncharted waters,” said Ms. Plotkin Boghardt, the Washington Institute fellow. “The oil income has been like the superglue between the Saudi government and the Saudi citizens. With this glue beginning to melt away, it opens up a whole situation that we’ve never seen before and they’ve never been in before.”
 
It is not all dire news for the kingdom. Saudi Arabia still has the world’s largest reported reserves of oil, which remains essential to the global economy. The country also has low debt and large cash reserves.
 
And although Iran has increased its influence in Lebanon, Syria and Iraq, it has done so at great cost, financially and militarily. “The Saudis took the region for granted while Iran put a strategy in place back in the ’80s, and has been implementing it year by year and dollar by dollar,” said Randa Slim, an analyst at the Middle East Institute.
 
But the kingdom maintains strong ties with many other countries — including Egypt, Britain and Pakistan — and as a leading Sunni nation, it has the demographic upper hand against Shiite Iran. “The score is still in their favor because it is a majority Sunni Arab region,” Ms. Slim said.
 
Officials involved in the Saudi-United States relationship acknowledge the chill, but say that it has not filtered down to the operational level, and that cooperation remains robust on issues like security, counterterrorism and business. And many Saudis realize that Mr. Obama’s days in the White House are almost over and that his successor may engage differently with the kingdom.
 
“I’ve read so many accounts over the years predicting the demise of the House of Saud, and each time they’ve managed to survive,” said Robert W. Jordan, a former United States ambassador to Saudi Arabia. “They have an enormous survival instinct.”
 

Friday, March 18, 2016

On the importance of improving the process for selecting the next Secretary-General of the United Nations.

Bloggers note: a 2015 article ....God Save us if Obama is ever considered for this job...

An international election that Canada can help to fix: Opinion

Canada is ideally suited to lead an effort to reform the way the United Nations chooses its secretary-general.

http://www.thestar.com/opinion/commentary/2015/02/24/an-international-election-that-canada-can-help-to-fix.html?utm_source=twitterfeed&utm_medium=twitter

United Nations Secretary-General Ban Ki-moon: his term expires next year.
MANDEL NGAN / AFP/GETTY IMAGES
United Nations Secretary-General Ban Ki-moon: his term expires next year.


The emergence of potential candidates reminds us that the 2016 race for the White House has already begun. Canadians will watch the American contest in fascination and frustration, aware that although the choice has momentous consequences for Canada, we are mere spectators.
 
There is another important “foreign” election in 2016, campaigning for which is also getting underway. But in this one, Canadian leadership could have a profound impact on the result.
In 2016 Ban Ki-moon will complete his term as secretary-general of the United Nations. At some point next year – no one knows when – a new secretary-general will be nominated by the Security Council for approval by the UN General Assembly. Canada could make a real difference, not by backing a particular candidate, but rather by leading an effort now to reform the flawed process by which that person is being selected.
 
At present, the secretary-general selection is rather informal. There is no fixed procedure. There is no search committee to identify promising candidates and encourage them to come forward. There is no agreed list of required qualifications, nor is there an opportunity for member states to ask questions of the candidates. Any one of the Permanent Five (P5) members of the Security Council can veto a candidate; hence their views on candidates matter most. This leads to a good deal of backroom negotiation among the P5, and it is in these negotiations that the real decision is made.
 
The only certainty is that at the beginning of 2017 a new secretary-general will be in place. The Security Council will, when it chooses, put forward a candidate’s name for a largely pro forma majority vote in the general assembly. Only one name has ever gone forward to the general assembly – mocking the notion that an “election” is taking place.
 
Such an opaque process is hardly guaranteed to deliver the best candidate. It is, however, likely to produce someone unduly beholden to the P5, which suits their purposes well. It has never led to a woman being nominated.
 
An open process, engaging all member states and offering a real choice, would strengthen the legitimacy of the next secretary-general and make more probable the election of a person qualified for one of the world’s most demanding – and important – jobs. A fair and transparent process would also enhance the UN’s authority and appeal, both of which are only undermined by the current, secretive approach.
 
The good news is that a sizeable majority of UN member states has voted in favour of change. The UN’s own review body has joined those calls. Furthermore, a global campaign is forming, under the moniker “1 for 7 Billion,” to push for choice and transparency in the secretary-general election.
But while public pressure helps, only member states can effect change. Canada is ideally suited to lead that effort. One of the top contributors to the UN budget, Canada has a legitimate stake in the issue. Although the current government has not always appeared as enamored of the UN as its predecessors, both Prime Minister Stephen Harper and former Foreign Minister John Baird have urged greater transparency and the reform of outdated practices.
 
The precise elements of a new process will, of course, need to be worked out.
At a minimum, there should be clear, merit-based selection criteria and an open call for nominations, permitting member states and civil society to put forward names by an established deadline. Both the general assembly and the Security Council should then publish a list of candidates under consideration. The candidates should make public their vision and priorities, and face scrutiny in open sessions of the assembly. The Security Council should be required to submit at least two names to the assembly for the vote that will determine the next secretary-general.
 
Finally, the secretary-general should be offered a single, non-renewable term of, say, seven years. This would remove the need to campaign for re-election, and permit the secretary-general to focus from the outset on implementing her or his vision and plans.
 
Meanwhile, in New York, one can already see the shadowy, secretive signs of the current, flawed process. Names are being whispered. Would-be candidates are visiting P5 capitals to test the waters. Their efforts will only accelerate during the year ahead, as they curry favour with the five leaders who will choose our next secretary-general.
 
Prime Minister Harper could speak out now to demand a better, fairer process. He could put Canada’s name and reputation behind the movement for change, and rally other nations to the cause. And whether or not he wins re-election this year at home, successfully bringing transparency and democracy to the election of a new UN chief would be a legacy of which any politician could be proud.

David Petrasek is Associate Professor at the Graduate School of Public and International Affairs, University of Ottawa. He was formerly Senior Policy Director and Special Adviser to the Secretary-General of Amnesty International.


Allan Rock is President of the University of Ottawa and a former Canadian Ambassador to the United Nations.

Monday, February 15, 2016

Energy Intelligence Report

Energy Intelligence Report       http://oilprice.com/newsletters/free/opintel09022016

Greetings from London.

In today's newsletter, we will take a quick look at some of the critical figures and data in the energy markets this week. We will then look at some of the key market movers early this week before providing you with the latest analysis of the top news events taking place in the global energy complex over the past few days. We hope you enjoy.







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Chart of the Week



•    Crude oil sitting in storage is about one-third higher than the five-year average, according to the EIA.
•    Commercial stocks hit 503 million barrels at the end of January, an 80-year high, and about 10 million barrels above the peak in 2015. That is also 132 million barrels above the five-year average for this time of year.
•    Oil inventories have jumped sharply since the beginning of 2016, a worrying sign about the state of the economy, but also further evidence that U.S. oil production remains resilient.

Market Movers

•    Chesapeake Energy (NYSE: CHK) saw its share price crash on February 8 after news reports suggested the company was looking to restructure more than $9 billion in debt, raising fears of Chapter 11 bankruptcy. The company said it has no plans to file for bankruptcy, but its share price fell by more than 50 percent in early trading on Monday, before regaining some ground.
•    Total (NYSE: TOT)
started a North Sea gas project this week, one of the last major North Sea oil and gas projects greenlighted before oil prices crashed. Total started production at a field near the Shetland Islands, which it says will produce 90,000 barrels of oil equivalent per day, or 6 percent of the UK’s total production.
•    Transocean’s (NYSE: RIG) share price fell by more than 9 percent on Monday after it
announced that Murphy Oil (NYSE: MUR) terminated a contract for an ultra-deepwater drilling ship. The contract was supposed to run through November, but Murphy has elected to pay a termination fee.

Tuesday February 9, 2016

Oil prices slumped on Monday as news emerged from Riyadh that the meeting between Venezuela’s oil minister Eulogio del Pino did not succeed in bringing Saudi Arabia on board for an emergency OPEC meeting.

Venezuela has been pleading with OPEC members to come together for a production cut, and has at least succeeded in generating some buzz. But thus far, the diplomacy of the country’s oil minister has not resulted in getting a meeting on the calendar. Saudi oil minister Ali al-Naimi said the meeting was “successful,” but in reality, the only thing the markets care about is whether or not OPEC will meet to cut production. In that sense, the meeting as not successful. “Nothing really happened at the meeting,” one OPEC official told the
WSJ. WTI briefly below dipped below $30 per barrel on Monday following the news, before closing a few cents above $30.

More spending cuts needed. Even if crude oil averages $40 per barrel this year, the oil and gas industry in North America will need to slash more spending in order to correct their balance sheets. According to IHS Inc., who surveyed a group of 44 prominent oil and gas firms in the U.S. and Canada, spending is still too high. IHS says that the 44 companies will need to cut another 30 percent from their planned expenditures, or an additional $24 billion, in order for them to get spending down to 130 percent of cash flow.

“These spending cuts will be particularly troublesome for the highly leveraged companies,” said Paul O’Donnell, principal analyst at IHS Energy, according to
Bloomberg. “These E&Ps are torn between slashing spending further to avoid additional weakening of their balance sheets, and the need to maintain sufficient production and cash flow to meet financial obligations.”

Libya unrest. Political strife in Libya continues. Despite the small bits of progress achieved between the two rival governments in the war-torn country, they are still clashing over the right to export oil. The Tripoli-based National Oil Company recently
condemned the agreements that foreign companies reached with the port of Hariga, located in the territory of the Eastern government.

The companies, which
include Loyd Capital and Netoil, said that the government in Tripoli is not internationally-recognized and thus has no power over oil exports. Meanwhile, oil traders such as Glencore (LON: GLEN) and Vitol Group have worked with the government in the west. The battle over control of Libya’s oil resources is showing no signs of easing, although there is some hope that the governments can begin reconciling after they have agreed to participate in negotiations over a unity government.

Iran. Oil trader Vitol Group says that it is “very much business as normal” with Iran following the removal of sanctions. The company
confirmed it has purchased oil from Iran.

Oil prices lower for longer. More news from Vitol Group…in one of the most bearish calls yet, the oil trader says that crude prices could stay low for another decade due to a slowing Chinese economy and the ability of U.S. shale producers to ramp up production whenever prices do rise. “It’s hard to see a dramatic price increase,” Vitol’s CEO Ian Taylor
told Bloomberg. He thinks that oil will trade within a range with $50 oil as the midpoint. “We really do imagine a band. I can see that band lasting for five to ten years. I think it’s fundamentally different.” He estimates a price band of roughly $40 to $60 per barrel. “You have to believe that there is a possibility that you will not necessarily go back above $100, you know, ever,” he warned.

Shale production down. The EIA released its latest
Drilling Productivity Report, which predicts a loss of another 92,000 barrels per day in oil production from shale in March. The Eagle Ford will lead the losses, with a decline of an expected 50,000 barrels per day of output. Natural gas production is also declining – the EIA expects the U.S. to lose 451 million cubic feet of gas production per day in March. It should be noted, however, that the EIA has published some confusing figures in recent months. Forward-looking predictions have consistently predicted output declines, but estimates of production retrospectively show output has been relatively flat. So take these estimates with a grain of salt.

Chesapeake bankruptcy rumors. Chesapeake Energy (NYSE: CHK) had to go to lengths to dismiss rumors on Monday that it was nearing bankruptcy when news reports surfaced over the weekend that it was working with Kirkland & Ellis on an effort to restructure some of its debt. Chesapeake
said it had no plans for bankruptcy and that Kirkland & Ellis had been the company’s counsel since 2010. But it is never a good thing when your company has to issue a press release saying that it is not going bankrupt. Chesapeake’s share price plunged by one third on Monday.

Reuters
reported that a bankruptcy from the nation’s second largest natural gas producer would ripple across the midstream sector. Pipeline operators Kinder Morgan (NYSE: KMI) and Williams Companies Inc. (NYSE: WMB) could be vulnerable to a Chesapeake bankruptcy because they have contracts with the gas producer for pipeline capacity. Even though some of their contracts include minimum volume provisions, which would require a company like Chesapeake to pay the pipeline operators for space regardless if they actually wanted to ship gas, the pipeline companies still might be forced to take a hit given Chesapeake’s dire circumstances. Whether through bankruptcy or renegotiation, minimum volume contracts might not be quite as safe as the pipeline companies had thought. Williams, for example, might lose $300 to $400 million because of Chesapeake’s woes.

Obama’s oil tax. President Obama proposed a $10-per-barrel oil tax in his latest budget proposal, a plan that would raise $30 billion per year for investments in clean energy, mass transit, and high-speed rail. The idea has very little chance of passing in the Republican-controlled Congress. Even the administration admits as much, saying that the proposal is intended to at least get the conversation started.

Global recession not assured. Despite growing concerns about the health of the global economy, Goldman Sachs said that the
probability of a recession in the industrialized world is only about 25 percent over the next year and 34 percent in the next two years. The investment bank said that the U.S. only faces an 18 percent chance of a recession within the next four quarters.

Sub-$20 oil? But the bad news is that Goldman also says that oil could still fall below $20 given the extreme volatility and persistent oversupply, although such a scenario is not guaranteed.

We invite you to read several of the most recent articles we have published which may be of interest to you:


In Spite Of Oil Price Slump, Speculators Drive Bets To Record Levels
Iran Signs Oil Deal With Total, Deal Done In Euros
Computerized Trading Creating Oil Price Volatility
No Agreement on OPEC Meeting After Venezuela Meets With Saudi Arabia
Defending Gazprom’s Market Share Will Cost $25 Billion
Despite Huge Losses Oil Companies Reluctant To Shut In Production
The $2 Trillion Gift From Oil Companies To Consumers    
Russia So Desperate It Could Sell Off State-Owned Oil Assets
Can Big Oil Continue To Pay Dividends?

That’s all from your midweek intelligence report, we hope you enjoyed it and we´ll be back on Friday, with your latest energy market update, industry intelligence and special report.

Best regards,

Evan Kelly
News Editor, Oilprice.com

P.S. – This week’s IEA report draws a somber picture for oil markets in the near term, but how close are we really to a meaningful rally? Veteran trader Dan Dicker sees some tangible signals of a workable long-term bottom forming in oil – he expects we might be closer to a bull market than the markets suggest indicate. Find out why Dan is bullish on oil once again
by clicking here

Statement on the Worldwide Threat Assessment

http://www.dni.gov/index.php/newsroom/recent-news]

DNI Clapper Opening Statement on the Worldwide Threat Assessment
Tuesday, February 09, 2016




Statement for the Record Worldwide Threat Assessment of the U.S. Intelligence Community
Tuesday, February 09, 2016