With the near completion of his clearing the way for his path to power in the Kingdom of Saudi Arabia, crown prince Mohammed bin Salman, who has even taken steps to arrest members of the royal family in a bid to consolidate his power base at the upper levels, he has set himself up to deal with economic and social woes that have been plaguing the corruption-ridden kingdom.
At the same time, the lingering ill effects of the Obama-era Iran Nuclear Deal that was pushed through secretively by proxy John Kerry, then-Secretary of State, the administration’s audacity to do so without Congressional approval leads many to believe that there is a harboring effect that has caused the Iranians to feel emboldened to produce long- and short-range ballistic missiles in the past few months. While the sanctions by the United Nations appeared to be having the intended effect on Iran for decades, the lifting of certain sanctions through the muscle of Barack Hussein Obama seemed to say, “Go ahead, do your worst,” to the Iranian leaders. And now, it’s possible that they will.
An armed conflict between Riyadh and Tehran would have a major impact on oil markets and the global economy. RT asked experts what a war between the two Middle East superpowers would mean for crude prices.
If a conflict happens, oil prices could increase 500 percent.
“Energy prices will seriously depend on the severity of the conflict. Let’s remember the unrecognized Iraqi Kurdistan, which in a state of continuous war exported about 550,000 barrels per day through Turkey. In this connection, we can expect a panic rise in oil price to $150-$200 on the first day of the conflict… If Saudis and Iran attack each other’s oil facilities, crude prices can skyrocket to $300,” Mikhail Mashchenko, an analyst at the eToro social network for investors told RT.
Ivan Karyakin, an investment analyst at Global FX, points out that the area of possible conflict pumps a third of global oil. Saudi Arabia, Iraq, Iran, the United Arab Emirates, Kuwait, Oman, and Qatar together produce about 28 million barrels per day, which is slightly less than 30 percent of global production; prices will go up immediately to $150-180 per barrel, he said.
“Then everything will depend on the duration of the conflict. The world market will survive two or three days of the conflict. If the conflict lasts a week, then prices will rise to $200 or higher, and this will have long-term consequences, as stockpiles will decrease,” Karyakin said.
The analyst insists a war between Riyadh and Tehran is unlikely, as it’s not in the interests of Russia and China.
“Russia is a partner of many conflicting countries in the Middle East. Largest oil importer China, which carries the greatest risks in the event of a rise in oil prices, will use all its influence on Iran and the US to prevent a conflict,” he said.
A war in the Middle East will be very unprofitable for importers, according to Ivan Kapustiansky, Forex Optimum analyst. “In the event of war, markets may lose about 20 percent of the world supply. First of all, of course, the largest importers will be affected. These include the US, China, Japan, as well as the Eurozone, in fact, the main locomotives of the world economy,” he said.
Both Saudi Arabia and Iran understand how crucial oil is to their economies, and will try to maintain production even in the event of a conflict, says Andrey Dyachenko, Head of Private Solutions Department of Сastle Family Office in Russia and the CIS. “Even a temporary drop of market share will mean that other players like the US will take their place. And they will not be able to get their market share back. Therefore, if such a conflict does happen, both Saudi Arabia and Iran will do everything possible to continue producing and supplying as much as possible,” he said.
Of special note here is the insistence by all of the analysts that the conflict would lead to economic and social woes for all countries, and that each of the five analysts from five different companies are clearly of Russian descent. Is this significant?
Perhaps. But the other question to ask is why China would carry “the greatest risks in the event of a rise in oil prices,” considering that recently, it has struck a deal with Russia to provide refined petroleum in exchange for gold, while Russia has promised crude oil (which it has in excess) to China for gold. The Chinese are even letting fly their newest endeavor in the form of a petroyuan, which it hopes will balance the power of the world’s oil reserves that deal primarily in the US petrodollar. Through a hand-in-hand integration of both the Shanghai Cooperative Organization (SCO) and Brazil, Russia, India, China, South Africa (BRICS) organization, the Chinese and Russians hope to corner the market in certain quarters of the world in both oil production and petroleum market influence.
The SCO already rivals the NATO alliance, accounting for “half of humanity” in its efforts. That’s an alarming notation for anyone watching the balance of world power shifting slowly like a pendulum in the direction of the East. The US is heartened by the recent announcement of the European Union penning an agreement for an EU standing army, but that does not yet exist and it could end up taking a decade or more before that vision is realized. On the other hand, Germany has been getting pretty chummy with China in recent months.
In the meantime, we arrive full circle at the beginning, where America is facing off against the big players of China and Russia once again.
Image: Forces.net
How is that?
Now that’s B******T!!!!!