Saudi Arabia: A Weak Kingdom On Its Knees?
Submitted by Tom Kool via OilPrice.com,
The great Kingdom of Saudi Arabia - the long-time dictator of crude oil prices for the world - is struggling on all fronts.
The Saudis are losing their proxy wars in both Syria and Yemen; their OPEC leadership is under threat; they are not winning the crude oil price war; and its long-running alliance with the West is in question.
From Saudi Arabia’s perspective, Iran seems to be gaining ground everywhere. Saudi Arabia has several weaknesses that help explain the current anxiety emanating from Riyadh.
1. Saudi Arabia losing its leadership in the OPEC
Saudi Arabia has been the default leader of OPEC; however, despite Saudi insistence to the contrary, the U.S. shale boom, increased Russian oil production, and a very resolute Iran are challenging this leadership.
The result is that Saudi Arabia now finds itself powerless in supporting oil prices. Instead of the much-needed production cuts, during the 4 December 2015 meeting, the OPEC nations refused to adhere to any ceiling, which has been the practice for years.
2. Burning through reserves—fast
(Click to enlarge)
Source: www.tradingeconomics.com
Iran is waiting for the lifting of sanctions, expected sometime in 2016, to pump more oil to improve its economy, whereas the Saudi’s are losing they are burning through their cash reserves quickly. The above chart speaks for itself, depicting the kind of damage low oil prices are inflicting on Saudi reserves. By the most optimistic opinion, Saudi Arabia can survive low oil prices only for four years.
3. Iran has assumed a very significant leadership role among Shia Arabs
Both Iran and Saudi Arabia are currently locked in a bitter proxy war on two fronts: Syria and Yemen.
Iran has the support of Hezbollah in Lebanon, along with support from the majority of Shiites in Iraq. More to the point, Iran has even managed to grow its Shiite support base among Sunni-ruled nations. The execution of Shia Sheikh Nimr Al-Nimr by the Saudis is an indirect acceptance of the growing influence of Iran among the suppressed 15 percent Shiite population in Saudi Arabia. This shows that the Saudi leadership is feeling threatened on their own soil.
4. Saudi Arabia cannot defeat Iran in a direct war
Iran is a much larger nation than Saudi Arabia by population and has held its own in numerous long wars. By comparison, the Saudis have an army that is inexperienced, led by loyalists of the Royal family who occupy plum postings. These are not the war-hardened generals of Iran.
While Saudi Arabia has a nice arsenal with the latest weaponry, the kingdom is heavily dependent on the West for its use and maintenance. Its indecisive and ineffective handling of three conflict fronts—Iraq, Syria, and Yemen—give us no confidence in its ability to take on Iran.
5. Saudi Arabia knows it won't have U.S. support for a direct war with Iran
The painfully misguided wars in Iraq and Afghanistan are enough to deter the current U.S. administration from entering into full-fledged war in the Syrian and Yemen theaters. Washington's non-committal stance, along with efforts to broker a deal with Iran, should serve as very loud signals to Saudi Arabia. The message to the kingdom is this: Don't go to war with the hope that that U.S. will support you. And without the West, Saudi Arabia knows it stands no chance of winning a war against Iran. The royal family will probably not take the risk of losing power by indulging in such a war.
These relationships are anything but clear, and everything about balance. So the U.S. will continue to sell weapons to Saudi Arabia to allow it to maintain a bit of balance—with the latest deal approved in October—and Washington and Tehran will continue to play cat and mouse as they near a nuclear deal and a removal of sanctions. This is best illustrated by the recent detainment and then quick release of U.S. sailors for an incursion into Iranian waters, and the statement and then denial by Iran that it had completely closed off a key nuclear reactor that would have sealed the nuclear deal.
The Saudis are in a state of panic all around - from its OPEC status and dwindling reserves to its proxy wars that absolutely cannot turn into full-fledged wars and its growing friendlessness. The fact that oil fell briefly below $30 a barrel on Tuesday for the first time in 12 years won't have helped.
At the end of the day, Saudi Arabia has overextended itself, and overestimated its prowess and it does not have the clout that it once had to be able to do this effectively.
If you're wondering whether there will be an all-out war between Saudi Arabia and Iran, it's unlikely. At this point, the Saudis are likely to continue the proxy war and hope that the Iranians do something foolish to upset the nuclear deal with the West. Until then, Saudi Arabia will make a lot of noise and attempt subversive activities, but nothing more.
(14 votes)
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I hope so. At least they have plenty of lube.
You people are "just peddling fiction"....
Twilight in the Desert fades into Evening in the Desert.
Cool and breezy with a chance of war.
Those inbred Al-Saud rulers are about to see how true Lord Palmerston's quote is:
We have no permanent allies, we have no permanent enemies, we only have permanent interests
Bush/Cheyney are not coming to your rescue.
'The Fall of the House of Saud'http://www.theatlantic.com/magazine/archive/2003/05/the-fall-of-the-hous...
From 13 years ago. Fat lot of good that was.
Beheading 12 people a week is not profitable?
That's odd.
Hopefully theses wahabi terrorist supporting primitive throwbacks will need it. Worst ally the US has ever had.
If you don´t have oil for more than three weeks, and if you fail to steal other countries´ oil, you should not lead OPEC.
second worse, after "the democarcy in middle east".
We should get the hell out of the middle east and mine the hell out of the Persian gulf on the way and just let'em kill each other off.....
Israel is far worse for the US.
How many of the 911 "Terrorists" were Persian?
The Saudis aren't in a panic about any of this... Tom Kool needs to lay off the Iran Kool-aid and come to terms with the fact that current events were part of the Saudi plan all along...
No one can compete with the Saudis on either level or cost of production... no one... the financial angle is a non-issue and will be tackled by going to the bond market and the Saudi Aramco IPO... anyone who thinks their war chest is shallow and will be snuffed out immediate term is simply unable to grasp the money Saudis can bring to bear for this market share war...
It will take a vigorous nuclear confrontation in the Gulf region for oil prices to spike at this point... highly unlikely...
Karma, bitchez
FUCK THE HOUSE OF SAUD !
Fuck the House of Pancakes too.
They never do an egg over easy right.
Cooking an egg over easy is a art , usually only done right by a Mother or Grandma, my dear wife of many years still can only do it right about 60 % of the time. Asking a minimum wage egg flipper to do it right is like trying to teach a pig to sing.
Tip: The egg must be cooked in the leftover meat grease, Fuck Pam, margarine or organic olive oil
Is Walmart closing those stores in SA?
Instead of Mr Potato Head I have come up with MR. Mohammad Head... Where you get to dress up your favorite Prophet in 3 stylish outfits.
1. Barbie Mr Mohammad head fully equipped with lipstick and eyelashes cause Islam is soo ugly and needs some color! :)
2. The Royals where Mr Mohammad head can be dressed like the house of Saud...
3. Russian Version where Mr Mohamaad head can be accessorized like any true russian with a nice new Ushanka ....
Worth keeping in mind that if Saudi Arabia decide Oil carnage has done the job they can easily hint at a production cut. A 5% cut would take oil to $100 and the worry about cash reserves would vaporize.
$100 oil brings back all the marginal oil in the world. Not going to happen in an instant.
How about those Northern Arabs:
Net Energy WCS Closing Price* -$14.60 USD/BBL
That's right Western Canadian Select is USD $ 14.60/BBl
"That's right Western Canadian Select is USD $ 14.60/BBl"
And at what cost?
But Canada's currency is in sharp decline so the oil price in their currency is holding.
that's what? 20 loonies/bbl below the cost of production, not including the price of the barrel or the vast array of costs that have been successfully 'externalized'.
And some USeans thought NAFTA was a bad deal for them; three cheers for the 'proportionality clause'!
chortle, even Mexico wouldn't sign on for that one...
PS
Coincidentally, the last time the Alberta provincial gov't suggested reviewing their royalty rates was late 2008, and this year they are actually doing it... pure coincidence.
Actually, it is close to the marginal cash cost for some players, but doesn't cover any overhead whatsoever. So they are stuck producing because the cost of shutting all of it down exceeds the cost of operating. No return on investment until it exceeds $50USD. The walking dead.
Which 'players'? I call bs on that one.
Eg. To my knowledge Suncor actually had a 'cash cost' of 35 USD/bbl four years ago for then existing operations, I doubt they've managed to eviscerate the prices of labour, production and transport (it actually costs 11 fiatscos/bbl just to get the stuff to market by rail) that much since the beginning of the 'fall'.
Your 50USD/bbl number is bang on regarding tarsands profitability, which means so is " the walking dead", but that hardly qualifies Canuckistan as 'Northern Arabia', since the Saudis are still actually turning a profit/bbl at these prices, if only just; not to mention that all told Canada actually produces only ~4 million bpd in a 90 million bpd market, compared to SA's 12 million bpd, or even the US's actual 14 million bpd
In light of these actualities perhaps your 'Arabian' epithet might stick better to the US, especially if all the claims made on ZH that the current POTUS is a muslim are actually true?
I hope the Sauds get their hairy asses kicked by Iran, it's time for some justice on this mud ball.
Hold on to your asses the tyrants are going to shake us like a ragdoll again.
Yeah cause Iran is such a peach. It's more akin to death by fire or drowning?
For the majority of U.S. citizens it would be MUCH better if the U.S. dumped the Saudi relationship and went full bromance with Iran...that way we can become new friends with Russia again...a 2fer!
But Iran is Israel's nemesis and Russia Brezinski's, so that can't happen.
I just finished watching a Tarpley talk :
https://www.youtube.com/watch?v=5Tef2UDN_2k
He is excellent.
If the House of Saud falls then too the petro-dollar relationship, then the Dollar. So be careful what you wish for if you live in the U.S.
fuck the FRN..........it cant die fast enough for me.........
They solve all problems with beheaded
0% muslim for peninsula
Camel breeders shit.
Saudi has plenty of money....that's not their problem.
The problem is Iran would kick their ass (and Pakistan's) if a war started - but a war is not going to happen. Not a direct war at least.
Saudi is going through some 'management' issues right now...this is about their leadership (or lack of).
Also, the great Sunni vs Shia war is on the horizon at the rate things are going - and that will result in more violence in the Middle East and the word. The Radical Islamists (most of whom are Wahhabists from KSA) are infecting all other 'moderate' Muslims and you are seeing the more extreme Muslims starting to dictate rules to the rest of the Muslims. I have been warning people for years that the Zombie attack movies are really a very good model for what happens with Radical Islam in the Islamic world. (you want to see the future...watch "World War Z" and think about "World War MuZZie"
+100
I have little love for Phuckistan.However Phukistan has refused to send troops.A significant numer of the top brass are shites.
So Camelistan is shit out of luck.
Shia vs Sunni is too simple to allow useful thought. They intermarry everywhere the populations mingle without political interference, and it is only terrorism from the US, Israel and the Saudis that makes it any different anywhere.
All of those countries have reasons for fomenting as much chaos as possible, and Shia-Sunni is an after-the-fact explanation, not a significant cause. Kurds are Sunni, predominantly fight Sunni Turks and cooperate with Shia Iraq and now Shia Iran.
head choppers R Us also getting its ass kicked by a bunch of sandal wearing Yemeni Houthis...Karma bitches, you live by the sword, you gona die and get your fucking towel heads chopped off, cant wait for the day when the last helicopter hovers over the US embassy in Saudi Arabia
Repubs. agreed last nite that the US needs to lead a Sunni invasion of Syria to restore Democracy and because Saudi Arabia demands it. Plus Assad gasses his own people and has killed a quarter million. Jeb said "Peace Thru Strength".
That's why they had to axe the only guy, who would have called "BS!" on this: Rand Paul.
It's certainly why the jewmedia has pushed him off the stage.
>>5. Saudi Arabia knows it won't have U.S. support for a direct war with Iran
This is correct given the current WH Administration but what if Trump gets in? It'll be funny seeing the Saudis trying to kiss ass with someone who thinks them and their entire religion are akin to 5th century cave dwellers.
You"re right about Trump-at least he won't be turning all his cards face up on the card table.
I'm not sure Obama even knows how to unfold a card table.
Obama most certainly knows how to unfold a card table. The mechanism is almost identical to the massage tables where Reggie provides his "body work".
75C a gallon? Yeah!
Sauds should have vanished by 2005 but they got away with $150/barrel oil instead, can you believe it now? And ten years ago, after 5% inflation, more like $215 oil, OMG. That's the only reason they're still around at all.
So then last year some pencil-necked geek with a spreadsheet convinced them that their optimal response to US fracking would be to slash the price of oil to kill the frackers who were counting on $80/barrel or so. Saudis can probably still produce around, oh, $10-15/barrel, plus postage and handling. And, the US encouraged them (and probably is compensating them under the table), because it beggars Venezuela, Russia, and even Iran.
Excel error! Excel error! Excel error!
So the imminent end of the Sauds is brought about by geek power after all.
Goodbye, towel-heads, don't let the camel spit on you on your way out.
Saudi Arabia has a $750 billion dollar GDP and producing 10 million barrels per day for 365 days is 3,650,000,000 barrels per year. That's $205/ barrel.
The Sauds will run out of money and oil long before the money printers run out of money.