It is time for a current events lesson. Boys and girls, please take out your book, “The Absent Super Power,” and turn to chapter 7 entitled, “The (Next) Gulf War,” and read about how the coming “World Disorder,” as Peter Zeihan describes it, is about to consume the Mid-east. The split between the Saudis, Saudi allies and Qatar is the start of something big. History is being written.
Peter Zeihan: (Chapter 7 page 175) “As far as the Americans are concerned, most of its alliance network has outlived its usefulness, the Middles East’s oil isn’t needed, and the trade powered by oil was never directly used by the Americans in the first place. Every link in the logic chain that has kept American power tethered to the Persian Gulf has broken at more or less the same time. Even the managed withdrawal of American troops is well advanced. Since 2007 the total number of American military personnel in the region across the belt of countries from Morocco to Afghanistan has shrunk from a high of over 250,000 to under 15,000. Contrary to popular belief, the withdrawal isn’t an issue of an ideological split in American political thought. The majority of remaining U.S. forces is in the region at U.S. Central Command’s (CENTCOM) forward headquarters in Qatar. CENTCOM established its Qatari facility to oversee operations in Iraq and Afghanistan. Now that American efforts in those two locales are largely closed down, CENTCOM is highly likely to return its regional operations command to American territory in the not-too-distant future. This isn’t the new normal. This is merely the transition to the new normal. The transition to the Disorder. There still may be many reasons for many powers to have interests in the region, but since none of these powers is the global superpower, the strategic state that the region has existed in for the past 40 years is breaking like river ice in spring. The region will be left to sort out its own local geopolitics. And those geopolitics are, in a word, nasty.”
My take: Doha is the capital of Qatar. It will be hard to get a flight in there now as airlines dropped service. President Trump will claim credit for breaking the ice that Zeihan referred to. Qatar is the largest global exporter of liquefied natural gas (LNG). It will compete with the U.S. in the LNG business. It’s independence from the Saudis voicing reverence for Iran (called fake news by the Emir) finally became more than the House of Saud could tolerate, although the House of Saud has dirty hands too.
Many say that the Saudis calling out Qatar for supporting terrorism is the pot calling the kettle black. The Saudis have cut diplomatic and commercial ties with Qatar. The Doha based network Al Jazeera signals were being blocked. This is an exercise in forced transparency of Mid-east loyalties as the Islamic backed groups supported by Qatar are still in the terrorism business.
Qatar has had feet in both camps allowing the U.S. military to maintain its headquarters for the entire region (CENCOM) there while also aligning many of its extracurricular political activities with Iran. Qatar had indirectly supported the Muslim Brotherhood, ISIS and the Houthi rebels in Yemen all the while the U.S. military is directing operations against ISIS from there. This move by the Saudis to ostracize Qatar was in response to the U.S. decision to withdraw its control and interference in the region. We no longer need their oil. OPEC and Partners supply management plans will surely become a casualty as the disorder in the region expands. Those plans are intended to suppress/break Iran financially.
Trump is not going to step in and assert control or responsibility for maintaining order in the region as the U.S. has previously done as part of the new “America First” policy. He will pat the Saudis on the back. Essentially Qatar is being called out as a purveyor of terrorism and being forced to choose its poison. Oman and Kuwait are on the sidelines watching the consequences befalling Qatar as they too will have to go further picking a side.
When it looks like there could be regional war in the Mid-east in the offing why would oil prices fall? First off, likely the only power there that could cut off the Strait of Hormuz is the Saudis. The Saudis are not dependent on Gulf transit to move their oil having built a strategic pipeline that buy-passes the strait in the gulf as well as a major pipeline moving oil west across the county to the Red Sea. Short of war the OPEC and Partner supply management will break down. The whole point of the Saudi-engineered gas war that preceded recent efforts to moderate gulf oil production was to break Iran. Financial stress in the Mid-east is going to become progressively intolerable as the cost of the wars and infighting is escalating to a level that will soon breakdown the Cartel into an every man for himself interest in increasing cash.
The U.S. has already won in terms of both energy independence and security as shale oil technology and American ingenuity has lowered the cost of U.S. oil/gas production to be able to compete with conventional oil production economics. The Saudis and the U.S. are positioned well to financially stress Iran. It was no coincidence that the Saudis commercial war on Qatar happened shortly after Donald’s visit there or that Donald has sided with the Saudis despite the major U.S. military base in Qatar.
Another looming decision that will reveal how far that the President will go with his “America First” geopolitical agenda is the request by U.S. military commanders for several thousand more U.S. and NATO troops to re-assert control again in Afghanistan where it has been slipping back to the Taliban. This would appear to be an unwinnable war with the Afghan government unable to gain full control over the country. After a trillion dollars invested there in U.S. blood and treasure how much more with they contribute? A continued investment can maintain a stalemate but is that good enough for the President to double down again with ambiguous benefits to the U.S.?
David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.
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