I don’t usually venture into the realm of petroleum, but I’ve been to two events recently, one private and one public, that suggest that the entire world order is changing because of the collapse of oil prices. It could be that it is a confluence of factors and that there is no specific collaboration between the United States and Saudi Arabia, of a sort that used to exist during the Bush years. But it’s also possible that the two countries are aligned in allowing cheap U.S. shale energy to drive down world prices. The Saudis have said they are not going to cut production to ease the glut of oil in the world. They have $1 trillion in the bank so they can wait this out for years, a Dallas-based oil and gas executive told me.
And look who is losing? Iran, Russia and Venezuela. The Americans and Saudis both want to see Iran’s influence rolled back. These are the Shiites who support Hamas and Hezbollah. (Israel also would like to see those groups put on shorter leashes.) That makes Iran the major rival to Sunni Saudi Arabia. This is about settling scores in an ancient religious war! The Americans and Saudis both have major problems with Vladimir Putin because of his support of Syria’s Assad. And the Americans have had big problems with Venezuela because of its efforts to make trouble in the hemisphere. They’ve been supporting Cuba, for example. Now that Venezuela is reeling, it’s perhaps no surprise that the Cubans need to open up relations with the United States for crucial economic inputs.
The public event I attended that supported this general line of analysis was an Overseas Press Club event featuring old friend Michael Moran, who is now managing director at Control Risks and in charge of their macro risk analysis. Moran did not explicitly state that the United States and Saudi Arabia are cooperating. But he noted that both countries are benefitting enormously from the decline in oil prices. They are both signaling major geopolitical power, not just ramping up oil production or maintaining it at current levels. What they are doing could force Iran into cutting a deal on its nuclear ambitions. And it is going to force Putin into a tough corner. The big question at this panel discussion was how Putin will respond. He could become more accomodative toward the West to begin easing the enormous economic damage that is being inflicted on Russia. Or he could become more provocative in the lands neighboring Russia. That is the biggest question mark right now.
