Oil prices too high for fundamentals

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Geopolitical Notes From India

M D Nalapat

IF any single gesture was designed — inadvertently or not — to further raise international oil prices beyond the already high levels reached during the past year, it was President Donald J Trump’s tweet threatening Iran with consequences far deadlier than anything that nation has faced before. For a country that endured a murderous war launched by Saddam Hussein (with various forms of assistance from the US and the UK), this was a threat too far. Till now, the security establishment in Tehran may have simply made a few alterations here and there to the war plans already on file in the event of hostilities launched by the US and its allies. After the Trump “threat tweet”, it is certain that the Iranian Revolutionary Guards Corps (IRGC) in particular must be working round the clock on blueprints designed to inflict as high a cost as possible on the US and its regional allies (mainly Israel and Saudi Arabia), should military action follow the tweet. However, such a kinetic rise in the tensions between Washington and Tehran is unlikely.
Donald Trump is a businessman, not a politician, and therefore can be expected to understand the disastrous consequences to the global economy were there to be a substantial escalation of an already simmering low intensity conflict between Iran and Israel in both Syria as well as Lebanon. This columnist warned more than once in speeches and in writing that Syria under Bashar Assad was not Iraq under Saddam Hussein or even Libya under Kaddafy. That the majority of the population of Syria preferred the Assad’s to the alternative on offer, which was militants backed by Saudi Arabia, Qatar, Turkey, the US and much of the EU.
This backing of such fighters by NATO and its allies did not stop even after Christians, Druze and Alawites were killed off in a systematic fashion by these “freedom fighters”, nor when some of them began to trickle into Europe so as to form modules there that could get activated at a suitable opportunity, the way it actually happened with several. Barack Obama tried to slow down the flow of assistance to such fighters, and was ridiculed by those in the US who favoured the same strategy as Qatar, Saudi Arabia and Turkey were pushing for. The ceaseless effort by the Washington Beltway and its Atlanticist core to reduce Trump to irrelevance notwithstanding, the 45th US President has quietly begun a process of disengagement from Syria, lest his military find itself in that country in the same morass that faulty tactics and over-confidence caused in Iraq and Afghanistan. Donald Trump’s overall policy towards global heat islands has been a mixture of Trumpian pragmatism and Bush-style zealousness, the latter largely a consequence of the fact that Prime Minister Benjamin Netanyahu of Israel often proffers counsel on ways to deal with the Middle East, advice that Trump very often takes. On Iran, the US President and the Prime Minister of Israel are on the same page, in the process wiping out the gains made by moderates during the second term of President Barack Obama and strengthening hardline factions in much the same manner as Iraqi Head of State Saddam Hussein’s thoughtless adventure into Iran in 1980 did. Should hostilities erupt between Iran and the US and its allies, there will almost certainly be a complete takeover of power by hardliners in Teheran, not good new for either the US or Israel. Unlike in the case of Iraq or even Libya, the people of Iran have a fierce determination to protect their land against a military attack, and all bets will be off as a result, with such disasters as the stoppage of the Strait of Hormuz being among them.
A factor which would send oil prices to levels higher than what George W Bush made them through the measures he and Vice-President Cheney took in the Middle East. Of course, the huge profits that such spikes in price made to the oil majors based in Houston must have been a source of some satisfaction to the Bush family, whose relationship with the sticky liquid goes back a long way, although it would be unfair that Bush and Cheney launched the war with Iraq to send oil prices skyrocketing. The fact is that in the case of both Iran as well as Kuwait, Saddam Hussein showed himself to have a pathological streak that made him a danger to the stability of the region. There was therefore a sound case for overthrowing him by military means, in view of the fact that his hold on power was too strong for any other method of regime change ( such as that adopted in the case of Ukraine or Egypt) to work. What was wrong was not the war but the clumsy, colonial manner in which the occupation of Iraq by the US and its EU partners was carried out. Had the US done what this columnist advised Andrew Marshall in early 2004 at the Pentagon (to thin out and thereafter to confine US troops to safeguarding the borders of Iraq), subsequent disasters could have been avoided.
It was to the credit of Marshall – easily among the greatest military minds since Clausewitz and Vo Nguyen Giap – that he listened very carefully to the arguments made, summarizing it as a call for the US military to leave Iraq altogether, although US tactics changed not a whit thereafter. Instead, a myth was created that the “Surge” in troops “stabilized” the situation. The Fake News spewed out by the self-proclaimed Truth Brigade in the US (and substantially within its EU allies) has weaved a narrative which places almost the entire blame for the wounds inflicted on Iraq Libya and Afghanistan by prolonged US-EU occupation on the local people and leadership, omitting any serious mention of the errors made by the occupying forces.
Should President Trump’s innate pragmatism ( it was not an accident that he remained a billionaire through much of his business career) prevail over the counsel of the triumvirate of Saudi Arabia, Turkey and Israel, the “threat tweet” is unlikely to be followed up by steps which would be sen to be provocative enough to warrant a kinetic response by the IRGC, a force that has done more than any other to destroy Daesh in the lairs that were constructed for it by copious amounts of cash, training and weapons given by individuals and entities that have wholly escaped punishment for such a crime. Oil prices should be around $ 45 a barrel at most, based on fundamentals. The rest has been made up of manufactured crises and manipulation of perceptions in a world where oil is rapidly becoming a surplus commodity.
—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.

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