Questions that Saudi Arabia’s oil minister may not answer
What happened on that cold day in Vienna two weeks ago?
Why doesn't Saudi oil minister Ali al-Naimi address Saudi citizens and explain to them the kingdom's decision at the recent OPEC meeting to leave the Saudi current output ceiling unchanged despite huge global oversupply? This oversupply has decreased oil prices across the world and caused a similar decrease in the Saudi stock market - expressing the worry of the local economy which knows very well that everything in the country is linked to oil and its prices.
Why doesn't Naimi talk and reveal what he's got? His speech to the Saudi people is a speech to the entire world. If he wants to tell the world something, he would've done so in Vienna where dozens of journalists and oil experts gathered. However, the minister settled with brief statements. Will he reassure the worried Saudi market if he does speak? Let's assume he says: "Be patient. We will win in the end. The massive governmental expenditure which the rich among you depend on before the poor, some of which is spent on several businesses you're involved with, will not be affected. The reserves which you want as a safe fund for your sons and grandchildren will only be slightly affected because this phase necessitates that." If Naimi says that, will the market be convinced and return to rising? Will this decrease the worry of businessmen?
Previous questions reveal how the economy has become complex and globally intertwined. It's no longer simple like the invention of a Japanese man who was working in the rice industry and ended up developing the concept of cultured pearl farms during the 1930's. Back then, this invention severely disrupted the economies of small Arab Gulf cities which suffered for decades and only returned to prosperity when petroleum surfaced. Bahrain hasn't forgiven that Japanese man until this very day and it bans the importing of cultured pearls in order to maintain a special value for its own natural pearls. However, oil is not like pearls. When it comes to oil, it's a complicated affair where politics, wars, funds, major companies, conspiracies, coups, world economies, production, weather and modern technology and inventions intertwine just like that Japanese did with pearls.
The world of oil is brutal and Saudi Arabia's partners in the market will not hesitate to raise their production and replace Saudi Arabia's market shareJamal Khashoggi
There must be dozens of theories and reasons which Naimi – who has substantial experience in oil production and policies - is listening to silently and with a smile. However he must speak at some point. Saudi citizens have the right to know because they have a special relation with oil - after all the latter is a source of livelihood to them. So has the government maintained the current production output in order to maintain the kingdom's share of the market and out of respect for its customers in east Asia d whom it might lose if it decreases its production by 1 or 1.5 million barrels to keep the prices close to the pretty price of $100 a barrel?
However, the world of oil is brutal and Saudi Arabia's partners in the market will not hesitate to raise their production and replace Saudi Arabia's market share. In the end, the kingdom will lose its customers and the oversupply in the market will continue along with the decreased prices. Or is this a Saudi plan that aims to extract oil shale, which if it hadn't been for the increase of prices, it wouldn't be extracted due to the high cost of extractiont? Such a move thus threatens Saudi Arabia's strategic interests with its old American ally but is it perhaps that Saudi Arabia has had enough of the U.S. and wants to exert pressure on the hesitant Obama administration which is no longer the ally one can count on? However, even if the decrease of prices harms few American companies, it's actually beneficial to overall American economy and it's also enough to speed up its revival. This is what the Saudi kingdom wants as the world economy's recovery will benefit it in the long run. It's therefore a far-sighted Saudi policy.
One expert may object to this and say: "America benefits in all cases whether prices decrease and whether oil shale production continues. Saudi Arabia will not be able to get oil shale out of the market unless it harms itself and allows the price of oil barrels to decrease to below $50 a barrel. This is what Saudi Arabia's budget which is based upon an $85 a barrel cannot tolerate. The production cost of oil shale is around $53 and technologies are developing and the cost continually declines. This means the oversupply will continue and the same applies to America's policy of strategic storage of oil - an act that's weakened OPEC's capability, i.e. the kingdom's capability to influence the market."
It's all politics
So it's politics and the Saudi kingdom thus wants to weaken Russia and Iran. The Russian ruble is declining. This is a scenario similar to what Saudi Arabia did in the 1980's when it allied with the U.S. to knock out the Soviet Union after exhausting it in Afghanistan. However, the Soviet Union only collapses once and it's already collapsed and dissolved. This conspiracy hasn't been proven and it's still a matter of controversy. Sheikh Ahmed Zaki al-Yamani, a former Saudi oil minister who's witnessed that phase and was one of its victims, also denies this. If it's true however, then toppling the Soviet Union was a service to humanity and the Saudis may have the right to adopt it and use their patience over the years of recession as an excuse. Saudi Arabia lived through recession from the mid 1980's until the 1990's and the Kingdom certainly doesn't want to go through this again especially with the giant non-productive projects the government has committed to. Today, there's nothing that deserves such a great sacrifice as Ukraine is not their cause. As for Syria, a Saudi-Turkish-Jordanian intervention there is less costly than declaring an oil war on Mr. Putin.
The Iranians rushed to say it's a "Saudi conspiracy" against them. They will certainly say so as they suffer from two complexes which govern their foreign policy - that is their quest for domination and their complaint about the world's conspiracy against them. The Iranians allege that Saudi Arabia is allied with the U.S. against them; however Saudi Arabia also works against the Americans as mentioned at the beginning of the article. The final outcome is that there are dozens of reasons to explain what happened on that cold day in Vienna two weeks ago and nothing will finalize this except if minister Ali al-Naimi steps forward and says something, and I assume he won't.
This article was first published in al-Hayat on December 6, 2014.
Jamal Khashoggi is a Saudi journalist, columnist, author, and general manager of the upcoming Al Arab News Channel. He previously served as a media aide to Prince Turki al Faisal while he was Saudi Arabia's ambassador to the United States. Khashoggi has written for various daily and weekly Arab newspapers, including Asharq al-Awsat, al-Majalla and al-Hayat, and was editor-in-chief of the Saudi-based al-Watan. He was a foreign correspondent in Afghanistan, Algeria, Kuwait, Sudan, and other Middle Eastern countries. He is also a political commentator for Saudi-based and international news channels.
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