Middle East and North Africa 20 - The End of the Beginning in Syria? SPECIAL BONUS RUSSIAN JET CRISIS EDITION

[Free Northman Reborn]

Putin turned Syria into His Private Playground

http://www.haaretz.com/middle-east-news/.premium-1.702157

To quote some excerpts:

... In fact, Russia has engineered both a military and strategic about-face, not only because of its military assistance to the army but primarily because its activity in Syria prevents practically any other forces — American, Turkish or European — from operating beyond the area that Russia is willing to allow.

... The Russian monopoly presents Europe and the United States with a fait accompli: Anyone who wants to intervene in Syria, politically or militarily, will be forced to either clash with Russia or to cooperate with it.

But even from the perspective of Washington, and not only Washington, the “Russian solution” is not necessarily a terrible one. It would seem that anyone who seeks to fight the Islamic State organization needs a stable and unified Syria, and Assad is the only one who can guarantee that... But even assuming that Russia and Assad do join the fight against the Islamic State, Russia will still be the one to dictate the rules of the game.

...Overall, it seems the war against the Islamic States pales in comparison to Vladimir Putin’s power grab a la Chechnya in Syria.
read more: http://www.haaretz.com/middle-east-news/.premium-1.702157

 

[Bennis of the Brown Shield]

6 hours ago, Altherion said:

I think the Saudis are bluffing. The problem with sending in ground troops is that you need some manner of air cover and neither Turkey nor the Saudis have the capacity to challenge Russia in the skies. NATO could do it, of course, but, with the obvious exception of Turkey, the rest of NATO is not touching this one with a ten foot pole.

That said, this scenario is indeed very risky, though not because of the economies. Consider the following course of events:

1) Turkey sends ground forces into Syria.

2) Russia bombs them.

3) Turkey publicly expresses outrage and closes the Bosphorus and the Dardanelles to the Russian navy.

4) Russia follows through on their long-advertised contingency for this event (which was repeated again in the wake of the November plane incident by one of the jesters they keep in the Duma for such announcements) thereby starting what is at the very least a full-scale war between Russia and Turkey and quite likely WWIII.

 

Well, that's the doomsday scenario. However even though Turkey under Erdogan is quite aggressive, one could hope that they at least wouldn't try to trigger a full scale war by closing the Bosphorus. Russia after all has thousands of nuclear weapons and Turkey has none*. 

Russia likewise has become very fond of hybrid warfare in recent years (which means operating in the grey zone between "war" and "peace", for people wondering) as exemplified in Ukraine. So they would hopefully be able to prevent escalation as well even if they were to suffer significant casualties and setbacks, like they did there. 

So one could hope that the worst thing that would happen from a Turkish/Saudi intervention would be a continuing meat grinder where neither side can manage to defeat the other. Which in any case is the last thing that Russia needs right now, considering their finances. 

*Of their own. 

[Kalbear]

Quote

Turkey's economy would also tank if they got involved in military action against Russia, and Saudi Arabia is facing the same economic challenges from the oil price collapse that Russia is. Except, Saudi is even MORE dependent on oil than Russia is.

This really isn't true. Saudi Arabia can still make money on oil for as low as $24 a barrel, IIRC. Russia can't make money on oil for less than $40. Saudi Arabia is really the primary reason that oil prices are low - they're increasing supply to fuck over other countries (including Russia) to gain market share. The notion that Saudi Arabia is actually having a problem with this when they are the actual source of the problem is ludicrous. 

[Altherion]

They are the ones increasing supply, but that does not mean this action is not self-destructive. The Saudis can still make money on cheap oil, but not as much money as they've already allocated towards public spending, government jobs, various wars, etc. They can't keep this up forever.

[A Horse Named Stranger]

Basically, yes.

And it gives other competitors on the energy market a very hard time. Just look at the fracking industry. They can only run profitable from a certain oil price, otherwise the production costs kill them. At the moment the oil price is far too low for them. Thus it will be interesting to see how many fracking companies go bust.

 

http://www.cnbc.com/2016/01/11/half-of-us-shale-drillers-may-go-bankrupt-oppenheimers-gheit.html

First link I found on that issue.

[Kalbear]

They can't keep it up forever, but the notion that the Saudis are going to be hurt by the actions that they themselves are doing and thus have a desire to stop them is not reasonable. SA can't keep it up forever, but they can keep it up long enough to bring other countries to the table to get what they want. 

[Free Northman Reborn]

1 hour ago, Kalbear said:

They can't keep it up forever, but the notion that the Saudis are going to be hurt by the actions that they themselves are doing and thus have a desire to stop them is not reasonable. SA can't keep it up forever, but they can keep it up long enough to bring other countries to the table to get what they want. 

This article breaks the effect of low oil prices down nicely, per country. It's titled Oil Wars -Russia vs Saudi vs Iran

http://www.marketoracle.co.uk/Article53690.html

In short, each country has a break even price for their oil industry to continue producing oil, and a different, much higher oil price that is required to balance their national budget.

Russia has a suprisingly low break even price of only $20, but need a price of $110 to balance their national budget.

Saudi's situation is not much better. They require a price of $10 for their oil industry to break even, but a price of $100 to balance their national budget.

52% of Russia's revenue is from oil exports, compared to a whopping 85% for Saudi Arabia.

So in short, every day that the oil price is below $110 for Russia, and $100 for Saudi, they are eating into their reserves. Having your oil industry break even doesn't mean much if your national budget deficit is skyrocketing.

And in the case of Russia, they can generate in the region of half their revenue requirements even with a total shutdown of the oil industry, while Saudi would only be able to generate 15% of their revenue requriements without oil.

So, as is quite apparent, both these countries are suffering from the low oil price.

[Kalbear]

Quote

 

And in the case of Russia, they can generate in the region of half their revenue requirements even with a total shutdown of the oil industry, while Saudi would only be able to generate 15% of their revenue requriements without oil.

So, as is quite apparent, both these countries are suffering from the low oil price.

 

Except Saudi Arabia is gaining market share - and more importantly, is encouraging the low price. They're choosing to do this. Which you seem to conveniently ignore. 

[Free Northman Reborn]

1 minute ago, Kalbear said:

Except Saudi Arabia is gaining market share - and more importantly, is encouraging the low price. They're choosing to do this. Which you seem to conveniently ignore. 

They are choosing to do it out of desperation. They are paying a heavy price for their "oil war". Sure, they can end it whenever they want. But unless it achieves their initial goals, they can't really reverse course, else it would have been for nothing. So it is a real question of how long they can keep it up.

[jarl the climber]

1 hour ago, Free Northman Reborn said:

They are choosing to do it out of desperation. They are paying a heavy price for their "oil war". Sure, they can end it whenever they want. But unless it achieves their initial goals, they can't really reverse course, else it would have been for nothing. So it is a real question of how long they can keep it up.

One thing that the Saudis can do for money and its something I've seen floated in the news, is that they can partially or fully privatize the state oil company, in other words they can do an IPO. The state oil company of Saudi Arabia would have a market value somewhere between a trillion and 10 trillion dollars. The Saudis also don't have an income tax or a lot of other taxes that we have in the West, so they can keep it up for a long time depending on how far they are willing to go. Based on cash reserves alone they can do it for about another five years or so.

[jarl the climber]

3 minutes ago, jarl the climber said:

 

 

[Altherion]

It's not obvious what they're trying to do by keeping the price so low. If the idea was to put the new producers (mainly American ones) out of business, then they've already done it and can stop now. At the moment, they are hurting mainly the poorer OPEC countries (e.g. Venezuela). If they're trying to do serious damage to Russia, they'll have to wait long enough to also do considerable damage to themselves and Russia has means by which it can push back (to some extent the intervention in Syria is a prelude to this).

Speaking of Russia, I am getting the feeling that Putin is really angry about that plane Turkey shot down. I don't mean the calculated public display of anger (which he would have done regardless), but the internal state. Ever since they shot the plane down, he keeps doing things obviously meant to be either an insult or an injury or both to the Turks. For example:

Quote

 

Escalating tension between Russia and Turkey will reach a new high when the Democratic Union party (PYD), the leading Kurdish political organisation in north-eastern Syria, which Ankara regards as a terrorist group, opens a representative office in Moscow on Wednesday at Vladimir Putin’s personal invitation.
...
Turkey has come under additional pressure in recent days as Russian military backing for Assad’s forces has tipped the balance against rebel forces around Aleppo and sent tens of thousands of additional Syrian refugees to its border. This in turn has led to more pressure on Ankara from European states and aid organisations.

Russian forces have also stepped up attacks on Syria’s Turkmen minority, whose fighters killed one of the pilots of the downed Russian bomber and have allegedly given military assistance to the PYD’s military wing, the People’s Protection Units (YPG) – a claim largely denied by Moscow.
...
Erdoğan, penned in on all sides, has also directed his wrath at the US after a senior US official met YPG leaders in Kobani, Syria, last week, apparently to offer reassurance after their exclusion from Geneva. The delegation included Brett McGurk, US special envoy on Isis.

“He [McGurk] visits Kobani at the time of the Geneva talks and is awarded a plaque by a so-called YPG general? How can we trust you [the US]? Is it me who is your partner or the terrorists in Kobani?” Erdoğan demanded. Last June, the Turkish president vowed that he would never allow a Kurdish state in northern Syria. To him, McGurk’s visit must have suggested tentative US recognition of just such an entity.

 

 

[jarl the climber]

53 minutes ago, Altherion said:

It's not obvious what they're trying to do by keeping the price so low. If the idea was to put the new producers (mainly American ones) out of business, then they've already done it and can stop now. At the moment, they are hurting mainly the poorer OPEC countries (e.g. Venezuela). If they're trying to do serious damage to Russia, they'll have to wait long enough to also do considerable damage to themselves and Russia has means by which it can push back (to some extent the intervention in Syria is a prelude to this).

Speaking of Russia, I am getting the feeling that Putin is really angry about that plane Turkey shot down. I don't mean the calculated public display of anger (which he would have done regardless), but the internal state. Ever since they shot the plane down, he keeps doing things obviously meant to be either an insult or an injury or both to the Turks. For example:

 

I was under the impression that the Saudi cheap oil policy is to put pressure on both Iran and Russia in the hopes that the economic pressure of low oil prices will force them out of Syria. Sort of like how low oil prices hurt the Russian in the 80's and 90's and played a role in them pulling out of Afghanistan. I suppose Saudi leadership figures they can weather the storm of low prices better than Russia or Iran and they are probably correct. At the same time if prices go back up fracking becomes viable again and more exploration for new sources of oil would take off again, so that's a long term problem that is not going to go away. Higher prices will always lead to higher production in the long term.

Another thing I have heard is that the new Saudi leadership is committed to building an economy that is more diversified and westernized like the UAE. Of course the succession situation in Saudi Arabia is a bit muddled and its not clear if that faction of the royal family will be able to set policy for the next forty or fifty years but there is some sort of plan.

[Free Northman Reborn]

Well, as I have said before, I would not put it past Putin to deliberately escalate the Syrian war into a general Middle Eastern conflict just to get oil prices to shoot through the roof.

Considering how important oil is to Russia, and considering that they have the military and political means to provoke the likes of Turkey and Saudi Arabia, this would be a strategy that he has surely considered. Furthermore, he would have a ready and well placed ally in Iran, who also desperately need oil prices to rise, and who happen to have pre-existing issues with Saudi.

Watch this space.

[Bennis of the Brown Shield]

On 2/9/2016 at 0:19 AM, Kalbear said:

This really isn't true. Saudi Arabia can still make money on oil for as low as $24 a barrel, IIRC. Russia can't make money on oil for less than $40. Saudi Arabia is really the primary reason that oil prices are low - they're increasing supply to fuck over other countries (including Russia) to gain market share. The notion that Saudi Arabia is actually having a problem with this when they are the actual source of the problem is ludicrous. 

It is probably more accurate to describe it as preserving market share rather than gaining it. The invention of fracking and the entry of Iran into the international oil market is a threat to their hegemony, and it seems questionable if Saudi's current price war can really result in any lasting remedy to this. Even if most American fracking companies go out of business now it should only be a matter of time before new ones enter the market. USA has every reason to encourage them to do so after all, since they don't want to depend on Arab oil. Iran isn't going anywhere either. 

[Free Northman Reborn]

I see today that Iran just offered oil to Asian markets at a discounted price.

They have loads to sell, and are eager to do business.

[A Horse Named Stranger]

It may or may not be about Iran's share on the oil market, but I don't see how the low prices are particularly harmful to Iran. Iran just had sanctions lifted, so it's not like they could make big bucks there before. So I would think even those discount prices are an improvement for them. As for Russia, the west has placed sanctions on them for Vladimir's wacky Ukrainian adventure. So their economy is in deep trouble anyway, no idea if the Saudis felt like bringing down the oil price would be the final straw to break the camel's back. But the Russians are proud and stubborn. So I don't see them wince any time soon.  If anything this insolence that some crazy Arabs dare  to challenge the great Russian bear must gall Putin. 

If Saudi Arabia really intends to grind Putin/Russia down, they are in for a rather long grinding period. And that game is not risk free at all. 

[Free Northman Reborn]

From the Guardian today:

http://www.theguardian.com/world/2016/feb/11/syria-vladimir-putin-russia-running-rings-around-west

Basically, Putin's strategy is working.

[cgrnosfe]

From the Guardian today:

http://www.theguardian.com/world/2016/feb/11/syria-vladimir-putin-russia-running-rings-around-west

Basically, Putin's strategy is working.

It is definite that Putin is winning. They seem well organised, effective in fighting and Putin seems to have grasped from the very beginning that Turkey would be left alone by its western allies.

Erdogan is such desperate that he has threatened the eu today by opening the borders and sending the refugees with buses, trains and planes right into the Eu.

Eu is also incapable, not United, and does not know what to do. They have proposed to pay a funny sum of €3bn to the Turkish government, in exchange for keeping the migrants inside and also they want to organise how money is spent. I would not object against it, given how notorious the Turkish government is. However this was naturally seen as an insult by turkish government.

To be honest, although heavily losing and although he is one of the many reasons why this is all happening, Erdogan has the balls of steel to let some 3m migrants into the country, which is already fighting unemployment and poverty itself.

Even the mighty Germany has way lower migrants. And Eu is still trying to act as if nothing has happened and all Syrians are in Syria, they simply ignore the fact that only thing between their precious Europe and some 3 million and still growing number of refugees is the heavily threatened Turkish government and poor, unemployed Turkish people. This situation is not sustainable. One way or other, we shall see things escalate this summer it seems.

[Free Northman Reborn]

5 minutes ago, cgrnosfe said:

It is definite that Putin is winning. They seem well organised, effective in fighting and Putin seems to have grasped from the very beginning that Turkey would be left alone by its western allies.

Erdogan is such desperate that he has threatened the eu today by opening the borders and sending the refugees with buses, trains and planes right into the Eu.

Eu is also incapable, not United, and does not know what to do. They have proposed to pay a funny sum of €3bn to the Turkish government, in exchange for keeping the migrants inside and also they want to organise how money is spent. I would not object against it, given how notorious the Turkish government is. However this was naturally seen as an insult by turkish government.

To be honest, although heavily losing and although he is one of the many reasons why this is all happening, Erdogan has the balls of steel to let some 3m migrants into the country, which is already fighting unemployment and poverty itself.

Even the mighty Germany has way lower migrants. And Eu is still trying to act as if nothing has happened and all Syrians are in Syria, they simply ignore the fact that only thing between their precious Europe and some 3 million and still growing number of refugees is the heavily threatened Turkish government and poor, unemployed Turkish people. This situation is not sustainable. One way or other, we shall see things escalate this summer it seems.

Interesting perspective about the situation inside Turkey. Things seem poised to escalate, one way or another.