A piece by the well-known journalist Abdulrahman al-Rashed, published a year ago in Al-Arabiya (a Saudi-backed paper), provides useful background to the present crisis. Al-Rashed discusses Iranian complaints that Iran’s share of the oil market is being “stolen” by the Saudis.
These are the signs of a long crisis when Iran accuses Russia and Saudi Arabia of stealing its share of oil! Iran knows very well that no one stole a barrel from it or from its share. The market has its rules that have not changed since ages ago; the oil market is for those who can sell oil and not those who sit on it.
Iran has a massive reserve underground but it produces a little and it will sell even less. Due to the American sanctions against it, it lost half of its exports so far, although the US embargo on its oil purchases did not go into effect yet and will in November.
Iran is not prohibited from producing or exporting oil but buyers will have to choose between Iran’s oil or trade with America. Of course, most countries abandoned buying Iran’s oil in order not to lose the American market.
Amid this dangerous situation, the Iranian government is, before its people, trying to create justifications to the bad situation it has led the country to and it’s doing so by blaming others such as accusing Saudi Arabia and Russia of stealing its market share. The truth is the entire blame must be directed at the regime
Iranian foreign, oil, and commerce ministers toured half of the world trying to tempt buyers by decreasing prices, accepting their local currency and accepting a bartering system. However, most of these countries refused to buy oil from Iran despite all the temptations. Hence, it’s not Saudi Arabia and Russia that stole oil but this is Iran’s hostile policy which cost it its markets, clients and revenues.
As long as Tehran wants to play a heavy game by militarily deploying in the region, igniting wars, supporting terror groups and insisting on its military nuclear program, then it must tolerate the price.
Iran immediately lost more than a million barrels which it could not sell out of its daily production of 2.5 million barrels. It will probably lose another million barrels during the next weeks when the sanctions are implemented. Iran’s share will shrink to no more than half a million barrels and it will have to sell it for a very low price – this is if it could because the American government intends to harass it until its oil exports are zero.
Iran’s losses are doubled because its revenues will collapse as its exports decline and then the cost of imports will increase due to the American boycott campaign against it. We must note that the Iranian government’s dream to develop its capabilities to double its oil production so it reaches five million barrels a day failed after global companies withdrew.
Amid this dangerous situation, the Iranian government is, before its people, trying to create justifications to the bad situation it has led the country to and it’s doing so by blaming others such as accusing Saudi Arabia and Russia of stealing its market share. The truth is the entire blame must be directed at the regime, which put its foreign military projects before its domestic commitments, and since it militarily and politically expanded in the region, it should have expected a counter attack.
Tehran seeks to create a foreign enemy, Saudi Arabia in particular, and we do not expect it to go far in accusations against Russia because it’s not in a situation that allows it to confront two major global powers at the same time: the US and Russia.
Another reason for Iran not to dwell on Russian sales of oil is that in Syria, Russia has proven to be he indispensable ally of Assad, and thus also of Iran, that supports Assad. Iran may not like the increase in Russian production, but in public it will exclusively attack the Saudis for “stealing” Iran’s market share.
The Iranian regime’s behavior is reminiscent of what Saddam Hussein did at the end of his war with Iran as he blamed his country’s economic hardship on Kuwait, which he accused of stealing oil. He also blamed Saudi Arabia and the UAE, claiming they were decreasing oil prices in the market to intentionally harm Iraq’s economy.
There are always shifts in the market as even with the decrease of oil exports of countries like Iran, Libya, Venezuela and others, there are countries whose production increased like the US who along with Russia became among the largest producers in the market. Despite the increased production by capable countries like Saudi Arabia and Russia, the prices continue to increase.
Everything Abdurrahman al-Rashed says was true then, and is still true now. Iran is economically on the ropes, flailing wildly in an attempt to assign blame to others. The first group of American sanctions that snapped back in place on August 4, 2018 affected sales of airplanes ($39.5 billion of plane sales to Iran were promptly canceled), as well as the sale by Iran of pistachios, carpets, and gold. On November 5, 2018 the major sanctions, on the sale of Iranian oil, were imposed. Not only does the American market remain closed to Iranian oil, but other countries are afraid to buy Iranian oil, for fear of American retaliation against their economies. But long before that, companies were already cancelling contracts for Iranian oil. The Iranian ministers have been frantically traveling the globe, offering their oil for sale at lower than current market prices, but finding no takers. American economic clout is simply too great.
Saudi Arabia and Iran are two oil-rich countries but the difference is in the philosophy and in how to handle this oil. In Iran, ever since the religious system assumed power, oil has been the state’s means of implementing its ambitions of expansion and wars.
As for Saudi Arabia, it’s the same Saudi Arabia in the 1970s, 1980s and afterwards; it looks at oil as a commodity that it relies on in its revenues to run the country’s economy. The result is that Iran became an economically destroyed country that brags about its production of missiles and nuclear reactors and the Revolutionary Guards. Saudi Arabia, however, brags about successful companies like Aramco and SABIC and about its participation in stability and development along with the region’s countries.
It’s true that Saudi Arabia has, by comparison with Iran, spent far less on military adventures abroad. It became involved in Yemen in order to prevent the Houthi rebels, Shi’a who are backed by Iran, from winning the civil war and thereby allowing Iran to establish military bases just on the southern border of Saudi Arabia. But the Saudis have spent a lot on non-military ways to project power. Possibly Saudi Arabia has spent as much as $100 billion over several decades, money that paid for mosques, madrasas, and imams in Muslim communities around the world, so as to spread Wahhabi Islam.
As for Iran, al-Rashed is right to note that so much of Iran’s oil revenues has gone to support military adventures in Yemen, Iraq, Syria, and Lebanon, and in buying or producing expensive military equipment. Iran’s nuclear project alone has cost tens of billions of dollars. No one has threatened Iran since 1988, when the war with Iraq ended in stalemate. Rather, it has been Iran that has continually threatened the United States (with endless rallies against the Great Satan), Israel (rallies against the Little Satan), and Saudi Arabia, the most implacable Sunni enemy of the Shi’a.
The Iranians are right now in economic freefall. They now produce 2.5 million barrels of oil a day, in the expectation that they could sell that amount, but find that sales of 1 million barrels have disappeared, and when American sanctions on Iranian oil sales were reimposed (sanctions, that is, on all those who buy oil from Iran), according to Abdurrahman al-Rashed, Iran found it had another million barrels of oil it could not sell.
That leaves a country that is expensively overextended. In Yemen, the Houthis are being pummeled by the forces backed by the Saudis. Until the strikes on the Saudi oil industry, their Iranian missiles shot toward Riyadh fell aimlessly in the desert; the port of Hodeidah, which Iran needs to have the Houthis control, in order to ship supplies to them, has been subject to attacks by UAE-supported forces. In Syria, Iran’s plans to establish permanent bases are being foiled by Israeli airstrikes on Iranian bases everywhere, and the devastation wrought by the Israelis has not been answered by the Iranians. In Iraq, even many Iraqi Shi’a in Basra have been demonstrating against Iran and demanding the withdrawal off its forces from the country. Thus does nationalism trump sectarianism.
In Iran itself, there has been a terrible drought, the worst in half a century. And it is especially devastating in the southwest region of Khuzestan, where the oil wells and sugar cane refineries, the historic economic lifeblood of the region, contribute to the crisis by polluting the water and inflicting residents with a myriad of health complications. Broken water pipelines, extended water outages, and widespread illnesses caused by the consumption of contaminated water resulted in an extensive grassroots response from those impacted by the crisis.
There have been demonstrations in the southwest against the Iranian’s government mismanagement of the water crisis, a crisis that continues to worsen. The people most affected are ethnic Arabs, who make up most of the population in Khuzestan, and who, even without the water crisis have long been opposed, even though most of the Khuzestan Arabs are also Shi’a, to being ruled by Persians.
Iran faces an economic crisis unlike anything in its history. It is selling less than 1 millions barrels of oil a day, and probably closer to half-a-million, as al-Rashed predicted. The relentless American sanctions cannot be ignored by those who otherwise would be glad to buy Iranian oil (especially as it has been offered at a discount to the OPEC price). Trump and Pompeo have made it clear: if you do business with Iran, you can’t do business with America.
The once-in-a-half-century drought has already done colossal damage to agriculture and the raising of livestock. It has also affected the supply of drinking water. The mullahs are not engineers or water conservationists. Nor are they willing, of course, to call for help from that world expert in the management of water resources, Israel. Nationwide protests and strikes, which began in December of 2017 and quickly spread across the whole country, are continuing. Where the protests were initially aimed at the soaring price of food and other basic commodities, and the failure of the state to pay wages, the demonstrations have turned against the despotic clerical government.
The inflation rate in Iran has reached 60 percent. The Iranian rial has hit a record low against the U.S. dollar because of the deterioration in the economic situation and the reimposition of sanctions by the United States. The country’s active work force is 26 million, of whom at least 10 million are jobless. Youth unemployment is at 40 percent. Many university graduates are unable to find any job, even the most menial.
Even Afghan migrants who sought refuge in Iran have been forced to return to their war-torn country because of the economic situation. At least 33 percent of the population now live under the absolute poverty line.
There are only 31 private and state-owned banks in Iran. Most of them have failed, but the government is attempting to hide this. Instead of tackling the economic crisis, the corrupt mullahs have announced budget cuts that will hit the poor, while military spending in Iraq, Syria, Yemen and Lebanon has been increased.
How many of Iran’s poor know just how corrupt their ruling clerics are? A six-month investigation by Reuters concluded that the Ayatollah Khamenei controls a private empire worth $95 billion. Akbar Rafsanjani has a net worth of $1.2 billion. Mohammed Ali Taskhiri has $90 million, Mohammed Khatami has $84 million, Ali Larijani has $70 million, and you can find the rest of the top-ten in this corrupt crew here.
What can the mullahs do? They can’t force foreigners to buy their oil. They can’t force foreign companies to invest in what is a collapsing economy. Germany’s state-owned rail operator Deutsche Bahn announced that it is phasing out its projects in Iran. The French oil giant Total, the carmakers Renault, Daimler, and PSA all suspended plans to invest in Iran. Secretary of State Mike Pompeo urged all countries to reduce their imports of Iranian oil to zero. Since Pompeo’s announcement, and because of it, Iranian oil exports dropped by almost one-third.
Except for the drought — which a government run by technocrats rather than clerics might have managed better, especially if it were willing to collaborate with Israeli water experts (Israel is the world’s leader in water technology, including desalinization, advanced drip irrigation, and water recycling) — Iran’s problems are entirely the result of political and military ambitions beyond its means. In a summit between Russia, Iran, and Syria last year, the Iranian representative stressed his country’s desire to participate in the “reconstruction” of Syria. Iran wants to establish itself deep in Syrian political life, so as to be able to establish bases from which to attack Israel. But how is this to be accomplished? Syria is a country largely in ruins. It would take hundreds of billions of dollars to “reconstruct” the country. Where is Iran going to get any money, much less those sums, to “reconstruct” Syria? And if it somehow were able to cobble together a few billion dollars to start reconstruction in Syria, what would be the reaction of the Iranian people?
Iranians in the summer of 2018 and thereafter have been demonstrating all over the country, expressing their fury at where money has been going abroad. Here are some of the chants that were recorded:
“Death to Syria.”
“Death to Palestine.”
“Not Lebanon, not Gaza. My life is devoted to Iran.”
“Palestine, [and] Syria, is the cause of [our] misery.”
“Death to Dictator.”
“Death to Khamenei.”
“Reza Shah, blessed be your soul.”
“Long live the Shah!”
That should send shivers down the spines of the ayatollahs. Iranians are fed up with these expensive foreign adventures. Iran’s banks have been failing. Foreign investors are fleeing. The rial is collapsing. Agriculture is suffering. Livestock are dying. Oil sales are already down more than 50% of what they were a year ago, and they are predicted to go down still further to 20% of what they were a year ago.
In this complete economic meltdown, Iran’s leaders cannot possibly blame themselves. They must find The Culprit Behind the Conspiracy. This time Israel won’t fit the bill. So they blame their Wahhabi archenemy, Saudi Arabia, for “stealing” Iran’s customers. Saudi Arabia, of course, did no such thing. The former oil customers of Iran have been coming to Saudi Arabia, as they have also gone to Russia, and the United States, and the Emirates, and Kuwait, and have bought the oil they won’t be buying from Iran until the American sanctions are lifted. And that won’t happen, under this president, unless Iran ends its expensive military escapades, in Yemen, Iraq, Syria, and Lebanon, and its nuclear science project, which had been put on hold, but has not been dismantled. The Iranian regime is coming apart. For more and more Iranians, disenchanted with the clerics, and many, too, with Islam — the fastest growing religion in Iran is Christianity, where it is growing faster than in any other country in the world — that is a spectacle devoutly to be wished.
Alarmed Pig Farmer says
Has there ever been a non-Moslem nation that came out ahead in its dealings with a Moslem one? The best you can hope for is stasis, where the Jihad aggression is at least not expanded.
The president’s policies are a marvel to behold. It couldn’t be done to a more deserving country, including its citizens. But, alas, sooner or later the U.S. will have to pull the trigger on Iran, it’s demanding it. Here’s an idea: instead of the U.S. doing it, make Communist China launch a military attack on Iran. After all it’s the ChiComs who benefit most from oil going through the Hormuz.
Angemon says
Indeed, and they have, as Hugh Fitzgerald correctly points out, put their money where their mouths are, supporting terror groups like, for example, Hezbollah. Well, I say terror groups but a more accurate description would be “proxies” – proxies of the Iranian regime, created and supported by Tehran for carrying out its orders. I always get a chuckle when Iranian apologists spout the “Iran is a peaceful nation that never attacked anyone” line – especially when it’s the exact same people who accuse Western nations of using jihadi groups as their proxies for whatever problem is being blamed on the West…
Infidel says
The most interesting part of this article is the part that’s usually glossed over, particularly by conservative foreign policy analysts. Namely, Iran’s real attitude towards Moscow!
In Syria for instance, Iran and Russia do not have identical interests, and it’s shown. Like Russia’s campaign in support of Assad was an anti-Sunni campaign, aimed at the myriad militias backed by Qatar, Saudi Arabia, Turkey, et al. Iran’s, otoh, was a campaign to make Syria an anti-Israel outpost. Which explains why Israel was willing to accommodate Russian activities in Syria, but drew a firm line on any Iranian presence anywhere in Syria.
As I pointed out in the thread on US forces being deployed in Saudi Arabia, Russia is not a supporter of Iran in that they have only benefited as a result of Iran being taken offline. On the issue about stealing customers, while Hugh is right about the market forces, events like these do make and break business relationships. For instance, India was a major customer of Iran before the US withdrew the waivers on countries being allowed to buy oil from them. Ever since they were forced to take off Iran, and also since they’ve had to provide navy escorts to their tankers, they’ve been shopping around elsewhere, and have stepped up their purchases of US oil even at higher ASPs, and are also building facilities in the Russian far east where they can produce and import their oil (that too not involving their foreign exchange reserves, but simply using money they’re both free to print to execute such transactions – both rupees and rubles). Business relationships that wouldn’t have existed had sanctions/Hormuz blockade not happened simply due to the logistics involved: it’s not cheaper to ship oil from Houston or Vladivostok to India than it is to ship it from Bandar Abbas, Basra or Dhahran. So once they are forced to put in the time, money and effort to create these new supplies, it’s unlikely that they’d revert to more Middle Eastern oil when the situation improves.
Also, while Iran has been hurting, the other Gulf states have risked losing a lot of their exports due to the uncertainty over the stability of shipping via the Straits of Hormuz. Iran doesn’t have to actually block it: if there is enough fear that Hormuz ain’t a safe passageway, countries that buy oil/gas from the region will source elsewhere. That could potentially take Iraq, Kuwait, Bahrein and Qatar off the world’s oil markets, even if Saudi Arabia itself might be somewhat immune. The Saudis could build pipelines to the Red Sea, but then they risk getting in the range of Houthi firing ranges. This would make the world oil supplies a duopoly of the US and Russia, although there are several smaller players, like Libya, Algeria, Indonesia, Kazakhstan, Turkmenistan, Azerbaijan. Unfortunately, Venezuela too is offline.
About the Iranian slogans above, I’ll take that more seriously when I see them abandon Islam in droves. The statement that Christianity is the fastest growing religion in Iran is statistically misleading: if you have in a country 75 million Muslims and 100,000 Christians, any growth in the Christian population will exceed a similar growth in Muslim population by several % points. It would be interesting to see if there are major waves of apostasy should the Iranian regime collapse. But when the Maduro regime in Venezuela hasn’t collapsed despite desperate poverty in that country, it’s questionable whether Iran would collapse either
gravenimage says
Yes–Russia is foolish for considering Iran to be an ally–just as Saudi Arabia is no ally of ours.
Infidel says
graven, do you actually think Moscow really wants the sanctions on Iran to be lifted? B’cos if that happens, and if the Gulf stabilizes, the price of oil will again plummet, and not just that, Russia won’t have too many customers. They don’t have too many ports to route that oil (most of it produced just east of the Urals), since their Arctic coast is essentially blocked, which is why they’re developing their Far East for that. It’s thanks to the Middle East impasse that they’re getting business opportunities that they’ve never had, and I can hardly believe that Putin – an ex KGB to boot – would have glossed over that
Walter Sieruk says
This above top Jihadwatch article informs the reader that “As long as Tehran wants to play a heavy game by militarily deploying in the region, igniting wars, supporting terror groups and insisting on its military nuclear program, then it must tolerate the price.” This is all so true and not only ,because of its behavior , this Islamic tyranny “must tolerate the price.” As for all this funding of Islamic terror groups and its continued military agenda for obtaining nuclear weapons is sadly keeping with the national character of the rough Islamic state of Iran .
Therefore that attack, against Saudi Arabia’s oil sources by Iran,as well as other forms violence against Israel and the West should be of no surprise to any informant person, in fact , this fits in with the real legacy of Ayatollah Khomeini who was the Imam who was so powerful that he played large role in the establishment of the current Islamic tyranny of Iran which has the official title of “ The Islamic Republic of Iran” Khomeini had declared “ Jihad or Holy War ,which is for the conquest of [other ] countries and kingdoms , becomes incumbent after the formation of the Islamic State in the presence of the Imam or in accordance with his command. Then Islam makes it incumbent on all males…to prepare themselves for the conquest of countries so that the writ of Islam is obeyed in every country in the world… those who study Islamic Holy War will understand why Islam wants to conquer the whole world. The goal of this conquest would be to establish the hegemony of Islamic law.” [1]
[1] THE HISTORY OF JIHAD by Robert Spencer , page 319.
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Walter Sieruk says
This article by Fritz Gerald reveals that “more and more Iranians, disenchanted with the clerics, and many, too, with Islam — the fastest growing religion in Iran is Christianity, where it is growing faster than in any other country in the world…”
Likewise, a Christian author, William Wagner, in his book entitled HOW ISLAM PLANS TO CHANGE THE WORLD, by on page 208 the reader is informed that “The creation of the Islamic republic in Iran has had the effect that many from that country have become disillusioned with Islam and are looking to leave Iran. ” This is a point worth pondering.
Walter Sieruk says
At the very end of his article Mr Fitzgerald , to reiterate , wrote “For more and more Iranians, disenchanted with the clerics, and many, too, with Islam — the fastest growing religion in Iran is Christianity, where it is growing faster than in any other country in the world — that is a spectacle devoutly to be wished.”
Likewise the following information ,very much, applies to all this.
First, it would be naïve not to understand the those mullahs and ayatollahs didn’t have a hand in having their stooges , who are Islamic state police, the Revolutionary Guard s arrest those Christians because those in power in the Islamic tyranny are ruthless and cruel.
Second, this is further proof that Islam is such a weak and fragile religion that the arrest of those few Christians was felt necessary by the ayatollah, mullah and imams of Iran. For those Muslim clerics are afraid that if the Iranian people even have a chance to examine and thus compare and contrast the Bible and the Quran the people of Iran might discover that the Bible of the super of those two books.
Since the foundation for the tyrannical regime of the Islamic “Republic” of Iran is based on the Quran, which is also the entire foundation for of Islam, the Muslim clerics fear that their power base might collapse. So the arrests and sentencing to death of Christians reveals extreme fear those Muslim clerics have of the Bible, For this also show that those Muslim clerics in power in that “mullahs regime” of Iran will use .the Islamic state police and their tools to stop Christians and keep the Iranian people in in ignorance of the Bible and in the darkness of Islam
Third, those mullahs and ayatollahs and imams of Iran with their falsehoods and deceptions of the many false doctrines of Islam in which they brainwash the Iranian people in believing is something that is both sad and tragic. Those ayatollahs and mullahs are, no doubt, just as deluded as the people who they thoroughly indoctrinate with false teachings of Islam. Of such demonic deception by false teachers who are also deluded such men a have been predicted in the Bible. For in the Bible it’s written that “Evil men and seducers shall wax worse and worse deceiving and being deceived.” Second Timothy 3:13. [K.J.V.]
All those mullahs and ayatollahs are, according to the doctrines of the Bible, Isaiah 8:20. false religious teachers .Meaning false teachers who teach and indoctrinate the false doctrines of the false religion of Islam into the hearts and minds of others . Such false teachers are described in the Bible ,in Second Peter 2:1. “There were false prophets also among the people, even as there shall be false teachers among you, who privately shall bring in damnable heresies, even denying the Lord that bought them, and bring upon themselves swift destruction.”
In addition, it should be make clear that in the context and meaning of the above Bible verse Second Peter 2:1. The word “destruction” does not mean “loss of being but loss of well-being ,as the destruction of well- being . That is “going to ruin” by ending up and a terrible place of awful suffering which the Bible call hell, Luke 16:19-31.
Westman says
Aggression coupled with incompetence doesn’t attract wealth. Every nation that had serious economic exchange with Iran has been burned through its instability and its service of aggressive interests instead of serving its own citizens. Getting on the big wheel seems attractive until realizing that it’s rolling downhill. Governments with a stable future don’t hang their citizens from construction cranes or put women, not wearing hijabs, in prison.
Let’s hope the Iranian citizens save their nation before the West is forced to remove its corrupt, warmongering, regime.
gravenimage says
Iran, Saudi Arabia, Oil, and Water
…………………
Iran doesn’t seem to realize that these days “trade wars” seldom involve missile attacks…
Deanne says
SORRY but Iran & Saudi Arabia common denominators via sharia & “muhammad’s teachings” is still far too outside America’s cultural values and makes them closer than their differences make them apart… I say America SHOULD NEVER BE ALLIES with those who practice sharia especially now that we are energy & oil independent now… PERIOD!
gravenimage says
Hear, hear, Deanne!
Infidel says
I just hope the Straits of Hormuz are successfully closed, thereby cutting off not just sanctioned Iran, but also Iraq, Kuwait, Bahrein, Qatar and to a good extent, UAE and KSA as well. Western Europe can get its oil from Russia, Libya, Algeria as well as its own (Norway), while Eastern Europe can get it from Norway, US, Canada, et al. China can get theirs from Kazakhstan, Turkmenistan, and given that their trade w/ the US is collapsing, they might as well just buy from Iran too.
Essentially, let the US and Russia pick and choose who they wanna prioritize, until such time that Venezuela comes online again