Set America Free Notes&Comments

originally posted by Set America Free Coalition member Gal Luft on MESH on May 16:

Four months and thirty extra dollars a barrel later, President Bush is again in Saudi Arabia trying to persuade the Saudis to open the spigot and increase OPEC production. Last time the answer was a resounding no. Not even a gift of 900 precision-guided bombs helped convince the Saudis to show more oomph at the pump. The lesson for the Administration: speak softer and wave a bigger gift. This time the United States has agreed to help Saudi Arabia, the world’s largest oil exporter, develop “civilian” nuclear power.

Of course the Saudi interest in nuclear power has nothing to do with energy production but with Iran and the Sunnis’ fears of Iranian hegemony. Does President Bush really believe that helping the Saudis with nuclear technologies would cause Tehran to pull the plug on its nuclear program?

Saudi Oil Minister Ali al-Naimi insists that the oil market is well supplied, blaming the high prices on hedge funds and speculators. Considering the fact that OPEC production level is not much higher than its level thirty years ago and that Saudi output is lower than it was two years ago, putting the entire blame on speculators is utter nonsense.

The Saudis have always taken pride in their role as swing producers, claiming to own over 2mbd in spare capacity. But what good is this liquidity mechanism if they are not prepared to use it? When last month Nigeria’s production fell by 330,000 bpd, OPEC did not lift a finger to compensate for the loss. At what level will they provide us with liquidity? $200? $300?

If the Saudis are right and it’s all about the speculators, why not put this to test? This is exactly what Bush should have suggested: pour some oil into the market for a limited period of time and let’s measure the effect on prices so we can determine who is the culprit. With projected revenues of $400 billion this year, the Saudis can surely afford to embark on such an experiment and clear their name once and for all. But as I wrote here in January, we’d rather beg than blame.

The spectacle of an American president begging for oil every few months only to be rewarded with a slap in the face is getting a bit tedious. What’s next? Naming one of our aircraft carriers USS Ibn Saud?

The Australian surveys what petrodollars buy for the Saudis:

The Saudi Government – largely through its embassy – is believed to have funnelled at least $120 million into Australia since the 1970s to propagate hardline Islam, bankroll radical clerics and build mosques, schools and charitable orgnisations.
But the Saudi cash that has flowed into Australia, that also allegedly has paid the allowance of hardline Canberra cleric Mohammed Swaiti, who has publicly praised jihadists, is dwarfed by the $90 billion Riyadh is believed to have pumped into promoting Islamic fundamentalism internationally.

The article adds this additional insight into the regime that holds the world by its unmentionables by virtue of its control of a quarter of the world’s oil reserves and essentially all of the oil market’s swing capacity:

The most recent insight into the nature of Saudi society came with the release this month of the Human Rights Watch report Perpetual Minors, about the status imposed on women by Riyadh’s doctrinaire interpretation of Sura 4, verse 34 of the Koran: "Men are the protectors and maintainers of women because God has given the one more (strength) than the other and because they support them from their means."
The report outlines how adult Saudi women generally must obtain permission from a male guardian to work, travel, study or marry, while being denied the right to make even the most trivial decisions on behalf of their children and being segregated from men under laws enforced by the Orwellian-sounding Commission for the Promotion of Virtue and the Prevention of Vice (the religious police).
In 2004, the UN ranked Saudi Arabia 77th of 78 countries for gender empowerment, defined as the ability of women to take part in economic and political life, ahead of Yemen. Australia was eighth, Norway first.
While Saudi Arabia exports its Wahhabi version of Islam to the world, Saudi society groans under the weight of its internal contradictions. The first class of female law students will graduate from King Abdul Aziz University this year, but the Saudi Ministry of Justice prohibits female lawyers from practising. Judges consider women to be lacking in reason and faith, and have refused to allow them to speak in the courtroom because their voices are shameful.
A Saudi labour code, which came into force in 2006, states that all Saudi workers have the right to work without discrimination, but also specifies "women shall work in all fields suitable to their nature".
Literacy among Saudi women and girls over the age of 15 has risen sharply, according to UN reports, from 16.4 per cent in 1970 to 83.3 per cent in 2005 and Saudi women make up 58 per cent of university graduates (most at teachers colleges), but education is dependent on the permission of male guardians, universities are segregated, and women are excluded from disciplines such as engineering, architecture or political science.
Last year, a 19-year-old gang-rape victim was sentenced to 200 lashes and six months’ jail for being in a car with an unrelated man when she was attacked by seven men. In 2002, a fire at an elementary school in Mecca resulted in 15 schoolgirls being burned alive because the religious police refused to let them out of the school without headscarfs.

(Crossposted at Middle East Strategy at Harvard (MESH))

President Bush’s appeal to the Saudis to increase oil production is more pitiful than understandable. At $100 a barrel, the United States bleeds over a billion dollars per day in order to finance its petroleum import needs. The result: ballooning trade deficits, growing unemployment, a weakened dollar and crumbling financial institutions like Citigroup and Merrill Lynch now forced to beg Persian Gulf monarchies for cash infusions. At current oil prices, the U.S. economy is melting faster than the ice caps.

But despite the president’s sweet-talk, his ridiculous appearance in a traditional Arab robe, his hand-holding with the Saudi monarchs, and even his gift of 900 precision-guided bombs, the Saudis were quick to respond with a slap in the face. Within one hour, the kingdom’s oil minister announced that oil prices would remain tied to market forces and the Saudis would not open the spigot.

This is hardly a surprise to me. The Saudis—despite their claims that oil high prices are the doing of Wall Street speculators and American SUV-driving soccer moms—are the first to blame for the current oil crisis. Their reluctance to invest in new production, their lack of transparency on reserve data and their anti-market practices, which prevent international oil companies from operating in their midst in any meaningful way, are the real reason for the quadrupling of prices in the past six years.

The Saudis are also the prime reason for the failure of the Iraqi oil industry to take off. Exactly four years ago I warned that the United States was turning a blind eye to the Saudi failure to seal its border with Iraq. This led to a migration of thousands of Saudi jihadists into Iraq, a fact that contributed to the terror campaign against Iraq’s oil industry. If not for the attacks, Iraq today could have been producing at least five million barrels per day. Instead it does less than three. Of course no one has ever held the Saudis accountable for the loss of two million barrels per day—an amount of oil that, were it in the market today, would have dropped prices by at least $30 a barrel. We’d rather beg than blame.

The truth is that the Saudis feel quite cozy at $100 oil. The world economy hasn’t come down (yet), the American public is docile, and oil-exporting countries—the recipients of a transfer on a scale the world has never known—are having a jolly time. Furthermore, the Saudis feel they have already met their obligation to the American economy by standing steadfast against other OPEC members like Iran and Venezuela, which are pushing for an OPEC decision to dump the dollar as the currency used for oil trades. Such a step could send the dollar down like a rocket.

So much of this is our own doing. Two years ago President Bush committed a major blunder, allowing Saudi Arabia’s admission to the World Trade Organization. By dint of its leadership of the OPEC cartel, no other country is more responsible for violating free trade than Saudi Arabia. Yet, its admission was not contingent on any behavioral change. Thus the Saudis enjoy the benefits of free trade while continuing to manipulate the price of the world’s most important traded commodity.

Furthermore, the United States has its own mechanisms to bring down oil prices. It owns 770 million barrels in strategic reserves. OECD countries have between them 4 billion barrels in stock. Yet, not a drop of oil has been released. Now that the Iowa caucuses are over, the United States could remove the 54-cent tariff on imported ethanol and bring billions of gallons of alternative fuel into the country almost overnight. This alone could drive down gasoline prices by at least 50 cents per gallon. And there are more strategic solutions which could remove the yoke of our oil dependence, like providing fuel choice and electrifying our transportation system. (We no longer produce electricity from oil.)

The spectacle of American presidents kowtowing to the Saudis is as old as U.S. involvement in the Middle East. Six decades ago FDR had to steal a cigarette in a stairwell of the USS Quincy in order not to smoke in King Abdulaziz’s presence. (Winston Churchill, on the other hand, had a smoke and a drink!) With growing dependence on the Saudis, our sovereignty and freedom of action have been steadily eroded. Barring some serious action, no matter who the next president is, he or she will have to ride a lot of camels and wear a lot of robes to keep the oil barrels rolling.