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Page added on January 5, 2015
Michael Lynch: King Abdallah’s Illness, Political Change And The Oil Market
With King Abdallah of Saudi Arabia in serious condition, oil market participants are undoubtedly nervous that this could portend change and even upheaval in Saudi Arabia. Concern that his death could lead to a coup attempt or unrest in the Shi’ite population will no doubt be voiced, but is also likely to prove overblown.
The overthrow of the Shah of Iran in 1979 came as a great surprise to most pundits. Indeed, as street demonstrations were growing more violent, a group of European bankers visited to lend more money to the Iranian government, dismissing the protests as nothing the Shah couldn’t handle. Among the more shocking revelations, it came to be known that the CIA station didn’t even have a farsi-speaking agent. The US government was so close to the Shah that it avoided doing anything that might upset him, such as talking to the opposition.
Afterwards, there was a great rush to improve political risk analysis, much of which proved to be of little value. But the appeal and power of the Iranian Revolution and its new Islamic government was exaggerated by many, just as with ISIS last year. Saudi Arabia became ‘targeted’ by pundits as the next domino to fall, with some thinking its demise was imminent, in an excellent example of superficial political analysis. The joke became that most pundits’ views were based on the thoughts of the cab driver who drove them to the airport on their departure from the country.
The reality is that the Saudi monarchy is not modeled on European monarchies, where the monarch, as late as World War I in Germany and Austria, had few restraints on his power and could behave mercurially as Kaiser Wilhelm often did. The Saudi king relies heavily on the extended Saud family for support and advice, and based on Arab culture, listens to the public in continuous audiences, fueled by strong coffee. (Which is probably more productive than the McConnell-Obama bourbon summit.)
This has two important consequences: few political actions involve extreme change, with most measures being moderate and incremental; and support for the government is stronger than in the European monarchies was. There is unhappiness in many quarters with a variety of government policies, but there appears to be nothing like an organized opposition that would bring down the government as in countries like Egypt and Libya.
The possible death of King Abdallah could see brief concern in the oil market, but the leadership transition is unlikely to be any bumpier than in the past. Indeed, the situation in Caracas is a much greater potential source of upheaval and oil supply disruption. As they say in NewYork, Watch This Space…
13 Comments on "Michael Lynch: King Abdallah’s Illness, Political Change And The Oil Market"
Apneaman on Mon, 5th Jan 2015 10:02 am
Good ole ass kissing Forbes sticking to the Empire narrative as per usual. There are few places left where malcontent is not brewing.
The Worst News Story of 2015
http://www.dailyimpact.net/2015/01/04/the-worst-news-story-of-2015/
Reporting Saudi Arabia’s hidden uprising
http://www.bbc.com/news/world-middle-east-27619309
paulo1 on Mon, 5th Jan 2015 11:04 am
A few pipeline bombings could ignite things and an ISIS backed group would be the obvious guess. This regime should have been displaced years ago and good riddance.
Northwest Resident on Mon, 5th Jan 2015 11:16 am
Forty princes vying for as yet still occupied throne that King Abdullah sits in. I’m sure it will be a smooth transition — real smooth — just like in Game Of Thrones. What could go wrong?
GregT on Mon, 5th Jan 2015 11:23 am
‘This regime should have been displaced years ago and good riddance.’
Absolutely agree. Enjoy the spoils, as long as they continue to last………
ghung on Mon, 5th Jan 2015 12:21 pm
A little more in-depth:
Middle East Time Bomb: The Real Aim of ISIS Is to Replace the Saud Family as the New Emirs of Arabia
http://www.huffingtonpost.com/alastair-crooke/isis-aim-saudi-arabia_b_5748744.html
“Its real potential for destruction lies elsewhere — in the implosion of Saudi Arabia as a foundation stone of the modern Middle East. We should understand that there is really almost nothing that the West can now do about it but sit and watch.”
Davy on Mon, 5th Jan 2015 12:45 pm
Maybe the west can’t do anything about a KSA implosion but Iran may if ISIL were to gain control of KSA.
GregT on Mon, 5th Jan 2015 12:48 pm
“The Real Aim of ISIS Is to Replace the Saud Family as the New Emirs of Arabia”
The real question should be:
Why did the US support the FSA (radical Islam) to begin with?
ghung on Mon, 5th Jan 2015 1:31 pm
I wonder what most Americans will do when they discover we really did need that MENA oil to keep flowing; “but,, but, we’re energy independent, right?”
Speculawyer on Mon, 5th Jan 2015 2:58 pm
Maybe the Saudis were just getting tired of the low oil prices and figured that if they released a story saying that the King was near death, that would cause oil prices to go up without them having to reduce production.
Makati1 on Mon, 5th Jan 2015 10:31 pm
GregT, because they agreed to only sell oil for USDs and would guarantee the other oil producers would also only use USDs. It was to support the Empire and, in return, be protected from it’s enemies. Or so I understand.
When oil is sold in other than USDs, the Empire’s power is “Game Over”. That is why Russia is stirring up a hornet’s nest with it’s new deals cutting the USD out of the game. China and the Brics are also moving in that direction along with a lot of other Central Banks. 2015 is getting exciting.
GregT on Mon, 5th Jan 2015 11:02 pm
A rhetorical question Makati.
Northwest Resident on Tue, 6th Jan 2015 12:18 am
“2015 is getting exciting”
Has anybody else here read Kunstler’s predictions for 2015? Hard to know of course if any of these will come true, but what’s a little scary is that none of these financial, geopolitical and home front predictions seem all that far-fetched, given the way we all know things are going.
Forecast 2015 — Life in the Breakdown Lane
“Don’t look back — something might be gaining on you,” Satchel Paige famously warned. For connoisseurs of civilizational collapse, 2014 was merely annoying, a continued pile-up of over-investments in complexity with mounting diminishing returns, metastasizing fragility, and no satisfying resolution. So we enter 2015 with greater tensions than ever before and therefore the likelihood that the inevitable breakdown will release more destructive energy and be that much harder to recover from.
I don’t know how anyone can trust the statistical bullshit emanating from our government reporting agencies, or the legacy news organizations that report them. Yet the meme has remained firmly fixed in the popular imagination: the US economy has recovered! GDP grows 5 percent in Q3! Manufacturing renaissance! Energy independence! Cleanest shirt in the laundry basket! Best-looking house in a bad neighborhood…!
http://kunstler.com/forecast/forecast-2015/
Davy on Tue, 6th Jan 2015 6:52 am
Mak said – When oil is sold in other than USDs, the Empire’s power is “Game Over”.
Mak, more complicated than your simplistic “we good yoos bad” interpretation IMA as usual. This is much more systematic then a currency. It is about the whole global structure and interconnectedness. It is about critical “TBTF” nodes that must work symbiotically together so a global can support all those “delocalized” locals which now predominate.
The world is completely unprepared for an end of globalism. . Your insistence on framing this has a conflict and competition misses the main point of BAU can’t decouple without collapse. Oil producers will not have the advantage that is thought of in this situation. Oil is of little use without a functioning economy.
The greatest importance for this end of globalism is carrying capacity in relation to food and space. You Asians are suffering in that category Mak. We North Americans have our own problems with a fall from complexity and our own high density urban zones but 4BIL people in a small area has no solution. I am sorry you are in that situation