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Page added on January 15, 2016
Saudi Arabia: A Weak Kingdom On Its Knees?
The great Kingdom of Saudi Arabia – the long-time dictator of crude oil prices for the world – is struggling on all fronts.
The Saudis are losing their proxy wars in both Syria and Yemen; their OPEC leadership is under threat; they are not winning the crude oil price war; and its long-running alliance with the West is in question.
From Saudi Arabia’s perspective, Iran seems to be gaining ground everywhere. Saudi Arabia has several weaknesses that help explain the current anxiety emanating from Riyadh.
1. Saudi Arabia losing its leadership in the OPEC
Saudi Arabia has been the default leader of OPEC; however, despite Saudi insistence to the contrary, the U.S. shale boom, increased Russian oil production, and a very resolute Iran are challenging this leadership.
The result is that Saudi Arabia now finds itself powerless in supporting oil prices. Instead of the much-needed production cuts, during the 4 December 2015 meeting, the OPEC nations refused to adhere to any ceiling, which has been the practice for years.
2. Burning through reserves—fast
(Click to enlarge)
Source: www.tradingeconomics.com
Iran is waiting for the lifting of sanctions, expected sometime in 2016, to pump more oil to improve its economy, whereas the Saudi’s are losing they are burning through their cash reserves quickly. The above chart speaks for itself, depicting the kind of damage low oil prices are inflicting on Saudi reserves. By the most optimistic opinion, Saudi Arabia can survive low oil prices only for four years.
3. Iran has assumed a very significant leadership role among Shia Arabs
Both Iran and Saudi Arabia are currently locked in a bitter proxy war on two fronts: Syria and Yemen.
Iran has the support of Hezbollah in Lebanon, along with support from the majority of Shiites in Iraq. More to the point, Iran has even managed to grow its Shiite support base among Sunni-ruled nations. The execution of Shia Sheikh Nimr Al-Nimr by the Saudis is an indirect acceptance of the growing influence of Iran among the suppressed 15 percent Shiite population in Saudi Arabia. This shows that the Saudi leadership is feeling threatened on their own soil.
4. Saudi Arabia cannot defeat Iran in a direct war
Iran is a much larger nation than Saudi Arabia by population and has held its own in numerous long wars. By comparison, the Saudis have an army that is inexperienced, led by loyalists of the Royal family who occupy plum postings. These are not the war-hardened generals of Iran.
While Saudi Arabia has a nice arsenal with the latest weaponry, the kingdom is heavily dependent on the West for its use and maintenance. Its indecisive and ineffective handling of three conflict fronts—Iraq, Syria, and Yemen—give us no confidence in its ability to take on Iran.
5. Saudi Arabia knows it won’t have U.S. support for a direct war with Iran
The painfully misguided wars in Iraq and Afghanistan are enough to deter the current U.S. administration from entering into full-fledged war in the Syrian and Yemen theaters. Washington’s non-committal stance, along with efforts to broker a deal with Iran, should serve as very loud signals to Saudi Arabia. The message to the kingdom is this: Don’t go to war with the hope that that U.S. will support you. And without the West, Saudi Arabia knows it stands no chance of winning a war against Iran. The royal family will probably not take the risk of losing power by indulging in such a war.
These relationships are anything but clear, and everything about balance. So the U.S. will continue to sell weapons to Saudi Arabia to allow it to maintain a bit of balance—with the latest deal approved in October—and Washington and Tehran will continue to play cat and mouse as they near a nuclear deal and a removal of sanctions. This is best illustrated by the recent detainment and then quick release of U.S. sailors for an incursion into Iranian waters, and the statement and then denial by Iran that it had completely closed off a key nuclear reactor that would have sealed the nuclear deal.
The Saudis are in a state of panic all around – from its OPEC status and dwindling reserves to its proxy wars that absolutely cannot turn into full-fledged wars and its growing friendlessness. The fact that oil fell briefly below $30 a barrel on Tuesday for the first time in 12 years won’t have helped.
At the end of the day, Saudi Arabia has overextended itself, and overestimated its prowess and it does not have the clout that it once had to be able to do this effectively.
If you’re wondering whether there will be an all-out war between Saudi Arabia and Iran, it’s unlikely. At this point, the Saudis are likely to continue the proxy war and hope that the Iranians do something foolish to upset the nuclear deal with the West. Until then, Saudi Arabia will make a lot of noise and attempt subversive activities, but nothing more.
68 Comments on "Saudi Arabia: A Weak Kingdom On Its Knees?"
Revi on Fri, 15th Jan 2016 12:55 pm
I am surprised that they are “friendless”. I would think that since they are spending lots of money they would be everyone’s friend. I would think the friendlessness would commence when the money runs out.
Truth Has A Liberal Bias on Fri, 15th Jan 2016 1:12 pm
There are some competing interests coming to a crisis. KSA needs about $106/barrel to balance the budget and maintain the social contract (i.e. We throw lots of money around and you all keep quiet). The world’s economies and people thereof are mired in debt, pollution, rising costs and diminishing returns and for the most part have absolutely no prospects whatsoever. $30 oil doesn’t seem to solve the problem. Humanity is at a turning point. By 2025 we may well be living as our grandparents did; burning wood for heat, riding bicycles and horse carts to get around, dying from influenza, sewing our own clothes, eating root vegetables from October to April etc etc. Most people I encounter would consider this lifestyle ‘stone age’ however it’s really for the most part it’s your grandparents age. Last but not least 7 billion people won’t be able to survive in this manner so it’ll be a bit of a competition to live rough. The next 10 years are going to be very interesting!
GregT on Fri, 15th Jan 2016 2:22 pm
“By 2025 we may well be living as our grandparents did; burning wood for heat, riding bicycles and horse carts to get around, dying from influenza, sewing our own clothes, eating root vegetables from October to April etc etc. Most people I encounter would consider this lifestyle ‘stone age’ however it’s really for the most part it’s your grandparents age.”
Depending on ones age or location I suppose. That would be how my parents grew up, and is mostly how a rather large percentage of the world’s population still lives today.
yoananda on Fri, 15th Jan 2016 4:30 pm
@GregT
and be far less numerous too
penury on Fri, 15th Jan 2016 5:02 pm
I am afraid that Truth has nailed it. My major concern at this point is his points may be outdated by events in the next few weeks. (and not to the upside)
IanC on Fri, 15th Jan 2016 5:08 pm
It’s amazing how little critical analysis of KSA we get in our mainstream media – even the New York Times. As many here would agree, their imminent crack-up is a huge story that we should all be following. We get some reports of them bombing Yemen and beheading Al-Nimr, but very little questioning of the bigger factors at play, like depleting oil wells, competition from Iran, and KSA’s support of worldwide terrorism.
Welch on Fri, 15th Jan 2016 5:22 pm
” By 2025 we may well be living as our grandparents did; burning wood for heat, riding bicycles and horse carts to get around, dying from influenza, sewing our own clothes, eating root vegetables from October to April etc etc.”
You know, we may be facing significant challenges, but I wonder if we live on the same planet sometimes. Seriously?? In ten years? Why?
Go Speed Racer on Fri, 15th Jan 2016 5:31 pm
The Kingdom wasted too much money on solid-gold commodes.
http://img.thesun.co.uk/aidemitlum/archive/01412/Golden-toilet_682_1412928a.jpg
Gotta get your priorities straight.
shortonoil on Fri, 15th Jan 2016 5:44 pm
“You know, we may be facing significant challenges, but I wonder if we live on the same planet sometimes. Seriously?? In ten years? Why?”
When producers can no longer make lifting costs wells are shut in. $29 is getting really close to that point. Every Gb of production lost reduces world GDP by about 3%. Ten years is not only possible, its likely.
Davy on Fri, 15th Jan 2016 5:49 pm
Welsh, we don’t know what is coming. There is a spectrum of possibilities and the best I can predict is all possibilities point to less with the trend to increasing “less” (I love incongruous juxtapositions). The critical point is how long. This board is notorious for collapse speculation. We hear people comment about how life is going to change drastically soon. We hear people talk about a mad max world. Doomers often paint a dark and violent picture. People like you Welsh are more moderate.
If our population wasn’t so high I would be more optimistic. If we hadn’t destroyed our climate I would feel better. We can live with less like are ancestors but not until a majority of the population dies off. Our global carrying capacity should be 1Bil or less. Who here is going to be a part of that die off. I imagine many of us are going to die before or normal status quo lifespan. This is why I live life everyday like it is my last.
BC on Fri, 15th Jan 2016 6:45 pm
The KSA’s oil production per capita is at the level of the late 1990s. Their deficit to GDP recently reached 20-25%.
KSA is a slow-motion failed state in the making. The more it fails, the more reactionary the leadership will become.
Don’t be surprised if the US and NATO occupy the peninsula before the decade is out to secure the oil fields and “holy cities”.
Apneaman on Fri, 15th Jan 2016 7:14 pm
In Saudi Aramco IPO Talk, Some See Age of Oil Coming to End
http://www.bloomberg.com/news/articles/2016-01-15/in-saudi-aramco-ipo-talk-some-see-age-of-oil-coming-to-an-end
Apneaman on Fri, 15th Jan 2016 7:19 pm
Feeling Ignored By Obama Saudi Dynasty Threatens To Hurt Itself
http://www.moonofalabama.org/2016/01/feeling-ignored-by-obama-saudi-dynasty-threatens-to-hurt-itself.html
shortonoil on Fri, 15th Jan 2016 7:20 pm
“Don’t be surprised if the US and NATO occupy the peninsula before the decade is out to secure the oil fields and “holy cities”.
The US spent $3 trillion trying to do exactly that in Iraq. Do you think the world would let it get away with using a few dozen neutron bombs? Short of that the chances don’t look very good.
“Welsh, we don’t know what is coming.”
“We”– got a mouse in your pocket?
BC on Fri, 15th Jan 2016 7:21 pm
@Davy (and points below for short): “I imagine many of us are going to die before or normal status quo lifespan. This is why I live life everyday like it is my last.”
As you know, in the late 19th century (1.5-1.7 billion world population), the average male’s lifespan in the West was ~45 years. By the 1930s (2 billion world population), with the widespread implementation of public sanitation and vaccines, lifespan reached 65 years.
Today, the average lifespan is 78 years for males and 81 years for females.
However, for about half of the world’s male population today, average lifespan for males is fewer than 60 years.
Now consider that US oil production per capita is at the levels of the late 1930s to late 1940s to early 1950s. Adjust the price of oil for CPI AND the US$ since the late 19th century, and the price of oil is at the adjusted price of the 1880s-90s and the 1920s to late 1930s.
Put another way, the domestic capacity of the US to produce oil for domestic consumption per capita is no higher than 70-80 to 120-130 years ago, but the marginal increase in production from 5-6Mbd to 9Mbd since 2008-09 is not profitable at the adjusted prices of 80-130 years ago when the US population was 50-125 million.
Consider what this implies for the price of oil, oil production, real GDP per capita, oil demand, and the rate of population growth hereafter for the next 10-20 years.
We will be lucky to sustain 6Mbd production hereafter, which will be more than a 50% decline per capita since 1970 by no later than the early 2020s.
With net oil exports worldwide falling 20-25% per capita since Peak Oil in 2005, the US will not have the ability to import 10Mbd or even half that in time, whereas domestic production of shale oil is not profitable.
Imagine the US at 5-6Mbd of oil production without the ability to maintain 10Mbd of oil imports, forcing consumption to decline AT LEAST 3-4Mbd, taking us back to the levels of the early to mid-1990s.
Promoting increasing immigration under these conditions is sheer self-destructive madness.
Therefore, it is not inconceivable that we have seen the peak in lifespan and males born in the past 10-20 years will experience a declining lifespan from 78 years to 65 years and fewer over the course of their lifetimes.
🙂
makati1 on Fri, 15th Jan 2016 7:26 pm
As goes the KSA, so goes the Petrodollar and the US economy.
Not only does the KSA have to placate the 30 million ‘common citizens’ but also the 7,000+ member royal family that has lived ‘high on the hog’ for most/all of their lives. They are not interested in going back to camels.
Yep! Life is going to get very interesting there and in every country tied to the Petrodollar over the next few years. Buckle up!
Davy on Fri, 15th Jan 2016 7:27 pm
I am all ears about the particulars if you care to elaborate on them. I don’t think the ETP is going to go quite that far. There are limits to the utility of models. The mouse in my pocket says good luck with your predictions other than worse than now and someday in the future.
BC on Fri, 15th Jan 2016 7:27 pm
Right, short, but the Anglo-American and NATO imperial military probably won’t ask for permission this time around.
The global Long Wave, Peak Oil, and debt-deflationary end-game scenario is only in the early phase of its progression to date. Historically, the elites chose large-scale, winner-take-all war as “a solution”.
geopressure on Fri, 15th Jan 2016 7:28 pm
We’ve given them the choice of:
A) going broke & loosing their heads, or
B) going broke & loosing their heads
& we’ve left the choice all up to them…
shortonoil on Fri, 15th Jan 2016 7:33 pm
In Saudi Aramco IPO Talk, Some See Age of Oil Coming to End
http://www.bloomberg.com/news/articles/2016-01-15/in-saudi-aramco-ipo-talk-some-see-age-of-oil-coming-to-an-end
That is what we have been saying for the last two years. Glad to hear someone else is finally catching on!
http://www.thehillsgroup.org/
makati1 on Fri, 15th Jan 2016 7:35 pm
BC, I agree with your assessment. I also see life expectancy falling sharply in the near future. Especially in the West where the prevalence of self abuse is highest. Those alive now will probably not see the life spans of their parents. Maybe not even close. When the procedures and drugs of today are not available, death will happen faster and sooner. We will truly return to ‘survival of the fittest’ and evolution will cull the herd.
Davy on Fri, 15th Jan 2016 7:40 pm
There may not be much of a reason for NATO to be in KSA if the place is a disaster zone from a catastrophic event. No Muslim is going to allow non-believers to secure the holy cities. I doubt Russia is going to be a willing party to NATO in KSA. Yet, the way the world is changing Russia and NATO may be allies by then. Things are likely going to unravel and get blurry soon. Normal thinking does not work in the twilight zone of the end of the status quo.
shortonoil on Fri, 15th Jan 2016 7:49 pm
“Right, short, but the Anglo-American and NATO imperial military probably won’t ask for permission this time around.”
Is this how we will begin our voyage back to barbarism? Even the Romans would have thought twice before doing something that debased. Rats have more respect for each other that. It puts a new definition to the world “evil”!
Apneaman on Fri, 15th Jan 2016 8:21 pm
https://www.youtube.com/watch?v=87F2jX5Qk2Y
Boat on Fri, 15th Jan 2016 8:43 pm
short,
When producers can no longer make lifting costs wells are shut in. $29 is getting really close to that point. Every Gb of production lost reduces world GDP by about 3%. Ten years is not only possible, its likely.
What happened to less than 3 years before the entire infrastructure of oil would crash. You back tracking already?
BC on Fri, 15th Jan 2016 8:43 pm
@short, “evil” is from the proto-German (???) yfel, which is transliterated as “up from under”, i.e., perceiving oneself as inferior or at risk of exploitation and harm and thus desiring, and thereby acting, to rise above “other” to become superior.
That rather well describes most human apes and their empires historically and the elites who primarily benefited from them. (One of a few possible exceptions was Ashoka’s short-lived Buddhist empire, but only after his violent military conquests.)
By definition, the “winners” make the rules and write the history, as it is said.
Boat on Fri, 15th Jan 2016 8:48 pm
Davey,
Yet, the way the world is changing Russia and NATO may be allies by then.
LOL Your crazy is off the chain again. Once again you got dates to go with these projections?
Boat on Fri, 15th Jan 2016 9:04 pm
BC,
With net oil exports worldwide falling 20-25% per capita since Peak Oil in 2005, the US will not have the ability to import 10Mbd or even half that in time, whereas domestic production of shale oil is not profitable.
When the production of oil becomes smaller than the consumption of oil prices will rise and drilling will resume. This is called supply and demand. Pay real close attention over the next few years. It will happen.
Not only that but the market will pay close attention to the global reserves. Drilling will start to happen as the perceived glut is disappearing. The glut is still growing and reserves are still growing, hence the low price of oil. Pretty simple stuff.
Apneaman on Fri, 15th Jan 2016 9:11 pm
Boat, in WWII your country was allied with the Soviet Union against the Germans. Then in a matter of a day they became enemies of the USSR and allies with half the Germans. Now y’all is allied with all the Germans against the Russians. Alliances come and go like the seasons. There have been a million flip flops throughout ape history and it will never stop.
How the mutual funds working out there, Warren Buffett Jr?
BC on Fri, 15th Jan 2016 9:15 pm
mak, yes, and I am just idealistic enough to envision that before the mass die-off descends into unspeakable, abject, indiscriminate suffering at unprecedented scale that the more empathetic, compassionate among us in the positions of influence and authority just might influence a mass-social spiritualism or religiosity that permits or encourages honorific, ritualistic, virtually painless deaths my one’s choosing.
It need not be the punitive aspect of the martial Bushido hara-kiri in Japan but rather its emphasis on a “good death” as the reward for a good life and a kind of self-motivated, self-compassionate, self-deliverance as in “Sol going home” in “Soylent Green”. 🙂
Apneaman on Fri, 15th Jan 2016 9:16 pm
Boat says
” Drilling will start to happen as the perceived glut is disappearing.”
“Once again you got dates to go with these projections?”
Where are your dates for this increased drilling Boat?
Apneaman on Fri, 15th Jan 2016 9:26 pm
Boat, how about some more fine investing advice?
Stock market slides again
“Never before has Wall Street gotten off to a worse start to a year.
The stock market capped the first two weeks of 2016 with a steep slide Friday that sent the Dow Jones industrial average down nearly 400 points.
All three major stock indexes — the Dow, the Nasdaq composite and the Standard & Poor’s 500 — are now in what’s known as a correction, or a drop of 10 percent or more from their recent peaks.”
http://www.columbian.com/news/2016/jan/15/stock-market-slides-again/
yabut cheap gas N stuff …………..
makati1 on Fri, 15th Jan 2016 9:42 pm
BC, if nothing else, we should be allowed to decide the day of our leaving, if not by accident or other means, if we so wish. Would not a simple “End It All” pill be better than years of pain and debilitation, especially if you were dependent on others for even personal care? A burden on your family?
I recently did something stupid that put my back out of sync and I was barely able to move without a lot of pain. It has since healed and the pain is gone, but to have to live with that everyday, for the rest of my life would have eventually caused me to wish for an “End It All” pill, I think.
Boat on Fri, 15th Jan 2016 9:46 pm
Apeman,
Boat, in WWII your country was allied with the Soviet Union against the Germans. Then in a matter of a day they became enemies of the USSR and allies with half the Germans. Now y’all is allied with all the Germans against the Russians
We sent the Russians, Chinese, Europe, Africa etc goods and war machine material. It was a world divided into two camps for the most part. If your terminology is allie that’s your words not mine. Germany was a forced friend, the US still has over 50,000 troops there now. Gotta keep an eye on them Germans. lol Troops in Japan also BTW.
Do you follow history? At all?
The US is not an enemy of Russia. The sanctions are just a reminder that if you want to play with the capitalists there are rules. Cremia was a no no. We had to slap there hands. No big deal.
And yes your right, Congress is considering selling arms to Vietnam. Who would have thought that. lol Not me.
Boat on Fri, 15th Jan 2016 9:55 pm
Apeman,
Investing advice. It’s called dollar cost averaging. It has worked well for almost 35 years. See no reason to change yet.
As a US citizen were poised for world commerce competition better than ever. Our low energy prices will weather the storm of cheap labor better over time. The future is bright.
Unlike you doomers I don’t worry about growth
penury on Fri, 15th Jan 2016 10:18 pm
Boat, the U.S. is the enemy of any nation which wishes not to use the dollar and refuses to bow to the authority of the U.S. gov currency laws on bank transactions or refuses to comply with U.S. laws on trade, finance or myriad of other reasons, If nations avoid the dollar they have no fear of Sanctons, and we lose a large amount of control over that country.
makati1 on Fri, 15th Jan 2016 10:30 pm
Boat reminds me of a character representing pure ignorance … Alfred E. Newman. lol.
“…Over the decades, Neuman has frequently been referenced in outside media, and his face has often appeared in political cartoons as a shorthand for unquestioning stupidity…”
https://en.wikipedia.org/wiki/Alfred_E._Neuman
Boat on Fri, 15th Jan 2016 11:05 pm
penury,
No nation needs to trade using the dollar. No nation needs to follow any rule of law but their own. By doing so they just isolate themselves from trading opportunity in most of the world. Their choice. US citizens believe in freedom of choice. Personally I like well stocked stores with plenty of choices and variety. Many countries have systems that don’t do so well. Move there and skip that dollar. lol
Boat on Fri, 15th Jan 2016 11:08 pm
mak,
Boat lives in the most successful country in the history of mankind. I know that is hard to wrap your brain around. But it’s ok, I believe in free speech and opinion. Without the US we wouldn’t have the ability to read your shyt. Your welcome.
joe on Fri, 15th Jan 2016 11:54 pm
Also they are at conventional peak oil. Why can’t they just pump 14mlnbpd and just own the market the way they once would have done, then cut production later. They have no response in this market, because they are at full production, it’s still not enough. The next cut will be caused by a need to cut costs and repair fields.
Conventional oil is maxed out, so they are monetizing the costs of tight oil by low interest rates and that has only limited impact because you have to keep going at full capacity with the production of tight oil, and because conventional oil hides the true cost of tight, it causes it’s own gluts. Tight oil on its own is expensive and dirty, mixed sources causes gluts and instability.
In peak oil jargon, it’s called the bumpy plateau, and it affects everything to do with money, commodities and demand/supply.
HARM on Sat, 16th Jan 2016 12:05 am
“My grandfather rode a camel, my father rode a camel, I drive a Mercedes, my son drives a Land Rover, his son will drive a Land Rover, but his son will ride a camel”
–Rashid bin Saeed Al Maktoum
Boat on Sat, 16th Jan 2016 12:07 am
joe,
I disagree with conventional oil is past it’s peak. I think the new peak is in the near future. Russian oil is conventional, Saudi, Iraq, Iran etc. All suppliers who have conventional oil and have been growing their production. Well Iran soon to. If geopolitics calm some there is more conventional for the market in Lybia, Nigeria. Unconventional oil is what? 5-5 mbpd out of 97? As the frackers shut down conventional oil is taking it’s place because it is cheaper to produce. Welcome to the death of the conventional oil conspiracy theory.
onlooker on Sat, 16th Jan 2016 12:22 am
Penury is right. Any given nation is bullied into conforming with the protocols of the world economic system if they do not they are ostracized in every possible way. Look at Cuba.
GregT on Sat, 16th Jan 2016 12:45 am
Penury is right onlooker, except for one small thing.
The US is not in control of the ‘world economic system’, the ‘world economic system’ is in control of the US, and the US is the ‘world economic system’s’ strategic base.
GregT on Sat, 16th Jan 2016 1:02 am
Boat,
Best comment from you ever. Until the last sentence. Epic failure.
onlooker on Sat, 16th Jan 2016 1:39 am
very good point Greg. Our reference to TPTB in the shadows making key decisions that have shaped the world.
onlooker on Sat, 16th Jan 2016 1:40 am
Great minds think alike haha
GregT on Sat, 16th Jan 2016 1:57 am
“mak,
Boat lives in the most successful country in the history of mankind. I know that is hard to wrap your brain around. ”
My bad. Didn’t see your former comment Boat. Clueless idiot.
onlooker on Sat, 16th Jan 2016 2:02 am
Yes Boat, successfully myopic and selfish as in the world is our and the heck with the future and with others.
GregT on Sat, 16th Jan 2016 2:07 am
Yah, two thumbs up to you onlooker.
I have more to learn from you, then you have to learn from me. A wise man you are.