Saudi Arabia’s oil war plan hinted
1 Jun, 2012 10:07
Saudi Arabia and its Sunni allies may right now be boosting oil production, aiming to plunge the market price to as low as US$60 per barrel. The ultimate goal is to cripple the economies of Shiite Iran and Iraq, an insider view suggests.
The insight comes from Barton Biggs, hedge fund manager running Traxis Partners, who spoke with a Saudi Arabian businessman close to the country’s royal circles. Biggs met the man for a business lunch and asked for an overview of the Middle-Eastern country’s policies in the medium and long terms, reports Business Insider citing Biggs’ note published by Itaú BBA."You have to understand our geopolitical equation and vulnerability,” the Saudi businessman is cited as saying.“Our two most dangerous enemies are Iraq and Iran. Both are Shia, and both are trying to destabilize the Arab world and our Sunni kingdom by funding terrorism. Our only weapons against them are our wealth and our oil. Their current vulnerability is their financial fragility. Their financial reserves are a fraction of ours, and they desperately need money to prop up their economies,” he said.The Saudi ruling council’s plan is to ramp up oil production over the next two years and seize the moment to strike at Iran and Iraq, the businessman, who is described as “very rich and presumably well-connected”, explained.“Iraq and Iran need to produce and sell their oil at well over $100 a barrel. In the next 24 months, we will gradually increase our production with the objective of breaking the price of crude down to sixty dollars a barrel,” he said.The businessman, who is not part of the Saudi extended royal family, added that the plan has the backing of other Persian Gulf monarchies.“Under normal recessionary circumstances, we would be reducing production to maintain current prices. Instead, we will be flooding a weak market already suffering indigestion. You also should understand that Kuwait and the United Arab Emirates are with us. Royal families tend to stick together,” he is cited as saying.Barton Biggs says cheap oil would be good news for the global economy as a whole, as it would essentially amount to "a giant tax cut, which is just what this sickly old world needs." Still he sees many obstacles to the plan, if it is indeed what was outlined in the conversation, given the political instability in the region ravaged by the Arab Spring.This comes as Saudi Arabia boosted its oil output in May to the highest level in 23 years, a Bloomberg survey showed. The biggest contributor to the Organization of Petroleum Exporting Countries pumped 9.9 million barrels a day during the month. OPEC’s total output is currently highest since October 2008.Saudi Arabian Oil Minister Ali al-Naimi said in mid-May, that he wanted to see the Brent crude contract drop to $100 a barrel.