Oil: An Effective Weapon In The Economic War

Using oil as a economic weapon is not a new invention and Obama prides himself for this aggression. In fact in what is know as the Carter doctrine, the United States commits itself to control the Persian Gulf, which implies controlling oil reserves. Oil price was at $110 a barrel in the summer of 2014 but has collapsed rapidly. Prices are down by a quarter in the past three months. The current conditions would naturally lead to hight prices in oil, given the turmoil in Iraq and Syria caused by ISIS.  However, it seems the unfailing partners in crime, the U.S., Saudi Arabia and Israel just broke a deal back in September of 2014 to keep oil price cheap [Guardian Nov 9-2014].

Oil as an Economic weapon was already effectively used in response to the Yom Kippur war in 1973 causing an increase in oil prices by four times – at the time the target was the U.S. and the the U.S. in no time took the measures to enter into an alliance with the Saudis.  Also in the mid-1980s, with the U.S. in charge,  the oil price was taken below $10 a barrel to affect the Soviet Union. This time, the targets are Russia, Iran and Venezuela – for instance, the U. S. keeps imposing more sanctions on these three countries in addition to many other threats against them [TeleSur Dec 11-2014].

The current situation reveals companies can easily manipulate oil price. Oil companies enjoy U.S. subsidies and their high executives receive millionaire salaries. It is estimated that oil corporations receive $1,4T in subsidies from U.S. tax payers [Democracy Now Sep 26-2014]. However that fact on itself does not justify how corporation can manipulate oil price. One important reason is that Saudi Arabia and the U.S. have kept their oil production high – in the case of the U.S. this has been possible due to fracking, a very dangerous procedure to obtain shale oil. An additional factor is that the extremist organization ISIS is selling oil on the black market at a very low price, especially to U.S. Europe and Israel [TeleSur Oct 30-2014]. And a last component, but no the least under any means,  the Rockefeller family is retiring their investment in fossil fuel for about $50B – that news by itself brought down oil price significantly [BBC Sep 22-2014].

Due to the falling on oil price,  OPEC member countries asked Saudi Arabia, the 2nd most powerful member of OPEC,  in the last meeting in Austria to lower its production to stabilize oil price, but the Saudis rejected the petition. Saudi Arabia needs oil to be above $90 a barrel to balance their books but obviously the U.S. has managed an accord to keep the Saudi monarchs still somehow comfortable with the cheap oil prices [The Telegraph Nov 27-2014].

For many, this is a mutation the cold war to at least weaken these states that represent an effective opposition to U.S. hegemony [RT Dec 30-2014]. Oil and gas account for 70% of Russia’s exports and the budget doesn’t add up unless the oil price is above $100 a barrel. But Russia is not the only main target. Venezuela represents the main an immediate target for the Pentagon and oil prices certainly can shake Venezuela’s programs for the population. In Venezuela, the U.S. keeps supporting and funding right wing extremist groups and for next year the NED budget for Venezuela was increased from $5M to $15M [PX]. A key factor to keep in mind is that Venezuela has gotten to keep the 17 countries from PetroCaribe accord away from the IMF. Nowadays, IMF functionaries have been stalking the PetroCaribe members expecting Venezuela to drop its financial assistance and stop its delivery of oil at a cheap price (remember Venezuela gives cheap oil also to poor neighborhoods in the U.S).

Hitting Russia, Iran and Venezuela with lowering oils prices just begun. Thus far, Russia hasn’t been affected in a severe way and it seem they have a reliable contingency plan given they have gold reserves and a good relation with China.  In addition, at the time Russia is increasing its gold reserves, Venezuela is adding diamonds, gold and other precious stones and metals to its foreign reserves [RT Dec 5-2014]. The U.S. has imposed more sanctions on Venezuela, but it is rather in response to the strong popular support that Venezuela enjoys – just on December 15, a massive concentration in Caracas showed full support to the Bolivarian Revolution of president Nicolas Maduro. The sanctions imposed on Venzuela have been condemned by the entire region and by global organizations such as the G77 [La Iguana Dec 24-2014] .

Other two countries affected by this crisis are Syria and Ecuador, incidentally both are two very annoying stones in uncle Sam’s shoes. Syria is Iran’s main ally and is the only country in the Mediterranean  area still with a state oil company and is not in debt with the IMF.  For now, support for President Bashar al-Assad remains strong among majority of Syrians despite the bloody conflict.  Ecuador has become a prominent left country in confronting corporations especially oil companies. Support for the Correa administration is amazingly high and the government is look upon as a model of progress. It is important to know, the current budget structure in Venezuela and Ecuador is organized in a way that will affect only infrastructure projects in a minor way. However, since the media is property of the rich, the news are painting a scenario of massive turmoil coming due to the low prices on crude, something that does affect theses governments whatsoever.

After taking all of that into account, we must be aware this is just the beginning of an eminent full strike from the U.S. against these three countries. In the mean time, the affected parties are working hard in strengthening alliances. It must be taken into account that there is an unwanted effect of this economic war, this is affecting affecting also Mexico,  an unconditional supporter the U.S. foreign policy. In addition some corporations are having an uneasy feeling about the crude’s collapse since they maintain strong investments in that kind of businesses [Wall Street Journal Dec 16-2014].



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