Oil Revenue War

The Middle East has long relied on the United States to maintain a balance of what passes for moderation in that highly volatile area. That oversight by the most powerful and persuasive nation on Earth has latterly undergone a tectonic power shift. Under the Obama administration the United States has gradually shifted away from its conventional role and its traditional allies in the Middle East. When Barack Obama visited Egypt shortly after his presidential inauguration he spoke to the Muslim world that a new day was dawning between America and the world of Islam.

President Barack Obama with President Hosni Mubarak, Cairo, Egypt, June 2009  Photo: Stephen Crowley/The New York Times

He was speaking of course of Arab/Muslim resentment over perceived and actual interference in the Middle East by the United States. There have always been polarizing views over the position of the U.S. in the Mideast; resentment that Israel has always seemed a protectorate of the U.S. Yet relief when the U.S. assembled allies to free Kuwait from Saddam Hussein's belief that it should be part of Iraq. And anger at the manipulations between oil-producing sheikdoms and kingdoms and the U.S.

Where once the United States of America was the champion of Israeli existence in a swamp of Islamic fury, and where the U.S. cultivated Saudi Arabia and managed Egypt, that has all undergone a change of sudden and stunning proportions. The terrorists representing al-Qaeda who destroyed the World Trade Centre in New York and took the lives of almost three thousand people, were mostly of Saudi origin. Their leader, a Saudi of Yemeni origin, set out to destroy the Saudi regime and set its sights on the U.S. as well.

Even so, the bonds between Saudi Arabia and the U.S. remained tightly oil-obsessed. But the United States electorate is tired of fighting Middle East/Muslim wars; Iraq and Afghanistan, and the U.S. administration set itself the goal of becoming energy-independent of Mideast oil; it can be said with confidence that the U.S. funded the rise of fanatical Islam through Saudi Wahhabism generating jihad, a central duty of pious Muslims. Wealthy Saudis financed al-Qaeda just as they finance the Islamic State of Syria and Al-Sham.

The predicament now for the Middle East is an implosion of violent jihad-borne Islamofascism with the rise of a totalitarian Sunni caliphate, ISIS, in competition with Shiite Iran and its proxy Shia militias, fundamentalist Islamists whose threat is more than equal to that of ISIS. And Saudi Arabia, with the U.S. poised to become completely oil-sufficient no longer requiring oil from the Middle East has found itself cast adrift. With ISIS threatening invasion on one flank, Iran threatening on the other.

The Saudis viewed with no little degree of alarm the offhand manner in which the U.S. divested itself of interest in Egypt after having supported a Muslim Brotherhood government once they abandoned Hosni Mubarak; reacting unfavourably to seeing the Brotherhood deposed. Under the Obama administration the Brotherhood had legitimacy and Egypt now finds itself partially divorced from the good graces of the U.S. In this, Egypt has a counterpart in where Israel finds itself, in the bad books of the Obama administration.

U.S. policy has seen a 90-degree turnabout under President Obama. The shift has left doubts that the U.S. will push too hard over Iran's nuclear aspirations. That being the case, Saudi Arabia now has more in common with Israel than would be otherwise, with both countries in dread of the Islamic Republic of Iran acquiring nuclear weapons. While Saudi Arabia is in a political-religious war with Iran, Israel is in Iran's sights as a blot on Islamic geography waiting to be destroyed.

Where Saudi Arabia might have fondled the thought that at some point the U.S. would honour its threat to destroy Iranian nuclear installations for fear of its acquiring nuclear warheads, that is no longer the case. The power that could destroy Iran's installations will not, Israel that wishes to, cannot. Iran suffered under the U.S.-led sanctions, yet now the sanctions have been partially lifted and negotiations appear stalled at the point where it seems the U.S. is prepared to surrender key demands to Iran's ambitions.

The result of which has been a sudden glut of Mideast oil on the international market at bargain-basement prices that might go lower yet. Saudi Arabia has led the way to lower per barrel prices, taking a hit it is prepared to weather leaving it reliant on its vast currency reserves. Whereas Iran, with its much slimmer currency reserve, and ailing from the effect of the sanctions, needs higher per barrel oil prices to lift it from its economic slump.

Saudi Arabia has no intention to going to war with Iran to preserve itself, not in the conventional sense. But it can and will continue to lower oil prices a little more, leaving Iran to struggle with a critically leaner revenue source. A situation that, just coincidentally, impacts Russia, Syria and ISIS as well, all dependent on sustained high oil per-barrel prices to keep them ticking along. Russia, already in recession, and Syria in parlous straits, getting their just desserts, courtesy of Saudi Arabia.