Choosing His Weapons Wisely

"Whether it goes down to US$20/barrel, US$40/barrel, US$50/barrel, US$60/barrel, it is irrelevant."
"Based on the analysis we have done, we will not cut output at OPEC."
"I did not ask him [Russian counterpart] any questions and I don't know who reported this talk."
Ali al-Naimi, Saudi oil minister

Saudi Oil Minister Ali al-Naimi is flanked by Qatar Oil Minister Mohammed bin Saleh Al-Sada (L) and United Arab Emirates Energy Minister Suhail bin Mohamed al-Mazroui (R) at the opening session of the 10th Arab Energy Conference in Abu Dhabi, on December 21, 2014.  (MARWAN NAAMANI/AFP/Getty Images)

 

'This talk' alluded to reports in the media that Saudi Arabia's oil minister had taken the issue of oil policy to a debate with Alexander Novak, representing Russian interests, during a meeting outside the larger November OPEC conference held in Vienna. As far as Mr. al-Naimi could recall, the head of Russian state oil firm Rosneft OAO, Igor Sechin, had given a 30-minute talk on the Russian oil industry.

That talk concluded with the statement "We cannot cut anything because our wells are old and if we reduced their output they will not produce again." To which one can only wonder why some of the elaborate costs associated with the Sochi Winter Games hadn't gone instead to refurbishing those old oil wells which Russian GDP is so wholly dependent upon. Alternately some of the massive investments in upgrading the Russian military machine. But that's another, obviously side issue, albeit germane.

But Mr. al-Naimi did state he ended the meeting with the confirmation from Mr. Novak that his country was unwilling to cut its output. As for lower oil prices resulting in a Saudi budget deficit for the year, that was dismissed with the statement that the Kingdom of Saudi Arabia has no debt. And, if necessary, oil producers in the Gulf remained in a position to cope with lower oil prices for two or three years, if deed necessary.

So are oil prices to remain at their bargain-basement pricing level, or what does the near future hold? That future is Saudi Arabia's confidence in meeting the demands of any new customers by an increase in oil output resulting in a bigger share of the market. And certainly delivering clear pain through no gain for other oil producers, most notably the Islamic Republic of Iran whose economy is anything but stable.

Would Saudi Arabia plan to maintain a market share of 9.7 million barrels daily, an interviewer from the Saudi-owned Al-Hayat newspaper asked? "Yes, unless a new client comes along and then we may increase it", was the unequivocal response. The emerging battlefields of the 21st Century have changed; there is the aggressive threats of the Cyberwar type, and there is the bully pulpit of the oil-cartel type.

And in the latter case, clearly Saudi Arabia has chosen its weapon and its targets; both Iran and Russia, each of which support the Syrian regime of Bashar al-Assad, busy with his butchery-specialty, both of which are involved in the nuclear assets that Iran is headed toward; Russia through its helpfulness to Iran, and Iran for its dogged determination to bring nuclear weapons to the Middle East power table.

David McNew / Getty Images / AFP Photo