Can OPEC opt for production cut?

The Organization of the Petroleum Exporting Countries (OPEC) and its allies face a major challenge in 2020 as demand for crude is expected to fall sharply.

The IEA estimated non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year as compared to 1.8 million bpd in 2019, based on production hike in the United States, Brazil, Norway and Guyana.

The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month.

While US supply rose by 145,000 bpd in October, the IEA said, a slowdown in activity that started earlier this year looks set to continue as companies prioritize capital discipline.

Demand for crude oil from OPEC in 2020 will be 28.9 million bpd, the IEA forecast; one million bpd below the exporter club’s current production.

The recovery by OPEC’s de facto leader Saudi Arabia from attacks on the country’s oil infrastructure contributed 1.4 million bpd to the global oil supply increase in October of 1.5 million bpd.

With plans underway for the Aramco IPO and the persistent need for revenues to fund the government budget, Riyadh has every incentive to keep oil prices supported.

Saudi state oil company Aramco, the world’s most profitable firm, scheduled to start its share sale on 17^th November in an IPO that may help in mobilizing between US$20 billion to US$40 billion.

The IEA said that if some or all tariffs were lifted in coming months, world economic growth and oil demand growth would both rise significantly, though the rebound may not be immediate.

Sluggish refinery activity in the first three quarters has caused crude oil demand to fall in 2019 for the first time since 2009, but refining is set to rebound sharply in the fourth quarter and in 2020.

Washington looting Syrian oil

Recently released satellite images by the Russian Defense Ministry show tank trucks guarded by US military servicemen and private military companies were busy in smuggling oil from fields in the eastern part of Syria to other countries. It suggests that Washington is looting Syrian oil and transporting it to outside Syrian territories under American military guard. The revenues of the US government from the theft were estimated more than US$30 million per month.

Washington is capturing and holding oil fields under its control in the eastern part of Syria. This is a clear international state-sponsored gangsterism, say Russians. These resources inside the Syrian territories belong to the Syrian Arab Republic. They neither belong to Daesh nor to the American protectors. The cost of one barrel of oil smuggled from Syria estimated at US$38 generates monthly revenue for the private business exceeds US$30 million.

While US President Donald Trump has ordered a partial withdrawal of the approximately 1,000 US troops from Syrian territory, who have been enforcing an illegal military occupation under international law. The US President himself and US officials have admitted that some will be staying in Syrian. They will remain on Syrian soil not to ensure the safety of any group of people, but rather to maintain control over oil and gas fields. Donald said openly, “We want to keep the oil.”

The US military has already killed hundreds of Syrians, and possibly even some Russians, precisely in order to hold on to these Syrian fossil fuel reserves. Washington’s obsession with toppling the Syrian government refuses to die. The US remains committed to preventing Damascus from retaking its own oil, as well as its wheat-producing breadbasket region, in order to starve the government of revenue and prevent it from funding reconstruction efforts.

It is for the first time, Trump has openly confirmed the imperialist ulterior motives behind maintaining a US military presence in Syria. “We want to keep the oil,” Trump confessed in a cabinet meeting on October 21. “Maybe we’ll have one of our big oil companies to go in and do it properly.”

Few days earlier, the president had tweeted, “The US has secured the Oil.” “President Trump is leaning in favor of a new Pentagon plan to keep a small contingent of American troops in eastern Syria, perhaps numbering about 200, to combat the Islamic State and block the advance of Syrian government and Russian forces into the region’s coveted oil fields.

“We secured the oil (in Syria), and therefore a small number of US troops will remain in the area where they have the oil,” Trump said. “And we’re going to be protecting it. And we’ll be deciding what we’re going to do with it in the future.”

“We have troops in towns in northeast Syria that are located next to the oil fields. The troops in those towns are not in the present phase of withdrawal. Our forces will remain in the towns that are located near the oil fields.

Unlike Trump, others offer an excuse to justify the continued US military occupation of Syria’s oil fields. He insisted that American soldiers remain to help the Kurdish-led Syrian Democratic Forces (SDF) hold on to the resources and prevent ISIS jihadists from taking them over.

But any observer who carefully witnessed the press confirmation during his press conference would have been able to detect the real goal behind the prolonged US presence in northeastern Syria. It seems the purpose of those troops, working with the SDF, is to deny access to those oil fields by ISIS and others who may benefit from revenues that could be earned.

It is clear that the US strategy is to prevent Syria’s UN-recognized government and the Syrian majority that lives under its control from retaking their own oil fields and reaping the benefits of their revenue. US military massacred hundreds to keep control of Syrian oil fields. This is not just speculation. CNN made it plain when reported the following in an undeniably blunt passage, citing anonymous US senior military officials:

The oil fields are assets that have also been long sought after by Russia and the Assad regime, which is strapped for cash after years of civil war. Both Moscow and Damascus hope to use oil revenues to help rebuild western Syria and solidify the regime’s hold. CNN acknowledged that the US military had killed up to “hundreds” of Syrian and Russia-backed fighters seeking to gain access to Syria’s oil fields. It massacred these fighters not for humanitarian reasons, but to prevent the Syrian government from using “oil revenues to help rebuild western Syria.”

This shockingly direct admission flew in the face of the popular myth that the US was keeping troops in Syria to protect Kurds from an assault by NATO member Turkey. The CNN report was an apparent reference to the Battle of Khasham, a little known but important episode in the eight-year international proxy war in Syria.

The battle unfolded on February 7, 2018, when the Syrian military and its allies launched an attack to try to retake major oil and gas reserves in Syria’s Deir ez-Zour governorate, which were being occupied by American troops and their Kurdish proxies. The US has aimed to prevent Damascus from retaking profitable territory, starving it of natural resources from fossil fuels to basic foodstuffs.

In 2015, the then President Barack Obama deployed US troops to northeastern Syria on the grounds of helping the Kurdish militia the People’s Protection Units (YPG) fight ISIS. What started as several dozen US special operations forces quickly ballooned into some 2,000 troops, largely stationed in northeastern Syria.

While Trump has pledged to bring US soldiers home and end their military occupation of Syrian territory, it is evident that the broader regime change war continues. A brutal economic war on Damascus is escalating, not only through sanctions but through the theft of Syria’s natural treasures by foreign powers.

Malaysia likely next victim of trade sanctions by United States

Lately, Malaysian Prime Minister, Mahathir Mohamad has expressed concerns that his exports-reliant country could be hit with trade sanctions amid rising protectionism highlighted by the Sino-US tariff war. While Mahathir did not mention the source of possible sanctions on the Southeast Asian country, he expressed disappointment the way proponents of free trade were now indulging in restrictive trade practices on a grand scale.

“Unfortunately, we are caught in the middle,” said Mahathir referring to the Sino-US trade war. “Economically we are linked to both markets, and physically we are also caught in between for geographical reasons. There are even suggestions that we ourselves would be a target for sanctions,” he added

The US and China were two of the three biggest export destinations for Malaysia between January and August this year. Singapore was the top destination.

To cushion the impact of the collision between the superpowers, Mahathir said Malaysia was collaborating more with its regional neighbors.

Mahathir also complained of being bullied by powerful nations, referring to a campaign by European countries against Malaysia’s agricultural mainstay, palm oil. The edible oil contributed 2.8% of Malaysia’s gross domestic product last year and 4.5% to total exports.

“Having cleared most of their forests and refusing to reduce their noxious emissions, they now try to impoverish the poor by preventing them from clearing their forest for living space and earning a living,” he said.

The European Union passed an act earlier this year to phase out palm oil from renewable fuel by 2030 due to deforestation concerns.

There are also concerns that India, one of the biggest buyers of Malaysian palm oil, would restrict imports of the product due to a diplomatic row over comments made by Mahathir on New Delhi’s recent actions in the disputed South Asian region of Kashmir.

Moreover, countries are reeling under the pain inflicted by a trade war between the most powerful economies; there is international political turmoil; savage conflicts and widespread terrorism are killing millions; and budgets that should be devoted to helping the poor are being used to buy and maintain expensive weapons of war, he said.

“There is something wrong with our way of thinking, with our value system … we still believe that conflict between nations can be resolved with war,” added the Malaysian Prime Minister.

He went on to say that “free trade” means “no protection” for small countries and their small industries, with simple products of the poor subjected to clever barriers that prevent their sale to rich markets. At the same time, globalization, despite its benefits, has imperilled the independence of smaller countries.

Applauding the efforts of the UN to end poverty, protect the environment and bring peace to all countries, Prime Minister Mahathir, underscored the need for reform in the Organization, particularly the Security Council.

“Five countries on the basis of their 70-year-old war victories cannot claim to have a right to hold the world to ransom forever,” he said, underling the need to reform the veto rights in the Security Council.

Who killed Gaddafi?

I was amazed to read two headlines lately: 1) Declassified e-mails reveal NATO killed Gaddafi to stop Libyan creation of gold- backed currency and 2) Declassified emails reveal Gaddaffi was brutally murdered because France wanted to maintain its financial stranglehold on African Nations. I am inclined to believe that the latest attempt to malign France is aimed at saving Hillary Clinton, the then US Secretary of State.

This also reminded me of one of my blogs written as back as September 2012. Its caption was “Chris Stevens a diplomat or spy” https://shkazmipk.blogspot.com/2012/09/chrisstevens-diplomat-or-spy-killing-of.html.  I wrote this after Killing of Christopher Stevens, US Ambassador in Libya and his portrayal as friend of ‘freedom’ fighters. In the recent past many countries have been alleging that spies have become an integral part of the US diplomatic core.

Reportedly, one of the over 3,000 new Hillary Clinton emails released by the State Department on 2016 New Year’s Eve, contain damning evidence of Western nations using NATO as a tool to topple Libyan leader Muammar al-Gaddafi. The NATO overthrow was not for the protection of the people, but instead it was to thwart Gaddafi’s attempt to create a gold-backed African currency to compete with the Western central banking monopoly.

The April 2011 email, sent to the Secretary of State Hillary by unofficial adviser and longtime Clinton confidante Sidney Blumenthal with the subject line “France’s client and Qaddafi’s gold,” reveals predatory Western intentions.

The emails indicate the French-led NATO military initiative in Libya was also driven by a desire to gain access to a greater share of Libyan oil production, and to undermine a long term plan by Gaddafi to supplant France as the dominant power in the Francophone Africa region.

The email identifies French President Nicholas Sarkozy as leading the attack on Libya with five specific purposes in mind: to obtain Libyan oil, ensure French influence in the region, increase Sarkozy’s reputation domestically, assert French military power, and to prevent Gaddafi’s influence in what is considered “Francophone Africa.”

Most astounding is the lengthy section delineating the huge threat that Gaddafi’s gold and silver reserves, estimated at “143 tons of gold, and a similar amount in silver,” posed to the French franc (CFA) circulating as a prime African currency.

The email makes clear that intelligence sources indicate the impetus behind the French attack on Libya was a calculated move to consolidate greater power, using NATO as a tool for imperialist conquest, not a humanitarian intervention as the public was falsely led to believe.

This gold was accumulated prior to the current rebellion and was intended to be used to establish a pan-African currency based on the Libyan golden Dinar. This plan was designed to provide the Francophone African Countries with an alternative to the French Franc (CFA).

According to knowledgeable individuals this quantity of gold and silver is valued at more than $7 billion. French intelligence officers discovered this plan shortly after the current rebellion began, and this was one of the factors that influenced President Nicolas Sarkozy’s decision to commit France to the attack on Libya.

The email provides a peek behind the curtain to reveal how foreign policy is often carried out in practice. While reported in the media that the Western backed Libyan military intervention is necessary to save human lives, the real driving factor behind the intervention was shown to be the fact that Gaddafi planned to create a high degree of economic independence with a new pan-African currency, which would lessen French influence and power in the region.

The evidence indicates that when French intelligence became aware of the Libyan initiative to create a currency to compete with the Western central banking system, the decision to subvert the plan through military means began, ultimately including the NATO alliance.

Who has attacked Iranian oil tanker?

Reportedly, an Iranian oil tanker Sabiti was hit by missiles in Red Sea waters off Saudi Arabia on Friday. The incident is likely to further heighten friction in the region already rattled by attacks on tankers and oil installations since May. Oil prices rose on the news of the incident and industry sources said it could drive up already high shipping costs.

The Red Sea is a major global shipping route for oil and other trade, linking the Indian Ocean with the Mediterranean via the Suez Canal.

It is the latest incident involving oil tankers in the Red Sea and Gulf region, and may ratchet up tensions between Iran and Saudi Arabia, long-time regional adversaries fighting a proxy war in Yemen, at the southern end of the Red Sea.

There was no claim of responsibility for the reported incident and it has yet to be independently confirmed.

The proximity of the tanker at the time of the attack to Saudi Arabia’s Jeddah port gives western media to allege that the missiles could have been launched from the kingdom.

Another plausible theory could be that the ship was hit in an Israeli sabotage operation. The purpose would be to disrupt Iranian tanker activity in the Red Sea corridor as it heads toward the Suez Canal. A third possibility would be that the attack was conducted by a terrorist group.

An Iranian government spokesman has described targeting of an Iranian-owned oil tanker by missiles as a “cowardly attack” and said Iran would respond after the facts had been studied.

“Iran is avoiding haste, carefully examining what has happened and probing facts,” government spokesman Ali Rabei, siad.

Separately, a senior security official said video evidence had provided leads about the incident, adding that the Sabiti was hit by two missiles.

“A special committee has been set up to investigate the attack on Sabiti... with two missiles and its report will soon be submitted to the authorities for decision,” said Ali Shamkhani, secretary of Iran’s top security body.

“Piracy and mischief on international waterways aimed at making commercial shipping insecure will not go unanswered,” he said.

According to Iranian sources, leakage of cargo from the tanker has been stopped as it heads for the Gulf. The tanker is heading for Persian Gulf waters and it was expected to enter Iranian waters safely. Nasrollah Sardashti, head of National Iranian Tanker Company (NITC) that owns the damaged tanker, said the crew was safe and the vessel would reach Iranian waters within 10 days.

Saudi Arabia said it received a distress message from the damaged tanker but the vessel kept moving and switched off its transponder before it could be provide assistance.

The United States has been balaming Iran for attacks on tankers in the Gulf in May and June as well as for strikes on Saudi oil sites in September. Tehran has denied having a role in any of them.

The U.S. Navy’s Fifth Fleet, which operates in the region, said it was aware of the reports but had no further information.

According to western media, at times, Iranian narratives offer diverging accounts. State-run television, citing the national oil company, said the tanker was hit by missiles while denying a report they came from Saudi Arabia.

It also said, Iran’s Foreign Ministry said the ship was hit twice, without saying what struck it. State television broadcast images from the Sabiti’s deck saying they were taken after the attack but showing no visible damage. The ship’s hull was not in view.

Political risk consultancy Eurasia Group said it did not have firm evidence about who may have been behind the incident.

Media in United States in the grip of intelligence agents

Some of my blog readers did not like a term coined by me “Dishonest Western Media”. Today I got an opportunity to read an article in "Information Clearing House", I am happy to share it verbatim.

After years in the shadows overseeing espionage, kill programs, warrantless wiretapping, entrapment, psyops and other covert operations, national security establishment retirees are are turning to a new line of work where they can carry out their imperial duties.

That is, propagandizing the public on cable news. Reborn as cable news pundits, these people are cashing in. So many years working in the dark, only to emerge in the studio lights of the same networks that rail all day everyday against state TV from countries that America hates.

It may look crazy how many former spooks have been hired at corporate news outlets like CNN and MSNBC as “analysts”. After spending their careers serving the national security state, they get to shape the news under the guise of expertise. It’s like state TV

Following is but a partial list of prominent former spooks turned mainstream media pundits and analysts, to say nothing of the even greater numbers of retired generals the network continuously rely on. 

Former CIA Director John Brennan who is now an NBC News senior national security and intelligence analyst

Fran Townsend, former homeland security advisor to George W. Bush. She's now a CBS News senior national security analyst. 

But CNN takes the cake — it's the biggest spook show of all

Jim Clapper, former Director of National Intelligence, now a CNN national security analyst

Retired General Michael Hayden, former director of the CIA and the NSA, now a CNN national security analyst

Asha Rangappa, former FBI special agent, now CNN legal analyst

James Gagliano, a retired FBI supervisory special agent, now a CNN law enforcement analyst

Tony Bliken, former deputy secretary of state and former deputy national security advisor, and now CNN global affairs analyst

Mike Rogers, former chair of the House Intelligence Committee, now CNN national security commentator

Samantha Vinograd senior advisor to the national security advisor under President Obama, now CNN national security analyst

Steven Hall, retired CIA chief of Russia operations, now a CNN national security analyst

Philip Mudd, former CIA counter-terrorism official, now CNN counter-terrorism analyst

If Strait of Hormuz Blocked, Can Saudi Arab Overcome Oil Supply Crisis?

After 14/9 attacks on Aramco installations, some critics doubted the capacity of Saudi Arabia to guarantee adequate and uninterrupted oil flows to the market. The narrative of these analysts is not based on current situation but a temporary closure of the Strait of Hormuz, in case of a full blown war between Saudi Arab and Iran. They conclude, Saudi Arabia may be capable of doing a lot, but saving the global economy if the Gulf explodes is not one of its capabilities.

They say, Saudi Arab will not be able to keep the necessary crude oil and products volumes flowing to Asian and European markets in the case of blockade of Strait of Hormuz, even though Saudi Arab owns and operates a crude oil pipeline with a capacity of 5 million bpd, carrying crude 1,200 kilometers between the Arabian Gulf and Red Sea.

They also say, Saudi move to stabilize the current market is praiseworthy, especially just before the upcoming meeting of OPEC+ in Vienna. Saudi Arab has been saying that it is capable of supplying sufficient crude through the Red Sea, reiterating that the necessary pipeline and terminal infrastructure is there. These critics say, Saudi Arab can only assure its supply, which may be not higher this summer than around the level this pipeline can support. The real issue, if it comes to a full-blown conflict, is that not only Saudi oil is being threatened.

Reportedly, around 20 million bpd of crude and petroleum products are transported via the Strait of Hormuz, at present. Saudi exports are significant, but other countries include UAE, Iraq, Kuwait, Bahrain, Qatar and Iran, who will have to explore alternative routes. They warn, any military action in the region can cause a temporary disruption for all maritime traffic.

Besides the options that are the already on the table, such as the Saudi onshore pipeline and the UAE’s Fujairah pipeline, no other real alternatives are available, as overland trucking or rail transport is minimal. Transferring volumes via the Saudi and UAE’s pipelines is not an option at all, as the total capacity of the two is less than 10 million bpd, representing not even 50% of the current maritime flows through Hormuz. Another thing that should be noted is that pipelines can’t ship crude and crude products at the same time.

Another consequence of a blockade would be that most available VLCCs and other tankers will either be in the Persian Gulf and blocked or will not be able to be rerouted, before the market finds solution days and probably weeks will have gone by and a price spike for all products cannot be ruled out.

Only a few analysts are talking about oilfield security and pipeline availability. Any military advisor will put these options as part of his or her 1st phase military action plan. If Iran were to be attacked, or faces a surgical strike by an opponent, all Arab oil and gas infrastructure will become a legitimate offensive target, least in the eyes of Tehran and its proxies.

Looking at the majority of oil and gas production assets and infrastructure in the Arab world, especially in Saudi Arabia, UAE or even Iraq, everything is in reach of short-distance missiles, fighter jets, and even drones. Any move against Iran will result in a full-scale attack on Saudi’s Eastern Province, which produces 80% of all its oil and gas, Abu Dhabi’s offshore oil infrastructure and the regional pipelines. Looking at history, denying energy access and diminishing the opponent’s stability are on top of military strategy.

At present, oil market is a victim of geopolitical power projections of emotional leaders superseding rationality. The continuing references to Iran-Iraq tanker war during 1980-1988 is out of touch with reality. At this time, it is not going to be Iran denying support or trade with Iraq, but a possible Arab-Iranian confrontation, led by the US if no countermeasures are being implemented.

Iran Saudi Rapprochement

According to media reports Saudi Arabia has given a green light to Iraqi Prime Minister Adel Abdul Mahdi to arrange a meeting with Iran as a first step towards deescalating tensions in the region.

Abbas al-Hasnawi, an official in the prime minister’s office, informed that Abdul Mahdi was mediating between the leaderships in Riyadh and Tehran and had communicated each side’s conditions for talks to the other.

The remarks came after Iranian government spokesman Ali Rabiei said Saudi Arabia had sent messages to Iranian President Hassan Rouhani via the leaders of some countries.

Hasnawi confirmed that Abdul Mahdi was acting as a mediator with the aim of easing tensions after Iran was alleged for September 14 attacks on Saudi oil facilities.

“The Iraqi leadership has channels with both sides. Our Sunni brothers [in the government] liaise with the Saudis and our Shia brothers with the Iranians,” he said.

“The Saudis have conditions before the negotiations process starts and the same with Iranians. We have liaised these conditions to each side. It is not an easy task to get together two opposite sides in terms of their ideology, sect and their alliances in the region.”

Earlier, the Iraqi prime minister had said he believed Saudi Arabia was looking to deescalate tensions with Iran.

In an interview with Al Jazeera, he said that it is in everybody’s interest to prevent further war in the region.

“Nobody possesses the weapons necessary to deal their adversary a fatal blow. Chaos and destruction will hit the region in its entirety,” he said.

“Everybody is open to dialogue,” he said. “Iran says [it is] willing to negotiate if sanctions are lifted; the U.S. [also] asks for dialogue ... neither does Saudi Arabia close the door for dialogue,” Abdul Hadi added.

“There are many countries, and Iraq is one of them, that can offer a solution or a place for a solution to be found.”

In an interview with the CBS program “60 Minutes” broadcast, Saudi Crown Prince Mohammed bin Salman said he preferred a political resolution rather than a military one to the issues with Iran.

A war with Iran would lead to “a total collapse of the global economy”, he said, as he called for a political solution and backed talks between US President Donald Trump and Iran’s leaders.  

“The political and peaceful solution is much better than the military one,” he added.

Iranian Parliament Speaker Ali Larijani welcomed the Saudi crown prince’s willingness to resolve disputes with Tehran through talks, saying Iran’s doors are open to the Saudis.

Larijani said if Iran and Saudi Arabia hold talks, many of the region’s security and political problems would be resolved.

“We want to create a security system in the Persian Gulf with cooperation of all Persian Gulf states,” said Larijani.

Tensions in the Persian Gulf have heightened following the attack on Saudi oil fields, for which Riyadh and their Western allies, especially the US blamed Iran.

Iran has rejected the claim that it is behind the attack on the Saudi oil sites, calling it a “great deceit” in line with “great pressure” campaign on the Islamic Republic.

Iranian Foreign Minister Mohammad Javad Zarif said last month that “even the Saudis themselves don't believe the fiction of Iranian involvement” in the attacks on the Aramco oil facilities.

Western Media Adamant at Initiating War between Saudi Arabia and Iran

It may not be wrong to say that the western media loves when the United States bombs countries. Even at present such media houses are adamant at starting war between Saudi Arabia and Iran by propagating anti-Iran narrative and running it again and again. There is consensus that they use the content till attack on Iran becomes a reality. Most of the coverage on Aramco attack, accuse Iran for the attacks.

Surprisingly, neither the US nor Saudi Arabia have so far presented or shared any credible evidence that can prove Iran launched the attack on Aramco. Riyadh put on display a wreckage of what it said were remnants of weapons used in the attacks. It was claimed the wreckage showed the attacks were unquestionably sponsored by Tehran, but many believe the assemblage of junk were not the concrete evidence.

When US President Donald Trump decided to impose yet another round of sanctions to punish the people of Iran for what there is no public proof of, western media was furious that he has backed away from an all-out war. They are demanding why he is not initiating another military conflict in the Middle East.

The latest series of strikes on Saudi Arabian targets this year, were launched from south-western Iran using drones and cruise missiles. The strike on Aramco fits in the pattern of Yemeni strikes against Saudi economic infrastructure. There is no plausible reason to believe Iran was behind the attacks, and it’s even unclear if Iran has indirectly played a role in the attacks. Although the US government and establishment media often call the Houthis a proxy of Iran, it is an independent force grown out of decades-long conflict in Yemen. The extent to which Iran offers support to the Yemeni forces has never been established.

A columnist suggested Iran was behind the attack. A paragraph says,” Iran has been testing drones and supplying them to regional allies such as Hezbollah for years. It was also said that the missiles were reportedly able to evade Saudi air defenses.

Another article “United States sending troops to bolster Saudi defenses after attack”, says the US officials told that Southwest Iran was the staging ground for the attack that might has been authorized by Iran’s Supreme Leader Ayatollah Ali Khamenei. The article says, an assessment based at least in part on still-classified imagery showing Iran appearing to prepare an aerial strike.

A pep into the recent history tells, when President Trump ordered missile strike on Syria’s Shayrat Air Base in April 2017, it was widely admired by the western media. A day after the attack a reporter said he thinks Trump had just became President of the United States. Another asserted he has put the credibility of American power,” and yet another claimed, “We finally have a man who knows the difference between right and wrong and good and evil, and it makes us proud.”

All this was not new, in the past the barrage of propaganda directed at the American public forced them believe that Saddam Hussein was personally involved in 9/11 attacks. That was a significant achievement in manipulation. The poll results must have been news for the Iraqi dictator himself, a forgotten one-time American ally, who fought a proxy war with Iran, spread over a decade.

Have Moscow and Tehran essentially turned away from United States Dollar?

“Russia and Iran will transfer payments using an alternative system to the internationally recognized SWIFT money transfer network, Governor of Iranian central bank, Abdolnaser Hemmati”, has announced.

Instead of SWIFT, a system that facilitates cross-border payments between 11,000 financial institutions in more than 200 countries worldwide, the two countries will use their own domestically developed financial messaging systems – Iran’s SEPAM and Russia’s SPFS.

“Using this system for trade and business exchanges between EAEU (Eurasian Economic Union) member states can help develop and expand trade exchanges between the member states as well,” Abdolnaser Hemmati said.

Tehran is set to officially join the Russia-led free-trade zone, the EAEU shortly. The document on Iran’s participation was ratified in June by the nation’s parliament (Majlis) and President Hassan Rouhani has already ordered that the free trade zone agreement be implemented.

Earlier this month, Russian presidential aide Yury Ushakov said that Tehran and Moscow are developing an alternative to SWIFT. Russia began development of SPFS in 2014 amid Washington’s threats to disconnect the country from SWIFT.

The first transaction on the SPFS network involving a non-bank enterprise was made in December 2017. Around 500 participants, including major Russian financial institutions and companies, have already joined the payment channel, while some foreign banks have shown interest in joining.

Last year, Belgium-based SWIFT cut off some Iranian banks from its messaging system. It came after US President Donald Trump abandoned the landmark nuclear deal with the Islamic Republic and resumed US sanctions against Tehran.

Moscow and Tehran have essentially turned away from the greenback in bilateral trade, and are using the Ruble and Rial for payments. Turning to cross-currency trade was a vital issue for both Russia and Iran, and the two countries are planning to use all available means to boost these efforts.

“We have already essentially dropped the dollar in cooperation with the Iranians, we will rely on the Russian Ruble and the Iranian Rial, [and] in case of urgent need, on the Euro, if we have no other options,” the diplomat said. He added that banking structures in both countries have the potential to cope with this “difficult” task.

Despite efforts by European countries to keep trading with the Islamic Republic after the US pulled out of the nuclear agreement, their efforts still do not fully address Tehran’s interests, Dzhagaryan believes.

The diplomat said that the payment system recently created by France, Germany and the UK to facilitate trade with Iran raises “more questions than it answers,” claiming that it does not change the state of affairs for Tehran.

He explained that the Instrument in Support of Trade Exchanges (INSTEX) covers only items not blacklisted by the US, but does not apply to vital sectors of trade for Iran.

“Oil is the most important [sector] for Iran. It is a huge question if Europe can allow the proper volume of oil exports and flow of revenue to the Iranian budget,” Dzhagaryan stated. “EU countries should show that they can carry independent foreign policy without fearing any warnings from overseas partners.”

Russia along with several other countries, including India, China and Turkey – has been accelerating efforts to fight the dominance of the US currency in global trade amid rising tensions with Washington. Last year, Russian President Vladimir Putin called on the member states of the Eurasian Economic Union (EEU) to create a common dollar-less payment system for boosting economic sovereignty. The bloc, which consists of Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia, has free trade agreements with multiple partners across the globe, including Iran and China.

Will United States Attack Iran?

The United States has openly accused Iran for the drone and cruise missile attacks on Saudi Arabia’s largest oil refinery. Now the question is what will it do in response? 

The attacks have not affected the sole surviving super power. On the contrary, the US will benefit the most from the hike in oil prices, which has overtaken Saudi Arabia as the largest oil producing country.

There is a temptation for the US to let the attacks slip into history. The US has formed an anti-Iran alliance in which Saudi Arabia is a key player. Doing nothing would put the coalition into question. Failing to respond to an Iranian attack on a vital Saudi facility could help Iran increase its power throughout the region.

Donald Trump’s inclination has been to avoid initiating direct military action against Iran but applying economic pressure. He has maneuvered to minimize and halt active military engagement. Military action would not only contradict the US strategy, but also endanger other alliance members.

An alternative option would be to introduce new sanctions, but there are two problems with this move. First, sanctions do not have the psychological impact and second, the US has already imposed sanctions on Iran and any more sanctions would have only limited effects.

The US could impose a blockade on Iranian ports and close of Strait of Hormuz. This strategy has three weaknesses. First, a large naval force of multiple carrier battle groups would have to be deployed for a potentially unlimited time. Second, the fleet could come under attack from Iranian missiles. To counter this, anti-missile air attacks as well as defensive measures would be needed, creating a second potentially costly dimension to this operation. Finally, such a blockade is by definition without a terminal point. If Iran does not fold under the pressure, the blockade could continue indefinitely, since ending it without a successful outcome would be seen as a defeat.

Another possible response would be to launch air strikes against Iran. The most appropriate target would be the factories producing drones and cruise missiles, along with storage facilities and so on. However, the biggest problem will be getting accurate intelligence. Acting on poor information could result in an Iranian strike on US forces or another sensitive site under informal American protection.

As regards an air campaign, history has shown that these tend to take much longer than expected and sometimes fail altogether. Any US attempt to eliminate Iran’s strike capability can be costly and hidden Iranian missiles can attack regional targets. An air campaign can go on indefinitely without yielding the desired results.

As for sending in ground troops, the US military fully deployed can defeat the Iranian military and take terrain, but to hold it against a hostile militia would create interminable conflict with casualties that cannot be sustained. Iran is a big and rugged country, with a population of 82 million people, more than twice as large as Iraq or Afghanistan. And the idea that US troops would be greeted as liberators is mere fantasy.

The US has been concerned about Iran’s expanding political influence, which also creates potential targets that are of high value to Iran. Hitting these targets would be less daunting as compared to attacks on Iran. Iran has its own or proxy forces in Iraq, Syria, Lebanon and Yemen. It has invested a great deal of time, resources and risk in creating these forces that are now holding territory in these countries.

Doing nothing could well destroy the anti-Iran bloc the US has worked hard to create. The likely but not certain answer to this problem will be a symbolic retaliation. The problem with retaliations, however, is that they get out of hand

Who has attacked Saudi oil facility?

Western media controlled by those having vested interest was prompt in spreading the disinformation about attacks on Saudi oil facilities. It has used following pointers: 1) Yemen’s Iran-aligned Houthi group has claimed responsibility of attacks, 2) Kingdom’s output will be knocked out more than half, 3) oil prices will surge and 4) tension will rise in the Middle East.

This is exactly what western media has been doing for ages, only the operators have been changing. One must not forget that these attacks have come in the aftermath of earlier cross-border attacks on Saudi oil installations and on oil tankers in Gulf waters, which have failed in skyrocketing oil prices.

Mike Pompeo, Secretary of State of United States was prompt in accusing Iran of the attacks. In the same breath he ruled out Yemeni involvement and denounced Tehran for engaging in false diplomacy. He claimed “Tehran is behind nearly 100 attacks on Saudi Arabia. He accused Iran’s President Hassan Rouhani and Foreign Minister Mohammed Javad Zarif for pretending to engage in diplomacy.”

Apparently the Zionists were happy when US President Donald Trump withdrew his country from a 2015 pact and imposed a series of sanctions that could cripple Iran’s economy. But in recent weeks they were annoyed when Trump said he would be open to meeting with Rouhani on the sidelines of the United National General Assembly in New York later this month. Pompeo had also said such talks could take place without any preconditions.

Let us review the immediate response of the US which alleges Iran for the attack. The sole purpose is to diminish any and every possibility of reconciliation with Iran and keep it out of oil trade. The ultimate beneficiary of high crude price is United States as 1) its Shale oil producers remain competitive and 2) it keeps on selling arms to Saudi Arabia.

One could also recall that President Trump has often said “Saudis can’t survive without their (US) help.” As the Kingdom was going for IPO of Aramco, its production has to be suspended to make the IPO a big failure. The attack is also aimed at proving that Saudis can’t protect their assets and must ask the US to provide security. Interestingly, it is beyond comprehension how a Houthi drone attack could curtail Saudi crude production to half?

The sole purpose of spreading disinformation is to jack up crude price. Certainly, if output is curtailed by 5.7 million barrels per day the price could raise up to US$10/ barrel on Monday. Since the US has the largest surplus production capacity, it will be the only beneficiary. The attack is also aimed at reducing the importance of newly appointed Saudi Oil Minister.

To create uncertainty and make crude price volatile, the news have started pouring in. “Abqaiq is the nerve center of the Saudi energy system. Even if exports resume in the next 24-48 hours, the image of invulnerability has been altered,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told Reuters.

A Saudi-led coalition battling Yemen’s Houthi group said it was investigating drone attacks against Saudi oil installations and would confront terrorist threats to global energy security. “Investigations are ongoing to determine the parties responsible for planning and executing these terrorist attacks,” said coalition spokesman Colonel Turki al-Malki. Analysts can’t rule out putting the entire blame on Iran.

Iranian foreign ministry spokesman Abbas Mousavi dismissed the US allegation as pointless. A senior Revolutionary Guards commander warned that the Islamic Republic was ready for full-fledged war. He went to the extent of saying, “All the US bases and its aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles.”

While the probability of any attack on Iran remains low, the US will be able to achieve its prime objective, jacking up crude oil prices. Western media has already started saying, “Aramco has given no timeline for output resumption, but return to full oil capacity could take weeks, not days.” Traders and analysts say crude price may spike to as high as US$100/barrel if Riyadh fails to quickly bring back supply.

Stimulus Package of European Central Bank

The European Central Bank (ECB) rolled out a massive stimulus package on Thursday. The actions not only reflect the desperation but also the resolve to boost the Eurozone economy and mitigate the risk of recession.

The announcement could be summed up in five steps and the combination drove EUR/USD to a low of 1.0927. The ECB also lowered its inflation and GDP forecasts for 2019 and 2020.

According to ECB President Draghi, these actions were prompted by 3 elements - a more marked slowdown in the Eurozone economy, the persistence of downside risks and their baseline scenarios that included downward revisions to all of their inflation projections. However, instead of extending its losses below 1.09, EUR/USD reversed sharply after Draghi's press conference and traded well above 1.10.

ECB Stimulus Package

1. Interest rates cut by 10bp to -0.5%
2. ECB dropped their calendar guidance
3. Restarted bond purchases
4. Changed their TLTRO rate to eliminate 10bp spread and provide more favorable bank lending conditions
5. Introduced a 2 tier reserve system that would exempt part of bank holdings from negative rates

One can find at least three reasons for the turnaround in the EUR. First and foremost, ECB President Draghi called on governments to go big with fiscal stimulus. He said "reform implementation must be stepped but substantially" to raise long term growth potential. The central bank has long felt that monetary stimulus alone won't be enough and by doubling down on a massive stimulus package, he's put the ball in their court. With his bold curtain call, Draghi took the problem of low growth seriously and said the governments would have to act.

Euro also u-turned on the hope that the stimulus will work as the promise of unending QE should go a long way in boosting the economy. The market believes that all of this guarantees a rate cut from the Federal Reserve next week and the prospect of Fed easing is bullish for EUR/USD.

EUR Recovery

1. ECB lays on fiscal stimulus pressure
2. Unending QE will have positive impact on the economy
3. ECB actions guarantee Fed cut next week

Looking ahead, analysts believe that the actions could mark a bottom for EUR/USD. One of the biggest near term risks for the EUR was looming. Christine Lagarde takes over as head of the ECB in November and like Draghi, she's a big supporter of fiscal stimulus. The difference between Draghi and Lagarde is that she's more politically rooted and could have a greater influence on Germany.

If the Eurozone existed in a silo, analysts would declare ECB move a sustainable bottom for euro. However, US President Trump made it very clear that he's not happy the ECB is "weakening the euro," so we need to be mindful of the risks including retaliatory actions from the US (including tariffs) and Brexit.

Likely rate cut by European Central Bank

European Central Bank monetary policy announcement scheduled today is one the most important event risks of the week. Analysts should not be surprised if EUR/USD pair broke below 1.10 ahead of this rate decision.

Investors have big expectations for this meeting because of widespread deterioration in the Eurozone economy and talk of recession in Germany. EUR hit a 2-year low last week against the USD as German bund yields tumbled deeper into negative territory.

Back in July, Mario Draghi, Chief of European Central Bank brought up the benefits of a combination of measures and since then the need for stimulus intensified. While investors are preparing for a massive dose of stimulus, there's also a reasonable chance the ECB may under deliver.

The Eurozone economy needs help. Retail sales, inflation, employment and manufacturing activity slowed across the region and in Germany, growth contracted in the second quarter. The region's largest economy is crippled by weak global growth and a collapse in manufacturing. Not only did the PMI manufacturing index fall for the eighth month in a row but it reached to its weakest level in 7 years.

The Bundesbank said there's a very good chance that Germany will fall into a technical recession in the third quarter. With a tense trade war and weakening US and global growth, the grim outlook for the region is why the ECB needs to find ways to stimulate the economy.

The European Central Bank has many options including a rate cut, stronger forward guidance, a new program of asset purchases and compensation for banks to relieve the negative effects of negative interest rates. They prefer a combination of measures because they feel that a package is "more effective than a sequence of selective actions."

The market expects a minimum of a 10bp rate cut. If the central bank combines this with rate tiering or a new Quantitative Easing program, EUR/USD will sell off aggressively but if all they do is cut rates and strengthen their low rate pledge, euro will soar in disappointment.

With EUR so weak, less aggressive measures could trigger a sharp short squeeze in the currency. Unfortunately, there's resistance to a package that includes QE - one of the strongest forms of easing.

Bank of France Governor Villeroy is skeptical of the immediate need for QE while German and Dutch policy makers also believe its too early for the move.

Given the market's lofty expectations, EUR/USD traders could be setting themselves up for disappointment. Draghi could also opt for a stimulus package that does not include the most aggressive measures to leave his successor Christine Lagarde with ammo to fight a deeper slowdown.