The End of Neoliberalism and the House of Saud? Some Hopeful Signs

"If It Owns a Well or a Mine, It’s Probably in Trouble," by Clifford Krauss and Ian Austen is worth reading:

“The world of commodities has been turned upside down,” said Daniel Yergin, the energy historian and vice chairman of IHS, a consultant firm. “Instead of tight supply and strong demand, we have tepid demand and oversupply and overcapacity for commodity production. It’s the end of an era that is not going to come back soon.” 

The pressure on prices has been significant.

Prices for iron ore, the crucial steelmaking ingredient, have fallen by about 40 percent this year. The Brent crude oil benchmark is now hovering around $40 a barrel, down from more than a $110 since the summer of 2014.

What caught my eye was the tail end of the quote from Establishment analyst Yergin, "It's the end of an era that is not going to come back soon." And what era would that be? Depending on how one looks at it, Yergin could be talking about neoliberalism. Having recently read Varoufakis' The Global Minotaur, I am inclined to agree with the Greek economist that the era of neoliberalism, what Varoufakis names the "Global Minotaur," began when the Nixon administration removed the dollar from its gold peg and let it float freely against other currencies. The result was a sharp increase in commodity prices.

Later on in the Krauss/Austen piece there is this gem:

Others are facing a period of prolonged problems. 

Some energy experts are even beginning to express concerns that sovereign wealth funds of Saudi Arabia and other wealthy Persian Gulf and oil-producing countries will redeem their money from investment firms in the coming year to shore up their balance sheets. If they do, the moves could initiate more instability in global equity and debt markets.

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Some good news to report locally. In November I mentioned in "Election Day: Emerging Class Consciousness in West Coast Tech Cities":

Locally the race to watch is in District 1. If Lisa Herbold can defeat Shannon Braddock, surmounting the largest independent expenditure campaign in the history of Seattle, we can pronounce with some certainty that there is blossoming old-school "Which Side Are You On?" class consciousness in one the West Coast tech hubs.

After a recount was completed this week, Herbold was officially declared the winner, overcoming a six-point election-night deficit. As she said in an email to her supporters yesterday,

Of course early in the campaign these values became an even bigger focus because an Independent Expenditure (IE) campaign made a record-busting investment against me. Their donations were not subject to financial limits like our donations are. This District 1 $230,000 IE was more than all IEs combined in citywide Council races in the last 3 election cycles combined. 

But maybe now we can ensure that the influence of IEs will not become the new "politics as usual. It's not everyday that a candidate outspent 3-1 wins her election. Hasn't this election proven to us that if we continue to work together like we have over the last 10 months we can make sure that all voices are represented and that we can challenge those who would maintain the status quo?

Developers tried to take out Herbold because they fear she will work to enact rent control citywide. "Change we can believe in" seems to be coming our way.

European Fracture

This year promises to be even more jarring than the last. The pace of change and the spread of unrest will accelerate. Hopefully, this will translate into a toppling of the neoliberal consensus that has ruinously governed the globe for the last thirty years.

Europe is in trouble. Birthplace of the West, it is fitting that change will start there. The Charlie Hebdo massacre will certainly benefit Marie Le Pen's National Front, already polling ahead in France.

"‘Dangerous Moment’ for Europe, as Fear and Resentment Grow," by Steven Erlanger and Katrin Bennhold, provides a useful snapshot of the spread of nativism in Europe. From Britain to Germany, mainstream political formations are unwilling to accommodate anti-immigrant demands, and this has led to the rise of far-right parties.

Couple this with the rise of the radical left -- hopefully Syriza will triumph in Greek parliamentary elections at the end of the month -- and Europe will shortly have to perform an ideological about-face or risk the disintegration of the eurozone.

All of this is taking place against a backdrop of deflation. Brent crude dropped below $50 a barrel yesterday (before closing at $51) and American producers are beginning to cancel orders for oil rigs. (See Clifford Krauss' excellent "U.S. Oil Producers Cut Rigs as Price Declines.")

Mike Whitney has consistently argued from the outset of the current oil-price drop that $50-a-barrel oil will rip through the U.S. economy, increasing unemployment and undermining banks loaded with energy-sector derivatives. He revisited this topic yesterday in "Oil Price Blowback: Is Putin Creating a New World Order?"

Whitney frames plummeting oil prices in terms of the New Cold War. Shortly after the Minsk ceasefire agreement was signed at the beginning of September, U.S. Secretary of State John Kerry visited Saudi King Abdullah in Jeddah. An agreement was struck to increase Saudi production and cut the price of its crude. The targets were U.S.-Saudi enemies Russia and Iran. On Tuesday, Whitney notes, the U.S. Department of Commerce announced that it was fast-tracking the sale abroad of lightly processed U.S. crude. Deflation looks to be here to stay for a while.

Deflation is not as catastrophic an issue in the U.S. as it is in Europe. The Federal Reserve can maintain its policy of quantitative easing. The European Central Bank is not in the same position since Germany is opposed.

The U.S. is able to do what it does because it carries European elites in its hip pocket. Just look at what happened in Ukraine last year. The U.S.-EU relationship is about to be roiled because Europe is going to fracture. Putin invested wisely in loaning money to the National Front.

The Future State of Kurdistan + Navi Pillay Steps Out on al-Assad

This blog has been committed to following the war in Syria. Originally part of the wave of protests that made up the Arab Spring, the popular uprising in Syria has morphed into a military conflict that pits salafi jihadists, many of whom are foreigners supported by wealthy Gulf sheikhdoms, against the Baathist Syrian government and its allies, Hezbollah, Iran and the Shia of Iraq.

Syria, like Iraq, is a former League of Nations mandate country that originated in the secret 1916 Sykes-Picot Agreement by France and Britain divvying up the Ottoman Empire. The century-old boundaries that constitute the Middle East are fraying.

This morning there is an informative piece by Tim Arango and Clifford Krause, "Kurds’ Oil Deals With Turkey Raise Fears of Fissures in Iraq." Iraqi Kurds are cutting their own oils deals absent approval from Baghdad. A second pipeline to Turkey is in the works:

Even as sectarian killing is again spiking across Iraq, and the Syrian civil war destabilizes the region, American officials in Baghdad say the flow of oil to Turkey may be the greatest potential risk to Iraq’s cohesion. 

But a year-and-a-half-long diplomatic drive by the United States to stop the flow has so far failed, reflecting Washington’s diminished influence in the region, even with its two longtime allies. Not only will trucks continue to travel daily from the Kurdish region to two Turkish cities on the Mediterranean coast, and not only will the Kurds continue to deliver oil via a pipeline to Turkey, but the parties plan to build a second pipeline, whose details have been kept secret. 

“The Kurdistan deal with Turkey is a huge violation against the Iraqi Constitution because they didn’t make the deal with the coordination of the central government,” said Ali Dhari, the deputy chairman of the Iraqi Parliament’s oil and gas committee. “This means the stealing of the Iraqi wealth, and we will not allow it.” 

The oil accords with Turkey, potentially worth billions of dollars, are part of a broader effort by Iraqi Kurds in recent years to cut their own energy deals — including exploration agreements with foreign companies like Exxon Mobil, Chevron and Gazprom — that sidelined the central government. The Kurds, and the Turks, say they will pay Baghdad its fair share. But officials in the capital have long claimed such arrangements are illegal. 

The controversy is in part the unfinished business of the American occupation of Iraq. The failure of the Iraqi government to pass a national oil law, one of the benchmarks set by President George W. Bush when he announced the United States troop “surge” in 2007, has left Baghdad and Erbil, the Kurdish capital, in a perpetual feud over how to divide profits and who has the authority to make agreements with international oil companies.

Commentators on the Left warned that the U.S. invasion and occupation of Iraq would fracture the country, but no one in power ever listens to commentators on the Left. The fact that their insights more often than not prove to be correct does not earn them any respect from state officials.

Kurds are battling and defeating Al Qaeda in northeast Syria where an autonomous Kurdish administrative territory has been declared. With an understanding now in place with archfoe Turkey, the possibility of a future state of Kurdistan seems like a good bet. The Kurds have been shrewd; they're taking small bites and doing their best to stay under the radar; they're taking the long view. They are impressive.

What UN high commissioner for human rights Navi Pillay's statement the other day -- that there is massive evidence of war crimes and crimes against humanity by Bashar al-Assad and his government -- portends is hard to suss out. Pillay says that al-Assad should be referred to the International Criminal Court. Nick Cumming-Bruce has the story, "Top U.N. Rights Official Links Assad to Crimes in Syria":

Ms. Pillay said the panel had handed her lists of names to be held securely at the human rights office in Geneva. Ms. Pillay also repeated demands that she and the panel have made that the situation in Syria should be referred to the International Criminal Court in The Hague. 

“Accountability should be key priority of international community, and I want to make this point again and again as the Geneva 2 talks begin,” she said, alluding to the second international conference on Syria scheduled to start in Geneva on Jan. 22.

At the very least Pillay's broadside makes it more difficult for Western leaders to cozy up to the Baathists in Syria, something that has been underway since the September chemical weapons deal was signed; since then there has been a polar shift in the United States away from vilifying al-Assad and praising the opposition. It's hard to imagine a situation where Pillay stepped out on her own. It must be an attempt by the West to shape the outcome of Geneva II. Al-Assad can enter negotiations but any deal the West agrees to will not include al-Assad remaining the head of government. If he agrees to step down, the West can offer him freedom from prosecution in The Hague.