End Times Approaching for the Kingdom of Saudi Arabia

There were two interesting stories -- Ben Hubbard's "ISIS Turns Saudis Against the Kingdom, and Families Against Their Own" and "Saudis Moving to Reduce Dependence on Oil Money" by Hubbard and Stanley Reed -- at the end of last week that read as salvos in an information war that the Kingdom of Saudi Arabia is losing.

With 2015 on record as the hottest year by far, and a bombshell prediction appearing last week that West Antarctic ice sheet melt will lead to a six-foot sea level rise by the end of the century, a politics of finding ways to keep vast carbon reserves in the ground is gradually emerging.

The undeniable reality of catastrophic climate change, Brent crude trading below $40 barrel, and Wahhabism and neoliberalism at full stop add up to a paradigm shift.

The two Hubbard stories are meant to convince readers that the the bloodthirsty kleptomaniacs who rule al-Saud are paying attention to the shift underway and making the necessary changes to transition their atavistic society to a new, less profligate dispensation.

Hubbard's Friday story, the one about Islamic State's terror attacks inside the Kingdom, is meant to create the false impression that the Saudi royal family is a victim of ISIS aggression like the Yazidis who were forced into sexual slavery or the Syrian state that has been cracked apart. What the reader ends up getting is a description of a sloppy murder or two perpetrated by ne'er-do-wells glued to their laptops, not the well-funded and organized blitzkrieg that captured big cities like Mosul and Raqqa.

Hubbard's reporting is not completely Orwellian though. He does -- much like Beirut bureau chief Anne Barnard does when she toes the administration lie in Syria -- find the time to shine a light; in this case, the undeniable reality that the export of Sunni jihad is a Saudi product:

Saudi Arabia has a tangled history with Islamic militant groups. For a long time, it backed them as proxy forces to push its agenda in places like Bosnia, Chechnya and Afghanistan (where it worked with the United States). But that largely ended in 2003, when Al Qaeda turned its focus on the kingdom and staged a series of deadly attacks.

Now the Islamic State poses a new challenge, by turning aspects of Saudi Arabia’s conservative creed against it. Wahhabism has been molded over the years to serve the interests of the monarchy, emphasizing obedience to the rulers and condemning terrorist attacks, even against those seen as apostates. 

Still, among the Islamic State’s many enemies, Saudi Arabia is the only one that considers the Quran and other religious texts its constitution, criminalizes apostasy and bans all forms of unsanctioned public religion. 

The country was founded on an alliance between the Saud family, whose members became the monarchs, and a cleric named Sheikh Muhammad ibn Abdul-Wahhab, whose teachings were used to justify military conquest by labeling it jihad against those deemed to be infidels, most of whom were other Muslims.

Sheikh Abdul-Wahhab’s descendants still dominate the religious institutions of the Saudi state, which now play down the violence in the country’s history and emphasize aspects convenient to an all-powerful royal family, like the importance of obeying the leadership.

Saudi officials reject comparisons between their ideology and that of the Islamic State, noting that millions of non-Muslims live in the kingdom and that the government is closely allied with the United States and participates in the American campaign against the militant group.

They also say that Saudi Islam does not promote the caliphate, as does the Islamic State, and that senior clerics condemn the terrorist attacks and have branded the group “deviant.”

But critics argue that many Saudi clerics have never renounced the aspects of the Wahhabi tradition that the Islamic State has adopted, especially with regard to Shiites, who make up an estimated 10 percent of the kingdom’s 20 million citizens. Many Saudi clerics consider Shiites heretics and accuse them of loyalty to Saudi Arabia’s regional rival, Iran.

The jihadists have exploited this by repeatedly launching suicide attacks on Shiite mosques and then accusing Saudi clerics of hypocrisy for condemning the violence.

“It is clearly hard for Saudi clerics to condemn outright attacks on Shiites,” said Mr. Bunzel, the Princeton scholar. “And you get the feeling that they don’t care as much if the Shiites get attacked, since they’re not really Muslims in their view.”

But the more interesting story of the two is Saturday's. Hubbard and Reed recapitulate an interview with Deputy Crown Prince Mohammed bin Salman that Bloomberg published on Friday announcing the creation of a Saudi sovereign wealth fund that will be bankrolled by selling shares in Saudi Aramco to the public:

RIYADH, Saudi Arabia — A top Saudi prince has announced new elements of a plan to reduce the kingdom’s heavy dependence on oil, amid a drop in world prices that has sent shock waves through the Saudi economy. 

The plans include publicly selling shares of the state oil giant, Saudi Aramco, and routing much of its worth into a public investment fund, said the prince, Mohammed bin Salman, in an interview with Bloomberg published Friday.

The fund could become the world’s largest, he said, with more than $2 trillion in assets. 

“Undoubtedly, it will be the largest fund on earth,” said Prince Mohammed, who is second in line to the Saudi throne and has emerged as the country’s most powerful and dynamic official. “This will happen as soon as Aramco goes public.” 

Although less than 5 percent of Saudi Aramco would be sold, the prince said the national oil company would be transferred to a government fund, now relatively small, called the Public Investment Fund, giving it instant heft and potential financial firepower.

Saudi Aramco is the world’s leading oil producing company. It has about 10 million barrels per day of output, or about 10 percent of global production, and reserves of about 160 billion barrels. The company also has large refining and petrochemical interests inside Saudi Arabia and internationally, including in the United States.

At present, Norway’s fund, called the Government Pension Fund Global, is believed to be the world’s largest so-called sovereign wealth fund. It has about $850 billion in investments.

The announcements came as Saudi Arabia, the world’s largest oil exporter, struggles to reformat its economy.

A decade-long boom left the kingdom’s economy heavily dependent on oil, which provides most of the government’s income, and made the state far and away the country’s biggest employer. The drop in oil prices — to about $39 a barrel from more than $100 a barrel in June 2014 — undermined that model, leading to huge budget deficits and vast cuts in public spending.

Prince Mohammed, the apple of King Salman's eye, is the young man who is the architect of the failed, criminal war on Yemen.

The really shocking quote of the story appears in the next paragraph:

Rachel Ziemba, an analyst at Roubini Global Economics in New York, estimates that Saudi Arabia is burning up its financial reserves at the rate of $10 billion to $15 billion per month. She estimates that the kingdom has about $600 billion left. 

There are longer-term worries as well. A recent study by the consultants McKinsey warned that with more than half of Saudi Arabia’s population under 25, a surge of young people was likely to enter the work force in the coming years. This will require the creation of almost three times as many jobs for Saudis as the kingdom created during the 2003-13 oil boom.

Clearly this is a society headed fast for fracture. There have been thinkers like Christopher Davidson who have been sounding this alarm for years. But now with the Kingdom set to run out of cash in four to five years, the caliphate shrinking in Iraq and Syria, Iran gradually integrating into the global economy, and the supplicant Western neoliberal political parties completely discredited it seems a certainty.

Prince Mohammed's announcement smacks of a public relations ploy similar to a 60 Minutes report I saw years ago trumpeting the technological wizardry of Saudi Aramco, its engineering expertise and visionary investment in solar for a post-carbon world. All hokum as far as I can tell.

Why if Norway used its far-smaller oil reserves to build an $845 billion fund is the House of Saud's only worth $5 billion today?

The Kingdom is a kleptocracy. A big pile of money in a sovereign wealth fund will just be siphoned off by the royal family. Hubbard and Reed back this up in their story:

Western diplomats and analysts say it is hard to gauge the Saudi plans because much about the kingdom’s economy remains opaque and the deadlines for implementation remain unclear.

“The strategy makes sense,” Ms. Ziemba said, “but it is not a silver bullet.”

She said it would have been easier to try such reforms when oil prices were higher and Saudi Arabia’s assets were worth far more than they are now.

Some have questioned how many private investors will want to put their money in a company like Saudi Aramco that releases very little financial information and is seen by many as the piggy bank of the Saudi royal family.

Jean-Francois Seznec, a senior fellow in the Global Energy Institute at the Atlantic Council, said an initial public offering of less than 5 percent made sense because the amount of cash involved in a larger offering could flood the market.

The bigger challenge, he said, will be bringing transparency to a company that has long avoided it. “All of a sudden, everyone could see how much money is being taken off the top by the royal family, and everyone wants to avoid that,” he said.

When push comes to shove and the war really comes home to Riyadh, the royals will simply jet off to their European estates. Now at least such a moment appears to be visible on the horizon.

Paradigm Shift in 2016

Something is happening that points emphatically in the direction of paradigm shift.

Oil prices are the lowest they have been in ten years; lower than they were during the period of the Lehman Brothers meltdown. Chinese stocks dropped today, forcing a halt in trading. China is the engine of global economic growth. Saudi Arabia is in the midst of forcefully breaking free of the Pax Americana in the Middle East, meaning there is an even larger war to come. This does not bode well for the future of the European Union, which is already reeling from a refugee crisis. The spate of groping assaults in Cologne on New Year's Eve is certain to translate into a nativist upswing at the German polls.

In the United States, with Obama weeping in the White House over gun violence, a right-wing militia continues its armed rebellion at the Malheur Federal Wildlife Refuge in Oregon, and a reality TV star continues to dominate the presidential race (even if he isn't currently polling ahead in Iowa).

Two-thousand-sixteen promises to be the year that the dominant neoliberal paradigm of the last 40 years cracks irreparably. That's my prediction.

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.

****

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.

The Death of King Abdullah: "Change You Can Believe In"? Let's See What Happens Now in Yemen

The spate of articles in today's paper announcing the death of Saudi King Abdullah at the age of 90 might lead a reader to believe that the monarch of the United States has just passed. And this belief would not be that wide of the mark.

What makes the plethora of stories (I count four) in the Gray Lady incongruous is that for the most part Saudi Arabia receives little attention in the "newspaper of record," particularly compared with "official" adversaries like China or Russia (or Venezuela when Chavez was still alive). The rare large article usually accentuates the positive, such as Dionne Searcey's "A Conundrum for Saudis: Women at Work." The NYT sticks to a respectful tone, the theme being that the Kingdom is a rich, traditional society making gradual changes to incorporate modern values.

And this is pretty much what one gets in the anchor article by Douglas Martin and Ben Hubbard, "King Abdullah, a Shrewd Force Who Reshaped Saudi Arabia, Dies at 90," a reverential appraisal that does not obscure a legacy of mendacity and intolerance:

. . .[Abdullah] was also mindful that his family had, since the 18th century, derived its authority from an alliance with the strict Wahhabi sect of Sunni Islam. He accordingly made only modest changes to the kingdom’s conservative clerical establishment. When Islamic State forces conquered vast stretches of Syria and Iraq, imposing a creed linked to Saudi Arabia’s own, the kingdom was slow to respond.

*** 

Abdullah did make changes that were seen as important in the Saudi context. He allowed women to work as supermarket cashiers and appointed a woman as a deputy minister. At the $12.5 billion research university he built and named for himself, women study beside men.

However, he did not fulfill a promise made to Barbara Walters of ABC News in his first televised interview as king in October 2005: that he would allow women to drive, a hugely contentious issue in Saudi Arabia.

Although he ordered the kingdom’s first elections for municipal councils in 2005, a promised second election, in October 2009, in which women would vote, was postponed until September 2011. Then in March of that year, the Ministry of Municipal and Rural Affairs announced that the question of women voting would be put off indefinitely “because of the kingdom’s social customs.”

***

Perhaps Abdullah’s most daunting challenge arrived in the wake of the Sept. 11, 2001, terrorist attacks, with the revelation that 15 of the 19 hijackers were Saudis. The royal family at first railed at what it called a vicious smear campaign against the kingdom, then ruthlessly suppressed known militants — not least because the monarchy itself was a main target of Al Qaeda.

Striking a balance was almost always Abdullah’s preference. He strove to keep oil prices high, but not so high that they prompted consumers to abandon petroleum, then hedged his bets by investing billions in solar energy research. In 2008, he convened a meeting of world religious leaders to promote tolerance, but held it in Madrid rather than Saudi Arabia, where the public practice of religions other than Islam is outlawed.

Yet Abdullah could, and did, take strong positions. He denounced the American-led invasion of Iraq as “an illegal occupation”; proposed a comprehensive peace plan for the Middle East that included recognition of Israel by Arab nations; and urged in a secret cable that the United States attack Iran, Saudi Arabia’s great rival. “Cut off the head off the snake,” he said. 

The three other stories have to do with the Kingdom's role as a regional hegemon paranoid about Iran (Anne Barnard and Alan Cowell, "New Saudi Ruler Pledges Continuity After Death of King Abdullah"); the impact of Abdullah's death on the Saudi-engineered oil-price drop (Stanley Reed, "King Abdullah’s Death Unlikely to Upset Saudi Oil Goals, Analysts Say") and an opaque assessment of Abdullah's successor Salman bin Abdul-Aziz Al Saud (Ben Hubbard, "Salman Ascends Throne to Become Saudi King").

Long story short, nothing is going to change as far as the Kingdom of Saudi Arabia goes. Salman has been ruling as Crown Prince for some time due to Abdullah's poor health, The problem for the Saudis is next door in Yemen. The resignation of President Abdu Rabbu Mansour Hadi and his cabinet is a move that could not have happened without the approval of the United States and the Saudis. Hadi's government is a fiction, window dressing for Saudi and U.S. wirepullers, but one that cannot project power even in its own capital city; the Houthis, the Hezbollah-like Shiite movement, can and have. The resignation of Hadi is a bluff by the U.S./KSA to bring the Houthis to heel. The Houthis as a Shiite sect, the thinking goes, don't have the wherewithal to keep the Sunni-majority nation of Yemen intact, and the Houthis want to keep Yemen whole. So concessions will be made to Hadi or another Hadi-like figurehead in order to maintain Yemen in its present boundaries.

If this gambit fails then the country splits, with the south already showing signs of breaking away. That the Kingdom would reprise its Bahrain performance is unlikely. The Saudis aren't dealing with young urban protesters here. The Houthis can fight. The Kingdom would just as soon ramp up its support for Al Qaeda in the Arabian Peninsula. Meaning down the road more Charlie Hebdo massacres.

I think "Change You Can Believe In" is indeed coming our way, and not just in the form of an election campaign slogan. The Arab Spring was rolled back but at huge ongoing yet-to-be-tallied cost. Things are about to shift.

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.

Grexit Sturm und Drang

Europe has problems. A barrel of Brent crude fell below $52, causing the euro to drop to a nine-year low, $1.19, against the dollar. A contentious meeting of the European Central Bank will be held on January 22, a few days prior to the election in Greece, to consider some form of quantitative easing in order to stave off deflation. As Jack Ewing explains in "Falling Euro Fans Fears of a Regional Slowdown":

The further declines in the euro and in oil did not change expectations that when the European Central Bank meets on Jan. 22 that it would unveil further stimulus, broad-based purchases of government bonds, so-called quantitative easing. 

When deciding policy, E.C.B. officials are probably focused on the inflation rate more than the value of the euro or the price of oil, and the German data indicated that inflation continues to fall to levels considered dangerously close to deflation — a downward price spiral that is poisonous for corporate profits. 

German inflation was just 0.1 percent in December, according to an estimate by the government statistics office. 

An official estimate of inflation in the eurozone as a whole is to be released on Wednesday. Analysts expect the rate to fall to close to zero or even below it, putting further pressure on the European Central Bank to act.

Germany, which is dealing with a burgeoning nativist movement that is eroding the base of support for mainstream conservative parties (Alison Smale, "Anti-Immigration Rallies in Germany Defy Calls to Desist"), will argue against quantitative easing. The Germans will reason that the oil-price drop will act as a form of stimulus:

There are still many economists and public officials, though, who maintain that in fact cheap oil and a cheap currency are overwhelmingly good for Europe. One of them is Jens Weidmann, president of the Bundesbank and an influential member of the Governing Council of the European Central Bank. 

“The cheaper oil price works like a stimulus program,” he said in an interview published Sunday by the Frankfurter Allgemeine newspaper. “Consumers and companies have to spend less and can consume and invest more.” 

The statement was a signal by Mr. Weidmann that he remains skeptical about whether more E.C.B. stimulus was needed. 

While a majority of the E.C.B. Governing Council appears to support embarking on a quantitative easing program, members may be reluctant to risk alienating Mr. Weidmann and the larger German public whose views he represents. Germany worries that it might get stuck paying a big part of the bill if the European Central Bank loses money on any eurozone government bonds it might buy as part of quantitative easing.

These German worries of being left holding a huge bag of worthless bond paper are compounded by Syriza's lead in the Greek polls. Alexis Tsipras, the leader of Syriza, has promised if elected to renegotiate and possibly repudiate loans with the troika (European Commission, European Central Bank, IMF). For the last week German government officials have been lecturing Greeks to stay in line and not monkey with austerity. Liz Alderman has a helpful summary today ("Euro Countries Take Tough Line Toward Greece") of this hectoring:

On Monday, Germany’s economics minister, Sigmar Gabriel, said Europe would not accept undermining the stability that has returned to the eurozone in the last couple of years.

“We aren’t vulnerable to blackmail,” he said in an interview with the German newspaper Hannoversche Allgemeine. “We expect from the Greek government — regardless of who will form it — that the agreements made with the E.U. will be respected.”

Last week, Wolfgang Schäuble, the German finance minister, cautioned Greece against moving away from its current economic reforms, saying: “If Greece takes another path, it will be difficult. Any new government will have to stick to the agreements made by its predecessor.”

In an acknowledgment of the delicacy of the situation, German officials on Monday quickly backed away from a weekend report by the magazine Der Spiegel that suggested that Chancellor Angela Merkel and Mr. Schäuble believed that the eurozone could cope if Greece quit the euro and returned to the drachma.

A government spokesman denied that contingency plans had been made for such a possibility, and insisted that Germany wanted Greece to remain in the eurozone.

Officials in Brussels, too, emphasized Monday that membership in the euro bloc was “irrevocable,” although they left open to what extent Greece could renegotiate the terms of its bailout after the election.

“The euro is here to stay,” said a European Commission spokeswoman, Annika Breidthardt.

Guy Verhofstadt, a former Belgian prime minister who leads the Liberal group in the European Parliament, called the idea of a Greek exit, or “Grexit,” from the eurozone “nonsense,” not only because most Greeks do not want to leave the euro, but also because European taxpayers would wind up losing billions of euros that Greece owes them.

If Greeks can hold on and weather the threats and fear mongering (incumbent prime minister Antonis Samaras is campaigning on a purely fear-based appeal asserting that a havoc-plagued Grexit will result if Syriza triumphs) and Syriza can form a government, Tsipras will have a solid bargaining position. Europe is engaged in a pestilential fiction that an austerity-ravaged Greece can actually pay back the loans she has been awarded.

Alderman concludes her story by quoting two Commerzbank economists, Jörg Krämer and Christoph Weil, who say that renegotiation is the most politically expedient option Germany has, despite all the threatening noises from Schäuble et al.:

Still, most observers expect a Greece run by Mr. Tsipras would stay within the eurozone, and that a new Greek government would reach an agreement with its European creditors following a period of turmoil. After all, if Greece were to return to the drachma, the country would likely face new economic upheaval that it could ill afford. 

Preventing a Greek exit is also still desirable for Germany and other countries, since billions of euros in European taxpayer money could be wiped out if Greece were to leave the euro, raising the risk of a political backlash against leaders in those countries, said Jörg Krämer and Christoph Weil, the Commerzbank economists. 

“It would be much easier politically to renegotiate a compromise with Greece, albeit a lame one, and thus maintain the fiction that Greece will pay back its loans at some point in time,” they said.

The fear mongering has just begun. Greeks will pummeled with every type of propaganda and every form of thought control over the next three weeks. Dire warnings of anarchy will be broadcast. The proud Scots were made to buckle recently. Can we expect the Greeks to act rationally and vote to reject the pestilential fiction of austerity?

Last week I was sanguine. Years of brutal benefit cuts and high unemployment would inure the Greek voter to fear mongering at the polls. Now I am not so sure. Deflation on the European continent is going to up the ante and turn the January 25 poll into total war. No effort will be spared to maintain the neoliberal credo of austerity. Alderman reports that Tsipras has only a three-point lead with 20 percent undecided. Not terrific numbers.

Ferguson Protests + Afghan Government in Trouble + Oil Price War

Obama holds a PR event today (Julie Hirschfeld Davis, "Obama Plans Meetings on Ferguson Unrest at the White House") the goal of which is to put a lid on the public outrage over the police killing last August of unarmed black teenager Michael Brown in the St. Louis suburb of Ferguson.

[Obama] will gather his cabinet on Monday to discuss the results of a review of federal programs that provide military-style equipment to state and local law enforcement agencies. The initiatives were called into question in August, after the Ferguson police responded with riot gear and assault-style weapons to protests in the aftermath of the shooting of Michael Brown, the teenager, by Officer Darren Wilson.

“As the country has witnessed, disintegration of trust between law enforcement agencies and the people they protect and serve can destabilize communities, undermine the legitimacy of the criminal justice system, undermine public safety, create resentment in local communities, and make the job of delivering police services less safe and more difficult,” a White House official said Sunday night, speaking on condition of anonymity to describe the meetings.

Don't count on any significant changes in the federal policy of offloading surplus military hardware to local constabularies.

The faux-macho, Fortune 500 thinking prevalent in our "Land of the Free/Home of the Brave" encapsulated in spouted lines like "Money talks; bullshit walks" is actually a helpful guide here. As long as the protesters stay mobilized in significant numbers the state will have to take special measures to fund the deployment of the highway patrol and national guard. According to Jack Healy and Monica Davey, "Darren Wilson, Officer in Ferguson Shooting, Resigns From Police Dept.":

The peaceful daytime demonstrations came as Gov. Jay Nixon of Missouri sent state lawmakers a letter outlining what he called an urgent need to cover the ballooning costs of maintaining hundreds of National Guard troops and state police officers who are deployed here on the streets, day and night. The governor has called a special legislative session.

One Ferguson resident interviewed last month prior to the grand jury decision thought some sort of indictment had to be forthcoming because a spike in protests that would follow an acquittal would bankrupt the community. Unfortunately, St. Louis County prosecuting attorney Robert McCulloch was not so prescient.

At this point I think the protests have legs. There was encouraging evidence of crossover between anti-racist and economic justice activists in the form of coordinated Black Friday protests.

Many significant shifts are currently underway. In Afghanistan the unconstitutional power-sharing agreement between Ashraf Ghani and Abdullah Abdullah is near collapse. A helpful summary of recent events is found in this morning's Foreign Policy Situation Report by David Francis and Sabine Muscat:

Kabul is the focus of Taliban insurgents seeking to undermine the fledgling government of new Afghan President Ashraf Ghani. The Afghan capital has been under siege in recent days with a dozen attacks in the last two weeks. Taliban spokesman Zabiullah Mujahid claimed the attacks were intended to scare foreigners out of the capital as well as to undermine Ghani. They follow the ratification of a bilateral security agreement between Kabul and Washington that will allow for 10,000 American troops to stay in the country in 2015. 

The Wall Street Journal's Nathan Hodge and Habib Khan Totakhil: "The past two weeks have seen a string of attacks on diplomatic and international targets in Kabul, including a deadly assault Saturday on a guest house belonging to a nongovernmental organization, Partnership in Academics and Development. This past Thursday a suicide attack hit Wazir Akbar Khan, the heart of the diplomatic quarter, and a car bombing struck a British diplomatic convoy." More here. 

The attacks, which targeted both Afghan officials and foreigners, have already forced the resignation of Kabul's Chief of Police Gen. Zahir Zahir. Ghani is scheduled to travel to London and Brussels this week to rally global support for his country. But political fallout in Kabul has already begun. 

Ghani has been unable to form a new government amid escalating violence and has dismissed most of the existing ministers in Afghanistan's government. The New York Times' Joseph Goldstein: "The underlying problem, which various factions in the government point to, is the power-sharing agreement that followed this year's disputed presidential election. It makes Mr. Ghani president and his election rival, Abdullah Abdullah, the chief executive. Since the deal was struck in September, Mr. Ghani and Mr. Abdullah have been unable to agree on a new cabinet, leaving the government in the lurch and raising questions about the long-term chances of the power-sharing deal." More here. 

Optimism had grown in recent weeks that Ghani and Abdullah would be able to find a way to work together. Their original agreement allowed the United States to finalize the bilateral security pact. Now, with the fate of Ghani's government uncertain, there are sure to be questions from Washington about whether the pact will hold.

My only quibble with the way Francis and Muscat frame the upswing in Taliban attacks is that they make it seem as if it directly followed Ghani's signing the bilateral security agreement as soon as he took office in September. I think the recent spate of attacks in Kabul come after reports in November that Ghani had lifted Karzai's ban on U.S.-led nighttime raids and airstrikes.

A developing story that has global ramifications not just for the power elite but for every single one of us who consume is the present oil-price war underway. OPEC met last week and decided against any production limits (Stanley Reed, "OPEC Holds Production Unchanged; Prices Fall"). This dropped the price of barrel of oil down around $70.

There is plenty of speculation as to why the Saudis, whose fiscal breakeven is reported to be around $90 a barrel, are opposed to production quotas and willing to let the price drop to $60 level. Some say it is to kill off the U.S. shale oil boom in Texas and North Dakota; some say it is to punish Iran and Russia. Whatever it is I think it is pretty safe to say the Saudis are practicing some form of predatory pricing; they want to maintain market share above all else because that is where their power comes from.

Naked Capitalism's Yves Smith has a helpful post this morning: "OPEC Fires First Shot In Global Oil Price War."

To get a sense of the type of new energy frontier we are in, check out last week's story by Diane Cardwell, "Solar and Wind Energy Start to Win on Price vs. Conventional Fuels":

According to a study by the investment banking firm Lazard, the cost of utility-scale solar energy is as low as 5.6 cents a kilowatt-hour, and wind is as low as 1.4 cents. In comparison, natural gas comes at 6.1 cents a kilowatt-hour on the low end and coal at 6.6 cents. Without subsidies, the firm’s analysis shows, solar costs about 7.2 cents a kilowatt-hour at the low end, with wind at 3.7 cents. 

“It is really quite notable, when compared to where we were just five years ago, to see the decline in the cost of these technologies,” said Jonathan Mir, a managing director at Lazard, which has been comparing the economics of power generation technologies since 2008. 

Mr. Mir noted there were hidden costs that needed to be taken into account for both renewable energy and fossil fuels. Solar and wind farms, for example, produce power intermittently — when the sun is shining or the wind is blowing — and that requires utilities to have power available on call from other sources that can respond to fluctuations in demand. Alternately, conventional power sources produce pollution, like carbon emissions, which face increasing restrictions and costs. 

But in a straight comparison of the costs of generating power, Mr. Mir said that the amount solar and wind developers needed to earn from each kilowatt-hour they sell from new projects was often “essentially competitive with what would otherwise be had from newly constructed conventional generation.”

The Saudis and the Koch brothers will do everything they can to maintain their fossil-fueled hegemony.And at this point it is becoming apparent that it is going to be a very destructive effort.

House of Saud Oil-Price Drop

Plenty of speculation the last several days as to why the Saudis seem to support the price drop in oil, which has gone from a six-month high of $115 a barrel to $83.

One school of thought is that the Saudis want to make sure that U.S. shale oil production is not expanded. The closer the price-per barrel reaches the $60 mark, the more Texas and North Dakota oil become a money loser.

Another school of thought, one expressed by Thomas Friedman in a column yesterday, "A Pump War?," is that the Saudis are seeking to damage the Russia-Iran-Syria axis:

The price drop is the result of economic slowdowns in Europe and China, combined with the United States becoming one of the world’s biggest oil producers — thanks to new technologies enabling the extraction of large amounts of “tight oil” from shale — combined with America starting to make exceptions and allowing some of its newfound oil products to be exported, combined with Saudi Arabia refusing to cut back its production to keep prices higher, but choosing instead to maintain its market share against other OPEC producers. The net result has been to make life difficult for Russia and Iran, at a time when Saudi Arabia and America are confronting both of them in a proxy war in Syria. This is business, but it also has the feel of war by other means: oil. 

The Russians have noticed. How could they not? They’ve seen this play before. The Russian newspaper Pravda published an article on April 3 with the headline, “Obama Wants Saudi Arabia to Destroy Russian Economy.” It said: “There is a precedent [for] such joint action that caused the collapse of the U.S.S.R. In 1985, the Kingdom dramatically increased oil production from 2 million to 10 million barrels per day, dropping the price from $32 to $10 per barrel. [The] U.S.S.R. began selling some batches at an even lower price, about $6 per barrel. Saudi Arabia [did not lose] anything, because when prices fell by 3.5 times [Saudi] production increased fivefold. The planned economy of the Soviet Union was not able to cope with falling export revenues, and this was one of the reasons for the collapse of the U.S.S.R.” 

Indeed, the late Yegor Gaidar, who between 1991 and 1994 was Russia’s acting prime minister, observed in a Nov. 13, 2006, speech that: “The timeline of the collapse of the Soviet Union can be traced to Sept. 13, 1985. On this date, Sheikh Ahmed Zaki Yamani, the minister of oil of Saudi Arabia, declared that the monarchy had decided to alter its oil policy radically. The Saudis stopped protecting oil prices. ... During the next six months, oil production in Saudi Arabia increased fourfold, while oil prices collapsed. ... The Soviet Union lost approximately $20 billion per year, money without which the country simply could not survive.”

Neither Moscow nor Tehran will collapse tomorrow. And if oil prices fall below $70 you will see a drop in U.S. production, as some exploration won’t be cost effective, and prices could firm up. But have no doubt, this price falloff serves U.S. and Saudi strategic interests and it harms Russia and Iran. Oil export revenues account for about 60 percent of Iran’s government revenues and more than half of Russia’s. 

The price decline is no accident. In an Oct. 3 article in The Times, Stanley Reed noted that the sharp drop in oil prices “was seen as a response to Saudi Arabia’s signaling ... to the markets that it was more interested in maintaining market share than in defending prices. Saudi Aramco, the national oil company, stunned markets by announcing that it was cutting prices by about $1 a barrel to Asia, the crucial growth market for the Persian Gulf producers, as well as by 40 cents a barrel to the United States.” The Times also noted that with America now producing so much more oil and gas, “net oil imports to the United States have fallen since 2007 by 8.7 million barrels a day, ‘roughly equivalent to total Saudi and Nigerian exports,’ according to a recent Citigroup report.”

The last paragraph points to a purely economic rationale for the Saudis keeping oil prices low: they want to maintain their market share. Reduced demand is with us to stay for the foreseeable future. Europe is mired in recession; a stock market panic in the U.S. could halt the anemic Obama recovery; Ebola will have a damaging effect on the global economy; and the Green energy revolution will continue to sap demand for oil in industrialized nations.

The Saudis have read the tea leaves. Decreased demand for petroleum is in the future. They're making their play now to keep their spot as king of the hill.