U.S., Saudis Play Dangerous Game With Oil

By Richard Walker —

The elites in the mainstream media are celebrating reports that President Barack Hussein Obama has been exploiting America’s major role as an oil producer to get into bed with the Saudis and wage economic warfare against Iran and Russia.

The theory advanced by the likes of Tom Friedman of The New York Times is that Obama and the Saudis have been flooding the market with crude oil to drive prices down. This has resulted in a 40% drop in global prices in the past four months. The deflationary effect, said Friedman and others, will wreck the economies of Iran and Russia over time since they depend on oil remaining over $100 a barrel to boost their economies.

The story goes that the Saudis want to attack Iran and Russia in order to weaken their support for Syria—objectives that fit neatly into Obama’s foreign policy aims.

The problem with all of this, of course, is that the oil weapon, which traditionally has not proved particularly effective, could result in long-term damage to the U.S. economy if countries opposed to Washington decide to influence markets as well.

It should not be forgotten that the United States does not even need to play this cynical game. America is floating on oil and natural gas, which is all we need to supply Americans’ energy needs. And that’s what makes what the U.S. government is doing even more dangerous as the price of oil is influenced highly by international markets. This means that whatever the U.S. does internationally will come back to haunt U.S. energy companies and those Americans who drill for oil and natural gas.

But choosing to use oil as a weapon, which is just another form of sanctions, could be compared to the way Obama used cyber-weapons by joining with Israel to unleash the Stuxnet virus against Iran’s nuclear infrastructure. The effect of that was to make cyber-warfare an acceptable foreign policy weapon. Other countries soon followed this example, and cyber-attacks from countries like North Korea have become commonplace.

There are also many imponderables surrounding the Obama-Saudi strategy. In some circles, there is a genuine belief the Saudis have conned Obama into using oil as a weapon because keeping energy prices low means that, long term, shale oil extraction as well as the fracking industry in the U.S., which are major Saudi competitors, will be hurt.

Fracking is expensive as is drilling for shale oil. Only when crude is over $100 a barrel are these highly profitable enterprises. Should the collapse in prices remain, fracking will quickly become unprofitable and many U.S. companies will be forced out of business. They will then have to pay back massive loans they received to run their operations.

So where does all this leave Russia?

In the short term, cheap oil hurts Russia. There is, however, a belief in Russian intelligence circles that Obama is using oil prices as yet another sanction because elites are looking to control world energy, especially by dominating the Arctic in the coming decade.

A Russian intelligence source who spoke with this reporter had this to say: “Obama’s strategy in keeping oil prices low is to damage the Russian economy and limit Russia’s long-term plans to develop energy in the Arctic. The problem is the oil market is a fickle thing and the Saudis may have the last laugh by hurting America’s fracking industry and so returning power to the Arabs in OPEC [Organization of the Petroleum Exporting Countries]. Obama’s choice of energy as a weapon will only make its use more widespread in the future and there could come a time when America is targeted by such a weapon. People in Washington should understand there is a major risk in hurting Russia. Those who think Russia will just sit back and take the pain should think again. Russia has options.”

A similar warning appeared in The Economist magazine when one writer remarked, “Optimists think economic pain may make these countries more amenable to international pressure. Pessimists fear that, when cornered, they may lash out.”

When Russian President Vladimir Putin was asked about the oil plot theory, he remarked there may indeed be a plot by Obama and the Saudis to hurt Russia, Iran and Venezuela.

However, he also suggested it could be a “struggle between the traditional producers of raw materials and shale oil,” meaning between the Arabs as traditional extractors of crude and the fracking industry worldwide, especially in America.

Richard Walker is the pen name of a former N.Y. news producer.