Charles A. Kohlhaas | January 3, 2024
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A few nights ago at dinner with friends, a lady asked: “What is the oil business doing?” It is not easy to summarize quickly what a major worldwide industry is doing, but after pondering a moment, I answered: “Waiting.” Reflecting on the news since then gives me the impression everybody is waiting. The whole world seems not quite decided on something, uncommitted, waiting for something.

The question is: Who is waiting for what?

Except the Israelis. And their war in Gaza seems to have caused this feeling of everybody waiting to see how that turns out or what it leads to.  

As I mentioned in my last Note, the Saudis seem to have taken a seat in the bleachers and are waiting to see who wins and who does what about it. That feeling seems to have spread, but no-one seems to know which shoe is the next to drop. Taiwan? U.S. or international financial system breakdown? Banks? Another war? More money to Iran? Yellowstone erupting? A revolution/coup in (fill in the blank)? Inflation? Another terrorist attack somewhere? At this point, we can conclude that whatever is expected is not what will happen and intelligence agencies will not have a clue beforehand. 

Some things do seem sure. A very messy and controversial U.S. election. A continuation of non-assertive U.S. foreign and military policy. We shall continue to hope we can shoot down all the Houthi missiles fired at ships. Hope is not a very effective strategy. 

This is playoff time, so I conjectured a metaphor for U.S. war-fighting strategy:

The Dallas Cowboys decide they will take the field on their own 20-yard line, challenge any and all Texas high school teams to play against them, and commit to only play defense.

At first, this may attract some fans for the novelty of it all, hoping to see one of those clever Texas kids get in a lucky pass to the endzone. But over time, the Cowboys will get bored, tired, and distracted by thoughts of doing something else. At that point, one of those clever quarterback kids may get in a lucky pass but, more likely, the Cowboys’ owner, Jerry Jones, would wonder why he is paying for this and call the whole thing off.  

The Cowboys’ score is always zero, has no chance to be anything but zero, and that was baked in from the beginning.  

That is the way the U.S. government has fought its wars since the second year of the Korean War and is still the principle with which we approach conflict: always on defense. Our score is always zero and we do not plan it to be otherwise. Maybe we should not have named it the Department of Defense. We do not want Ukraine to win; just not lose. Please stop. We keep trying to talk the Israelis into adopting our war-losing strategy. Please stop. (We call it a Ceasefire). We refuse to take forceful action against Iran and its proxies when they shoot at us.

China is taking notice and wondering how they can take advantage of this and how long we shall put up with Iran jabbing at us. So are the Saudis. And the Indians. And everybody else. They are waiting to see what we do.

Sometimes principles get ignored, however. In our case, it was the first Gulf War. It had a clear, justifiable, objective which attracted allies. Our action was swift, effective, and thorough. That war is largely forgotten - but not by the Russians, Chinese, or Saudis. They are not waiting to see if we can do something like that again, but will we do it, if given enough justification. 

Impacting all this is the deteriorating U.S. financial system with excessive government expenditures and debt compounded with collapsing societal cohesion, economic resilience, electoral integrity, political effectiveness, and institutional decay. Can anyone, particularly its own citizens, depend on the U.S. anymore?

The Saudis are obviously waiting to find out. They have positioned themselves to follow a Chinese-led world order - but are not enthusiastic about it. As of today, they joined the BRICS group along with Iran, the United Arab Emirates, Egypt, Ethiopia, and Argentina. The group now produces over 40% of the world’s oil.

This seems to be a Saudi move to hedge their long-standing bet on the U.S. Reportedly, Brazil and India were opposed to this membership expansion because they want to set up an alternate-currency strong trading group and are not sure as to the inclinations and dedication of the new members. Saudi Arabia and Iran, as leaders of the Sunni and Shiite factions of Islam, are long-term enemies and hate each other. The Saudis have benefited from their long-term relationship with the U.S. and would prefer to continue with it on the dollar-based system of trade - so they are waiting to see if the U.S. can rise above its current difficulties and assert itself again. 

China is hoping the Saudis will help them undermine the dollar-based international trading system and they have other reasons to be waiting to see what the U.S. election brings. With China growing more assertive, the rest of Asia also is waiting to see a return of an effective U.S. Europe, as usual, is aggravated about being disturbed and is waiting for things to calm down so it can resume its strategic nap. 

So the world waits.

If nothing else happens beforehand, the most critical event it waits for is the U.S. election. But much of the world seems restless, impatient, and ready to take some un-thought-out action. A de-stabilizing event can happen at any time. The event is quite likely not to be anything we predict at this time.