War Effects

Charles A. Kohlhaas | November 6, 2023
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The Israel-Gaza War is having strong effects we did not expect and - so far - not having effects we expected. One of the first results was exposure of the wreckage of the American education system for all to see. Suddenly the success of a 50-year campaign to convert the U.S. school system, top to bottom, into a political weapon cannot be ignored. Concomitant with that are the results of mass indiscriminant migration, and DEI policies eroding cultural coherence and administrative competence.

All this also exposes one of the mysteries of American politics: The Democratic Party, to which most Jews belong and vote for, is fundamentally anti-Semitic. (The other great mystery is why most Black Americans vote for Democrats - the party that championed slavery, fought to preserve it as the Confederacy, created the Ku Klux Klan and preserved Jim Crow segregation well into the 20th century.)

These unforeseen results are fundamental, dramatic, disruptive, and will be long-lasting.

What is also surprising is that the war has had little effect on oil price, supply, or demand. The international, Brent, oil price has been lingering between $85 and $90 per barrel. A Middle East war generally has immediate effects on oil prices. Not this one - yet.

Neither Israel nor Gaza are significant oil producers, but Hamas, Hezbollah, and the Houthis are all proxies for Iran. Hezbollah and the Houthis have fired missiles into Israel, but have not launched a major offensive. Some missiles and drone attacks have been directed against U.S. bases in Syria and Iraq, presumably directed by Iran, with limited U.S. retaliation. The U.S. has not responded in strength. 

The Biden Administration has a history, following the Obama Administration lead, of accommodating and appeasing Iran. Secretary of the Treasury Janet Yellen continues to make a fool of herself claiming the sanctions against Iranian oil production are still in place, as if she were not aware the Biden Administration does not enforce them. Iran continues to export 1.2 to 1.4 million barrels per day (mb/d), allowing it to fund its proxy terror/paramilitary organizations.  

The Saudis, with their friends in the Emirates, have not taken a strong stand regarding the Hamas attack and the war. One gets the impression they have decided to take a seat in the bleachers and to see who wins although they are rooting for their choice: the US. 

Saudi actions and statements show they are not much concerned about who wins the Israel-Gaza conflict. They are well aware the major contest is between the U.S. and Iran as to who will run the Middle East and, by extension, the world trading system. They have also shown they are aware the consistently incompetent Biden Administration may not even realize the contest is crucial.

Before the war, the Saudis were in late stages of three-way negotiations with Israel and the U.S. to recognize and establish diplomatic relations with Israel in exchange for renewed U.S. guarantees of their security and a civilian nuclear power program.

Iran is a deep long-term enemy of the Saudis. The Saudis have made it clear they would like to see strong, assertive U.S. anti-Iran action. They have issued statements on their desire to continue the negotiations, which were underway with Israel. They have intercepted Houthi missiles. The leader of Hezbollah made a speech Friday threatening Israel and the U.S. and blaming the U.S. for the Gaza War. He referred to the “Axis of Resistance” of Iranian proxies blessedly working against Israel. The next day Saudi Prince Abdulrahman bin Mosaad issued a strong statement repudiating the speech and labeling it all lies.

Based on current and past actions, however, the Saudis evidently have little confidence in a forceful, effective U.S. action against Iran and its proxies. The U.S. State Department sent a tweet to Israel urging them not to retaliate while the Oct. 7 attacks were still in progress. It lets Iran make $3 billion per month selling oil. The news is full of Blinken pitifully pleading for a “humanitarian pause,” effectively an Israeli surrender. The Crown Prince recently kept Secretary of State Blinken waiting hours, overnight, for a meeting. The Prince showed up the next morning for an evening meeting. The message there: We would like to work with you, but we need to see some strength and we realize that, maybe, we need to wait to see the results of the next U.S. election. At one point, the Saudis seemed to have hedged their bets and agreed to a rapprochement with Iran negotiated by China, but have now rejected that.

The world is using about 103 million barrels per day (mb/d) of oil. The three largest producers are the United States (13.2 mb/d), Russia (10.4 mb/d, so much for the sanctions), and Saudi Arabia 910 mb/d). 

According to an interview with Amin Nasser, CEO of Saudi Aramco, in London recently, Saudi Arabia is willing to make the investment to establish and maintain a surplus production capacity because that gives them an outsized influence on oil markets and prices.  They can adjust rates to move prices. They currently maintain a spare capacity of about 2 mb/d which they intend to expand to 3 mb/d within the next year. They intend to expand their market clout. Whether they come out of this Middle East confrontation on the side of the U.S. or Iran has critical implications.

As noted, the Obama Administration initiated the program of Iran appeasement. Obama, the closet Muslim, is now publicly advocating for further appeasement with a ceasefire. He seems to be pulling the strings of the Biden group. If the Biden Administration succeeds in continuing to appease Iran until Iran achieves Middle East dominance, one must wonder if is deliberate Administration policy.

The Saudis are quite likely to conclude the U.S. is too far gone and, albeit reluctantly, align themselves with Iran and, by extension, with China, Russia, and the BRICS group. That will end U.S. and European dominance of world trade and re-align world trade, political, military, and financial relationships and quite possibly de-dollarize international trade. The BRICS will usurp Saudi capability and manipulate oil prices upward to destroy the U.S. and European economies. 

The U.S., the West, free markets and trade, and democracy need strong forceful anti-Iran U.S. leadership and they need it now. The Saudis know that. U.S. leadership may well be forfeited by the Biden Administration, either deliberately or by incompetence.