Yemen: Saudi-led coalition launches attack to recapture Hodeida port city

The exiled Yemeni government said the attack will “cut off the hands of Iran, which has long drowned Yemen in weapons that shed precious Yemeni blood.” But a regional expert told DW the humanitarian crisis could worsen.

    
 Saudi fighter jet, which will support the coalition forces as part of the fight against Daesh, is seen in the sky before they land at Incirlik base in Adana, southern Turkey (picture-alliance/AA/I. Erikan)

A coalition of mostly Gulf countries led by Saudi Arabia launched an attack on Wednesday to recapture the Yemeni port city from the Iran-backed Houthi rebels.

Yemeni troops loyal to the internationally recognized exile government have begun pressing forward toward Hodeida airport, according to local commanders.

Warplanes and naval vessels hit Houthi targets in the early morning hours after the Houthis refused to leave the city, the exile government said. The United Arab Emirates (UAE) had issued a deadline for the rebel group to abandon the strategically important port.

Read more: Yemen: Fears mount as fighting focuses on port of Hodeida

Losing port would hurt the Houthis

The multi-pronged attack is the first time coalition forces have tried to retake control of a major city during the three-year conflict. It aims to cut off supplies to Houthi-controlled Sanaa, Yemen’s capital city, to pressure rebel leaders to enter negotiations.

The Houthis would suffer a heavy defeat if they lose Hodeida, Jens Heibach, a research fellow and analyst at the German Institute of Global and Area Studies, told DW.

“It would be very hard or rather impossible for the Houthis to make up for all the supplies hitherto received via Hodeida,” Heibach said, adding: “plus the Houthis would lose an important geostrategic port which they could use to, for instance, target coalition vessels.”

Watch video04:39

Jan Egeland, director of the Norwegian Refugee Council, on the humanitarian situation in Yemen

The head of the Norwegian Refugee Council Jan Egeland told DW that the attack on the large port city “should not happen.”

“This is like attacking Rotterdam,” said Egeland, who also served as a humanitarian official in the UN.

“What is special about Hodeida is that it’s a lifeline to most of the population who live in the north,” Egeland told DW.  “If that is now destroyed in the fighting, we will lose the lifeline to millions and millions of people that are already on the brink of starvation.”

Western powers have ‘fingerprints all over’ Yemen blockade

He also told DW that he would speak to representatives of the United Arab Emirates and the  Saudi Arabia and urge them to call a ceasefire and put Hodeida under UN management.

“I’m actually very surprised and disappointed that the United States, the United Kingdom, France, and all these powers – that have fingerprints all over this blockade against Yemen and are very close to Saudi and Emirati-led military coalition – have not been able to avert this attack,” he said.

Houthi forces captured Hodeida and Sanaa in 2014, and the coalition intervened in the civil war one year later after Houthi forces ousted President Abed Rabbu Mansour Hadi. More than 10,000 people have been killed in the war, which is seen largely as a proxy conflict between Saudi Arabia and its regional rival Iran.

Heibach said the Houthis could pose a difficulty for the coalition if they decide to withdraw to the highlands in surrounding Hodeida. “As far I know it is utterly hard to lead a military campaign in mountainous terrain as it is more complicated to use heavy weapons,” he said. “It would probably end up in guerrilla warfare which is almost impossible to win and which the Houthis are quite experienced in.”

Read more:Why are EU countries reluctant to intervene in Yemen’s war?

Watch video03:35

Anas Shahari, aid worker in Yemen, on the latest Saudi-led attacks on Hodeidah Port.

Attack could worsen humanitarian crisis

Saudi Arabia and the UAE have said recapturing the port would allow the coalition to bring in supplies to relieve millions of people throughout Yemen who are facing starvation and disease.

But Adam Baron, a visiting fellow at the European Council on Foreign Relations, told DW the assault risks doing the exact opposite.

“If this ends up being a quick battle with the port being restored quickly, that’s one thing,” he said. “If it ends up being an extended battle where the port is destroyed in the process, that’s quite another.”

The International Committee of the Red Cross (ICRC) and United Nations called on both sides to protect civilians in Hodeida.

ICRC spokeswoman Marie-Claire Feghali said the attack was “likely to exacerbate an already catastrophic humanitarian situation in Yemen.”

“Under international humanitarian law, parties to the conflict have to do everything possible to protect civilians and ensure they have access to the assistance they need to survive,” Lise Grande, UN humanitarian coordinator for Yemen, told Reuters news agency.

The organization warned the coalition against striking the city amid concerns a battle could worsen one of the world’s worst humanitarian crises and cause some 250,000 deaths in a worst-case scenario. International UN officials were ordered to leave the city on Monday.

‘Cut off the hands of Iran’

Saudi Arabia has accused the Houthis, who deny they are fighting for Iranian interests, of using Hodeida port to import Iranian weapons. Riyadh has said some of the weapons, including missiles, have been launched against Saudi territory.

“The liberation of Hodeida port is a turning point in our struggle to recapture Yemen from the militias that hijacked it to serve foreign agendas,” Yemen’s exiled government said.

“The liberation of the port,” it said, “is the start of the fall of the Houthi militia and will secure marine shipping in Bab al-Mandab strait and cut off the hands of Iran, which has long drowned Yemen in weapons that shed precious Yemeni blood.”

COURTESY: DW

Win the Vote, End the War

How a Senate resolution can end Saudi Arabia’s war in Yemen.

By Robert Naiman, Opinion ContributorMarch 6, 2018, at 10:45 a.m.
U.S. News & World Report

Win the Vote, End the War

Yemenis inspect damage at the site of a reported air strike by the Saudi-led coalition, on the outskirts of the northwestern Huthi-held Saada province, on January 22, 2018.(STRINGER/AFP/GETTY IMAGES)

SENS. BERNIE SANDERS, I-Vt., Mike Lee, R-Utah, and Chris Murphy, D-Conn., have introduced SJRes54, invoking the War Powers Resolution to force a Senate floor vote on ending unauthorized U.S. participation in the Saudi war in Yemen. A floor vote on the resolution is expected next week. Co-sponsors currently include Senate Democratic Whip Dick Durbin, D-Ill., and Sens. Elizabeth Warren, D-Mass., and Cory Booker, D-N.J.

The Sanders-Lee Yemen war powers resolution will get a vote. While this tool has never been used to force a Senate vote on war powers, it has been used to force Senate votes on arms sales. In September 2016 and June 2017, these provisions of law were used to force Senate votes on arms sales to Saudi Arabia.

The resolution could pass the Senate, because the margin of the June 2017 vote was narrow. Forty-seven Senators – 43 Democrats and four Republicans – voted against continuing to arm Saudi Arabia’s war in Yemen. If the same 47 vote against Saudi Arabia’s war in Yemen again – and the war and humanitarian catastrophe have only gotten worse since June – then four more Senators voting against Saudi Arabia’s war would make 51.


If the Sanders-Lee resolution passes, it is likely that the Trump administration will comply with the Senate’s demand. Presidents have backed down when faced with broad Congressional pushback on war powers. In August 2013, President Barack Obama threatened to bomb Syria without Congressional authorization. Two hundred Republican and Democratic House Members signed a letter to Obama saying that under the Constitution and the War Powers Resolution, you can’t do this without our prior authorization.

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Obama backed down and agreed to seek Congressional authorization. When he could not obtain it, he sought a diplomatic solution. Later, Obama adviser Ben Rhodes acknowledged that Obama had not acted without Congressional authorization, in part, because of the threat of impeachment.

President Donald Trump himself already called in December for Saudi Arabia to completely end its blockade of goods into Yemen; two days later, the White House called for the immediate cessation of hostilities in Yemen. It would be difficult for the Trump administration to explain why U.S. participation in the Saudi war must continue when the Senate has just declared such participation unconstitutional and insisted that it stop, even as the administration itself has said hostilities should cease, even as the war has created the worst humanitarian crisis in the world, with millions of people on the brink of famine, even as U.S. taxpayers are paying for humanitarian assistance to ameliorate the near-famine that Saudi Arabia is deliberately creating in Yemen.

Saudi Arabia will not continue the war without U.S. military support. Foreign Policy reported that the Saudi-United Arab Emirates “daily bombing campaign would not be possible without the constant presence of U.S. Air Force tanker planes refueling coalition jets.” Bruce Riedel, a senior fellow at the Brookings Institution and CIA veteran, said: “if the United States and the United Kingdom, tonight, told King Salman, ‘This war has to end,’ it would end tomorrow. The Royal Saudi Air Force cannot operate without American and British support.”

But if Trump does not comply with the Senate’s demand, the matter will return to the House. HConRes81 was introduced in September by Reps. Ro Khanna, D-Calif., Thomas Massie, R-Ky., Mark Pocan, D-Wis., and Walter Jones, R-N.C. It currently has 50 co-sponsors. At that time, the House leadership was able to block floor action. But in the wake a resolution passing in the Senate, the political dynamics in the House would be completely different. Pressure for the House to take up the Senate resolution would be intense, and House members like Khanna can invoke the War Powers Resolution to try to force a vote.

If the Sanders-Lee resolution can pass the Senate, companion legislation can pass the House. Already in June 2016, the last time the House was allowed to vote on any aspect of this war, 40 House Republicans joined 164 House Democrats to nearly block the transfer of cluster bombs to Saudi Arabia.

It is hard to imagine that Trump would risk impeachment to keep the Saudi war in Yemen going. Does Trump really care that much about preserving the conflict?

Robert Naiman, Opinion Contributor

Robert Naiman is policy director at Just Foreign Policy.

Tags: YemenSaudi ArabiaMiddle East

COURTESY: US News and World Report

Shale Surges, But Oil Market Power Swings Back to Saudis

With prices at their highest since 2014, the Kingdom can respond much faster than hundreds of private U.S. firms spread from Texas to North Dakota

Saudi Energy Minister Khalid al-Falih attends a session of the St. Petersburg International Economic Forum in Russia, May 25, 2018.
Saudi Energy Minister Khalid al-Falih attends a session of the St. Petersburg International Economic Forum in Russia, May 25, 2018. PHOTO:SERGEI KARPUKHIN/REUTERS

The U.S. is producing more oil than ever, but when it comes to pulling the strings of the market, Saudi Arabia is still king.

Oil is flowing from shale fields at a record pace, propelling U.S. output to roughly double in a decade. That remarkable growth had led some observers to pronounce the U.S. the new swing producer in the market—a mantle long held by Saudi Arabia.

Yet with prices rising to their highest levels since 2014, the Kingdom still holds the power to single-handedly respond much more quickly than hundreds of private companies spread from Texas to North Dakota.

Brent crude-oil priceSources: IEA (Saudi); EIA (U.S.); SIX Financial (price)
.a barrel2015’16’17’1820304050607080$90

In the latest sign of Saudi Arabia’s sway, energy minister Khalid al-Falih said Friday that the Organization of the Petroleum Exporting Countries and its allies are likely to open the taps to address rising prices after their production-cutting pact and threats to supplies from Venezuela and Iran helped push global oil prices to $80 a barrel this month.

That news sent Brent prices falling nearly 3%, while U.S. crude prices promptly shed 4%—the biggest one-day percentage drop since July. On Monday, Brent continued falling, losing 1.5% to $75.30 a barrel.

Saudi Arabia’s clout stems from an abundance of spare capacity. The Kingdom is capable of producing as much as 12 million barrels a day, though it has kept its output much lower due to the OPEC deal. Its ability to open or close those taps almost overnight enables Riyadh to influence price movements more than any other producer.

Pumpjacks operate above oil wells in the Bakken Formation in this aerial photograph taken outside Williston, N.D., in March.
Pumpjacks operate above oil wells in the Bakken Formation in this aerial photograph taken outside Williston, N.D., in March. PHOTO: DANIEL ACKER/BLOOMBERG NEWS

U.S. shale companies are much more nimble than oil giants that rely on more cumbersome and time-consuming methods such as offshore drilling. But shale still needs several months of lead time between a change in price and a tweak in output—and that is a decision made by corporate bosses rather than politicians.

“Several years ago everybody who loved the ‘Shale is Superman’ story would have said we’re never going to be in that situation again—we’re never going to have to go to the Saudis with an oil ask,” said Helima Croft, global head of commodity strategy at RBC Capital Markets. “Yet here we are.”

Saudi Arabia’s status as the world’s swing producer and de facto leader of OPEC bestows it with an outsize role in the global economy, which remains highly sensitive to the price of oil. By curbing supply, the Kingdom can boost prices at the pump, stoke inflation world-wide, and cause transportation companies’ costs to soar. Or it can offer relief by releasing more crude.

Saudi Arabia has adapted to the rise of shale by partnering with Russia. The world’s two biggest exporters have only rarely cooperated, often viewing each other as rivals. But after prices fell to less than $30 a barrel in 2016, OPEC clinched a deal with Russia and other producers to cut around 2% of global output.

Oil GiantsU.S. oil production has surged, but Saudi Arabia still holds greater sway in moving global prices.Crude-oil production, monthly
.million barrels a daySaudi ArabiaU.S.2014’15’16’17’187.58.08.59.09.510.010.511.0

Even some U.S. oil executives who had belittled OPEC’s role in stabilizing prices have come around. Harold Hamm, the chief executive of Continental Resources Inc., said in 2016 “we and other producers have made OPEC policy less relevant to the world’s energy markets.” But earlier this month, he credited OPEC’s production cuts with helping work down the glut that had weighed on the market.

Since the price shocks of the 1970s, the U.S. has leaned on the Saudis, trying to coax them to use their influence to keep prices stable—with mixed results.

Former U.S. Energy Secretary Bill Richardson said he used to fly all over the world to meet with then Saudi Oil Minister Ali al-Naimi to try to sway him to adjust production up or down to balance the market. In 2000, Mr. Richardson lobbied oil ministers for a production increase after prices more than doubled in a year.

Back then, Mr. Naimi was the “benevolent dictator” of the oil market. “The Saudis controlled OPEC and they controlled oil prices,” he said in an interview.

Saudi Arabia has rejected the status of a swing producer, but it has often acted like one. Then, in 2014, OPEC surprised the market by declining to cut output and halt sliding prices. Some analysts interpreted the move as the Saudis trying to squeeze U.S. shale out of the market, before OPEC reversed course when it agreed in late 2016 to cut production.

Analysts said the move was a sign that OPEC had “blinked” after failing to fend off shale. Some predicted it was too late for the cartel to regain relevance after retreating from the market for so long and that resilient U.S. producers were ready to pounce on any increase in prices and cut nascent rallies short.

But nearly a year and a half after it took effect, OPEC’s production deal has helped fuel a more than 30% rise in prices, allowing the group, and particularly its de facto leader, to reassert itself.

While U.S. producers have ramped up quickly, growing pains in the shale patch—from crowded pipelines in West Texas to investors asking companies focus on profits rather than barrels—have raised questions about whether they can take the reins of the market.

“The U.S. secretary of energy can’t just give the signal and regulate output the way Saudi leaders can,” said Daniel Yergin, vice chairman of IHS Markit.

With higher crude prices now threatening to boost inflation and trip up a global economic upswing, pressure had been building on the Kingdom to pull back.

Four Democratic senators called on President Donald Trump in a letter last week to “leverage your personal relationship with Saudi Crown Prince Mohammed bin Salman to urge Saudi Arabia to use their swing capacity to increase world oil supplies” ahead of summer driving season.

Still, some say OPEC’s success was due to good timing as much as anything.

“Last year everything went right for the producers [under the deal],” said Robert McNally, president of Rapidan Energy Group. “The effectiveness of Saudi Arabia as a swing producer when spare capacity is low and geopolitical risk is high is limited.”

Write to Alison Sider at alison.sider@wsj.com and Georgi Kantchev at georgi.kantchev@wsj.com

Could America’s hardline policies towards Iran be a dilemma for Arab countries?

US Secretary of State Mike Pompeo has announced new economic sanctions and a more hardline American policy towards Iran. How are Middle Eastern nations likely to react?

    
Iran protests

On Monday, US Secretary of State Mike Pompeo gave a speech in which he said that the US will “crush” Iran by the means of economic sanctions and military pressure. The Trump administration’s new policy on Iran comes just weeks after the US withdrew from the Iran nuclear deal. Pompeo said that the US is now intent on restraining Iran’s influence in the Middle East and ensuring that Tehran is never able to develop nuclear weapons. But many political analysts and pundits in Washington say the new policy amounts to one of regime change.

Some Arab countries will likely welcome this new tougher US policy. Saudi Arabia, Iran’s arch-rival in the region, has openly called the Iranian regime a member of the “axis of evil” in the past. Saudi Arabia, along with Qatar, Bahrain, Kuwait and Oman, is a member of the Gulf Cooperation Council (GCC), which may also back Washington’s policy to isolate Iran. Earlier this month, GCC Secretary General Abdullatif al-Zayani said that Iran should have to meet certain requirements such as “the completion of the nuclear file in terms of inspection, not providing terrorists with ballistic missiles, respecting UN Security Council resolutions and non-interference in neighboring countries.”

Dr. Mohamad Ezz al-Arab, a political expert at the Al-Ahram Center for Strategic Studies in Cairo added that elites in Gulf nations such as Saudi Arabia, the United Arab Emirates and Bahrain view Iranian influence to be “very dangerous” for their security due to Iran’s support for militias such as Hezbollah in Lebanon and Syria or the Houthis in Yemen. Speaking to DW, he also noted that the US role in the region is to bolster Israel’s security and support governments of countries such as Saudi Arabia that align with US interests.

Saudi Arabian Foreign Minister Adel al-Jubeir and US Secretary of State Mike Pompeo (Reuters/F. Al Nasser)Saudi Arabian Foreign Minister Adel al-Jubeir meets with US Secretary of State Mike Pompeo

The US as new regional police?

But Iranian political analyst and former diplomat Said Hadi Afaqhi told DW that countries which support the new US policy on Iran could face negative repercussions. “The American desire to change the balance of the region runs contrary to the interests of Russia and Arab countries,” he said. Greater US intervention in the case of Iran could mean that the US is becoming more of watchdog in the Middle East. If Arab countries refuse to act in a way that the US wants and step out of line with American policy, they too could face economic sanctions or isolation from the American administration. He warned that Arab countries should refrain from “applauding” Trumps hardline policy towards the Islamic Republic.

Saudi Arabian vs. Iranian competing influence in the Middle East Saudi Arabia and Iran are in a power struggle and use proxies to push their interests in the Middle East.

 

Afaqhi also argued that Iran does not intervene in the conflicts of Arab countries without the permission of the governments in those countries. “It is not for America to determine what Iran should or should not do. Iran has entered Syria and Iraq at the invitation of the government officials there,” he said. He also said that Iran’s dispute with Saudi Arabia and other Gulf States is a matter for those countries to decide – not the US. “In regards to the nuclear agreement, Iran was able to reach an understanding with the US, EU and other great powers, so why is Iran seen as not being able to deal with its neighbors?” he argued.

What future for Iran?

One Middle Eastern country that is sure to take Iran’s side in the face of this new hardline policy from the US is Syria, as the Iranian government financially backs the Assad regime in Damascus. And Holly Dagres, an Iran analyst and curator of The Iranist newsletter, says past experience shows that Iran’s influence in the region is unlikely to dwindle, despite the renewed sanctions and American pressure. “We have have to remember that when the Syrian uprising started and Iran intervened on the behalf of Bashar Assad’s government, the country was under the worst sanctions in its history, which were implemented by the Obama administration, ” she told DW.

Watch video03:53

US foreign policy planner: Iran must behave ‘like a normal nation’

If anything, Dagres believes that the Iranians will continue to expand their influence in the region. “After decades of international isolation, Iran has managed to circumvent sanctions in numerous ways, whether by working the middleman, the black market, or trading with countries that the American sanctions enforcement agency OFAC cannot reach. If Iran wants something to be done, it will find a way,” Dagres concluded.

Every evening at 1830 UTC, DW’s editors send out a selection of the day’s hard news and quality feature journalism. You can sign up to receive it directly here.

COURTESY: DW

Belgium declares war on radical Islam by seizing Saudi-funded mosques – Muslims are outraged

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The Muslim community in Belgium is furious after the authorities started to fight Islamic terrorism by nationalizing mosques funded by Saudi Arabia.
Liberals and leftists in the West use the made up term “Islamophobia” to portray anyone who criticizes Islam as a “racist”.
Radical Muslim terrorists all over the world carry out terror attacks “in the name of Allah”.
They justify their violence by quoting verses from the Quran.
Islamophobia is a made up word created by the Muslim Brotherhood specifically to silence debate.

Here’s why sharia law should be banned in the West.
Under Sharia law a woman is considered half of a man, when a woman attests to a Sharia court in countries like Saudi Arabia or Iran, she should bring at least 4 men who support her testimony.
So in most cases of rape a woman can not prove that she was raped and the court can sentence her to death for adultery, that is what happened to Suraya Menuchari who was stoned to death in Iran on false charges of adultery.

Under Shari’a laws in the Arab world, almost 90% of women underwent FGM.
The practice of FGM is banned in most Western countries but some Muslim immigrants are ignoring the law and practicing FGM even in the UK and US.

Under Sharia law girls can marry at the age of 6, just like the Prophet Muhammad from the Koran did when he married Aisha.
In Muslim countries like Yemen and Iran, girls are considered “adult” and being sold into forced marriages with grown men by their families.
There are even some cases of child marriages in Australia and Britain when immigrants brought this tradition into the West.According to the Sharia laws An honor killing is the homicide of a member of a family, due to the perpetrators’ belief that the victim has brought shame or dishonor upon the family.
Shari’a honor killing is very common in the Muslim world, but it also happens in the West, in countries such as Britain, the United States and even the Netherlands.
According to the British media there are 12 honour killings in the UK each year.

Human rights organizations in the Western world are turning a blind eye to the brutal violation of human rights in the Muslim world under Sharia law.
Sharia law should be banned in the Western world.
Share this post if you think Sharia law should be banned in the West.

Courtesy: Free Speech Time

Saudis Move to Push Oil Prices Higher, in Break From Past Policy

Crown Prince Mohammed is behind the move, which aims to raise revenue as his government seeks to carry out a wide-ranging economic overhaul

Saudi Energy Minister Khalid al-Falih said last month at an OPEC gathering in Jeddah that higher prices wouldn’t affect oil demand yet.
Saudi Energy Minister Khalid al-Falih said last month at an OPEC gathering in Jeddah that higher prices wouldn’t affect oil demand yet.PHOTO: SEONGJOON CHO/BLOOMBERG NEWS

DUBAI—Saudi Arabia is maneuvering to push oil prices up to at least $80 a barrel this year, shifting away for now from its long-time role as a stabilizing force in global energy markets.

Crown Prince Mohammed bin Salman, the country’s day-to-day ruler, is behind the move, aimed at raising revenue as his government seeks to carry out a wide-ranging economic overhaul, senior Saudi officials said.

The Saudis already have helped drive oil prices up nearly 50% in the past year—to nearly $74 a barrel on Friday for Brent crude—by engineering a large output cut with the Organization of the Petroleum Exporting Countries and Russia.

By aiming to force prices even higher, Prince Mohammed is stepping away from a compact that has defined the kingdom’s foreign relations for decades—offering stability in oil prices in exchange for security assistance from the U.S. and other big energy consumers.

That equation has been changing with the rise of American shale-oil producers, a diminished U.S. appetite for Middle East military action and the ambitious, expensive agenda of the 32-year-old crown prince to modernize his kingdom.

“There is no intention whatsoever from Saudi Arabia to do anything to stop the rally” in oil prices, said a senior Saudi government official, who cited the minium $80 estimate. “It is exactly what the kingdom wants.”

For every dollar that oil prices rise, Saudi Arabia gets about $3.1 billion a year in extra revenue, according to Rapidan Energy Group, a Washington consultancy. That cash infusion comes as the Saudi economy goes through a rough patch that shows just how dependent it remains on oil.

An austerity plan imposed when oil prices were lower levied new taxes on and stripped government support from regular Saudis, depressing consumer spending. The Saudi economy contracted in 2017 and is forecast to be an anemic 1.7% in 2018, largely because it has cut oil output with OPEC, according to the International Monetary Fund. Rising oil prices are driving a gradual economic recovery. Saudi crude exports have risen in recent months but down significantly from 2016.

Crude Rises​Oil prices have increased because of OPEC supply cuts, strong demand and Middle East tensions.Weekly brent crude oil priceSource: SIX FinancialNote: Front-month contract
.a barrel2013’14’15’16’17’18020406080100120$140

More oil revenue would also give Prince Mohammed some time and money to proceed at a slower pace with other economic reforms. The government has delayed the centerpiece of his plans, the initial public offering of state-energy giant, Saudi Arabian Oil Co., or Aramco, which had been expected to raise tens of billions of dollars this year for the kingdom to invest in non-oil sectors.

“It gives everyone time to breathe,” a second senior Saudi official said of higher oil prices.

Saudi officials are prepared to drive oil prices higher in June when they push for a continuation of OPEC’s output limits with Russia. They have also proposed scrapping the nuclear deal with Iran and reimposing sanctions on its oil, which could drive prices up further. And Saudi officials have privately floated their desire for higher prices in the media, which helps push prices up.

Officially, the Saudi government says it is agnostic about the price of crude. But Saudi energy minister Khalid al-Falih signaled the kingdom’s posture last month at an OPEC gathering in Jeddah, where he said higher prices wouldn’t affect oil demand yet.

Export StrategySaudi Arabia has reduced oil shipments tohelp raise prices.Saudi Arabia crude oil exportsSource: Joint Organizations Data Initiative
.million barrels a day2015’16’17’186.06.57.07.58.08.5

“I don’t see any impact on demand with current prices. We have seen prices significantly higher in the past. Twice as much as where we are today,” he said.

That stance has rattled some oil-consuming countries, including the U.S., where President Donald Trump recently weighed in on Twitter with a warning that oil prices were “artificially very high.” Average U.S. gasoline prices in April neared $3 a gallon, their highest levels in three years.

Brent, a North Sea crude against which internationally traded crude is priced, has breached $75 a barrel this year for the first time in over three years. West Texas Intermediate, a crude used to price American oil, has flirted with the $70 a barrel mark.

In the past, the Saudis have worked to cool off oil prices as they heated up in 2008 and 2011, although not always successfully, knowing that moderately priced oil kept demand high and helped blunt a drive towards renewable energy. The Saudis often argued with OPEC members like Iran and Venezuela, which pushed for ever higher prices.

Back then, though, Saudi government spending was lower. From 2000 to 2014, Saudi Arabia needed an average oil price of about $75 a barrel to cover its government spending, according to the IMF.

In 2018, the IMF says, Saudi Arabia needs oil prices at over $87 a barrel to balance its budget. Prince Mohammed unveiled a record $260 billion budget last year, as the kingdom fights a costly war on its southern border with Yemeni rebels and supports growth in non-oil industries with subsidies.

The Saudi alliance with the U.S. remains strong as both move to contain Iran in the Middle East. The U.S. imported about 667,000 barrels of Saudi oil a day in February, among the lowest levels since the 1980s.

Economy BuoyedSaudi GDP fell in 2017 amid an austerity planbut is gradually recovering as oil prices rise.Saudi Arabia real GDP growthSource: International Monetary FundNote: 2018 and 2019 are estimates
%2015’16’17’18’19-1012345

To be clear, Saudi Arabian officials say, they would step in with more production if prices suddenly soared. That would likely include increasing production and replacing Iranian output should Mr. Trump end the nuclear deal and re-impose sanctions on Tehran’s oil industry. Prices of $100 a barrel remain a psychological barrier the Saudis don’t want to hit, people close to the kingdom say.

Saudi Arabia could face some resistance from fellow oil producers to pushing prices up too high, too fast.

Iranian oil minister Bijan Zanganeh told The Wall Street Journal in March that oil prices around $60 a barrel were ideal, setting up Tehran on the opposite side of a crude-market debate with its regional political rival, Riyadh.

Russia, which isn’t an OPEC member, has also been more cautious about pushing for higher prices.

Some oil-industry analysts close to the Saudis say the kingdom is trying to stave off a future oil-price rise by nudging prices higher today to encourage more investment in the energy industry.

Mr. Falih has warned that oil supply could fall short of demand in the near future if companies don’t invest in more drilling projects. Despite a 50% surge in prices since last year, drilling budgets at the largest global oil-and-gas companies are up only about 7%, according to consultancy Wood Mackenzie.

“They want more investment,” said Bob McNally, the president of Rapidan Energy, who speaks with Saudi government officials. “The consequences of Saudi policy now is higher prices, but if you could have more investment at $65 a barrel, they would want $65.”

Balancing ActSaudi Arabia relies on oil exports to fund itsbudget, which varies year to year.Saudi Arabia breakeven oil priceSource: International Monetary FundNote: 2018 and 2019 are estimates
.a barrel2015’16’17’18’190255075$100

There are risks for the Saudis in higher oil prices. The government peeled back energy subsidies this year, exposing regular Saudis to the higher gasoline prices that come with rising oil prices.

“I’m not just hurt by these price hikes, I’m going mad over them,” said Abdulaziz Mohammed, a 29-year-old event-management employee as he bought gasoline at a fuel station in Riyadh. Filling up the tank of his Infiniti sport-utility vehicle costs the equivalent of between $30 and $40 for a tank now, about twice as much as last year.

The IMF warned this week that strong oil prices could cause the Saudi government to slow down its economic reforms. And there is the prospect that Mr. Trump will put the pocketbooks of American drivers ahead of his strong alliance with the Saudis, should prices rise too high.

Jim Krane, an oil and geopolitics fellow at Rice University’s Baker Institute in Houston, said the Saudi push for higher oil prices is a short-term shift designed to help Prince Mohammed through some challenging times.

“Saudi wants high oil prices for short-term goals like the Aramco IPO, budget deficits, fighting wars, and subsidizing citizens in ways that keep them satisfied with autocratic rule,” Mr. Krane said. “Over the long term, however, the Saudis’ interests align with cheaper oil.”

Write to Summer Said at summer.said@wsj.com and Michael Amon at michael.amon@wsj.com

Courtesy: WSJ

Down In Saudi Arabia, They’re Partying Like It’s 2008

Trump aside, OPEC should look at its own unhappy history before getting carried away with the oil price.
Photographer: ADAM JAN/AFP/Getty Images

Is this really 2018? It started to sound a lot like 2008 in Saudi Arabia on Friday, as the kingdom’s oil minister argued that the world could tolerate a higher crude price.

“I haven’t seen any impact on demand with current prices,” Khalid Al-Falih told reporters at the meeting of OPEC and non-OPEC producers in Jeddah. Arguing that the energy intensity of global economic growth hadn’t declined, he offered the view that “there is the capacity for higher prices.”

President Trump certainly didn’t appreciate the sentiment, firing off a tweet that accused OPEC of promoting “artificially high prices” which “will not be accepted.”

Yet setting aside Trump’s unique approach to geopolitics, the Saudi comments are indeed troubling. They are an eerie echo of comments made almost exactly a decade earlier by a former OPEC grandee: Libya’s Shukri Ghanem. The world economy “has not reached the tipping point where it can’t accept higher prices,” Ghanem said back in April 2008.

Little did he realize just how close that tipping point was. West Texas Intermediate crude, which had touched a record $116.97 a barrel the previous day, continued to climb for another 3 months as OPEC insisted it didn’t need to raise production. But then the collapse came, and it was quite a crash. After trading above $145 a barrel in the first half of July, WTI was below $40 by the end of the year.

What Goes Up…

High oil prices brought about their own demise in 2018, when demand collapsed

Source: Bloomberg

Of course, oil prices are nowhere near as high as a decade ago. But it’s startling how quickly the lessons of 2008, or indeed the last price crash of 2014, are being ignored — even if they’re unlikely to have been forgotten.

When OPEC met in May, oil ministers were talking quite casually about $50 a barrel as a good price for crude. By the time of the December meeting, several were suggesting that a “fair” price for oil was $70 a barrel and at least one put it higher. Now that OPEC’s basket of crudes has reached that $70 level, the target appears to have mysteriously moved upwards again. This is mission creep, OPEC-style.

Global demand does indeed seem remarkably robust. OPEC sees it increasing by 1.6 million barrels a day this year. If that happens, it would be the first time since the early 1970s where we’ve had four consecutive years of oil demand growing by more than 1.5 million barrels a day.

Stronger for Longer

Global oil demand growth hasn’t been so strong for so long since the early 1970s

Source: Bloomberg, BP, OPEC

While higher crude prices would naturally be expected to boost spirits in the oil-dependent economies of the Middle East and elsewhere, they may have a chilling effect elsewhere. The growth of U.S. gasoline demand has already started to slow after pump prices rose late last year, and prices are still heading up.

If crude reaches $80 a barrel by the middle of the summer driving season, those gasoline prices could be pressing $3.30 a gallon. Al-Falih might not have seen any demand impact yet, but that could change very quickly — especially with Trump on the rampage.

Gasoline Rising

U.S. retail gasoline prices are the highest for the time of year since 2014 and heading upwards

Sources: Bloomberg, American Automobile Association

Not everyone was as sanguine as Mr Ghanem a decade ago. OPEC’s then Secretary General Abdalla el-Badri sounded a warning a couple of months later. High prices were “not a bonanza” for OPEC because they had the potential to “destroy everything” by curbing oil demand, the chief revenue-generator for most of his group’s members. Al-Falih and his boss Mohammed bin Salman, would do well to remember his words.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Julian Lee in London at jlee1627@bloomberg.net

To contact the editor responsible for this story:
James Boxell at jboxell@bloomberg.net

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Courtesy: Bloomberg