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King Salman Visits Russia: Something is Brewing

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As though there aren’t enough surprises in the Middle East, consider these: King Salman of Saudi Arabia will visit Russia tomorrow, China will continue its import of crude oil from Iran, the Organization of Petroleum Exporting Countries (OPEC) meets next month, and Russia, well it plays all sides depending on which way it wants to tilt the balance. What all these dynamics have in common? Oil!

Only a year ago, energy analysts argued that China’s oil demand that fueled the world economy in the last decade is slowing down. Could Chinese demand for oil, mainly from the Middle East, peak again? Absolutely! China is the main importer of Iran’s oil. On average, the Chinese have shipped in more than 600,000 barrel per day (bpd) of oil from Iran. Beijing is estimated to raise its oil imports by another 2 million bpd and Tehran is well-placed, following the lifting of sanctions, to further increase oil sales to the world’s second biggest economy. Thus, challenging Maryelle Demongeot’s, a senior reporter and deputy Singapore bureau chief at Energy Intelligence, argument that China’s demand of oil from the Middle East will decrease.

And if that is not enough reason for you to believe that China’s demand for oil will continue to grow, consider this, “China’s oil demand rose by 690,000 BPD in July, marking a 6% year-over-year (YOY) increase. China’s total oil demand reached 11.67 million BPD in July. Year-to-date data indicates an average growth of 550,000 BPD, more than double the 210,000 BPD growth recorded during the same period in 2016,” according to Forbes. I see the writing on the walls as China’s oil demand, at least in the short term, will continue to grow. That growth, will eventually peak by 2035. China’s oil consumption by then will be about 7 million bpd. One sees, I hope, why China is investing heavily in Iran.

My analysis comes on the hills of Saudi king’s upcoming visit to Russia. The royal visit highlights not only Saudi Arabia’s anxiety about China’s economic investments in the kingdom’s archenemy, Iran, but also Russia’s economic concerns over China’s growing oil demand from the Middle East, especially when adding natural gas to the equation. China’s oil import from Iran is cutting into oil profits of both, Russia and Saudi Arabia.

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While diplomatic norms suggest that both leaders, King Salman and Mr. Putin will discuss global/regional issues of mutual interests, there is an economic agenda at the heart of this visit at this specific time. Of interest is the announcement by both KSA and Russia of launching a billion dollar investment in energy projects. Mind you that both countries are the world’s top oil producers; thus, this joint economic cooperation (mainly from KSA’s perspective) aims, in my opinion, at undermining Iran economically.

Equally important, king Salman’s visit to Moscow comes prior to (OPEC)’s meeting next month, presumably to discuss extending oil output reduction agreement which led to better prices. As I argued in my previous writings that despite Saudi efforts to undermine Iran economically, the kingdom failed to foresee that the demand for Iran’s energy (gas and oil) following the lifting of sanctions will continue to grow especially in countries like China and India.

I predict that China’s demand for energy from the Middle East (mainly Iran) will continue to grow. As I argue in my forthcoming book, Volatile State: Iran in the Nuclear Age, China’s acquisition of major oil contracts in Iraq exemplifies its strategy and pragmatism. From China’s perspective, it makes economic sense to expand its presence in the Middle East, and the perfect conduit to do so is through Iran.

King Salman’s visit to Russia highlights both countries’ [KSA & Russia] anxiety and concerns over (a) Chinese’s demand of oil and soon natural gas from Iran, (b) supply abundance, and (c) ongoing drop in oil prices. What’s important to highlight is that natural gas is expected to grow faster than oil or coal, with consumption increasing by 1.6 percent per year between 2015 and 2035, according to British Petroleum (BP). Taken this into consideration, I can see why China’s investments in Iran’s energy sector makes economic sense.

And in case you did not know: Iran holds the world’s fourth-largest proved crude oil reserves and the world’s second-largest natural gas reserves. The world’s biggest gas field lies between Qatar and Iran. As ties between Qatar and Iran are improving, Saudi Arabia is becoming less and less relevant. Saudi Arabia needs to accept that it can’t influence oil prices as it once did. That’s a bygone era!

One thing is sure: My analysis herein serves as a reminder of why Saudi Arabia is doing all it can to undermine Iran, even it means siding with Russia. Alas, the Saudis never cease to amaze!


15 Comments on "King Salman Visits Russia: Something is Brewing"

  1. Cloggie on Thu, 5th Oct 2017 7:50 am

    #1 Gernan industry organisation BDI is warning German firms in Britain for a “very hard Brexit”.

    (Move out while you stil can)

    Add to that the developments in Spain, where Gibraltar could be easily used to deflect attention away from Barcelona and you have all the ingredients for a breakpoint of the West in place.

  2. Davy on Thu, 5th Oct 2017 7:55 am 

    Break point in Europe cloggie. I thought the grand battle was going to be fought on American soil complete with American blood? It seems more like my view of both regions suffering decline and decay on all levels

  3. Cloggie on Thu, 5th Oct 2017 8:11 am 

    Hard-Brexit is a prerequisite for Parijs-Berlin-Moscow.

    There will be war both in Europe and America to liberate the West from multikult. The endgame will be in North-America, where Europeans will support constitutionalist insurgents to break away from Washington.

    Exit American hegemony.
    Enter multipolar indentitarian world order, with center of gravitatie in Eurasia.

    Greetings from Samuel Huntington.

  4. Cloggie on Thu, 5th Oct 2017 8:14 am 

    New British national anthem:

  5. Davy on Thu, 5th Oct 2017 8:57 am 

    End game is looking more European despite your fantasies.

  6. Duncan Idaho on Thu, 5th Oct 2017 9:08 am 

    The EU has a higher growth rate than US:

    Eurozone economy quietly outshines the US

    Even the Corporate Scum are scrambling to Frankfurt.

  7. Cloggie on Thu, 5th Oct 2017 9:12 am 

    Møre important than growth rates is the renewable energy strategy, supported by the vast majority of the population.

  8. Davy on Thu, 5th Oct 2017 9:20 am 

    DI, by how much and how real? The US and Europe are both experiencing sub par growth after10years of repressed rates and monetary easing and still neither are making inflation goals. Please spare me the “quietly outshining” comparison. Now with the Spanish crisis hell might break lose in the EU financially with bad sovereign debt issues.

  9. tahoe1780 on Thu, 5th Oct 2017 12:31 pm 

    “Hell might break loose…”

  10. Dredd on Thu, 5th Oct 2017 12:56 pm 

    King Salman Visits Russia: Something is Brewing

    It could be about the Petrodollar (The Peak Of The Oil Wars – 12).

  11. dissident on Thu, 5th Oct 2017 5:35 pm 

    The visit is about Syria and Iran. The rest is window dressing. Russia is facilitating the establishment of a crescent of non-hostile countries from Lebanon to Iran. Even Afghanistan could be included at some stage in spite of the Soviet history. This crescent is a barrier to the Wahabbi hordes controlled by the Saudis. It appears the Saudis are worried that they could be terminally undermined by Russia and are likely trying to establish a new power balance arrangement.

  12. DerHundistlos on Thu, 5th Oct 2017 8:31 pm 

    Rats play a critical role ensuring a healthy ecosystem. One of the world’s most unique ecosystems exists in Santa Marta, Colombia. For this reason, there exists numerous indigenous flora and fauna species found nowhere else. A number of years ago the Santa Marta rat was declared extinct due to the introduction of felines- that is until a group of volunteer German youth recently photographed and captured video of a small colony at the central Santa Marta wildlife reserve. This is important news not just due to its rediscovery, but the Santa Marta rat is essential for dispersing plant seed. We could never understand why the reserve forests and recently purchased cattle grazing fields now undergoing a regrowth of forest cover required very little tree planting work. Now we know and it’s thanks to the Santa Marta rat.

  13. joe on Fri, 6th Oct 2017 9:41 am 

    Of course under sharia laws and customs, leaders meet when agreement has been reached first. So for example Trump went to Saudi when they agreed the weapons deal, but this time the house of Saud visits the Russian…..
    Syria was supposed to be the cork in the Iranian bottle, now Iran could potentially supply Europe too someday. What a disaster the Iraq/Syrian conflicts have been for the CIA.
    The smart move would be for the establishment to listen to Trump. Stop treating Russia as an existential enemy and see that China is eating Americas lunch.

  14. Cloggie on Fri, 6th Oct 2017 11:55 am 

    Bloomberg: Russia new master Middle East

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