Geopolitical Tsunami: Pax Americana, Petrodollar, & The Coming Crisis In The Gulf

It’s easy to get lost in all things Middle East, especially concerning the chaotic events that unfolded over the weekend in Lebanon and Saudi Arabia.

Three days after the most stunning purge in recent Saudi history - which was really a countercoup, that led to the arrest of dozen of Saudi Arabian royals, ministers and businessmen to further the control of the Kingdom - Saudi Arabia called Yemen’s missile launch on Riyadh an ‘act of war’ by Iran, and also played victim by saying Lebanon has declared war against the Kingdom.

How to make sense of this all? 

An author on twitter by the handle Black Pigeon Speaks beautifully outlines today’s events in an easy to understand video titled: PAX AMERICANA, PetroDollar & the Coming CRISIS in the GULF… 

The author of the video focuses on the Middle East and says a perfect storm is gathering upon the horizon, as the whole world is changing and the only way to change it for the better is to understand the world around you.

The video opens up with a brief understanding of the stunning purge in Saudi Arabia and how it has cleared any potential obstacles for King Salman’s son ascension to the throne.

This was done by a widespread arrest of royals, ministers and businessmen who have large sums of money and control key parts of the economy and parts of the military. Such an unorthodox move is bound to force internal conflict with-in the country that could very well spillover.

In the next section, the author says “this comes all at a time of seeming change for the Kingdom”. Allowing women to drive was merely a window dressing event and the real issue is the country’s economic transition away from oil. The problem resides around the world’s most generous social welfare systems of which most citizens do not work. The money transfer from state to citizens is similar to the United States social programs, but the objective in Saudi Arabia has been to sedate the populace from expressing any collective opposition to the kingdom. It is easy to understand how fragile the house of Saud really is….

Moreover as what was highlighted by the recent arm sales via the Trump administration. The country is armed with the most technological weapons in the world, as it has completely abandoned the line of succession through a stunning weekend purge.

The idea that Saudi Arabia is trying to cement a new era for the kingdom at the expense of those who have been purged could pose serious problems. And how the author puts it, “you have a recipe for civil war– for two reasons:

• Those who have been purged will claim they’ve a legitimate claim to power. These individuals are very wealthy and have the means to buy mercenary armies to fight for their claim
• Breakdown of the social welfare program

The outlook for Saudi Arabia is bleak and in our view, the conditions are perfect for a civil war. The probability of an expansionist war also increases as the kingdom has Iran and Lebanon in its crosshairs.

11 Novembre 2017

Fonte: qui

Real Motive Behind Saudi Purge Emerges: $800 Billion in Confiscated Assets

From the very beginning, there was something off about Sunday’s unprecedented countercoup purge unleashed by Mohammad bin Salman on alleged political enemies, including some of Saudi Arabia’s richest and most powerful royals and government officials: it was just too brazen to be a simple “power consolidation” move; in fact most commentators were shocked by the sheer audacity, with one question outstanding: why take such a huge gamble? After all, there was little chatter of an imminent coup threat against either the senile Saudi King or the crown prince, MbS, and a crackdown of such proportions would only boost animosity against the current ruling royals further.

Things gradually started to make sense when it emerged that some $33 billion in oligarch net worth was “at risk” among just the 4 wealthiest arrested Saudis, which included the media-friendly prince Alwaleed.

One day later, a Reuters source reported that in a just as dramatic expansion of the original crackdown, bank accounts of over 1,200 individuals had been frozen, a number which was growing by the minute. Commenting on this land cashgrab, we rhetorically asked “So when could the confiscatory process end? As we jokingly suggested yesterday, the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country’s foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account.”

Then an article overnight from the WSJ confirmed that fundamentally, the purge may be nothing more than a forced extortion scheme, as the Saudi government – already suffering from soaring budget deficits, sliding oil revenues and plunging reserves – was “aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite.”

As we reported yesterday, the WSJ writes that the country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.” But what is more notable, is that while we first suggested – jokingly – on Monday that the ulterior Saudi motive would be to simply “nationalize” the net worth of some of Saudi Arabia’s wealthiest individuals, now the WSJ confirms that this is precisely the case, and what’s more notably is that the amount in question is absolutely staggering: nearly 2x Saudi Arabia’s total foreign reserves!

As the WSJ alleges, “the crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.”

While much of that money remains abroad – and invested in various assets from bonds to stocks to precious metals and real estate – which will complicate efforts to reclaim it, even a portion of that amount would help shore up Saudi Arabia’s finances.

A prolonged period of low oil prices forced the government to borrow money on the international bond market and to draw extensively from the country’s foreign reserves, which dropped from $730 billion at their peak in 2014 to $487.6 billion in August, the latest available government data.

Confirming our speculation was advisory firm Eurasia Group, which in a note said that the crown prince “needs cash to fund the government’s investment plans” adding that “It was becoming increasingly clear that additional revenue is needed to improve the economy’s performance. The government will also strike deals with businessmen and royals to avoid arrest, but only as part of a greater commitment to the local economy.”

Of course, there is a major danger that such a draconian cash grab would result in a violent blowback by everyone who has funds parked in the Kingdom. To assuage fears, Saudi Arabia’s minister of commerce, Majid al Qasabi, on Tuesday sought to reassure the private sector that the corruption investigation wouldn’t interfere with normal business operations. The procedures and investigations undertaken by the anti-corruption agency won’t affect ongoing business or projects, he said. Furthermore, the Saudi central bank said that individual accounts had been frozen, not corporate accounts. “It is business as usual for both banks and corporates,” the central bank said.

However, this is problematic: first, not only is the list of names of detained and “frozen” accounts growing by the day…

The government earlier this week vowed that it would arrest more people as part of the corruption investigation, which began around three years ago. As a precautionary measure, authorities have banned a large number of people from traveling outside the country, among them hundreds of royals and people connected to those arrested, according to people familiar with the matter. The government hasn’t officially named the people who were detained.

… but the mere shock of a move that would be more appropriate for the 1950s USSR has prompted crushed any faith and confidence the international community may have had in Saudi governance and business practices.

The biggest irony would be if from this flagrant attmept to shore up the Kingdom’s deteriorating finances, a domestic and international bank run emerged, with locals and foreign individuals and companies quietly, or not so quietly, pulling their assets and capital from confiscation ground zero, in the process precipitating the very economic collapse that the move was meant to avoid.

Judging by the market reaction, which has sent Riyal forward tumbling on rising bets of either a recession, or devaluation, or both, this unorthodox attempt to inject up to $800 billion in assets into the struggling local economy, could soon backfire spectacularly.

Meanwhile, for those still confused about the current political scene in Saudi Arabia, here is an infographic courtesy of the WSJ which explains “Who Has Been Promoted, Who Has Been Detained in Saudi Arabia”

All images are from Zero Hedge.

The original source of this article is Zero Hedge

Fugnoli: L’INNESCO

Lancio del missile dallo Yemen a Rhiyad

Quello che potrebbe fermare il rialzo. Un aggiornamento

L’economia globale attraversa una fase di crescita forte e sincronizzata. Le banche centrali si mantengono espansive. L’inflazione non è preoccupante. Gli utili crescono. Molti cominciano a pensare che siamo entrati davvero in una nuova era di crescita senza inflazione e non riescono a trovare una ragione per cui il rialzo delle borse si debba fermare.

È davvero così? Proviamo a passare in rassegna i fattori di rischio. Alcuni sono nuovi di fiamma.

Arabia Saudita. La caduta del petrolio e l’idea che i combustibili fossili siano in declino strategico hanno iniziato a corrodere alle fondamenta un paese che appariva solido solo perché era immobile. L’indebolimento strutturale arriva poi nel momento peggiore, in una fase in cui l’Iran stringe l’assedio a sud con lo Yemen, a est con il Qatar e a nord con un Iraq filo- iraniano e un Kurdistan indebolito, con una Siria alauita che si sta rimettendo in piedi e con un Libano che ogni giorno scivola sempre più nelle mani degli sciiti di Hezbollah.

L’elite saudita si aggrappa agli Stati Uniti e a Israele, ma in questo processo si divide perché trova un’America divisa. Il giovane principe Mohammad bin Salman è salito al potere con l’appoggio di Trump con un colpo di mano che ha emarginato il cugino obamiano e ora sta attaccando il ricchissimo e antitrumpiano Al-Waleed. George Friedman, uno stratega geopolitico dotato di grande profondità di pensiero, non esclude la possibilità di una guerra civile o di un nuovo colpo di stato. Il tutto con l’Iran alle porte che, per farsi sentire meglio, manda un missile sulla capitale Riyadh. L’Iran conta grandi amici in Russia, in Europa e tra i democratici americani ed è in buona forma economica grazie all’accordo sul nucleare che ha posto termine alle sanzioni.

Il petrolio ha reagito nel passato recente a crisi di produzione in Libia e Nigeria con qualche dollaro di rialzo. Una crisi in Arabia provocherebbe rialzi ben maggiori e occorrerebbero comunque settimane ai produttori americani per cercare di compensare l’eventuale minore produzione saudita.

Fonte: qui