Recently, I wrote on these pages that a remarkable turnaround was taking place in the President’s fortunes. It’s an impressive display of rising from the depths of falling popularity last fall, and it is starting to be felt in many areas, with major impacts on the future of energy.
At his lowest point, the U.S. President was widely regarded as a lame duck, shedding influence and power, and on a down-hill slide.
This was followed by a number of embarrassments, with one of the worst coming from Russia, when it chose to provide sanctuary to Edward Snowden who revealed that the U.S. was hacking the strategic communications of its closest allies.
More damaging, the revelation came at the worst possible time for the U.S., seriously discrediting its campaign to enlist allies against alleged Russian and Chinese hackers.
This was followed by another embarrassment where the U.S. utterly failed to prevent U.S. allies from joining the Chinese-sponsored Asian infrastructure bank. It seemed that the doomsayers were proving correct about America's decline and fall.
Since then, Obama has been on a roll, with victories in Congressional trade agreements and at the Supreme Court with decisions that removed legal and constitutional challenges to the President's health program, and gay marriage.
Even more surprising was the President's ability to marginalize the powerful lobbies and opponents of these agreements, including hard-liners in the U.S., Iran, Israel, and the Gulf Kingdoms.
Not Your Father's Sanctions
In the past, the effectiveness of sanctions was often questioned because of the difficulty of tracking compliance. The result was that targeted countries easily hid and continued banned activities. The sanctions golden rule: if you can't track them, you can't enforce them.
But current sanctions are nothing like they were in the past. The difference is that technology has lifted surveillance to unprecedented levels. What with spy satellites, drones, and sophisticated listening devices, the U.S. now has the capacity to pierce nearly every form of communication and transaction. That is the secret weapon which enables the west to impose iron bound constraints that can level just about any economy.
Whether the participants in the recent negotiations will comply with the terms of their agreements, only the future can tell. But there's little question that none would have come to the table without the sanctions.
Recall also that only first stage sanctions had been imposed on Cuba, Iran, and Russia, with each nation clearly warned that far worse lay in store if targeted activities continued.
The message was hardly lost on the ever pragmatic President Putin, who despite brave words of resistance, suddenly saw that it was to his country's benefit to cooperate with the U.S. and its allies, particularly in the Iranian nuclear negotiations, and the ongoing war in Syria and Iraq.
Nor was the message lost on China either, who also suddenly found it in their interest to stop island building in the South China Sea, and began negotiations with its neighbors over territorial claims, as urged by the U.S. and its allies in the region. China 'acting poor' when Russia recently came calling for financial help also smacked of western influence.
Contrary to their rhetoric, Iran and Russia were deeply chastened by sanctions, even more so by the oil price collapse, and have agreed to major concessions. It's no accident that both countries are also becoming ever more important in the world's anti-terrorism campaign, an effort clearly being coordinated with the U.S.
Playing into Obama's hand was a different sort of victory taking place during the same period. That was the Saudis leading OPEC to defend their traditional market share by flooding the oil markets.
The ensuing trade war against competitors has caused every other major oil producing country and oil companies to cut future development plans. Importantly, the oil glut reinforced the damaging effects of sanctions on targeted countries.
Some conspiracy theorists have claimed that the U.S. Administration conspired with the Saudi King to create an oil glut by over-producing, directly aimed at crashing the Russian economy, where energy accounts for nearly 50 percent of its budget.
U.S. Investment Bank, Morgan Stanley recently reported that the Saudi's were over-producing by some 1.5 million barrels per day in a market with a surplus of around 800,000 barrels per day.
The Bank added that the oil markets' fall could be worse and last longer than the one created 1986, in which Saudi Arabia grew tired of shouldering the burden of production cuts and decided to flood the market in an effort to pursue market share.
With Iran expected to return to markets, thereby adding to the glut, the bank also stated that these current moves made the risk in oil markets "historically unanalyzable," a red alert to the investment community.
Oil Glut Ricochet
The Saudis enthusiastically took up the opportunity to lower global energy prices, ostensibly claiming they were not aiming to kill off rivals in Russia or the U.S., but merely that they were not the highest cost producer.
There were also other unexpected reversals. It has been widely reported that the Gulf Kingdoms are outraged over the U.S. drawing closer to Iran, as well as the U.S. distancing itself from the wars in the Middle East. Evidence for this view can be found in the Saudis' multi-billion dollar deals with the Russia, which fly in the face of U.S./EU sanctions.
The clincher in the Russian-Saudi entente may just have occurred with the sudden ISIS terrorist attacks in Saudi Arabia.
The Saudis are all too aware of the threat that ISIS presents, the monster that some claim they created, and are now badly in need of military assistance, especially with the U.S. declining full scale military engagement in the region.
The Glut's Toll
The result of the ensuing glut is a fast declining industry that is now willingly accepting new production cutbacks, while oil producing countries like Russia, Canada and Australia, are edging dangerously close to recession, with their currencies hitting six year lows.
As reported by CNBC, global job losses in the oil industry have reached over 141,200, with severe ripple effects across supporting industries. The U.S. is by no means immune to the downtrend, where current lay-offs in the energy field are approaching 71,000, and expected to climb.
U.S. Strategy for the Middle East
If, as it seems, Obama is back on top as a world leader, it's important to understand his overall strategy and the likelihood of success.
The consensus amongst energy mavens is that if the Iran nuclear deal eventually leads to a withdrawal of sanctions, the results will be increased Iranian supplies, forcing prices lower by some $10 per barrel, according to World Bank estimates.
But Iran's nuclear deal is about much more than the price per gallon. What the U.S. and its allies are trying to accomplish is no less than the reversal of political hostilities that have marginalized Iran for over thirty years and fueled hostility across the region.
As the President recently stated, the nuclear agreement is also meant to restore Iran as a regional leader in the Mid-East and turn a hostile relationship into at least a neutral one. That could go a