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Libya and the essence of the agreement between OPEC and non-OPEC countries

Giancarlo Elia Valori

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[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] L [/yt_dropcap]ibya is planning to double its crude oil production next year. Although it has been an OPEC member since 1962, as well as the African country with the largest (and best quality) oil reserves, for obvious geopolitical reasons it has not been involved in the recent agreement between OPEC and non-OPEC countries, which favours the Russian Federation, reconnects Russia to Saudi Arabia, thus avoiding too close a link between Russia and Iran, and make Russia play a primary broker’s role in the Middle East.

Also Iran has no intention to sabotage this agreement on oil prices, which will certainly favour also the Shiite republic.

Conversely Nigeria and Libya itself have increased their production, while the whole non-OPEC area, Russia, Brazil, Canada, Norway and Kazakhstan have increased stocks, especially because a decrease in oil and gas demand is expected, starting from China.

According to the statements made by the President of the National Oil Corporation (NOC), Mustafa Sanalla, currently Libya extracts 708,000 barrels/day, but production is expected to soon reach 900,000 and level off at around 1 million barrels per day in late 2017.

It is worth recalling that, pending the crazy and senseless Libyan civil war, production had fallen to 200,000 barrels per day.

Later it was NOC itself to deal with the various armed groups deployed to patrol the pipelines in exchange for considerable money payments and resorting to the effective support of General Khalifa Haftar’s forces.

In fact, Libya’s new presence on the global oil market was made possible by an agreement reached last September between NOC and General Khalifa Haftar, who holds power over most Libyan ports and, above all, on Ras Lanuf and Es Sider.

As already said, Libya was not involved in the agreement between OPEC and non-OPEC countries, along with Nigeria and Iran which, however – as stated by the Oil Minister, Zangrneh – supports the process of controlled reduction of the Vienna-based cartel’s oil production and of the even larger oil production of the non-OPEC area.

For the time being, the agreement is operating particularly between Russia, Saudi Arabia, Qatar and Venezuela.

Moreover, for the first time since 2012, few days ago Iran resumed its oil exports to Europe.

If the agreement between OPEC and non-OPEC countries works, Iran will have every interest in becoming an integral part of it.

If Saudi Arabia – albeit unwillingly – withdraws 4.5% of its daily oil production from the market, equivalent to 500,000 barrels a day, all the non-OPEC area will cooperate and contribute to this bullish operation for a total of 600,000 barrels a day, while the Russian Federation is ready to cut its daily production by 300,000 barrels.

Hence, with specific reference to Libya, a quick economic revival is expected – driven, as usual, by oil and gas – which will certainly not bring back the country to the glories of Muammar El Gaddafi’s leadership, with its 1.6 million barrels a day, but will certainly allow to somehow rebuild this poor and very unfortunate country.

Hence Libya as a sort of oil “replacement economy” for the rest of OPEC, which will allow to improve its economy but could even weaken – and virtually stultify – the OPEC and non-OPEC countries’ efforts to make the oil barrel price rise again.

Nevertheless we do not believe that NOC will shoot itself in the foot. Quite the reverse. We are certain that Libya will follow the rise on the markets with careful daily adjustments of its oil production.

Furthermore, in the second half of 2017, nothing prevents OPEC from adapting to another further decrease in oil production. If an oil barrel price of 60 US dollars were recorded – as is likely – also Iran would have an interest in participating in the process.

So far Iraq has lobbied to avoid having to enter into the agreement between OPEC and non-OPEC countries, considering that it must back a military and social effort against terrorism and the so-called Al Baghdadi’s “Caliphate”, but it eventually agreed to a daily ceiling of 4.35 million barrels a day.

Russia pressed for the agreement also with Iraq and, despite extraction restrictions, probably the increase above 60 dollars a barrel will allow high liquidity.

According to the independent analysts of this particular market, currently compliance with the agreement accounts for 90% approximately. This will enable Saudi Arabia, which has agreed to make the largest cuts, to stabilize the Middle East region. It will also enable Russia to become the great player and mediator in the Middle East and even the United States to make the oil shale extraction very profitable.

According to the most reliable economic intelligence analyses, however, the break-even point of the US shale oil is well under 30 US dollars per barrel – and this is the real Saudi Arabia’s problem.

Saudi Arabia did everything – even cutting the oil barrel price down, as until recently – to eliminate the North American competition since the very beginning, although the shale oil production cost in the United States varies greatly from one region to the other.

Saudi Arabia dreams of reducing the number of companies operating in the US shale oil sector to fewer than ten, so as to later try to achieve a vertical consolidation of that market with some large international players.

On the other hand, the Saudi oil production cost is very low and the country can afford a trade war with the US shale oil as long as it wants.

With specific reference to natural gas, which has a structurally different market compared to the oil one, a trade war is foreseen in the near future between some US operators and the EU traditional Russian gas suppliers, while Gazprom will take remedial measures by flooding European countries with low-cost natural gas.

Hence another trade war looming over the energy systems, not to mention the fact that if very low oil prices had continued to dominate the markets for another two years, Saudi Arabia would have gone into default in mid-2018 – and the 30 US dollars a barrel prolong Saudi Arabia’s life by approximately six months.

The other “poor” OPEC countries are in the same situation as the rich Saudi Arabia.

Saudi Arabia, however, has favoured the too low oil prices with a view to destroying the US and, above all, the Russian production.

Now, with the new agreement, the OPEC area becomes a point of reference for Russian geopolitics, and even Libya will increasingly operate in close connection with Russia, considering that it was exactly the Russian pressure that led to the “finalization” of the Algiers agreement and, later, to the Doha agreement.

Nevertheless Saudi Arabia, which has monetary reserves to the tune of 655 billion US dollars, cannot accept – for a long period of time – even a barrel price above 60 US dollars, unless it cuts its public spending and starts its external indebtedness.

Furthermore also Russia has the problem of the impoverishment of its oil fields in Western Siberia. Hence the production reduction, which for Moscow is not high, is a blessing for prices and for extending the lifecycle of oil wells – not to mention the fact that the sanctions, imposed as a result of the Ukrainian issue, blocked the arrival of modern extraction technologies in Russia, with the related increase in production costs.

Therefore if – thanks to this agreement with OPEC – Vladimir Putin succeeds in reaching the level of 100 US dollars per barrel within a time frame acceptable to international investors, the new “big game” in Central Asia and the Greater Middle East will begin.

Saudi Arabia began to extract large and unexpected oil quantities in the mid-1980s, on the basis of a political and financial agreement with the United States, which further destroyed the Soviet economy – but now the mechanism is working exactly in the opposite way.

Currently the Russian oil barrel production cost is equal to 5.4 US dollars. Saudi Arabia’s cost is only 3 US dollars, while obviously the next start of offshore extraction activities will only increase production costs.

In Libya, the production cost – net of the country’s political disaster – is similar to the Saudi one, but data shows that, without an increase – as expected – in production and prices, the Libyan State, or what remains of it, would have no more funds by the end of this year.

To some extents this is also the Russian problem.

Russia’s federal deficit amounts to 1.5 trillion rubles (23.2 billion US dollars) and, according to the relevant Ministers, the Russian Reserve Fund could dry up just at the end of 2017.

Hence, without the oil price recovery, the whole Russian strategic architecture would go to ruin, thus causing an even more severe geopolitical disaster than the one which led to the USSR collapse – as Putin put it.

However, as we have seen, if the agreement between OPEC and non-OPEC countries works – and is even strengthened during the year – the stabilization (and diversification) of the Russian economy and, consequently, the stabilization of the entire Middle East crisis arc, will be a reality.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

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Middle East

Erdogan’s Calamitous Authoritarianism

Dr.Alon Ben-Meir

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Turkey’s President Erdogan is becoming ever more dangerous as he continues to ravage his own country and destabilize scores of states in the Middle East, the Balkans, and North Africa, while cozying up to the West’s foremost advisories. Sadly, there seems to be no appetite for most EU member states to challenge Erdogan and put him on notice that he can no longer pursue his authoritarianism at home and his adventurous meddling abroad with impunity.

To understand the severity of Erdogan’s actions and ambitions and their dire implications, it suffices to quote Ahmet Davutoglu, formerly one of Erdogan’s closest associates who served as Minister of Foreign Affairs and subsequently Prime Minister. Following his forced resignation in May 2016 he stated “I will sustain my faithful relationship with our president until my last breath. No one has ever heard — and will ever hear — a single word against our president come from my mouth.”

Yet on October 12, Davutoglu declared “Erdogan left his friends who struggled and fought with him in exchange for the symbols of ancient Turkey, and he is trying to hold us back now…. You yourself [Erdogan] are the calamity. The biggest calamity that befell this people is the regime that turned the country into a disastrous family business.”

The stunning departure of Davutoglu from his earlier statement shows how desperate conditions have become, and echoed how far and how dangerously Erdogan has gone. Erdogan has inflicted a great calamity on his own people, and his blind ambition outside Turkey is destabilizing many countries while dangerously undermining Turkey’s and its Western allies’ national security and strategic interests.

A brief synopsis of Erdogan’s criminal domestic practices and his foreign misadventures tell the whole story.

Domestically, he incarcerated tens of thousands of innocent citizens on bogus charges, including hundreds of journalists. Meanwhile he is pressuring the courts to send people to prison for insulting him, as no one can even express their thoughts about this ruthlessness. Internationally, Erdogan ordered Turkish intelligence operatives to kill or smuggle back to the country Turkish citizens affiliated with the Gülen movement.

He regularly cracks down on Turkey’s Kurdish minority, preventing them from living a normal life in accordance with their culture, language, and traditions, even though they have been and continue to be loyal Turkish citizens. There is no solution to the conflict except political, as former Foreign Minister Ali Babacan adamantly stated on October 20: “… a solution [to the Kurdish issue] will be political and we will defend democracy persistently.”

Erdogan refuses to accept the law of the sea convention that gives countries, including Cyprus, the right to an Exclusive Economic Zone (EEZ) for energy exploration, while threatening the use of force against Greece, another NATO member no less. He openly sent a research ship to the region for oil and gas deposits, which EU foreign policy chief Josep Borrell called “extremely worrying.”

He invaded Syria with Trump’s blessing to prevent the Syrian Kurds from establishing autonomous rule, under the pretext of fighting the PKK and the YPG (the Syrian Kurdish militia that fought side-by-side the US, and whom Erdogan falsely accuses of being a terrorist group).

He is sending weapons to the Sunni in northern Lebanon while setting up a branch of the Turkish Cooperation and Coordination Agency (TIKA) in the country—a practice Erdogan has used often to gain a broader foothold in countries where it has an interest.

While the Turkish economy is in tatters, he is investing hundreds of millions of dollars in the Balkans, flooding countries with Turkish imams to spread his Islamic gospel and to ensure their place in his neo-Ottoman orbit. Criticizing Erdogan’s economic leadership, Babacan put it succinctly when he said this month that “It is not possible in Turkey for the economic or financial system to continue, or political legitimacy hold up.”

Erdogan is corrupt to the bone. He conveniently appointed his son-in-law as Finance Minister, which allows him to hoard tens of millions of dollars, as Davutoglu slyly pointed out: “The only accusation against me…is the transfer of land to an educational institution over which I have no personal rights and which I cannot leave to my daughter, my son, my son-in-law or my daughter-in-law.”

Erdogan is backing Azerbaijan in its dispute with Armenia (backed by Iran) over the breakaway territory of Nagorno-Karabakh, which is inhabited by ethnic Armenians and has been the subject of dispute for over 30 years.

He is exploiting Libya’s civil strife by providing the Government of National Accord (GNA) with drones and military equipment to help Tripoli gain the upper hand in its battle against Khalifa Haftar’s forces. Former Foreign Minister Yasar Yakis said in February 2020 that “The unclear Turkish foreign policy by Erdogan may put Turkey in grave danger due to this expansion towards Libya.”

He is meddling in the Israeli-Palestinian conflict in an effort to prevent them from settling their dispute unless Israel meets Palestinian demands. He granted several Hamas officials Turkish citizenship to spite Israel, even though Hamas openly calls for Israel’s destruction.

He betrayed NATO by buying the Russian-made S-400 air defense system, which seriously compromises the alliance’s technology and intelligence.

He is destabilizing many countries, including Somalia, Qatar, Libya, and Syria, by dispatching military forces and hardware while violating the air space of other countries like Iraq, Cyprus, and Greece. Yakis said Turkey is engaging in a “highly daring bet where the risks of failure are enormous.”

Erdogan supports extremist Islamist groups such as the Muslim Brotherhood and Hamas, and an assortment of jihadists, including ISIS, knowing full well that these groups are sworn enemies of the West—yet he uses them as a tool to promote his wicked Islamic agenda.

He regularly blackmails EU members, threatening to flood Europe with Syria refugees unless they support his foreign escapades such as his invasion of Syria, and provide him with billions in financial aid to cope with the Syrian refugees.

The question is how much more evidence does the EU need to act? A close look at Erdogan’s conduct clearly illuminates his ultimate ambition to restore much of the Ottoman Empire’s influence over the countries that were once under its control.

Erdogan is dangerous. He has cited Hitler as an example of an effective executive presidential system, and may seek to acquire nuclear weapons. It’s time for the EU to wake up and take Erdogan’s long-term agenda seriously, and take severe punitive measures to arrest his potentially calamitous behavior. Sadly, the EU has convinced itself that from a geostrategic perspective Turkey is critically important, which Erdogan is masterfully exploiting.

The EU must be prepared take a stand against Erdogan, with or without the US. Let’s hope, though, that Joe Biden will be the next president and together with the EU warn Erdogan that his days of authoritarianism and foreign adventurism are over.

The views expressed are those of the author.

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Middle East

Syrian Refugees Have Become A Tool Of Duplicitous Politics

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Syrian refugees in Rukban camp

Since the beginning of the conflict in Syria the issue of Syrian refugees and internally displace has been the subject of countless articles and reports with international humanitarian organizations and countries involved in the Syrian conflict shifting responsibility for the plight of migrants.

The most notorious example of human suffering put against political games is the Rukban refugee camp located in eastern Syria inside the 55-km zone around Al-Tanf base controlled by the U.S. and its proxies.

According to official information, more than 50,000 people, mostly women and children, currently live in the camp. This is a huge number comparable to the population of a small town. The Syrian government, aware of the plight of people in Rukban, has repeatedly urged Washington to open a humanitarian corridor so that everyone can safely return home. However, all such proposals were ignored by the American side. U.S. also refuse to provide the camp with first aid items. Neighbouring Jordan is inactive, too, despite Rukban being the largest of dozens other temporary detention centres in Syria, where people eke out a meager existence.

At the same time, the problem is not only refugee camps. Syria has been at war for a decade. The country’s economy has suffered greatly over this period, and many cities have been practically grazed to the ground. Moreover, the global coronavirus epidemic didn’t spare Syria and drained the already weakened economy even more. However, Damascus’ attempts of post-war reconstruction and economic recovery were undermined by multiple packages of severe sanctions imposed by the U.S. At the same time, U.S.-based human rights monitors and humanitarian organizations continue to weep over the Syrian citizens’ misery.

The situation is the same for those refugees who stay in camps abroad, especially in countries bordering on Syria, particularly Jordan and Turkey. Ankara has been using Syrian citizens as a leverage against the European states in pursuit of political benefits for a long time. No one pays attention to the lives of people who are used as a change coin in big politics. This is equally true for Rukban where refugees are held in inhuman conditions and not allowed to return to their homeland. In those rare exceptions that they are able to leave, refugees have to pay large sums of money that most of those living in camp are not able to come by.

It’s hard to predict how long the Syrian conflict will go on and when – or if – the American military will leave the Al-Tanf base. One thing can be said for sure: the kind of criminal inaction and disregard for humanitarian catastrophe witnessed in refugee camps is a humiliating failure of modern diplomacy and an unforgivable mistake for the international community. People shouldn’t be a tool in the games of politicians.

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Middle East

Is Syria Ready For Second Wave Of COVID-19?

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©UNICEF/Delil Souleiman

Despite a relative calm that has been holding on the front lines of the Syrian conflict since the beginning of the year, Syria had to face other equally – if not more – serious challenges. The spread of COVID-19 virus in the wake of a general economic collapse and a health care system battered by nine years of war threatened Syria with a death toll as a high as that of resumed military confrontation. However, the actual scale of the infection rate turned out to be less than it was expected considering the circumstances.

Although Syria did not have much in resources to mobilize, unlike some other countries that were slow to enforce restrictions or ignored them altogether, the Syrian authorities did not waste time to introduce basic measures that, as it became obvious in hindsight, proved to be the most effective. A quarantine was instituted in the areas controlled by the government, all transportation between the provinces was suspended, schools and universities were temporarily closed and face masks were made obligatory in public spaces.

As a result, official data puts the number of people infected with COVID-19 in the government areas at modest 4,457 while 192 people died of the infection. In turn, the Autonomous Administration of North and East Syria announced that 1,998 people contracted the virus. The data on the infection rate in the opposition-controlled areas in Idlib and Aleppo is incomplete, but the latest number is 1,072. Compared to the neighboring Turkey with  9,000 of deaths of COVID-19, Syria seems to be doing relatively well.

Tackling the virus put the already embattled health care system under enormous strain. Syrian doctors are dealing with an acute shortage of medicines and equipment, and even hospital beds are in short supply. Over 60 medical workers who treated COVID-19 patients died.

The situation is worsened even further by the economic hardships, not least due to the sanctions imposed on Syria by the U.S. and the European states. Syrian hospitals are unable to procure modern equipment necessary for adequate treatment of COVID-19, most importantly test kits and ventilators.

The economic collapse exposed and aggravated many vulnerabilities that could have been easily treated under more favorable circumstances. A grim, yet fitting example: long queues in front of bakeries selling bread at subsidised prices, that put people under the risk of catching the virus. Many Syrians are simply unable to avoid risking their health in these queues, as an average income is no longer enough to provide for a family.

Moreover, despite a nation-wide information campaign conducted with the goal of spreading awareness about means of protections against COVID-19 like social distancing and mask-wearing, for many Syrians the disease is still stigmatized, and those who contracted it are often too ashamed to go to a hospital or even confess to their friends. As consequence, a substantial number of cases goes unreported.

With the second wave of COVID-19 in sight, it is of utmost importance that the work of health care professionals is supported, not subverted by the citizens. Otherwise Syria – and the world – may pay too high a price.

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