US – Saudi Oil Price Manipulation Backlash & The Inevitable Global War
by Matthias Chang on 04-12-2014
| BRussells Tribunal |
A military coup was launched in Ukraine. On the assumption that they have total control of Ukraine, NATO became arrogant and started to deploy military assets in frontlines of Eastern Europe.
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Anyone reading the mainstream media will have difficulty connecting the dots and getting the big picture so as to arrive at the right conclusions. A tremendous amount of information needs to be collated and analysed before we get a vague idea of what have transpired. We need also to analyse the actions of global leaders and compare and contrast with their published statements. The effects of short term actions and or policies are additional indications of the ultimate intentions of the geopolitical players in the overall scheme of things.
The events that have unfolded in the past few weeks have added an urgency to arrive at the right conclusion and to make preparations to face the inevitable eventualities.
What we are about to confront in 2015 will come as a surprise to many.
We hope and pray that we are wrong in our analysis. We invite you to consider the facts and take actions accordingly to protect your family.
The stark reality is that global war is looming on the horizon!
We are of the view that the issue is not “If” but rather “when” such a war would be unleashed.
It has been a difficult decision for us to warn our readers now and not later as our credibility is at stake. The team at Future Fast-Forward have spent years building our reputation as a source for independent, objective and reliable analysis, unsupported by any external funds - absolutely zero external funding of any kind.
If at this point, you are of the view that the threat of war is a big yarn, stop reading and move on. But, on the other hand if our past record is any measure of reliability, we hope you will finish reading this article.
CONNECTING THE DOTS
The US is bankrupt and cannot pay its debts
Jack Lew in his testimony before the Senate Finance Committee in October, 2013 told Congress why the Treasury has no choice but to constantly issue new debt. He said,
“Every week we roll over approximately $100 billion in US bills. If US bondholders decided they wanted to be repaid rather than continuing to roll over their investments, we could unexpectedly dissipate our entire cash balance… There is no other plan other than raising the debt limit that permits us to meet all of our obligations.”
Lew went on to say,
“Let me remind everyone, principal on the debt is not something we pay out of our cash flow of revenues. Principal on the debt is something that is a function of the markets rolling over.”
2015 fiscal year began some eight weeks ago and on November 26, 2014 the US Treasury had to issue over $1trillion of new debts in order to pay off Treasury securities that were maturing as well as to cover the deficit spending. As at end October, 2014, the total Federal debt was $17,937,160,000,000 (i.e. $17.9 trillion) of which only $1,547,073,000,000 are long term bonds that mature in 30 years with average interest rates at 4.919 per cent. Some $8,192,466,000,000 of debts were short term debts that mature between 2 to 10 years with average interest rates of 1.807 per cent (source: Treasury Monthly Statement). Finally, there are $1.4 trillion Treasury bills (maturing between a few days and 52 days) with an average interest rate of 0.056 per cent.
If the Treasury were to convert the $1.4 trillion bills into 30 year bonds at existing rates, interest on the debt would increase 88 fold. ( For an in depth analysis see CNS News, Ponzi: Treasury Issues $1T in New Debt in 8 weeks - to Pay Old Debt by Terence P. Jeffrey.)
It is the rolling over of these short term debts that have caused the Treasury to issue new debts in the first eight weeks of 2015 fiscal year! And there is just no way for the Treasury to convert these short term debts to long term debts.
Consequences of Plunging Oil Price
It has been reported that the US and the Saudis entered a secret deal to plunge the oil price to destroy Russia’s and Iran’s economy. Today, we have seen oil price plunged to a four year low, with WTI crude oil at $69 and Brent crude oil at $72.
This is the retaliation by the US against Russia and President Putin’s leadership in the de-dollarisation of global trade, specifically trade in crude oil.
William Engdahl correctly observed:
“The strategy is similar to what the US did with Saudi Arabia in 1986 when they flooded the world with Saudi oil, collapsing the price to below $10 a barrel and destroying the economy of then Soviet ally, Saddam Hussein in Iraq and, ultimately, of the Soviet economy, paving the way for the fall of the Soviet Union.”
“Today, the hope is that a collapse of Russian oil revenues, combined with select pin-prick sanctions designed by the US Treasury’s Office of Terrorism and Financial Intelligence will dramatically weaken Putin’s enormous domestic support and create conditions for his ultimate overthrow.”
“It is doomed to fail for many reasons, not the least, because Putin’s Russia has taken major strategic steps together with China and other nations to lessen its dependence on the West. In fact the oil weapon is accelerating recent Russian moves to focus its economic power on national interests and lessen dependence on the Dollar system.”
“If the dollar ceases being the currency of world trade, especially oil trade, the US Treasury faces financial catastrophe. For this reason, I call the Kerry-Abdullah oil war a very stupid tactic.”
More importantly, this strategy has now backfired on the US. Leonid Fedun, the Vice-President of OAO Lukoil observed,
“OPEC policy on crude production will ensure a crash in the US shale industry.”
If one needs an example to illustrate the idiom – “cut off your nose to spite your face”, this is an apt illustration!
Several analysts have commented that many businesses are in fact fleeing shale oil extraction whether due to poor profitability, as in Texas, in the US Northeast, in Poland; opposition to extraction in England and in Romania… Oil below $80 a barrel is beginning to spread panic and already drilling has slowed down and companies are selling assets to bail themselves out as many are highly indebted.
Wolf Richter paints a more detail nightmare scenario:
The US shale oil revolution is bleeding as well. Shares across the board are getting hit, many of them outright eviscerated. If the word “plunge” occurs a lot, it’s because that’s what these stocks did on Friday.
- Goodrich Petroleum plunged 34% on Friday; down 80% from June.
- Sanchez Energy plunged 29.5% on Friday, down 71% from June.
- Clayton Williams Energy plunged 25.6% on Friday, down 61% from May.
- Callon Petroleum plunged 18.6% on Friday, down 60% from June.
- Laredo Petroleum plunged 33.5% on Friday, down 66.5% from June.
- Oasis Petroleum plunged 27.2% on Friday, down 68% from July.
- Stone Energy plunged 24.1% on Friday, down 68% from April.
- Triangle Petroleum plunged 25.6% on Friday, down 62% from June.
- EP Energy plunged 25.3% on Friday, down 54% from June.
The list goes on. Even large oil companies got clobbered:
- Exxon Mobil down 4.2% for the day and 13% from July.
- ConocoPhillips down 6.7% for the day and 24% from July.
- Marathon Oil down 11% for the day and 31% from early September.
- Occidental Petroleum down 7.4% for the day and 24% from June.
- Anadarko Petroleum down 10.5% for the day and 30% since late August.
There is collateral damage.
With increasing amounts of oil being carried by oil trains, the railroads, which had been trading near their exuberant 52-week highs in large part due to the lucrative oil-train business, suddenly took a dive on Friday:
- Union Pacific -4.9%
- CSX -3.8%
- Canadian Pacific -8.0%
- Norfolk Southern -4.7%
- Kansas City Southern -5.1%
- Canadian National Railway -4.6%
- Burlington Northern Santa Fe, which is owned by Warren Buffett’s Berkshire Hathaway, isn’t publicly traded. But if the oil-train business gets hit, so will Buffett’s “stea.”.
But this pales compared to the carnage in tank-car builders. On Friday, they plunged:
- Greenbrier -15% for the day, -28% from its September high.
- American Railcar Industries -12.9% for the day, -28.3% since August.
- FreightCar America -7.5% for the day, -21% since September.
- Trinity Industries -11.3% for the day, -36% since September.
The oil price move is already cascading through American industry. Bondholders are next. The US fracking boom was built with debt, much of it junk rated. And this pile of debt is now at the confluence of the collapsing price of oil, high costs of production, and sharp decline rates of fracked wells that force drillers to continue drilling just to maintain their revenues. It’s a toxic mix.
The plunging oil price will also impact on US dollar denominated assets as there would be less Petro-dollars to be recycled. One of the first casualties would be the stock market. With less liquidity, oil exporting countries would have to cash out their investments to cushion short falls in oil revenues. This will add pressure on the bond markets as bondholders demand repayments instead of rolling over their investments. Jack Lew will have difficulty issuing new debts to pay off the old debts that would not be rolled over, as there would be fewer bondholders from oil exporting countries taking up the new issues.
In the result, the FED would have to launch another round of QE, hastening the collapse of the dollar as the global reserve currency.
Financial Warfare
The US cannot impose financial sanctions on countries, especially Russia and not expect any retaliation. Imposing sanctions is economic warfare, the means to destroy the target country’s economy. And Russia has taken up the challenge. What shocked Obama was the agreement by Putin at the recent OPEC meeting, in tandem with the Saudis, not to cut oil output to trigger an increase in the price of crude. This was Putin’s chess move against Obama’s / John Kerry’s game of Bingo! With one bold move the entire US and EU shale oil industry is brought to its knees. Though Saudi Arabia was complicit with the US in its attempt to scuttle Russia’s economy, the Saudis are not too unhappy with the outcome as US shale oil industry’s threat of gaining market share has been neutralised. In the final analysis, it is clear that the US is the ultimate loser, the victim of its own devious plot!
Ukraine & The Hot War
Whether a glass is half full or half empty is a matter of perception. To the players that plays Bingo (the glass is half empty), Russia is dependent on EU for its export of oil and gas and any disruption in the supply (i.e. pipelines in Ukraine) would result in a massive loss of revenue. Russia would be brought to her knees and submit to the diktat of the US. Bingo!
A military coup was launched in Ukraine. On the assumption that they have total control of Ukraine, NATO became arrogant and started to deploy military assets in frontlines of Eastern Europe.
What was not expected was the speed in which Russia took control over Crimea and the entire Black Sea. Checkmate!
Given all these setbacks, it is only to be expected that the Zionist Anglo-American war party would lash out in frustration and indulge in reckless provocations not only against Russia, but China and the other members of BRICS. But, this kind of hubris has not gone down well even with hard core establishment figures such as Doug Bandow, a former Special Assistant to President Ronald Reagan. It pays Obama to give some attention to what he has said recently:
“…Nor is Moscow threatening any core U.S. interest. The Obama administration objects to Russia’s support for Syria’s Assad regime, but former Secretary of State Hillary Clinton once called the Syrian president a reformer. Attempting to overthrow an important though illiberal Arab barrier to Islamic radicalism has proved to be a tragic mistake. No wonder President Putin refused to follow Washington’s inconsistent lead.”
“Moscow demands respect and focuses on border security. But allied behavior post-Cold War—expanding NATO up to Russia’s border, dismantling Serbia, treating Georgia as a military ally, holding open the possibility of NATO membership for Kiev, and trying to pull Ukraine away from Moscow into Europe’s economic orbit—has consistently ignored or threatened Russia’s interests. It doesn’t matter what Washington (and Brussels) intended. What matters is what Russian officials perceived Washington (and Brussels) to intend.”
“The principle danger to America comes from hubris, the conviction of U.S. elites that they have been anointed by God to run the world and their assumption that the rest of the world wants to be run by them. As a result, Washington constantly foments hostility, generates chaos, exacerbates conflicts, attempts social engineering, and makes other nations’ battles its own.”
The Dangerous Game of Chicken
Subject to further confirmation, it has been reported that following Russia’s decision at the OPEC meeting not to cut oil output, Obama gave notice to Russia that the US would launch three (3) SLBM towards (but not at) Russia’s far eastern pacific region to demonstrate US’s annoyance.
In response, President Putin has ordered over 2,000 top military officers to report for duty at the National Defence Control Centre. This command headquarters built in 2013 is also the control centre for Strategic Nuclear Forces. Russia has also completed the construction of 5,000 bomb shelters in Moscow. This is therefore indicative that Russia is prepared for an all-out global war by the US and NATO.
That this danger is real is obvious from the comments made by President Putin when he was quoted as saying,
“No matter what our Western counterparts tell us, we can see what’s going on. NATO is blatantly building up its forces in Eastern Europe, including the Black Sea and the Baltic Sea areas. Its operational and combat training activities are gaining in scale.”
No country in history has been successful in invading and occupying Russia.
It would be foolhardy for the Zionist Anglo-American war party to embark on such an adventure.
But, given the imminent collapse of the US economy and the demise of the dollar as the global reserve currency, it would be naïve of us to think that the war party would just give up their power. They will fight to the bitter end
Matthias Chang – Future Fast-Forward
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