Sic Semper Tyrannis 2008

The Oil Meeting at Jeddah - 2

"Producers and consumers should ``wrest control'' of trading in the oil by agreeing to restrict prices, Chidambaram told energy ministers in Jeddah, Saudi Arabia, according to speech notes e-mailed from his ministry.

Crude oil touched a record $139.89 a barrel on June 16 as investors bought commodities to hedge against a weakening dollar and concern mounted that demand is growing faster than supply. Chakib Khelil, president of the Organization of Petroleum Exporting Countries, said today there isn't a supply shortage.

``Surely demand and supply cannot explain what has happened over the last 12 months,'' Chidambaram said. ``Oil prices were $70 a barrel in August 2007 and how is it that they've doubled when there has been no dramatic change in demand?''

Oil prices surged as financial institutions invested in the commodity through ``unregulated and highly opaque'' transactions, he said. "  Bloomberg

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Chidambaram is a socialist to be sure, but his emphasis on the role of "concern" in this matter is well placed. Engdahl's article is good background on this whole business. pl

http://www.bloomberg.com/apps/news?pid=20601080&sid=a1soSwhkWDkI&refer=asia

http://globalresearch.ca/index.php?context=va&aid=8878

http://en.wikipedia.org/wiki/F._William_Engdahl

The Oil Meeting at Jeddah

"Saudi Arabia will press consumer nations at an oil meeting in Jeddah this week to take action to curtail the speculation it sees as a major factor behind high oil prices, a newspaper reported on Saturday.

"Governments have a role in organising (oil) markets and structuring them in a way that prevents speculators behaving in a manner that has led oil prices to reach their current levels," Deputy Oil Minister Prince Abdulaziz bin Salman was quoted as saying in the Saudi-owned Asharq al-Awsat daily.

The prince was discussing a paper Saudi Arabia will present to an unprecedented meeting of consumer and producer countries in Jeddah on Sunday. He said the Saudi paper had been prepared in coordination with the oil producer cartel OPEC. "  Reuters

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We are about to enter a period in which a major lesson will be taught to the world regarding the fact that market prices are more a product of mass perception and a form of hysteria than they are of "hard data."

Greed feeds greed.  Prices in oil have been rising because there was money to be made in the atmosphere of "casino" gambling fostered by the impatience of the young and ruthless adventurers who dominate the derivatives markets.

In the "make or break" games that are played in those markets perception is more important than reality.  The impressions made on each other by "players" at lunch in restaurants where the amount of the check would feed families for weeks or months in the developing world are more important than any statistics on supply and demand.

The US government has now focused on the men in mega suits from Italy.  Some have been indicted, others will walk the "perp" walk in a process of reduction of the the risk of unrest that has been the unintended effect of the functioning of unrestrained commodity futures markets.

The Saudis are going to lend a hand in that process this weekend.  The amount of the increase in their production is not significant as an incremental rise in the world's oil supply.  Its significance lies in their stated intent to cripple the process of parasitic speculation in a vital commodity.  pl

http://uk.reuters.com/article/oilRpt/idUKL2132604120080621

http://www.bloomberg.com/apps/news?pid=20601087&sid=aMTWS1Pzs0Jc&refer=home

Overflight Clearance for an Israeli strike at Natanz

"The exercise involved Israeli helicopters that could be used to rescue downed pilots, the newspaper reported.

The helicopters and refuelling tankers flew more than 1,400km (870 miles), roughly the distance between Israel and Iran's main uranium enrichment plant at Natanz.

The New York Times reported that Israeli officials declined to discuss the details of the exercise.

A spokesman for the Israeli military said the air force "regularly trains for various missions in order to confront and meet the challenges posed by the threats facing Israel". "  BBC

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We went over this once before in a study of what Israeli routes would likely be in an attack on Natanz.  Rick Francona has looked at this on his blog.  He is a skilled and experienced air force officer and I trust his judgment as I always did.

My thoughts on the overflight clearance issue:

"Overflight Clearance" is the granting of permission for one country's military or civilian aircraft to fly over and through the air space of another sovereign political entity.  For one country to overfly the territory of another without permission is a clear violation of international law which invites engagement by air defense forces of the country overflown or any country that has effective authority to grant or deny overflight permission.

"could be used to rescue downed pilots"  Really?  Where?  Routes to and from Natanz would have to cross some combination of the territories of Jordan, Iraq, Saudi Arabia or Turkey.

Jordan and Saudi Arabia are extremely unlikely to grant overflight clearance for this purpose.  Presumably this would include Search-Air Rescue (SAR) missions over their territory as well as the strike itself.  Egress from Iran after a strike might well involve Israeli aircraft with combat damage or mechanical problems.  Downed aviators in Jordan, Iraq or Saudi Arabia would be a distinct possibility.  Are the Israelis envisioning fighting their way into and out of these countries on SAR missions?  Would the United States, Jordan, Saudi Arabia or Iraq allow damaged Israeli aircraft to land on airfields in Iraq or these other countries?

Is Turkey going to grant Israel overflight clearance for a routing of the strike or SAR that would enter Turkey at its Mediterranean coast near Iskendurun, turn east to reach Iranian kurdistan, then south to Natnz and return by same route?  Opinions?

Is a Syrian route a realistic possibility?  Certainly the Syrians are not going to grant such overflight permission.  Was the "celebrated" Israeli mission in Syria a while back a test to see how difficult it would be to use Syrian airspace?

Finally, there is the issue of whether or not the Israelis would have overflight clearance for Iraqi airspace at all.  At present, the US exercizes airspace control for Iraqi airspace under the authority it has from the UN for the coalition's operations.  This authority from the UN is to expire soon.  Because of this (and other reasons), the US is seeking acceptance from the Iraqi government for two agreements. One is a SOFA agreement and the other amounts to a mutual defense and cooperation pact.  Among the things the US wants under these agreements is a continuation of its authority over Iraqi airspace.  The Iraqis are reluctant to concede this as well as a number of other points.

I wonder why.  pl

http://news.bbc.co.uk/2/hi/middle_east/7465170.stm

Who are the Target Audience?

"US military officials on Wednesday accused a Shiite militant group of carrying out a truck bombing in northwestern Baghdad on Tuesday evening that killed at least 65 people, the deadliest attack in the capital since March.

The accusation was startling because the bombing in the Hurriyah neighborhood had the hallmarks of earlier large-scale attacks in predominantly Shiite areas that had been attributed to Sunni insurgent groups such as al-Qaeda in Iraq.

A U.S. military spokesman said intelligence reports indicate that Haydar Mehdi Khadum al-Fawadi, the leader of a Shiite "special group," planned the bombing in an effort to fuel animosity toward Sunnis in the largely Shiite district. The U.S. military uses the term special groups to describe what it says are smaller Iranian-backed militias.

The bombing followed aggressive U.S. and Iraqi military operations against Shiite militias and the so-called special groups in Baghdad. If residents could be convinced that Sunni extremists are still killing Shiites indiscriminately, they might also be convinced of the ongoing need for protection by militiamen."  Washpost

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In recent years the idea of lying to gain a propaganda advantage has become a popular concept among some people in the US armed forces.  That is a bad idea for many reasons.  To begin with lying is, in itself, a bad idea.  Abandonment of the truth is a corrupting and corrosive concept, a step on a path that leads to an inability to believe the statements of one's own people even within the armed forces.  Armies operate on a belief in the integrity of comrades.  Without that, only a fool will accept the risks involved in trusting the guidance given by one's superiors.  There are other reasons.  In the end the truth will normally become evident and when it does, the trust necessary to maintain the support of one's own public for a war effort is destroyed.  How foolish it is to risk that. 

Nevertheless, our neocon Jacobin "friends" love the idea of deception and manipulation and their influence on the armed forces expressed through the civilian government has corrupted the basic belief in truthfulness as the best policy.   Unfortunately, it is now plausible that the claim of Iranian responsibility for this attack on a predominately Shia market place in Baghdad may be a crude lie intended to support a propaganda campaign.  Is the claim of Iranian responsibility true?  Unfortunately, the "coin" of credibility has been spent to such an extent that the claim itself can not be believed without real proof.

Has the US government ever sought to manipulate opinion by deliberately using half truths or whole untruths?  Yes, it has, but the targets have by law been limited to foreign populations.  The danger inherent in doing such a thing has always been reflected in US public law.  We need to return to this policy.  pl

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/18/AR2008061800344.html

"Speculators accused of dictating oil prices"

"Just how much oil prices are being driven by speculation became clearer yesterday as regulators revealed that Wall Street dealers, hedge funds, pension funds and other speculators hold 70 percent of the leading oil futures contracts traded in New York.

The price on those contracts continued to defy gravity yesterday, with premium crude closing near $134 a barrel despite trends that in the past would have weighed down prices, including falling demand for oil in the United States and a strengthening U.S. dollar. Oil's seemingly relentless rise in the face of these trends has prompted charges that speculators have taken control of the market.

The latest estimate of how large the investor involvement in the market has become was provided by the Commodity Futures Trading Commission this week to the Senate Energy and Natural Resources Committee.

The commission previously said speculators constituted only 37 percent of the market, but at the committee's behest, the new estimate includes for the first time the 40 percent of oil futures contracts held by Wall Street dealers who have taken advantage of a regulatory loophole for "swap dealers" provided by the commission.

"Even 70 percent may represent a low-ball figure," as it includes only trading in the most popular crude-oil contract on the New York Mercantile Exchange - the benchmark premium crude West Texas Intermediate, said Bill Wicker, spokesman for committee Democrats. "  Washtimes

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I offer the opinion that the "fundamentals" of supply, demand and all the other undergraduate economics concepts that we all remember from long ago do not adequately explain the pricing process that now prevails in the oil and financial markets.

Investment in oil futures is not criminal.  It is not conspiratorial.  It is merely another aspect of the oh, so clever greed game played in the markets of New York and London.  Having operated on the fringes of that society of global "crap shooters" for a couple of decades, it seems very clear to me that all the expensively dressed and self assured youngish men who inhabit the hedge funds, etc. view the oil futures markets as just another sandbox to play in on the road to "making it big."

Yes.  There are long term supply problems in energy that must be solved soon.  No.  This years craziness in the price of oil is not a clear reflection of that problem.  pl

http://www.washtimes.com/news/2008/jun/18/speculators-accused-of-dictating-oil-prices/

"Bubble, bubble, toil and trouble..."

OK, folks. let's start a pool on where the price is going.  Remember, the argument is not about long term supply and demand.  The argument is about this year.  pl

http://finance.yahoo.com/tech-ticker/article/28315/Get-Used-to-Oil-Volatility----the-Bubble-May-Last-Longer-Than-Expected?tickers=STO,USO,OIL,DUG,XOM,COP,CVX

Hudna? - At Last

"Tuesday the two sides agreed to a six-month deal. He voiced confidence the latest violence would not hold up the start of the agreement to end constant bloodshed. "Implementation of the truce will begin at 6 a.m. (4 a.m. British time) on Thursday," said the official, who spoke on condition of anonymity because he was not authorised to announce an accord. A ceasefire would aim to end rocket and mortar bomb attacks on Israel from the Hamas-controlled Gaza Strip and Israeli raids in the territory. Israel has said it would continue preparations for broad military action should a truce fall apart. A senior Egyptian official was quoted by Egypt's Middle East News Agency as confirming the Palestinian official's information. A Hamas source had said announcement of a deal would be made by Egypt. Israel stopped short of confirming the timing of what it said would be an informal arrangement to halt fighting." Reuters

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The picture is of Omar Suleiman, the senior Egyptian official who negotiated the truce.

As I have written and said many times a truce of this kind is the only way to begin a process of gradual confidence building while moving forward in what may be very long negotiations.  Such a truce can be extended any number of times.

Let us hope that both sides have the good sense to observe this terms of this opportunity for actual progress.  pl

http://uk.reuters.com/article/worldNews/idUKL1760197120080617?ageNumber=1&virtualBrandChannel=0

King Abdullah and the speculators

"Saudi Arabia, Opec's largest oil producer, moved to take some of the heat out of rising fuel prices yesterday with plans to increase production next month.

The Saudi move followed a weekend of talks between the UN secretary general, Ban Ki-moon; the Saudi ruler, King Abdullah, and the country's oil minister Ali al-Naimi.

The news is expected to help depress the crude oil price, which hit a record high of $139 a barrel last week, ahead of an unprecedented meeting of oil producers and importers to be held in the Red Sea port of Jeddah on Sunday."  Guardian

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Sooo, the Saudi king is going to increase production at the margin on crude oil going into the spot market and this is expected to lower the market price on deliveries of crude to refiners.  That, in turn, is expected to cause a failure in confidence in the whole nasty complex of capitalist hedge fund managers, index fund managers, bankers, advisers to same, and individual mega-investors.  It is hoped/believed that this failure in confidence will cause the players to lose faith in their ability to pass the risk along to the greater fools waiting somewhere in speculator limbo.  After that set of developments the price per barrel is supposed to fall, a lot.  I believe this to be true.  We will assemble here afterwords to gloat, or not. 

A couple of things... 

- This declaration by the Saudis means that the Saudi gremlins (something like the gnomes of Zurich but more colorful and with bigger boats at Nice) believe that they can affect the price by doing this.  It is intuitively obvious that they thought that all through the time that they assured the cretins in the Bush Administration that they could not possibly increase oil production since they were already at the top of their production limit.  I seem to remember that some of you believed that.

- Believing that, they still did not choose to increase production enough to take the steam out of the commodity/financial market upward spiral in price.  That spiral gained speed as marginal scarcity fed the greed and confidence of the players.

- Now they are going to boost production because the accelerating rate of destruction of the world economy threatens everyone, including them.   Even 300 foot yachts can be threatened by instability.

-  Why did they play this game?  The Saudis are angry with us and have been for some time.  They are tired of being treated like poor relatives at the family reunion.  They are tired of being ignored in the matter of policy with regard to Shia triumphalism, Iran and the Palestinian question.  The Saudis don't care about that last one?  Only a neocon or a State Department hack toadying his way towards promotion would even try to believe it to be true that the Saudis do not care about Palestine or Jerusalem.  Ask the Saudis.

Foreign policy doesn't matter to the "little people?"  Ask yourself if that is true next time you fill up mama's Explorer. pl

http://www.guardian.co.uk/business/2008/jun/16/oil.saudiarabia

“the necessity to forgive.” McCain

Mr. McCain’s 1974 thesis, though, also revealed a welter of other emotions about his years as a prisoner of war, including a deep anger at those he considered collaborators, a tough-minded disdain for public hand-wringing about captives like himself, and a sharp impatience with the American government for failing to “explain to its people, young and old, some basic facts of its foreign policy.” But at the same time, Mr. McCain also urged that any military survival training should include lessons in what he called “the necessity to forgive.”  NY Times

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The Senior Service Colleges (War Colleges) are year long mid-career courses for the most promising officers.  Selection for attendance is by national board and the selection rates for officers are very, very low.   McCain as Lieutenant Commander was quite young to go to one of these as a student, but the Navy does things its own way.  There are some civilians from other parts of the government in each class.  They are there for "broadening" and to provide some successful civil servants for the officers to interact with in an educational environment.  Some of the officers have spent their careers to that point in regimental duties and know few civil servants.  Attendance at such a course is a major "gate" in a career and is as much therapy and a chance for familiy repair as a chance to do research.  A War College "thesis" is often as much a way to get things out "on the table" as anything else.  I would judge this one to be that.

He seems to be much the same man now.  There is a certain rigidity about him, and an inability to deal with new paradigms of thought that I find worrisome.  He seems locked into a paradigm made up of World War II, the Cold War and Vietnam.  This is a problem.  That paradigm is no longer supported by reality.

The Soviet Union is no more.  The takfiri jihadis are not the Soviet Union.  They do not have the capacity to destroy the United States. There is no Al-Qa'ida equivalent to the "Red SIOP."  Why is there not such a plan?  Simple.  They lack the weaponry and always will.  They are a regional threat in the Middle East.  They are losing both in terms of physical destruction of their assets and in their appeal to Sunni Muslims.  Muslims are not fools.  Al-Qa'ida's cause has been demonstrated to be a very expensive adventure in medieval thinking. Iran is not Hitler's Germany nor Mao's China re-born.  Once again, Iran is a regional threat which should be dealt with through aggressive diplomacy and minimalist police and special operations.

McCain does not seem to be able to grasp the complexity of that set of ideas.  He often lapses into confusion over the basic facts of the situation regarding the Middle East and sometimes seems to resemble the intellectually isolated souls across the country who insisted during the primary season that Obama is a Muslim because for them he fits neatly into the category of "other" and therefore must be one of them "Ayrabs."  When told that Obama says he is a Christian, such people often replied with something such as, "Well, he's a Muzlim (sic) to me."

“the necessity to forgive.”

Someone will tell us who it is that he wanted to forgive.  The collaborators?  Some of us are not particularly good at "forgiving."  pl

http://www.nytimes.com/2008/06/15/us/politics/15pows.html?hp

The Iraq Agreements - 2

"On Iraq, Bush brushed off criticism that a long-term security deal between the United States and Iraq was faltering.

"If I were a betting man, we'll reach an agreement with the Iraqis," Bush said. "Of course, we're there at their invitation. It's a sovereign nation ... We're going to work hard to accommodate their desires. It's their country."

The deal would provide a legal basis for the presence of U.S. forces in Iraq after a U.N. mandate expires. Bush said the agreement would not commit future U.S. presidents to any troop levels in Iraq and would not establish permanent U.S. bases.

Bush's upbeat assessment came as Prime Minister Nouri al-Maliki declared Friday that talks with the U.S. on the deal were deadlocked, as Sunni and Shiite preachers spoke out against a plan that would enable American troops to remain in Iraq after year's end.

Al-Maliki said negotiations will continue, but his tough talk reflects Iraqi determination to win greater control of U.S. military operations after the U.N. mandate expires at the end of the year. Failure to strike a deal would be a major setback for Bush ahead of the November presidential election."  AP

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No.  Failure to strike a deal would be a major setback for McCain.

A policy wonkista asked me at a meeting last week (I know.  I know.  I was there too.  So what does that make me?) if the Iraqis could not simply say no and set a date at which they want the US to have its forces out of the country.

The answer is - yes.  They could do that.  They could do it if they could muster up the courage and unity to do it in spite of their massive internal devisions and the blandishments of people like Petraeus, Crocker and Satterfield.  You can be sure that a myriad of seductions is being served up for the purpose of getting an agreement before the end of the summer.

At the same time voices from across the region and the Islamic World are whispering in silence that to agree to long term "partnership" with the Americans is treason to Islam and to the Arab People.  The implied long term price for such "treason" will be perceived as high.

I would bet on the effectiveness of the blandishments, rather than the whisperings.  pl

http://news.yahoo.com/s/ap/20080614/ap_on_re_eu/bush_europe