The world oil flood is quickly rising. As we have seen in “Oil Flood (1): The Kingdom is Back”, the decisions taken by OPEC members and Russia not to curb oil production, while Saudi Arabia is forcing prices down, are much more about power politics and strategies than about economics and the “invisible hand” of the logic of “supply and demand”. We shall now focus on what the evolution of the current oil market reveals about current and future geopolitics.

320px-Opec_Gebäude_Wien_Helferstorferstraße_17Since the end of November, especially since the 27 November OPEC meeting, prices have kept falling down, while the main producers, chiefly among them Saudi Arabia, Russia, Iran, and the private U.S. companies, have all decided, for reasons of their own, to maintain their level of production, or to even increase it. On 5 January, oil prices even passed under 50 USD, while global oil production knows record highs (AFP, “Le baril de pétrole passe sous la barre des 50 dollars”, Le Point, 05/01/2015).

A brief review of the different explanations for this pattern shows that there are three main categories of analytical frameworks. The first one, which emerged as early as September and October 2014 is organized around the idea that the Saudi decision was a positive response to a U.S. demand, given the will of Washington to “sanction” Russia and its President Vladimir Putin for the tensions in Ukraine (Michael Klare, “Washington wields the oil weapon”,  Tom Dispatch, 9 October 2014).

Another school of thought sees the slump in prices as the will of Saudi Arabia to “punish” Russia for its support of Syrian dictator Bashar Al Assad and of Iran, both adversaries, if not enemies, of the Saudi kingdom, while targeting the U.S.shale oil and gas industry, in order to re-conquer market shares (Tyler Durden,  “A Look inside the secret deal with Saudi Arabia that unleashed the Syrian bombing”, Zero Hedge, 09/25/2014).

Xi_Jinping_meet_Russian_Duma

A third category identifies China’s imports of oil as a driver for the market price. China would thus benefit from the lowering prices and be “manipulating” Russia, in an environment of quasi saturation of the world oil market (Pepe Escobar,  “Blowback after blowback for the Empire of Chaos”, Gold Switzerland, the Matterhorn interview, 22 Dec. 2014).

Each of these approaches has very real merits. Nonetheless, it seems that these analyses are altered by a common blind spot: they fail to see that they describe the world of today, with concepts, ideas, systems of representations that come from yesterday, and are on their way to becoming obsolete. And so, they block our ability to understand what the current evolution of the oil market is revealing.

Taking pain

The current fall of the oil prices has a common effect on the different oil producers: it inflicts them pain, and a lot of it. The political authorities of Saudi Arabia, for example, are much more comfortable with high oil prices, given the fact that they need to heavily subsidize the fuel used by Saudi citizens, in order to support the social cohesion of a society knowing rising social, gender, religious, and political tensions (John Kemp, “Money to burn: OPEC’s wasteful energy subsidies”, Reuters, May 16, 2014).

The Saudi authorities are also trying to alleviate coming environmental factors of tensions due to the way the kingdom uses too much water considering its reserves. As a result, desalinating seawater is necessary, knowing that the industrial process so involved is extremely costly. In effect, the Saudi 36 desalination The_Main_Water_Reservoir,_Muzahimiyah_(2807216425)stations pump more than 3.3 million cubic meters of water. The cost corresponded to 300.000 oil barrels, when the price of the oil barrel was around 110 USD. The price paid by consumers is more or less 0.12 USD, while the production cost was 3.20 USD (at 110 USD per barrel).

Meanwhile, the consumption of water rises by 8.8% each year (Ubaid Al Usaymy, “Saudi Arabia: the desalination nation”, Asharq Al Awsat, 2 july, 2013). In other terms, the Saudi decision to curb the oil prices raises very serious domestic and social issues, as the numbers of barrels needed to produce a cubic meter of water will increase.

In Russia, the diminishing benefits of oil connect with the Ruble crisis, the international tensions due to the bad relations with the U.S. and the European Union regarding Ukraine, and the related sanctions that were decided by Western countries. Nevertheless, there are few signs of actual direct tensions between Russia and the Saudi Kingdom, and it could even be said that the two countries are working towards closer relationships (Maria Dubovikova, “Russian Saudi cooperation on the rise?”,  Al Arabya News, 24 Nov. 2014), even if Russia badly needs high oil prices in order to maintain the post 1990s economic and social recovery, as well as its development projects (Marin Katusa, The Colder War, 2014).

In other terms, the big producers are willing to “take the pain” of their oil decisions.

The “Muhammad Ali strategy”?

This approach to the oil market by historically great producers reveals something particularly significant regarding the way they want to steer the international distribution of power.

Muhammad_Ali_visits_WashingtonWe shall call it the “Muhammad Ali strategy”, because of the strategy Muhammad Ali used against George Foreman during the heavyweight championship match on 30 October 1974, in Zaire. In order to surprise and exhaust his more powerful and younger adversary, Ali had trained himself to be punched while leaning in the ropes. After five rounds of taking the pain while giving some right hand unexpected hard punch, Ali started to counter-attack fiercely an exhausted Foreman and knocked him out (Norman Mailer, The Fight, 1975).

The “Muhammad Ali strategy” tells us much regarding what is now happening in, and through, the oil market. Some very tough players are preparing themselves and the rest of the world to the fact that they have decided to enter a new era.

In these new times, oil is used as a political tool in new ways, Michael Klare would even say a weapon (Klare, ibid), to assert that the region defined by the relations between Russia, China, India, Pakistan, Iran and the Middle East countries, as well as by the new Latin-America oil players, is now dominated by new struggles. Those have the political function of being the support upon which rests the intent of these players to make themselves known as the new dominant ones.

These struggles have, at least, a twofold function. First, they are used by the players to define the new political identity of the countries involved in this “Very Great Game” as “poles” of the multipolar world, finally emerged (Zorawar Daulet Sinhg, “The benefits of a multipolar world”, The Hindu, September 13, 2014).

Second, these struggles define an international political space, where their crossed influence and power-plays are competing with the U.S. influence with more and more efficiency and brutality. That is shown and foretold by the “Muhamad Ali strategy”: “taking the pain” goes with the very intention to inflict more of it, and to replace the heavyweight champion … even if it takes time and sustainable and enduring  willpower.

The time issue

Another thing countries as radically different as Russia, China, Saudi Arabia, and Iran, among others, have in common, is their relation to time and strategy.

All these countries, their people and political authorities are rooted in an ancient history, defined by very tough strategic plays (John Keegan, A History of Warfare, 1993). For example, after one millennium of harshness, Russia went through the extreme Mur_Moskiewskiego_Kremla_lato_2013hardships of the Bolshevik revolution, Stalin’s Great Terror, the Second World War, and, in twenty-five years, had lost 75 millions of people (Michel Heller, Histoire de la Russie et de son empire, 1997). Then came the end of the Soviet regime, followed by the terrible 1990s, during which the Russian average life expectancy went from 65 to 55 years, in less than ten years (Naomi Klein, The Shock Doctrine, 2008).

In the same time line, from the fifties to the beginning of the 2000s, the Russian oil infrastructures went derelict (Katusa, ibid), with a disastrous impact on the very basis of the Russian economy. Reconstructing these, putting Russia back on top of the oil food chain, while becoming the main producer for China (Valantin, “Arctic Fusion: Russia and China convergent strategies”, The Red Team Analysis Society, June 23, 2014), involves a strategy devised for the long-term, and the capacity to take, and give, political pain through oil strategies. The same can be said of players like Iran, or Saudi Arabia.

In other words, what the world experiences through the sustained fall in oil prices is that the multipolar world is ready to struggle for a long time in order to find an exit from the “unipolar moment”. This one was defined by the dominant influence of the United States and their European allies, knowing that Western governments are much more worried by the domestic political and financial impacts of “oil pain” than the oil producer governments and their societies. In effect, those are forced to learn to live in tough economic and political contexts.

However, a new issue arises: it is now necessary to wonder if the unexpected meeting of climate change and new radical ideologies, all over the world is not going to disrupt oil politics.

To be (soon) continued.

Dr Jean-Michel Valantin (PhD Paris) leads the Environment and Security Department of The Red (Team) Analysis Society. He is specialised in strategic studies and defense sociology with a focus on environmental geostrategy.

Featured image: Public Domain, This Image was released by the United States Marine Corps with the ID 100922-M-7110J-091: Staff Sgt. Francisco Martinez, a platoon sergeant with Lima Company, 3rd Battalion, 7th Marine Regiment, takes a punch to the face during a boxing match, Sept. 22. Martinez, a 27-year-old native of St. Paul, Minn., and fellow Marines joined together with the British 40 Commando, British Royal Marines, for some physical training. The boxing matches attracted crowds of U.S. and UK Marines cheering on the fighters. Martinez said he is a former golden glove boxer and has been boxing for 15 years. 22 September 2010