From Gal Luft
What’s behind the sudden burst of willingness on the part of the Saudis, who announced that they will increase oil output by 500,000 barrels per day in the coming months? After all, for many months they were quite unfazed by the economic havoc caused throughout the world by the rise in oil prices. Even two visits by President Bush, loaded with offers of sophisticated weapons, nuclear technology collaboration and other goodies, didn’t convince them to open the spigot. So what changed? And why are the Iranians so opposed to the Saudi newfound goodwill? “If Saudi Arabia takes a measure to unilaterally increase [oil] output, it is a wrong move,” complained Mohammad Ali Khatibi, Iran’s new representative to OPEC, repeating the mantra that “the oil market is saturated.”
Here is a theory: The dispute within OPEC between Saudi Arabia and Iran, the first and second largest exporting members, has, in part, to do with the upcoming presidential elections. Unlike the Iranians who would like the United States to withdraw from Iraq so they can turn the country into another Iranian satellite, the Saudis dread nothing more than a strengthened and emboldened Iran and prefer the United States to stick around for a while. Their concerns about the regional destabilization associated with a nuclear Iran, and hence their loss of points in the centuries-old Sunni-Shiite rivalry, is only part of the story. What keeps the Saudis awake at night is the challenge to their ability to control the oil fields in the Eastern Province where most of Saudi Arabia’s oppressed Shiites happen to live. Iranian hegemony in the Persian Gulf could inspire a Shiite intifada in the place where Saudi Arabia’s wealth is generated, constituting a real danger to the survival of the House of Saud.
From a Saudi perspective, an American president who plans to withdraw from Iraq while being conciliatory toward Iran is bad news. The Saudis, therefore, vote McCain; Iran goes for Obama.
Pouring oil into the global market five months prior to the elections could influence the tight race in a non-trivial way. The state of the U.S. economy and high energy prices are at the top of the voters’ agenda. Most oil contracts are traded three to six months prior to delivery. The Saudi announcement would therefore signal to speculators that more supply is on the way, driving prices down in the futures markets. This could have a calming effect on the economy in the coming months, which is likely to benefit McCain. The question now is whether Iran will do something in response to help Obama.
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