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Geopolitics - Jan 6

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Many more articles are available through the Energy Bulletinhomepage

Russia flexes its military muscle

Roger McDermott, the Guardian
As Russia once again resorts to aggressive economic tactics in its latest dispute over gas supplies with neighbouring Ukraine, its official state documentation is raising the spectre of future military conflict over energy resources. Russia's security council prepared a draft document on national security strategy until 2020. At a joint security council and state council meeting held in Moscow on 25 December and chaired by Russia's president, Dmitry Medvedev, the document in question was to be discussed, but this was postponed at the last minute, instead concentrating on Russian policy in the Commonwealth of Independent States (CIS).

President Medvedev ordered a new security strategy in June 2008, and its draft form has been discussed among all its regions. The "strategy of national security of the Russian Federation until the year 2020" – written under the direction of Nikolay Patrushev, secretary of the security council, is expected to be adopted at a state council meeting on 20 February 2009. In early December 2008 Patrushev toured Russia's federal districts promoting the new security strategy. Following a meeting on national security in the far eastern city of Blagoveshchensk he said the proposed draft was pragmatic and practical, and lists specific measures to ensure Russia's national security.
(4 January 2009)

Arab News: Why should we bail out US automobile industry

Turki Faisal Al-Rasheed, Arab News
According to reports published in Al-Seyassah, a Kuwaiti newspaper, and some other Gulf newspapers, the United States has asked four Gulf states for financial aid close to $300 billion to face the fallout of the financial crisis and help prevent its economy from sliding into a painful recession.

Washington is seeking $120 billion from Saudi Arabia, $70 billion from the United Arab Emirates, $60 billion from Qatar and $40 billion from Kuwait.

The Kingdom has dismissed these reports. There is enough evidence that the Federal Reserve is out of ammunition. The Fed can only control the supply of money, it cannot control the velocity of money or the rate of its turnover. The outcome of this crisis will be that the currency will be “devalued” as policy makers seek to weaken it, undermining its role as an international reserve currency.

The dollar is going to lose its status as the world’s reserve currency. The catalyst will be foreign creditors who are replacing dollar with gold. That will in turn lead to global recognition of the need for a vastly more disciplined financial system.

The Gulf’s vast investment funds are run by professionals who know that stocks go down as well as up. But they have lost heavily because of their forays into Western markets, particularly with their investments in banks, which are hit by the credit crisis.
(1 January 2009)

New Year, New Outlook For Oil

Lionel Laurent,
Recession fatigue is setting in; now, geopolitics, and supply worries are likely to start to have an effect on prices.

Ever since demand for commodities like oil began to sputter in the second half of 2008, driving the price of crude down from a high of $147.50 per barrel to a four-year low of less than $40.0 a barrel, few seemed willing to look past the demand slump and think about the issue of supply. But with geopolitical disputes ringing in the New Year in sensitive areas such as the Caucasus and the Middle East, supply worries are gradually overtaking priced-in fears about weak demand.
(5 January 2009)

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