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Saudi-Iran Price War If Tehran Doesn't Stop Shi'ites Massacring Iraq Sunnis.

There is a scenario that, if the US is to withdraw its armed forces from Iraq, there could be an oil price war between Iran and Saudi Arabia. This will be similar to a war the Saudis waged against Iran in 1986, when as a result the price of crude oil fell to less than $7 per barrel. Why would such a war take place? The answer is simple: to prevent Shi'ite Iraqis backed by Iran from massacring Iraq's Sunni Muslims.

The Iran-backed Shi'ite Muslims in Iraq have their own armed militias which have been killing Sunni Iraqis as a result of a sectarian conflict triggered on Feb. 22, 2006, when a revered Shi'ite shrine in Samarra', north of Baghdad, was blown up by Neo-Salafi Sunni militants.

To explain the sectarian conflict between the Sunnis and Shi'ites in Islam, a complicated affair, is beyond the scope of this report. But one should know the main geo-strategic and geo-economic aspects of this conflict; otherwise it would be impossible to understand why Saudi Arabia and Iran - OPEC's largest and its second largest oil producers, respectively - should have an oil price war against each other.

The grounds under which most of the world's proven oil reserves - the reserves which are the cheapest to extract in the world - are inhabited by Shi'ites of the Ja'fari order. Ja'fari Shi'ites follow 12 Imams in Islam. The 12th Imam - called al-Mahdi - has been a child in a state of occultation since the 9th century AD. According to Ja'fari Shi'ite beliefs, al-Mahdi will return to Earth to rule the world with justice before Judgment Day.

Watchers of oil prices should keep this matter in mind as it will influence world events in the not-too-distant future. According to one of the Grand Ayatollahs in Ja'fari Shi'ism, the time for al-Mahdi's return is getting close; some say he could return at any time between now and 2008.

The Eastern Province of Saudi Arabia, a desert region on the Persian Gulf coast inhabited by Ja'fari Shi'ites, contains the world's biggest reservoir of oil. Southern Iraq, also inhabited by Ja'fari Shi'ites, is the world's second biggest oil reservoir. The province of Khuzistan, in south-western Iran, contains the world's third biggest oil reservoir.

Iran is ruled by a Ja'fari Shi'ite theocracy. Saudi Arabia is ruled by Wahhabism, which is a puritanical branch of Sunni Islam. Iraq's population consists mainly of a Ja'fari Shi'ite majority and several minorities, including Sunnis, and such ethnic groups as the Kurds, the Turkomans, the Assyrian and Caldean Christians, etc.

When the US invaded Iraq - in March 2003 - some people thought the Americans had thus come to control the world's oil. But the US has failed to control Iraq peacefully and, since Feb. 22, 2006, the country has been in a sectarian Sunni-Shi'ite war. The US and Iraq's Sunnis accuse Iran of fuelling this war by siding with the Shi'ites. Now one of the Iran-backed leaders of the Shi'ites, Abdul-Aziz al-Hakim, denies had had warned that the Sunnis will be the biggest losers of a sectarian war if the US withdraws from Iraq. Hakim was due to meet US president Bush at the White House on Dec. 4. Iraq's Sunni VP Tareq al-Hashemi is to meet Bush in January.

The Sunni militants who destroyed the Shi'ite shrine in Samarra' on Feb. 22 follow a Neo-Salafi ideology developed in the late 1940s. The Neo-Salafis, mainly consisting of Wahhabi radicals like al-Qaeda leader Osama bin Laden, regard all Shi'ites including the Ja'faris as heretics. They are particularly hostile towards those Ja'faris who regard Imam Ali and his 11 direct descendants as being divine; they are totally opposed to Ja'fari religious rituals which they condemn as a form of paganism.

Sunni-Shi'ite massacres in Iraq follow suicide bombings staged almost daily against innocent Ja'faris by Neo-Salafi militants. These militants are also known as "takfiris" (those who regard others as heretics) or jihadis (holy warriors and suicide bombers). The Neo-Salafis have recently announced a Sunni caliphate in Iraq, which is a universal state whose promoters regard it as being in charge of the whole world.

This counters the universal Ja'fari theocracy of Iran which also regards itself as being in charge of the world, with Hizbullah in Lebanon being one of its branches. There is a similar branch in the oil-rich Saudi Eastern Province (see news23-IraqLebPalCivilWarsDec4-06 and fap6-IraqCwarDec4-06).

Writing in The Washington Post on Nov. 29, a senior Saudi government security adviser warned that Saudi Arabia will intervene - using money, weapons and its oil power - to prevent Iranian-backed Shiite militias from massacring Iraqi Sunnis once the US begins pulling out of Iraq. The adviser, Nawaf Obaid, is a very cautious person working for the Saudi government. He would not have written such a warning in a US newspaper of such high standing and The Washington Post would not have published it, had he not been authorized to do so by someone at the top political leadership.

Iraq's Sunni Arab neighbours, led by Saudi Arabia and Egypt and including Jordan, fear that the sectarian violence in Iraq could spill into large-scale civil war between Shi'ites and Sunnis in the Muslim world and set off a political earthquake far beyond this part of the Middle East.

It is important to note that the Muslim world has a population of about 1.4 billion. Of this the Sunnis account for about 90%. The Ja'fari Shi'ites account for less than 10%. But the Shi'ites are concentrated on the world's biggest oil provinces in the Middle East - mainly in Iran, Iraq, the Saudi Eastern Province and in communities spread all the way along the Gulf from Kuwait down to Afghanistan, Pakistan and India.

Obaid wrote in The Washington Post that the Saudi leadership was preparing to revise its Iraq policy to deal with the aftermath of a US pullout, and was considering options including flooding the oil market to crash prices and thus limit Iran's ability to finance Shi'ite militias in Iraq.

Obaid said: "To be sure, Saudi engagement in Iraq carries great risks - it could spark a regional war. So be it: the consequences of inaction are far worse". The article said the opinions expressed were Mr Obaid's own and not those of the Saudi government, headed by King Abdullah ibn Abdul Aziz. But, again, it is unlikely that such a piece could have been written without permission.

Obaid wrote: "To turn a blind eye to the massacre of Iraqi Sunnis would undermine Saudi Arabia's credibility in the Sunni world [as being its leader] and would be [regarded as a Sunni] capitulation to Iran's militarist actions in the region".

The UK newspaper The Scotsman on Nov. 30 quoted an "official Arab source" as saying: "Saudi Arabia is worried about Iran imposing its political agenda on the region. We don't want Iran and its allies to have a free hand. Iran knows that it is vulnerable and that Saudi Arabia has the upper hand [through the oil weapon] and maintains real weight and power".

The Scotsman quoted a "Western diplomat based in the Saudi capital", Riyadh, as saying that Saudi Arabia was already funding Sunni tribes in Iraq. Saudi Arabia, the world's biggest oil exporter and a close US ally, fears Shi'ite Iran has been gaining influence since the 2003 invasion of Iraq.

Adding weight to the problem is the accusation of the US and other Western powers that Iran was developing nuclear weapons. If one combines the predictions of al-Mahdi's imminent return to Earth and Iranian nuclear weapons, then one like the state of Saudi Arabia would be very worried and thus would not hesitate to use its oil weapon.

Saudi Arabia used its oil weapon in February 1986, when during the Iran-Iraq war Iranian forces invaded southern Iraq and took over the oil-rich Faw Peninsula. From there the Iranian forces could have Kuwait and the Saudi Eastern Province within the range of the theocracy's missiles. As a result, Saudi Arabia acquired long and medium-range missiles from China and began flooding the world's oil market with extra crudes until the price of crude oil crashed below $7/b in the summer of 1986. (Saudi Arabia and fellow Arab oil states used the oil weapon in the wake of the Arab-Israeli war of October 1973 which, among other things, led the a quadrupling of world oil prices and triggered a global recession).

In his Washington Post article, Mr Obaid listed three options being considered by the Saudi government: (1) providing Sunni military leaders (ex-Iraqi officer corps, now the backbone of the insurgency) with funding and arms; (2) establishing new Sunni brigades to combat the Iranian-backed Shi'ite militias; and (3) choking off Iran's ability to fund the militias by flooding the oil market.

Mr. Obaid added: "If Saudi Arabia boosted [oil] production and cut the price of oil in would be devastating to Iran. The result would be to limit Tehran's ability to continue funnelling hundreds of millions [of US dollars] to Shi'ite militias in Iraq and elsewhere".

Indeed, during Hizbullah's 34-day war against Israel from July 12 the Ja'fari Shi'ites in the Eastern Province of Saudi Arabia demonstrated and hailed Hizbullah's Secretary-General Sayyed Hassan Nasrallah as a hero of the Arab world. It is important to note here that Mr. Nasrallah, a religious man descended from the Prophet Muhammad, is the representative of Iran's Supreme Leader Ayatollah Ali Khamenei.

Hizbullah is an offshoot of Iran's theocracy in Lebanon. A similar Hizbullah has been established in the Eastern Province of Saudi Arabia, headed by a representative of Khamenei; there is a similar system in Bahrain, where the majority of the population is Ja'fari Shi'ite.

Ayatollah Khamenei is not just the leader of Iran. The Ja'fari Shi'ite theocracy is a universal state meaning it also rules the world. As such the Supreme Leader has a representative in each of the Ja'fari Shi'ite communities around the world.

Wahhabism is particularly hostile to those devout Ja'faris who believe that al-Mahdi is God's representative having divine powers. This is why there is a sectarian Sunni-Shi'ite war in Iraq. But there is sectarian tension between Sunnis and Shi'ites in all other parts of the Middle East, notably including Lebanon, Bahrain, etc.

Two lingering issues are keeping the energy world nervous for the short term: (1) OPEC's price defence efforts by cutting production, at a time when world oil consumers should be assured of adequate supplies for winter; and (2) a confrontation between a US-led Western alliance and Iran over Tehran's nuclear ambitions, an issue being taken up by the UN Security Council.

Obaid's article came after US Vice President Dick Cheney held talks in Riyadh with King Abdullah on Nov. 25. After those talks, Saudi Arabia's National Security Adviser Prince Bandar ibn Sultan flew to Jordan to brief King Abdullah II of the outcome of the Riyadh meeting. On Nov. 30, President Bush had a meeting in Amman with Iraqi Prime Minister Nouri al-Maliki.

Maliki is a Ja'fari Shi'ite and belongs to al-Da'wa al-Islamiya, which is backed by Iran. Although not much was revealed to the world media about the talks between Bush and Maliki, APS has been told that the US president pressed the Iraqi prime minister that he should disarm the Shi'ite militias in order to end the sectarian violence in Iraq.

However, the APS source says Maliki failed to give Bush a firm promise that he will disarm the Shi'ite militias, and that he asked the US president to send more American troops to Baghdad in order to defeat the Sunni insurgency.

Iraq's Shi'ites are particularly apprehensive about plans by Neo-Salafi insurgents to escalate their war against the Ja'fari majority. The Neo-Salafis are the most violent branch of Sunni Islam. The Neo-Salafis have vowed to exterminate the Ja'fari Shi'ites in Iraq.

When will Saudi Arabia use the oil weapon? This is a good question; but equally interesting is the question whether Saudi Arabia will act now, before the US takes action on Iran's nuclear ambitions. Will the Saudis use of the oil weapon to coincide with a US air war against Iran's nuclear installations?

There is a strange rumour that the US will hit Iran's underground nuclear installations in December 2006 or in January 2007.

However, Saudi Arabia now wants OPEC's oil ministers who will meet in Abuja, Nigeria, on Dec. 14, to consider cutting production, rather than raising it, in order to prevent prices from falling further down.
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Publication:APS Review Oil Market Trends
Date:Dec 4, 2006
Previous Article:Saudis See Another OPEC Output Cut.
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