‘SAUDI POLICY OF DOWNPLAYING OIL
PRICES TO BACKFIRE ON THEM’
Pepe Escobar interviewed in RT. Published time: October 20,
2014.
Saudi Arabia wants to
use lower oil prices to pressure Russia to change its stance on Syria, to
antagonize Iran, and to force US shale gas out of the market, roving
correspondent for the Asia Times Pepe Escobar told RT.
RT: Russia's economy is surely being hit by the falling oil
prices. But what about other oil producers like the OPEC states?
Pepe Escobar: A lot of people are being hurt. There are more or less 20 nations that need
oil at least for 50 percent of their budget. Among these nations we’ll find
especially a mix of African countries and Persian Gulf countries, that includes
Saudi Arabia and Iraq as well, Venezuela and Ecuador. So it’s very complicated,
it’s not only to hurt Russia...
RT: Saudi Arabia is one of the OPEC members and it is supposed to
collaborate its oil price policy with other members. Why it is acting like
this?
PE: OPEC is not a moralistic organization. There has been a lot of speculation about
what Saudi Arabia has been doing. In fact, their strategy is still faulty –
they want lower oil prices to pressure Russia vis-à-vis Syria, change their
stance vis-à-vis Damascus and they want to more or less price shale gas from
the US out of the market, and also pressure Iran vis-à-vis what’s going on in
the Middle East, the famous Saudi-Iranian antagonism. This is not going to work
in the long run because even Saudi Arabia will be in trouble if we have a
barrel of oil like it was projected for the first quarter of 2015 between $70
and $80, now it’s a round $86-87. So they will be in trouble as well, their
strategy in the long run is going to backfire.
RT: So, how long are these major oil exporting countries going to
follow this strategy? When will they think of their own economic interests?
PE: When we look at the breakeven for most of these
countries in terms of their state budget - how much they need a barrel of oil
to cost if they can more or less even their expenses? When we look at the
latest table - which is a composite of indexes from the Economist, Wall Street
Journal, Bloomberg, Reuters - Venezuela and Ecuador need oil at $120 a barrel,
they are going to be in a deep trouble. Iraq, for instance, needs around
$106-116 – they are in trouble. The problem with Iran is that we don’t have
very exact figures.
According to these indicators, Iran will need a barrel of
oil between $130 and $140. That’s too much because oil is less than 20 percent
of Iran’s revenues, so it’s not essential for them. Gas is much more important.
In terms of Russia, we know how Russia may [be] hurt because for the State
Budget of Russia for 2015 it’s around $100 a barrel. So if we have next year,
according to the best projecting so far, between $70 and $80 and maybe even
going down to $65-70 in the next few years, all of these countries are going to
suffer. But the market is very volatile. In one year from now we could be
talking about a completely different situation if we have more demands,
especially from China, from the US, from Europe, supposing there is some sort
of economic realignment in Europe. So this could change not just in a matter of
not only days and weeks or years but very fast.
RT: Why aren't the OPEC-states reducing the production volumes,
like they normally do when prices drop?
PE: There are a lot of back-door consultations among
OPEC members at the moment. Sooner or
later we can expect less oil in the market, so the prices will go up. Especially,
I would say from Venezuela, Ecuador… Iran - they need the revenue, so at the
moment they are just starting the market flows. Obviously they have very
good customers in Asia, even if they are buying less like China, they still buy
Iranian oil. We have to see the US point of view, in fact, because the US
doesn’t want very low oil prices to price their shale gas exploration out of
the market. So there are going to be
counter-moves by many OPEC and non-OPEC players as well.
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The statements, views and opinions expressed in this column
are solely those of the author and do not necessarily represent those of RT.
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