WNDI 2008 1

Oil Shocks Adv

Oil Shocks Adv

Oil Shocks Adv...........................................................................................................................................................1
Oil Shocks Adv...............................................................................................................................1
Russia Module: Price Collapse Kills Russian Economy ...........................................................................................3
Russia Module: Price Collapse Kills Russian Economy ............................................................3
Russia Module: Price Collapse Kills Russian Economy............................................................................................4
Russia Module: Price Collapse Kills Russian Economy.............................................................4
Oil Key to Relations: (1/3)..........................................................................................................................................5
Oil Key to Relations: (1/3).............................................................................................................5
Oil Key to Relations: (2/3)..........................................................................................................................................6
Oil Key to Relations: (2/3).............................................................................................................6
Oil Key to Relations: (3/3)..........................................................................................................................................7
Oil Key to Relations: (3/3).............................................................................................................7
Relations Solve Prolif: Ext (1/2).................................................................................................................................8
Relations Solve Prolif: Ext (1/2)....................................................................................................8
Relations Solve Prolif: Ext (2/2).................................................................................................................................9
Relations Solve Prolif: Ext (2/2)....................................................................................................9
Relations Good--Multiple Scenarios.........................................................................................................................10
Relations Good--Multiple Scenarios..........................................................................................10
Relations Good-Nuclear War....................................................................................................................................11
Relations Good-Nuclear War......................................................................................................11
Saudi Arabia Module: ..............................................................................................................................................12
Saudi Arabia Module: ................................................................................................................12
A2: Economy............................................................................................................................................................13
A2: Economy................................................................................................................................13
A2: Economy (2/)......................................................................................................................................................14
A2: Economy (2/)..........................................................................................................................14
A2: Economy (3/) .....................................................................................................................................................15
A2: Economy (3/) .........................................................................................................................15
A2: Economy (4/)......................................................................................................................................................16
A2: Economy (4/)..........................................................................................................................16
A2: Economy (5/)......................................................................................................................................................17
A2: Economy (5/)..........................................................................................................................17
A2: Terrorism’ (1/2)..................................................................................................................................................18
A2: Terrorism’ (1/2).....................................................................................................................18
WNDI 2008 2
Oil Shocks Adv

A2: Terrorism’ (2/2)..................................................................................................................................................19

A2: Terrorism’ (2/2).....................................................................................................................19
A2: Oil Black-mail....................................................................................................................................................20
A2: Oil Black-mail.......................................................................................................................20
WNDI 2008 3
Oil Shocks Adv

Russia Module: Price Collapse Kills Russian Economy

RUSSIA IS SURGING BUT A PRICE COLLAPSE WOULD GUT THE ENTIRE
ECONOMY, SPARKING A MASSIVE RECESSION

THE AUSTRALIAN 2007

[staff, “All is not what it seems in the Russian Story”, p. lexis//

In the area of economy, Russia has never had it so good. The Russian economy is the 12th largest
in the world. Economic growth in the first half of 2007 amounted to 7 to 8 per cent. Goldman Sachs has projected
that by 2025 Russia could be a $US6 trillion economy and in the world league table. Russians live better -- the national average income reached $US350 ($427) a month in 2006, compared
Russia looks a stable
with $US80 ($98) in 2000; the number of people living below the poverty line fell from 37 per cent in 1999 to 25 per cent in 2006.

country, with a president who enjoys a sky-rocketing approval rating of 80 per cent. Appearances, however, are deceiving. As with
everything else in Russia, the economy has a false bottom. The causes of the economy's success
give no ground for optimism, mainly because the success is due to high oil prices. A collapse of
the oil price could plunge the Russian economy into a recession. The economic model that has evolved in Russia is beginning
to resemble a petrostate. The Russian oil and gas sector's share of the federal budget in 2006 was 49 per cent. Oil and gas accounted for 63.3 per cent of exports. The Russian elite
dreams about Russia as an energy super power. Meanwhile, Gazprom's output grows by just 1 per cent, when oil output growth is not expected to exceed 2 per cent this year .

THAT DESTROYS THE ENVIRONMENT AND SPARKS NUCLEAR WAR

DAVID (Prof. Poli Sci @ Johns Hopkins) 1999
[Steven, “Saving America From the Coming Civil Wars”, Foreign Affairs, Jan/Feb 1999, Vol. 78, no. 1 //
If internal war does strike Russia, economic deterioration will be a prime cause.
From 1989 to the present, the GDP has fallen by 50 percent. In a society where, ten years ago,
unemployment scarcely existed, it reached 9.5 percent in 1997 with many economists declaring
the true figure to be much higher. Twenty-two percent of Russians live below the official poverty
line (earning less than $70 a month). Modern Russia can neither collect taxes (it gathers only
half the revenue it is due) nor significantly cut spending. Reformers tout privatization as the
country's cure-all, but in a land without well-defined property rights or contract law and where
subsidies remain a way of life, the prospects for transition to an American-style capitalist
economy look remote at best. As the massive devaluation of the ruble and the current political
crisis show, Russia's condition is even worse than most analysts feared. If conditions get worse,
even the stoic Russian people will soon run out of patience. A future conflict would
quickly draw in Russia's military. In the Soviet days civilian rule kept the powerful armed
forces in check. But with the Communist Party out of office, what little civilian control remains
relies on an exceedingly fragile foundation -- personal friendships between government leaders
and military commanders. Meanwhile, the morale of Russian soldiers has fallen to a dangerous
low. Drastic cuts in spending mean inadequate pay, housing, and medical care. A new
emphasis on domestic missions has created an ideological split between the old and new guard
in the military leadership, increasing the risk that disgruntled generals may enter the political
fray and feeding the resentment of soldiers who dislike being used as a national police force.
Newly enhanced ties between military units and local authorities pose another danger. Soldiers
grow ever more dependent on local governments for housing, food, and wages. Draftees serve
closer to home, and new laws have increased local control over the armed forces. Were a
conflict to emerge between a regional power and Moscow, it is not at all clear which side the
military would support. Divining the military's allegiance is crucial, however, since the structure
of the Russian Federation makes it virtually certain that regional conflicts will continue to erupt.
Russia's 89 republics, krais, and oblasts grow ever more independent in a system that does
little to keep them together. As the central government finds itself unable to force its will beyond
Moscow (if even that far), power devolves to the periphery. With the economy collapsing,
republics feel less and less incentive to pay taxes to Moscow when they receive so little in
return. Three-quarters of them already have their own constitutions, nearly all of which make
some claim to sovereignty. Strong ethnic bonds promoted by shortsighted Soviet policies may
motivate non-Russians to secede from the Federation. Chechnya's successful revolt against
Russian control inspired similar movements for autonomy and independence throughout
the<CONTINUED>
WNDI 2008 4
Oil Shocks Adv

Russia Module: Price Collapse Kills Russian Economy

<CONTINUED>
country. If these rebellions spread and Moscow responds with force, civil war is likely. Should
Russia succumb to internal war, the consequences for the United States and Europe will be
severe. A major power like Russia -- even though in decline -- does not suffer civil war quietly or
alone. An embattled Russian Federation might provoke opportunistic attacks from enemies
such as China. Massive flows of refugees would pour into central and western Europe. Armed
struggles in Russia could easily spill into its neighbors. Damage from the fighting, particularly
attacks on nuclear plants, would poison the environment of much of Europe and Asia. Within
Russia, the consequences would be even worse. Just as the sheer brutality of the last Russian
civil war laid the basis for the privations of Soviet communism, a second civil war might produce
another horrific regime. Most alarming is the real possibility that the violent disintegration of
Russia could lead to loss of control over its nuclear arsenal. No nuclear state has ever
fallen victim to civil war, but even without a clear precedent the grim consequences can be
foreseen. Russia retains some 20,000 nuclear weapons and the raw material for tens of
thousands more, in scores of sites scattered throughout the country. So far, the government has
managed to prevent the loss of any weapons or much materiel. If war erupts, however,
Moscow's already weak grip on nuclear sites will slacken, making weapons and supplies
available to a wide range of anti-American groups and states. Such dispersal of nuclear
weapons represents the greatest physical threat America now faces. And it is hard to think
of anything that would increase this threat more than the
WNDI 2008 5
Oil Shocks Adv

Oil Key to Relations: (1/3)

OIL SALES ARE KEY TO US/RUSSIAN RELATIONS—FAILURE TO KEEP RUSSIAN

PRICES HIGH LEADS TO FEARS OF CONTAINMENT AND HOSTILITY

MYERS JAFFE & MANNING (Dir. Energy Research Program @ James A. Baker III Institute
for Public Policy & Dir. Asian Studies @ Council on Foreign Relations) 2001
[Amy & Robert, “Russia, Energy and the West”, Survival, Summer 2001, vol. 43, no. 2, pp. 133-
152 //

In Russia’s official foreign policy doctrine, published in June 2000, there is not a single reference to oil
and gas.’ Yet the fate of the Russian economy, the dynamics of the new Russian elite arid the
outcome of the country’s still- uncertain post-communist transition are related in no small measure to
Russia’s vast oil and gas resources. Energy is a key factor in President Vladimir Putin’s diplomacy —
whether with Iran and Iraq, former Soviet republics or the EU. Energy is also an important subtext in
US—Russian relations, both as a source of cooperation and, in some respects, of tension. The
energy factor has been underestimated, if not discounted, in the formation of US policy towards Russia,
to the detriment of Russia’s relations with the West. Unless they take into account Moscow’s
concerns about energy revenues and export routes, the US and NATO risk sending the message
that they aspire to slow Russia’s economic transformation and recovery from the misfortune of
being the first dc-modernised society of the twentieth century. And the West would do well to
appreciate the increasingly important integrative effect that Russian natural gas exports to Europe are
having on Moscow’s relations with and views of the EU.

3. US/RUSSIAN COOPERATION ON OIL KEY TO MAINTAINING GOOD

RELATIONS

MYERS JAFFE & MANNING (Dir. Energy Research Program @ James A. Baker III Institute
for Public Policy & Dir. Asian Studies @ Council on Foreign Relations) 2001 Amy & Robert, “Russia,
Energy and the West”, Survival, Summer 2001, vol. 43, no. 2, pp. 133-152 //

In fact, the United States could significantly enhance its own energy security by assisting Russia to
revive its energy industries. Direct aid for the expansion of Russian oil and gas fields would provide
Moscow with an incentive for adopting more transparent market-oriented policies. Energy should be
accorded a much higher status in US—Russian relations, as a critical element of a US approach
for integrating its Cold War adversary into the post-Cold War international system. In practice,
American policy has been more muddled: such elements as NATO expansion, the bombing of
Yugoslavia and US Caspian ambitions have not been reassuring to Moscow. They suggest, as Michael
Mandelbaum observes, that ‘Russia has been and is being ignored where its own defInition of its
interests is concerned, and being ignored contrary to what Russia believes were Western
assurances’
WNDI 2008 6
Oil Shocks Adv

Oil Key to Relations: (2/3)

4. OIL DEPENDENCE FORMING BACKBONE OF U.S./RUSSIA RELATIONSHIP,
QUELLS CONCERN OVER U.S. PRESENCE IN CENTRAL ASIA

BARNES et al. (energy analyst) ‘04

[Joe, with Amy Jaffe & Edward Morse, “The New Geopolitics of Oil,” The National Interest, Winter 2003-4, ASP//]

U.S.-Russian cooperation on energy in general and oil in particular has been high on the agenda
of Bush-Putin summits that began in the summer of 2001 and culminated in the creation of a
U.S.-Russian Energy Dialogue after the two Presidents met in May 2002. Given Russia’s
surprising accommodation to America’s need for Central Asian bases to serve as a “staging
area” for the campaign in Afghanistan, expectations were high that a new “axis of oil” between
Moscow and Washington could be formed—with Russia supplementing, if not displacing, Saudi
Arabia.

5. OIL IS THE ONLY SUSTAINABLE POINT OF DIALOGUE IN US/RUSSIAN

RELATIONS

MYERS JAFFE & MANNING (Dir. Energy Research Program @ James A. Baker III Institute
for Public Policy & Dir. Asian Studies @ Council on Foreign Relations) 2001[Amy & Robert, “Russia,
Energy and the West”, Survival, Summer 2001, vol. 43, no. 2, pp. 133-152 //

Since the mid-1990s, with the dying of post-Cold War optimism, US— Russian relations have been
plagued by mistrust and miscommunication. Since coming to power on New Year’s Day 2000, the
Putin government has promoted a more hard-line definition of Russian interests. In responding,
the US must recognise Russia’s real strategic concerns, and if necessary, determine what policy
trade-offs — if any — the US and NATO can accept. This means distinguishing between Russia working to
protect the transport of a vital export commodity and Russia refusing to renounce its ‘imperial past’.
The challenge to Western diplomacy is how to accommodate legitimate Russian interests without
jeopardising US and NATO interests. A proper analysis of the energy element in Moscow’s
foreign policy can help Western policy-makers map a more cooperative fit between Russian
interests and Western security, or at a minimum, provide a more productive dialogue where the
two cannot be fully resolved.
WNDI 2008 7
Oil Shocks Adv

Oil Key to Relations: (3/3)

6. STABLE RUSSIAN OIL MARKET KEY TO ECONOMY AND RELATIONS WITH
THE US

MORSE & RICHARD (Executive Adviser @ Hess Energy & portfolio manager, Firebird) 2002 [Edward & James, “The
Battle for Energy Dominance”, Foreign Affairs, Mar/Apr 2002, p. asp//

Russia's oil revival has coincided with a downturn in the global economy and the first major
reduction in the global demand for oil since the early 1980s. The nearly 1 mbd increase in its
production over the last two years came at a time when OPEC cut output, thus losing market
share, to put a floor under prices. Not surprisingly, Moscow's motivations are being questioned and
are often seen as an attempt to grab power in the global arena. But Russia's petroleum revival has also
coincided with the terrorist attacks of September 11, which have provided Moscow a chance to displace
OPEC as the key energy supplier to the West. Moscow's political leaders, as well as its corporate
leaders in oil and gas, are portraying Russia's oil firms as stable sources of supply, willing to add
output to the market to keep prices reasonable and thus revive the global economy. In the eyes of
these leaders, the new geopolitics of energy can help Moscow gain both economically and
politically. In economic terms, energy production lets Russia integrate itself into the
industrialized West. In political terms, energy resources can be used to buttress Moscow's goal
of becoming a key partner of the United States

7. US AND RUSSIAN LEADERS ARE PINNING HOPES FOR RELATIONS ON OIL

MARKETS BETWEEN THE TWO

VICTOR & VICTOR 2003 (Dir. Program on Energy and Sustainable Development at Stanford & Economist at
Yale)
[David G & Nadejda, “Axis of Oil?”, Foreign Affairs, March/April, Vol. 82, no. 2, p. asp //

On the surface, energy cooperation seems a wise choice. Russians are rich in hydrocarbons and
Americans want them. Oil and gas account for two-fifths of Russian exports. In 2002 Russia
reclaimed its status, last held in the late 1980s, as the world's top oil producer. Its oil output in
2003 will top 8 million barrels per day and is on track to rise further. Russian oil firms also made
their first shipments to U.S. markets in 2002 -- some of it symbolically purchased as part of the
U.S. government's effort to augment its Strategic Petroleum Reserve (SPR). In addition, four
Russian oil companies are preparing a large new port in Murmansk as part of a plan to supply more than
10 percent of total U.S. oil imports within a decade. Meanwhile, the United States remains the world's
largest consumer and importer of oil. This year the United States will import about 60 percent of the oil
that it burns, and the U.S. Energy Information Administration expects that foreign dependence will rise to
about 70 percent in 2010 and continue inching upward thereafter. Although the U.S. economy is much
less sensitive to fluctuations in oil prices than it was three decades ago, diversification and stability in
world oil markets are a constant worry. War jitters and political divisions cast a long shadow over the
Persian Gulf, source of one-quarter of the world's oil. In Nigeria, the largest African oil exporter, sectarian
violence periodically not only interrupts oil operations but also sent Miss World contestants packing in
2002. A scheme by Latin America's top producer, Venezuela, to pump up its share of world production
helped trigger a collapse in world oil prices in the late 1990s and ushered in the leftist government of
President Hugo Chavez. In 2002, labor strikes aimed at unseating Chavez shut Venezuela's ports and
helped jerk prices to more than $30 per barrel. Next to these players, Russia is a paragon of stability.
WNDI 2008 8
Oil Shocks Adv

Relations Solve Prolif: Ext (1/2)

U.S./RUSSIAN COOPERATION HIGH NOW--ELIMINATES NUCLEAR WAR
THREATS AND CHECKS WMD PROLIFERATION

JONES (Asst. Secretary of state) 3/18/04

[Beth, Statement Before the House International Relations Committee, “U.S. Russia-Relations,” Federal Document
Clearing House Congressional Testimony, LN

As I reported to your Sub-Committee on Europe earlier this month, we have made remarkable
progress with the Russians on a broad range of issues on which we share a common interest. It is
easy, but shortsighted, to take for granted the most notable achievement of the past decade: we have
essentially eliminated the threat of global nuclear annihilation. No longer are Russian and American
missiles targeted against our respective homelands. Instead, valuable work has been underway to
make drastic reductions in strategic arsenals, to secure nuclear and other weapons-of-mass-
destruction related materials on the territory of the former Soviet Union and to improve our
cooperation in the area of nuclear and WMD non-proliferation. In my view, there is no more
important area of common interest between Washington and Moscow, and these cooperative efforts,
which have enjoyed the strong support of the Congress, must continue.

U.S./RUSSIAN COOPERATION HELPS STOP WMD TERRORISM, PARTICULARLY

BIOLOGICAL WEAPONS

ISRAELYAN (former Soviet Ambassador) ‘02

[Victor, Fighting Anthrax: A Cold Warrior’s Confession,” Washington Quarterly, Spring, v. 25 n. 2, ASP

We are witnessing "the beginning of a completely new relationship with the United States," the
Russian daily Izvestiia wrote after the September 11 tragedy. n16 Some members of the U.S.
administration are saying that the common fight against terrorism will revive comprehensive U.S.-
Russian relations and may lead to an opportunity to build a new strategic relationship between the two
states. Sergei Mikhailov, deputy director of the Moscow-based Russian Public Policy Center, made a
similar point: "Now, for the first time in many decades, Russia and the United States are acting as de
facto allies." n17 After the September 11 tragedy, Presidents George W. Bush and Putin agreed in a
statement after the leaders held a news conference in Shanghai to "increase cooperation in the
fight against new terrorist threats in the nuclear, chemical, and biological fields, as well as in the
field of computers." n18 At the November 2001 summit in Crawford, Texas, Bush and Putin reaffirmed
their support for the BWC. Although the two differ on verification procedures for the treaty, Russian
foreign minister Igor Ivanov said that dealing with terrorism was the central topic of discussions between
Putin and Bush and that it revealed a common approach. The presidents agreed that the Departments of
State, Defense, Agriculture, Energy, and Health and Human Services should work jointly on programs to
curb the proliferation of biological material, dismantle biological weapons infrastructure, and perform
research on biodefense and public health.
WNDI 2008 9
Oil Shocks Adv

Relations Solve Prolif: Ext (2/2)

U.S./RUSSIAN COOPERATION KEY TO CHECKING PROLIFERATION OF
BIOLOGICAL WEAPONS

ISRAELYAN (former Soviet Ambassador) ‘02

[Victor, Fighting Anthrax: A Cold Warrior’s Confession,” Washington Quarterly, Spring, v. 25 n. 2, ASP//

The close cooperation of the United States and Russia, allies in the war against international
terror, is one of the vital prerequisites to achieving long-term nonproliferation success. The
exchange of information on biotechnology research as a whole, on biological warfare protection and
prophylactics research, and on facilities at which the most dangerous biological materials are produced
helps to facilitate cooperation. Unfortunately, last October the head of the Department of Chemical,
Biological, and Radiation Defense of Russia's Ministry of Defense, Victor Cholstov, was not very
optimistic about the likelihood of U.S.-Russian cooperation. He claimed that Moscow and Washington
had not yet exchanged information on biological warfare and doubted that U.S. experts were ready to
share their problems about terrorist biological warfare with their Russian colleagues. At the same time,
Cholstov admits that his department has created a special division tasked with protecting Moscow's
subways and other infrastructure from biological, chemical, and radiological attack. He did not express
readiness, however, to share that information with his U.S. colleagues. Vershbow sounded more
optimistic when he stated that, after the recent anthrax incidents in the United States, Russian and U.S.
officials and experts will work together to prevent terrorists from acquiring biological weapons and on
related health measures to protect populations. According to some sources, the Federal Bureau of
Investigation and the KGB-successor agencies are examining mail suspected of containing anthrax and
exchanging information. Additionally, Kolzovo, an Institute for Microbiology in Novosibirsk that keeps a
unique collection of the most virulent bacteria, has cooperated for many years with U.S. partners. This
international activity must be strengthened and stabilized.

U.S. AND RUSSIA COOPERATING ON NON-PROLIFERATION NOW--RECENT

MEETINGS PROVE

INGRAM (staffwriter) 5/20/04

[Judith, “U.S. Diplomat Holds Nonproliferation Talks in Moscow,” Associated Press Worldstream, LN

U.S. Undersecretary of State John Bolton held nonproliferation talks with high-ranking Russian
officials on Thursday, including discussions of Russia's nuclear aid to Iran and a U.S. initiative
that would halt illicit commerce in weapons transported by land, sea or air. Bolton's visit was timed
for the run-up to meetings next month between Russian President Vladimir Putin and U.S. President
George W. Bush at the D-Day commemoration at Normandy, France and the Group of Eight meeting in
Sea Island, Georgia. The United States wants the G-8 meeting to focus on economic issues, a plan to
boost democratization and reform in the Middle East, and the Proliferation Security Initiative calling for
international cooperation in interdictions of mass destruction weapons. In particular, it is pushing for
Russia to join that initiative by the G-8 meeting or a meeting on the initiative in Krakow, Poland on May
31-June 1. U.S. officials say that Russia's joining would be especially significant because it would
encourage China to follow suit, and because Moscow could bring its influence to bear on other former
Soviet republics that have weak export controls.
WNDI 2008 10
Oil Shocks Adv

Relations Good--Multiple Scenarios

COOPERATION WITH RUSSIA KEY TO STABILIZING EURASIA, SOLVING AIDS
AND ECO-DECAY, AND CHECKING PROLIFERATION AND TERRORISM

HAASS (Dir., Policy Planning Staff) 6/1/02[Richard N., “U.S.-Russian Relations in the Post-Post-Cold War
World,” Remarks to RAND Business Leaders Forum, Tenth Plenary Meeting, New York, New York,
http://www.state.gov/s/p/rem/10643.htm, accessed 6/15/04]

Given today’s international landscape, it is clearly in the interest of both the United States and Russia
that Russia be fully integrated into this post-post-Cold War world. Russia can be a critical partner in
building security and stability in the regions it borders -- Europe, Central Asia, and the Far East.
After half a century in which we viewed the Soviet Union as the primary threat to stability in these
regions, we can now work with a democratizing Russia to help integrate these areas more fully into the
global system. Russia is also a necessary partner in addressing today’s many transnational and
global challenges. As a permanent member of the Security Council and a nation with broad
international reach, Russia must be part of the solution to such threats as terrorism,
proliferation, HIV/AIDS, and environmental degradation
WNDI 2008 11
Oil Shocks Adv

Relations Good-Nuclear War

FIRST, U.S./RUSSIAN COOPERATION KEY TO GLOBAL NUCLEAR STABILITY

LEGVOLD (Prof., Political Science, Columbia Univ.) ‘03

[Robert, “U.S.-Russian Relations Ten Months After September 11,” The National Interest, Winter, ASP//mac-dch]

Finally, the rarity of the moment and the possibilities in U.S.-Russian relations converge in one last
critical sphere—in shaping the next phase of the nuclear world we cannot escape. Currently U.S.
preponderance has permitted the United States to dictate the shape of the U.S.-Russian nuclear
relationship, and, in the end, Putin has bowed to an outcome he cannot prevent. In the process, he and
parts of the Russian security establishment are slowly coming to accept the possibility of working with
the United States in setting the role missile defense will play in the next phase. But these are opening
gambits, and they lead in unknown directions—quite likely into space and the uncertainties competition
there will bring; most likely to a set of Chinese responses that will further complicate the Indo-Pakistani
nuclear nexus and draw the Japanese across the nuclear threshold. The United States may for some
time enjoy technological leads permitting it by means of its own choosing to cope with the threats that lie
ahead. In the modern era, however, history has not worked out well for states that assumed they could
unilaterally impose a security order of their own devising and make it last. If we are to do better, we
need partners willing to join us in constructing a mutually acceptable strategic nuclear regime,
which in turn can serve as a basis for containing and redirecting nuclear trends occurring
outside the U.S.-Russian relationship. Russia remains the obvious and most important candidate
WNDI 2008 12
Oil Shocks Adv

Saudi Arabia Module:

HIGH OIL PRICES KEY TO THE SAUDI REGIME—KEY TO BUY-OFF

POPULATION AND EXTREMISTS AND PREVENT UNREST

YETIV (Prof. Political Science @ Old Dominion) 2.6.2008

[Steve, “Why the Saudi’s aren’t lifting a finger to ease oil prices”, Christian Science Monitor, p. l

Another explanation for no action could be that the Saudis may not want to look an oil horse in
the mouth. Saudi Arabia's young population has nearly tripled since 1980, while oil export
revenues in real terms have fallen by around one-quarter (despite recent increases). Each Saudi gets
72 percent less in trickle-down money today than in 1980. The nation needs oil export
revenues to maintain high levels of subsidies (for food, fuel, you name it) to sustain the
population and to build massive infrastructure. Those funds help soothe a population that suffers
from 13 percent unemployment. It also helps buy off Wahhabi radicals and antiregime
elements who work against the royal family.

SAUDI CIVIL WAR WOULD SHUT DOWN WORLD ENERGY SUPPLIES,

COLLAPSING THE AMERICAN AND GLOBAL ECONOMIES

DAVID (Prof. Poli Sci @ Johns Hopkins) 1999

[Steven, “Saving America From the Coming Civil Wars”, Foreign Affairs, Jan/Feb 1999, Vol. 78, no. 1
//wyo-tjc]

In a Saudi civil war, the oil fields will be a likely battle site, as belligerents seek the revenue
and international recognition that come with control of petroleum. For either side to cripple oil
production would not be difficult. The real risk lies not with the onshore oil wells themselves,
which are spread over a 100-by-300 mile area, but in the country's dependence on only a few
critical processing sites. Destruction of these facilities would paralyze production and take at least
six months to repair. If unconventional weapons such as biological agents were used in the oil fields,
production could be delayed for several more months until workers were convinced it was safe to return.
Stanching the flow of Saudi oil would devastate the United States and much of the world
community. Global demand for oil (especially in Asia) will increase in the coming decades, while non-
Persian Gulf supplies are expected to diminish. A crisis in the planet's largest oil producer, with reserves
estimated at 25 percent of the world's total, would have a massive and protracted impact on the price
and availability of oil worldwide. As the disruptions of 1973 and 1979 showed, the mere threat of
diminished oil supply can cause panic buying, national hysteria, gas lines, and infighting. Prices for oil
shot up 400 percent in 1973, 150 percent in 1979, and 50 percent (in just 15 days) in 1990. The oil
shocks of the 1970s threw the United States into recession, causing spiraling inflation and a decline in
savings rates that plagues the U.S. economy even now. Trillions of dollars were lost worldwide. And all
this occurred at a time when the United States was less dependent on foreign petroleum than it is now.
Cutting the Saudi pipeline today would cause a severe worldwide recession or depression.
Short of physical attack, it is the gravest threat imaginable to American interests.
WNDI 2008 13
Oil Shocks Adv

A2: Economy
STATUS QUO PRICES AREN’T HURTING THE ECONOMY & THE HOUSING
MARKET NON-UNQUES THEIR TURN

TAYLOR & VAN DOREN 9.28.2007

[Jerry & Peter, Sr. Cato Analysts, National Review, p. online //

During the last week of September, 2003, oil was selling in U.S. spot markets for $23.86 a barrel. If
one asked economists back then what would happen to the economy if oil prices were to hit
$80 four years hence, they would have almost certainly predicted economic ruin. But the
inflation, unemployment, and recession that supposedly follow oil price shocks are
nowhere on the macroeconomic radar screen. If the economy goes into a tailspin, it will be
in response to bad news in the housing market, not the oil market. The lesson to be derived from
this is pretty clear: While oil-price spirals are certainly nothing for consumers to celebrate, the
widespread belief that the health of the American economy is held hostage to oil
markets is, for the most part, incorrect.
WNDI 2008 14
Oil Shocks Adv

A2: Economy (2/)

NEWEST AND BEST STUDIES SHOW THAT OIL SHOCKS DON’T AFFECT THE
MODERN ECONOMY—ALL YOUR EVIDENCE DRAWS FROM THE 1970’s, WHICH
WAS MUCH DIFFERENT

TAYLOR & VAN DOREN 9.28.2007

[Jerry & Peter, Sr. Cato Analysts, National Review, p. online //

That was the state of the debate until the most recent price shock. The economy's failure to respond
to one of the steepest oil price increases in history with a recession, however, sent economists
back to the theoretical drawing board. Several important papers appeared in 2006, which
reexamine the role of oil shocks in the macroeconomy. A common theme of those papers is that
policy-imposed rigidities in the economy were responsible for the bad economic outcomes associated
with past oil price shocks. An analysis by economists at the Federal Reserve Bank of Atlanta
demonstrated that oil shocks had significant effects on the macroeconomy before 1985 but not
after. The authors argued that the federal price control regime of the 1970s was the true cause of the
recessions that decade. Economist David Walton at the Bank of England likewise argued that wage
rigidities in the 1970s were the culprit responsible for that dismal decade. And economists at the
Federal Reserve Bank of Cleveland offered evidence that oil price increases never have and never
will cause inflation. They calculated that a doubling of oil prices would lead to a one-time increase in
commodity prices of about 3-percent. All the new analyses agree that the more flexible economy
that we have now, allows us to cope more easily with oil price shocks. This development is of more
than academic interest. First of all, it underscores the danger of return to the price control regimes of the
1970s, something that politicians are increasingly flirting with as energy prices continue to climb.
Second, it puts into question a panoply of government programs (such as the Strategic Petroleum
Reserve), the panicky rush to break our so-called "addiction" to oil (which is leading to all kinds of
economic mischief), and a foreign policy excessively worried about oil supply disruptions around
the world.
WNDI 2008 15
Oil Shocks Adv

A2: Economy (3/)

THE ECONOMY WILL STAY STRONG EVEN AT 100 DOLLARS A BARREL

WALLSTREET JOURNAL 10.1.2007

The world economy has managed, with some indigestion, to swallow the rise of oil prices
past $80 a barrel. How well could it survive $100 a barrel?
The answer is quite well -- so long as several conditions still hold true. The price rise would probably
have to be gradual. Inflation couldn't get so bad as to force big interest-rate hikes. Oil-rich nations
would need to pump their profits back into U.S. and European economies. All of this has
happened so far.

HIGH PRICES DON’T HURT THE ECONOMY: THE ECONOMY IS LESS

DEPENDENT

USA TODAY 9/28/2004

[staff, “$50 oil probably won't cause a huge economic mess”, p. asp//wyo-tjc]
WASHINGTON -- Oil used to be the grim reaper of the economy: When prices spiked, recessions
almost always followed.
But while oil's passing the $50 a barrel mark for the first time ever Monday is not exactly
welcome news for consumers and most businesses, high energy costs are no longer the buzz-
kill for the economy they once were. Oil hit $50, an important psychological milestone, in after-hours
trading after a rebel group in Nigeria threatened to intensify fighting in the key oil-producing country.
The world is drastically less vulnerable to high oil prices than it once was, and the impact of $50
oil will likely be limited, although not entirely painless, because the world economy is much less
energy-dependent than it once was.
That's particularly true in the USA, where service industries account for a larger proportion of
economic activity than does more energy-intensive goods production. It takes about half as much
energy to produce a dollar of U.S. gross domestic product today as it did 50 years ago.
WNDI 2008 16
Oil Shocks Adv

A2: Economy (4/)

NO IMPACT TO CURRENT PRICE SPIKES—THE INCREASE FROM A FEW YEARS
AGO HAS LITTLE EFFECT ON THE ECONOMY

COURIER MAIL 10.18.2007

[staff, “Oil at $US100? That's really no problem”,

But a $US90 oil price and a weak US dollar are in broad terms a wash for the global economy. More
narrowly, expensive oil is not as significant as many might think. At $US90 the total global revenue
from selling crude oil would add to about $US2.7 trillion -- about 5 per cent of the global economy. Again
that percentage has increased with the rising oil price, but not by much. Because as the oil price has
gone up, the global economy measured in US dollars has also got bigger. The big shift in oil
share thus has not been the more recent kick-up from $US70 to $US90, but the earlier kick-up
from about $US40. That almost doubled the oil share from around 2.5 per cent of the global
economy to 4.5 per cent. And now it's about 5.4 per cent.

ITS NOT AS BAD AS THE PAST

BUSINESS WEEK 2004

[staff, “Let’s Make Gasoline Prices Even Higher”, May 5, p. asp//wyo-tjc]

The sharp rise in oil prices during the past year, to more than $40 a barrel, has been partly caused
by fear of terrorist attacks and political instability in Saudi Arabia and other large producers. The
booming Chinese economy, solid growth in the U.S., and a slower-than-expected rise in Iraqi
production also contributed to the price jump. So far industrial nations have absorbed these
increases without much damage because, even at $40, oil is cheaper in real terms than it
was during the price shocks of the 1970s and early '80s. Moreover, most countries have
since economized on usage through higher taxes on gasoline, more fuel-efficient cars and
planes, and power plants that use natural gas and coal, and to a lesser extent a shift in emphasis
to nuclear power. As a result, spending on oil relative to gross domestic product in the U.S., and
especially in Europe and Japan, is much less than it was 20 to 30 years ago.
WNDI 2008 17
Oil Shocks Adv

A2: Economy (5/)

OIL SHOCKS ARE NOT AN EXISTENTIAL THREAT TO THE ECONOMY—

GOVERNMENT MANIPULATION OF THE MARKET IS A BIGGER THREAT

TAYLOR & VAN DOREN 9.28.2007

[Jerry & Peter, Sr. Cato Analysts, National Review, p. online //

Those calls for assistance should be resisted. Energy market interventions have failed to help
consumers and done much damage to the economy. The oil price-control system in the 1970s induced shortages and increased reliance
upon imports at a time when America's stated policy was to reduce import dependency. Consumers were made materially worse off as a consequence. Likewise, federal policy to prop-up
It is time for
domestic oil prices in the 1960s with oil import quotas harmed consumers and made the economy far less efficient (energy and otherwise) than it could have been.

America to get over its inordinate fear of oil shocks. Soaring prices aren't pretty, but they are
scarcely the existential threat to our economy posited by many. Nevertheless, if we want to do
something about those shocks, then we should keep government far, far way from the wage and
price controls that are the true source of the macroeconomic mischief wrongly blamed on crude oil
markets.
WNDI 2008 18
Oil Shocks Adv

A2: Terrorism’ (1/2)

FIRST, TURN—DROPPED PRICES DESTROYS MIDDLE EAST ECONOMIES,

INCREASING TERRORISM RECRUITMENT AND KILLING KEY ALLIANCES IN
THE WAR ON TERROR

TAYLOR & VAN DOREN 3.9.2006

[Jerry & Peter, CATO sr. Analysts, “Driving Bin Laden?”, p. online //
So terrorists don't rely on oil revenues. What terrorists need most is a recruiting pool
from which to draw. Question: how do you suppose the Muslim world would react to a U.S. policy
that had the stated intention of impoverishing Muslims in suspect parts of the world? Lower
oil profits, after all, mean smaller state payments to young, underemployed Muslims and a
less robust economy. To the extent that deteriorating economic conditions breed
social discontent and political resentment (which could easily be blamed on the United States),
"starving the oil beast" might well increase the recruitment pool for al Qaeda and invite
producer states to reconsider their allegiances in the war on terror. Even though our
purchase of oil from some countries does prop-up some truly pathological regimes, cutting back on
oil consumption might produce even more pathological regimes.

SECOND, NO RISK OF YOUR TURN—

A) TERRORISM IS CHEAP & DOESN’T USE OIL PROFITS

TAYLOR & VAN DOREN 3.9.2006

[Jerry & Peter, CATO sr. Analysts, “Driving Bin Laden?”, p. online //

When you drive alone, do you drive with bin Laden? A growing number of foreign policy analysts seem to
think so, and the president himself said as much in an interview with CBS News anchor Bob Schieffer a
few days before his much-ballyhooed "State of the Addiction" speech to a joint session of Congress.
Unfortunately, the widespread belief that conservation and alternative fuels will cripple
Islamic terrorism is wishful thinking. The fundamental problem with the argument is that
terrorists don't need oil revenues. The fact that catastrophic terrorism can be
undertaken on the proverbial dime (a few hundred thousand dollars paid for the 9/11 attacks)
suggests that choking off financial resources to al Qaeda effectively is a hopeless task.

B) 1990s DISPROVES PRICE/TERRORISM CORRELATION

TAYLOR & VAN DOREN 3.9.2006

[Jerry & Peter, CATO sr. Analysts, “Driving Bin Laden?”, p. online //wyo-tjc]

Further evidence of the unimportance of money to terrorism is the absence of a

correlation between Persian Gulf oil revenues and terrorist activity. Oil prices and profits
during the 1990s were among the lowest ever seen in history. But the 1990s also
witnessed the worldwide spread of Wahabbi fundamentalism and the coming of age of
al Qaeda. Note too that Islamic terrorists in the 1990s relied upon help from state sponsors such as
Sudan, Afghanistan, and Pakistan — nations that aren't exactly known for their oil wealth or robust
economies.
WNDI 2008 19
Oil Shocks Adv

A2: Terrorism’ (2/2)

C) ALTERNATE FUNDING AND REGIMES HAVE NO INTEREST IN DOING SO

TAYLOR & VAN DOREN 3.9.2006[Jerry & Peter, CATO sr. Analysts, “Driving Bin
Laden?”, p. online //

Reducing oil revenue to noxious regimes might be a risk worth taking if billions were
finding their way from such regimes into al Qaeda coffers, but that seems unlikely.
Everything we know suggests that al Qaeda terrorist cells are "pay as you go" operations that
primarily engage in garden-variety crime to fund their activities. Given that the
governments of Saudi Arabia, Kuwait, and others in the region are slated for extinction
should bin Laden have his way, those governments have no interest in facilitating
the transfer of oil revenues to some post office box in Pakistan.

THIRD, NO INTERNAL LINK—EVEN IF PRODUCER STATES FUND TERROR,

DROPPED PROFITS WOULDN’T STOP THAT

TAYLOR & VAN DOREN 3.9.2006[Jerry & Peter, CATO sr. Analysts, “Driving Bin
Laden?”, p. online //
Producer states do use oil revenues to fund ideological extremism, and Saudi financing of
madrassas is the primary case in point. But given the importance of that undertaking to the
Saudi government (it was instituted, after all, to defend the House of Saud's position of leadership in the
Islamic world in response to criticism from radical Shiites from Iran), it's unlikely that the Saudis
would cease and desist simply because profits were down. They certainly weren't deterred by
meager oil profits in the 1990s. So cutting back on oil consumption would most likely not
cut back on terrorism. But wouldn't a cutback reduce the need for a military presence in the Persian
Gulf? No, because there is no need for a U.S. military presence in the Gulf regardless of the amount of
oil we import.
WNDI 2008 20
Oil Shocks Adv

A2: Oil Black-mail

NO RISK OF OIL BLACK-MAIL—PRODUCING STATES HAVE FAR MORE TO LOSE

TAYLOR & VAN DOREN 9.27.2007[Jerry & Peter, Sr. Cato Analysts, National Review,
p. online //wyo-tjc]

Moreover, oil-producing nations have never allowed their feelings towards oil-consuming
nations to affect their production decisions. After a detailed survey of the world oil market since
the rise of OPEC, MIT professor M.A. Adelman concluded, "We look in vain for an example of a
government that deliberately avoids a higher income. The self-serving declaration of an
interested party is not evidence." Prof. Philip Auerswald of George Mason University agrees; "For the
past quarter century, the oil output decisions of Islamic Iran have been no more menacing or
unpredictable than Canada's or Norway's." While it is possible that a radical oil-producing regime might
play a game of chicken with consuming countries, producing countries are very dependent on
oil revenue and have fewer degrees of freedom to maneuver than consuming countries.
Catastrophic supply disruptions would harm producers more than consumers, which is
why they are extremely unlikely.