***OIL DA

UNIQUENESS

mexico

uq mexican crude exports falling

exican crude exports to t!e U"S" !a#e fallen to multi$%ear lo&s EIA' ()*+/13, (USEIA, Mexico Week: Lower Mexican oil production contri ute! to lower crude oil export! to U"S"#, $/1%/&'13, U"S" Ener() In*or+ation Ad+ini!tration, ,ttp://www"eia"(o-/toda)inener()/detail"c*+.id/11&$1, 01a,n2 3rude oil export! anc,or t,e ener() trade etween Mexico and t,e United State! " In &'1& Mexico wa!
t,e world4! nint, lar(e!t oil producer" 5,e -alue o* crude oil export! *ro+ Mexico to t,e United State! reac,ed 63$"7 illion in &'1&, ,a-in( +ore t,an dou led !ince &''%" 8owe-er, Mexico4! crude oil production and export! to t,e United

State! ,a-e ot, *allen, wit, export! down to '"97 +illion

arrel! per da) ( l/d2 in &'1& *ro+ 1"%: +illion l/d in &''%" La!t )ear wa! t,e *ir!t ti+e !ince 199% t,at annual export! o* Mexican crude oil to t,e United State! *ell elow 1 +illion l/d" Mexico4! !,are o* total U"S" crude oil i+port! *ell to 11; in &'1&, down *ro+ 1<; in &''3" 5)picall), Mexico export! it! ,ea-ier crude oil! and keep! it! li(,ter crude, +o!tl) *ro+ !out,ern re(ion!, *or it! own re*inerie!" More t,an 9'; o* Mexico4! ,ea-) crude oil production occur! in t,e =ort,ea!tern Marine production re(ion (!ee +ap2, and t,i! i! w,ere 7$; o* Mexico4! oil production decline! ,a-e occurred" 5,e ,ea-) crude! are predo+inantl) co+po!ed o* t,e Ma)a -ariet), w,ic, !tate oil co+pan) >etroleo! Mexicano! (>e+ex2 +ainl) produce! *ro+ t,e 3antarell and 1u?Maloo ?@aap o**!,ore oil *ield!, located alon( t,e coa!t o* t,e Aucatan >enin!ula" 3rude oil production trend! in Mexico -ar) ) (rade and location" Mexico4! production

o* ,ea-) crude oil *ell %<;, or 1"1 +illion

crude oil ro!e '"& +illion

l/d, *ro+ &''% to &'1&" 8owe-er, Mexico4! production o* li(,t and extra li(,t l/d etween &''% and &'1&, partiall) o**!ettin( t,e ,ea-) crude decline!"

All t!eir aut!ors are too optimistic,oil fields in exico are running out and crude oil production is lo& no& -euters' .)()*/ (BIn!i(,t: 3loud! (at,er o-er Mexico4! procla+ation o* new oil dawnB, www"reuter!"co+/article/&'13/'</'$/u!?+exico?oil?in!i(,t?idUSCDE9$%'@C&'13'<'$ //kd,2 (Deuter!2 ? 5,e -a!t 1u Maloo @aap oil *ield i! t,e Eewel in t,e crown o* Mexico4! oil indu!tr), pu+pin( one in e-er) t,ree arrel! o* crude t,e countr) produce!, at !o+e o* t,e lowe!t co!t! in t,e world" Cut e,ind t,e lu!ter, !tate oil +onopol) >e+ex Fuietl) expect! a (loo+ier *uture *or t,e a(in( *ield, lea-in( a i( (ap in !uppl) and ca!tin( !eriou! dou t on it! pu lic procla+ation! o* a new era o* oil (rowt," In t,e +ain
control center on t,e 1U?S plat*or+, a 1&,$''?tonne tan(le o* tank! and pipe! at t,e ,eart o* 1u Maloo @aap, +onitor! *la!, real? ti+e data !,owin( ,ow +uc, crude i! ein( !ucked up *ro+ depo!it! two?t,ird! o* a +ile elow t,e ocean *loor in t,e $:?!Fuare? +ile (1$'?!F?k+2 *ield" Worker! ea+ w,en talkin( a out t,e plat*or+, t,e ,u *or a network o* 173 !,allow water well! t,at produce! crude *or t,e eFui-alent o* onl) a out 6< a arrel" 5,e) tout a *i-e?)ear !treak wit,out an accidentG a ,otel *or -i!itor!G e-en a ()+ *or t,e 11< worker! w,o li-e ,ere a o-e t,e (litterin( water! o* t,e Ca) o* 3a+pec,e" W,at

t,e) don4t di!cu!! ? and w,at >e+ex would rat,er a-oid talkin( a out ? i! t,at in a *ew )ear!, production ,ere i! expected to e(in a precipitou! decline" In He ruar), >e+ex !aid it expected 1u Maloo @aap4! output to ,old !tead) at :$',''' arrel! per da) ( pd2 t,rou(, &'17" Since t,en, >e+ex 3EI E+ilio LoJo)a ,a! repeatedl) declared t,at Mexico, t,e world4! !e-ent,?lar(e!t oil producer, i! +akin( a co+e ack" B>roduction i! not declinin(" It i! actuall)
e(innin( to rall),B ,e !aid recentl), re*errin( to total national output" B5,i! i! i( new! *or our countr), and !o+et,in( t,at i! not nece!!aril) known to t,e pu lic"B Cut +an) anal)!t! Fue!tion t,at !cenario" A clo!er look at 1u Maloo @aap ,elp! explain w,)" In a pre!entation at Dice Uni-er!it) in 8ou!ton, 5exa!, earl) la!t )ear, LoJo)a4! predece!!or, 0uan 0o!e SuareJ

3oppel, e!ti+ated production at t,e (iant o**!,ore oil*ield, w,o!e Ma)a na+e +ean! B(ood ne!t o* coal!,B will *all <' percent ) &'&3" >e+ex o**icial! initiall) declined to co++ent on t,e e!ti+ate until Deuter! !,owed t,e+ t,e Dice pre!entation" At t,at point t,e) con*ir+ed t,at t,e *oreca!t !till !tand!" E-en a cur!or) exa+ination o* >e+ex4! own *i(ure! underline! w,) oil anal)!t! do not !,are LoJo)a4! con*idence" Mexico4! a-era(e annual crude production ,a! een ed(in( down *or )ear!" At t,e out!et o* &'13, a-era(e *ir!t?Fuarter oil output !ank to &"$% +illion pd, it! lowe!t le-el !ince 199'" 5,e data and t,e *oreca!t! ,i(,li(,t a di!connect etween >e+ex4! opti+i!+ and t,e realit) at *ield! like 1u Maloo @aap" 5wo?t,ird! o* *ield! are alread) in decline, and LoJo)a4! late!t *oreca!t *or a &' percent ri!e in output to 3 +illion pd o-er t,e next *i-e )ear! i! pre+i!ed on
production *ro+ !o+e t,at ,a-e )et to e de-eloped, anal)!t! !a)" Hor +an), it !ound! all too *a+iliar" 0u!t a *ew )ear! a(o t,e (iant 3antarell *ield wa! t,ou(,t to e a !talwartG output ,a! now plun(ed to one?tent, o* &''% le-el!, a !,ockin(l) a rupt decline t,at

cau(,t world oil +arket! o** (uard" B>roduction

i! (oin( to *all and t,ere4! not,in( o -iou! t,at will

replace it,B !aid Ka-e >ur!ell, an oil anal)!t wit, 8ou!ton?

a!ed ener() de-elop+ent ank 5udor >ickerin( 8olt, w,o worked on re!er-oir !tudie! in Mexico in t,e 199'!" BI* a pu lic co+pan) in t,e U"S" told +e t,at, t,e !tock would e a !,ort,B ,e added" BAou4d !ell it"B 5,e Mexican (o-ern+ent ,ope! a land+ark ener() re*or+ ai+ed at lurin( pri-ate oil +aEor in-e!t+ent will ,elp oo!t output" =ext +ont,, >e+ex will auction !ix lock! in Mexico4! 3,icontepec a!in, ,o+e to t,e countr)4! lar(e!t ,)drocar on re!er-e, in a +ore i++ediate pu!, *or additional capital"

exican crude oil exports are lo& no&,suppl% and demand EIA' ()*()*/ (U"S" Ener() In*or+ation Ad+ini!tration, BMexico Week: 3rude oil +o-in( nort,, product! +o-in( !out, c,aracteriJe! U"S"?Mexico tradeB, www"eia"(o-/toda)inener()/detail"c*+.id/11&71 //kd,2
5,e United State! and Mexico conduct a !i(ni*icant a+ount o* trade in crude oil and petroleu+ product!, wit, t,e United State!

In &'1&, t,e United State! i+ported nearl) one +illion arrel! per da) ( l/d2 o* crude oil *ro+ Mexico, w,ile exportin( <'',''' l/d o* petroleu+ product! to Mexico (!ee c,art a o-e2" 5,e dri-er! *or recent trend! in crude oil and petroleu+ product trade etween t,e two countrie! include ri!in( crude oil production in t,e United State!, *allin( Mexican crude oil production, and ri!in( de+and in Mexico *or petroleu+ product! !uc, a! (a!oline and die!el *uel" Mexico i! t,e t,ird lar(e!t !upplier o* crude oil i+port! to t,e United State!" 8owe-er, t,e 97&,''' l/d o* U"S" crude oil i+port! in &'1& wa! t,e *ir!t ti+e !ince 199% t,at i+port! *ro+ Mexico were elow one +illion l/d" Meanw,ile, Mexico4! u!e o* re*ined petroleu+ product! ro!e &'; o-er t,e pa!t 1' )ear!, w,ile it! capacit)
pri+aril) i+portin( crude oil *ro+ Mexico and exportin( re*ined petroleu+ product! to Mexico" re+ained t,e !a+e" Mexico increa!in(l) look! to t,e United State! to +eet it! (rowin( need *or petroleu+ product!" Since &''%, U"S" export! o* petroleu+ product! to MexicoLpri+aril) +otor (a!oline and die!el *uelL,a-e nearl) tripled (!ee c,art elow2"

exican crude oil exports &ill stop &it!in a decade,t!e%0re running out of oil and fields are aging N12' ** (0o,n 3ollin! Dudol*, en-iron+ental Eournali!t, BMexico Iil Export! 3ould End Wit,in Kecade, Deport Warn!B, (reen" lo(!"n)ti+e!"co+/&'11/'%/&9/+exico?oil?export!?could?end? wit,in?decade?report?warn!/.Mr/' //kd,2 Mexico, t,e t,ird?lar(e!t !upplier o* *orei(n oil to t,e United State!, could lo!e t,e capacit) to export crude alto(et,er wit,in a decade wit,out +aEor new in-e!t+ent! in exploration and production , warn! a
re!earc, (roup report relea!ed on Hrida)" 5,e countr)N! !,i*t *ro+ exporter to i+porter would deal a !e-ere low to MexicoN! *ederal (o-ern+ent, w,ic, depend! on oil !ale! *or rou(,l) a t,ird o* it! ud(et, !aid t,e report, a two?)ear in-e!ti(ation ) re!earc,er! wit, t,e 0a+e! A" Caker III In!titute *or >u lic >olic) at Dice Uni-er!it) in 8ou!ton" A !,i*t toward oil i+porter !tatu! would e a !e-ere urden on t,e Mexican (o-ern+ent and cur it! a ilit) to pro-ide i+portant !er-ice!, ot, related to !ocial pro(ra+! and internal peace and !ecurit),# it !tate!" >roduction

) >e+ex, t,e national oil co+pan), ,a! *allen &$ percent *ro+ it! peak in &''%, w,ile internal de+and ,a! cli+ ed, !,arpl) curtailin( t,e a+ount o* crude a-aila le *or export" 5,e drop in !uppl) i! lar(el) due to !teep decline! at 3antarell, an a(in( !uper?(iant *ield *or+erl) re!pon!i le *or t,e ulk o* MexicoN! oil output" exican crude oil exports are decreasing$ AD-' .)3.)*/ (0">" Mor(an4! AKD, Olo al =ew! P 3o++entar), BMexico Ma) 5rade Ke*icit 3o+e! In =ear Expectation! at 6%7' MillionB, ,ttp!://www"adr"co+/Market!/Olo al=ew!Stor).docIK/1?K=&'13'<&<''71<1? '1A=KSI51337HHSK1'3<8UM$UM //kd,2 MEQI3I 3I5A??Mexico po!ed a trade de*icit in Ma) o* 6%7' +illion on *allin( crude?oil export!
co+pared wit, t,e )ear?a(o +ont, and an increa!e in i+port! o* inter+ediate (ood! to +ake *ini!,ed product!, t,e (o-ern+ent !tati!tic! a(enc) Ine(i !aid Wedne!da)" 5,e *i(ure wa! +o!tl) in line wit, expectation!" Econo+i!t! !ur-e)ed ) Kow 0one! ,ad expected a de*icit o* 6<'' +illion on weaker oil export!" So+e ,ad predicted a i((er de*icit on a *all in +anu*acturin( export! -er!u! la!t )ear, w,ic, did not +aterialiJe" Ma)4! o-erall export! *ell '"9; to 63&":% illion, Ine(i !aid" product!, +o!tl) crude

oil ,eaded to t,e U"S", were down 1<; to 63"<$

Export! o* petroleu+ illion" Mexico4! !tate oil +onopol)

exported an a-era(e o* 1"'&9 +illion arrel! o* crude oil at an a-era(e price o* 697"7$ per arrel in Ma), co+pared wit, )ear?earlier oil export! o* 1"19: +illion arrel! a da) at an a-era(e price Eu!t a o-e 61'& per arrel"

uq crude petroleum distinction

2!eir e#idence is citing petroleum' not crude oil &!ic! is t!e true controller of prices &e0ll insert t!is picture into t!e de4ate EIA' ()*//13, (Mexico Week: U"S" i! MexicoN! pri+ar) ener() trade partner a+id !,i*tin( trade d)na+ic!#, $/13/&'13, Untied State! Ener() In*or+ation Ad+ini!tration, ,ttp://www"eia"(o-/toda)inener()/detail"c*+.id/11&31, 01a,n2

#ene5uela

uq #ene5uelan production up
It0s increasing Iranian sanctions and ne& capacit% 6ox .)*+/13 (ReneJuela Cu+p! Up Iil Export! 5,ank! 5o Sanction! In Iran#, Hox =ew!, </1%/&'13, ,ttp://latino"*oxnew!"co+/latino/new!/&'13/'</1%/-eneJuela? u+p!?up?oil? export!?t,ank!?to?!anction!?on?iran/, 01a,n2 5,e recent !trin( o* !anction! a(ain!t Iran ) t,e United State! and t,e European Union ,a! unwittin(l) (i-en a oo!t to t,e Middle Ea!tern nationN! clo!e!t all) in Latin A+erica" 7ene5uela !as quietl% ta8en ad#antage of t!e sanctions a(ain!t Iran to !coop up !o+e o* t,e +arket t,at it ,a! lo!t in oo+in( A!ia, particularl) in 3,ina and India" It i! ironic,# Do ert Mc=all), a *or+er W,ite 8ou!e oil o**icial, told t,e Hinancial 5i+e! " Cut a! !anction! dri-e Iranian oil o** t,e +arket, it would e unrea!ona le to expect e-en 5e,ranN! *riend! like ReneJuela to *or(o opportunitie! to replace t!ose 4arrels"# I-er t,e pa!t two )ear!, ReneJuela ,a! expanded it! reac, in 3,ina, t,e worldN! !econd?lar(e!t oil con!u+er, and India
St,e *ourt, lar(e!tS to al+o!t 1 +illion arrel! o* crude a da)" 5,e ReneJuelan ri!e ,a! co+e a! Iranian oil export! to t,o!e countrie! ,a-e plu++eted to around $'',''' arrel! a da)" ReneJuela ,a! t,e world4! lar(e!t oil re!er-e! Swit, e!ti+ated &1 illion arrel! o* oil in re!er-e! in &'11S ut production ,a! een *allin( in t,e pa!t decade" 5,e (o-ern+ent ,a! relied ,ea-il) on t,e countr)4! oil inco+e to *und !ocial pro(ra+!, and rein-e!ted relati-el) little o* it to exploit new *ield! and replace depleted one!"

5,e u+p it ,a! recei-ed *ro+ exportin( to A!ia ,a! aided t,e (o-ern+ent o* ReneJuelan >re!ident =icolT! Maduro, w,ic, ,a! !tru((led !ince t,e da)! o* 8u(o 3,T-eJ to keep c,eck! on it! oil indu!tr)" An o**icial
*or t,e !tate run >etrUleo! de ReneJuela (>KRSA2 !aid la!t )ear t,at it ,a! to i+port *uel and co+ponent! *ro+ t,e United State! in order to *ul*ill contractual a(ree+ent! and *or con!u+ption" W,ile t,e export! to 3,ina and India +a) ,elp alle-iate !o+e o* MaduroN! worrie!, it could o**!et t,e political tie! etween ReneJuela and Iran !o+eti+e in t,e *uture" Hor now t,e two nation! !ee+ to e on !olid ter+!, wit, 3araca! o**erin( 5e,ran political and econo+ic !upport in t,e wake o* t,e wide!pread !anction!" 5,i! led t,e U"S" 5rea!ur) la!t +ont, to i+ple+ent !anction! on t,e Iranian ReneJuelan Ci?=ational Cank, a *inancial co+pan) ori(inall) e!ta li!,ed a! a ilateral Eoint -enture"

uq #ene5uelan prices rising

7ene5uelan oil prices are on t!e rise 6ocus .)**/13, (Hocu!Econo+ic!, citin( t,e ReneJuelan Mini!tr) o* >etroleu+ and Minin(, ReneJuelan oil price! re ound in Ma)#, </11/13, ,ttp://www"*ocu!? econo+ic!"co+/en/econo+)/new!/ReneJuela?3o++oditie!? ReneJuelanMoilMprice!Mre oundMinMMa)M?&'13?'<?11, 01a,n2 In Ma), t,e a-era(e price o* t,e ReneJuelan +ix o* crude oil ro!e '":; o-er t,e pre-iou! +ont, to USK 1''"% per arrel" 5,e Ma) readin( contra!t! t,e &"<; drop !een in April and +ark! t,e *ir!t increa!e in t,ree +ont,!" I il price! were oo!ted ) ri!in( ten!ion! in t,e Middle Ea!t, i+pro-in( econo+ic data in t,e United State! a! well a! a weak U"S" dollar" Accordin( to t,e late!t report *ro+ t,e Ir(aniJation o* >etroleu+ Exportin(
3ountrie! (I>E32, ReneJuelan oil production reac,ed &"3$ +illion arrel! per da) (+ pd2 in Ma), !li(,tl) a o-e t,e &"3% + pd !een in t,e pre-iou! +ont," LatinHocu! 3on!en!u! Horeca!t panelli!t! expect oil price! to a-era(e USK 1''"7 per arrel t,i! )ear, w,ic, i! down USK 1": per arrel o-er t,e la!t +ont,N! 3on!en!u!" In &'1%, t,e panel !ee! oil price! ri!in( to USK 1'%"< per arrel"

uq #ene5uelan exports falling

Oil imports are s!ifting a&a% from 7ene5uela eac!am' +)**/13 (3arl, director o* t,e 3SIS A+erica! >ro(ra+, *or+er t,e Senate Horei(n Delation! 3o++ittee +e+ er, M"A" de(ree! *ro+ A+erican Uni-er!it) and 3olu+ ia Uni-er!it), C"A" *ro+ t,e Uni-er!it) at Al an), State Uni-er!it) o* =ew Aork, ReneJuelaN! >re!idential Election: 8ow Si(ni*icant i! t,e Iutco+e *or t,e United State!.#, %/11/13, 3SIS, director o* t,e 3SIS A+erica! >ro(ra+, *or+er t,e Senate Horei(n Delation! 3o++ittee +e+ er, M"A" de(ree! *ro+ A+erican Uni-er!it) and 3olu+ ia Uni-er!it), C"A" *ro+ t,e Uni-er!it) at Al an), State Uni-er!it) o* =ew Aork, 01a,n2 V1: 8ow i! t,e ener() relation!,ip etween t,e United State! and ReneJuela e-ol-in( . A1: Muc, ,a! een !aid a out t,e interdependence o* t,e two countrie!, ut recent *i(ure! !,ow t,i! i! eco+in( le!! and le!! !o" ReneJuela, t,rou(, t,e !tate?owned oil co+pan) >KRSA, i! t,e *ourt, lar(e!t oil pro-ider to t,e United State!, trailin( onl) 3anada, Saudi Ara ia, and Mexico" At t,e end o* &'11, ReneJuela repre!ented 11 percent o* i+port! *or t,e United State!Lt,e worldN! lar(e!t oil con!u+er" 5o e !ure, 11 percent re+ain! a !i(ni*icant !,are o* t,e U"S" +arket, ut
ReneJuelaN! !,are continue! to decline" A! recentl) a! &''7, U"S" i+port! o* ReneJuelan oil !tood at 1"% +illion arrel! per da) ( pd2G ) &'1&, t,i! nu+ er !tood at :79,''' pd, accordin( to preli+inar) *i(ure! relea!ed ) t,e U"S" Kepart+ent o* Ener()N! Ener() In*or+ation Ad+ini!tration" Meanw,ile, t,e United State! continue! to ad-ance on it! pat, o* increa!in( ener() independence a! production o* !,ale (a! and ti(,t oil (row!" Hinal appro-al o* t,e &,''' +ile 1e)!tone pipeline, w,ic, would rin( 7'',''' pd o* oil *ro+ 3anada to re*inerie! in 8ou!ton and t,e Oul* o* Mexico, would increa!in(l) delink t,e United State! *ro+ ReneJuelan export!" =ot to +ention t,e po!!i ilit) o* increa!in( deep?water exploration in Mexico a! it e(in! to

enact re*or+! o* it! ener() !ector" Hor ReneJuela, t,e U"S" +arket will re+ain t,e nu+

er one de!tination o* oil export!, wit, rou(,l) %' percent o* it! oil (oin( to t,e United State!, *ollowed ) t,e 3ari ean and 3,ina" 5,e oil !ector account! *or &$ percent o* ReneJuelan OK> and :' percent o* export!" Le!! de+and *ro+ t,e U"S" +arket would ,it t,e ReneJuelan econo+) wit, con!idera le *orce" 5,e United State! +i(,t !ee ad-er!e e**ect! *ro+ rapidl) decrea!in( ReneJuelan !upplie!, !uc, a! ,i(,er *uel price!, and (rowt, would !low, ut t,e!e e**ect! would likel) e tran!itor)" W,at i! +ore likel) in t,e +idter+ i! a re alancin( o* t,e U"S" ener() a!ket" 5,i! i! likel) to include le!! dependence on ReneJuelan oil ecau!e o* t,e c,an(in( ener() !cenario de!cri ed a o-e" I* current trend! continue, t,e ReneJuelan econo+) i! likel) to experience di**icult)" Ke!pite ti(,t (lo al !upplie! o* oil, ReneJuela +a) !tru((le to *ind new u)er! and to reorient in*ra!tructure u!ed to re*ine it! oil to reac, ot,er +arket!, includin( A!ia, !ince toda) onl) t,e United State! i! well?eFuipped to re*ine ReneJuelaN! ,ea-), low?Fualit) oil"

7ene5uelan imports are at /9$%ear lo&s 62' *3 (0a-ier Cia!, de(ree *ro+ 5,e Uni-er!it) o* S,e**ield, 3o++oditie! 3orre!pondent at Hinancial 5i+e! US net i+port! o* ReneJuelan oil ,it 3'?)ear low#, 1&/13/&'13, ,ttp://www"*t"co+/intl/c+!/!/'/$e*9e'*a?%%*:?11e&?:$:*? ''1%%*ea dc'",t+lWaxJJ&QS!-@cW3, 01a,n2 =ot !o lon( a(o, 8u(o 3,T-eJ, t,e le*ti!t ReneJuelan leader, al+o!t e-er) +ont, would t,reaten t,e US t,at ,e would !,ut down ,i! countr)N! oil export!" Eac, ti+e, Wa!,in(ton took t,e t,reat! !eriou!l) ecau!e o* t,e i+portance o* 3araca! *or US ener() !upplie!" =ot an) lon(er" 5,e US dependence o* ReneJuelan net crude and oil product! export! (includin( t,e US Rir(in I!land!, w,ic, lar(el) re*ined ReneJuelan crude to export into t,e US2 ,a! dropped to le-el! la!t !een nearl) 3' )ear! a(o" 5,e !,arp drop i! due to t,ree *actor!" I-erall US oil i+port! are down on t,e ack o* t,e !,ale oo+" In addition, t,e clo!ure o* a lar(e re*iner) in t,e US Rir(in I!land! co?owned ) >etrUleo! de ReneJuela (>d-!a2 ,a! *urt,er reduced i+port! o* ReneJuelan?ori(in oil product!" And +ore recentl), ReneJuela ,a! !tarted to i+port lar(e a+ount! o* US?+ade (a!oline to o**!et a local !,orta(e" 5,e reduction in US i+port! o* ReneJuelan?ori(in crude and oil product! ,a! een (oin( on *or t,e la!t *i-e )ear!" 5,e new *actor i! t,e !ur(e in US export! o* oil product! into ReneJuela" In Septe+ er, US re*iner! !,ipped a record o* 19<,''' /d o* (a!oline and ot,er oil product! to 3araca!" 5,e
International Ener() A(enc), t,e we!tern countrie!N oil watc,do(, a!!ociate! t,e !ur(e in US export! to outa(e! in A+ua) and El >alito re*inerie! in ReneJuela" 5,e A+ua) plant, part o* t,e 9$$,''' /d (iant >ara(uana De*inin( 3enter S t,e worldN! !econd lar(e!t a*ter t,e 0a+na(ar re*iner) in India S !u**ered an explo!ion and *ire in Au(u!t t,at killed nearl) $' people and inEured +ore t,an 1$'" Alt,ou(, 3araca! ,a! !aid !e-eral ti+e! t,e re*iner) i! returnin( to *ull production, t,e !ur(e in oil product! *ro+ t,e US !u((e!t! t,e contrar)" 5,e Eu+p in US (a!oline export! to ReneJuela +ean! t,at *or eac, 1' arrel! o* crude t,at 3araca! !,ip! to t,e US, two return to ReneJuela a! product!" 5,e US oil product export! accounted in Septe+ er *or rou(,l) &' per cent o* ReneJuelan do+e!tic oil con!u+ption o* a out 1+ /d" 5,e co+ ination o* lower ReneJuelan oil export! S ot, *ro+ t,e countr) it!el* and t,e US Rir(in I!land! S and ,i(,er US (a!oline export! reduced in 0une US net i+port! o* ReneJuelan?ori(in oil to

<:$,''' arrel! a da), t,e lowe!t !ince Marc, 19:%, accordin( to Hinancial 5i+e!N e!ti+ate! a!ed on data *ro+ t,e US Ener() In*or+ation Ad+ini!tration" US net i+port! o* ReneJuelan?ori(in oil reco-ered a it in Septe+ er S t,e la!t data a-aila le S, reac,in( :39,''' /d" Mr 3,T-eJ, w,o i! under(oin( cancer treat+ent in 3u a, +a) t,reaten an oil e+ ar(o in t,e *uture, a! ,e did durin( t,e recent pre!idential election!" Cut ,i! +enace will no lon(er worr) Wa!,in(ton"

S:I62IN; 2O <:INA AND INDIA 62' .)*//13 (0a-ier Cla!, de(ree *ro+ 5,e Uni-er!it) o* S,e**ield, 3o++oditie! 3orre!pondent at Hinancial 5i+e!, ReneJuela *ill! -oid le*t ) Iranian oil export !anction!#, 0une 13, &'13 9:%9 a+, ,ttp://www"*t"co+/intl/c+!/!/'/%7e7*ad:?cdc3?11e&?:313? ''1%%*ea 7de",t+lWaxJJ&QMI@*CW), Eld2 I-er t,e pa!t two )ear!, ReneJuela ,a! nearl) dou led it! oil export! to 3,ina S t,e worldN! !econd?lar(e!t oil con!u+er S and to India S t,e *ourt, lar(e!t S to a co+ ined total o* al+o!t 1+ arrel! a da)" I-er t,e !a+e period, Iranian oil export! to ot, countrie! ,a-e ,al-ed to rou(,l) $'',''' /d" ReneJuela ,a! t,i! )ear eco+e t,e t,ird?lar(e!t oil !upplier to 3,ina and India, up *ro+ !e-ent, po!ition in &'11" Iran, w,ic, two )ear! a(o wa! t,e t,ird top !upplier to ot, CeiEin( and =ew Kel,i, ,a! *allen to
!ixt, and 11t,, re!pecti-el)"

Di#ersif%ing a&a% 62' .)*//13 (0a-ier Cla!, de(ree *ro+ 5,e Uni-er!it) o* S,e**ield, 3o++oditie! 3orre!pondent at Hinancial 5i+e!, ReneJuela *ill! -oid le*t ) Iranian oil export !anction!#, 0une 13, &'13 9:%9 a+, ,ttp://www"*t"co+/intl/c+!/!/'/%7e7*ad:?cdc3?11e&?:313? ''1%%*ea 7de",t+lWaxJJ&QMI@*CW), Eld2 5,e i+pact o* t,e !anction! on Iranian oil export! i! not t,e onl) *actor dri-in( ReneJuela into A!ia, ,owe-er" Accordin( to t,e US depart+ent o* ener(), ReneJuela ,a! atte+pted to di-er!i*) it! oil export de!tination! awa) *ro+ t,e US# a! a +atter o* national polic) o-er t,e pa!t *ew )ear!" Cut oil trader! and anal)!t! !a) t,at wit,out t,e retreat
o* Iran due to t,e !anction! it would ,a-e een i+po!!i le *or 3araca! to win A!ian +arket !,are !o Fuickl)" A+rita Sen, c,ie* oil anal)!t at con!ultant! Ener() A!pect!, !aid t,at t,e Iranian !anction! are ,elpin( ReneJuelaN! di-er!i*ication

!trate(), e!peciall) *or countrie! like India and to an extent 3,ina, w,o are replacin( Iranian crude wit, ot,er!#" Da*ael Da+XreJ, ReneJuelaN! oil +ini!ter, !aid durin( t,e recent +eetin( o* t,e Ipec oil cartel in Rienna t,at t,e (rowt, o* oil export! into A!ia wa! t,e re!ult o* a !ucce!!*ul oil +arket di-er!i*ication !trate()# awa) *ro+ t,e US" A2 refineries 62' .)*//13 (0a-ier Cla!, de(ree *ro+ 5,e Uni-er!it) o* S,e**ield, 3o++oditie! 3orre!pondent at Hinancial 5i+e!, ReneJuela *ill! -oid le*t ) Iranian oil export !anction!#, 0une 13, &'13 9:%9 a+, ,ttp://www"*t"co+/intl/c+!/!/'/%7e7*ad:?cdc3?11e&?:313? ''1%%*ea 7de",t+lWaxJJ&QMI@*CW), Eld2 I-er t,e la!t decade, ReneJuelan oil export! to t,e US ,a-e *allen &$ per cen t to an a-era(e o* 9'',''' /d in &'1&" 5,e drop in export! ,a! accelerated t,i! )ear , wit, !ale! *allin( to a &$?)ear low o* $79,''' /d in He ruar)" 5,e con!truction o* new and co+plex re*inerie! in A!ia ,a! al!o pa-ed t,e wa) *or t,e arri-al o* t,e notoriou!l) di**icult?to?re*ine ReneJuelan crude in 3,ina and India"

uq sanctions reduce exports

Sanctions &ill incline 7ene5uela to reduce exports -2' +)3//13, (D5 =ew!, citin( a!!i!tant Secretar) o* State 0aco !on and ReneJuelan Horei(n Mini!ter 0aua, ReneJuela t,reaten! oil, trade in continuin( election !pat wit, US#, D5 =ew!, %/&3/&'13, ,ttp://rt"co+/new!/-eneJuela?t,reaten!?u!?oil?&3:/, 01a,n2 In re!pon!e to re+ark! *ro+ US A!!i!tant Secretar) o* State Do erta 0aco !on, ReneJuelan Horei(n Mini!ter Elia! 0aua warned t,at an) !anction! i+po!ed ) t,e US *or it! April 1% pre!idential allot would e +et wit, puniti-e oil and trade +ea!ure!" I-er t,e weekend 0aco !on co++ented on 3== en E!panol,
!tatin( t,at t,e ReneJuelan !tate +o-ed too Fuickl) in proclai+in( =icolT! Maduro it! new pre!ident in li(,t o* ti(,t electoral re!ult!, and t,at ,al* o* t,e countr)N! pu lic reEected t,e re!ult!" W,en 0aco !on wa! a!ked w,et,er t,e US would (o !o *ar a! to i+po!e !anction! i* ReneJuela re*u!ed to recount poll re!ult!, !,e could not con*ir+ or den) t,e po!!i ilit)" In re!pon!e to 0aco !onN! re+ark!, Horei(n Mini!ter 0aua !aid t,at ,i! countr) ,eld t,e US re!pon!i le *or t,e -iolence t,at *ollowed t,e election and ,a! !o *ar le*t ei(,t people dead" 8e added t,at ReneJuela would re!pond in kind to an) US !anction! " BAou can e certain t,at in t,e *ace o* !anction! o* an) kind we will re!pond wit, econo+ic, political, diplo+atic action! to de*end t,e !acred ri(,t o* t,e will o* t,e ReneJuelan people,B 0aua noted in an inter-iew wit, roadca!ter 5ele!ur" Maduro wa! !worn in a! pre!ident la!t Hrida) at a cere+on) widel) attended ) Sout, A+erican leader!, includin( CraJilian >re!ident Kil+a Dou!!e** and t,e pre!ident! o* Ar(entina and 3u a" =o US diplo+at attended t,e cere+on)" Since t,e election re!ult! were tallied t,e US State Kepart+ent ,a! !upported t,e idea o* a recount, w,ic, ,a! een a de+and o* oppo!ition candidate 8enriFue 3aprile! and ,i! 0u!tice Hir!t part)" 5,e notion o* a *ull or partial recount ,a! een t,e !u Eect o* +uc, ack?and?*ort, de ate, t,ou(, la!t 5,ur!da) t,e countr)N! electoral oard (3on!eEo =acional Electoral2 indicated t,at it would !upport an audit" Since t,en, ,owe-er, t,e electoral od) !ee+! to ,a-e retracted it! !upport *or an audit" 5,e oardN! pre!ident, 5i i!a) Lucena, criticiJed a! an all) o* t,e incu+ ent part), told do+e!tic +edia t,at no one !,ould ,a-e *al!e expectation!# re(ardin( t,e re!ult! o* a potential audit, and reiterated t,at a! *ar a! t,e oard wa! concerned t,e -oteN! re!ult! were *inal and irre-er!i le" I**iciall), t,e US ,a! )et to accept t,e re!ult! o* ReneJuelaN! pre!idential election, w,ere Maduro wa! reported to ,old $1 per cent o* t,e -ote to 3aprile!N %9 per cent"

Sanctions t!reats reduced exports annion +)33/13, (0i+, reporter *or AH>, (raduate, 3olu+ ia Oraduate Sc,ool o* 0ournali!+, Uni-er!it) o* >enn!)l-ania ReneJuela t,reaten! oil trade in row wit, US#, A> =ew!wire, %/&&/&'13, ,ttp://www"(oo(le"co+/,o!tednew!/a*p/article/ALeFM$EHp0K(:@-&:l'*51Rx9w)K3!A 8w. docId/3=O"e*1'a:$&17d*''ee7$&**dc$&**:9:$1"1 1, 01a,n2 3ADA3AS L ReneJuela !tepped up attack! on t,e United State!, t,reatenin( retaliator) +ea!ure! a**ectin( trade and ener() i* Wa!,in(ton re!ort! to !anction! in a row o-er t,e countr)4! di!puted pre!idential election" Rowin( not to (o ack on t,e late 8u(o 3,a-eJ4! re-olution, >re!ident =icola! Maduro
!aid at a !wearin(?in cere+on) *or ,i! new ca inet, B5,ere will e no pact ,ere o* an) kind wit, t,e our(eoi!ie" Make no +i!take" 8e accu!ed t,e United State! o* t,reatenin( ReneJuela, and !poke wit, appro-al o* t,e warnin( to Wa!,in(ton le-eled earlier in t,e da) ) Horei(n Mini!ter Elia! 0aua in Oua)aFuil, Ecuador" BI* t,e United State! take! recour!e to econo+ic !anction!, or !anction! o* an) ot,er kind, we will take +ea!ure! o* a co++ercial, ener(), econo+ic and political order t,at we con!ider nece!!ar),B 0aua !aid in a tele-i!ion inter-iew" It ca+e a*ter a !enior State Kepart+ent o**icial wa! Fuoted a! ur(in( ReneJuela to recount t,e -ote! in t,e April 1% election to (i-e t,e pu lic con*idence in t,e re!ult" 5,e United State! ,a! !o *ar wit,,eld reco(nition o* t,e o**icial election re!ult!, w,ic, (a-e Maduro a narrow -ictor) o-er oppo!ition candidate 8enriFue 3aprile!, !ettin( o** -iolent prote!t! t,at le*t ei(,t dead" An audit o* t,e -ote i! !uppo!ed to e(in a! earl) a! t,i! week, ut t,e =ational Electoral 3ouncil4! -ice pre!ident !aid Saturda) it would not o-erturn Maduro4! -ictor)" US A!!i!tant Secretar) o* State Do erta 0aco !on wa! reported o-er t,e weekend to ,a-e !aid t,at t,e election council acted too Fuickl) in proclai+in( Maduro t,e winner, and t,at ,al* o* ReneJuelan! do not ,a-e con*idence in t,e re!ult" A!ked i* t,e United State! would i+po!e !anction! i* ReneJuela re*u!ed to recount t,e -ote!, 0aco !on !aid !,e could not !a) one wa) or anot,er, accordin( to 3== en E!panol" 5,e United State! i+port! !o+e 9'','''

arrel! o* oil a da) *ro+ ReneJuela, w,ic, produce! etween &"3 +illion and t,ree +illion arrel! a da)" ReneJuela, w,ic, depend! on oil !ale! *or 9' percent o* it! re-enue!, !it! atop t,e world4! lar(e!t pro-en crude oil re!er-e!" Maduro, +eanw,ile, +et wit, ,i! ca inet, w,ic, include! new *inance and
interior +ini!ter! ut i! +o!tl) +ade up o* ,oldo-er!, particularl) in t,e ke) *orei(n, de*en!e and ener() port*olio!" 3,a-eJ4! !on?in? law 0or(e ArreaJa wa! rati*ied a! -ice pre!ident" 5,e c,an(e! +ade it clear Maduro wanted new approac,e! to two +aEor !ource! o* pu lic di!content ?? an in*lation?ra-a(ed econo+) and !oarin( -iolent cri+e" BWe ,a-e to control in*lation,B Maduro !aid in announcin( ,i! !o?called B(o-ern+ent o* t,e !treet!B late Sunda)" 8e !plit t,e +ini!tr) o* plannin( and *inance in two, na+in( central ank c,ie* =el!on Merente! t,e new *inance +ini!ter to replace 0or(e Oiordani, w,o wa! le*t in c,ar(e o* t,e !eparate plannin( +ini!tr)" Oiordani wa! t,e arc,itect o* a !)!te+ o* !trict *orei(n currenc) control! t,at critic! !a) ,a-e contri uted to !,orta(e!, a !,arp decline in in-e!t+ent and Latin A+erica4! ,i(,e!t in*lation rate, at +ore t,an &' percent" Maduro prai!ed Oiordani a! Bone o* t,e +o!t lo)al +en 3,a-eJ ,ad,B ut !aid Merente! would rin( new idea! on ,ow to control !peculation and in*lation" 8e al!o na+ed ,i! intelli(ence c,ie*, Mi(uel Dodri(ueJ 5orre!, a! +ini!ter o* t,e interior and Eu!tice Bto protect and uild t,e *oundation! o* peaceB in a countr) wit, one o* t,e world4! ,i(,e!t +urder rate!" 5,e reEi((ed ca inet co+e! a! Maduro (rapple!

wit, t,e i+plication! o* a near lo!! at t,e poll!" An e!ti+ated 7'',''' -oter! !wun( to 3aprile! *ollowin( ,i! 11?point lo!! to 3,a-eJ in Icto er pre!idential election!" Maduro wa! proclai+ed t,e winner wit, a 1": percenta(e point +ar(in" Kurin( ,i! !peec, Monda) ni(,t, Maduro !aid ,e wanted a dialo(ue wit, t,e w,ole deepl) polariJed countr), ut e!peciall) wit, ReneJuelan! oppo!ed to t,e Bre-olutionar) proEect"B BW,at rea!on! do t,e) ,a-e *or oppo!in( t,i! de+ocratic re-olution o* t,e &1!t centur).""" W,at rea!on! do t,e) ,a-e *or *eelin( ani+o!it) toward u!.B =ational A!!e+ l) !peaker Kio!dado 3a ello, t,e !econd +o!t power*ul 3,a-i!ta *i(ure a*ter Maduro, !aid Sunda) ,e ,ad ordered an internal re-iew wit,in t,e rulin( part) to tr) to under!tand w,at ,appened" 8e !aid t,e !pirit o* !el*?critici!+ !,ould al!o extend to t,e (o-ern+ent"

2!reats are real t!e election &as a turning point A6= +)33/13 (ReneJuela t,reaten! oil, trade +ea!ure! in -ote row wit, US#, %/&&/&'13, ,ttp://www"(lo alpo!t"co+/di!patc,/new!/a*p/13'%&&/-eneJuela?t,reaten!?oil?trade? +ea!ure!?-ote?row?u!?', 01a,n2 ReneJuela t,reatened Monda) to take +ea!ure! a**ectin( ener() and trade i* t,e United State! re!ort! to !anction! in a row o-er t,e di!puted pre!idential election in 3araca! earlier t,i! +ont," BI* t,e United State! take! recour!e to econo+ic !anction!, or !anction! o* an) ot,er kind, we will take +ea!ure! o* a
co++ercial, ener(), econo+ic and political order t,at we con!ider nece!!ar),B Horei(n Mini!ter Elia! 0aua warned in a tele-i!ion inter-iew" 5,e warnin( ca+e a+id a political cri!i! in ReneJuela o-er oppo!ition de+and! *or a recount o* April 1% election return! t,at (a-e >re!ident =icola! Maduro a narrow win to replace t,e late 8u(o 3,a-eJ" US A!!i!tant Secretar) o* State Do erta 0aco !on wa! reported o-er t,e weekend to ,a-e ur(ed a recount in order to (i-e t,e pu lic con*idence in t,e outco+e, w,ic, ,a! een c,allen(ed ) oppo!ition candidate 8enriFue 3aprile!" A!ked w,et,er t,e United State! would i+po!e !anction! i* ReneJuela re*u!ed to recount t,e -ote!, 0aco !on !aid !,e could not !a) one wa) or anot,er, accordin( to 3== en E!panol" In t,e inter-iew *ro+ Vuito, Ecuador wit, 5ele!ur, a !tate?*inanced re(ional tele-i!ion network, 0aua !aid ReneJuela ,eld t,e United State! re!pon!i le *or po!t?election -iolence t,at le*t ei(,t people dead" BAou can e certain t,at in t,e *ace o* !anction! o* an) kind we will re!pond wit, econo+ic , political, diplo+atic action! to de*end t,e !acred ri(,t o* t,e will o* t,e ReneJuelan people,B ,e !aid" 5,e

United State! i+port! !o+e 9'',''' arrel! o* oil a da) *ro+ ReneJuela, w,ic, produce! etween &"3 +illion and t,ree +illion arrel! a da)" ReneJuela !it! atop t,e world4! lar(e!t pro-en crude oil re!er-e!"

uq c!a#e5 transition > in#estment

2!e% !a#e it 4ac8&ards t!e <!a#e50 deat! &ill reopen foreign in#estment opportunities <S ' /)./13, (3,ri!tian Science Monitor, 3=C3"co+ !ta** writer!, Wit, 8u(o 3,a-eJ (one, US oil indu!tr) e)e! ReneJuela#, 3/</&'13, 3SM, ,ttp://www"c!+onitor"co+/En-iron+ent/Late!t?=ew!?Wire!/&'13/'3'</Wit,?8u(o?3,a-eJ? (one?US?oil?indu!tr)?e)e!?ReneJuela, 01a,n2 Iil anal)!t! don4t expect !udden c,an(e! in ReneJuela oil policie! a*ter 8u(o 3,a-eJ4! deat," Cut political c,an(e in po!t? 3,a-eJ ReneJuela could open it! oil indu!tr) to +uc, wider *orei(n in-e!t+ent " ReneJuelan >re!ident 8u(o 3,a-eJ4! deat, i! not likel) to re!ult in near?ter+ c,an(e! to t,e ReneJuelan oil indu!tr) or (lo al ener() land!cape, ut it could ulti+atel) re!ult in political c,an(e t,at would reopen t,e countr)4! ener() indu!tr) to *orei(n in-e!t+ent" A! new! o* 3,a-eJ4! deat, !wept t,rou(, I8S 3EDAWeek, t,e world4! lar(e!t con*erence *or ener()
executi-e!, in 8ou!ton on 5ue!da) a*ternoon, participant! *locked to tele-i!ion!, lookin( *or new! on t,e political *uture o* a countr) t,at ,a! t,e !econd lar(e!t oil re!er-e! in t,e world" BIt4! too !oon to !a) w,at 8u(o 3,a-eJ4! deat, +ean! *or oil price!,B !aid I8S Rice 3,air Kaniel Aer(in" BCut it i! certainl) true t,at oil price! are w,at +ade 8u(o 3,a-eJ po!!i le,B a! t,e collap!e o* oil price! in t,e late 199'! B(a-e ,i+ t,e openin( to eco+e pre!identB and ri!in( oil price! !ince &''' B(a-e ,i+ t,e *inancial re!ource! to con!olidate power"B Anal)!t! and attendee! at t,e 8ou!ton ener() con*erence !aid it wa! unclear w,at would ,appen a*ter t,e countr) ,old! an election *or a new pre!ident" Hor now, ReneJuela4! Rice >re!ident =icola! Maduro i! in c,ar(e and t,e countr)4! ar+) c,ie*! are reported to e !upportin( ,i+" BWit,out (3,a-eJ4!2 c,ari!+a and *orce o* c,aracter, it i! not all clear ,ow ,i! !ucce!!or! will +aintain t,e !)!te+ ,e created,B Aer(in !aid" (Dead More: 5rader! Deact: W,at 3,a-eJ Keat, Mean! *or Iil Market2 A+on( t,e +aEor inte(rated oil co+panie!, 3onoco>,illip! and ExxonMo il could !tand to ene*it (reatl)

*ro+ re(i+e c,an(e in ReneJuela, i* t,e new leader!,ip allow! o-er!ea! oil co+panie! to return ,
anal)!t! !aid" 5,e nationaliJation o* ReneJuela4! oil indu!tr) in &''7 re!ulted in t,e exit o* t,o!e two co+panie! w,o were una le to reac, a new a(ree+ent wit, t,e !tate?owned oil co+pan) >KRSA" 5oo Earl) to 5ell BIt4! too earl) to tell ,ow t,e new leader will ,andle it, ut 3onoco>,illip! could ene*it t,e +o!t,B !aid Hadel O,eit, !enior oil anal)!t at Ippen,ei+er P 3o" 3onoco>,illip! wa! t,e i((e!t *orei(n !take,older in ReneJuela at t,e ti+e o* nationaliJation and could ene*it (reatl) *ro+ re(ainin( it! *or+er a!!et!, O,eit !aid, addin(: B5,e ook -alue o* a!!et! t,at were con*i!cated wa! 6%"$ illion (at t,e ti+e"2 5,e +arket -alue i! now 6&' to 63' illion""" 3onoco>,illip! could e-entuall) !ee a net (ain o* 61' illion"B Cut t,at a!!u+e! 3onoco>,illip! would want to return to t,e countr)" ReneJuela4! econo+ic pro le+! extend e)ond t,e oil u!ine!!" BIt reall) +uc, depend! on w,at kind o* (o-ern+ent will *ollow 3,a-eJ,B !aid EnriFue Sira, I8S !enior re!earc, director *or Latin A+erica" B5,e onl) t,in( *or !ure i! t,e *act t,at t,e indu!tr) i! in -er) poor condition ?? up!trea+, down!trea+, power, and di!tri ution" Electricit) ,a! to e rationed" It ,a! a (a! de*icit t,at4! een runnin( *or )ear! and t,e countr) doe!n4t produce an)w,ere near w,at it could produce,B Sira !aid" (Dead More: ReneJuela Rote, >o!t?3,a-eJ, =ext Di!k *or Iil2 3onoco>,illip! 3EI D)an Lance, w,o !poke 5ue!da) +ornin( at t,e 8ou!ton ener() con*erence prior to new! o* 3,a-eJ4! deat,, noted ,ow t,e (lo al ener() land!cape ,a! c,an(ed dra+aticall)" B 5,e new

land!cape i! like !o+eone picked up t,e ener() world and tilted it, B ,e !aid, a! countrie! wit, (reat de+and *or ener() and t,o!e wit, a+ple !upplie! ,a! c,an(ed " 5,e U"S" i! now exportin( +ore o* it! natural
re!ource! t,an e-er e*ore, ,e !aid" 5,o!e export! include !,ippin( record !upplie! o* US (a!oline to ReneJuela" Meanw,ile ReneJuela oil export! to t,e U"S" are on t,e decline" Sira !aid ReneJuela could produce a! +uc, a! < to 9 +illion arrel! o* oil a da) ut now it4! pro a l) le!! t,an &"$ +illion arrel!" 8e !aid oil production peaked in t,e earl) )ear at 3"3

+illion arrel!" (Dead More: W,) ReneJuela4! World?Ceatin( Iil De!er-e! Are 4Irrele-ant42 ReneJuela ranked *ourt, in oil i+port! to t,e U"S" la!t )ear at 9'<,''' arrel! per da), accordin( to t,e U"S" Ener() In*or+ation Ad+ini!tration (EIA2" Cut crude oil i+port! *ro+ ReneJuela ,a-e een declinin( !teadil) !ince
&''%, w,en t,e) peaked at 1"3 +illion arrel! per da)" ReneJuela4! re*inerie! are al!o in !uc, poor !,ape t,at it ,a! to i+port (a!oline and die!el *ro+ t,e U"S" In Kece+ er, ReneJuela i+ported a record 197,''' arrel! per da) o* petroleu+ product! *ro+ t,e U"S", accordin( to EIA data" In t,e !,ort?run, oil price! +a) not e (reatl) i+pacted ) re(i+e c,an(e in ReneJuela !ince *or now t,e *low o* oil *ro+ ReneJuela to t,e U"S" and do+e!tic *uel i+port! to t,e Sout, A+erican countr) are likel) to continue current trend!, !aid 8ou!ton? a!ed ener() anal)!t And) Lipow" BWe ot, need eac, ot,er"B

cu4a

uq cu4an production lo&

<u4an production is lo& tec!nical !urdles pre#ent effecti#e drilling ;i4son +)*+/13 (Willia+ E", Wa!,in(ton Cureau reporter *or t,e Sun Sentinel, 3o+panie! a andon !earc, *or oil in 3u a4! deep water!#, %/1%/13, Sun Sentinel, ,ttp://article!"!un? !entinel"co+/&'13?'%?1%/new!/*l?cu an?oil?drillin(?retreat?&'13'%1%M1MEor(e?pi?nort,?coa!t? cu an?o**icial!/&, 01a,n2 WAS8I=O5I= L A*ter !pendin( nearl) 67'' +illion durin( a decade, ener() co+panie! *ro+ around t,e world ,a-e all ut a andoned t,eir !earc, *or oil in deep water! o** t,e nort, coa!t o* 3u a near Hlorida, a low to t,e 3a!tro re(i+e ut a relie* to en-iron+entali!t! worried a out a +aEor oil !pill" Keci!ion! ) Spain? a!ed Dep!ol and ot,er co+panie! to drill el!ew,ere (reatl) reduce t,e c,ance! t,at a (iant !lick alon( t,e 3u an coa!t would ride ocean current! to Sout, Hlorida, t,reatenin( it! eac,e!, inlet!, +an(ro-e!, ree*! and
+ulti illion?dollar touri!+ indu!tr)" 5,e 3oa!t Ouard re+ain! prepared to contain, !ki+, urn or di!per!e a potential !lick" And 3u an o**icial! !till )earn *or a lucrati-e !trike t,at would prop up it! econo+)" A Du!!ian co+pan), @aru eJ,ne*t, i! drillin( an explorator) well in !,allower water! ,u((in( t,e 3u an !,oreline !out, o* t,e Ca,a+a!" Cut t,ou(, !o+e oil ,a! een *ound o**!,ore, explorator) drillin( in deep water! near current! t,at ru!, toward Hlorida ,a! *ailed to re-eal i( depo!it! t,at would e co++erciall) -ia le to extract, di!coura(in( co+panie! *ro+ pourin( +ore +one) into t,e !earc," B5,o!e co+panie! are !a)in(, 4We cannot !pend an) +ore capital on t,i! ,i(,?ri!k exploration" We4d rat,er (o to CraJilG we4d

rat,er (o to An(olaG we4d rat,er (o to ot,er place! in t,e world w,ere t,e tec,nolo(ical and (eolo(ical c,allen(e! are le!!,4B !aid 0or(e >iYon, an oil?indu!tr) anal)!t at t,eUni-er!it) o* 5exa! w,o con!ult! wit,
U"S" and 3u an o**icial! a! well a! ener() co+panie!" BI don4t *ore!ee an) ti+e in t,e *uture exploration in 3u a4! deep?water nort, coa!t" It i!, *or all practical purpo!e!, o-er"B Ke!pite t,e!e *ru!tration!, 3u a4! need *or oil wealt, and ener() independence ,a! onl) inten!i*ied" ReneJuela L w,ic, ,old! a pre!idential election Sunda) L +a) Fuit !endin( 63"$ illion wort, o* oil to 3u a eac, )ear under a arter arran(e+ent initiated ) t,e late ReneJuelan >re!ident 8u(o 3,T-eJ, an all) o* Hidel and DaZl 3a!tro" ReneJuela ,a! een !endin( oil to 3u a at *a-ora le price!, wit, part o* t,e co!t paid t,rou(, low?intere!t loan! and t,e re!t o**!et ) !er-ice! *ro+ 3u an doctor! , teac,er! and ad-i!er! L a !weet deal *or t,e 3a!tro re(i+e t,at +eet! t,e i!land4! ener() need! and *uel! it! !tru((lin( econo+)" Cut ReneJuelan oppo!ition leader 8enriFue 3aprile!, a pre!idential candidate, ,a! told -oter! t,at i* ,e i! elected Bnot anot,er drop o* oil will (o toward *inancin( t,e (o-ern+ent o* t,e 3a!tro! "B And e-en i* 3aprile! lo!e! to actin( >re!ident =icola! Maduro, ReneJuela +a) e una le to !u!tain it! (enero!it)" B8ow +uc, lon(er can ReneJuela pro-ide illion! o* dollar! in aid and petroleu+.B !aid U"S" Dep" 1at,) 3a!tor, K?5a+pa, w,o +et wit, ener() o**icial! in 8a-ana earlier t,i! +ont," B5,e) [3u an o**icial!\ know t,at i! !tarin( t,e+ in t,e *ace" B5,e) were up*ront t,at t,e) ,a-e not een !ucce!!*ul to date,B !,e !aid" BCut t,e) do ,a-e ot,er *orei(n in-e!tor! L t,e Du!!ian!, t,e CraJilian!, An(ola L and t,e) intend to proceed"B 3a!tor and ot,er Hloridian! *ear t,e con!eFuence! o* a potential o**!,ore oil !pill, e!peciall) i* a (iant !lick (et! cau(,t in ocean current! t,at *eed into t,e power*ul Oul* Strea+, w,ic, could dra( it nort, alon( t,e Hlorida coa!t and to t,e 3arolina!" Hlorida leader! *or )ear! ,a-e *ended o** oil drillin( wit,in 1&$ +ile! o* Hlorida4! Oul* 3oa!t *or *ear a !pill would da+a(e t,e en-iron+ent and t,e !tate4! 6<$ illion touri!+ indu!tr)" 5,o!e *ear! were ,ei(,tened w,en t,e Keepwater 8oriJon !pill in &'1' !pewed &1' +illion (allon! o* oil into t,e Oul*, ruinin( t,at !u++er4! touri!t and *i!,in( !ea!on alon( t,e Hlorida >an,andle and pollutin( coa!tal water! in wa)! t,at are !till ein( +ea!ured" In t,e a*ter+at,, drillin( nort, o* 3u a Eu!t 7' +ile! *ro+ Hlorida !et o** new alar+! and pro+pted t,e 3oa!t Ouard to de-i!e contin(enc) plan! to *end o** a potential !lick" 5,e 3oa!t Ouard toda) i! reat,in( a little ea!ier ut re+ain! on (uard" B5,e ocean current! [near t,e Du!!ian drillin( !ite\ are +uc, +ore *a-ora le in ter+! o* a U"S" landin( o* a potential oil !pill, ut clearl) t,ere4! !till ri!k,B !aid 3oa!t Ouard 3apt" 0o,n Slau(,ter, w,o o-er!ee! oil?!pill re!pon!e plan! in Sout, Hlorida" BE-en i* t,e current! don4t rin( it ,ere, )ou !till +a) ,a-e !tron( wind! *ro+ t,e ea!t pu!,in( t,e oil clo!er to our !,ore!" BEcono+icall) *or t,e !tate o* Hlorida, i* [a !pill\ were to ,appen, e-en i* not,in( reac,e! t,e !,ore, people are (oin( to (et a(itated" 4S,ould I !till co+e to Hlorida on -acation i* t,ere4! an oil !pill in t,e Hlorida Strait!.4 We would e -er) a((re!!i-e to en!ure t,at not,in( ,appen!"B Dep!ol, a Spani!, co+pan), ,ad een lookin( *or oil o** t,e !,ore! o* 3u a *or +ore t,an a decade, ,opin( *or a i( !trike t,at could (enerate illion! o* dollar! o* pro*it" 5,e co+pan) rou(,t a (i(antic !el*? propelled *loatin( ri( L t,e Scara eo 9 L all t,e wa) *ro+ Sin(apore to drill an explorator) well in ultradeep water! o* +ore t,an $,''' *eet nort, o* 8a-ana in 0anuar) &'1&" 5,e well produced !i(n! o* oil" Cut ) Ma) &'1&, t,e co+pan) concluded it wa!n4t enou(, to Eu!ti*) t,eco!t and di**icult) o* extraction t,rou(, a co+plex and porou! underwater rock !tructure" =ow Dep!ol i! clo!in( it! 3u an o**ice! and +o-in( el!ew,ere" Dep!ol, a Spani!, co+pan), ,ad een lookin( *or oil o** t,e !,ore! o* 3u a *or +ore t,an a decade, ,opin( *or a i( !trike t,at could (enerate illion! o* dollar! o* pro*it" 5,e co+pan) rou(,t a (i(antic !el*? propelled *loatin( ri( L t,e Scara eo 9 L all t,e wa) *ro+ Sin(apore to drill an explorator) well in ultradeep water! o* +ore t,an $,''' *eet nort, o* 8a-ana in 0anuar) &'1&" 5,e well produced !i(n! o* oil" Cut ) Ma) &'1&, t,e co+pan)

concluded it wa!n4t enou(, to Eu!ti*) t,eco!t and di**icult) o* extraction t,rou(, a co+plex and porou! underwater rock !tructure" =ow Dep!ol i! clo!in( it! 3u an o**ice! and +o-in( el!ew,ere"

uq at drilling ine#ita4le
Onl% U"S" cooperation can trigger t!e lin8,-ussian companies !a#e 4ac8ed off -euters' ()3? (Deuter!, B3u an oil ,ope! !putter a! Du!!ian (i-e up *or now on wellB, $/&9/13, www"reuter!"co+/article/&'13/'$/&9/cu a?oil?idUSL&='EA''W&'13'$&9 //kd,2 8ARA=A, Ma) &9 (Deuter!2 ? Du!!ian !tate?owned oil co+pan) @aru eJ,ne*t !aid t,i! week it wa! (i-in( up *or now on a pro le+?pla(ued exploration well o** 3u a4! nort,?central coa!t, w,ic, rin(! to an end t,e co++uni!t?led i!land4! onl) acti-e proEect in it! !earc, *or o**!,ore oil *ield!" 5,e new! wa! not all ad ecau!e t,e co+pan) !aid it would return to t,e !a+e !pot next )ear" Cut it wa! anot,er low to 3u a4! ,ope! *or ener() independence, w,ic, ,a-e acFuired new ur(enc) wit, t,e Marc, deat, o* ReneJuelan >re!ident 8u(o 3,a-eJ, t,e co++uni!t?led i!land4! top all) and ene*actor" 5,e Du!!ian!4 plan to drill <,$'' +eter! (&1,3&$ *eet2 elow t,e !ea *loor and ,ope*ull) *ind oil appear! to ,a-e een derailed ) t,e !a+e i!!ue t,at ot,er! ,a-e encountered in 3u an water! ? di**icult (eolo() ? a! well a! pro le+! wit, it! ri(, t,e Son(a Mercur, w,ic, at one point lo!t it! lowout pre-enter" B5akin( into con!ideration (eolo(ical
co+plication!, @aru eJ,ne*t and (3u an !tate oil co+pan)2 3u apetroleo ,a-e Eointl) decided to +ake c,an(e! in t,e initial drillin( pro(ra+ ) di-idin( it into two !ta(e!,B t,e co+pan) told Deuter! t,i! week" B5,e !econd !ta(e o* exploration work on Clock L i! due to e launc,ed in &'1%,B it !aid, declinin( to co++ent *urt,er" 5,e well, e(un *i-e +ont,! a(o, wa! in !,allow water a out &'' +ile! (3&' k+2 ea!t o* 8a-ana, near t,e popular touri!t de!tination 3a)o Santa Maria" 5,e pre+ature end o* t,e @aru eJ,ne*t well wa! not totall) unexpected ecau!e Son(a I**!,ore, owner o* t,e Son(a Mercur, earlier !aid t,e ri( would lea-e ) 0une 1

*or a proEect in Sout,ea!t A!ia" It ,ad ori(inall) een !c,eduled to !ta) in 3u a until 0ul) 1" 5,ere wa! a Du!!ian pre!! report t,at t,e ri( would co+e ack *or anot,er atte+pt ) @aru eJ,ne*t, ut Son(a I**!,ore 3,air+an 0en! Wil,el+!en told Deuter! t,e report wa! Bco+pletel) wit,out *oundation"B BWe ,a-e not an) a(ree+ent t,at Mercur will return and we ,a-e not recei-ed an) inFuirie! *ro+ @aru eJ,ne*t t,at t,e) want it ack,B ,e !aid" BSo I can Eu!t den) t,at Mercur will return"B CA31 5I SVUADE I=E All o* w,ic, +ean! t,at 3u a i! ack to !Fuare one in it! Fue!t to tap into *ield! o** it! nort,ern coa!t t,at it !a)! +a) ,old &'
illion arrel! o* oil" 5,e U"S" Oeolo(ical Sur-e) ,a! e!ti+ated a +ore +ode!t %"< illion arrel!"

2oo man% o4stacles t!at pre#ent <u4an production in t!e squo N12' *3 (=ew Aork 5i+e!, B3u a4! >ro!pect! *or an Iil?Hueled Econo+ic 0olt Halter Wit, Keparture o* Di(B, 11/9/1&, www"n)ti+e!"co+/&'1&/11/1'/world/a+erica!/ri(!?departure?to? ,a+per?cu a!?oil?pro!pect!",t+l.Mr/' //kd,2 8IUS5I= L 3u aN! ,ope! o* re-i-in( it! econo+) wit, an oil oo+ ,a-e produced little +ore t,an t,ree dr) ,ole!, per!uadin( *orei(n oil co+panie! to re+o-e t,e one deepwater ri( a le to work in 3u an water! !o it could e u!ed *or +ore lucrati-e pro!pect! el!ew,ere" 5,e ri(, w,ic, wa! uilt in 3,ina to (et around t,e United State! trade e+ ar(o, i! expected to depart in t,e next *ew week! " Wit, no ot,er ri(! a-aila le *or deepwater exploration, t,at +ean! 3u a +u!t now po!tpone w,at ,ad eco+e an a idin( drea+: a wind*all t,at would !a-e 3u aN! econo+) and lead to a uniFuel) 3u an utopia w,ere t,e i!landN! !ociali!t !)!te+ wa! paid *or ) oil !ale! to it! capitali!t nei(, or!" 5,e 3u an oil drea+ i! o-er and done wit,, at lea!t *or t,e next *i-e )ear!,# !aid 0or(e >iYon, a *or+er C> and A+oco executi-e w,o *led 3u a a! a c,ild ut continue! to rie* *orei(n oil co+panie! on 3u an oil pro!pect!" 5,e co+panie! ,a-e etter pro!pect! ) (oin( to CraJil, An(ola and t,e U"S" Oul*"#

u"s"

uq at s!ale production
U"S" s!ale findings !a#e !ad 5ero influence @usiness&ee8 ()/9/13 (Hred >al!, Ener() 3orre!pondent ReneJuela at Kow 0one!//Wall Street 0ournal, ReneJuela Sa)! U"S" S,ale WonNt 8urt I>E3N! 8ea-) Iil Exporter!#, Cu!ien!!week, ,ttp://www" u!ine!!week"co+/new!/&'13?'$?3'/-eneJuela?!a)!?u?dot?!?dot? !,ale?won?t?,urt?opec?!?,ea-)?oil?exporter!, 01a,n2 5,e ri!in( !uppl) o* U"S" !,ale oil doe!nNt a**ect exporter! o* +ediu+ and ,ea-) crude! !uc, a! ReneJuela, t,e Latin A+erican countr)N! oil +ini!ter told reporter! e*ore an I>E3 +eetin( to+orrow" S,ale i! a production o* li(,t crude and t,at doe!nNt a**ect u! a! ein( i( producer! o* +ediu+ and ,ea-) crude!,# Da*ael Da+ireJ !aid in Rienna, w,ere +ini!ter! *ro+ t,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! are (at,erin(" We ,a-e a i( capacit) to place our crude!, includin( t,e U"S" +arket" # 5,e pro!pect o* (rowin( U"S"
ener() independence ,a! co+e to t,e *ore a+id a reduction in U"S" crude i+port! *ro+ !o+e I>E3 nation!, nota l) t,o!e in A*rica, o-er recent +ont,!" At a ti+e o* weak econo+ic (rowt, and ri!in( U"S" production, I>E3 nation! ri!k a price decline unle!! t,e) cut !uppl) t,e+!el-e!, accordin( to Societe Oenerale SA and t,e 3entre *or Olo al Ener() Studie!" Hi-e +ont,! a(o, a*ter I>E3N! +id? Kece+ er +eetin(, t,e (roupN! !ecretar)?(eneral, A dalla el?Cadri, *ended o** Fue!tion! a out ur(eonin( U"S"

!,ale oil !uppl), !a)in(: WeNre not reall) concerned" I donNt !ee t,at i( a Fuantit)" # ReneJuelaN! Da+ireJ
!aid di-er!i*ication a-oid! co+petition wit, t,e (rowin( !uppl) o* li(,ter oil *ro+ !,ale depo!it!" Lon( ti+e a(o we decided to di-er!i*) our +arket! and (ood *or u! we did it,# ,e !aid" We !ell to 3,ina, 0apan, countrie! t,at ,a-e !u!tained (rowt, like India wit, t,e capacit) to proce!! ,ea-) crude"#

S!ale findings &on0t adequatel% increase supplies 62' */ (Ed 3rook!, Hinancial 5i+e!, US e)e! i+pro-e+ent in oil production#, 0une 1%, &'13 11:39 p+, ,ttp://www"*t"co+/intl/c+!/!/'/9% <9 <c?d$1<?11e&?93'&? ''1%%*ea 7de",t+lWaxJJ&QtdSwrIM, Eld2 Si(ni*icant i+pro-e+ent! in US oil production will e nece!!ar) *or t,e countr) to +eet it! de+and entirel) *ro+ do+e!tic re!ource!, t,e (o-ern+entN! Ener() In*or+ation Ad+ini!tration ,a! !aid" 5,e US
could potentiall) produce a out 1'+ arrel! per da) o* crude oil, up *ro+ 7"1+ /d toda), t,e EIA t,ink!" 5,at would e a record, exceedin( t,e pre-iou! peak in 197'" Wit, ot,er production includin( natural (a! liFuid! !uc, a! et,ane, t,at could (i-e total liFuid *uel !upplie! o* a out 1:+ /d, rou(,l) t,e !a+e a! US de+and" 8owe-er, t,e proEection! depend ,ea-il) on *actor!

!uc, a! t,e proportion o* oil in t,e (round t,at can e reco-ered *ro+ a !,ale well S t)picall) Eu!t 3?7 per cent toda)" 5o (et to 1'+ /d production, t,e EIA !aid, t,e US would ,a-e to e a le to reco-er twice a! +uc, !,ale oil a! it! +o!t recent e!ti+ate o* $: n arrel!" Eac, !,ale well would ,a-e to )ield twice a! +uc, oil o-er it! li*eti+e a! toda)N! a-era(e o* 13$,''' arrel!, and well! would ,a-e to e packed in +ore ti(,tl), on &'?%' acre! eac,, rat,er t,an up to %'' acre! eac, a! t,e) are toda)" I* t,o!e c,an(e! do not co+e, t,en US crude production in &'%' will e lower t,an it i! toda) , at a out <+ /d, t,e EIA t,ink!,
lea-in( i+port! at a out :+ /d"

Actual le#els of demand &ill remain near t!e same e#en &it! s!ale gas N12' *3 (KARIK L" OILKWA=, Makin( an Ener() Coo+ Work *or t,e U"S"#, =o-e+ er 1&, &'1&, ,ttp://www"n)ti+e!"co+/&'1&/11/13/ u!ine!!/ener()?en-iron+ent/+akin(?an?ener()? oo+?work?*or?u!",t+l.pa(ewanted/allPMr/', Eld2 5,i! i! unlikel) to ,appen" Ke!pite +ore production *ro+ !,ale depo!it! like t,e Cakken in =ort, Kakota, oilN! !,are o* total U"S" ener() de+and i! expected to decrea!e onl) to 3& percent *ro+ 37 percent ) &'3$" =atural (a! will increa!e it! !,are to &< percent *ro+ &$ percent and renewa le! will (row to 11 percent *ro+ 7 percent, accordin( to t,e U"S" Ener() In*or+ation Ad+ini!tration" 5,e +o!t !trate(ic *actor in A+erican con!u+ption will re+ain t,e price o* oil and t,e e**ect o* di!ruption! on t,e U"S" and t,e (lo al econo+), not t,e !ource or Fuantit) o* U"S" i+port!" :ot damn' cut4ac8s no&

6oxNe&s' */ (1ell) Ka-id Curke, I a+a ad+ini!tration cut! ack oil !,ale de-elop+ent#, >u li!,ed 0une &&, &'13,

,ttp://www"*oxnew!"co+/politic!/&'13/'</&&/o a+a?ad+ini!tration?cut!? ack?oil?!,ale?de-elop+ent/, Eld2

3ontro-er!) i! ,eatin( up o-er an

administration plan to drasticall% reduce t!e amount of federal lands a#aila4le for oil s!ale de#elopment in t!e American Aest " 5,e Cu!, ad+ini!tration ,ad !et a!ide 1"3 +illion acre! *or oil !,ale and tar !and! de-elop+ent in 3olorado, Uta, and W)o+in(" 5,e ne& @ureau of Land anagement plan cuts t!at amount 4% t&o$t!irds , down to 7'',''' acre!, a deci!ion t,at ,a! pro+pted indu!tr) outra(e" BA!at t!e% 4asicall% did &as ma8e it so t!at no4od% is going to &ant to spend mone% going after oil s!ale on federal go#ernment lands ,B
!aid Kan 1i!,, Senior Rice >re!ident o* In!titute *or Ener() De!earc,"

Oil &ill al&a%s 4e an issue N12' *3 (KARIK L" OILKWA=, Makin( an Ener() Coo+ Work *or t,e U"S"#, =o-e+ er 1&, &'1&, ,ttp://www"n)ti+e!"co+/&'1&/11/13/ u!ine!!/ener()?en-iron+ent/+akin(?an?ener()? oo+?work?*or?u!",t+l.pa(ewanted/allPMr/', Eld2
5o ,elp countrie!, +o!tl) in A!ia, t,at ,ad een lar(e cu!to+er! *or Iranian oil, Saudi Ara ia ot, increa!ed production and reportedl) pro-ided di!count! on oil !ale!" IraF and Li )a re-i-ed t,eir production" Wa!,in(ton ,inted at anot,er relea!e o* S">"D" crude to di!coura(e !peculation in t,e +arket!" 5,e *act t,at U"S" production ro!e 3"1 percent in &'11 *ro+ a

)ear earlier, wit, an expected increa!e t,i! )ear o* 1'"7 percent, wa! i++aterial to +ana(in( t,e!e di!ruption!" A! lon( a! !pare capacit), t,e worldN! u**er a(ain!t outa(e!, i! t,in and !uppl) di!ruption! can ,ar+ econo+ie! or allow countrie! to u!e oil a! a weapon, oil will re+ain !trate(ic"

opec

uq opec perception
O=E< t!in8s demand is sta4le $$$ an% demand increase &ill 4e marginal Smit! */ (Orant, 3orre!pondent S Cloo+ er(, I>E3 Coo!t! Suppl) to Six?Mont, 8i(,G Ke+and Horeca!t Sta le#, Cloo+ er(, <?11, ,ttp://www" loo+ er("co+/new!/&'13?'<? 11/opec? oo!t!?!uppl)?to?!ix?+ont,?,i(,?keep!?de+and?-iew?!ta le",t+l, Keec,2 5,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! rai!ed crude output in Ma) to t,e ,i(,e!t le-el in !ix +ont,! w,ile keepin( it! de+and *oreca!t *or &'13 unc!anged ecau!e o* ri!k! to t,e (lo al econo+)"
I>E3 increa!ed production ) 1'<,''' arrel! a da) to 3'"$7 +illion a da) la!t +ont,, led ) (ain! in Saudi Ara ia, t,e (roup !aid toda) in it! +ont,l) +arket report, citin( !econdar) !ource!" Olo al oil de+and will increa!e ) 7:',''' arrel! a da), or 9"?

percent, t,i! )ear to :9"7 +illion a da), in line wit, e!ti+ate! in t,e pre-iou! report"

Exi!tin( *unda+ental!

t,e world econo+) i! expected to experience !li(,tl) ,i(,er (rowt," 8owe-er, ri!k! are !kewed to t,e down!ide"#
portra) a +arket wit, a+ple !uppl),# t,e (roupN! Rienna? a!ed !ecretariat !aid" Lookin( at t,e !econd ,al* o* t,e )ear,

Demand is sta4le $$$ demand decreases in Europe offset 4% Asian consumption $$$ O=E< report pro#es E- */ (Exc,an(e Date, I>E3 +aintain! !ta le de+and *or oil de!pite t,e euro cri!i!#, %?1', ,ttp://con-ertocurrenc)"co+/new!/opec?+aintain!?!ta le?de+and?*or?oil?de!pite?t,e?euro? cri!i!, Keec,2 Rienna, 1' Apr (EHE2"?I>E3 +aintained toda) unc!anged it! *oreca!t on crude in &'13 (lo al de+and,
ut warned t,at t,e!e calculation! could e correction! due, pri+aril), to t,e e-olution o* t,e cri!i! in t,e euro Jone" 5,e Ir(aniJation o* t,e petroleu+ exportin( countrie! (I>E32 !tand! out in it! +ont,l) report t,at corrected e!ti+ate!

*ro+ pre-iou! )ear!, t,e annual (rowt, in de+and ('"9';2 i! !o+ew,at lo&er t,an t,e e!ti+ate la!t +ont, ('"9$;2" 5,u!, t,e *oreca!t i! t,at t,e planet will con!u+e :9"< +illion arrel! per da) (C>K2 o* crude
oil" 5,e -alue o* a arrel o* I>E3 *ell in Marc,, a $"<;, to 61'<,%%, w,ic, repre!ent! t,e i((e!t decline o* t,e +ont, !ince 0une o* la!t )ear, w,en tu+ led 1%;" So *ar in April *ollowed retreatin( to 1'&,7& dollar! )e!terda), ,i(,li(,t! t,e docu+ent" Al!o ot,er enc,+ark crude *ell !tron(l) in Marc,: t,e Crent, t,e =ort, Sea, and t,e 5exa! (W5I2 depreciated ) al+o!t :; and &"%;, re!pecti-el), to t,e 11<,&9 and t,e 9$,31 dollar!/ arrel" Al!o, Mere) ReneJuelan and Ecuadorian Iriente arrel! +ade c,eap ) 3;, to 699,71" Accordin( to t,e Ir(aniJation, w,ic, rin(! to(et,er 1& countrie!, t,e B reduced demand *ro+ re*inerie!

due to !u

!tantial +aintenance

work in t,e world wa! t,e ke) t,at )ou pre!!ed on t,e price!B"

5,u!, t,e (lo al

re*inin( capacit) declined t,ere*ore al+o!t 7 + d, Bt,e ,i(,e!t *i(ure expected t,i! )earB" Added to t,i! B renewed

*ear! *or t,e euro areaB, w,ic, ,a! led I>E3 expert! to encr)pt in '"$; contraction in t,e econo+) o* t,e euroJone (in &'132, co+pared
to '"&; calculated a +ont, a(o" 5,e report ,i(,li(,t! t,at t,e re(ion i! +arked ) Bweak econo+), alar+in( ri!e! in une+plo)+ent rate!, !e-eral European countrie! *acin( !trict +ea!ure! o* au!terit) ecau!e o* ,i(, de t!, and a declinin( con!u+er con*idence, w,ic, ,a! e(un to appear al!o in t,e =ort, o* t,e continentB" 5,e!e *actor! led to t,at t,e de+and *or crude

oil leadin( it ack in He ruar) *or t,e 1:t, !trai(,t +ont," All &'13, I>E3 expected t,at European! con!u+e 13"$& + per da), 3B less t,an in t,e la!t )ear" A(ain!t t,i!, t,e (rowin( ,un(er o* B lack (oldB in 3,ina, a! well a! ,i(,er de+and in India, Middle Ea!t, Latin A+erica and A*rica , t,e) will compensate *or t,e *all in Europe and ot,er indu!trialiJed countrie!, alt,ou(, t,e +ain con!u+er o*
ener(), USA, expect po!iti-e data a*ter re(i!ter *a!ter econo+ic (rowt, t,an expected"

EN;A;E

EN2 > OIL 2-ADE

cu4a

lin8 cu4a em4argo

Lifting t!e em4argo &ould instigate oil trade 2elegrap! ()3?/11 (US could li*t 3u a e+ ar(o a*ter oil di!co-er)#, 5ele(rap,, $/&9/&'11, ,ttp://www"tele(rap,"co"uk/new!/worldnew!/centrala+ericaandt,ecari ean/cu a/:$%%:7'/ US?could?li*t?3u a?e+ ar(o?a*ter?oil?di!co-er)",t+l, 01a,n2 5,e *i-e decade?lon( United State! e+ ar(o a(ain!t 3u a could *inall) e li*ted a*ter t,e di!co-er) o* an enor+ou! oil *ield in 3u an water!" 5,e world4! lon(e!t?runnin( e+ ar(o ,a! endured in part ecau!e t,ere wa! little t,e US wanted to u) *ro+ it! i+po-eri!,ed nei(, our" Cut t,e di!co-er) o* etween *i-e and &' illion arrel! o* oil in t,e deep water! o** 3u a4! nort, coa!t , onl) <' +ile! awa) *ro+ Hlorida, ,a! +ade A+erican u!ine!!+en and politician! con!ider li*tin( t,e e+ ar(o" Dep!ol, t,e Spani!, oil *ir+, will !tart explorator) drillin( wit,in +ont,!" I* it !trike! a lar(e depo!it, t,e trade
e+ ar(o could e !i(ni*icantl) re-i!ed or re+o-ed, accordin( to >ro*e!!or Mark 0one!, an expert on Latin A+erica at t,e Dice Uni-er!it) o* 5exa!" B5,e (reater t,e drillin( and production, t,e (reater t,e pre!!ure will e to

en(a(e in a co+plete o-er,aul o* t,e trade e+ ar(o, eit,er (ettin( rid o* it alto(et,er or waterin( it down
!u !tantiall),B ,e !aid" BI t,ink it i! *airl) reali!tic, !ince t,e e+ ar(o i! an anac,roni!+ o* t,e 3old War !u!tained onl) ) a +i!(uided *ear o* a ackla!, *ro+ anti?3a!tro 3u an A+erican!"B Ipponent! o* t,e US e+ ar(o ar(ue t,at it ,a! *ailed to dri-e Hidel and Daul 3a!tro *ro+ power and t,at i* 3u a eco+e! ric, *ro+ it! oil, re(i+e c,an(e i! e-en le!! likel)" 5,e) al!o ar(ue t,at war+er relation! etween t,e two countrie! could ,elp !ta-e o** an en-iron+ental cri!i! i* t,ere i! a !pill *ro+ t,e *ield" 0or(e >inon, -i!itin( re!earc, *ellow wit, Hlorida International Uni-er!it)4! 3u an De!earc, In!itute, warned: B5,e US e+ ar(o +ean! Dep!ol can4t pick up t,e p,one to Wa!,in(ton" An) eFuip+ent to ,elp in a pro le+ would ,a-e to co+e *ro+ t,e U1 or =orwa) or !o+ew,ere el!e"B Dep!ol will drill at lea!t one and po!!i l) a! +an) a! *i-e well! in water! o* !i+ilar dept, to t,o!e w,ere an explo!ion on C>4! Keepwater 8oriJon ri( cau!ed ele-en deat,! and led to an en-iron+ental cata!trop,e" In t,e e-ent o* a *urt,er di!a!ter, a! +uc, a! 9' per cent o* an) !pill could end up in US water!" BI* t,ere i! an) le-era(e t,at could pu!, t,e I a+a ad+ini!tration or t,e US 3on(re!! to pu!, *or c,an(e it would e *ro+ an en-iron+ental !tandpoint"B !aid 0o,n 1a-ulic,, !enior polic) ad-i!er at t,e US?3u a 5rade and Econo+ic 3ouncil" 8e ar(ued t,e US could treat 3u an oil in t,e !a+e wa) it treat! oil *ro+ ReneJuela: BWe don4t like t,e+ ut we like t,eir product and we are (oin( to u) itB" 5,e current e+ ar(o expire! t,i! Septe+ er" 8owe-er, >ro* 0one! !u((e!ted t,at it i! unlikel) t,at Carack I a+a will +o-e to li*t it w t,e conclu!ion o* ,i! next run *or >re!ident"

2!e frame&or8 and moti#e for oil trade exists no& it0s Cust a question of t!e em4argo A=' 9? (=ick Miro**, !ta** writer, 3u a4! Under!ea Iil 3ould 8elp 5,aw 5rade Wit, U"S"#, $/1</&''9, Wa!,in(ton >o!t, ,ttp://www"wa!,in(tonpo!t"co+/wp? d)n/content/article/&''9/'$/1$/AD&''9'$1$'3%1<",t+l, 01a,n2 Keep in t,e Oul* o* Mexico, an end to t,e 19<& U"S" trade e+ ar(o a(ain!t 3u a +a) e l)in( untapped, uried under la)er! o* rock, !eawater and itter relation! " Iil, up to &' illion arrel! o* it, !it!
o** 3u a4! nort,we!t coa!t in territorial water!, accordin( to t,e 3u an (o-ern+ent ?? enou(, to turn t,e i!land into t,e Vatar o* t,e 3ari ean" At a +ini+u+, e!ti+ate! ) t,e U"S" Oeolo(ical Sur-e) place 3u a4! potential deep?

water re!er-e! at %"< illion arrel! o* oil and 9": trillion cu ic *eet o* natural (a!, !tore! t,at would rank t,e i!land a+on( t,e re(ion4! top producer!" Krillin( operation! ) *orei(n co+panie! in 3u an
water! are !till in t,e explorator) !ta(e, and !i(ni*icant o !tacle! ?? tec,nolo(ical and political ?? !tand etween a U"S"?3u a rapproc,e+ent ea!ed ) oil" Cut a! t,e I a+a ad+ini!tration (e!ture! toward i+pro-ed relation! wit,

t,e 3a!tro (o-ern+ent, t,e national !ecurit), ener() and econo+ic ene*it! o* 3u an crude +a) +ake it a power*ul incenti-e *or c,an(e" Li+ited co++ercial tie! etween U"S" u!ine!!e! and t,e i!land4!
co++uni!t (o-ern+ent ,a-e een Fuietl) expandin( t,i! decade a! 3u an purc,a!e! o* U"S" (ood! ?? +o!tl) *ood ?? ,a-e increa!ed *ro+ 67 +illion in &''1 to 671: +illion in &'':, accordin( to cen!u! data" 5,awin( relation! could e-entuall) open up U"S" in-e!t+ent in +inin(, a(riculture, touri!+ and ot,er !ector! o* 3u a4! tattered econo+)" Cut t,e pro!pect o* +aEor o**!,ore re!er-e! t,at would e o**?li+it! to U"S" co+panie! and con!u+er! ,a! !o+e 3u a expert! ar(uin( t,at &1!t?centur) ener() need! !,ould pre-ail o-er &'t,?centur) 3old War politic!" B5,e i+plication! o* t,i! ,a-e t,e potential to e a !ea c,an(e, literall) and *i(urati-el), *or t,e 3u an!,B !aid 0onat,an CenEa+in?Al-arado, a political !cienti!t at t,e Uni-er!it) o* =e ra!ka?I+a,a w,o !tudie! 3u a4! ener() !ector" At a 8ou!e !u co++ittee ,earin( la!t +ont, on U"S"?3u a polic), *or+er oil executi-e 0or(e >iYUn told law+aker! t,at t,e United State! ,a! a !trate(ic intere!t in ,elpin( 3u a tap it! potentiall) -a!t ,)drocar on !tore! and t,at U"S" co+panie! !,ould recei-e !pecial per+i!!ion to do !o" BA+erican oil and oil eFuip+ent and !er-ice co+panie! ,a-e t,e

capital, tec,nolo() and operational know?,ow to explore, produce and re*ine in a !a*e and re!pon!i le +anner 3u a4! potential oil and natural (a! re!er-e!" Aet t,e) re+ain on t,e !ideline! ecau!e o* our al+o!t *i-e?decade?old unilateral political and econo+ic e+ ar(o ,B !aid

>iYUn, a +e+ er o* a Crookin(! In!titution ad-i!or) (roup on 3u a polic) re*or+" 3u a ,a! !aid it welco+e! U"S" in-e!t+ent, ut A+erican co+panie! re+ain lar(el) !ilent on t,e i!!ue, at lea!t in pu lic, ound ) trade !anction! t,at were e!ta li!,ed under t,e 1enned) ad+ini!tration" W,en 3u an oil o**icial! and U"S" co+panie! attended a Eoint ener() con*erence at an A+e]rican?owned ,otel in Mexico in &''<, t,e Cu!, ad+ini!tration *orced t,e *acilit) to expel t,e 3u an dele(ation, atte+ptin( to t,wart an) potential *or partner!,ip" BUntil trade arrier! are re+o-ed, 3,e-ron i! una le to do u!ine!! in 3u a,B !aid 3,e-ron !poke!+an 1urt Olau itJ" B3o+panie! like u! would ,a-e to !ee a c,an(e in U"S" polic) e*ore we e-aluate w,et,er t,ere4! intere!t"B Do ert Kod(e, a !poke!+an *or t,e A+erican >etroleu+ In!titute, !aid ,i! or(aniJation i! not lo )in( *or acce!! to 3u a, and 5exa! con(re!!ional repre!entati-e! wit, tie! to t,e oil indu!tr) !aid t,e) are *ocu!ed on openin( U"S" territorial water! to drillin(" Cut o !er-er! o* U"S"?3u a relation! !a) A+erican co+panie! ,a-en4t een !ittin( on t,eir ,and! and re+ain in con-er!ation! wit, 3u an counterpart!" At t,e &''< Mexico ener() con*erence, U"S" oil co+panie! Ball ,ad plan! to +o-e

*orward a! !oon a! t,e U"S" (o-ern+ent (i-e! t,e+ t,e (o?a,ead,B !aid CenEa+in?Al-arado, w,o attended t,e con*erence" I* t,at (o?a,ead i! (ranted, A+erican co+panie! would e enterin( a drillin( conte!t crowded
wit, *orei(n co+petitor!" Se-eral (lo al *ir+!, includin( Dep!ol (Spain2, >etro ra! (CraJil2 and Statoil8)dro (=orwa)2 are explorin( in t,e Oul* o* Mexico t,rou(, a(ree+ent! wit, t,e 3a!tro (o-ern+ent, and !tate co+panie! *ro+ Mala)!ia, India, Rietna+ and ReneJuela ,a-e al!o !i(ned deal!" S,erritt International, a 3anadian co+pan), ,a! ,ad oil derrick! pu+pin( ,ea-) crude alon( 3u a4! nort, coa!t *or +ore t,an a decade, extractin( a out $$,''' arrel! a da), +o!tl) *or 3u a4! do+e!tic ener() con!u+ption" Cut +o!t o* 3u a4! undi!co-ered re!er-e! are t,ou(,t to e in two o**!,ore area!" 5,e oil and (a! t,at +ake up t,e USOS e!ti+ate lie in an area known a! t,e =ort, 3u a Ca!in, a !,ort di!tance o** t,e i!land4! nort,we!t coa!t" 5,e lar(er depo!it i! t,ou(,t to e in a !ection o* t,e (ul* known a! t,e Ea!tern Oap, to w,ic, Mexico and t,e United State! al!o ,a-e a clai+" 3u an o**icial! elie-e t,ere are 1' illion to 1$ illion arrel! o* crude !tored t,ere under +ore t,an $,''' *eet o* !eawater and &',''' *eet o* rock?? co!tl) to extract ut acce!!i le wit, exi!tin( tec,nolo()" C) co+pari!on, U"S" pro-en re!er-e! total &1 illion arrel!" 5,e Ea!tern Oap area i! al!o co-eted ) A+erican co+panie!, ut in Hlorida, w,ere anti?3a!tro and anti?drillin( !enti+ent! run ,i(,, t,e 3u an (o-ern+ent4! ener() a+ ition! ,a-e alar+ed law+aker! w,o !ee t,e t,reat o* ecolo(ical cala+it) in 3u a4! plan! to drill in t,at part o* t,e (ul*" B5,e)4d e drillin( ri(,t in t,e Oul* Strea+,B Sen" Cill =el!on (K?Hla"2 !aid in a telep,one inter-iew, de!cri in( a ni(,t+are !cenario in w,ic, ocean current! could carr) !pilled crude into Hlorida4! +arine !anctuarie! and lacken eac,e! alon( t,e Ea!tern Sea oard" B5,ere would e a +onu+ental di!a!ter,B ,e !aid" B5,ere !i+pl) !,ould not e drillin( out t,ere"B It,er U"S" law+aker! !aid oil deal! wit, t,e 3u an (o-ern+ent would t,row a li*eline to t,e i!land4! *ee le econo+) and t,e $'?)ear rule o* Hidel and DaZl 3a!tro" 5,e) al!o Fue!tion ,ow relia le a partner 3u a would e" BW,at i* we +ake t,o!e in-e!t+ent! and t,en U"S" a!!et! are nationaliJed.B Dep" Karrell I!!a (D?3ali*"2 a!ked a*ter la!t +ont,4! !u co++ittee ,earin(" Cecau!e it would take t,ree or +ore )ear! *or 3u a to *ull) de-elop it! ener() re!ource!, accordin( to >iYUn, U"S" participation in t,e i!land4! ener() !ector could ene*it a 3u an (o-ern+ent not nece!!aril) led ) Hidel, :&, or DaZl, 7:" 8elpin( 3u a de-elop it! own re!er-e!, ,e !aid, would allow t,e i!land to (ain t,e political independence and econo+ic *ootin( needed to ne(otiate a reconciliation wit, t,e United State! wit,out out!ide inter*erence" BSince Hidel 3a!tro4! 19$9 re-olution, 3u a4! co++uni!t (o-ern+ent ,a! ,ad to lar(el) rel) on *orei(n pro-ider! ?? *ir!t t,e So-iet Union, now ReneJuela ?? to *ul*ill it! ener() need!,B >iYUn !aid" 3u a4! Bpetroleu+ dependenc)B on 8u(o 3,T-eJ4! (o-ern+ent Bcould e u!ed ) ReneJuela a! a tool to in*luence a 3u an (o-ern+ent in +aintainin( a politicall) anta(oni!tic and elli(erent po!ition toward t,e United State!,B ,e !aid"

2!e em4argo is t!e most significant factor in pre#enting an increase in <u4an oil production -euters' ()3? (Deuter!, B3u an oil ,ope! !putter a! Du!!ian (i-e up *or now on wellB, $/&9/13, www"reuter!"co+/article/&'13/'$/&9/cu a?oil?idUSL&='EA''W&'13'$&9 //kd,2 A nu+ er o* *actor! are workin( a(ain!t 3u a4! oil ,ope!, a+on( t,e+ t,e political and lo(i!tical di**icultie! i+po!ed ) t,e lon(?!tandin( U"S" trade e+ ar(o a(ain!t t,e i!land" 5,e e+ ar(o +ake! it di**icult to *ind ri(! t,at do not -iolate it! li+itation! on t,e u!e o* U"S" tec,nolo() in 3u a and, accordin( to expert!, add! an e!ti+ated &' percent to co!t! ecau!e e-er)t,in( in t,e proEect ,a! to e !,ipped in *ro+ di!tant, non?U"S" !ource!" LA 2imes' ** (3itin( t,e U"S" Oeolo(ical Sur-e), Like oil and water in t,e (ul*#, LA 5i+e!, 3/1%/&'11, >roFue!t, 01a,n2
3u a and it! *orei(n partner! will e(in explorin( *or oil t,i! )ear in t,e Oul* o* Mexico" Krillin( will take place a! clo!e a! $' +ile! *ro+ Hlorida and in !ite! deeper t,an C>4! Macondo well, t,e !ource o* la!t )ear4! di!a!ter" A out $ illion arrel! o* oil and 1' trillion cu ic *eet o* natural (a! lie eneat, t,e (ul* in land elon(in( to 3u a, accordin( to t,e U"S" Oeolo(ical Sur-e)" I* 3u a

*ind! oil in co++erciall) -ia le a+ount!, t,i! would e tran!*or+ati-e" De-enue *ro+ natural re!ource!
,a! t,e potential to pro-ide lon(?!ou(,t !ta ilit) *or it! econo+) and i! likel) to !i(ni*icantl) alter 3u a4! relation! wit, ReneJuela, A!ia and ot,er leadin( ener()?producin( and con!u+in( nation!" Ki!co-erie! o* co++erciall) -ia le re!ource!

would al!o ,a-e an enor+ou! e**ect on t,e (ul* en-iron+ent !,ared ) 3u a and t,e United State!" 5,ank! to t,e U"S" e+ ar(o a(ain!t 3u a ?? a re+nant o* t,e 3old War ?? t,e ri!k! to t,e United State! e(in t,e +o+ent t,e *ir!t drill it pierce! t,e !ea ed" And we are utterl) unprepared" =ot onl) doe! t,e e+ ar(o pro,i it U"S" *ir+! *ro+ Eoinin( 3u a in an) e**ort! to extract it! o**!,ore re!ource! , t,u! (i-in( t,e co+petiti-e ad-anta(e to
*orei(n *ir+!, ut it al!o denie! 3u a acce!! to U"S" eFuip+ent *or drillin( and en-iron+ental protection ?? an e!peciall) trou lin( polic) con!iderin( t,e potential *or a !pill" 5,e e+ ar(o al!o co+pel! 3u a4! *orei(n partner! to (o t,rou(, contortion!, !uc, a! orderin( a drillin( ri( uilt in 3,ina and !,ippin( it nearl) 1',''' +ile! to 3u an water!, to a-oid -iolatin( U"S" law" Mo!t

i+portant, t,e *ailed polic) o* i!olatin( 3u a ,a! t,e U"S" paral)Jed: It !top! u! *ro+ en(a(in( 3u a in +eanin(*ul en-iron+ental cooperation and pre-ent! u! *ro+ addre!!in( in ad-ance t,e t,reat o* potential !pill! cau!ed ) ,urricane! or tec,nolo(ical *ailure!, w,ic, could put our water!, *i!,erie! and eac,e! at peril" A! 3u a (et! read) to drill, t,e I a+a ad+ini!tration

,a! li+ited option!" It could do not,in(" It could tr) to !top 3u

a *ro+ de-elopin( it! oil and natural (a!, an alternati-e +o!t likel) to *ail in an ener()?,un(r) world" Ir it could u!e it! executi-e aut,orit) to cooperate wit, 3u a, de!pite t,e e+ ar(o, to en!ure t,at drillin( in t,e (ul* protect! our +utual intere!t!" Since t,e 199'!, 3u a ,a! !,owed a !eriou! co++it+ent to t,e en-iron+ent, uildin( an arra) o* en-iron+ental policie!, +an) a!ed on U"S" and Spani!, law" Cut it ,a! no experience re!pondin( to +aEor !pill!" And, like t,eU"S", 3u a ,a! to alance it! econo+ic and en-iron+ental intere!t!, and t,e en-iron+ental !ide will not alwa)! pre-ail" A(ain!t t,i! ackdrop, cooperation and en(a(e+ent i! t,e ri(,t approac,, and t,ere i! alread) precedent *or it" Kurin( t,e C> !pill, 3u a per+itted a -e!!el *ro+ t,e =ational Iceanic and At+o!p,eric Ad+ini!tration to look *or da+a(e in 3u an water!" 5,e I a+a ad+ini!tration declared it! willin(ne!! to pro-ide li+ited licen!e! *or U"S" *ir+! to re!pond to t,e C> !pill, and to ot,er! in t,e *uture t,at t,reaten 3u a" It al!o pro-ided -i!a! *or 3u an !cienti!t! to attend an i+portant en-iron+ental con*erence in Hlorida" Cut t,e!e +ode!t +ea!ure! are not !u**icient" Me+ er! o* 3on(re!! *ro+ Hlorida ,a-e introduced ill! to i+po!e !anction! on *orei(n oil co+panie! and U"S" *ir+! t,at ,elp 3u a drill *or oil, and to puni!, t,o!e *orei(n *ir+! ) den)in( t,e+ t,e ri(,t to drill in U"S" water!" 5,e!e propo!al! will not !top 3u a *ro+ drillin(G i* enacted, 3u a4! partner! will di!re(ard t,e+, and t,e) will +ake cooperation to protect our +utual coa!tal en-iron+ent e-en +ore di**icult" Ener() polic) and

en-iron+ental protection are cla!!ic exa+ple! o* ,ow t,e e+ ar(o i! an a idin( t,reat to U"S" intere!t!" It !,ould no lon(er e accepta le to a!e U"S" *orei(n polic) on t,e illu!ion t,at !anction! will cau!e 3u a4! (o-ern+ent
to collap!e ?? or !top 3u a *ro+ de-elopin( it! oil re!ource!" =or !,ould t,i! polic) or t,e political d)na+ic t,at !u!tain! it pre-ent t,e U"S" *ro+ addre!!in( ot, t,e c,allen(e! and ene*it! o* 3u a *indin( +eanin(*ul a+ount! o* oil in t,e Oul* o* Mexico" 5,e I a+a ad+ini!tration !,ould u!e it! executi-e aut,orit) to (uarantee t,at *ir+! wit, t,e e!t eFuip+ent and (reate!t experti!e are licen!ed in ad-ance to *i(,t t,e e**ect! o* an) oil !pill!" 5,e 5rea!ur) Kepart+ent, w,ic, en*orce! 3u a !anction!, !,ould +ake clear to t,e pri-ate !ector t,at e**ort! to protect drillin( !a*et) will not e +et wit, ad-er!e re(ulator) action!" 5,e U"S" (o-ern+ent !,ould co++it to -i(orou! in*or+ation?!,arin( wit, 3u a, and open direct ne(otiation! wit, t,e 3u an (o-ern+ent *or en-iron+ental a(ree+ent! +odeled on cooperation t,at exi!t! wit, our 3anadian and Mexican nei(, or!" Mo!t o* all, it !,ould replace a polic) predicated on 3u a *ailin( wit, a diplo+atic approac, t,at reco(niJe! 3u a4! !o-erei(nt)" Inl) t,en will our nation e a le to re!pond e**ecti-el) to w,at could eco+e a new c,apter in 3u a4! ,i!tor), and our!"

=adgett' 9D (5i+, 5IME Latin A+erica ureau c,ie*, winner o* t,e Maria Moor! 3a ot >riJe *ro+ 3olu+ ia Uni-er!it) *or Latin A+erica co-era(e, Inter?A+erican >re!! A!!ociation award winner, >,i Ceta 1appa (raduate o* Wa a!, 3olle(e, M"S"0" *ro+ =ort,we!tern Uni-er!it)N! Medill Oraduate Sc,ool o* 0ournali!+, 8ow 3u a4! Iil Hind 3ould 3,an(e t,e US E+ ar(o, 5IME, 9/&3/&'':, ,ttp://www"ti+e"co+/ti+e/world/article/',:$99,1:$3&$&,''",t+l, 01a,n2
Hor decade!, t,e onl) pro+i!e +o!t 3u an! !aw in t,e ocean nort, o* t,eir i!land wa! t,e current t,at carrie! ,o+e+ade ra*t! to Hlorida" 5,at all c,an(ed a *ew )ear! a(o w,en (eolo(i!t! e!ti+ated t,at etween $ illion l" and 1' illion l" o* oil lie eneat, t,e water! o** 3u a4! nort,we!t coa!t" Suddenl) it !ee+ed a! t,ou(, t,e ,e+i!p,ere4! !ole co++uni!t nation +i(,t *inall) end it! de!perate dependence on oil?ric, allie! like t,e *or+er So-iet Union and ReneJuela L and per,ap! e-en e!cape it! i+po-eri!,ed econo+ic ti+e warp alto(et,er" Wa!,in(ton4! own 3u a ti+e warp (ot a Eolt a! well" 5,e oil di!co-er) ,a! renewed

de ate o-er w,et,er a crude?t,ir!t) U"S" !,ould loo!en it! %<?)ear?old trade e+ ar(o a(ain!t 3u a and let )anFui *ir+! Eoin t,e drillin(, w,ic, i! takin( place *ewer t,an 1'' +ile! o** U"S" !,ore!" Ke!pite t,e Cu!, Ad+ini!tration4! ,ard line on 3u a, Depu lican! in 3on(re!! ,a-e propo!ed le(i!lation to exe+pt Ci( Iil *ro+ t,e e+ ar(o" 5,at cla+or i! !ure to ri!e L e!peciall) i* Carack I a+a, w,o i! +ore open to dialo(ue wit, 8a-ana,
eco+e! t,e next >re!ident L now t,at 3u a4! !tate oil co+pan), 3u apetroleo, or 3upet, ,a! announced a !tunnin( new e!ti+ate o* +ore t,an &' illion l" u lin( o** it! !,ore!" B5,i! i! not a (a+e,B 3upet4! exploration +ana(er, Da*ael 5enre)ro, a!!ured reporter! in 8a-ana la!t week" I* true, t,o!e potential re!er-e! could +ake 3u a a +aEor petro pla)er in t,e

,e+i!p,ere" (5,e U"S" ,a! re!er-e! o* &9

illion l"2 And it could render t,e e+ ar(o an e-en +ore ine**ecti-e +ean! o* di!lod(in( t,e a(in( 3a!tro rot,er!, Hidel and current >re!ident DaZl" BI* it reall) i! &' illion, t,en it4! a (a+e c,an(er,B !a)! 0onat,an CenEa+in?Al-arado, a 3u a oil anal)!t at t,e Uni-er!it) o* =e ra!ka?I+a,a" B It pro-ide! a lot +ore

Eu!ti*ication *or c,an(in( ele+ent! o* t,e e+ ar(o, Eu!t a! we did w,en we allowed a(ricultural and +edical !ale! to 3u aB a decade a(o" Cut i! t,e 3u an calculation reall) on t,e le-el. Skeptic! a!k i* t,e &'?
illion? l" e!ti+ate i! Eu!t a plo) to rekindle in-e!tor intere!t, at a ti+e w,en *allin( oil price! could +ake t,e +ariti+e *ind le!! attracti-e to t,e potential international partner! 3u a need! to extract t,e oil" 5,e e**ort i! all t,e +ore ur(ent, t,e) add, ecau!e reduced oil re-enue! could al!o +ake *riend! like le*t?win( ReneJuelan >re!ident 8u(o 3,T-eJ le!! a le to aid 3u a wit, cut?rate crude !,ip+ent! and capital to i+pro-e t,e i!land4! a(ed re*inerie!" B5,e 3u a nu+ er! *ro+ +) point o* -iew are not -alid,B !a)! 0or(e >inon, an ener() *ellow at t,e Uni-er!it) o* Mia+i and an expert on 3u a4! oil u!ine!!" BI t,ink t,e)4re *eelin( a lot o* pre!!ure ri(,t now to accelerate t,e de-elop+ent o* t,eir own oil re!ource!"B CenEa+in?Al-arado (i-e! 3u a4! (eolo(i!t! +ore ene*it o* t,e dou tG ut ,e call! t,e &'? illion? l" e!ti+ate Bo** t,e c,art!"B BI tru!t t,e+ a! oil people, and t,eir !ei!+ic readin(! +i(,t e ri(,t,B ,e !a)!, B ut until we !ee !econdar), out!ide anal)!i!, t,i! i! (oin( to e !u!pect"B 5,e U"S" Oeolo(ical Sur-e) (USOS2, a (o-ern+ent a(enc), +ade t,e initial e!ti+ate o* $ illion l"to 1' illion l" *or 3u a4! nort,we!t o**!,ore !ector (known a! t,e Exclu!i-e Econo+ic @one, or EE@2 in &''%" 5enre)ro !a)! 3upet4! anal)!i! i! a!ed on w,at ,e call! a +ore accurate co+pari!on o* !i+ilar +ariti+e oil *ield! like t,o!e o** Mexico4! Oul* 3oa!t" BWe4re talkin( a out t,at +a(nitude,B ,e ar(ued la!t

week" BWe ,a-e +ore dataB t,an t,e USOS" Cut 3upet, an ar+ o* 3u a4! ultra?!ecret co++uni!t (o-ern+ent, ,a!n4t o**ered +uc, +ore e-idence t,an t,at" 3,ri! Sc,enk, w,o a! USOS coordinator in t,e 3ari ean led t,e &''% !ur-e), a(ree! t,at 3u an (eolo(i!t! Bare -er) (ood"B Cut ,e add!, BWe would like to !ee +ore data"B Still, Sc,enk note!, ecau!e o* t,e e+ ar(o and 8a-ana4! in!ular in*or+ation policie!, Bwe can4t con-er!e wit, t,e 3u an!"B 5,e Spani!, ener() co+pan) Dep!ol?A>H ,a! entered into a production? !,arin( a(ree+ent wit, 3upet and i! !c,eduled to !tart drillin( t,e *ir!t real well in t,e EE@ next )ear" It,er international *ir+!, includin( =orwa)4! Statoil8idro and India4! Iil P =atural Oa! 3orp", are part o* t,e Dep!ol?led con!ortiu+" ReneJuela4! !tate?run >etroleo! de ReneJuela i! con!idered a le!!er pla)er ecau!e it ,a! little deep?water drillin( experience" (3,ina i! al!o intere!ted ut !o *ar onl) in-ol-ed in on!,ore drillin( in 3u a"2 3u a i! now in i+portant ne(otiation! wit, CraJil4! >etro ra!, w,ic, Eu!t +ade it! own +ulti illion? arrel oil *ind o** it! coa!t near Dio de 0aneiro and could, anal)!t! !a), e t,e +aEor o**!,ore drillin( partner *or 3u a i* it Eu+p! in" Still, t,e conce!!ion! !o *ar repre!ent le!! t,an a Fuarter o* t,e $9 drillin( lock! t,at 3u a ,ope! to exploit in t,e %3,'''?!F"?+i" (11&,''' !F k+2 EE@" Anal)!t! !a) one rea!on i! t,e dauntin( in*ra!tructural di**icultie! *acin( an) co+pan) t,at drill! in 3u a: *ir+! ,a-e to rin( +uc, +ore o* t,eir own capital, eFuip+ent, tec,nolo() and on?t,e?(round know?,ow t,an u!ual" 5,i! )ear4! !e-ere ,urricane da+a(e in 3u a ,a! +ade t,e !ituation wor!e" 3anada4! S,erritt, in *act, recentl) dropped out o* it! *our? lock contract" BW,o el!e i! (oin( to e willin( to actuall) co+e in and take t,e ri!k in 3u a.B !a)! CenEa+in?Al-arado" B In

ter+! o* proxi+it) and tec,nolo(), t,e onl) people reall) a le to do it to t,e extent t,e 3u an! need are t,e A+erican!"B 3u a now produce! a out <',''' arrel! o* oil per da) (C>K2 and con!u+e! +ore t,an 1$','''
C>K" (It al!o produce! natural (a!"2 ReneJuela +ake! up t,e di**erence ) !,ippin( al+o!t 1'',''' C>K to 3u a" 5,e Uni-er!it) o* Mia+i4! >inon !a)! t,e +ore !eriou! i!!ue i! re*inin( capacit): e-en i* 3u a ,a! onl) t,e low e!ti+ate o* $ illion l" L w,ic, could )ield +ore t,an 3'',''' C>K L it need! ReneJuela4! in-e!t+ent to up(rade re*inerie! like t,e So-iet? uilt plant at 3ien*ue(o!" Cut plu++etin( crude price! +ean t,at 3,T-eJ +a) ,a-e a lot le!! wealt, to !pread around *or ,i! petro?diplo+ac) proEect!" BLike t,e collap!e o* t,e So-iet Union,B !a)! >inon, Bt,i! kind o* t,in( ,a! alwa)! een 3u a4! Ac,ille!4 ,eel"B I* 3u a reall) doe! ,a-e &' illion l" to drill, ,owe-er, it could +ore ea!il) *ind ot,er intere!ted re*iner) in-e!tor!, like CraJil" 5,e Fue!tion i! w,et,er t,e U"S" will want to !tep o** t,e !ideline! and (et a piece o* t,e action too" 1ir ) 0one!, ,ead o* t,e U"S"?3u a 5rade A!!ociation and an e+ ar(o opponent, !a)! 5enre)ro4! !ta** ,a! een credi le in t,e pa!t, and ,e elie-e! t,e new e!ti+ate i! pro a l) accurate" B So

*or t,e U"S", t,i! eco+e! an :''?l " (uerrilla knockin( on e-er) od)4! door,B !a)! 0one!" BWit, t,at +uc, oil, t,ere would e t,e *eelin( t,at t,ere4! a real [U"S"\ price to e paid *or [+aintainin(\ t,e e+ ar(o" It c,an(e! 3u a4! econo+ic !ituation dra!ticall) and +ake! t,e U"S" le!! rele-ant"B >er,ap!,
ut in t,e !,ort run it4! +ore likel) to +ake t,e U"S" +ore deter+ined to do it! own o**!,ore drillin(" Rice >re!ident Kick 3,ene) and ot,er Cu!, Ad+ini!tration o**icial! point to 3u a4! petro *ortune! a! Eu!ti*ication *or openin( +ore o* A+erica4! coa!tline to oil production" Decent poll! in U"S" coa!tal !tate! like Hlorida !upport t,at idea, de!pite en-iron+entali!t co+plaint! t,at ot, U"S" and 3u an o**!,ore ri(! will *oul t,e Oul* o* Mexico" Meanw,ile, e+ ar(o proponent! on 3apitol 8ill ,a-e !pon!ored ill! t,at would, a+on( ot,er !anction!, den) -i!a! to t,e executi-e! o* *orei(n oil co+panie! t,at drill oil in 3u a" 5,eir rea!onin(: t,e +ore oil wealt, 8a-ana (ain!, t,e le!! incenti-e it ,a! to pur!ue de+ocratic re*or+" 5,at la!t part +a) well e true" Cut at t,e end o* t,e da), U"S"?3u a relation! continue to exi!t in a 3old War ti+e warp" A! a re!ult, in ot, Wa!,in(ton and 8a-ana, &' illion l" o* oil +i(,t not e !uc, a (a+e c,an(er a*ter all"

lin8 cu4a econom%

<u4an economic gro&t! leads to oil production in <u4a Arig!t' ** (Lincoln Wri(,t, *or+er political Eournali!t *or t,e 3an erra 5i+e!, Vuadrant, 0une &'11, Rolu+e LR, <, BScrapin( t,e Du!t o** 3u aB, www"Fuadrant"or("au/+a(aJine/i!!ue/&'11/</!crapin(?t,e?ru!t?o**?cu a //kd,2 Export?led de-elop+ent relie! on !e-eral *actor!Lc,eap la our, *orei(n in-e!t+ent, tec,nolo() tran!*er, !o*t credit and open export +arket!" C) t,e pur!uit o* a !urplu! on t,e trade alance or t,e current account, export?led de-elop+ent can (enerate lar(e ,oldin(! o* *orei(n re!er-e!" 5,e!e re!er-e! can e u!ed to in-e!t in indu!trial de-elop+ent and in*ra!tructure, or pa) o** *orei(n de t, t,e -er) t,in(! 3u a need! to expand it! econo+) and
e!cape t,e (rip o* t,e US e+ ar(o" In 3u a, t,ere i! now talk o* creatin( Special Econo+ic @one!, w,ere *orei(n in-e!tor! can +anu*acture (ood! *or export, Eu!t a! 3,ina did in S,enJ,en pro-ince in t,e late 197'!" 5,e re*or+! al!o ,int at pro-idin( *a-oura le credit ter+! to exporter! and u!ine!!e! en(a(ed in i+port !u !titutionG o* re!torin( once (reat 3u an indu!trie! like !u(ar, to acco and co**eeG and o* de-elopin( new oil and (a! re!ource! in t,e Oul* o* Mexico"

A strong <u4an econom% leads to oil exploration @attalion' 3 (&/:/&, Anna 3,aloupka, B5rade wit, 3u a could open u!ine!! *lood(ate!B, www"t,e att"co+/&":$''/trade?wit,?cu a?could?open? u!ine!!?*lood(ate!? 1"1&13:&&W"Uc3RI-+)C!k //kd,2
B5,e ,i(, export (rowt, *oreca!t would e -er) di**icult to o tain in a !,ort ti+e,B Do!!on !aid" BCut t,e +oderate *oreca!t i! Fuite attaina le o-er t,e next *i-e )ear!" 5,e pro!pect! are +ore i+portant on i+pact"B Do!!on !aid 3u a4! econo+) al!o could

ene*it *ro+ t,e li*ted trade arrier, ad-ancin( in teleco++unication!, textile and apparel production, and oil and
(a! exploration" BWe would expect t,eir econo+) to experience po!iti-e (rowt, and econo+ic de-elop+ent,B Do!!on !aid" B5,eir econo+) would e +uc, +ore di-er!e"B

mexico

lin8 mexico engagement

U"S"$ exican economic ties &ill result in oil imports ar8etplace' ()3/13, (0enni*er 3ollin!, new!(roup *ocu!in( on international co++oditie! tradin(, A! I a+a -i!it! Mexico, t,e !lipper) topic o* oil co+e! up#, Marketplace, $/&/13, ,ttp://www"+arketplace"or(/topic!/world/o a+a?-i!it!?+exico?!lipper)?topic?oil?co+e!, 01a,n2 >re!ident Carack I a+a i! in Mexico toda), +eetin( wit, t,at countr)N! leader EnriFue >eYa =ieto " 5,e)Nll e talkin( i++i(ration, order !ecurit) and trade" Cut anal)!t! !a) t,eir con-er!ation will likel) turn to one touc,) topic: Iil and (a! re!er-e! in Mexico" 5went) )ear! a*ter t,e =ort, A+erican Hree 5rade A(ree+ent, MexicoN! oil re!er-e! ,a-e re+ained clo!ed to U"S" in-e!t+ent, ut t,at +a) !oon e c,an(in(" 5,ereN! prett) +uc, one rand o* (a!oline )ouNll !ee in Mexico: >e+ex , t,e !tate *uel +onopol)" Cut >e+ex i! in trou le" MexicoN! oil production ,a! een droppin(, and in le!! t,an 1' )ear!, t,e countr) could e i+portin( +ore oil t,an it export!" Anal)!t! !a) t,e *o!!il *uel re!er-e! are t,ere" Mexico re+ain! one o* t,e worldN! top 1' oil producer!" 5,ere could al!o e ten! o* illion! o* arrel! in untapped deep?!ea oil re!er-oir!" 5,e countr) ,a!, #5,e
pro-en *ourt, lar(e!t !,ale (a! re!er-e! in t,e world,# !aid Mic,ael S,i*ter i! pre!ident o* Inter?A+erican Kialo(ue" S,i*ter !aid >e+ex lack! t,e tec,nolo() to tap t,o!e re!er-e!" International co+panie! ,a-e t,e experti!e, ut MexicoN! con!titution pro,i it! Eoint -enture! in t,e !ector" S,i*ter !aid re*or+! +a) e on t,e wa)" #I t,ink i* t,ere are Eoint -enture!, U"S" co+panie! would e -er) attracted to t,e opportunitie! in Mexico,# ,e !aid" Arturo Saruk,Tn, w,o wa! Mexican a+ a!!ador to t,e U"S" until 0anuar), !aid ,e expect! Mexico to introduce oil and (a! re*or+! in 0ul) or Au(u!t t,i! )ear" #5,i! i! a i( !trate(ic (a+e c,an(er,# !aid Saruk,Tn, w,o i! now t,e c,air+an o* Olo al Solution!, a con!ultanc) wit,in t,e >ode!ta 3o+pan)" 8e !aid t,o!e Eoint -enture! could c,an(e t,e oil and (a! (a+e (lo all)" #C) rin(in( MexicoN! ener() a!!et! to t,e ta le , o-erni(,t 3anada, Mexico and

t,e United State! eco+e t,e lar(e!t producer o* oil on t,e *ace o* t,e eart,, *ar out!trippin( Saudi Ara ia,# ,e !aid" 5,at !,ould en!ure t,at oil and (a! keep *lowin( *or )ear! to co+e" Export gro&t! is 8e% to spur oil production in exico A2O' +)*?)*/ (Weekl) 5anker Ipinion, >oten P >artner!, BWill Mexico 0oin =ort, A+erican >roduction Coon.B, www"poten"co+/Kocu+ent"a!px.id/&%%9&P*ilena+e/Will;&'Mexico ;&'0oin;&'=ort,;&'A+erican;&'>roduction;&'Coon."pd* //kd,2 Keclinin( production, coupled wit, low le-el! o* in-e!t+ent in do+e!tic re*inerie! and crude exploration ,a-e di+ini!,ed MexicoN! role a! a +aEor crude oil producer and exporter" MexicoN! do+e!tic crude oil production and export -olu+e ,a-e *allen ) nearl) 1 +illion arrel! per da) (+ pd2 !ince &''<" At
t,e !a+e ti+e, !tead) econo+ic (rowt, ,a! increa!ed do+e!tic de+and *or re*ined product!, !o i+port -olu+e! ,a-e increa!ed ) nearl) %'' t,ou!and arrel! per da) (k pd2 !ince &''9" A new pre!ident (i-e! !o+e o !er-er! ,ope t,at t,e

countr) can re-er!e t,e!e ne(ati-e trend! and (enerate crude oil production and export (rowt,,
w,ile al!o reducin( re*ined product i+port!"

#ene5uela

lin8 #ene5uela engagement

Stronger economic ties &ill instigate oil trade <NN' /)D/13 (SeiJe t,i! +o+ent to *or(e tie! wit, ReneJuela#, 3==, 3/:/13, ,ttp://www"cnn"co+/&'13/'3/':/opinion/Eack!on?c,a-eJ?-eneJuela, 01a,n2
(3==2 ?? In 5,ur!da) ni(,t, I returned to 3araca!, ReneJuela, to participate in t,e *uneral and +ournin( o* 8u(o 3,a-eJ, pre!ident o* ReneJuela *ro+ 1999 until ,i! pa!!in( t,i! week" 3,a-eJ4! deat, ,a! captured t,e world4! attention *ront and center wit, renewed -i(or and intere!t" 8e *ir!t ur!t onto t,e world !cene wit, ,i! pre!idential -ictor) in 1999" Since t,en, t,rou(, ,i! *ourt, re?election in 0anuar) ?? and w,ile ,e wa! in 3u a *i(,tin( t,e cancer t,at would take ,i! li*e ?? ,i! *ocu! wa! on *or(in( a new !ociali!t ReneJuela" 5,i! won +an) *riend! and ad-ocate! at ,o+e and a road, e!peciall) a+on( ReneJuela4! and t,e ,e+i!p,ere4! poore!t population!" It,er world power! de+oniJed 3,a-eJ and !ou(,t to o!traciJe ,i+, a la 3u a4! Hidel 3a!tro, on a (lo al !cale" Cut I elie-e peace*ul, con!tructi-e ne(otiation !,ould carr) t,e da) o-er i!olation and de+oniJation" 5,at4! w,) I -i!ited ReneJuela in &''$, Eu!t a*ter t,e De-" >at Do ert!on called *or t,e a!!a!!ination o* 3,a-eJ" 8e in*la+ed a c,oru! o* extre+i!t -oice! in !eekin( a wa) to Bdeal wit, 3,a-eJ"B 5,at t)pe o* ,ot r,etoric !er-e! no producti-e purpo!e" I went to talk wit, 3,a-eJG I talked wit, 0ewi!, reli(iou! leader! in ReneJuela" I talked wit, A*ro?ReneJuelan!" I learned a out t,e tran!ition takin( place *ro+ t,e old anana repu lic re(i+e! to t,e new leader!, wit, new idea!, !uc, a! 3,a-eJ in ReneJuela, LuiJ Lula da Sil-a in CraJil and 0uan Manuel Santo! in 3olo+ ia" I looked not to exploit di**erence! and *uel di-i!ion, ut *or co++on (round" 5,at4! w,) I went to IraF to talk wit, Sadda+ 8u!!ein in 199' a! ,e in-aded 1uwait and con-inced ,i+ t,ere wa! no -alue in ,oldin( ,undred! o* people *ro+ t,e United State! and ot,er countrie! a! B,u+an !,ield!"B 8e relea!ed t,e+" 5,at4! w,) I went to w,at re+ained o* Au(o!la-ia a+id t,e *la+e! o* war in 1999, to talk wit, Slo odan Milo!e-ic to per!uade ,i+ to relea!e t,e t,ree U"S" !oldier! ein( ,eld ,o!ta(e" 8e did" And t,at4! w,) I went to 3u a in 19:% ?? lon( under a !en!ele!! U"S" lockade ?? to talk wit, 3a!tro and per!uade ,i+ to relea!e doJen! o* political pri!oner!" In eac, in!tance, t,e U"S" ,ad a no?talk polic) wit, t,e!e leader! and nation!" It4! een +) experience t,at talkin(, keepin( line! o* co++unication open to *riend and *oe alike, can reap di-idend!" =ation! cannot alwa)! a(ree, ut we can alwa)! talk" 5,at doe! not reFuire a !acri*ice o* principle! or !i(nal weakne!!" I elie-e in t,e Oand,i principle!, *a-orin( peace*ul ne(otiation o-er +ilitar) con*rontation" 8e called t,e doctrine B!at)a(ra,aB ?? and explained t,e Bpur!uit o* trut, did not ad+it o* -iolence ein( in*licted on one4! opponent ut t,at ,e +u!t e weaned *ro+ error ) patience and co+pa!!ion" BHor w,at appear! to e trut, to t,e one +a) appear to e error to t,e ot,er" And patience +ean! !el*?!u**erin(" So t,e doctrine ca+e to +ean -indication o* trut,, not ) in*liction o* !u**erin( on t,e opponent, ut on one!el*"B It work!" In +) -iew, it4! alwa)! +ore producti-e and +utuall) ene*icial to talk t,in(! out and not *i(,t t,in(! out" A! t,e world +ourn! t,e deat, o* 3,a-eJ, it4! ti+e to (o e)ond di-i!i-e r,etoric and ,i!torical *ear! t,at lea-e all o* u! in t,e dark" W,ere i! our co++on (round. We are nei(, or!G we li-e in t,e !a+e ,e+i!p,ere" 5,ere are &'',''' ReneJuelan! li-in( in t,e U"S" ?? includin( nearl) 7' MaEor Lea(ue a!e all pla)er! in &'1&, a+on( t,e+ 5riple 3rown winner Mi(uel 3a rera" We are tradin( partner!" ReneJuela !urpa!!ed Saudi Ara ia a! t,e

nation wit, t,e lar(e!t oil re!er-e! in t,e world, and t,e U"S" i! t,e lar(e!t i+porter o* ReneJuelan oil" 5,at oil i! *our da)! awa), co+pared wit, *our week! awa) in t,e Middle Ea!t" 5,ere i! a ,u(e potential to expand our +arket and ReneJuela4!" And wit, !tron(er econo+ic tie! co+e! political !ta iliJation" It4! ti+e to turn cri!i! into opportunit), to *ul*ill t,e un*ini!,ed u!ine!! o* realiJin( to
t,e *ulle!t potential t,e relation!,ip etween t,e U"S" and ReneJuela" SeiJe t,i! +o+ent to ,eal t,e wound and ind t,e tie!" It won4t e ea!), ut not,in( i!" And not,in( will e acco+pli!,ed wit, a no?talk polic)" =o dou t, ReneJuela4! relation! wit, t,e U"S" ,a-e een !trained ?? diplo+atic relation! were !e-ered *or a ti+e in &'': w,en ReneJuela accu!ed t,e U"S" o* plottin( t,e o-ert,row o* 3,a-eJ" 0u!t la!t week, da)! e*ore 3,a-eJ died, Rice >re!ident =icola! Maduro expelled two U"S" +ilitar) o**icial!, accu!in( t,e U"S" o* tr)in( to de!ta iliJe t,e (o-ern+ent" 5,e (ood new! i! t,at >re!ident Carack I a+a ,a! !ou(,t to re!tore relation!, !a)in( in a !tate+ent t,at t,e United State! Brea**ir+! it! !upport *or t,e ReneJuelan people and it! intere!t in de-elopin( a con!tructi-e relation!,ip wit, ReneJuela4! (o-ern+ent" """ A! ReneJuela e(in! a new c,apter in it! ,i!tor), t,e United State! re+ain! co++itted to policie! t,at pro+ote de+ocratic principle!, t,e rule o* law and re!pect *or ,u+an ri(,t!"B 5,e U"S" i! !endin( an o**icial dele(ation to 3,a-eJ4! *uneral" And I a+a and Secretar) o* State 0o,n 1err) ,a-e expre!!ed t,eir de!ire to *or(e a +ore po!iti-e and producti-e relation!,ip wit, ReneJuela" A! I +eet wit, political, reli(iou! and co++unit) leader! in ReneJuela, t,i! i! t,e +e!!a(e I rin(" Let4! put an end to ,ot r,etoric, de+oniJation and policie! o* i!olation" It4! ti+e to *or(e a practical, producti-e relation!,ip t,at will lead to nor+aliJation o* diplo+atic relation! etween t,e U"S" and ReneJuela"

lin8 #ene5uela econom%

Economic reco#er% allo&s 7ene5uela to end its de4t to <!ina,increasing exports to ot!er countries li8e t!e U"S" @<<' /)()*/ (Do ert >lu++er, Cu!ine!! reporter, Criti!, Croadca!tin( 3o+pan), B8u(o 3,a-eJ lea-e! ReneJuela in econo+ic +uddleB, www" c"co"uk/new!/ u!ine!!?&'79$7:1 //kd,2
Corrowin( a(ain!t oil" So ,ow did t,e (o-ern+ent *inance it! pre?election !pendin( !pree. Horei(n pri-ate in-e!tor! ,a-e certainl) !ta)ed awa) !ince Mr 3,a-eJ4! nationali!ation dri-e e(an" 8i(, in*lation, !till nud(in( &'; a )ear, doe!n4t ,elp eit,er" Will t,e ReneJuelan capital !ee ri(,ter ti+e! a,ead. A! !ur-e) or(aniJation 3on!en!u! Econo+ic! !a)!: B Soarin( in*lation and

(o-ern+ent !pendin( ? coupled wit, currenc) and capital control! ? ,a-e created a widenin( *i!cal de*icit" B5,e aut,oritie! are increa!in(l) reliant on external de t to *inance t,i!"B Hor Bexternal de tB, read loan! *ro+
3,ina" Accordin( to Cloo+ er( new! a(enc), t,e !tate?run 3,ina Ke-elop+ent Cank ,a! lent ReneJuela 6%&"$ n o-er a *i-e?)ear period" Iil Mini!ter Da*ael Da+ireJ !aid in Septe+ er &'1& t,at o* t,e <%',''' arrel! o* oil a da) t,at

ReneJuela export! to 3,ina, &'',''' went toward! !er-icin( t,e countr)4! de t to CeiEin(" Unle!! >KRSA4! underper*or+ance can e re+edied, t,o!e de t! will re+ain and will pro a l) (row a! t,e countr)4! (ap etween !pendin( and inco+e widen!"

LINE

prices lin8s

prices lin8 cu4a

An increase in <u4an oil production &ould lo&er prices,399F pro#es ;arcia' F (8u(o Oarcia, Eournali!t *or 0u-entud De elde, 0u-entud De eld(e, 1&/&7/'7, B3u a >u+pin( I-er &: Million Carrel! o* Iil Annuall)B, www"Eu-entudre elde"co"cu/cu a/&''7?1&? &7/cu a?pu+pin(?o-er?&:?+illion? arrel!?o*?oil?annuall)/ //kd,2 3Trdena!"L 3u aN! -olu+e o* oil and natural (a! production will reac, *our +illion ton! L&:": +illion arrel!L t,i! )ear *or Eu!t t,e t,ird ti+e in it! ,i!tor)" 5,i! ,a! een a (ood )ear *or t,e 3u an oil indu!tr),# !aid 3arlo! La(e
KT-ila, !ecretar) o* t,e Executi-e 3o++ittee o* t,e 3ouncil o* Mini!ter!, at a cere+on) +arkin( t,e one +illiont, ton o* oil produced ) t,e MatanJa! 3entral Iil Krillin( and Extraction 3o+pan) (E>E>?32" La(e noted t,at t,e la!t ti+e production

reac,ed t,i! +ark wa! in &''3, and !tated t,at in order to +aintain and increa!e production, t,e drillin( o* a lar(e nu+ er o* new well! i! needed La! well a! a little it o* luckL (i-en t,e natural depletion o* exi!tin( well!"
Acco+panied ) Ca!ic Indu!tr) Mini!ter Aadira OarcXa, and >edro Cetancourt, t,e *ir!t !ecretar) o* t,e pro-incial part) or(aniJation, La(e !aid, t,e countr) ,a! alread) *ul*illed it! ,)drocar on production plan, wit, (a! production plan ,a-in( een exceeded and t,e crude oil production expected to e +et ) Kece+ er 3'" 8owe-er, a! t,e (a! production proEection! were !urpa!!ed ) 11 percent, t,e annual plan ,a! alread) een +et"# 5,e national o**icial explained t,at depletion o* well! lead!

to ,i(,er oil price! and !aid t,at (i-en t,e current world +arket Lwit, oil price! a o-e 69' a arrelL t,e deci!ion wa! +ade to !ecure new drillin( ri(! and (i-e priorit) to t,i! !ector o* econo+) to stem declining production rates" We ,a-e alread) !tarted to !ee t,e *ruit! o* t,i! polic) and
deci!ion +ade ) co+rade Hidel 3a!tro, w,ic, are now +ore clear and e-ident t,an e-er,# ,e !aid" A+on( t,e )earN! ,i(,li(,t! i! an increa!e in crude production alon( wit, t,e utiliJation o* 97 percent o* t,e a!!ociated (a! produced, w,ic, -irtuall) eli+inate! en-iron+ental conta+ination *ro+ a!!ociated (a! relea!ed into t,e air"

Increasing oil production &ould drasticall% lo&er glo4al oil prices , t!is is in t!e context of <u4a @elt' ? (0uan A"C" Celt, Senior Econo+ic Ad-i!or *or t,e U"S" A(enc) *or International Ke-elop+ent, *or+er 3,ie* Econo+i!t *or t,e U"S" A(enc) *or International Ke-elop+ent, de(ree! *ro+ 8ar-ard Uni-er!it) 1enned) Sc,ool o* Oo-ern+ent in In*ra!tructure in a Market Econo+), 3ornell Uni-er!it) in A(ricultural econo+ic!, A+erican Uni-er!it) in econo+ic!, and Oeor(etown Uni-er!it) in econo+ic!, B5,e Electric >ower Sector in 3u a: >otential Wa)! to Increa!e E**icienc) and Su!taina ilit)B, USAIK, pd*"u!aid"(o-/pd*Mdoc!/>=AKI%'7"pd* //kd,2
5ACLE 3"11 S S3E=ADII SE5S A=K SE=SI5IRI5A 3ASES Set Ke!cription Sen!iti-it) ca!e! CAU o Moderate electricit) de+and (rowt, in line wit, recent trend! o Slow (rowt, in oil and (a! production in line wit, recent trend! o 8i(,er (a! price! o Lower oil price! o Li+ited rate o* new in-e!t+ent o =o L=O i+port a-aila le o 8i(,er a(a!!e a-aila ilit) 8I o Dapid econo+ic (rowt, o 8i(, *orei(n in-e!t+ent o Accelerated oil and (a! production (rowt, o 8i(,er (a! price! o Lower oil price! o Li+ited rate o* new in-e!t+ent &&o 5ran!ition to +arket electricit) price! o =o L=O i+port a-aila le o 8i(,er a(a!!e a-aila ilit) In t,e 8I !cenario, !)!te+ co!t! were al!o !en!iti-e to increa!e! in (a! price! and re!triction! on t,e rate o* in-e!t+ent in new power plant!, ut t,e e**ect wa! le!! pronounced t,an in t,e CAU ca!e" W,en electricit) !u !idie! were re+o-ed, de+and (rowt, +oderated, ut onl) !li(,tl)" 5,e e**ect wa! +o!t pronounced w,en replace+ent o* t,e exi!tin( plant! wa! !lowed ) in-e!t+ent con!traint!" Ince t,e tran!ition wa! co+pleted, relati-el) low de+and" Inl)

+arket price! led to onl) +inor adEu!t+ent! in re!trictin( new in-e!t+ent or den)in( L=O i+port! !i(ni*icantl) increa!ed price! e)ond t,i! le-el" Unlike in t,e CAU !cenario, rapidl) expandin( do+e!tic (a! production ena led !)!te+ reliance

on (a! e-en in t,e a !ence o* L=O i+port!, wit, a +inor role *or wind and a(a!!e" 8owe-er, ,i(,er co!t! led to a downward adEu!t+ent o* de+and in re!pon!e to +arket price!, !u((e!tin( t,at end u!e ener() e**icienc) potential and co!t are i+portant -aria le! *or *urt,er anal)!i!" A! in CAU, t,e !witc, to natural (a! in t,e 8I !cenario ena led a !u !tantial drop in *uel

co!t!" 8owe-er, ,i(,er de+and (rowt, le*t t,e !)!te+ -ulnera

le to increa!e! in natural (a! price!, w,ic, !u !tantiall) increa!ed (eneration co!t!" Oreater do+e!tic production o* natural (a! t,an in CAU allowed t,e !)!te+ to o tain t,e +aEorit) o* it! *uel *ro+ do+e!tic !ource!, decrea!in( ener() !ecurit) concern!"

prices lin8 mexico

Increasing exican oil production &ould lo&er oil prices glo4all% ' *3 (BIil >rice! >ro+i!e to 8ead 8i(,er A! Mexican >roduction Kwindle!B, Mone) Mornin(, +one)+ornin("co+/&'1&/':/&%/oil?price!?pro+i!e?to?,ead?,i(,er?a!?+exican? production?dwindle!/ //kd,2 Mexico i! currentl) ranked =o" 7 on t,e li!t o* t,e world4! top oil producer!, !o less exican oil production would al!o mean !ig!er oil prices worldwide" 5,e lo!! o* Mexico4! 1 +illion arrel! a da) in
export! o-er an extended period would e a (reater low t,an t,e total lo!t due to !anction! on Iran" W,ile t,e e**ect! o* Mexico4! la((in( oil production are clear, t,e cau!e! are +ore co+plex" 5,e root o* t,e pro le+ i! )ear! o* ne(lect and a (o-ern+ent?en*orced +onopol)" =ationaliJed in 193:, Mexico4! oil indu!tr) ,a! pro,i ited oil e,e+ot,! like Exxon Mo il (=ASE: QIM2, C> (=ASE AKD: C>2 and ot,er! *ro+ takin( an) !iJa le !take in t,e countr)4! oil operation!" I* it allowed +ore in-e!t+ent! *ro+

international oil co+panie!, Mexico could re-i-e production , indu!tr) anal)!t! !a)" Cut t,at won4t

e ea!)" >etroleo! Mexicanco!, >EMEQ, ,a! !ole control o* t,e Mexican oil indu!tr) and dole! out o-er 3&; o* it! re-enue to Mexico4! (o-ern+ent" Cut w,ile t,e Mexican (o-ern+ent like! t,e oil re-enue, it ,a! *ailed to re?in-e!t enou(, +one) ack into t,e indu!tr)" Mexican law+aker! ,a-e lon( re!i!ted pro-idin( >EMEQ wit, t,e *und! needed to *ind new !ource! o* crude" I* late, >EMEQ ,a! +o-ed to relax it! oil +onopol), allowin( *orei(n *ir+! to id *or >EMEQ contract!" A!poke!per!on *or >EMEQ !aid t,e!e new e**ort!, in addition to t,e current dou lin( o* it! ud(et, would allow t,e co+pan) to Fuickl) oo!t production" Cut >EMEQ4! director o* operation! 3arlo! Morale! told Deuter! t,e co+pan) i!

extre+el) cautiou! and prudent w,en calculatin( t,e price! it i! willin( to pa) *ir+! to de-elop oil *ield a! a(reed on in new contract!" BWe can4t lea-e +one) on t,e ta le" We al!o can4t !et -er) low price!""" ecau!e we +a) e le*t wit,out an) o**er! , Eu!t like
w,at ,appened wit, [oil *ield\ ArenFue"B 5,e ina ilit) to auction o** t,e ArenFue oil *ield rai!e! t,e Fue!tion o* Eu!t ,ow co++itted >EMEQ i! to expandin( pri-ate !ector in-ol-e+ent" A! lon( a! >EMEQ dra(! it! *eet, Mexican oil production will keep !lippin(" B5,e next (o-ern+ent +a) want an openin(, ut >EMEQ lo-e! ein( a +onopol),B Miria+ Orun!tein, an ener() re!earc,er wit, Mexico4! 3IKE In!titute, told Deuter!" Cut ecau!e oil i! !o -ital to t,e Mexican econo+), ot, >EMEQ and t,e Mexican (o-ern+ent +a) e-entuall) e *orced to adEu!t t,eir t,inkin(" B5,e *act t,at Mexico4! production i! rapidl) declinin( could potentiall) cau!e a *inancial cri!i! not onl) *or >EMEQ ut *or t,e (o-ern+ent,B EnriFue Sira o* ener() con!ultin( *or+ I8S told t,e =A5" BA! )ou lo!e Mexican oil, )ou lo!e critical !uppl)" It4! not a out ener() !ecurit) ut national !ecurit), ecau!e our nei(, or4! econo+ic and political well? ein( i! lar(el) linked to it! capacit) to produce and export oil,B 0ere+) M" Martin, director o* t,e ener() pro(ra+ at t,e Uni-er!it) o* 3ali*ornia, San Kie(o told 5,e =ew Aork 5i+e!"

In#esting in exican oil &ould su4stantiall% decrease U"S" dependence on iddle East A!doot et" al' * (0a!on K" A,doot, Attorne) at t,e Law I**ice! o* 0a!on K" A,doot, Ma!ter! in >u lic >olic) *ro+ >epperdine Uni-er!it) Sc,ool o* Law, Ka-id Rela, 3,arit) Mor!e), BAlle-iatin( U"S" Kependence on I>E3B, >epperdine Uni-er!it) Sc,ool o* >u lic >olic), April &''1, pu licpolic)"pepperdine"edu/+a!ter?pu lic?polic)/content/cap!tone!/opec"pd* //kd,2 I* t,e U"S" in-e!t! +ore +one) in countrie! t,at ,a-e pro-en re!er-e!, it +a) e a le to le!!en dependence on oil *ro+ I>E3 and !a*e(uard it!el* *ro+ an oil !,orta(e at a ti+e o* cri!i! or econo+ic di!ruption" 5,e U"S" could in-e!t in do+e!tic production capacit), a! well a! production and re*inin( *acilitie! a road" 3urrentl),
non?I>E3 production i! concentrated in !e-en countrie! includin( 3anada, U1 Mexico, =orwa), 3,ina, Du!!ia and t,e US" 3urrentl), t,e Cu!, ad+ini!tration ,a! called *or an expan!ion in i+port! o* petroleu+ *ro+ Mexico" 5,e ad+ini!tration call! *or +ore pri-atiJation o* t,e oil re!er-e! in Mexico and +ore in-e!t+ent ) U"S" oil producin( co+panie!" 5,i! +ake! !en!e ecau!e a!ide *ro+ t,e *act t,at Mexico i! one o* our clo!e!t nei(, or!, we ,a-e a ilateral trade pact t,at would *acilitate t,e export o* oil, creatin( a relati-el) !a*e in-e!t+ent opportunit)" In a recent !tud), t,e Criti!, >etroleu+ Stati!tical De-iew, Mexico ,a! &:"% +illion arrel! o* pro-en oil re!er-e! a! o* 1999" 3ontract! wit, Mexico *or t,e i+portation o* oil to t,e U"S" ,a-e een on t,e ri!e !ince 199%"37 5,i! capacit) ,a! een *urt,ered wit, t,e i+ple+entation o* t,e =ort, A+erican Hree 5rade A(ree+ent (=AH5A2" =AH5A ,a! pierced t,rou(, +an) Euri!dictional arrier!, allowin( A+erican! to enEo) t,e i+portation o* Mexican petroleu+" Cecau!e Mexico ,a! lar(e pro-en re!er-e!, and t,e U"S" ,a! !uc, a ,i(, de+and *or petroleu+ , we !,ould e a le to *acilitate a +utuall) ene*icial relation!,ip" In Mexico, pri-atiJation o* t,e nationaliJed petroleu+ indu!tr) +a) e a c,allen(e, ut t,e current ad+ini!tration ,a! pro+i!ed to ,elp A+erican! wit, t,eir ener() cri!i!" >EMEQ ,a! lon( een t,e exi!tin( +onopol), and t,e Mexican 3on!titution !tipulate! t,at natural re!ource! !uc, a! oil and (a! +u!t re+ain nationaliJed" In ,ope! o* li eraliJin( a !ector o* t,i! +onopol) and a+endin( t,e con!titution, newl) elected Mexican >re!ident R" Hox ,a! appointed *our o* MexicoN! wealt,ie!t u!ine!!+en to t,e >EMEQ oard" 5,e U"S" (o-ern+ent in t,i! in!tance can opt to in-e!t in MexicoN! ener() !ector -ia =AH5A ne(otiation!" I* !o, =AH5A will e rene(otiated in t,e )ear &''7" 5,i! could !er-e a! an

opportunit) *or t,e US to propo!e plan! *or a +ore inte(rated ener() trade and re(ional !el*?!u**icienc) !trate()" 5,e precur!or! *or e!ta li!,in( a re(ional trade a(ree+ent wit, Mexico alread) exi!t wit,in t,e political and

econo+ic *ra+ework o* t,e Mexico?U"S" =AH5A partner!,ip" 5,e!e policie! are a enc,+ark *or t,e de-elop+ent o* (eo(rap,ical linka(e! *or !el*?!u!tenance"# An in-e!t+ent in Mexico would
+iti(ate t,e i+pact o* a((re!!i-e policie! ) t,e Middle Ea!t and it! de!ta iliJin( !urpri!e!"

U"S" imports from exico &ould decrease prices <NN' 0*3 (Hor +ore oil, U"S" !,ould look to Mexico#, 3==, 3/1/1&, ,ttp://www"cnn"co+/&'1&/'3/'1/opinion/na-arrette?(a!?price!, 01a,n2
San Kie(o, 3ali*ornia (3==2 ?? Hor +e, t,e i!!ue o* !k)rocketin( (a!oline price! ca+e into *ocu! a out *our )ear! a(o, w,en t,e national a-era(e t,at A+erican! paid at t,e pu+p reac,ed an all?ti+e ,i(, o* 6%"11 a (allon " 5oda), t,e a-era(e ?? up 3' cent! in t,e la!t *our week!, and 13 cent! in t,e la!t week alone ?? i! a out 63"7'" In t,e !u++er o* &'':, I pulled up next to a (a! pu+p o** a +aEor ,i(,wa) in Sout,ern 3ali*ornia w,ere ?? apparentl), a *ew +inute! earlier ?? a recreational -e,icle, w,ic, ,eld +ore t,an 1'' (allon!, ,ad !topped to *ill up" 5,e price wa! !till on t,e !creen: 6$''" 3an )ou i+a(ine pa)in(

6$'' to put (a! in )our -e,icle. Hor +an) o* u!, t,at4! +ore like a +ont,l) car pa)+ent" Cut *or t,o!e w,o li-e in
Sout,ern 3ali*ornia ?? w,ere t,e car i! kin(, pu lic tran!it i! !pott) and t,e carpool lane i! al+o!t alwa)! underu!ed ?? e-en a ta t,at !iJe ,ardl) rai!e! an e)e row" At t,e (a! !tation clo!e!t to +) ,o+e in San Kie(o, a (allon o* (a! i! (oin( *or a out 63"%9, and a *ull tank co!t! +e a out 6<$" I !,ell t,at out t,ree or *our ti+e! a +ont," >rice! are !k) ,i(, in Lo! An(ele!" Wit, t,e a-era(e price ,ere expected to reac, a! +uc, a! 6$ a (allon ) Me+orial Ka), it4! not !urpri!in( to !ee +ore co++uter! Ea++ed onto train! and ,ear t,at +ore o* )our *riend! are tr)in( to work *ro+ ,o+e a *ew da)! a week" Alt,ou(, +) *riend! on t,e Ea!t 3oa!t like to t,ink t,e) ,a-e it ea!ier wit, +ore option! *or pu lic tran!portation, it4! a +i!take *or people to a!!u+e t,at ,i(,er (a! price! don4t a**ect t,e+" It4! not a out (eo(rap,)" We4re all in t,i! to(et,er" 8a-e )ou noticed t,e price o* (rocerie! latel), a! t,o!e co+panie! t,at operate deli-er) truck! ,a-e to !pend +ore to !tack *ood on !uper+arket !,el-e!. So )ou don4t own a car" Ma) e )ou take t,e !u wa) to work" Swell" Cut i* )ou ,a-e a +out,, and occa!ionall) like to *ill it wit, *ood, ,i(, (a! price! !,ould e ,ard to !wallow" Meanw,ile, political leader! ?? in ot, partie! ?? need to *ill up on coura(e and co++on !en!e in order to work on a !olution" >re!ident I a+a wa! ri(,t to !a) recentl) t,at t,ere i! little a c,ie* executi-e can do a out (a! price!" 5,at !aid, pre!idential candidate! !,ould !top pro+i!in( ot,erwi!e" At t,e +o+ent, our politician! !ee+ to e runnin( low on idea! and )et o-er*lowin( wit, an ea(erne!! to exploit t,e uptick in price! *or t,eir own political ene*it" =ewt Oin(ric, i! pro+i!in( lower price!" 8e al!o pled(e! t,at, i* elected pre!ident, ,e won4t ow e*ore a Saudi kin(" So w,at. W,at doe! t,at ,a-e to do wit,

an)t,in(,

e)ond political r,etoric. At t,e +o+ent, our +ain concern ?? and certainl) t,at o* our one true *riend and all) in t,e Middle Ea!t, I!rael ?? i!n4t Saudi Ara ia ut Iran" A! part o* a !+all (roup o* Latino Eournali!t! w,o -i!ited I!rael la!t +ont,, I wa! re+inded ) I!raeli o**icial! in one rie*in( a*ter anot,er t,at ?? were Iran to uild a nuclear weapon ?? t,e e ntire world would c,an(e" Iranian >re!ident Ma,+oud A,+adineEad could lock t,e Strait o* 8or+uJ and t,e re!t o* t,e world would e too *ri(,tened to do an)t,in( a out it" 5,at4! w,at we !,ould e worried a out, not w,et,er U"S" pre!ident! ow e*ore t,e Saudi!" It al!o wouldn4t ,urt to pa) +ore attention to oil re!er-e! in t,i! ,e+i!p,ere" Mexico i! a +aEor producer, and a *riend

and all)" 5,e relation!,ip etween t,e United State! and Mexico i!n4t per*ect G ten!ion! recur o-er
i++i(ration, dru(! and trade" Eac, countr) ,a! an anno)in( ,a it o* la+in( t,e ot,er *or it! pro le+!" Cut it4! a !tron( +arria(e t,at will endure" In!tead o* c,antin( BKrill, a ), drill,B +ore o* our leader! !,ould e !a)in(: B8ola a+i(o"B 5,e U"S"

(o-ern+ent !,ould increa!e oil i+port! *ro+ Mexico" =ot onl) i! it

etter to deal wit, *riend! t,an ad-er!arie!, it4! al!o a (ood wa) to ,elp t,e Mexican (o-ern+ent *und it! war a(ain!t t,e dru( cartel! ?? a attle t,at i!, let4! not *or(et, *ueled ) anot,er one o* our addiction!" Oranted, in order *or t,e United State! to increa!e oil i+port! *ro+ Mexico, our nei(, or +a)

,a-e to increa!e production" 5,at4! a !lipper) !ituation" Mexico nationaliJed t,e oil indu!tr) in t,e &'t, centur) and
*orei(n co+panie! are pro,i ited *ro+ drillin(" Cut t,at re!i!tance !ee+! to e weakenin(" Mexico4! national oil co+pan) ,a! allowed !o+e pri-ate contract! and !a)! it! +ature *ield!, w,ic, produce Eu!t 1&,''' arrel! o* oil per da), could produce up to &&' +illion arrel! o* oil" We can ,a-e t,at con-er!ation" And let4! *ace it, t,e United State! would rat,er work t,rou(, t,at i!!ue t,an work wit, countrie! t,at are ,o!tile to A+erican!" Look at t,e poll!, and )ou4ll !ee t,at one o* t,e +aEor rea!on! e-er)da) A+erican! t,ink we need to eco+e +ore ener() !el*?!u**icient and de-elop a etter !trate() *or i+portin( oil i! t,at t,e)4re leer) o* eco+in( too dependent on countrie! in t,e Middle Ea!t t,at are o*ten unwelco+in(, unde+ocratic and un!ta le" A*ter all, no +atter ,ow +uc, we lo-e our car! and need our (a!oline, *ew t,in(! are !carier t,an reakin( down in a ad nei(, or,ood"

prices lin8 #ene5uela

Saudi Ara4ia &ill flood t!e mar8et,empiricall% pro#en orse and -ic!ard' 3 (Edward and 0a+e!, Executi-e ad-i!er at 8e!! ener() tradin( co+pan), *or+er deput) a!!i!tant !ecretar) o* !tate *or international ener() polic) and port*olio +ana(er at Hire ird Mana(e+ent, an in-e!t+ent *und acti-e in ea!tern Europe, Du!!ia, and 3entral A!ia" 5,e attle *or ener() do+inance#, *orei(n a**air! :1"& // kd,2 5,en, in t,e 199'!, I>E3 +e+ er ReneJuela c,allen(ed Saudi Ara ia ) decidin( to +axi+iJe it! production" Alt,ou(, ReneJuela ,ad an I>E3 Fuota o* &"3 + d, 3araca! e+ arked on an a+ itiou! polic) de!i(ned to e-entuall) triple it! production capacit)" 3araca! knew it could not do t,i! on it! own, !o it reopened it! nationaliJed re!ource !ector to *orei(n in-e!t+ent" C) t,e winter o* 199<?97, 3araca! wa! producin( 3 + d, knockin( Saudi Ara ia *ro+ it! po!ition a! nu+ er one !upplier to t,e U nited State!" In re!pon!e, Di)ad, *ir!t tried rea!onin( wit, 3araca!" W,en diplo+ac) *ailed, Saudi Ara ia rai!ed it! production ) clo!e to 1 + d and induced t,e oil price collap!e o* 199:" Di)ad,4! action! were tou(, ut e**ecti-e" C) en(ineerin( a price drop, it ,ad to wit,!tand a pain*ul drop in inco+e ?? ut it ac,ie-ed it! +ain (oal! " Saudi Ara ia
rea!!erted it! I>E3 leader!,ip, ree!ta li!,ed it!el* a! t,e pri+e !upplier o* oil to t,e United State!, and induced non?I>E3 producer! Mexico and =orwa) to !upport I>E34! re-enue?+axi+iJin( (oal!"

An increase in 7ene5uelan oil production &ould lo&er oil prices =!ilip' *9 (Oeor(e >,ilip, >ro*e!!or o* 3o+parati-e and Latin A+erican politic! at t,e London Sc,ool o* Econo+ic!, BIil and 5went)?Hir!t 3entur) Sociali!+ in Latin A+erica: ReneJuela and EcuadorB, London Sc,ool o* Econo+ic!, Latin A+erica and International A**air! >ro(ra+, www"l!e"ac"uk/IKEAS/pu lication!/report!/pd*/SU''$/p,ilip"pd*22 At t,e !a+e ti+e, ot, countrie! *ace !peci*ic do+e!tic and external c,allen(e! in t,eir oil !ector! " 5,e ReneJuelan and Ecuadorian econo+ie! depend ,ea-il) on oil and (a! export!, w,ic, pro-ide t,e +aterial *oundation! *or ot, t,eir *orei(n and do+e!tic radicali!+" In ter+! o* export inco+e, ReneJuela and Ecuador are t,e +o!t oil dependent countrie! in t,e re(ion, wit, t,e corollar) t,at t,e) are t,e lea!t dependent on t,e per*or+ance o* t,eir non? oil econo+ie!" Worr)in(l), t,ou(,, ReneJuelan oil and (a! export! are currentl) in decline, partl) a! t,e re!ult o*
lon( ter+ trend! and partl) ecau!e o* 3,a-eJN! !t)le o* (o-ern+ent" Ecuadorian oil export! are not reall) in decline in t,e !a+e wa) ut t,e) are likel) to (row onl) !lowl) w,ile do+e!tic con!u+ption +a) (row *a!ter" So+e %' percent o* Ecuadorian oil i! now con!u+ed do+e!ticall) and t,e *i(ure *or ReneJuela i! nearl) 3' percent" do+e!tic price! are -er) low in ot, ca!e! and !o+e oil li!ted under ^do+e!tic con!u+ptionN +a) well ,a-e een !+u((led to 3olo+ ia, w,o!e oil con!u+ption appear! !u!piciou!l) low, and al!o to Ou)ana" International oil price! ,a-e ri!en !i(ni*icantl) in t,e pa!t decade , w,ic, ,a! +ore t,an o**!et S*or now at lea!t S t,e con!eFuence! o* !ta(nant or *allin( production" 5,e!e

i!!ue! point to a i+portant and

(rowin( area o* -ulnera ilit) in ot, countrie!" 7ene5uela cuts its oil production in order to 8eep oil prices !ig!, increasing production &ould lo&er oil prices =!ilip' *9 (Oeor(e >,ilip, >ro*e!!or o* 3o+parati-e and Latin A+erican politic! at t,e London Sc,ool o* Econo+ic!, BIil and 5went)?Hir!t 3entur) Sociali!+ in Latin A+erica: ReneJuela and EcuadorB, London Sc,ool o* Econo+ic!, Latin A+erica and International A**air! >ro(ra+, www"l!e"ac"uk/IKEAS/pu lication!/report!/pd*/SU''$/p,ilip"pd*22
A *urt,er *actor ,oldin( ack production in ReneJuela ,a! een I>E3?+andated re!triction!" 5,e!e i+pact to !o+e extent on Ecuador ut +atter +uc, +ore in t,e ca!e o* ReneJuela" 5,e) can o* cour!e e !een a! part o* a potentiall)

wort,w,ile trade o** etween lower production and ,i(,er price!" 5,ere ,a! indeed een a con!idera le increa!e in international oil price le-el! !ince t,e e(innin( o* t,e 197'! w,en ReneJuelan oil production peaked" Se-eral ReneJuelan (o-ern+ent!, includin( 3,a-eJ, ,a-e pla)ed an acti-e part in ac,ie-in( t,i! ) ,elpin( to en(ineer international production cuts at critical ti+e!" 8owe-er i* currentl) ,i(, international price! are not !u!tained, ReneJuela !ee+! acutel) -ulnera le" Increase in 7ene5uelan production drops oil prices

;<A' +)*?)*/ (BE**ect! o* 8u(o 3,a-eJ4! Keat, on Olo al Iil Market!B, Olo al 3on*lict Anal)!i!, (lo alcon*lictanal)!i!"co+/&'13/'%/e**ect!?o*?,u(o?c,a-eJ!?deat,?on?(lo al?oil? +arket!/ // kd,2 5,i! i! t,e ca!e ecau!e de!pite t,e *act t,at 3,a-eJ ,a! pa!!ed awa), 3,a-i!+o i! !till ali-eG t,ere*ore, +an) anal)!t! elie-e t,at ,i! polic) o* dependin( on oil re-enue! to *o!ter !ocial pro(ra+! at ,o+e and a road will continue, leadin( to a continuation o* a decrea!e in ReneJuelaN! oil production" I* t,i! i! ca!e S a! i! expected S (lo al oil !uppl) would decrea!e and oil price! would increa!e ecau!e de+and would not c,an(e" 5,i! decline could ,a-e a ne(ati-e i+pact on A+erican and We!tern econo+ie!, !ince t,ere would e le!! !uppl)"
5,i! i! a (reat opportunit) *or Mexico to !tep up it! production and *ill in t,e -acuu+ le*t ) >KRSAN! decline ecau!e t,e US and ot,er We!tern nation! will need to i+port oil, and !ince t,e US i! currentl) !eekin( to eco+e ener() independent in a =ort, A+erican context, Mexico +u!t capitaliJe on ReneJuelaN! continuou! expected decline" 8owe-er, t,i! potential opportunit) *or >e+ex and t,e Mexican oil and (a! indu!tr) depend! on t,e political *uture o* ReneJuela S w,ic, i! expected to ,old election! in t,e next 3' da)!" W,ate-er t,e outco+e, i* t,e newl) elected ReneJuelan pre!ident decide! to open up t,e +arket and allow t,e return o* *orei(n co+panie! !uc, a! Exxon?Mo il and 3onoco>,illip!, t,e

potential *or oil production increa!e would ri!e, leadin( to a !ig!er glo4al oil suppl% and lo&er oil prices" 5,i! could ,a-e a
potential ne(ati-e e**ect on MexicoN! oil export! !ince potential oil co+panie! could !tart *ocu!in( on ReneJuela, e-en t,ou(, >KRSA i! not (oin( to e turned around o-erni(,t and +an) ener() anal)!t! elie-e t,e political tran!ition will +o!t pro a l) lead to !i+ilar !t)le o* (o-ern+ent"

7ene5uela production &ould lo&er oil prices,empirics pro#e N12' /)D)*/ (BKwindlin( >roduction 8a! Led to Le!!er Dole *or ReneJuela a! MaEor Iil >owerB, www"n)ti+e!"co+/&'13/'3/'9/world/a+erica!/-eneJuela!?role?a!?oil?power? di+ini!,ed",t+ // kd,2 8IUS5I= L >re!ident 8u(o 3,T-eJ reli!,ed u!in( ReneJuelaN! oil wealt, to proEect power internationall), nud(in( I>E3 to rai!e oil price! w,en ,e could , !,owerin( allie! like 3u a and =icara(ua wit, !u !idiJed oil
!,ip+ent!, and +ockin( t,e United State! w,ile !ellin( it ,i! crude" Cut Mr" 3,T-eJN! deat, on 5ue!da) ,a! ,ad !urpri!in(l) little i+pact on (lo al oil +arket!, ,i(,li(,tin( ,ow ReneJuelaN! dwindlin( crude production and export! ,a-e undercut it! (lo al power in recent )ear!" International oil price! ,a-e arel) +o-ed !ince Mr" 3,T-eJ died" I>E3 ,a! decided to

Iil co+pan) executi-e!, lon( *ru!trated ) Mr" 3,T-eJN! nationaliJation!, are -oicin( onl) tepid ,ope! t,at t,e) could po!!i l) return in *ull *orce to w,at wa! once one o* t,eir crown Eewel! " ReneJuelaN! annual oil production ,a! declined !ince Mr" 3,T-eJ took o**ice in 1999 ) rou(,l) a Fuarter, and oil export! ,a-e dropped ) nearl) a ,al*, a +aEor
increa!e !,ip+ent! to t,e United State! and Europe t,i! +ont,, u!in( oil *ro+ Saudi Ara ia and ot,er Oul* !tate!" econo+ic t,reat to a countr) t,at depend! on oil *or 9$ percent o* it! export! and %$ percent o* it! *ederal ud(et re-enue!" ReneJuelaN! clout on I>E3 and on world oil price! ,a! een (reatl) di+ini!,ed ecau!e o*

it! ina ilit) to exploit it! enor+ou! re!ource!,# !aid Mic,ael L)nc,, pre!ident o* Strate(ic Ener() and Econo+ic De!earc,, a con!ultanc)" In t,e 199'!, t,eir production wa! oo+in( and t,e) could t,u+ t,eir no!e at Saudi Ara ia and (et awa) wit, it, ut now t,e) ,a-e eco+e I>E3N! poor cou!in"# In a *unda+ental (eopolitical turn, ReneJuela now relie! *ar +ore on t,e United State! t,an t,e United State! relie! on ReneJuela" ReneJuela depend!
on t,e United State! to u) %' percent o* it! export! ecau!e Oul* o* Mexico re*inerie! were de!i(ned to proce!! low?Fualit) ReneJuelan and Mexican crude! t,at +o!t re*inerie! around t,e world cannot ea!il) ,andle" Cut in recent )ear!, t,e United State! ,a! een replacin( it! i+port! o* Latin A+erican crude! wit, oil *ro+ 3anadian oil !and! *ield!, w,ic, i! !i+ilarl) ,ea-)" A+erican i+port! o* ReneJuelan oil ,a-e declined to Eu!t under a +illion arrel! a da), *ro+ 1"7 +illion arrel! a da) in 1997, accordin( to t,e Ener() Kepart+ent" And w,ile ReneJuelan export! o* oil are in decline, it! dependenc) on A+erican re*inerie! *or re*ined petroleu+ product! ,a! (rown to nearl) &'',''' arrel! a da) ecau!e o* !e-eral recent ReneJuelan re*iner) accident!" Expert! expect ReneJuela to !end arrel! no lon(er needed in t,e United State! to 3,ina, a! pa)+ent! in kind under oil?*or?loan! contract!" ReneJuelaN! roken re*iner) !ector ,a! le*t !,orta(e! o* (a!oline and die!el in part! o* Latin A+erica, openin( t,e door *or -alua le +arket! to A+erican re*iner!" I-er ,i! 1% )ear! in power, Mr" 3,T-eJ relied ,ea-il) on oil re-enue! to *inance ,i! !ocial pro(ra+!" Ener() expert! !a) ,i! (a!oline !u !idie! dou led do+e!tic con!u+ption, cuttin( deepl) into export!, ut t,at ,i! ,o!tilit) to *orei(n in-e!t+ent and +i!+ana(e+ent o* t,e !tate oil co+pan) >etroleo! de ReneJuela were t,e pri+ar) rea!on! *or t,e !teep decline in production" A !trike and t,e *irin( o* +ana(e+ent talent and &',''' worker! at t,e oil co+pan) in &''& led to a !teep decline in t,e co+pan), w,ic, ,a! een under!cored ) t,e re*iner) accident!" ReneJuela i! a *raction o* w,at it u!ed to e,# !aid Sadad I ra,i+ al?8u!!eini, a *or+er ,ead o* Saudi Ara+coN! exploration and production di-i!ion, and t,atN! reall) ecau!e ReneJuelaN! tec,nocrat! ,a-e !cattered o-er t,e world and are no lon(er acti-e in ReneJuela"# Mr" 3,T-eJ *urt,er o-er,auled oil exploration and production wit, a nationaliJation pro(ra+ in &''< t,at ordered a rene(otiation o* contract! wit, *orei(n co+panie!, +andatin( t,at ReneJuelaN! oil co+pan) (et a +ini+u+ <' percent !,are in all production proEect!" Sixteen *orei(n co+panie!, includin( Do)al Kutc, S,ell and 3,e-ron, went alon( wit, t,e new rule!, w,ile Exxon Mo il, 3onoco >,ilip! and ot,er co+panie! re!i!ted, and t,eir ,oldin(! were nationaliJed" ReneJuela ,a! ,u(e re!er-e!, includin( it! Irinoco ,ea-) oil elt, w,ic, t,e United State!

Oeolo(ical Sur-e) e!ti+ate! to ,a-e $13 illion arrel! o* reco-era le oil L enou(, potentiall) to +ake ReneJuela one o* t,e top t,ree world producer!" Cut *orei(n oil co+panie! ,a-e een war) o* in-e!tin("

0o!e Ralera, a 8ou!ton ener() law)er, !aid t,at i* =icolT! Maduro, Mr" 3,T-eJN! -ice pre!ident until ,e wa! !worn in a! pre!ident on Hrida), or anot,er +e+ er o* t,e Mr" 3,T-eJN! +o-e+ent wa! elected pre!ident in a !pecial election it i! rea!ona le to expect continuit) o* a !u !tantial portion o* t,e policie!"# Cut a! *or ReneJuelaN! econo+), ,e ar(ued, t,e !ituation ri(,t now i! not !u!taina le and itN! onl) a +atter o* ti+e e*ore !o+e !i(ni*icant c,an(e! will ,a-e to e in!tituted"#

prices lin8 small c!anges 8e%

Small c!anges in prices influence t!e glo4al mar8etplace :ill 3)//13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, MaEor c,an(e! *ro+ oil re-olution#, Wa!,in(ton 5i+e!, &/3/&'13, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/*e /%/!ea?c,an(e!?*ro+?oil?re-olution/, 01a,n2
5,e U"S" +ilitar) pre!ence in t,e Middle Ea!t ,a! ,ad !o+e unde!ira le !ide e**ect!, !uc, a! !tokin( t,e indi(nation o* +ilitant Mu!li+! in t,e re(ion in a wa) t,at ,a! ,elped *eed !upport *or t,e al Vaeda terrori!t network L one o* w,o!e pri+e (oal! i! to (et t,e U"S" out o* Mu!li+ ,ol) land! in Saudi Ara ia and IraF" 0a+e! 0e**re), *or+er U"S" a+ a!!ador to IraF, !aid t,e U"S" will ,a-e to +aintain it! pre!ence in t,e >er!ian Oul* de!pite t,e ud(etar) pre!!ure!" 5,e re(ion keep! eruptin( into one kind or anot,er o* -iolence or in!ta ilit)" So we ,a-e to e pre!ent,# ,e !aid on >lattN! Ener() Week" Oil is fungi4le" 2!ere is one

international oil mar8et" GIfH prices go up 4ecause of s!ortages in one area' t!e% are going to go up in e#er% ot!er area' e#en in t!e United States , e-en i* we i+port *ro+ !a*er area! or produce it our!el-e!" IE#en more importantl%' at t!e #er% core of America0s securit%
relations!ip since Aorld Aar II !as 4een guaranteeing supplies of oil and gas to our friends and allies" E#en if &e are independent in energ%' most of our friends in East Asia and certainl% in Europe' and else&!ere in t!e &orld are not"# Mr" 1in(!ton !ee! anot,er +aEor Fue!tion ari!in( *ro+ t,e c,an(in( oil d)na+ic!: W,) doe! t,e U"S" need to ,old !o +uc, oil in t,e Strate(ic >etroleu+ De!er-e i* it! i+port dependence i! plu++etin(.# ,e a!ked" >re!ident Oeor(e W" Cu!, undertook to *ill t,e re!er-e to a record 7&7 +illion arrel!, o*ten at price! o* +ore t,an 61'' per arrel" Aet t,e oil ,a! rarel) een u!ed, e-en t,ou(, t,e U"S" *ro+ ti+e to ti+e ,a! een t,reatened wit, oil !,utdown! ecau!e o* war! and e+ ar(oe! in countrie! !uc, a! IraF, Li )a, ReneJuela and Iran" 5,e re!er-e contain! enou(, crude to co-er 9' da)! o* i+port! at t,e current, reduced rate o* con!u+ption, Mr" 1in(!ton !aid" Iil anal)!t! expect t,at political leader! will e te+pted to !ell !o+e o* t,e oil in t,e re!er-e in t,e *uture eit,er *or political or ud(etar) rea!on!, to ,elp at lea!t te+poraril) reduce t,e ud(et de*icit"

flood lin8s

flood *nc
O=E< mem4ers &ill flood t!e mar8et our e#idence postdates %ours and assumes U"S" s!ale findings c<art!e% and Jones' .)D/13 ((lo al ener() reporter *or t,e Olo e and Mail, u!ine!! reporter *or t,e Olo e and Mail, citin( Saudi Ara iaN! oil +ini!ter and I>E3, I>E3N! !lippin( (ra!p on t,e worldN! oil +arket#, 5,e Olo e and Mail, </:/&'13, ,ttp://www"t,e(lo eand+ail"co+/report?on? u!ine!!/indu!tr)?new!/ener()?and? re!ource!/opec!?!lippin(?(ra!p?on?t,e?world!?oil?+arket/article1&%317%</.pa(e/1, 01a,n2
I>E3 +ini!ter! put on a ra-e *ace w,en pre!!ed a out one o* a nu+ er o* (rowin( t,reat! to t,e cartelN! in*luence o-er world crude oil +arket! S !ur(in( !,ale oil production in t,e United State!" At I>E3N! ,o+e a!e in Rienna la!t week, Saudi Ara iaN! power*ul oil +ini!ter, Ali al?=ai+i, pla)ed down t,e i+pact o* t,e li(,t, !weet crude t,at i! (u!,in(

in record -olu+e! *ro+ eneat, =ort, KakotaN! ald prairie and t,e !cru ) land!cape o* Sout, 5exa!" 5,i! i! not t,e *ir!t ti+e new !ource! o* oil are di!co-ered, donNt *or(et ,i!tor),# ,e !aid"
5,ere wa! oil *ro+ t,e =ort, Sea and CraJil, !o w,) i! t,ere !o +uc, talk a out !,ale oil now.# Secretar)?(eneral A dalla El?Cadri wa! e-en +ore lunt: I>E3 will e around a*ter !,ale oil *ini!,e!"# Ke!pite t,e lu!ter *ro+ t,e i((e!t na+e! in t,e 1&?nation (roup t,at !upplie! a t,ird o* t,e worldN! oil, ,owe-er, it i! clear t,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! i! (ettin( ner-ou!, and expert! are Fue!tionin( ,ow lon( t,e cartel can act to(et,er to ,old !wa) o-er (lo al oil price!" At t,e +eetin(, w,ere t,e (roup kept it! production ceilin( o* 3' +illion arrel! a da), it al!o took t,e re-ealin( !tep o* *or+in( a co++ittee to !tud) t,e i+pact o* t,e ,)draulic *racturin( and ,oriJontal drillin(" 5,e tec,nolo() i! propellin( =ort, A+erica toward ener() !el*?!u**icienc) and +a) !pread to ot,er countrie! wit, t,eir own !,ale oil pro!pect!" It i! a (reat concern *or u!, e-en i* we do re!pect t,e inte(rit) o* t,e U"S" to e !el*?!u!taina le in ter+! o* oil and (a!,# !aid =i(erian Iil Mini!ter o* >etroleu+ De!ource! KieJani Ali!on? Madueke, w,o!e countr) i! a+on( t,e +o!t a**ected in ter+! o* t,e lo!! o* export! to t,e United State!" More t,an $' )ear! a*ter it wa! created to wre!t econo+ic power *ro+ t,e +aEor oil co+panie!, t,e I>E3 oil cartel *ind! it!el* at ri!k o* lo!in( it! do+inant role in t,e (lo al oil +arket" 5,e (roup i! increa!in(l) co+petin( wit, new oil !ource! t,at are !tartin( to c,ip awa) at it! !,are in pre-iou!l) !ecure +arket!, w,ile a !,ak) (lo al econo+) keep! de+and *or oil at a)" Al!o trou lin( *or I>E3 a! it look! to protect oil price!: Ine ke) +e+ er, lon(?!u**erin( IraF, i! ai+in( to dra+aticall) increa!e production and *lex it!

+u!cle! a(ain a! a +aEor exporter" It add! up to a ni(,t+are !cenario *or t,e (roup" 3,ina, Du!!ia and ot,er countrie!
are takin( earl) !tep! to e+ulate t,e =ort, A+erican uncon-entional oil oo+ o* recent )ear!, w,ic, ,a! t,e U"S" on track to o-ertake Saudi Ara ia a! t,e worldN! lar(e!t oil producer" So+e ke) I>E3 +e+ er!, +eanw,ile, are ea(er to

pu+p a! +uc, a! po!!i le to rin( in adl) needed re-enue, rat,er t,an re!train output a! part o* an) concerted e**ort to add upward pre!!ure to price!" 5,e ri!k i! t,at !uc, a !cenario lead! to cutt,roat co+petition and a *lood o* oil in (lo al +arket!, tri((erin( a plun(e in price! t,at could t,reaten t,e econo+ic and political !ta ilit) o* it! +e+ er nation!" 5,ereN! a !tor+ rewin( on t,e ,oriJon,# !aid Ore( >ridd), an anal)!t wit, Eura!ia Oroup, a Wa!,in(ton? a!ed political ri!k *ir+, Aou are lookin( a )ear or two out e*ore it eco+e! acute" Cut t,at i! t,e direction we are ,eaded"# 8ow Saudi Ara ia and t,e re!t o* t,e *ractiou! (roup cope wit, it! external and internal t,reat! will ,a-e ripple e**ect! around t,e (lo e, *ro+ con!u+er! e-er !en!iti-e to pu+p price!, to 3,inaN! *a!t?(rowin( indu!trie!, to Al ertaN! ,i(,?co!t oil !and! producer! t,at need ric, enou(, price! to Eu!ti*) new in-e!t+ent in t,eir own -a!t re!er-e!" 5,e co+in( ^!uppl) !,ockN 5,ere i! no Fue!tion t,at I>E3 !till ,old! !wa) in t,e +arket " 5rader! *ro+
Sin(apore to =ew Aork to 3al(ar) ,an( on e-er) word it! +ini!ter! utter a! t,e) enter and exit clo!ed?door +eetin(!, to (au(e potential i+pact! on price!" 5,e (roupN! *ir+ ,and on it! oil tap! in t,e *ace o* (rowin( !upplie! *ro+ non?I>E3 countrie! continue! to in*luence international price!, w,ic, ,a-e re+ained around it! 61'' (U"S"2 a arrel tar(et" Still, I>E3N! world i! c,an(in(" 5,e) are not at a pi-ot point )et, ut t,ere are clear c,allen(e! a,ead,# !aid Kaniel Aer(in, -ice?c,air+an o* I8S Inc" and a leadin( con!ultant on t,e (lo al oil indu!tr)" 5,ere are (eopolitical c,allen(e! S re(ional c,allen(e! t,at co+e wit, t,e !tand?o** o-er IranN! nuclear pro(ra+ and t,e concern! Ara Oul* !tate! ,a-e o-er it, and t,e S)rian con*lict, w,ic, ,a! ele+ent! o* ein( a prox) war a+on( countrie! t,at are ke) +e+ er! o* I>E3" And t,ere i! t,e uildup o* !uppl) co+in( *ro+ =ort, A+erica S in particular t,i! dra+atic increa!e, t,i! !ur(e, in U"S" oil production S and al!o t,e potential reco-er) o* IraF, [w,ic, i!\ -er) keen to +ake up *or lo!t ti+e"# A! recentl) a! la!t )ear, I>E3 +e+ er! di!+i!!ed oo+in( U"S" !,ale oil production a!

a *la!, in t,e pan" 5,e *or+ation o* a !tud) (roup to pore o-er t,e i+pact! !,ow! t,e t,at t,inkin( ,a! c,an(ed" It i! no
wonder" In it! Ma) Mediu+?5er+ Iil Market Deport, t,e International Ener() A(enc) re*erred to (rowt, in U"S" li(,t oil, alon( wit, t,e 3anadian oil !and!, a! a !uppl) !,ock# t,at will e a! tran!*or+ati-e to t,e +arket o-er t,e next *i-e )ear! a! wa! t,e ri!e o* 3,ine!e de+and o-er t,e la!t 1$"# Kri-en ) t,e oo+ in oil production *ro+ re(ion! !uc, a! t,e =ort, Kakota Cakken and Ea(le Hord in 5exa!, t,e United State! i! now on track to e t,e worldN! lar(e!t oil producer in t,e next decade, accordin( to !o+e *oreca!t!" 5,e IEA, t,e We!tN! ener() watc,do(, ,a! predicted t,e United State! will pu+p 11"1 +illion arrel! a da) ) &'&', up *ro+ nearl) !e-en +illion in &'1& and !urpa!!in( Saudi Ara ia in t,e proce!!" =ort, Kakota production ,a! +ore t,an dou led in two )ear! to nearl) :'',''' arrel! a da)" Alread), a*ter decade! o* pro+i!e!, t,e !,ale re-olution i! ,elpin( t,e U"S" *inall) !,ake it! un,ealt,) addiction# to i+ported oil, a! *or+er pre!ident Oeor(e W" Cu!, called it" 5,at alone will not !trip I>E3 o* it! o-erall +arket power" Cut cartel +e+ er! !uc, a! =i(eria and Al(eria t,at are known *or producin( li(,t !weet crude S t,e ea!il) *lowin(

!upplie! t,at are low in !ulp,ur content and !i+ple to re*ine S are *eelin( t,e pinc," U"S" i+port! *ro+ =i(eria were +ore t,an ,al-ed to %'3,''' arrel! a da) in Marc,, &'13, *ro+ 913,''' in Marc,, &'11, accordin( to t,e U"S" Ener() In*or+ation Ad+ini!tration" =i(eria, Al(eria and ot,er! ,a-e redirected export! to A!ia and ot,er +arket! a+id expectation! t,at t,e U"S" will e-entuall) reFuire no !uc, !upplie!, !aid Mic,ael Wittner, +ana(in( director and ,ead o* co++oditie! re!earc, *or Soci_t_ O_n_rale SAN! A+erica! operation!" I! I>E3 rele-ant. A! lon( a! t,e !,ale oil i! a =ort, A+erican t,in(, )e! " 5,atN! !o+et,in( I would !a) will ,old *or +a) e a *i-e?)ear ti+e ,oriJon",# Mr" Wittner !aid" Iut e)ond t,at, t,e Fue!tion eco+e! +uc, +ore co+plicated"# 8e point! out t,at ot,er countrie!, includin( Du!!ia, 3,ina, Au!tralia and Ar(entina, +a) ,a-e lar(e !,ale oil re!er-e! t,at could one da) +ean !ti** new co+petition *or t,e I>E3 producer!" A! we +o-e into uncon-entional!, I>E3 i! no lon(er (oin( to ,old all t,e card!,# !aid 5,o+a! >)le, pre!ident o* t,e In!titute *or Ener() De!earc, in Wa!,in(ton" Man) in t,e U"S" !ee 3anada and t,e propo!al to uild t,e 1e)!tone QL pipeline to (et increa!in( -olu+e! o* Al erta itu+en to t,e U"S" Oul* 3oa!t a! an i+portant +o-e in t,e (eopolitical (a+e" I* t,e U"S" (o-ern+ent (ot it! act to(et,er and appro-ed t,e 1e)!tone pipeline, it would *or(e u! a la!tin( relation!,ip wit, 3anada t,at would !,i*t (lo al ener() power Fuite !i(ni*icantl),# Mr" >)le !aid" An i++ediate concern *or I>E3 due to *allin( li(,t oil export! to t,e U"S" i! increa!ed co+petition wit, ot,er crude! !uc, a! t,o!e *ro+ t,e =ort, Sea and Du!!ia, !aid 0udit, Kwarkin, director o* re!earc, at I5O In-e!t+ent De!earc," A! t,e U"S" draw! le!! on (lo all) traded crude!, t,o!e crude! will t,en e lookin( *or a ,o+e and t,atN! w,ere t,e pre!!ure co+e! S co+petition a+on( non?=ort, A+erican internationall) traded crude! o* w,ic, I>E3 i! a i( part, ut t,ere are ot,er!,# M!" Kwarkin !aid So itN! a !o+ew,at +ore co+petiti-e en-iron+ent in t,at !en!e"#

Le#ine' *3 (Ste-e, Cernard L" Sc,wartJ Hellow at t,e =ew A+erica Houndation, and i! Wa!,in(ton corre!pondent *or VuartJ, adEunct pro*e!!or at Oeor(etown Uni-er!it)4! Sc,ool o* Horei(n Ser-ice, *or+er *orei(n corre!pondent *or 5,e Wall Street 0ournal, 5,e =ew Aork 5i+e!, 5,e Wa!,in(ton >o!t, t,e Hinancial 5i+e! and =ew!week 5,e 3o+in( Iil 3ra!,#, Horei(n >olic), </19/&'1&, ,ttp://www"*orei(npolic)"co+/article!/&'1&/'</19/t,eMco+in(MoilMcra!,, 01a,n2
M) +o+ out in 3ali*ornia i! elated ?? (a!oline price! in ,er nei(, or,ood are elow 6% a (allon *or t,e *ir!t ti+e in *our +ont,!" Le!! !o are t,e world4! petro?ruler!, w,o are watc,in( t,e price o* oil ?? t,eir li*e lood ?? plun(e at

a rate t,e) ,a-e not experienced !ince t,e dreaded )ear &'':" Indu!tr) anal)!t! are u!in( p,ra!e! !uc, a! Bde-a!tationB and B!e-ere !trainB to de!cri e w,at i! next *or t,e petro?!tate! !,ould price! plu++et a! low a! !o+e *ear" =o one i! a! )et *oreca!tin( a *re!, round o* Ara Sprin(?like re(i+e i+plo!ion!" Cut t,at4! t,e ni(,t+are !cenario i* )ou ,appen to run a petrocrac) " 5o under!tand w,) )our a-era(e oil kin( i!
ri(,t to e worried at t,e +o+ent, (ra )our calculator" 5,e price o* U"S"?traded oil *ell to 6:3"&7 a arrel on Monda), and (lo al enc,+ark Crent crude to 69<"'$ a arrelG now Euxtapo!e t,at a(ain!t t,e !tate ud(et! o* Iran, Du!!ia, and ReneJuela,

w,ic, reFuire +ore t,an 611'?a? arrel Crent price! to reak e-en , accordin( to (enerall) accepted
e!ti+ate!, and )ou4ll !ee t,e pro le+" Oi-en t,i! alread)?exi!tin( re-enue (ap, one +i(,t *airl) wonder w,at would ,appen i*, a! 3iti(roup4! Edward Mor!e !a)! i! po!!i le, price! drop anot,er 6&' a arrel *or an extended len(t, o* ti+e" Iil econo+i!t >,ilip Rerle(er4! *oreca!t i! e-en (loo+ier ?? a plun(e to 6%' a arrel ) =o-e+ er" Ir *inall), w,at ReneJuelan Iil Mini!ter Da*ael Da+ireJ *ear! ?? 63$?a? arrel price!, near t,e low! la!t !een in &'':" In Du!!ia, *or in!tance, B63$ or 6%', or e-en 6<' a arrel, would e de-a!tatin( *i!call),B !a)! Andrew 1uc,in! o* t,e 3enter *or Strate(ic and International Studie!" 5,at could da+a(e

t,e !tandin( o* >re!ident Rladi+ir >utin, !ince ,i! Bpopularit) and aut,orit) are clo!el) correlated wit, econo+ic (rowt,,B 1uc,in! told +e in an e+ail exc,an(e" Wit, *ew exception!, t,e !a+e (oe! *or t,e
re!t o* t,e world4! petro?ruler!, w,o!e oil re-enue !upport! -a!t !ocial !pendin( ai+ed at lea!t in part at !u duin( po!!i le di!!ati!*action ) t,eir populace" Saudi Ara ia can alance it! ud(et a! lon( a! price! !ta) a o-e 6:' a arrel, accordin( to t,e International Monetar) Hund, alt,ou(, proEected *uture !ocial !pendin( o li(ation! will dri-e it! reak?e-en price to 69: a arrel in &'1<" I* t,e +aEor petro?!tate!, onl) Vatar ?? wit, a reFuire+ent o* a out 6$:?per? arrel to alance it! ud(et ?? appear! to ,a-e !u**icientl) di!ciplined !tate !pendin( to weat,er all ut t,e +o!t dire *oreca!t!" 5,e i((e!t uncertaint) in t,e (lo al

oil +arket i!n4t w,et,er oil price! will drop *urt,er ?? t,e) !ee+ likel) to ?? ut ,ow lon( t,e) will !ta) down" In !,ort, ,ow lon(, and at w,at !cale, are t,e petrocracie! likel) to !u**er. 5,i! !tate o* a**air! i! a woe*ul low
to petro?ruler! a*ter nine )ear! o* +o!tl) nir-ana" 5,e )ear &''3 !tarted wit, oil at a out 633 a arrel, a*ter w,ic, price! went +ainl) up, peakin( in 0ul) &'': at 61%7 a arrel" 5,e) ounced ack nicel) e-en a*ter t,e (lo al *inancial cri!i! !ent price! plu++etin( elow t,eir &''3 le-el, to a out 631 a arrel in Kece+ er &'':" W,en t,e Ara Sprin( un*olded, *ir!t Li )a and t,en Iran tri((ered worried look! on tradin( de!k! in London and =ew Aork, and t,e price !piked to a out 61&: a arrel" M) +o+ !aw t,e a-era(e price o* (a! in 3ali*ornia ri!e to 6%"3< a (allon" Cut t,en t,e concern o* war etween Iran and I!rael all? ut -ani!,ed, and price! !ince ,a-e een on a !ee+in(l) relentle!! decline" =ow, a con-er(ence o* *orce! i! wei(,in( on petro?ruler!4 ner-e!: Europe4! econo+ic cri!i!G a !lowdown in 3,ine!e (rowt, includin( t,e de+and *or oilG a !teep decline in U"S" oil con!u+ption wit, a !i+ultaneou! ri!e in do+e!tic oil productionG and a deter+ined e**ort ) petroleu+ colo!!u! Saudi Ara ia to uild up (lo al in-entorie!" It i! per,ap! t,e la!t data point ?? Saudi Ara ia4! a((re!!i-e action! to lower price! ) pu+pin( !o+e 1' +illion arrel! a da) ?? t,at +i(,t !ee+ a**lin( (i-en Di)ad,4! econo+ic !take in t,e oil (a+e" Cut Rerle(er, t,e 3olorado? a!ed oil econo+i!t, !a)! t,e Saudi rationale i! clear, and linked to t,e kin(do+4! traditional lon( (a+e" In an e+ail exc,an(e, Rerle(er pointed +e to an inter-iew ,e did a *ew da)! a(o wit, 1ate MackenJie at t,e Hinancial 5i+e!" Hir!t, ,e explain!, t,e Saudi! are out *or

lood w,en it co+e! to *ellow petro?!tate! Du!!ia and Iran , t,e *or+er *or *ailin( to ,elp cal+ t,e *ur) in S)ria, Saudi! t,ink lower price! will produce a +ore rea!ona le attitude" In addition, Saudi Ara ia i! terri*ied o* a current U"S" oo+ in !,ale oilG it i! ,opin( t,at lower price! will render +uc, o* t,e drillin( in =ort, Kakota4! Cakken S,ale and 3anada4! oil !and! unecono+ical" Hinall), t,e Saudi! are well aware t,at low oil price! ,elped to turn around t,e (lo al econo+ic downturn in 199: and 1999, and t,e) ,ope to ,elp acco+pli!, t,e !a+e now, and per,ap! win new
and t,e latter *or re*u!in( to (o to ,eel and (i-e up it! nuclear a+ ition!G in ot, ca!e!, t,e a**ection *ro+ t,e world4! leadin( econo+ie!" Meanw,ile, t,ou(,, Rerle(er t,ink! t,at oil price! will cra!," Market! o-er!,oot w,en one i! tr)in( onl) to *ine?tune t,e+, a! t,e Saudi! are, ,e ar(ue! ?? w,ic, i! t,e a!i! *or ,i! *oreca!t! o* 6%'?a? arrel oil and 6&?a? (allon (a!oline ) =o-e+ er" 5o t,e de(ree t,at !uc, *ire?!ale price! are lon(?li-ed, t,e) could cau!e +a),e+ a+on( petro?ruler!" W,ile Rerle(er t,ink! t,at t,e Saudi! can +aneu-er price! ack up w,en t,e) want, t,e -er) nature o* a cra!, de+on!trate! t,at +arket! can e uncontrolla le" Cut t,e Saudi! are willin( to !u**er t,e con!eFuence!, knowin( t,at t,eir

own *inancial re!er-e! (!o+e 67'' illion2 (i-e t,e+ !ta)in( power" B5,e Saudi! are a

le to look at t,e lon( ter+,B >,il Hl)nn, an anal)!t wit, >ricin( Huture! Oroup, told +e" 3iti(roup4! Mor!e t,ink! t,at price! can *all *urt,er *ro+ w,ere t,e) are now, ut not a! low a! Rerle(er *oreca!t! ecau!e, ,e told +e, toda)4! +arket condition! are di**erent *ro+ &'': ?? t,e decline in de+and i! not a! !teep, and in-entorie! are not a! lar(e" Mor!e calculate! t,at Crent can *all into t,e 67'!?per? arrel ran(e and U"S"?traded oil into t,e 6<'!?a? arrel ran(e" B5,ere i! a (ood c,ance Saudi Ara ia continue! to produce enou(, to *orce [a ri!e in oil in-entorie!\" And t,ere4! a (ood c,ance, etween Europe and 3,ina, t,at de+and (rowt, could co+e to a ,alt,B Mor!e !aid" I>E3 +i(,t re!pond ) reducin( production, ut it! action! would e late" BAdd to t,e !cenario no +ore !uppl) di!ruption! (or onl) +ode!t one!2 and no +ilitar) con*lict in-ol-in( Iran,B Mor!e !aid, Band price! could *all anot,er 6&' a arrel *airl) ea!il)"B Low oil price! can ,a-e !eriou! !ocial i+pact! !i+pl) ecau!e, wit, le!! *ree ca!,, people tend to !tart +ore clo!el) !crutiniJin( t,eir !urroundin(! ?? and w,en t,e) eco+e un,app) wit, w,at t,e) !ee, t,e) !tart lookin( *or a !cape(oat" 5,e condition! t,at led to t,e !trin( o* Ara Sprin( ou!ter! were not !o +uc, t,e lack o* de+ocrac) a! wide!pread pu lic di!!ati!*action wit, per!onal econo+ic pro!pect!" Anal)!t! !ee !i+ilar -ulnera ilitie! *or t,e ruler! o* Iran, Du!!ia, and ReneJuelaG w,en ReneJuelan >re!ident 8u(o 3,T-eJ can no lon(er +ilk t,e !tate oil co+pan) *or pu lic pa)out!, *or in!tance, ,i! political !upport could e in Eeopard)" =ot e-er)one t,ink! t,e ti+e! will e !o rutal *or petro?ruler!" =eil Ce-erid(e o* Cern!tein De!earc, told +e t,at condition! +a) pu!, down price! a! low a! around 69' a arrel, ut no +ore t,an t,at" And t,e Ener() In*or+ation Ad+ini!tration (EIA2 on Monda) e!ti+ated oil price! in t,e !econd ,al* o* &'1& at 69$ a arrel" 5,e latter would e a ,eart?in?)our t,roat, 1' percent plun(e *ro+ t,e EIA4! pre-iou! *oreca!t" Cut it would e now,ere near t,e cli** t,at rin(! cold c,ill! to t,e world4! petro?ruler!" A! *or +) +o+, eit,er o* t,e!e outco+e! will +ake ,er +errier crui!in( t,e %'$"

flood 3nc
Increasing U"S" oil independence forces Saudi to flood t!e mar8et and sin8 oil prices U2' 3)*( (BWit,out Iil" Wit,out Allie!: USA and t,e =ew A+erican Krea+ o* Independent Ener()B, &/1$/13, Ur an 5i+e! Ma(aJine, ur anti+e!"co/+a(aJine/&'13/'&/u!a?oil?!audi? ara ia?independent?do+e!tic?ener()?!uppl)/ //kd,2 At t,e end o* t,e da), t,e United State! o* A+erica i! o-erco+in( Saudi Ara ia *or a !i+ple rea!on" 5,e cut! on Saudi production are part o* a well?planned econo+ic !trate()" 5,e +ore oil )ou pu+p, t,e +ore oil )ou ,a-e on t,e +arket" 2!e more oil on t!e mar8et' t!e lo&er t!e price of t!e oil " 5,e Saudi
(o-ern+ent know! t,at inEectin( t,e +arket wit, +ore t,an t,e nece!!ar) a+ount o* oil would reduce re-enue!" 5o top it all, A+erican oil production i! expected to o-erco+e t,e SaudiN! &'&'" 8owe-er, Saudi Ara ia will re(ain it! po!ition ) &'&7" US i! li-in( t,e drea+, *or now" 5,e per!pecti-e o* (i-in( up t,e dependence on Saudi oil i! appealin( " 5,e 1e)!tone pipeline will open Eo po!ition! *or t,ou!and! o* A+erican worker! w,ic, i! (ood new! a! 7"9; o* t,e workin( population re+ain une+plo)ed" Cut t,e ac,ie-e+ent o* ener() independence !ound! like a *lu**) *air) tale

wit,out t,e li-in( ,appil) e-er a*ter#" Saudi oil production i! deter+ined ) Saudi (o-ern+ent polic)" Saudi! could potentiall) produce +ore oil t,an t,e) do now , ut *or w,ate-er rea!on! t,e) c,oo!e
not to do !o" I elie-e we need an all?o*?t,e?a o-e !trate()" 5,at +ean! producin( +ore io*uel!" More *uel?e**icient car!" More !olar power" More wind power,# Carack I a+a !tated, in 3u!,in(, la!t )ear" 5,e Fue!tion we !,ould a!k i! w,et,er an ener() independent countr) S w,o!e econo+) i! a!ed on do+e!tic *o!!il *uel! S i! actuall) +oti-ated to +o-e toward! a (reen econo+) +odel. So *ar, !+all countr)!ide town !uc, a! 8ardi!t) and 3u!,in( are (ettin( i((er, ric,er and prouder, a+on( crop *ield!" 5,e 1e)!tone i! t,e !)+ ol o* t,i! new era" Cut, i* t,e *oreca!t! are correct, t,i! new A+erican drea+ wonNt la!t lon(" If (reen ener() +erel) re+ain! an electoral pled(e and Saudi

re$opens t!e taps w,ile t,e US i! una le to re+ain ener() independent, t!e 4ac8las! could 4e far &orse t!an an% price fluctuation or di!counted !tock o* H?1$" Wit,out (reen ener(), wit,out oil, wit,out allie!" Saudi Ara4ia is feeling t!e pressure of U"S" oil independence no&,anot!er step could cause t!em to flood t!e mar8et :a&8ins' ()3?)*/ (Awr 8awkin!, >,K in US +ilitar) ,i!tor) *ro+ 5exa! 5ec, Uni-er!it), weekl) contri utor to Creit art, and a con!er-ati-e colu+ni!t, Creit art, BSaudi Ara ia Heelin( >re!!ure A! U"S" Iil >roduction Coo+!B, www" reit art"co+/Ci(?>eace/&'13/'$/&9/Saudi? Ara ia?Heelin(?>re!!ure?A!?U?S?Iil?>roduction?Coo+! // kd,2 Lon( accu!to+ed to do+inatin( world ener(), Saudi Ara ia i! !cra+ lin( *or wa)! to +aintain a !tron( role in ener() *or decade! to co+e" Wit, U"S" oil production oo+in( and t,e International Ener() A(enc) predictin( t,e U"S" will actuall) e t,e world4! top ener() producer ) &'&', Saudi Ara ia i! !tartin( to *eel t,e !FueeJe" Accordin( to Horei(n >olic), t,i! new pre!!ure ,a! put t,e Saudi! in !o+ew,at o* a Fuandar), a! B%' percent o* [t,eir\ &: +illion citiJen! [are\ under t,e a(e o* 1$BG t,e +ale! a o-e t,i! a(e are +o!tl) e+plo)ed in t,e nation4! B loated pu lic !ector"B Add to t,i! t,e Bpo!t?Ara Sprin( era o* ele-ated per?capita (o-ern+ent !pendin(B and it4! ea!) to !ee w,) Saudi Ara ia *eel! pre!!ure " Aet t,eir plan *or dealin( wit, t,i! pro le+ ,a! een unclear" In April &$, >rince 5urki al?Hai!al Bannounced t,at Saudi Ara ia i! !et to increa!e it! total production capacit) *ro+ 1&"$ +illion arrel! per da) (+ d2 toda) to 1$ +illion + d ) &'&'"B Suc, an increa!e would (uarantee t,at Saudi Ara ia re+ain! t,e world4! top oil producer" 8owe-er, Eu!t *i-e da)! a*ter t,i! announce+ent wa! +ade, t,e Saudi Ara ian Mini!ter o* >etroleu+ and Mineral
De!ource!, Ali al?=ai+i, !aid 1$ +illion + d couldn4t e produced ) &'%', +uc, le!! &'&'"

Saudi Ara4ia &ill let prices fall @ro&er' *3 (Kerek, writer and contri utor to t,e Econo+i!t, >etroleu+ Econo+ic!, t,e 5i+e!, t,e Ouardian, and ,te Oul* Iil De-iew, >,"K" Du!!ian literature, M"A" in Ea!t European Studie!, Uni-er!it) o* London, Ix*ord Uni-er!it), Euro+one) In!titutional In-e!tor, In!ide t,e Ipec oil?price u le#, 7/&'1&, Lexi!, 01a,n2
Kerek Crower, RIE==A: Hor an) -endor, a &&; drop in t,e price o* t,e product i! ound to (et pul!e! racin(" 5,at4! t,e ca!e *or Ipec4! oil producer!, w,o ,a-e watc,ed !tren(t, drain *ro+ Crent *uture!, w,ic, ,a-e tu+ led *ro+ April4! ,i(,! o* +ore t,an 61&$ a arrel to Eu!t a o-e 697/ now" It !ee+! t,ere4! !o+et,in( +a(ical a out t,e 61''/ arrier, too" An)t,in( lower, !aid Li )a4! oil +ini!ter A dura,+an Cen)eJJa, ,ere in Rienna t,i! week *or t,e Ipec +eetin(, Bi! -er) pain*ulB *or ,i! countr)" So+e t,ink price!

!,ould e e-en ,i(,er" 5,e *inance! o* IraF and Iran, w,o!e oil +ini!ter! ,eld a ilateral +eetin( a,ead o* t,e (roup4! !u++it on 1% 0une, are (ettin( de!perate" A dul 1aree+ Luai i, IraF4! oil c,ie*, reckon! 61''?1&'/ i! a *airer price" 5,o!e two countrie!, lood) ri-al! in t,e pa!t, will adopt a uni*ied !tance w,en t,e) ar(ue in t,e Ipec +eetin( toda) t,at t,e (roup !,ould rein in output to pre-ent a price collap!e" 5,ank! to Saudi Ara ia and ot,er Oul* producer!, Ipec4! output i! now a out 1"< +illion arrel! a da) ( /d2 a o-e a production ceilin( o* 3' +illion /d !et la!t )ear" 5,at re*lect! a *unda+entall) di**erent under!tandin( o* ,ow +arket! work" ReneJuela4! oil +ini!ter, Da*ael Da+ireJ, (lee*ull) !poke o* t,e cri!i! in We!tern capitali!+

in Rienna ? and t,en !aid t,at ecau!e oil de+and would *alter a+id t,e +eltdown, Ipec !,ould act now to !top a *urt,er plun(e in t,e price" Saudi Ara ia take! a di**erent -iew" I* )ou4re worried a out *allin( de+and *or )our product, run! t,e t,inkin( in it! oil +ini!tr), )ou !,ould pro a l) +ake it +ore attracti-e" Aou certainl) don4t want to cop t,e la+e *or tur+oil in t,e (lo al econo+)" Iil +ini!ter Ali =ai+i ,a! !aid 61''/ i! a *air price ? ut t,e kin(do+ i! willin( to let *uture! !ink *urt,er" It ,elp!
t,at Saudi Ara ia, alon(!ide ot,er Oul* producer!, can keep it! *i!cal ud(et tickin( alon( nicel) at a *raction o* t,e oil price needed in 5e,ran, Al(ier!, Ca(,dad and 3araca!" Extra production i! al!o needed, ar(ue! Saudi Ara ia, ecau!e t,e call on Ipec4! crude i! !et to ri!e in t,e !econd ,al* o* t,e )ear: *ro+ &9": +illion /d to 3'"9 +illion /d, accordin( to t,e International Ener() A(enc) (IEA2G or to a! +uc, a! 31"7 +illion /d, accordin( to Carcla)!, a ank" Di!k?a-er!e ,awk! dou t t,at t,e extra de+and will +ateriali!e" 5,e i+pa!!e !,ould +ean t,at Ipec lea-e! t,e ceilin( unc,an(ed, and Saudi Ara ia i!

le*t to c,art it! own production cour!e, keepin( output ,i(, to *lood t,e +arket ? and in-entorie! ? wit,
crude" It doe!n4t reall) +atter"

flood #ene5uela lin8

<ompetition is increasing increased U"S" in#ol#ement &it! 7ene5uelan oil &ill incline Saudi Ara4ia to flood t!e mar8et ASJ' ()3F (Ceno`t Haucon, Sara, 1ent and 8a!!an 8a*id,, U"S" Iil Coo+ Ki-ide! I>E3#, Wall Street 0ournal, $/&7/&'1&, ,ttp://online"w!E"co+/article/SC1'''1%&%1&7::73&3:$$:'%$7:$'::711:<%<'9:<",t+l, 01a,n2 5,e A+erican ener() oo+ i! deepenin( !plit! wit,in t,e Ir(aniJation o* t,e >etroleu+ Exportin( 3ountrie!, t,reatenin( to dri-e a wed(e etween A*rican and Ara +e+ er! a! I>E3 (rapple! wit, a re-olution in
t,e (lo al oil trade" I>E3 +e+ er! (at,erin( on Hrida) in Rienna will con*ront a di!a(ree+ent o-er t,e i+pact o* ri!in( U"S" !,ale? oil production, wit, t,e +o!t -ulnera le countrie! ar(uin( t,at t,e (roup !,ould prepare *or

production cut! to prop up price! i* t,e) *all an) lower" BWe are ,eadin( toward !o+e pro

le+!,B !aid a >er!ian Oul* I>E3 dele(ate" A*rican I>E3 +e+ er! !uc, a! Al(eria and =i(eriaLw,ic, produce oil o* !i+ilar (rade to !,ale oilLare !u**erin( t,e wor!t e**ect! *ro+ t,e =ort, A+erican oil oo+" =i(eria Iil Mini!ter KieJani Ali!on?Madueke dee+ed U"S" !,ale oil a B(ra-e concern"B Oul* countrie!, nota l) Saudi Ara ia, pa!! relati-el) un!cat,edLand are t,e onl) I>E3

+e+ er! wit, t,e *lexi ilit) to cut production" Cut t,e) are unlikel) to let t,at ,appen at Hrida)4!
+eetin(, !e-eral I>E3 dele(ate! !aid" 5,at would deepen power !tru((le! t,at ,a-e do+inated t,e or(aniJation in recent )ear!"

Iran, ReneJuela and Al(eria, w,o need ,i(, oil price! to co-er do+e!tic !pendin( and o**!et *allin( production, ,a-e re(ularl) cla!,ed wit, Oul* countrie! led ) Saudi Ara ia, w,o ,a-e t,e *inancial !tren(t, to wit,!tand lower price!" I>E3 ,a! o-erco+e pa!t ri-alrie! to rall) a(ain!t an external t,reat, +o!t nota l) in &'': w,en it a(reed to a production cut o* +ore t,an *our +illion arrel! a da) to !te+ a price cra!, durin( t,e *inancial cri!i!" Cut t,e une-en i+pact o* t,e =ort, A+erican !uppl) !ur(e +ake! a collecti-e
re!pon!eL!uc, a! a coordinated production cut to !upport price!L+ore di**icult, !aid dele(ate! on ot, !ide! o* t,e di-ide" 5,e U"S" and 3anada are !et to produce a out &1; +ore oil ) &'1: t,an *ro+ t,i! )ear, accordin( to data *ro+ t,e International Ener() A(enc)" 5,i! +ark! a ,i!toric and lar(el) unexpected re-er!al" U"S" crude?oil production peaked in 197' and ,ad declined continuou!l) *or +ore t,an &' )ear! w,en !,ale oil *ir!t e(an to *low a*ter &'':" U"S" crude production ,a! ri!en to a &1?)ear ,i(, a! ,)draulic *racturin(, known a! *rackin(, and ot,er tec,nolo(ie! ,a-e unlocked lar(e re!ource! o* oil pre-iou!l) trapped in !,ale rock in =ort, Kakota and 5exa!" S,ale depo!it! in ot,er area!, !uc, a! >enn!)l-ania, are )ieldin( +o!tl) natural (a!" I>E3, t,e !ource o* around one?t,ird o* t,e world4! oil, ,a! clearl) een taken a ack ) t,e !,i*t in U"S" production" In &'1', t,e or(aniJation *oreca!t U"S" and 3anadian oil production o* &'1% at 11": +illion arrel! a da)" 0u!t two )ear! later, t,at *oreca!t ,ad ri!en to 1%"$ +illion arrel! a da)" A re ound in U"S" production would ,a-e een unexpected Eu!t *i-e )ear! a(o ecau!e !,ale oil production reFuire! an oil price t,at ,a! rarel) pro-ed !u!taina leLt)picall) 67' a arrel or a o-e" Cut oil price! ,a-e re+ained

+uc, ,i(,er in t,e pa!t two )ear!, t,ank! in part to per!i!tent (eopolitical ten!ion! in I>E3
producer!, !uc, a! t,e Li )an ci-il war and >er!ian Oul* ten!ion!" A! U"S" production ,a! (rown, export! to t,e U"S" *ro+ t,ree o* I>E34! A*rican +e+ er!, =i(eria, Al(eria and An(ola, ,a-e *allen to t,eir lowe!t le-el! in decade!, droppin( %1; in &'1& *ro+ &'11, lar(el) ecau!e o* !,ale oil, accordin( to t,e U"S" Kepart+ent o* Ener()" In contra!t, Saudi !,ip+ent! o* oil to t,e U"S" increa!ed 1%; in &'1&" Saudi Iil Mini!ter Ali al?=ai+i !aid recentl) t,at t,e ri!e o* uncon-entional ener() !ource! doe!n4t t,reaten ,i! countr)4! do+inant role in world oil !uppl) ecau!e de+and al!o i! increa!in(" BI don4t t,ink an)one !,ould *ear new !upplie!a" 5,e pie i! (ettin( i((er, and t,ere i! enou(, to (o around,B ,e !aid" Cut t,e =i(erian oil +ini!ter, M!" Ali!on?Madueke, !ee! dan(er *or ,er countr)" BS,ale oil ,a! een identi*ied a! one o* t,e +o!t !eriou! t,reat! *or A*rican producer!,B !,e !aid in t,e U"1" t,i! +ont," 5,o!e producer!, !,e !aid, could lo!e &$; o* t,eir oil re-enue a! t,e) are ed(ed out o* t,e U"S" =i(eria ,a! een ,arde!t ,it ecau!e it! li(,t and low?!ul*ur crude! co+pete directl) wit, !,ale oil, unlike Saudi Ara ia4! ,ea-ier and +ore !ul*urou! crude" It,er I>E3 +e+ er! w,o don4t !er-e t,e U"S" +arket, !uc, a! Iran, are al!o co+plainin(" Mu,a++ad Ali 1,ati i, Iran4! en-o) to I>E3, told 5,e Wall Street 0ournal t,at a co+ ination o* ri!in( U"S" !,ale production and tepid de+and i! rin(in( Bt,e price down"B W,ile

Saudi Ara ia can tolerate lower price!, Bt,ere will e !o+e +e+ er!, like ReneJuela, Iran w,o will !tru((le at 69',B !aid A+rita Sen, c,ie* oil anal)!t at London? a!ed Ener() A!pect! Ltd " 5,e
*ront +ont, Crent contract *or 0ul) !ettled at 61'&"<& a arrel Monda)" ReneJuela4! oil +ini!ter !aid on Monda) t,at ,e would pu!, *or a cut in I>E3 production i* oil *all! elow 61'' a arrel" Iran need! ,i(, price! to o**!et t,e lo!! o* 6&< illion o* oil re-enue la!t )ear *ro+ tou(, We!tern !anction! on it! export!, accordin( to e!ti+ate! *ro+ t,e U"S" Ener() In*or+ation Ad+ini!tration" Al(eria, w,ic, ,a! een rattled ) riot! o-er *ood and ,ou!in(, need! an oil price o* 61&1 a arrel to co-er planned do+e!tic !pendin(L includin( *or road!, Eo ! and ,ou!in(Laccordin( to t,e International Monetar) Hund" 5,e countr)4! oil and (a! re-enue *ell ) 9; in t,e *ir!t *our +ont,! o* &'13, accordin( to (o-ern+ent *i(ure!" Al(erian Hinance Mini!ter 1ari+ KEoudi ,a! !aid t,at lower re-enue tied to +ountin( U"S" !,ale production could *orce t,e (o-ern+ent to cut do+e!tic !pendin(" B3uttin( !u !idie! wit,out increa!in( wa(e! could rin( tre+endou! political ani+o!it),B and in!ta ilit), !aid Oeo** >orter, ,ead o* !ecurit) con!ultanc) =ort, A*rica Di!k Inc" I>E3 o**icial! !aid t,e (roup i! preparin( !tudie! to e-aluate t,e i+pact o* U"S" !,ale oil on de+and *or it! crude" BKe*initel), we will re-iew noncon-entional !,ale oil *ro+ t,e U"S",B !aid Mr" 1,ati i, t,e Iranian en-o)" 8owe-er, t,ere i! no a(ree+ent on t,e !iJe o* t,e c,allen(e" Mr" 1,ati i !aid t,e =ort, A+erican oil oo+ ,a! created a (lo al o-er!uppl) o* 1"$ +illion arrel! a da)" Kele(ate! *ro+ Oul* nation! !ee t,e exce!! at no +ore t,an $'',''' arrel! a da)" In t,e pa!t, Saudi Ara ia ,a! !i+pl) i(nored +ore ,awki!, +e+ er! !uc, a! Iran and increa!ed oil production w,en t,e) *ailed to reac, an a(ree+entLa! wa! t,e ca!e durin(

an acri+oniou! !plit two )ear! a(o" Saudi

Ara ia i! t,e onl) countr) wit, !iJa le *lexi le production, (i-in( it !o+e in*luence on price!" Cut t,e (roup can ill a**ord new di-i!ion! " In &'':, Saudi Ara
*orced to ackpedal *ro+ a unilateral !uppl) oo!t a*ter price! cra!,ed ) 61'' a arrel"

ia wa!

A transition to U"S"$7ene5uelan oil trade &ill incline Saudi Ara4ia to flood t!e mar8et EaleeC .)*./13 (Ku aiN! lar(e!t new! a(enc), Iil central ank#, 1alee* 5i+e!, $/1</&'13, Lexi!, 01a,n2 Saudi Ara ia ,a! a !trate(ic national intere!t in a !ta le oil +arket, ut it +a) *ace lon(er?ter+ t,reat! to it! do+inance *ro+ out!ide t,e Ipec, write! Sarie 1,alid Saudi Ara ia i! t,e central ank o* crude oil, an oil !uperpower wit, t,e lowe!t production co!t!, ,i(,e!t !pare capacit), ,i(,e!t pro-en re!er-e! and i((e!t export -olu+e! in t,e world " Iil wa! di!co-ered in t,e Ea!tern >ro-ince )
3,e-ron (eolo(i!t! in a !alt do+e near Ka++a+, a di!co-er) t,at wa! to tran!*or+ t,e de!ert kin(do+ into t,e *inancial !uperpower o* t,e Ara world and a +aEor power roker in t,e Middle Ea!t" Saudi Ara ia pu+p! 9": +illion arrel! o* oil e-er) da) and it! econo+), t,e lar(e!t in t,e Ara world, i! entirel) dependent on oil export! t,at con!titute 7$ per cent o* it! (o-ern+ent4! re-enue and 9' per cent o* it! export earnin(!" In &'':, oil price! collap!ed *ro+ a peak o* 61%: a arrel in 0une (on t,e Crent contract2 to elow 6%' a arrel in Kece+ er due to t,e Wall Street cra!,, t,e *ailure o* Le,+an Crot,er! and t,e on!et o* t,e rece!!ion in t,e US and Europe" Saudi Ara ia *eared a cata!trop,ic *all in oil price! and en(ineered a

*our?+illion? arrel?a?da) *all in Ipec output, t,e i((e!t, lar(e!t and +o!t !ucce!!*ul Fuota li+it a(ree+ent in it! ,i!tor)" Earlier in t,e decade, Saudi Ara ia ,ad re!i!ted t,e de+and o* oil ,awk! in ReneJuela, Iran, =i(eria and IraF *or ,i(,er oil price! ) pu+pin( +ore oil *ro+ it! oil*ield! in t,e Ea!tern >ro-ince, w,ic, included O,awwar, t,e lar(e!t oil*ield in t,e world" A! t,e owner o* t,e world4! lar(e!t, c,eape!t +ean! to extract oil re!er-e!, Saudi Ara ia ,a! a !trate(ic national intere!t in a !ta le oil +arket !ince an oil cra!, ,it! it! re-enue! and an oil !piral
tri((er! an econo+ic rece!!ion and political in!ta ilit) in e+er(in( +arket!" Iil i! al!o t,e indu!trial li*e lood o* t,e We!t, 3,ina and t,e ti(er econo+ie! o* t,e A!ia?>aci*ic Ca!in, all diplo+atic allie! o* t,e 8ou!e o* Saud" An oil price !pike to 61$' could +ean anot,er Wall Street cra!,, a deeper rece!!ion in We!tern Europe w,en it ,a! not reco-ered *ro+ it! !o-erei(n de t cri!i!, a 0apan t,at i! !tru((lin( to e+er(e *ro+ two Blo!t decade!B o* de*lation and !ocial unre!t in 3,ina and t,e de-elopin( world" A !pike in

oil price! would al!o add to t,e (eopolitical ri!k pre+iu+ in ener() +arket! due to t,e !pillo-er o* t,e S)rian ci-il war to 5urke), IraF and Le anon " 5,i! i! t,e rea!on Saudi Ara ia ,a! allowed Ipec +e+ er! to
pu+p +ore t,an 9'',''' arrel! a o-e t,e 3'?+illion arrel Fuota t,e kin(do+ ,ad ne(otiated in Rienna in &'11" Saudi Ara ia *ace! a new paradi(+ in t,e world oil?and?(a! indu!tr) t,at t,e kin(do+ once do+inated" =ew tec,nolo(ie! like ,)draulic *racturin( and ,oriJontal drillin( ,a-e +ade t,e United State! t,e *a!te!t?(rowin( !,ale oil producer in t,e world" US oil

i+port! *ro+ ReneJuela, =i(eria, An(ola and t,e Oul* !tate! ,a-e now dropped to a &'?)ear low and cau!ed a (lut o* We!t A*rican crude t,at will now e !old in t,e Dotterda+ and Sin(apore !pot tanker +arket!" Since crude oil i! *un(i le, t,e world could *ace an oil cra!, i* Ipec +e+ er! do not re!train t,eir output or Saudi Ara ia doe! not act a! t,e !win( producer and pu+p le!! Ara ian Li(,t to pre-ent an oil price cra!," Saudi Ara ia4!
oil polic) will increa!in(l) e do+inated ) Di)ad,4! econo+ic and *orei(n polic) intere!t!" 5,e kin(do+4! population ,a! +ore t,an tripled !ince 19:' to &: +illion and Ara+co/>etro+in increa!in(l) !uppl) c,eap?!u !id) do+e!tic *uel and power to Saudi citiJen! and u!ine!!e!" Saudi Ara ia al!o re!ponded to t,e Ara !prin( wit, a 613' illion !ocial wel*are pro(ra++e, and Saudi econo+i!t! now e!ti+ate t,e kin(do+4! ud(et reak?e-en oil price ,a! tripled in t,e pa!t decade to 69'" 5,e!e de+o(rap,ic and *i!cal con!traint! +ean Saudi Ara ia cannot unilaterall) !la!, it! own production to acco++odate Li )a or IraF, w,o ,a-e ot, declared t,at t,e) will dou le t,eir oil production a! a B!o-erei(n deci!ionB wit,out ein( ound ) Ipec Fuota li+it!" 5,e lon(er?ter+ t,reat! to Saudi do+inance o* (lo al oil could well co+e *ro+ out!ide t,e Ipec" Du!!ia4! Do!ne*t ,a! replaced Saudi Ara ia4! Ara+co a! t,e world4! i((e!t oil producer" I**!,ore oil*ield! are producin( We!t A*rica, CraJil, Sout,?ea!t A!ia and t,e Oul* o* Mexico" 3,ina4! oil deal! wit, Iran, Sudan and ReneJuela al!o under+ine Saudi in*luence in t,e oil +arket" 5,e writer i! a Ku ai? a!ed re!earc, anal)!t in ener() and O33 econo+ic!"

A transition to 7ene5uela puts pre!!ure on Saudi oil exports Luft' .)3/13, (Oal, co?director o* t,e In!titute *or t,e Anal)!i! o* Olo al Securit), ad-i!er to t,e United State! Ener() Securit) 3ouncil and co?*ounder o* t,e Set A+erica Hree 3oalition, pu li!,ed nu+erou! !tudie! and article! on !ecurit) and ener() i!!ue! in -ariou! new!paper! and pu lication! !uc, a! Horei(n A**air!, Horei(n >olic), 5,e A+erican Intere!t, 3o++entar) Ma(aJine, Middle Ea!t Vuarterl), LA 5i+e!, 5,e Wa!,in(ton >o!t and 5,e Wall Street 0ournal, de(ree! in international relation!, international econo+ic! and !trate(ic !tudie! and a doctorate in !trate(ic !tudie! *ro+ t,e >aul 8" =itJe Sc,ool o* Ad-anced International Studie!, 0o,n! 8opkin!, 5,e co+in( A+erican oil oo+ i! ad new! *or Saudi Ara ia#, Lowell Sun, </&/&'13,

,ttp://www"lowell!un"co+/oped/ciM&337&$9</co+in(?a+erican?oil? oo+?i!? ad?new!?!audi, 01a,n2 WAS8I=O5I= ?? 3urrent trend! in t,e (lo al ener() +arket don4t look (ood *or Saudi Ara ia " Hir!t,
t,e International Ener() A(enc) proEected in =o-e+ er &'1& t,at t,e United State! will !urpa!! t,e Oul* petro(iant a! t,e world4! top ener() producer ) &'&'" 5,en, la!t week, it re-ealed t,at =ort, A+erica, uo)ed ) t,e rapid de-elop+ent

o* it! uncon-entional oil indu!tr), i! !et to do+inate (lo al oil production o-er t,e next *i-e )ear!" 5,e!e un*ore!een de-elop+ent! not onl) repre!ent a low to Saudi Ara ia4! pre!ti(e ut al!o a potential t,reat to t,e countr)4! lon(?ter+ econo+ic well? ein( ?? particularl) in t,e po!t?Ara
Sprin( era o* ele-ated per?capita (o-ern+ent !pendin(" Cut i* t,e kin(do+4! outlook i! decidedl) leak, it! o**icial re!pon!e ,a! een +uddled" Wit,in a period o* Eu!t *i-e da)! la!t +ont,, two !enior Saudi Ara ian o**icial! laid out !tarkl) di**erent -er!ion! o* t,eir countr)4! oil production plan" In an April &$ !peec, at 8ar-ard Uni-er!it), >rince 5urki al ?Hai!al, a *or+er ,ead o* Saudi

Ara ia4! top intelli(ence a(enc) and t,e current c,air+an o* t,e 1in( Hai!al 3enter *or De!earc, and I!la+ic Studie!, announced t,at t,e kin(do+ i! !et to increa!e it! total production capacit)
*ro+ 1&"$ +illion arrel! per da) (+ d2 toda) to 1$ + d ) &'&', an a+ount t,at would ea!il) +ake it t,e world4! top oil producer once a(ain" Cut *i-e da)! later, in a !peec, at t,e 3enter *or Strate(ic and International Studie! in Wa!,in(ton, K"3", Saudi Ara ian Mini!ter o* >etroleu+ and Mineral De!ource! Ali al?=ai+i con-e)ed an entirel) di**erent +e!!a(e, reEectin( 5urki4! !tate+ent out o* ,and" BWe don4t !ee an)t,in( like t,at, e-en ) &'3' or &'%',B ,e !aid" BWe reall) don4t need to e-en t,ink a out 1$ +illion"B So w,at are we to +ake o* t,i! &"$ + d di!crepanc). 3on!iderin( t,e world4! dependenc) on petroleu+ and t,e proEected (rowt, in (lo al de+and *or oil, it4! certainl) not c,u+p c,an(e" In *act, &"$ + d i! rou(,l) eFui-alent to t,e entire production capacit) o* +aEor oil producer! like Mexico, 1uwait, IraF, ReneJuela and =i(eria" W,et,er or not Saudi Ara ia plan! to ra+p up it! production, in ot,er word!, i! rele-ant to -irtuall) e-er) ,ou!e,old on t,e planet" Ine +i(,t e te+pted to di!+i!! 5urki4! (randio!e proEection on (round! o* tec,nical i(norance and de*er to t,e +an w,o i! actuall) in c,ar(e o* t,e countr)4! oil indu!tr)" 5,at i! certainl) one wa) to read t,e o**icial incon!i!tenc)" Cut in Saudi Ara ia, ,ow +uc, oil to produce i! *ir!t and *ore+o!t a political deci!ion" Unlike =ai+i, a petroleu+ en(ineer w,o cli+ ed up t,e ladder o* Saudi Ara+co, 5urki i! a +e+ er o* t,e ro)al 8ou!e o* Saud, and w,en it co+e! to politic!, ,i! -iew! are not le!! i+portant" 5,e di!pute etween t,e two oil! down to a +aEor !trate(ic deci!ion Saudi Ara ia will ,a-e to +ake in t,e co+in( )ear!: w,et,er to drill +ore or to drill le!!" Wit, no re-enue! *ro+ per!onal inco+e tax and %' percent o* it! &: +illion citiJen! under t,e a(e o* 1$ ?? not to +ention a +ale population t,at i! +o!tl) e+plo)ed in t,e loated pu lic !ector ?? Saudi Ara ia i! ,ea-il) dependent on oil re-enue! to pro-ide cradle?to?(ra-e !ocial !er-ice! to it! people" And t,e *inancial lia ilit) ,a! onl) (otten ,ea-ier !ince t,e Ara Sprin( *orced t,e re(i+e to *i(,t pu lic di!content wit, e-er +ore (i*t! and !u !idie!" 5o +ake t,in(! wor!e, Saudi Ara ia i! t,e world4! !ixt, ?? !ixt,b ?? lar(e!t oil?con!u+in ( countr), (uJJlin( +ore crude t,an +aEor indu!trialiJed countrie! !uc, a! Oer+an), Sout, 1orea, and 3anada" Wit, !o +uc, o* it! oil con!u+ed at ,o+e, t,e kin(do+ ,a! onl) 7 + d to export ?? e-en a! (o-ern+ent expenditure! are on t,e ri!e" All t,i! i! to !a) t,at in order

*or Saudi Ara ia to (uarantee it! econo+ic -ia ilit), it +u!t en!ure t,at t,e reak?e-en price o* oil ?? t,e price per arrel it need! to alance it! ud(et ?? +atc,e! t,e countr)4! *i!cal need!" 5,i! reak?e-en
price ?? t,e Brea!ona le priceB or, a! t,e Saudi Ara ian eup,e+i!+ ,a! it, t,e B*air priceB ?? ,a! ri!en !,arpl) in recent )ear!" BIn 1997, I t,ou(,t &' dollar! wa! rea!ona le" In &''<, I t,ou(,t &7 dollar! wa! rea!ona le,B =ai+i explained in Marc," B=ow, it i! around 61'' " " " and I !a) a(ain 4it i! rea!ona le"4B Accordin( to t,e Ara >etroleu+ In-e!t+ent! 3orporation, t,e reak?e-en price i! currentl) 69% per arrel, le!! t,an t,e current !pot price *or Crent crude" (Iran need! oil to e at 61&$ per arrel to reak e-en, w,ic, explain! t,e *eud etween Iran and Saudi Ara ia wit,in I>E3"2 Cut a !ent deep political re*or+! t,at create new !ource! o* inco+e, t,e reak?e-en price will !urel) (row" Accordin( to Di)ad,? a!ed 0adwa In-e!t+ent, one o* t,e world4! +o!t i+portant knowled(e a!e! on Saudi Ara ia4! econo+), ) &'&' t,e reak?e-en price will reac, 611: per arrel" At t,i! point, t,e Saudi Ara ia Monetar) A(enc)4! ca!, re!er-e! will e(in to drain rapidl) and t,e reak?e-en price will !oar to 617$ a arrel ) &'&$ and to o-er 63'' ) &'3'" And t,i! cut! to t,e ,eart o* t,e dile++a: 5o alance it! ud(et in t,e *uture, Saudi Ara ia will need to eit,er drill +ore arrel! and !ell t,e+ *or lower price! or drill *ewer arrel! ?? acti-el) reducin( (lo al !uppl) ?? and !ell eac, at a ,i(,er price" 5,i! i! t,e crux o* t,e 5urki?=ai+i de ate" Cot, o**icial! under!tand t,e centralit) o* oil re-enue! to t,e !ur-i-al o* t,e 8ou!e o* Saud, ut t,e) di**er on ,ow e!t to co+e up wit, t,e +one)" 5urki elie-e! t,at Saudi Ara ia !,ould (row it! production capacit) in !)nc wit, t,e (rowt, o* t,e (lo al econo+)" Cut =ai+i, t,e per!on w,o will actuall) e c,ar(ed wit, +eetin( t,i! (oal, pre*er! to keep capacit) a! it i! and, i* needed, e-en let it !lide" I* ,i!tor) i! our (uide, =ai+i4! wa) will pre-ail" Since 19:', a! t,e world econo+) (rew ) leap! and ound!, oil price! +ore t,an Fuadrupled in real ter+!" Aet Saudi Ara ia, w,ic, !it! atop o* one *i*t, o* t,e world4! econo+icall) reco-era le re!er-e!, ,a! arel) increa!ed it! production capacit)" Anot,er potential explanation *or =ai+i4! reluctance to (row capacit) i! t,at ,e know! w,at Sadad al?8u!!eini, t,e *or+er ,ead o* exploration at Saudi Ara+co, alle(edl) told t,e U"S" con!ul (eneral in Di)ad, in &''7" Accordin( to a leaked ca le pu li!,ed ) WikiLeak!, 8u!!eini !aid t,at Saudi Ara ia +a) ,a-e o-er!tated it! oil re!er-e! ) a! +uc, a! %' percent, +eanin( t,at production at current le-el! i! un!u!taina le" I* 8u!!eini4! clai+ i! true, it +ean! t,ere i! onl) one wa) *or t,e kin(do+ to +ake end! +eet: 1eep price! ,i(, ) !tallin( t,e de-elop+ent o* new capacit) w,ile adEu!tin( t,e production o* oil downward to o**!et an) (rowt, in !uppl) e+anatin( *ro+ t,e A+erican oil oo+" It al!o +ean!, contrar) to popular elie*, t,at t,e current ri!e in U"S" do+e!tic production will ,a-e +ini+al i+pact on (lo al crude price!, and ,ence on t,e price we pa) *or (a!oline at t,e pu+p" Iil i! a *un(i le co++odit) and it! price! are deter+ined in t,e (lo al +arket" I* t,e United State! drill! +ore, Saudi Ara ia will !i+pl) drill le!!, keepin( t,e !uppl)/de+and relation!,ip ti(,t and price! ,i(," 5,e 5urki?=ai+i di!pute i! not an acade+ic one ut one wit, potentiall) !eriou! i+plication! *or t,e *uture o* t,e world econo+)" W,et,er or not Saudi Ara ia like! it ?? and it al+o!t certainl) doe! not ?? t,e (lo al ener() +arket i! a out to (et +ore co+petiti-e" In a co+petiti-e +arket, oil !,ould e !upplied ) all producer! rou(,l) in accordance wit, t,eir (eolo(ical re!er-e! and +ar(inal co!t!" 5,ere i! !o+et,in( pro*oundl) wron( w,en t,e United State!, w,ic, !it! atop arel) two percent o* (lo al con-entional oil re!er-e!, produce! +ore arrel! per da) t,an Saudi Ara ia, a countr) wit, re!er-e! ten ti+e! i((er" Saudi Ara ia pre!ent! it!el* a! a re!pon!i le producer !en!iti-e to t,e need! o* con!u+in( countrie!" 5,e!e need! are !urel) (rowin(" It would onl) e appropriate *or t,e kin(do+ to (row it! capacit) in kind ) +akin( additional in-e!t+ent!" S,ould Saudi Ara ia decide not to do !o, t,e United State! !,ould u!e it! -a!t re!er-e! o* c,eap natural (a! a! a tru+p

card" Ince car! and truck! !old in t,e United State! are capa le o* runnin( on *uel! +ade *ro+ natural (a! and it! product! ?? w,et,er co+pre!!ed natural (a! it!el*, liFuid *uel! !uc, a! +et,anol, or natural?(a! deri-ed electricit) ?? t,e price o* tran!portation *uel will e deter+ined ) *ree and di-er!i*ied co++odit) +arket!, not deci!ion! +ade in Di)ad," A !)!te+ in w,ic, oil con!u+er! are *orced to pa) a ri!in( Brea!ona le priceB per arrel in order to *und Saudi Ara ia4! e-er?(rowin( *i!cal o li(ation! i! un!u!taina le, e!peciall) in a ti+e w,en +o!t ca!,?!trapped countrie! are lookin( *or wa)! to reduce t,eir own *i!cal o li(ation!" A! t,e world +o-e! (raduall) toward +ore rea!ona l) priced +et,od! o* powerin( -e,icle!, t,e kin(do+ would do well to drill into t,e rain! o* it! people ?? and t,at include! wo+en ?? a! -i(orou!l) a! it drill! into t,e (round"

2!e U"S" is dependent on Saudi oil no& an increase in 7ene5uelan production &ould !urt t!at N12' *3 (BU"S" Deliance on Iil Hro+ Saudi Ara ia I! Orowin( A(ainB, =ew Aork 5i+e!, www"n)ti+e!"co+/&'1&/':/17/ u!ine!!/ener()?en-iron+ent/u!?reliance?on?!audi?oil?i!? (rowin(?a(ain",t+l.pa(ewanted/all //kd,2
In recent )ear!, United State! oil i+port! ,a-e een trendin( lower, alt,ou(, total i+port! are little c,an(ed *ro+ t,e end o* la!t )ear" Cut t,e i( c,an(e ca+e in i+port! *ro+ t,e >er!ian Oul*, !pikin( to &"< +illion arrel! a da) in Ma) *ro+ 1"9 +illion arrel! a da) la!t Kece+ er, now rou(,l) &3 percent o* total i+port!, co+pared wit, a out 17 percent e*ore" Ko+e!tic oil production ,a! een !ur(in( t,e la!t t,ree )ear! and i! up 1' percent t,i! )ear" Cut +o!t o* t,e new production i! co+in( *ro+ !,ale oil *ield! in =ort, Kakota and 5exa! t,at produce ,i(,?Fualit) !weet (rade!" Man) o* t,e re*inerie! on t,e Oul* o* Mexico

coa!t are de!i(ned to re*ine t,e ,ea-ier oil! t,at t,e United State! ,a! traditionall) i+ported *ro+ ReneJuela, Mexico and 3anada" Mexican and 7ene5uelan production !as 4een sliding t!e last fe& %ears' and +uc, o* t,at oil ,a! een replaced ) 3anadian oil *ro+ oil !and!" W,ile 3anadian production
,a! een increa!in( rapidl) in recent )ear!, t,ere i! not enou(, pipeline capacit)" 5,ere are al!o ec,oe! *ro+ t,e di!a!trou! C> Oul* o* Mexico well explo!ion and !pill in &'1', w,ic, led to a *ederal +oratoriu+ on Oul* drillin(" Ce*ore t,e accident, Oul* oil production wa! 1"7$ +illion arrel! a da), and it wa! proEected to increa!e to &"& +illion arrel! a da) ) t,i! )ear" In!tead, ecau!e o* t,e )earlon( ,alt on new drillin(, production i! a out 7'',''' arrel! a da) lower t,an *oreca!t" Muc, o* t,at oil i!

,ea-) and i! ein( replaced ) Saudi i+port!, expert! !aid" 5,e

oo!t in Saudi !,ip+ent! to t,e United State! al!o repre!ent! a !win( *or t,e kin(do+, w,ic, ,ad een !,i*tin( export! to 3,ina in t,e wake o* t,e &'': *inancial cri!i! and rece!!ion" 5,e U"S" +arket *or !our crude i! lookin( -er) (ood *or Saudi Ara ia t,i! )ear w,ile t,e 3,ine!e +arket i! lookin( prett) ad,# !aid Edward Mor!e, 3iti(roup (lo al ,ead o* co++odit) re!earc," 8e noted t,at de+and *or crude in 3,ina (rew ) le!! t,an 1 percent o-er t,e *ir!t ,al* o* t,e )ear" Saudi oil expert! !aid t,e kin(do+ wa! +erel) *ollowin( t,e +arket!" 5,i! i! !trictl), totall) u!ine!!,# !aid Sadad Al 8u!!eini, a *or+er executi-e at Saudi Ara+co, t,e !tate oil co+pan)" Saudi

production i! *lat out" W,ere )ou !end it i! a +atter o* w,ere )ou +ake t,e e!t pro*it"#

flood #ene5uela 8e%

7ene5uelan suppl% is a 8e% glo4al indicator ;AO' 9. (U"S" OAI, E=EDOA SE3UDI5A I!!ue! Delated to >otential Deduction! in ReneJuelan Iil >roduction#, United State! Oo-ern+ent Accounta ilit) I**ice, ,ttp://www"(ao"(o-/new"ite+!/d'<<<:"pd*, ,ttp://www"(ao"(o-/new"ite+!/d'<<<:"pd*, 01a,n2
5,e United State! i+port! a out 13 +illion arrel! o* crude oil and re*ined petroleu+ product! eac, da), or a out <$ percent o* it! total dail) con!u+ption" ReneJuela i! t,e worldN! ei(,t, lar(e!t crude oil exporter and !upplie! a out

1"$ +illion arrel! per da) o* crude oil and re*ined petroleu+ product!, !uc, a! (a!oline and *uel oil, to t,e U"S" +arket, co+pri!in( a out 11 percent o* current U"S" i+port! " In addition, ReneJuela
rank! a+on( t,e top 1' countrie! in t,e world in t,e !iJe o* it! pro-en oil re!er-e!Loil t,at ,a! een pro-en to exi!t in t,e (round and could e produced" ReneJuela i! al!o one o* t,e *ounder! and an in*luential +e+ er o* t,e Ir(aniJation o* t,e >etroleu+ Exportin( 3ountrie! (I>E32, w,o!e 11 +e+ er! control o-er t,ree?Fuarter! o* t,e worldN! total oil re!er-e! and can (reatl) a**ect world oil price!" 3on!eFuentl), ReneJuela i! a ke) pla)er in t,e *uture ener() !ecurit) o* t,e United

State! and t,e world" Mo!t o* ReneJuelaN! crude oil t,at i! not con!u+ed do+e!ticall) in ReneJuela i! exported to t,e United State!" 5,e United State! i! a natural +arket *or ReneJuelan oil ecau!e it i! !o
clo!eLa out $ da)! ) tanker to t,e U"S" Oul* 3oa!t co+pared to a out 3' to %' da)! *or !upplie! co+in( *ro+ t,e Middle Ea!t" Moreo-er, ReneJuelaN! national oil co+pan), >etroleo! de ReneJuela S"A" (>KRSA2, w,oll) own! *i-e re*inerie! in t,e United State! and partl) own! *our ot,er re*inerie! in t,e United State! and U"S" Rir(in I!land!, eit,er t,rou(, partner!,ip! wit, U"S" co+panie! or t,rou(, >KRSAN! U"S" !u !idiar), 3I5OI, Inc" 5,e!e re*inerie! are unu!ual in t,eir capacit) to re*ine lar(e -olu+e! o* t,e ,ea-), !our (,i(,? !ul*ur2 crude oil t,at con!titute a lar(e part o* ReneJuelaN! oil export!" >olitical !tri*e wit,in ReneJuela and

political ten!ion etween ReneJuela and t,e United State! ,a-e cau!ed concern a out t,e !ta ilit) o* ReneJuelan oil production and export! to t,e United State! " 5,e election o* 8u(o 3,a-eJ a!
>re!ident o* ReneJuela in 199: !i(naled a +aEor c,an(e in ,ow t,e ReneJuelan (o-ern+ent -iew! t,e countr)N! oil indu!tr)" Hor exa+ple, t,e (o-ern+ent took !tep! to !,i*t +ana(erial aut,orit) *or ReneJuelaN! oil re!ource! *ro+ >KRSA to t,e ReneJuelan Mini!tr) o* Ener() and >etroleu+" 5,e (o-ern+ent al!o c,an(ed t,e wa) it deal! wit, *orei(n co+panie!Lit rai!ed t,e +axi+u+ ro)alt) rate! paid ) *orei(n oil co+panie! *ro+ 1<?&/3 to 3' percent, e!ta li!,ed a new extraction tax,# rai!ed inco+e taxe! *or t,o!e co+panie!, and in!tituted pro-i!ion! reFuirin( Eoint owner!,ip !tructure! wit, +aEorit) !,are! *or >KRSA" Ippo!ition to t,e new (o-ern+ent cul+inated in a (eneral !trike t,at la!ted *ro+ Kece+ er &, &''&, until He ruar) &, &''3, and -irtuall) !,ut down t,e oil !ector o* t,e econo+)" 5,i! !trike te+poraril) decrea!ed world oil !upplie! ) a out &"3 +illion arrel! per da), or a out 3"' percent o* total world dail) oil !uppl), and reduced oil export! to t,e United State! ) a out 1"& +illion arrel! per da)LeFui-alent to a out 11 percent o* total U"S" oil i+port! at t,e ti+e" More recentl), in April &''<, ReneJuela !eiJed two oil *ield! operated ) two *orei(n oil co+panie! ecau!e t,e co+panie! did not co+pl) wit, new rule! unilaterall) i+po!ed ) t,e ReneJuelan (o-ern+ent"

In!ta ilit) in ReneJuelaN! oil !ector exi!t! in a roader context o* a ti(,tenin( (lo al oil !uppl) and de+and alance"

flood lin8 magnifier

E#en a slig!t drop in prices causes Iran to con#ene an emergenc% O=E< meeting $$$ K*99 is a 8e% 4enc!mar8 =ress 27 */ (Iran to de+and e+er(enc) I>E3 +eetin( i* price! keep *allin(#, %?1$, ,ttp://www"pre!!t-"ir/detail/&'13/'%/1$/&9:%1'/iran?to?call?opec?+eetin(?i*?price!?*all/, Keec,2 An Iranian Iil Mini!tr) o**icial !a)! Iran will a!k I>E3 to call an e+er(enc) +eetin( to di!cu!! oil price! i* t,e) !lu+p 4elo& USD *99 a arrel" 5o t,at e**ect, IranN! oil +ini!ter [Do!ta+ Va!e+i\ will ,a-e telep,one con!er-ation wit, I>E3 pre!ident a out an extraordinar) +eetin(,# t,e o**icial, w,o wa! not na+ed, !aid Monda)" In Sunda), Va!e+i !aid Iran wanted oil price! to !ta) a o-e USK 1'' per arrel , notin( t,at an oil price elow USK 1'' i! not rea!ona le *or an)one"# And $$$ t!at magnifies t!e lin8 $$$ generates uncertaint% and price declines :oran + (Step,en M", >ro*e!!or o* Hinance S St" Cona-enture Uni-er!it), I+plied Rolatilit) o* Iil Huture! Iption! Surroundin( I>E3 Meetin(!#, 5,e Ener() 0ournal, &$(32, p(" 1'3?1&$, >roFue!t, Keec,2
5a le 1 !,ow! t,e pattern o* a-era(e i+plied -olatilit) o* crude oil option! durin( a %1?da) window period !urroundin( t,e %: I>E3 +eetin(! u!in( t,e t,ree +odel! de!cri ed a o-e" Se-eral pattern! are notewort,)" Hir!t, -i!ual in!pection o* t,e data indicate! t,at t,e -olatilitie! wit,in t,e pre?e-ent, e-ent, and po!t?e-ent window! appear to e -er) !ta le, !u((e!tin( a ,i(, de(ree o* internal con!i!tenc) and -eracit) o* t,e -olatilit) e!ti+ate!" !econd, t,ere appear! to e a (eneral increa!e in -olatilit) durin( t,e pre?e-ent period, w,ic, i! con!i!tent wit, t,e !t)liJed pattern predicted ) >atell and Wol*!on (19:12" 5,e) di!tin(ui!, etween in!tantaneou! -olatilit) o* t,e underl)in( a!!et and a-era(e -olatilit) o-er t,e li*e o* t,e option, w,ic, i! captured ) i+plied -olatilit) calculation! and reported in 5a le 1" 5,e) de+on!trate t,at a predicta le !pike in in!tantaneou! -olatilit), !uc, a! t,at

a!!ociated wit, a potentiall) in*or+ati-e and pre-iou!l) !c,eduled I>E3 +eetin(, create! an upward dri*t in a-era(e -olatilit) until t,e e-ent date at w,ic, ti+e it drop! precipitou!l)" Se-eral da)! in t,e pre?e-ent window experience a significant increase in -olatilit) (e"(", t / ?1%
and t / ?:2" Since -olatilit) dri*t! upward in t,e pree-ent window, one would expect !o+e !tati!ticall) !i(ni*icant increa!e!, e!peciall) w,en Jero c,an(e i! u!ed a! t,e null ,)pot,e!i!" Anot,er wa) to approac, t,i! i!!ue i! to u!e t,e !ecular upward dri*t a! t,e null in t,e t?te!t!" U!in( an upward dri*t o* '"%; per da) (a! indicated ) re!ult! t,at *ollow2 a! t,e null ,)pot,e!i!, no dail) percent c,an(e in t,e pre?e-ent window i! !i(ni*icant a o-e t,e 9'; le-el o* con*idence" 3on!i!tent wit, t,e pattern predicted ) >atell and Wol*!on (19:12, 5a le 1 report! t,at a-era(e i+plied -olatilit) drop! ) al+o!t t,ree percent on t,e *ir!t da) o* I>E3 +eetin(!" 5,i! drop in -olatilit) i! !tati!ticall) !i(ni*icant at t,e 99; le-el o* con*idence" C) wa) o* co+pari!on, Ederin(ton and Lee4! (199<2 !tud) t,e i+pact o* !c,eduled +acroecono+ic new! relea!e! on t,e i+plied -olatilit) o* 5?Cond and Eurodollar option!" 5,eir !tron(e!t re!ult! are le!! t,an ,al* a! lar(e" 5,e direct link etween t,e in*or+ation di!clo!ed *ro+ I>E3 +eetin(! and t,e -alue o* t,e crude oil +a) account *or t,e +a(nitude o* t,e reaction" In contra!t, t,ere +a) e +ore con*oundin( *actor! t,at can a**ect t,e -alue o* intere!t rate option! on a (i-en da)" I* t,e la!t da) o* t,e +eetin( i! de!i(nated a! da) Jero, no !i(ni*icant -olatilit) c,an(e exi!t!" It al!o appear! *ro+ 5a le 1 t,at -olatilit) e(in! to drop e-en e*ore t,e *ir!t da) o* t,e +eetin(" Hinall), 5a le 1 !,ow! t,at a-era(e -olatilit) appear! to trend up&ard a*ter I>E3 +eetin(!" We ,a-e no de*initi-e explanation *or t,i! trend, ut po!it t,at t,e re!olution o* uncertaint) a*ter an I>E3 +eetin( +a) B*ade outB a! new econo+ic de-elop+ent! introduce new !ource! o* uncertaint)" Hor exa+ple, it +a) eco+e le!! clear o-er ti+e w,et,er production Fuota! will e ad,ered to or w,at e**ect t,e) +i(,t ,a-e on +arket price! a! ot,er econo+ic *actor! de-elop" Alternati-el), t,e upward trend o-er t,e entire window period could e explained ) t,e -olatilit) !+ile a!!ociated wit, +aturit) identi*ied ) 3anina and Hi(lew!ki (19932 and Ku+a!, Hle+in( and W,ale) (199:2" In +an) ca!e! t,e -olatilit) !+ile, w,ic, i! cau!ed ) +odel +i!!peci*ication, +i(,t cau!e a !eriou! +et,odolo(ical conundru+" In our ca!e, ,owe-er, it! e**ect i! li+ited !ince t,e *ocu! o* t,i! !tud) i! c,an(e! in -olatilit) rat,er t,an le-el! o* -olatilit)" Anot,er explanation *or t,e upward dri*t a*ter +eetin(! i! t,at t,e po!t?e-ent window o* one +eetin( can o-er lap wit, t,e pre?e-ent window o* anot,er +eetin( durin( w,ic, we expect an upward dri*t in -olatilit)" 5,i! !ituation occur! *ourteen ti+e! in our !a+ple and could e re!pon!i le *or t,e po!t?e-ent upward dri*t" In an) ca!e, t,ere i! no o -iou! rea!on w,) it +i(,t a**ect t,e re!ult! around t,e e-ent window or t,e re!ultin( in*erence!"

flood consumption lin8

-educing demand causes O=E< to flood t!e mar8et Eole F, A> Writer [Willia+, Ke!pite Di!in( >rice!, I>E3 Appear! to e in =o Du!, to Dai!e it! Iutput 5ar(et!,# 9/:, ,ttp://nwiti+e!"co+/article!/&''7/'9/':/ u!ine!!/ u!ine!!/doc7e79 33c 7ec<*&:<&$73%* ''7&3 *d"txt\ I* )ou re+e+ er w,at ,appened in t,e 197'4! (look it up i* )ou don4t2 )ou will *ind t,e i((e!t *ear I>E3 ,a!" It i! t,at oil price! will (o up and !ta) ,i(, lon( enou(, to *uel in-e!t+ent into con!er-ation and alternati-e ener() !ource! to t,e point t,at a critical +a!! i! reac,ed and t,e need *or t,eir oil i! (reatl) di+ini!,ed or replaced ) ot,er ener() !ource! t,e) don4t control" 5,at4! exactl) w,at !tarted ,appenin( in t,e 197'4! and it took I>E3 openin( up t,e tap to +ake oil c,eap a(ain o-er a decade to
re-er!e t,e trend!" 5,e re!ult wa! t,at intere!t in con!er-ation and alternati-e ener() waned and in-e!t+ent! dried up in t,e *ace o* c,eap oil a(ain"

We are once a(ain nearin( t,at point and )ou can expect to !ee I>E3 *lood t,e +arket a(ain i* t,e) !ee u! (ettin( !eriou! wit, con!er-ation and alternati-e ener() !ource! t,at co+pete wit,, or wor!e )et, actuall) replace de+and *or t,eir oil" I>E3 walk! t,e *ine line etween price and de+and and want! to keep u! ,ooked up to t,eir oil like a
unc, o* Eunkie! on dru(! w,ile +akin( a! +uc, +one) a! po!!i le"

-educed US demand causes a Saudi flood Al$2amimi L** ? !tudent at Cra!eno!e 3olle(e, Ix*ord Uni-er!it), and an adEunct *ellow at t,e Middle Ea!t Horu+ (A)+enn 0awad, 5,e 3o+in( S,ale?Iil De-olution.#A)+enn 0awad, 11/&$/11 ,ttp://www"a)+ennEawad"or(/1'779/oil?!,ale?re-olution2 Until now t,e [oil\ price! were deter+ined ) !carcit)" Soon t,e) will e deter+ined ) uncon-entional oil production co!t! " In particular i* t,e Saudi! are windin( down t,eir expan!ion plan!, t,at +ean! t,e) are (i-in( up on t,e *i(,t" 5,e Saudi!4 control o-er t,e price! until now wa! prett) +uc, a!ed on an i+plicit t,reat to low t,eir top and *lood t,e +arket wit, t,eir !pare capacit)" 5,i! i! w,at i! puttin( o** ot,er I>E3 +e+ er! and

alternati-e! until now" Iran !,ould e t,e +o!t -ulnera le o* t,e+ all" Ulti+atel) w,at +atter! i! t,e reak e-en price" I elie-e t,e >er!ian! are ud(etin( on t,e a!!u+ption o* 6:' to arrel i* not all 61''" Update II: It appear! t,at in t,e ori(inal article I con*u!ed oil !,ale wit, !,ale oil" 5,e latter i! t,e !u Eect o* tec,nolo(ical reakt,rou(,! di!cu!!ed in t,e article, and exi!t! in t,in la)er! o* !,ale depo!it! !e-eral +ile! eneat, t,e Eart,4! !ur*ace, w,ile oil !,ale i! *ound in !edi+entar) rock near t,e Eart,4! !ur*ace and exi!t! in t,e +a!!i-e Fuantitie! I cited at t,e e(innin( o* t,e article, )et t,ere i! a !i(ni*icant i+pedi+ent to t,e de-elop+ent o* t,e!e re!er-e! in t,e United State! on account o* t,e *act t,at t,e land containin( oil !,ale re!er-e! i! *ederal land" Iil !,ale ,a! al!o een t,e !u Eect o* !peculation o* oil re!er-e! near I!rael" A! *or !,ale oil re!er-e!, it i! t,ou(,t t,at t,ere +a) e at +o!t ten! o* illion! o* arrel! wort, o* oil in t,e United State! it!el*, and !o not Fuite t,e le-el o* Saudi Ara ia4! oil re!er-e! " 5,ere*ore, t,e pro!pect! o* ener() independence *or t,e United State! are e-en le!! likel) t,an I ,ad ori(inall) !uppo!ed, in !pite o* tec,nolo(ical reakt,rou(,! *or !,ale oil" W,at i! al!o needed i! an end to

le(al re!triction! on t,e potential de-elop+ent o* oil !,ale in t,e countr) (t,ere i! alread) an e!ta li!,ed +et,od o* oil !,ale extraction: na+el), ,eat t,e rock! in t,e (round and t,en pu+p out t,e oil2" Man) t,ank! to Cruce Ste-en! *or pointin( out t,e erroneou! con*u!ion, w,ic, i! a co++on pro le+" Update III: Ste-en! ,i(,li(,t! two ot,er tec,nolo(ical pro le+! e,ind oil !,ale and !,ale oil tec,nolo(), na+el): (i2 Water leaka(e in aFui*ier! i! a pro le+ *or ,)draulic *racturin( in !,ale oil extraction" It i! uncertain i* propane (el can +iti(ate t,i! en-iron+ental draw ack" (ii2 5,e tec,nolo() to produce oil *ro+ oil !,ale i! not co+pletel) co++ercialiJed, !o t,e co!t! are not )et well calculated" 5,i! will un*ortunatel) e t,e ca!e until t,e U"S" (o-ern+ent per+it! de-elop+ent o* oil !,ale re!er-e! on *ederal land" Ste-en! al!o point! out to +e: B5,e U"S" (and I!raeli and ot,er2 oil !,ale! and 3anadian (and ReneJuelan and Du!!ian and ot,er!2 oil !and! are al!o i(?(a+e c,an(in( *actor! t,at are pro a l) on t,e Saudi!4 +ind!" 5,e 3anadian! are o* cour!e alread) producin( and ra+pin( up t,eir output, w,ile t,e Ren! ,a-e announced t,at t,e) intend to !tart oil !and! production" 5,e!e re!er-e! are enor+ou!: 3anadian re!er-e! are uno**iciall) proEected to e a out 1"7 trillion arrel!, and t,e Ren! ,a-e !o+et,in( like 1 trillion l!" 5,e U"S" oil !,ale re!er-e! are co+para le to 3anada4!, ut are o* cour!e currentl) politicall) locked" I ,ope t,i! will c,an(e, and I propo!ed to !e-eral 3on(re!!ional people t,at t,e (o-ern+ent !,ould per+it de-elop+ent o* t,e!e re!er-e!, w,ile !i+ultaneou!l) protectin( =ort, A+erican

Ine can *urt,er draw up proEected (lo al oil !uppl) cur-e! in co+pari!on wit, t,e )ear &'''? a!!u+in( t,e *ull de-elop+ent o* U"S" oil !,ale re!er-e! and 3anadian tar !and!? t,at !upport t,e opinion expre!!ed ) 5,e 8app) Ara =ew! Ser-ice" In t,e !cenario outlined ,ere I a(ree wit, Ste-en! on t,e *ollowin( i+plication! re(ardin( oil (eopolitic!: BI* =ort, A+erica eco+e! t,e
ener() production (includin( B(reenB *or+!2 *ro+ anot,er Saudi?led price war"B (lo al +ar(inal producer o* oil, wit, production capa ilit) o* replacin( Midea!t production i* nece!!ar), t,en (eopolitic! will c,an(e dra+aticall)" 5,e U"S" will no lon(er need to protect t,e !ea lane!, t,e 3,ine!e will *eel le!! need *or a lue water na-), and ot, de-elop+ent! will ,elp t,e re!pecti-e (o-ern+ent! *i!call)" (Ke-elop+ent o* our !,ale! would al!o e a oon to t,e econo+) and to (o-ern+ent re-enue!" Area! w,ere !,ale oil and (a! are ein( de-eloped, like t,e Cakken, are alread) ,eadline?(ra in( oo+ re(ion!"2 Meanw,ile, t,e Saudi! and Iranian! will e +ar(inaliJed and lo!e ot, inco+e and in*luence" I* t,e U"S" took it!el* o** t,e (lo al +arket *or oil, acceptin( a ,i(,er do+e!tic price t,an would exi!t a road a! a !en!i le !ecurit) trade?o**, t,en t,e (lo al price o* oil would cra!, to around 63'/ l" (It +a) e-en reac, t,at le-el in =ort, A+erica, dependin( on w,at t,e actual production co!t! o* oil !,ale turn out to e"2 5,i! would cau!e !e-ere ca!, *low pro le+! in ot, t,e 1in(do+ and Iran, pro a l) t,reatenin( t,eir (o-ern+ent!, and certainl) cripplin( t,eir +ilitar) !pendin("B =e-ert,ele!!, I !till dou t t,at an) o* t,i! would ,a-e a !i(ni*icant i+pact on I!la+i!+ a! a w,ole" 5o under!tand w,), con!ider t,e ca!e o* Mali" Mali i! a predo+inantl) Sunni Mu!li+ countr) (9';2 and one o* t,e ten poore!t nation! in t,e world" 8owe-er, I!la+i!+ a! a political *orce i! not !i(ni*icant in Mali" In *act, Mali i! a !ecular !tate wit, no o**icial reli(ion, tolerate! reli(iou! and acade+ic *reedo+, and i! cla!!i*ied a! a (enuine electoral de+ocrac) and B*reeB in Hreedo+ 8ou!e4! &'11 report on political and ci-il li ertie! in t,e countr)" 5o e !ure, t,ere i! a od) known a! t,e 8i(, I!la+ic 3ouncil, ut it! role i! not to i+po!e S,ari4a in t,e pu lic real+" I*

cour!e, t,ere are pro le+! like ra+pant *e+ale (enital +utilation, and t,e !ecurit) t,reat o* al?Va4ida in t,e I!la+ic Ma(,re (al eit (enerall) lackin( !upport a+on( t,e nati-e population2" So+e *urt,er i!!ue! are ,i(,li(,ted in t,e World Al+anac o* I!la+i!+4! entr) on Mali" So w,) i! I!la+i!+ (enerall) a +ar(inaliJed *orce in Mali. 5,e an!wer i! t,at, !ince I!la+ !pread peace*ull) in t,e area and wa! !)nt,e!iJed wit, local (ani+i!t2 tradition!, a!pect! o* t,e traditional t,eolo() like Ei,ad and i+po!ition o* S,ari4a in t,e pu lic real+ were (raduall) de?e+p,a!iJed and di!re(arded (t,i! i! al!o true *or part! o* Indone!ia, 1o!o-o and Al ania, w,ere I!la+i!+ likewi!e lack! *ir+ popular !upport2, ,ence t,e wide!pread perception in Mali toda) t,at I!la+i!+ doe! not elon( in t,e countr) a! it i! not in accordance wit, t,e culture o* tolerance" I* t,e (rowt, o* I!la+i!+ were pri+aril) a +atter o* I!la+i!t!4 u!e o* oil re-enue! to propa(ate t,eir ideolo(), w,) ,a-e t,e) ,ad little !ucce!! in entrenc,in( t,eir ideolo() in Mali. So t,e !a+e can e a!ked o* Sene(al, anot,er poor countr)? wit, a 9%; Mu!li+ +aEorit)? !corin( Eu!t elow t,e !tatu! o* B*reeB in Hreedo+ 8ou!e4! e!ti+ation, and w,ere Breli(iou! *reedo+ i! re!pected, and t,e (o-ern+ent continue! to pro-ide *ree airline ticket! to Sena(ale!e Mu!li+! and 3,ri!tian! undertakin( pil(ri+a(e o-er!ea!"B 5,u!, t,e pro le+ o* I!la+i!+ i! +uc,, +uc, deeper t,an t,e oil oo+ t,at e(an in t,e 197'!"

flood at no capacit%
2!e% !a#e it &rong s!ort term flooding a4ilit% still exists <ooper' *3 (Andrew Scott, ad-anced de(ree! *ro+ 3olu+ ia Uni-er!it), Uni-er!it) o* A erdeen, and Rictoria Uni-er!it), colu+ni!t *or >CS/Hrontline4! 5e,ran Cureau, *ellow at t,e Middle Ea!t In!titute, Iran, Saudi Ara ia, and a Olo al Oa+e o* Di!k#, >CS, </%/&'1&, ,ttp://www"p !"or(/w( ,/pa(e!/*rontline/te,ran ureau/&'1&/'</co++ent?iran?!audi? ara ia?and?a?(lo al?(a+e?o*?ri!k",t+l, 01a,n2
A )ear a(o, a !enior +e+ er o* t,e Saudi ro)al *a+il) t,reatened to drop a *inancial !uper o+ on Iran4! econo+)" >rince 5urki al? Hai!al, *or+er c,ie* o* Saudi intelli(ence, explained to =A5I o**icial! t,at i* Bd)!*unctionalB Iran tried to take ad-anta(e o* unre!t in t,e Middle Ea!t and per!i!ted wit, it! uraniu+ enric,+ent pro(ra+, t,e Saudi! were prepared to take deci!i-e action" 5,e Iranian re(i+e4! B,old on power i! onl) po!!i le i* it i! a le, a! it arel) i! now, to +aintain a le-el o* econo+ic pro!perit) t,at i! Eu!t enou(, to paci*) it! people"B Hloodin( world oil +arket! wit, !urplu! Saudi crude would dri-e oil price! down

and den) 5e,ran t,e illion! reFuired to alance it! ud(et, *inance it! nuclear a+ ition!, and +aintain !ocial ,ar+on)" Ha!t *orward to Ma) &'1& and oil i! !till priced at o-er 61'' per arrel, Iran4! nuclear pro(ra+ i! +o-in( *orward, and t,e Saudi! ,a-e not +o-ed a(ain!t t,e oil +arket!" Wa! >rince 5urki !eriou! w,en ,e deli-ered ,i! t,reat, or wa! it intended a! a lu** in an increa!in(l) dan(erou! (a+e o* ,i(,? !take! !trate(ic poker. Are t,e Saudi! idin( t,eir ti+e, waitin( to *lood t,e +arket w,en t,e Iranian! lea!t expect it.
De(ardle!! o* ,i! +oti-e!, >rince 5urki +a) ,a-e unintentionall) expo!ed !eriou! !,ortco+in(! in t,e Ke!ert 1in(do+4! +uc, -aunted petro?power" Wit, petroleu+ re!pon!i le *or :' percent o* inco+e *ro+ export!, t,ere i! no dou t t,at Iran4! econo+) i! perilou!l) expo!ed to unexpected price *luctuation! in t,e oil +arket!" In at lea!t *our !eparate occa!ion! in recent

decade! t,e Saudi! ,a-e u!ed t,eir pree+inent !tatu! a! I>E34! B!win( producerB to !aturate oil +arket!, deli-er price relie* to We!tern con!u+er!, and ,a++er t,eir nei(, or4! econo+)" 5,e *ir!t occa!ion wa! until recentl)
!,rouded in !ecrec)"

flood at ine#ita4le s!ale

S!ale production is meaningless Saudi po&er out&eig!s and U"S" cuts increase #ulnera4ilit% At&ood' *3 (Ed, !ta** writer *or Ara ian Cu!ine!!, citin( U"S" Secretar) o* Ke*en!e Willia+ 3o,en, US Secretar) o* Ke*ence inter-iew: Willia+ 3o,en#, 1&/9/&'1&, Ara ian Cu!ine!!, Lexi!, 01a,n2
A+erica4! two partie! ,a-e until t,e e(innin( o* 0anuar) to t,ra!, out a deal t,at will pre-ent tax increa!e! and !pendin( cut! co+in( into *orce, a +o-e t,at could ,o le not onl) t,e world4! i((e!t econo+), ut +arket! around t,e world a! well" A! +i(,t e expected, 3o,en i! prett) (lu+ a out t,e pro!pect! *or a re!olution"BIt [t,e lack o* cro!!?part) ne(otiation!\ ot,ered +e w,en I wa! in t,e Senate, and it wa! one o* t,e *actor! t,at ,elped +e decide to lea-e a*ter &% )ear! on t,e 8ill,B ,e !a)!, !,akin( ,i! ,ead" BI *elt it wa! eco+in( too polari!ed" I !aw t,at !tructure di!!ipate w,en I wa! in o**ice, and I *elt t,at per,ap! new lood co+in( in would +ake a c,an(e" It didG it +ade it wor!e"BIne +i(,t a!!u+e, wit, t,e US !tarin( down t,e arrel o* a 61< trillion de t pile, plu! a! +uc, a! 61"3 trillion in annual de*icit!, t,at *indin( a co+pro+i!e +i(,t e o* para+ount i+portance" 8owe-er, 3o,en point! out t,at e-en t,e ter+ 4co+pro+i!e4 ,a! eco+e tainted ) a!!ociation wit, weakne!! or a lack o* c,aracter" In!tead, t,e p,ra!e ein( andied around ) Depu lican !peaker 0o,n Coe,ner i! Bco++on (roundB"BI* we (o o** t,e *i!cal cli**, it i+pact! t,e Oul*, it i+pact! 3,ina, it i+pact! t,e world ? ecau!e o* t,e inte(ration o* t,e -ariou! econo+ie!G we4re (lo ali!ed,B 3o,en !a)!" BAnd t,ere*ore w,at ,appen! in t,e United State! will ,a-e a +aEor i+pact el!ew,ere" 5,e price o* oil, i* t,at (oe! down, w,at doe! t,at do *or re-enue! *or t,e re(ion.B5,e oil price i!, o* cour!e, a +aEor concern *or re(ional polic)+aker!" Cud(et! in t,e Oul* ,a-e ri!en o-er t,e la!t )ear or !o, a! (o-ern+ent! ai+ to u!e !k)?,i(, oil receipt! to uild out in*ra!tructure and increa!e !ocial !pendin( packa(e! *or t,eir citiJen!" Cut t,e International Monetar) Hund (IMH2 ,a! recentl) warned t,at !uc, ,ea-) !pendin( +a) ,a-e to e reined in in t,e near *uture to ,ed(e a(ain!t t,e unpredicta ilit) o* t,e oil price" 5,ere i! al!o t,e *ear t,at new !,ale

(a! di!co-erie! in =ort, A+erica +a) lead to t,e US puttin( le!! !trate(ic !i(ni*icance on t,e Oul*, particularl) a! it! +ilitar) !,i*t! it! *ocu! *ro+ t,e Atlantic to t,e >aci*ic" W,ile t,ere are ca-eat! to t,i! t,eor) ? Saudi Ara ia4! production power could !till *lood (lo al +arket!, +akin( t,e extraction o* !,ale oil and (a! le!! econo+icall) -ia le ? 3o,en doe!n4t !ee a retreat *ro+ t,e Middle Ea!t an) ti+e !oon" Article continued on next pa(e[[pa(e? reak\\BI don4t reall) t,ink t,at4! t,e ca!e,B ,e !a)!" B5,e *act i! t,at it4! not onl) ener() we are talkin( a out, it4! a trade relation!,ip" 5,ere4! a !)ner() ,ere t,at *or t,e +o+ent +a) e *ocu!ed on oil and (a!, ut I t,ink t,ere4! a pi-ot takin( place ,ere" 5,e pi-ot i! ea!tG i* )ou look at t,e a+ount takin( place etween t,e UAE, 3,ina, India and A*rica,
)ou can !ee t,at t,i! i! a tradin( ,u w,ic, ,a! !poke! (oin( into t,e w,ole A!ia?>aci*ic part o* t,e world" We [t,e US\ can4t !a): 4We4re independent, we4re o-er ,ere and t,e re!t o* t,e world can take care o* it!el*4"BAll t,o!e con!ideration! will !till pla) !econd *iddle to 3o,en4! concern! o-er t,e *uture o* t,e US +ilitar), i* !eFue!tration co+e! into *orce at t,e end o* t,i! )ear" I* ne(otiation! etween Ke+ocrat! and Depu lican! *ail, !win(ein( cut! will pla) ,a-oc wit, t,e Kepart+ent o* Ke*ence4! ud(et" 5,e *or+er !enator !a)! t,at it i! not t,e !iJe o* t,e cut! t,at +atter, ut t,e ,ap,aJard wa) in w,ic, t,e) are ein( i+ple+ented" In particular, 3o,en expre!!e! concern a out t,e widel) reported Bpi-otB t,at will !ee t,e US !et up a a!e *or Marine! in Karwin, !end +ore !,ip! t,rou(, t,e Sin(apore Strait and ee* up it! pre!ence in t,e >,ilippine!" W,en Fue!tioned a! to w,et,er t,e cut! will +ake t,e US +ore -ulnera le, ,e nod! ,i! ,ead in a(ree+ent" BI* )ou !i+pl) cut acro!! t,e oard wit,out re(ard to w,at

t,e capa ilitie! are, it !ee+! )ou are i+pairin( )our a ilitie! to de*end a(ain!t t,e kind o* t,in(! )ou need to de*end a(ain!t,B 3o,en ar(ue!" BIt4! +indle!!" 5,e pre!ident !a)! we are (oin( to c,an(e our !trate() ?
we are (oin( to +o-e our *ocu! to t,e Middle Ea!t and t,e A!ia >aci*ic re(ion" Cut I ,a-en4t !een an) o li(ation o* *und! *or t,e !o? called pi-ot"BAnd w,et,er t,e US take! a runnin( Eu+p o** t,e *i!cal cli** or not, t,e Middle Ea!t will !till loo+ lar(e in t,e !econd ter+ o* pre!ident Carack I a+a" Hro+ inter-ention in Li )a, to t,e upri!in(! in S)ria and t,e depo!ition o* 8o!ni Mu arak in E()pt, A+erica ,a! een accu!ed o* doin( eit,er too +uc, or too little in I a+a4! *ir!t ter+ in o**ice" >er,ap! t,e i((e!t i!!ue ri(,t now i! Iran, w,ere an intran!i(ent re(i+e i! de*)in( !trin(ent international !anction! to pu!, a,ead wit, it! nuclear power pro(ra++e" Sa re?rattlin( *ro+ I!rael ,a! +ade a potential !trike on Iran I a+a4! top *orei(n polic) ,eadac,e"3o,en !a)! t,at o* t,e t,ree cour!e! o* action currentl) open to t,e US ? ti(,tenin( !anction!G participatin( in or at lea!t !eein( a +ilitar) !trike takin( placeG or Bli-in( wit, t,e o+ B ? I a+a i! pur!uin( t,e correct polic)" 8i! +ain ,ope *or re!olution lie!, !o+ew,at !urpri!in(l), wit, 3,ina"B3,ina ,a! taken t,e pu lic po!ition t,at t,e) were oppo!ed to Iran (ainin( a nuclear weapon! capa ilit),B 3o,en !a)!" B5,e) t,en need to (o to t,e Iranian! and !a): 4We4re !eriou! a out t,i!G we ,a-e not Eoined in t,e +o!t !eriou! !anction!, ut we are prepared to do !o now ecau!e t,e alternati-e i! t,at eit,er I!rael or I!rael and t,e US are conte+platin( a !trike a(ain!t t,e!e !ite! ? it would e ad *or t,e re(ion, it would e ad *or 3,ina, and it would e ad *or t,e world4" I t,ink t,at would c,an(e t,e traEector) *or Iran"BW,ile 3o,en !a)! t,at ,e ,ope! t,ere will not e a !trike on Iran in t,e next !ix +ont,!, ,e i! doe! indicate t,at &'13 i! Bpro a l) a ti+e*ra+e t,at ,e [I!raeli pri+e +ini!ter CenEa+in =etan)a,u\ i! lookin( at, in ter+! o* w,et,er or not !anction! will workB" W,ile ,e doe! not elie-e t,at Iran would e-er conte+plate launc,in( an attack on t,e 0ewi!, !tate, a +aEor concern i! t,at ot,er countrie!, !uc, a! Saudi Ara ia, would *eel t,e need to (ain nuclear weapon! capa ilit)"Anot,er topic t,at will continue to pull in A+erican *ocu! in t,e near ter+ i! >ale!tine, w,ere a truce ,a! recentl) re!tored cal+ to OaJa" 5,e *or+er !ecretar) o* de*ence i! a !tron( !upporter o* a !eparate >ale!tinian !tate, alt,ou(, ,e doe! indicate t,at t,e onu! o* continuin( ne(otiation! lie! wit, ot, !ide!"B5,e pro le+ to date ,a! een t,at, a!!u+in( t,e I!raeli leader!,ip are willin( to +eet t,e condition! laid out durin( Cill 3linton4! ter+, t,e >ale!tinian! !till ,a-en4t re!ol-ed t,e di**erence! etween 8a+a! and t,e >ale!tinian Aut,orit) [>A\,B 3o,en !a)!" BUntil t,at take! place, I don4t !ee +uc, ,appenin( in a po!iti-e wa)"BArticle continued on next pa(e[[pa(e? reak\\5,e loo+in( pro le+ *or t,e I!raeli leader!,ip i! de+o(rap,ic!G earlier t,i! )ear, t,e >A4! 3entral Cureau o* Stati!tic! predicted t,at t,e

nu+ er o* >ale!tinian! and I!raeli 0ew! would reac, parit) ) &'1$"BI wa! !urpri!ed to ,ear [*or+er I!raeli pri+e +ini!ter and current de*ence +ini!ter\ E,ud Carak u!e t,e ter+ apart,eid on 3== ? t,at4! a c,ar(ed word,B !a)! 3o,en" BCarak i! !a)in( t,at t,i! i! eco+in( a realit) ? i* )ou allow one +an one -ote, t,e Ara population will certainl) outnu+ er t,e I!raeli population" So t,e) will ,a-e a c,oice to +ake at t,at point: are t,e) !till (oin( to call t,e+!el-e! a de+ocratic !tate or not.BSo I t,ink t,ere4ll e pre!!ure *ro+ wit,in, ut I al!o t,ink t,e >ale!tinian! need to (et t,eir act to(et,er and !a): 4W,o are we. Are we one or di-ided, and i* we are di-ided, do t,e I!raeli! Eu!t +ake a deal wit, t,e We!t Cank, and ,ow will t,at work.4BSince lea-in( pu lic o**ice, 3o,en !et up t,e 3o,en Oroup, a Wa!,in(ton? a!ed con!ultin( *ir+ t,at ai+! to le-era(e t,e experti!e o* +ainl) ,i(,?le-el ex? (eneral! and diplo+at! to ad-i!e *orei(n and US *ir+!" 5,e co+pan) ,a! a lon(?!tandin( !trate(ic partner!,ip wit, KLA >iper, t,e world4! i((e!t law *ir+, a deal w,ic, ,a! *louri!,ed due to 3o,en4! relation!,ip wit, *or+er !enator Oeor(e Mitc,ell, KLA >iper4! c,air+an etween &''3 and &''9"8eadin( up t,e 3o,en Oroup +ean! t,at ,e !pend! an ex,au!tin( a+ount o* ti+e in t,e air, ut 3o,en !a)! t,at (lo al tra-el !,ould e part o* t,e curriculu+ *or US politician!" 8e Fuote! a line *ro+ Mark 5wain ? Btra-el +ake! narrow?+indedne!! i+po!!i leB ? and cite! t,e K> World contro-er!), w,en t,e Ku ai? a!ed port! *ir+ wa! anned *ro+ expandin( into t,e US due to !ecurit) *ear!"B5,at wa! a cla!!ic ca!e,B 3o,en !a)!" BW,o i! t,e e!t in t,e u!ine!! at pro-idin( !ecurit) *or port!. Di(,t ,ere" And )et it (ot lown out o* proportion i++ediatel) and !uddenl) 3on(re!! wa! dead a(ain!t it" And it wa! onl) in retro!pect t,at t,e) !aid: 4Oee, we didn4t reali!e t,e i+plication! o* t,i!" >art o* t,e pro le+ i! pre!!ure, w,ic, partl) co+e! *ro+ t,e +edia, w,ic, c,a!ti!e! politician! w,o tra-el" Cut I t,ink t,e e!t expenditure o* taxpa)er dollar! )ou can +ake i! to allow )our con(re!!+an to !ee t,e world"BIt4! ,ard to !ee !o+e o* t,e Depu lican part)4! +ore notoriou! pla)er! ? na+e! !uc, a! Sara, >alin and Mic,ele Cac,+ann !prin( to +ind ? a(reein( wit, 3o,en4! a!!e!!+ent" 8e i! ,ope*ul t,at *re!, lood, includin( *or+er Hlorida (o-ernor 0e Cu!,, can pla) a +ore pro+inent role in t,e next US election, in &'1<" Hor now, t,ou(,, ,e !a)! t,at a! well a! tra-ellin( +ore, A+erican! !,ould li!ten +ore at t,e !a+e ti+e" BWe4re !till t,e !tron(e!t +ilitar) in t,e world ? t,ere4! no peer co+petitor and t,ere i!n4t (oin( to e one in t,e *ore!eea le *uture,B 3o,en !a)!" BCut t,ere are li+it! to t,at power" W,at )ou reall) need i! a !tron( +ilitar) t,at i! u!ed to ack up diplo+ac)G we need +ore diplo+ac) and we need to li!ten +ore" We4-e (ot a lot o* learnin( to do, and a lot le!! lecturin( to do, and I ,ope t,i! [t,e la!t decade\ ,a! een a learnin( experience *or t,e US in ter+! o* t,e li+it! o* A+erican power"B

flood at s!ale out&eig!s

Saudi floods &ould destro% U"S" s!ale production and collapse prices U=I' ()3+/13 (Inter-iew wit, 3,ri! Haulkner, de(ree in io+edical en(ineerin( at Sout,ern Met,odi!t Uni-er!it), u!ine!! and +at,e+atic! de(ree at Ca)lor Uni-er!it) and t,e Uni-er!it) o* =ort, 5exa!, doctorate de(ree *ro+ 3oncordia 3olle(e, Will Saudi Ara ia Allow t,e U"S" Iil Coo+.#, $/&%/&'13, United >re!! International, Lexi!, 01a,n2
3,ri! Haulkner: We4ll pro a l) !ee a (rowin( con-er(ence o* +icro!ei!+ic data (at,erin( and proce!!in( in real ti+e and real?ti+e drillin( data (at,erin( to en,ance +appin( o* natural *racture! in ti(,t re!er-oir! t,at +a) ,elp driller! etter !teer t,e well !o a! to opti+iJe !u !eFuent place+ent o* *rac !ta(e!" 0a+e! Sta**ord: 3an t,e US reall) co+pete wit, Saudi Ara ia in

ter+! o* production. 3,ri! Haulkner: Sure' Cust as long as t!e Saudis &ill allo& it " Kon4t *or(et t,e 1in(do+ i! !till t,e world4! !win( !upplier, a role it4! ,eld !ince t,e late 197'!" It4! i+portant to re+e+ er t,at t,e Saudi! not onl) ,a-e t,e lar(e!t pro-ed re!er-e! o* oil, it4! al!o t,e lar(e!t repo!itor)? ) *ar?o* low?co!t oil re!er-e!" Muc, o* 3anada4! oil !and! and US ti(,t oil reFuire! 67$ per arrel or +ore to e econo+icall) -ia le" Saudi Ara ia al!o need! 67$ per arrel, ut t,at4! to !upport it! current do+e!tic ud(et" 5,e 1in(do+4! li*tin( co!t! are !o+ew,ere around 6$ at la!t report" So Saudi Ara4ia could easil% flood t!e mar8et, a! it did in t,e earl) 4:'!, i* it lo!t too +uc, +arket !,are, droppin( oil price! to 6$' or le!!, and US drilling and production &ould collapse " Ideall), (rowin( de+and *ro+ 3,ina and ot,er
A!ian +arket! will ,elp !u!tain Saudi production le-el! and oil price! e-en a! t,e A+erica! eco+e !el*?!u**icient in oil" 0a+e! Sta**ord: 3an we expect to !ee a (radual end to *o!!il *uel !u !idie! in t,e near or +ediu+?ter+. 3,ri! Haulkner: Kepend! on w,at )ou +ean ) !u !id)" Anti?oil *action! erroneou!l) clai+ t,at t,e !tandard tax incenti-e! t,at t,e US oil and (a! indu!tr) !,are! wit, +o!t ot,er A+erican u!ine!!e! are !u !idie!" Cut w,ile t,e!e incenti-e! are t,e tar(et o* !o+e ,eated r,etoric, t,ere are enou(, red?!tate Ke+ocrat! in 3on(re!! to pre-ent t,e+ *ro+ ein( !tripped awa), e!peciall) *or t,e independent oil co+panie! t,at rel) +o!t ,ea-il) on t,e+" A +ore likel) de-elop+ent in t,e US would e incre+ental atte+pt! to i+po!e a B ack doorB car on tax ) prox)?e!!entiall) t,e I a+a ad+ini!tration re!ortin( to re(ulator) o-erreac, to add to t,e co!t! o* *o!!il *uel de-elop+ent, production, and con!u+ption" 5,i! kind o* di!incenti-e e!!entiall) create! a !u !id)?in?re-er!e"

A2

at ot!er countries alt cause

2!e U"S" is t!e primar% destination of U"S" oil exports export profita4ilit% and proximit% USEA' *3 (U"S" Ener() Ad+ini!tration, ReneJuela#, 1'/3/&'1&, ,ttp://www"eia"(o-/countrie!/anal)!i! rie*!/ReneJuela/-eneJuela"pd*, 01a,n2 ReneJuela contain! !o+e o* t,e lar(e!t oil and natural (a! re!er-e! in t,e world" It con!i!tentl) rank! a! one o* t,e top !upplier! o* oil to t,e U"S" ReneJuela i! one o* t,e world4! lar(e!t exporter! o* crude oil and
t,e lar(e!t in t,e We!tern 8e+i!p,ere" 5,e oil !ector i! o* central i+portance to t,e ReneJuelan econo+)" A! a *oundin( +e+ er o* t,e Ir(aniJation o* t,e >etroleu+ Exportin( 3ountrie! (I>E32, ReneJuela i! an i+portant pla)er in t,e (lo al oil +arket" [Article cut\ 5,e lar(e!t !,are o* ReneJuela4! (lo al down!trea+ operation! i! in t,e United State!"

3I5OI, a w,oll)?owned !u !idiar) o* >dRSA, operate! t,ree re*inerie! (Lake 3,arle!, LAG 3orpu! 3,ri!ti, 5QG Le+ont, IL2, wit, a co+ ined crude oil di!tillation capacit) o* 7$$,%'' l/d" 3I5OI4! (ul* coa!t
re*inerie! !ource +o!t o* t,eir crude oil wit, >dRSA under lon( ter+ !uppl) contract!" >dRSA al!o own! a $'?percent !take in t,e 1:9,'''? l/d 3,al+ette *acilit) in Loui!iana" [Article cut\ Decent !tati!tic! !,ow t,at ReneJuela4! petroleu+ export! ,a-e dropped ) al+o!t $' percent, !ince peakin( at 3"'< +illion l/d in 1997" ReneJuela !end! a lar(e !,are o* it! oil export!

to t,e United State! ecau!e (eo(rap,ic proxi+it) en,ance! export pro*ita ilit) and ecau!e re*inerie! on t,e U"S" Oul* 3oa!t are !peci*icall) de!i(ned to ,andle ,ea-) ReneJuelan crude" 2!e U"S" dominates oil imports from 7ene5uela US DOS' *)*F)*/ (BU"S" Delation! wit, ReneJuelaB, Cureau o* We!tern 8e+i!p,ere A**air!, www"!tate"(o-/r/pa/ei/ (n/3$7<<",t+, 01a,n2 5,e United State! i! ReneJuela4! +o!t i+portant tradin( partner" U"S" export! to ReneJuela include +ac,iner), or(anic c,e+ical!, a(ricultural product!, optical and +edical in!tru+ent!, auto! and auto part!" Iil do+inate! U"S" i+port! *ro+ ReneJuela, w,ic, i! one o* t,e top *our !upplier! o* *orei(n oil to t,e United State!" A out $'' U"S" co+panie! are repre!ented in ReneJuela" U"S" *orei(n direct in-e!t+ent in ReneJuela i! concentrated lar(el) in t,e
petroleu+, +anu*acturin(, and *inance !ector!"

2!e United States is 7ene5uela0s largest oil importer <6-' ? (3e!ar 0" Al-areJ, Step,anie 8an!on, 3ouncil on Horei(n Delation!, BReneJuela4! Iil? Ca!ed Econo+)B, www"c*r"or(/world/-eneJuela!?oil? a!ed?econo+)/p1&':9 //kd,2
ReneJuela4! pro-en oil re!er-e! are a+on( t,e top ten in t,e world" Iil (enerate! a out :' percent o* t,e countr)N! total export re-enue, contri ute! a out ,al* o* t,e central (o-ern+entN! inco+e, and i! re!pon!i le *or a out one?t,ird o* t,e countr)N! (ro!! do+e!tic product (OK>2" Increa!e! in world oil price! in recent )ear! ,a-e allowed ReneJuelan >re!ident 8u(o 3,a-eJ to expand !ocial pro(ra+ !pendin(, ol!ter co++ercial tie! wit, ot,er countrie!, and oo!t ,i! own international pro*ile" 5,ou(, 3,a-eJ

,a! t,reatened to !top exportin( ReneJuelan oil and re*ined petroleu+ product! to t,e U nited State!, it! i((e!t oil?tradin( partner, expert! !a) a !i(ni*icant !,ort?ter+ !,i*t in oil relation! etween ReneJuela and t,e United State! i! unlikel) " 5,e +ediu+?ter+ outlook *or !tate oil co+pan) >KRSA i!
Fue!tiona le, ,owe-er, and anal)!t! draw link! etween >KRSA4! pro*ita ilit) and t,e political !ta ilit) o* t,e countr)" Anal)!t! !a) t,e recent (lo al *inancial cri!i! and !udden drop in oil price! are addin( to t,e oil co+pan)4! *inancial tur+oil"

at oil s!oc8s turn

Aon0t !appen Iraq can pre#ent s!oc8s 4% 4oosting production :ill' 3)//13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, IraFN! *lood o* ^c,eap oilN could rock world +arket!#, &/3/&'13, Wa!,in(ton 5i+e!, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/*e /3/iraF!?*lood?o*?c,eap?oil?could? rock?world?+arket!?/.pa(e/all, 01a,n2 5,e U"S" i! not t,e onl) nation experiencin( a renai!!ance in oil production" Sidelined *or two decade! )
war, !anction! and political in!ta ilit), IraFpa!!ed a critical +ile!tone la!t )ear ) producin( 3 +illion arrel! a da) o* crude oil *or t,e *ir!t ti+e !ince 199', e*ore t,e >er!ian Oul* War, reac,in( 3"% +illion arrel! a da) ) Kece+ er" Oi-en it! acce!! to

-a!t re!er-e! at low co!t!, Ca(,dad i! poi!ed to pla) a pi-otal role in deter+inin( w,et,er t,e worldN! (rowin( t,ir!t *or oil dri-e! up *uel price! to de ilitatin( le-el! in co+in( )ear!" IraF ,a! a potential a! a (a+e?c,an(er# in t,e -olatile (lo al oil +arket, !aid Maria -an der 8oe-en, executi-e
director o* t,e >ari!? a!ed International Ener() A(enc) (IEA2" Alread), !,e noted, IraF ,a! +o-ed up to e t,e worldN! t,ird?lar(e!t oil exporter and i! now on a pat, to e +uc, +ore, eco+in( a !trate(ic !ource o* world oil !uppl)# in t,e )ear! a,ead" IraF

e-en ,a! ,ope! o* !upplantin( Saudi Ara ia a! t,e (lo eN! i((e!t oil producer" IraF i! per,ap! t,e onl) countr) le*t in t,e world t,at ,a! ,u(e !tore! o* w,at in!ider! call c,eap oil# L untapped re!er-e! t,at can e extracted t,rou(, relati-el) inexpen!i-e, traditional drillin( tec,niFue! rat,er t,an ,a-in( to e+plo) co!tl) tec,nolo(ie! !uc, a! ,)draulic *racturin( and deep?!ea exploration L a! in t,e U"S" L to tap re!er-e! o* oil *ound o**!,ore or in deep under(round !,ale *or+ation!" 5,e oon o* c,eap oil i! t,e ironic re!ult o* IraFN! +an) )ear! out!ide t,e econo+ic
+ain!trea+, w,en on(oin( war! and an international oil e+ ar(o en*orced ) t,e United =ation! en!ured t,at t,e nationN! oil trea!ure! were le*t +o!tl) untouc,ed in t,e (round" 5,e (u!,er o* oil !tartin( to *low *ro+ IraFi well! couldnNt co+e at a etter ti+e" Ke+and *or oil i! e!calatin( in Fuickl) e+er(in( +arket! !uc, a! 3,ina and India, w,ere t,e u!e o* car! i! !ur(in(, and ot,er +aEor oil exporter! !uc, a! Du!!ia and Saudi Ara ia appear to e reac,in( li+it! o* t,eir a ilitie! to ratc,et up production in +aEor wa)!" In *act, t,e IEA i! proEectin( t,at +o!t o* IraFN! oil production L w,ic, IraFN! leader! ,ope will top Saudi Ara iaN! 11 +illion arrel! a da) at 13"$ +illion arrel! e-entuall) L will e *unneled to 3,ina and ot,er expandin( A!ian +arket! rat,er t,an it! traditional +arket! in t,e U"S" and Europe, *illin( a critical (ap in world oil !upplie! t,at !,ould alle-iate pre!!ure on price! in t,e )ear! a,ead" Sur(in( de+and E-en u!in( con!er-ati-e e!ti+ate!, t,e IEA expect! IraF to +ore t,an dou le it! current production to <"1 +illion arrel! a da) ) &'&' and :"3 +illion ) &'3', ena lin( t,e countr) to !uppl) %$ percent o* t,e increa!e in (lo al oil de+and ) &'3$" Wit,in two decade!, IEA anal)!t! expect IraF to !urpa!! Du!!ia to eco+e t,e !econd?lar(e!t oil exporter" IraF i! co+in( ack on t,e !cene Eu!t w,en de+and *or oil wa! poi!ed to !ur(e in a wa) t,at t,reaten! to dri-e up oil and (a!oline price! to de!ta iliJin( le-el!" 5,e world (ot a (li+p!e o* w,at !ur(in( de+and in e+er(in( +arket! can do to oil price! w,en t,e price o* pre+iu+ crude !,ot up to an unprecedented 61%$ a arrel in 0ul) &'': L t,e la!t ti+e t,e world econo+) wa! experiencin( ro u!t (rowt," Econo+i!t! !a) t,e &'': !pike in oil price! pla)ed a role in !endin( t,e U"S" econo+) into rece!!ion e-en e*ore t,e (lo al *inancial cri!i! ,it +ont,! later" 5,e (lo al econo+) ,a! een too weak !ince &'': to !toke !uc, ,i(, price!, wit, de+and *or oil in t,e U"S", Europe and 0apan L !till t,e i((e!t con!u+in( loc! L !ta le or in decline" Still, e-en in a weak econo+), pre+iu+ crude on t,e London exc,an(e ,a! een tradin( well a o-e 61'' *or !e-eral )ear!" 5,e IEA !aid IraF will need to oo!t

production to pre-ent anot,er de!ta iliJin( !pike in price! t,e next ti+e t,e world econo+) i! *irin( on all c)linder!" It e!ti+ate! t,at i* t,in(! (o well and IraF i! a le to +ake t,e ,e*t) 6$3' illion o* in-e!t+ent!
needed to triple production in co+in( )ear!, world oil price! !till will ri!e (raduall) to 6&1$ a arrel ) &'3' ecau!e o* *a!t?(rowin( de+and in e+er(in( countrie!" Cut it could e +uc, wor!e" S,ould IraF *ail to realiJe it! potential, t,e world could *ace a *uture punctuated ) oil cri!e!, wit, price! !k)rocketin( a! new !ource! o* !uppl) are una le to keep up wit, ro u!tl) (rowin( de+and" Succe!! i! not a!!ured, and *ailure to ac,ie-e t,e anticipated increa!e in IraFN! oil !uppl) would put (lo al oil +arket! on cour!e *or trou led water!,# !aid Hati, Cirol, t,e a(enc)N! c,ie* econo+i!t, addin( t,at t,e ,ealt, o* t,e (lo al econo+)# i! at !take" I !tacle! to o-erco+e Cut it will not e ea!) *or IraF to !crape up t,e +ountain o* ca!, needed to up(rade it! tattered oil?producin( *acilitie! and o-erco+e a le(ac) o* in!ta ilit) and -iolence t,at ,a! ,indered production in t,e pa!t" Aear! o* war and ne(lect ,a-e le*t IraFi oil *ield! wit, con!idera le da+a(e t,at will reFuire +aEor e**ort! to re-er!e" IraF al!o will ,a-e to +ake lar(e in-e!t+ent! in it! electrical, natural (a! and water !)!te+! a! well a! in etter oil tran!port, !tora(e and drillin( *acilitie!" IraF will ,a-e to +ake !o+e ,ard c,oice! to co+e up wit, t,e ca!, to +ake t,e!e +aEor up(rade!"IraFN! 611$ illion o* )earl) re-enue! *ro+ oil export! pro-ide! nearl) t,ree?Fuarter! o* t,e inco+e t,at t,e (o-ern+ent and t,e nationN! citiJen! depend on *or a!ic need! and !er-ice!" 5,e nation would ,a-e to de-ote a !i(ni*icant !,are o* t,o!e re-enue! L a out 1' percent L in t,e next decade to i+pro-in( it! oil *ield! and *acilitie!" Cut Mr" Cirol noted t,at t,e pa)o** i! enor+ou! i* IraF +ake! t,e reFuired in-e!t+ent!: a near dou lin( o* it! oil re-enue! to 6$ trillion in t,e next decade" 8e !aid IraF al!o could eco+e a +aEor exporter o* natural (a! i* it +ake! needed in-e!t+ent!" Cut per,ap! t,e +o!t nettle!o+e pro le+! t,e nation will ,a-e to o-erco+e are political" In particular, it +u!t re!ol-e a *e!terin( di!pute etween t,e (o-ern+ent in Ca(,dad and t,e 1urdi!, re(ional (o-ern+ent o-er control o* t,e nationN! nort,ern oil *ield! in 1urdi!, territor)" Aut,oritie! in t,e !e+iautono+ou! 1urdi!, re(ion de*ied Ca(,dadN! wi!,e! in recent )ear! and ne(otiated contract! wit, +aEor oil co+panie! !uc, a! Exxon Mo il 3orp" to de-elop t,e *ield! L a +o-e +ade po!!i le ) t,e lack o* a national

law or con!en!u! (o-ernin( w,o control! t,e oil *ield! and ,ow t,e re-enue! t,at co+e *ro+ t,e+ are to e di-ided a+on( t,e re(ion!" 5,e con*lict recentl) oiled o-er into ar+ed cla!,e!, wit, ten!ion! in particular centered on a plan )Exxon Mo ile to drill in an area o* di!puted territor) clai+ed ) Ca(,dad" 5,e national (o-ern+ent t,reatened to !end in t,e ar+), i* nece!!ar), to pre-ent t,e drillin(, and rai!ed t,e t,reat o* a wider war wit, IraFi 1urd! i* t,e co+pan) did not ack o**" Muc, intri(ue ,a! !wirled around Exxon Mo il ecau!e o* it! con*lict wit, t,e Ca(,dad (o-ern+ent, includin( report! t,at t,e oil (iant +i(,t !ell it! !take in t,e +a++ot, We!t Vurna oil *ield in t,e !out, to t,e 3,ina =ational >etroleu+ 3orp" *or 6$' illion" Ca(,dad al!o ,a! !,owed it! di!plea!ure wit, ot,er oil co+panie! doin( u!ine!! wit, t,e 1urd! ) re*u!in( to include t,e+ in deal! to de-elop IraFN! !uper? (iant !out,ern oil *ield! around Ca!ra, w,ic, contain t,e lar(e!t re!er-e! o* oil" 3,e-ron wa! recentl) told it wa! not Fuali*ied to do u!ine!! wit, IraF ecau!e o* deal! wit, 1urdi!tan,# Cen Lando, editor o* t,e IraF Iil Deport, !aid on >lattN! 5R" 5,e territorial di!pute ,a! put (lo al oil co+panie! in a di**icult po!ition, ,e !aid" 5,e 1urdi!, aut,oritie! o**er +ore lucrati-e production?!,arin( a(ree+ent!, ut t,e +o!t plenti*ul oil re!er-e! are in t,e !out,, w,ere t,e Ca(,dad (o-ern+ent i! o**erin( t,e+ !ki+p) *ee! *or a!!i!tance in exploitin( t,e oil" 5,e) ,a-e to decide w,et,er to in-e!t in 1urdi!tan or t,e re!t o* IraF,# Mr" Lando !aid" ItN! reall) a political i!!ue +ore t,an an)t,in( el!e"# Riolence ,a+per! drillin(Iil co+panie! *or )ear! a-oided workin( in IraF ecau!e o* t,e t,reat o* -iolence a(ain!t co+pan) per!onnel and *acilitie!" 5,at i! !till a concern, alt,ou(, t,e le-el o* -iolence i! down *ro+ t,e peak durin( t,e U"S"?led +ilitar) +i!!ion in &''<, Mr" Lando !aid" Riolence continue! to e ,orri le *or IraFi!,# ut it ,a!nNt reall) (one into t,e oil !ector t,at +uc," Aou ,a-enNt !een attack! on re*inerie!,# ,e !aid" A recent kidnappin( o* *orei(n oil co+pan) worker! wa! tri al?related rat,er t,an t,e work o* t,e al Vaeda terrori!t network, ,e !aid" 5,e (lo al !tando** wit, Iran t,at ,a! rai!ed *ear! a out di!ruption! o* oil tra**ic in t,e Strait o* 8or+uJ, t,e !,ippin( lane *or +o!t o* IraFN! oil, i! al!o not +uc, o* a concern in Ca(,dad, ,e !aid" Iran *reFuentl) t,reaten! to !,ut down t,e !trait in retaliation *or t,e We!tN! !anction! o-er nuclear acti-itie!, ut t,e IraFi! donNt t,ink itN! (oin( to ,appen,# ,e !aid" De(ardle!! o* t,e -iolence and political *eud!, IraF repre!ent! one o* t,e la!t and +o!t pro+i!in( unexplored territorie! on Eart, *or oil co+panie! at a ti+e w,en con-entional oil production i! declinin( in +o!t ot,er nation!, ,e !aid" IraF ,a! t,e *ourt,?lar(e!t pro-en re!er-e! in t,e world o* 1%3 +illion arrel! o* crude, ut t,e countr) i! onl) a out 3' percent to %' percent explored,# !aid Mr" Lando" 5,ereN! a lot o* opportunit) to *ind +ore oil"# >rior to t,e cla!,e! t,at roke out in =o-e+ er, Ca(,dad and 1urdi!, aut,oritie! ,ad reac,ed !o+e tentati-e co+pro+i!e! in t,eir di!pute, includin( a +o-e ) Ca(,dad to tolerate !o+e 1urdi!, export! t,rou(, a pipeline (oin( t,rou(, 5urke) t,at ,ad een !,ut down *or )ear!" Wa!,in(ton i! t,e onl) out!ide actor wit, t,e power and experience to pu!, Ca(,dad and t,e [1urd!\ toward *or+aliJin( t,e co+pro+i!e! ac,ie-ed t,i! !u++er,# Mr" 8ender!on !aid, addin( t,at t,i! !,ould e a priorit) *or t,e !econd I a+a ad+ini!tration"# 0a+e! 0e**re), a *or+er U"S" a+ a!!ador to IraF, a(reed" 5,e U"S" ,a! een -er) acti-e tr)in( to work out arran(e+ent! w,ere e-er) od) cooperate! and oil and e-entuall) (a! *ro+ t,e nort, i! exported in cooperation wit, Ca(,dad,# ,e told >lattN! Ener() Week" 5,e late!t deal ,a! *allen t,rou(," >eople are ack ar(uin(, and +ore need! to e done to en!ure t,at a !olution !ati!*actor) to e-er) od) can e ac,ie-ed ecau!e t,i! in-ol-e! +ilitar) a! well a! ener() politic!"# Ke!pite t,e pu lic r,etoric, ,e !aid, t,e 1urd! and central (o-ern+ent ,a-e cooperated on t,e !,ip+ent o* oil w,en it ene*it! t,e+" E-er) od) i! pla)in( a -eiled a! well a! open (a+e ,ere,# ,e !aid" A (reat deal i! at !take, not onl) in ener(), ut in t,e political !ta ilit) o* IraF, w,ere we lo!t !o +an) people, and t,ere*ore I know t,e U"S" (o-ern+ent i! -er) ener(eticall) en(a(ed in tr)in( to *ind a !olution"#

at ot!er producers
U"S" oil production is t!e 8e% factor in Saudi oil calculations orse and -ic!ards 3 (Edward L" Mor!e i! Executi-e Ad-i!er at 8e!! Ener() 5radin( 3o+pan) and wa! Keput) A!!i!tant Secretar) o* State *or International Ener() >olic) in 1979? :1" 0a+e! Dic,ard i! a port*olio +ana(er at Hire ird Mana(e+ent, an in-e!t+ent *und acti-e in ea!tern Europe, Du!!ia, and 3entral A!ia, Horei(n A**air!, Marc,/April2 Ine o* t,e ,idden a!pect! o* t,e relation!,ip i! t,e Saudi dependence on t,e United State! *or pro-idin( an expandin( +arket" Alt,ou(, A!ian de+and *or oil i! expected to (row dra+aticall) in co+in( decade!, no ot,er econo+) ri-al! t,at o* t,e United State! *or t,e (rowt, o* it! oil i+port!" I-er t,e pa!t decade, t,e increa!e in t,e U"S" !,are o* t,e oil +arket , in ter+! o* trade, wa! ,i(,er t,an t,e total oil con!u+ption in an) ot,er countr), !a-e 0apan and 3,ina " 5,e U"S" increa!e in i+port!
account! *or +ore t,an a t,ird o* t,e total increa!e in oil trade and +ore t,an ,al* o* t,e total increa!e in I>E34! production durin( t,e 199'!" 5,i! *act, to(et,er wit, t,e *all in U"S" oil production, +ean! t,at t,e United State! will

re+ain t,e !in(le +o!t i+portant *orce in t,e oil +arket" 5,e ,ope o* Saudi Ara ia and I>E3 *or an increa!ed +arket and *or (reater +arket !,are i! uniquel% dependent on (rowt, in U"S" de+and" 8ence it i! not *or !ecurit) alone t,at Di)ad, depend! on t,e United State! ut *or t,e -er) econo+ic a!i! o* t,e
Saudi re(i+e, w,ic, relie! al+o!t entirel) on oil *or re-enue"

at dutc! disease
Arong t!e Saudis &ill di#ersif% N12' *3 (Kania Saadi, !ta** writer, =ew Aork 5i+e!, 3/&1/&'1&, ,ttp://www"n)ti+e!"co+/&'1&/'3/&&/world/+iddleea!t/&&i,t?+&&?!audi? our!e",t+l. pa(ewanted/allPMr/', 01a,n2
KUCAI L Saudi Ara ia i! inc,in( toward openin( up it! eFuit) +arket to direct *orei(n in-e!t+ent, ut an) +o-e to (rant international acce!! i! unlikel) to unlea!, a *lood o* *orei(n +one) into t,e +arket" De(ulator! o* t,e Saudi !tock exc,an(e, 5adawul, t,e lar(e!t in t,e Ara world, are *ine?tunin( t,e dra*t o* a law on Vuali*ied Horei(n In-e!tor! in t,e ,ope o* attractin( in!titutional *und +ana(er! to u) !,are! directl) in t,e 6%'' illion +arket" 5,e +arket, w,ic, i! eFual in !iJe to t,e co+ ined -alue o* t,e !tock +arket! in t,e *i-e ot,er +e+ er !tate! o* t,e Oul* 3ooperation 3ouncil, i! lar(e enou(, and liFuid enou(, to e attracti-e" Cut in!titutional pro*e!!ional! are likel) to appl) +ore !crupulou! due dili(ence t,an t,e +arketN! current clientele o* Saudi in-e!tor!, re!ident *orei(ner! and citiJen! o* t,e ot,er Oul* !tate!, e*ore takin( !i(ni*icant in-e!t+ent deci!ion!" Until &'':, nonre!ident *orei(n in-e!tor! were per+itted to u) Saudi !tock! onl) t,rou(, +utual *und!" Since t,en, a !+all window ,a! een opened to t,e +arket t,rou(, t,e per+itted purc,a!e o* Saudi !,are! -ia !wap a(ree+ent! wit, aut,oriJed entitie!" Saudi

Ara ia pu+p! +ore t,an 1' percent o* t,e (lo al oil !uppl), and wit, t,e price ,o-erin( a o-e 61&' a arrel, it doe! not need an) i++ediate *orei(n direct in-e!tment" @ut t!e long$term plan to lo&er dependence on oil income' impro#e competiti#eness of Saudi companies and create Co4s is pus!ing it to em4race openness" In-e!tin( in Saudi Ara ia i!
co+pellin( *or in!titutional *orei(n in-e!tor!, (i-en t,e +a!!i-e (o-ern+ent !pendin( t,at i! takin( place in t,e countr),# !aid Da+i Sidani, ,ead o* Middle Ea!t and =ort, A*rica in-e!t+ent! at Sc,roder! In-e!t+ent Mana(e+ent, w,o i! a!ed in Ku ai" Saudi

Ara4ia !as 4een follo&ing an aggressi#e strateg% to di#ersif% from one source of income' &!ic! is oil' and to do t!is t!e% need to in#ol#e t!e pri#ate sector and attract foreign direct in#estment"M ;i#en t!e Saudi aut!orities0 measured approac! to freeing up t!e econom%' t!e largest in t!e Ara4 &orld' steps to attract international funds ta8e mont!s' if not %ears' to de#elop " A*ter t,e Saudi! opened up t,e !wap
in-e!t+ent! in &'':, t,e) *ollowed in &'1' ) introducin( exc,an(e?traded *und!, index? a!ed in-e!t+ent product! t,at are traded like !tock!, and allowin( nonre!ident *orei(ner! to trade in t,e+" 5,i! )ear, anal)!t! and anker! expect enact+ent o* t,e law on Vuali*ied Horei(n In-e!tor!" 5,e 3apital Market Aut,orit)N! announce+ent in 0anuar) o* rule! to allow *orei(n co+panie! to cro!!? li!t, t,ou(, not directl) related, i! an indication t,at re(ulator! are conte+platin( c,an(e" A !enior anker w,o exa+ined t,e *ir!t dra*t o* t,e Vuali*ied Horei(n In-e!tor! law in 0anuar) and !ent co++ent! to t,e aut,oritie! !aid t,e Saudi! were lookin( to ene*it *ro+ (lo al interaction" 5,e anker declined to e identi*ied ecau!e o* continuin( di!cu!!ion! wit, t,e aut,oritie!" 5,e) elie-e in t,e next couple o* )ear!, e+er(in( +arket! will e t,e direction w,ere a!!et +ana(er! will park t,eir +one),# t,e anker !aid, and !o+e Saudi?li!ted !tock! will ene*it wit, in-e!t+ent *ro+ *orei(n in-e!tor! t,at will tran!*er knowled(e and new idea!"# 5,e introduction o* t,e !wap a(ree+ent! in Au(u!t &'': did not open t,e *lood(ate! o* *orei(n *und! into t,e Saudi +arket, and t,e !u !eFuent Le,+an Crot,er! ankruptc) dented in-e!tor appetite in an) !tock!" 5rade! t,rou(, !wap a(ree+ent! a+ounted to le!! t,an 1 percent o* t,e -olu+e on t,e Saudi exc,an(e in He ruar), w,ile trade! o* Saudi retail in-e!tor! exceeded 9' percent, We !ite *i(ure! !,ow" 5,e introduction o* t,e Vuali*ied Horei(n In-e!tor! law i! unlikel) to c,an(e t,e !tatu! Fuo radicall), ecau!e t,e Saudi aut,oritie! want to in-ite a !elected (roup o* *orei(n in-e!tor!, t,o!e wit, a!!et! under +ana(e+ent o* 6$ illion or +ore, accordin( to t,e lawN! *ir!t dra*t" 8ot +one) i! t,eir i((e!t concern, and t,atN! w,) t,e) ,a-enNt opened t,e +arket in t,e pa!t,# !aid >aul Oa+ le, ,ead o* re!earc, at 0adwa In-e!t+ent, a Di)ad,? a!ed di-er!i*ied u!ine!! *ir+" C) takin( a Fuali*ied?in-e!tor approac,, t,e) ,ope to li+it acce!! to co+panie! t,at will e in t,e +arket *or t,e lon( ter+"# W,ile t,e Saudi aut,oritie! +a) want +ore in!titutional in-e!tor in-ol-e+ent, t,e) are war) o* takin( action t,at could lea-e Saudi! takin( a lo!!" And in a re(ion con-ul!in( wit, political tur+oil, t,e aut,oritie! are ea(er to a-oid t,e eFuit) lo!!e! !een in pre-iou! )ear! in t,e kin(do+ and ot,er !tate! in t,e O"3"3" In &'':, *or in!tance, a 1uwaiti court *orced a rie* clo!ure o* t,e !tock exc,an(e t,ere a*ter li-id !+all trader! de+on!trated o-er t,e +arket cra!, and *iled !uit" 5,e ot,er O"3"3" +e+ er! are Ca,rain, I+an, Vatar and t,e United Ara E+irate!" Ine o* t,e pro le+! )ou ,a-e wit, Saudi +arket! and all O"3"3" +arket! i! t,at in!titutional in-e!tor! and in!urance *und! t,at tend to dri-e t,e +ore e!ta li!,ed +arket! in t,e We!t are le!! i+portant in Saudi Ara ia and t,e O"3"3",# !aid 0ar+o 1otilaine, c,ie* econo+i!t at =3C 3apital, t,e in-e!t+ent ar+ o* t,e Saudi ank =3C" Aou ,a-e a +arket do+inated ) retail in-e!tor! t,at i! le!! dri-en ) *unda+ental!, and per,ap! +ore -olatile"# Saudi re(ulator! are keepin( track o* *orei(n owner!,ip" 5,e *ir!t dra*t o* t,e Vuali*ied Horei(n In-e!tor! law !tipulated t,at t,e +axi+u+ proportion o* t,e i!!ued !,are capital o* an) particular i!!uer w,o!e !,are! are li!ted t,at +a) e owned ) all cate(orie! o* *orei(n in-e!tor! in a((re(ate i! %9 percent, includin( intere!t! under !wap!"# I+po!in( !uc, li+it! i! t,e nor+ in t,e O"3"3" 5,e index co+piler MS3I ,a! not up(raded Vatar and t,e U"A"E" *ro+ Hrontier Market to E+er(in( Market !tatu! partl) ecau!e o* t,eir re!triction! on *orei(n owner!,ip" Saudi Ara ia i! )et to e included in t,e MS3I enc,+ark, ut it! exclu!ion i! unlikel) to detract *ro+ it! attraction to *orei(n in-e!tor!" Hor Saudi Ara ia, t,e) are not -er) concerned a out next +ont, or t,e *ollowin( +ont,,# !aid t,e anker w,o exa+ined t,e dra*t law" 5,e) will recei-e enou(, intere!t and will e expo!ed, and once t,e) are expo!ed t,eir inclu!ion on t,e indice! will e +uc, ea!ier"#

Di#ersification no&

de Eerros *3 (5atEana, an independent De!earc, Anal)!t and 3on!ultant, !pecialiJin( in Entrepreneur!,ip, 3SD and >ri-ate Sector Ke-elop+ent in O33 re(ion, wit, a particular *ocu! on Saudi Ara ia, t,e UAE and Vatar, Entrepreneur!,ip and >at, 3reation in t,e Saudi Ara ian Ener() 5ran!ition,# %/9/1&, ,ttp://t,eentrepreneuriali!t"net/&'1&/'%/'9/entrepreneur!,ip? and?pat,?creation?in?t,e?!audi?ara ian?ener()?tran!ition/ MOE2 W,ile it ,a! +ana(ed to weat,er t,e international *inancial cri!i!, Saudi o**icial! are keenl) aware o* t,e need to *o!ter econo+ic de-elop+ent Fuickl) to pro-ide Eo ! *or it! rapidl) (rowin( population (+ore t,an &; per )ear2" 5,e) are al!o anxiou! to di-er!i*) t,e a!e o* t,e econo+) awa) *ro+ it! current predo+inant reliance on ,)drocar on!, w,ic, directl) pro-ide clo!e to $'; o* OK> and indirectl) account *or +uc, o* t,e re!t o* Saudi indu!tr)" Saudi o**icial! under!tand t,e c,allen(e! t,e) *ace, includin( t,e need to +ake Saudi education
+ore rele-ant to toda)4! workplace and t,e need to increa!e t,e role o* wo+en in t,e econo+), ot, o* w,ic, are contro-er!ial in t,e !ociall) con!er-ati-e 1in(do+" Saudi o**icial! are lookin( to t,e U"S" to ,elp t,e+ +eet t,e!e

c,allen(e!, ot, t,rou(, increa!ed en(a(e+ent at t,e (o-ern+ent le-el, includin( educational exc,an(e!, and +ore Horei(n Kirect In-e!t+ent, particularl) in ener(), ,i(, tec,, and +anu*acturin( "
Saudi o**icial! !tron(l) welco+ed t,e >re!ident4! 3airo !peec, and it! pro+i!e o* (reater outreac,, w,ic, pro-ide! a (ood context *or )our -i!it" Saudi o**icial! *eel under t,e (un, a! t,e) are aware t,at a nu+ er o* ot,er countrie! are )ear! a,ead o* t,e+ in pur!uin( t,e !a+e !trate()"

at no flood
Saudi Ara4ia maintains a4ilit% t!eir aut!ors are &rong our e#idence assumes internal pressures 6ang' *3 (Son()in(, Sc,olar at t,e 0a+e! Caker In!titute *or >u lic >olic) S proce!!or o* econo+ic!, A!!i!tant >ro*e!!or o* >olitical Science at Dice Uni-er!it), cc0a**e Wallace, Wil!on Hellow in Ener() Studie! at Dice Uni-er!it), ccc5ed 5e+Jelide!, Caker In!titute S >ro*e!!or o* econo+ic!,# =ew Ali(n+ent!. 5,e Oeopolitic! o* Oa! and Iil 3artel! and t,e 3,an(in( Middle Ea!t#, 1/&'1&, ,ttp://www" akerin!titute"or(/pu lication!/EH?pu ?Oa!Iil3artel!?'1&31&"pd*, 01a,n2 Eit!er -ussia or Saudi Ara4ia can &age a price &ar in t!e oil mar8et" A! +entioned earlier,
Saudi Ara ia did t,i! !ucce!!*ull) in t,e +id?19:'! and a(ain in 199: to knock out co+petitor! and ac,ie-e (eopolitical (oal!" Kurin( t,e 19:< oil price war, t,e So-iet UnionN! re!pon!e to t,e Saudi c,allen(e wa! con!trained ) it! li+ited *inancial re!ource! and ) a adl) +ana(ed oil !ector" Saudi Ara ia at t,e ti+e ,ad +ore t,an 7 +illion arrel! per da) ( /d2 o* !pare production capacit) a-aila le to du+p on oil +arket! -irtuall) in!tantaneou!l), w,ile t,e USSD would ,a-e ,ad di**icultie! c,an(in( it! oil production pro*ile e-en o-er !e-eral )ear!" 2oda%' !o&e#er' t!e situation is more equal" Saudi

Ara4ia !as less spare capacit% immediatel% a#aila4le Nonl% a4out * to 3 million 4)dO and it &ill 4e quite expensi#e for Saudi Ara4ia to 4ring on ne& oil fields " 5,e 1in(do+ ,a!
!pent 61% illion !ince &''$ tr)in( to increa!e it! oil production capacit) *ro+ 1' +illion /d to 1&"$ +illion /d" 5,i! ,a! pro-ed di**icult and Saudi Ara ia, w,o!e capacit) i! now e!ti+ated at 11"$ +illion /d, i! !till workin( on t,e (iant Mani*a *ield to +eet it! 1&"$ +illion /d i++ediate?ter+ capacit) tar(et" Huture in-e!t+ent in a new tranc,e o* production capacit) i! likel) to e e-en +ore expen!i-e, (i-en t,at t,e 1in(do+ will ,a-e to !,i*t to area! t,at ,a-e +ore co+plex (eolo() and reFuire (reater tec,nolo(ical inter-ention" Moreo-er, in li(,t o* new re(ional and internal c,allen(e!, Saudi Ara4ia is facing competing

priorities &it! !ig!er spending requirements on social ser#ices and defense " In an
e**ort to re!pond to increa!ed in!ta ilit) acro!! t,e Middle Ea!t, 1in( A dulla, ordered !weepin( !pendin( increa!e! o* 6<7 illion in Marc, &'11 *or ,ou!in(, Eo creation, and t,e +ilitar), on top o* a 63< illion ,andout to citiJen! in He ruar)" 5,e pre!!ure *or ,i(,er de*en!e and !ocial !pendin( will +ake it ,arder *or t,e (o-ern+ent to Eu!ti*) a +a!!i-e ca+pai(n to expand it! oil !ector" It will not e a! ea!) *or Saudi Ara ia to +o iliJe a +aEor price war at t,i! ti+e" 8owe-er, it &ould 4e premature to

dra& t!e conclusion t!at Saudi Ara4ia &ill no longer 4e &illing to &age a price &ar" Its interest in carr%ing t!e spare capacit% to &age a credi4le price &ar goes 4e%ond its securit% relations!ip &it! t!e United States" Saudi Ara4ia gains international clout from its a4ilit% to guard t!e glo4al econom% 4% raising oil output and lo&ering oil prices" oreo#er' -i%ad!0s a4ilit% to t!reaten ot!er oil producers t!at it could flood t!e oil mar8et is a critical aspect 4uttressing its leaders!ip role inside O=E< and gi#es t!e countr% regional clout as &ell" Indeed' among t!e 4est le#ers Saudi Ara4ia !as to influence regional politics is its a4ilit% to dramaticall% lo&er t!e price of oil" Saudi Ara ia ,a! *looded t,e oil +arket *or (eopolitical rea!on! in t,e pa!t,
and could ar(ua l) do !o a(ain" Hor exa+ple, Saudi Ara ia ,a! +ade it clear t,at it ai+! to draw t,e line a(ain!t Iranian expan!ioni!+" Iran i! dependent on oil re-enue! *or +ore t,an <$ percent o* it! (o-ern+ent re-enue" In contra!t, t,e 1in(do+ i! in a po!ition to wit,!tand a period o* low oil price!" 5,u!, Saudi Ara iaN! a ilit) to wa(e a price war i! a +aEor tool it can u!e to di+ini!, Iranian power in t,e re(ion and weaken IranN! po!ition a! a re(ional +ilitar) and political ri-al to t,e 1in(do+" 5,e a ilit) to wa(e an oil price war al!o ,elp! t,e 1in(do+ to (uard a(ain!t ot,er producer! wit, lar(e oil re!er-e!, !uc, a! IraF, *ro+ takin( o-er it! oil +arket !,are" In *act, IraF ,a! expre!!ed t,e a+ ition to reac, 1' to 1& +illion /d o* production ) &'17" 5,i! le-el i! co++en!urate wit, Saudi Ara iaN! capacit)" Di!in( IraFi output could alter t,e alance o* political power wit,in I>E3 and c,allen(e Saudi Ara iaN! current leader!,ip" IraFi oil re!er-e! are con!idered -er) low?co!t to de-elop and are co+petiti-e wit, t,o!e o* Saudi Ara ia" In !u++ar), w,ile t,e co!t! o* +aintainin( enou(, !pare capacit) to wa(e a price war ,a-e ri!en *or Saudi Ara ia, t,ere are !till +an) (eopolitical incenti-e! *or t,e 1in(do+ to +aintain t,i! capa ilit)" 5,i! include! contri utin( to it! !ecurit) ) weakenin( Iran and ) re+ainin( i+portant to t,e United State!, w,ic, would t,en e +ore apt to pro-ide !ecurit) (uarantee! in exc,an(e *or t,e *ree *low o* oil" We now turn our attention to Du!!ia" It! incenti-e! re(ardin( an oil price war ,a-e al!o c,an(ed !ince t,e 19:'!" In t,e 19:'!, t,e USSD !tate?controlled !ector would ,a-e ,ad di**icult) re!pondin( to a price war wit, ,i(,er in-e!t+ent and ri!in( output" 5,e USSD ,ad !e-ere *inancial pro le+! and it! a(ed oil !ector wa! *ailin( adl)" In contra!t, Du!!ia now ,a! a relati-el) re*or+ed and +oderniJed oil !ector t,at could tap pri-ate in-e!t+ent i* Mo!cow pro-ide! attracti-e tax incenti-e!" In &'1', Du!!ia +ade adEu!t+ent! to it! tax re(i+e to en!ure it! oil production !ta)ed a o-e 1' +illion /d" Anal)!t! elie-e t,at a +ore po!iti-e tax en-iron+ent, includin( exe+ption! *ro+ export dutie!, will allow Du!!ia to +o iliJe new in-e!t+ent! Fuickl), allowin( it to rai!e it! production capacit) ) !e-eral +illion arrel! a da)" Ine pro le+ wit, t,i! !trate() i! t,at t,e Du!!ian (o-ern+ent relie! ,ea-il) on oil ro)altie! and export taxe! to co-er it! *ederal ud(et" Lowerin( !uc, taxe! would e pro le+atic *or Mo!cow i* oil re-enue! were al!o *allin( due to declinin( international oil price! re!ultin( *ro+ a price war" It i!

wort, +entionin(, ,owe-er, t,at Mo!cow ,a! tended to *a-or (eopolitical ene*it! o-er cono+ic co!t!" Decent deal! etween !tate? run oil con(lo+erate Do!ne*t and international +aEor oil co+panie!, a re-er!al o* pa!t policie! de!i(ned to renationaliJe and pu!, t,e -er) !a+e co+panie! out o* Du!!ia, indicate t,at Du!!ia ,a! an intere!t in expandin( it! output, e-en at t,e co!t o* !,arin( pro*it! wit, We!tern *ir+!"

at so#iet russia #ene5uela

2!e coming collapse of 7ene5uela &ill mirror t!e collapse of t!e So#iet Union NE7E- forget a4out So#iet -ussia in So#iet -ussia' oil trade %ou 6allo' .)3*/13 (Ha io Da*ael, econo+i!t and writer and retired o**icial o* t,e United =ation! 3on*erence on 5rade and Ke-elop+ent, *ellow at t,e Oate!tone In!titute ReneJuela I+plodin( Like t,e So-iet Union#, Deal3lear World, </&1/&'13, ,ttp://www"realclearworld"co+/article!/&'13/'</&1/-eneJuela!M!el*? de!tructi-eMd)na+ic!M1'$&$$",t+l, 01a,n2 5,e cru+ lin( o* t,e So-iet loc in t,e late 19:'! de+on!trated two t,in(!: Ine, t,at deep? !eated econo+ic ine**iciencie! could *orce a political !)!te+ to i+plodeG and two, t,at !uc, an i+plo!ion could e ,a!tened ) t,e ideolo(ical o !tinac) o* it! leader!" 5,e !tate4! +i!+ana(e+ent o* t,e econo+) ?? exacer ated ) t,e 3old War ar+! race a(ain!t t,e U"S and t,e co!t o* t,e in-a!ion o* A*(,ani!tan ?? le*t in tatter! t,e once power*ul Union o* So-iet Sociali!t Depu lic! (USSD2" 5,u!, in 19:$, w,en Mik,ail Oor ac,e- !ucceeded t,e -i!ionle!! and ideolo(icall)?cor!eted 1on!tantin 3,ernenko at t,e !u++it o* power in t,e USSD, ,e couldn4t ut realiJe t,at t,e So-iet !)!te+ lacked econo+ic ox)(en to continue pla)in( a !uperpower" Hour )ear! later, t,e Cerlin Wall cru+ led" 5,e current !ituation in ReneJuela ?? under t,e 3,a-eJ?de!i(nated ,eir and proclai+ed winner o* a tainted election =icolT! Maduro ?? i! !i+ilar to, and no le!! untena le t,an, t,at o* t,e So-iet Union at t,e ti+e o* 3,ernenko" 5,e +i!allocation o* re!ource! rou(,t a out ) price and *orei(n exc,an(e control!, t,e wa!tin( o* oil re-enue in t,e *undin( o* do+e!tic patrona(e and re(ional alliance!, a! well a! t,e paral)!i! o* pri-ate in-e!t+ent due to t,e (o-ern+ent4! ,o!tilit) a(ain!t t,e entrepreneurial cla!!, ,a-e taken a ,ea-) toll on t,e ReneJuelan econo+)" Da+pant in*lation, +ultiple de-aluation! and c,ronic !,orta(e! o* e!!ential (ood! *or+ Eu!t part o* t,e ,ard!,ip! enEo)ed ) t,e ReneJuelan population" Oone are t,e da)! w,en 8u(o 3,T-eJ oa!ted a out ein( a le to cut oil export! to t,e BE+pireB (i"e" A+erica2" More t,an e-er e*ore, t,e ReneJuelan re(i+e adl) need! t,e *orei(n exc,an(e (enerated ) !uc, export!" A! a +atter o* *act, oil !ale! to ot,er countrie! do not pro-ide a! +uc, *re!, *orei(n exc,an(e a! do t,e corre!pondin( export! to t,e United State!" Alt,ou(, at a 3'?)ear low, export! o* oil to t,e U"S" are !till $' percent ,i(,er t,an t,o!e to 3,ina" Moreo-er, out o* t,e <%' t,ou!and arrel! per da) t,at ReneJuela !,ip! to 3,ina, 3' percent i! de!tined to pa) ack t,e de t contracted ) 8u(o 3,T-eJ wit, CeiEin( (6%&"$ illion2" 5rue, unlike 3,ernenko4! USSD, ReneJuela doe!n4t !pend in +ilitar) ad-enture! out!ide t,e countr)" All t,e !a+e, t,e ReneJuelan (o-ern+ent i! !Fuanderin( t,e countr)4! *inancial re!ource! t,rou(, ot,er +ean!: It keep! ali-e t,e 3a!tro re(i+e and pro-ide! oil to *riendl) (o-ern+ent! in t,e re(ion" Hurt,er+ore, t,e purc,a!e o* ,ea-) weaponr) ) 8u(o 3,T-eJ ,a! ,ad ad-er!e econo+ic repercu!!ion! akin to t,e da+a(in( e**ect o* t,e 3old War ar+! race on t,e So-iet econo+)" 5o cope wit, !uc, a leak econo+ic and (eopolitical !cenario, w,at doe! >re!ident Maduro ,a-e to o**er. Well, ,e recentl) declared t,at ,e intend! to rin( B+ore and +ore !ociali!+B to ,i! countr)" BMore and +ore !ociali!+B. 5,i! !el*? de!tructi-e d)na+ic i! all t,e +ore de-a!tatin( a! >re!ident Maduro (i-e! !i(n! o* !ailin( directionle!!" Ine da) ,e declare! in a t,reatenin( tone t,at ,e know! t,e na+e! o* t,e ,undred! o* t,ou!and! o* 3,a-i!ta! w,o didn4t -ote *or ,i+ ?? t,ere ) ca!tin( dou t! on t,e con*identialit) o* ReneJuela4! -otin( !)!te+, w,ile ,intin( t,at ,e could take retaliator) +ea!ure! a(ain!t t,e turncoat! ?? and a *ew da)! later ,i! ri(,t?,and +an ElXa! 0aua di!tri ute! credit! to +icro?entrepreneur! !wearin( t,at t,e (o-ern+ent will not look at t,eir political a**iliation!" Ine da) t,e (o-ern+ent announce! t,e introduction o* a rationin( c,ip, and t,e *ollowin( da), notin( t,e wide!pread di!content tri((ered ) t,e announce+ent, Maduro alk!

and pretend! ,e didn4t appro-e o* t,e +ea!ure" Ine da) Maduro declare! t,at ,e ,old! o-erw,el+in( e-idence t,at t,e BE+pireB inoculated cancer to 8u(o 3,T-eJ, and a *ew week! later, de!perate to !ecure international le(iti+ac), ,e reFue!t! Secretar) o* State 0o,n 1err) to (rant an inter-iew to Mr" 0aua, ReneJuela4! +ini!ter *or *orei(n a**air!" Maduro4! *orei(n polic) ,a! t,u! *ar een a !ta((erin( exerci!e in pu lic -oci*eration a(ain!t an) *orei(n (o-ern+ent t,at dare! to call *or a dialo(ue etween (o-ern+ent and oppo!ition partie! in ReneJuela" Mr" Maduro, w,o wa! ,andpicked a! 8u(o 3,T-eJ4! !ucce!!or, not *or ,i! !,rewdne!! or co+petence ut *or ,i! lo)alt) (!o+e !a), docilit)2 toward 8u(o 3,T-eJ and t,e 3a!tro re(i+e, ,a! a point in co++on wit, t,e USSD4! 3,ernenko: ot, will e re+e+ ered a! ,a-in( lacked c,ari!+a and intellectual readt," 5,i! ode! ill *or Maduro4! capacit) to *ul*ill e**ecti-el) t,e +i!!ion e!towed on ,i+ a*ter t,e deat, o* ,i! +entor" In *act, eac, new !tu+ le ) t,e ReneJuelan 3,ernenko i! one +ore crack in t,e con*idence and credi ilit) t,at ,e +a) ,a-e enEo)ed initiall) a+on( t,e +e+ er! o* ,i! own political +o-e+ent" 5,e political a!e o* 3,a-i!+o ,a! een !,rinkin(, a! !,own ) t,e +illion -ote! lo!t etween t,e pre!idential election! o* Icto er &'1& and t,o!e o* April &'13" Little wonder t,at Standard P >oor4! ,a! Eu!t down(raded ReneJuela4! !o-erei(n de t, *ro+ Cd to C, pointin( to wor!enin( econo+ic condition! a+id political in!ta ilit) and in*i(,tin(" Hor all t,e!e rea!on!, w,at await! 3,a-i!+o? led ReneJuela doe!n4t look an) ri(,ter t,an t,e predica+ent o* t,e So-iet Union w,en 1on!tantin 3,ernenko kept crui!in( in collap!e +ode"

=A<2S

canada

***canada dollar

canada dollar *nc

Lo& oil prices de#alue t!e <anadian dollar #is a #is t!e US dollar S!ri4er *3 (5odd, Hinancial 3orrre!pondent S Cloo+ er( =ew!, 3anada4! 3o++odit) 3urrenc): Iil And 5,e Loonie#, In-e!topedia, :?1$, ,ttp://www"in-e!topedia"co+/article!/*orex/'9/canadian?dollar?loonie?co++odit)?oil"a!p, Keec,2 3anada4! deep tie! to t,e oil u!ine!! +ake t,e 3anadian dollar, or loonie, a *a-orite o* currenc) trader! to pla) on oil price!" 5,e)4re ri(,t to do !o, ecau!e t,e ,i!toric correlation etween t,e loonie and crude i! intimate to !a) t,e lea!t" I* )ou4-e e-er ,eard t,e ter+ Bco++odit) currenc),B t,e 3anadian dollar i! t,e em4odiment o* t,at ter+" It4! a (reat exa+ple o* a correlation etween co++odit) price! and currenc) +o-e+ent!" 3on-entional wi!do+ !a)! t,at i* t,e price o* oil i! ri!in(, t,e 3anadian dollar will *ollow !uit, e!peciall) a(ain!t t,e (reen ack ecau!e oil price! are deno+inated in U"S" dollar!" Likewi!e, currenc) trader! are apt to u) t,e uck a(ain!t it! nort,ern ri-al w,en crude price! tu+ le" =ow t,i! !trate() doe!n4t work 1''; o* t,e ti+e, no !trate() doe!, ut it work! enou(, o* t,e ti+e to e extre+el) pro*ita le *or *orex trader!" So let4! take a *urt,er look at crude oil price! and t,eir i+pact on t,e 3anadian dollar" A net stronger US dollar !urts American manufacturing Sands F (3,ri!top,er, Senior Hellow S 8ud!on In!titute, 3anadaN! Kollar KaJe#, 5,e A+erican, 1&?7, ,ttp://www"a+erican"co+/arc,i-e/&''7/dece+ er?1&?'7/canada&'19!? dollar?daJe/, Keec,2 Hor decade!, 3anadian *ir+! ,a-e relied on a low 3anadian dollar to co-er t,e (ap in la or producti-it) wit, U"S" co+panie! (w,o in-e!t +ore ,ea-il) and o*ten in auto+ation2 and to attract U"S" in-e!t+ent" 5,e low 3anadian dollar ,a! ,elped 3anadian co++ercial !er-ice *ir+! to co+pete in t,e U"S" +arket and ,a! lured +illion! o* A+erican touri!t! and con-ention -i!itor!" Cut now, in !ector! ran(in( *ro+ +anu*acturin( to !er-ice!, 3anadian exporter! are *indin( t,at t,e ,i(, dollar +ake! t,e+ +ore expen!i-e *or U"S" cu!to+er!" 5,i! i! w,) 3anadaN! *inance
+ini!ter, 0i+ Hla,ert), ,a! een talkin( up t,e -irtue! o* +onetar) and exc,an(e rate !ta ilit) and di!+i!!in( t,o!e 3anadian! w,o -iew it a! a !)+ ol o* national pride to ,a-e a currenc) t,at i! !tron(er# t,an t,e A+erican dollar" Hla,ert) ,a! al!o !i(naled t,at 3anada will e -i(ilant and puni!, !peculator! w,o tr) to id up t,e 3anadian dollar in order to +ake a Fuick pro*it at 3anadian!N expen!e" =ot e-er)one in 3anada i! !u**erin(" 5,e +ain rea!on t,e 3anadian dollar ,a! een ri!in( in -alue i! world co++odit) price!" 3anada i! a natural re!ource! !uperpower, wealt,) in +ineral! a! well a! ener() re!ource!, and a +aEor a(ricultural and *ore!tr) producer" It al!o i! t,e i((e!t *orei(n !ource o* U"S" ener() i+port!, !uppl)in( oil, natural (a!, electricit), and uraniu+ *or nuclear power plant!" Orowin( econo+ie! in t,e de-elopin( world, particularl) re!ource?poor 3,ina and India, are de+andin( +ore co++oditie! on world +arket! and are t,ere ) pu!,in( up price!" Alt,ou(, ,i(, co++odit) price! and t,e exc,an(e rate (ap will !o*ten U"S" de+and *or 3anadian re!ource!, continued !tron( de+and el!ew,ere will keep upward pre!!ure on t,e 3anadian dollar" 5,i! +a) lead to a per+anent re!tructurin( o* ilateral trade, w,ic, i! wort, around 61"%< illion (in U"S" dollar!2 e-er) da)" 5wo? t,ird! o* U"S"?3anada trade i! (enerated ) two !ector!: t,e auto+oti-e !ector and t,e ener() and natural re!ource! !ector" E-en e*ore t,e recent !ur(e o* t,e 3anadian dollar, 3anadian auto+oti-e export! to t,e United State! ,ad e(un to decline" =ow 3anadian plant! will appear e-en le!! attracti-e to t,e +aEor U"S" and 0apane!e a!!e+ ler!" W,en an auto plant win! new work *ro+ an a!!e+ ler, t,e re!ult! !,ow up in trade *i(ure! *or a! lon( a! a decadeG !o e-en i* t,e relati-el) ,i(, 3anadian dollar pro-e! to e a te+porar) p,eno+enon, it! i+pact on in-e!t+ent deci!ion! in t,e auto indu!tr) could lin(er *or !e-eral )ear!" 5,e !,i*t in t,e

U"S"?3anada exc,an(e rate will pu!, 3anadian +anu*acturer!Lin t,e auto+oti-e indu!tr) ut al!o in ot,er u!ine!!e!Lto +ake new in-e!t+ent! in auto+ation to clo!e t,e producti-it) (ap" (A relati-el) low 3anadian dollar pro-ided little incenti-e *or +akin( !uc, in-e!t+ent! in t,e pa!t"2 A! a re!ult, +anu*acturin( output will re+ain !tead) or e-en (row, ut +anu*acturin( e+plo)+ent will *all" In 3anada, w,ere la or union! ,a-e een !tron(er and +ore +ilitant t,an t,eir counterpart! to t,e !out,, t,i! will in-aria l) eco+e a political concern" Meanw,ile, in t,e United State!, t,e weak U"S" dollar i! actuall) pro-idin( a 4oost to +anu*acturin( e+plo)+ent ) +akin( A+erican product! c,eaper o-er!ea!" Kurin( t,e 199'!, ,i(, la or co!t! and a !tron( U"S" dollar tri((ered a *lood o* i+port!, includin( +an) *ro+ 3anada" =ow, a*ter

t,e dollarN! plun(e, U"S" +anu*acturer! are !eein( export gro&t! *or t,e *ir!t ti+e in decade!: in t,e t,ird Fuarter o* &''7, U"S" export! were up ) 1<"& percent o-er t,e !a+e period la!t )ear" And $$$ t!at puts a cap on conflict O0:anlon *3 (Mic,ael, Kirector o* De!earc, and Senior Hellow S Crookin(! In!titution, 5,e Ar!enal o* Ke+ocrac) and 8ow to >re!er-e It: 1e) I!!ue! in Ke*en!e Indu!trial >olic) 0anuar) &'1&#, ,ttp://www" rookin(!"edu/e/+edia/re!earc,/*ile!/paper!/&'1&/1/&<;&'de*en!e ;&'indu!trial;&' a!e/'1&<Mde*en!eMindu!trialM a!eMo,anlon2 5,e current wa-e o* de*en!e cut! i! al!o di**erent t,an pa!t de*en!e ud(et reduction! in t,eir likel) indu!trial i+pact, a! t,e U"S" de*en!e indu!trial a!e i! in a +uc, di**erent place t,an it wa! in t,e pa!t" Ke*en!e indu!trial i!!ue! are too o*ten -iewed t,rou(, t,e len! o* Eo ! and pet proEect! to protect in con(re!!ional di!trict!" Cut t,e o-erall ,ealt, o* t,e *ir+! t,at !uppl) t,e tec,nolo(ie! our ar+ed *orce! utiliJe doe! ,a-e national !ecurit) re!onance" Vualitati-e !uperiorit) in weaponr) and ot,er ke) +ilitar) tec,nolo() ,a! eco+e an e!!ential ele+ent o* A+erican +ilitar) power in t,e +odern eraLnot onl) *or winnin( war! ut *or deterrin( t,e+" 2!at requires &orld$class !cienti*ic and manufacturing capa4ilities,&!ic! in turn can al!o generate ci-ilian and militar% export opportunities *or t,e United State! in a (lo aliJed +arketplace"

uq u"s" manufacturing
US manufacturing gaining no& $$$ momentum is neg =lumer */ (Crad, Ko+e!tic 3orre!pondent S Wa!,in(ton >o!t, I! U"S" +anu*acturin( +akin( a co+e ack L or i! it Eu!t ,)pe.#, Wa!,in(ton >o!t, $?1, ,ttp://www"wa!,in(tonpo!t"co+/ lo(!/wonk lo(/wp/&'13/'$/'1/i!?u?!?+anu*acturin(?!et? *or?a?co+e ack?or?i!?it?all?,)pe/2 ItN! ea!) to e !keptical" So *ar, t,e e**ect on Eo ! ,a! een +ode!t" Since 0anuar) &'1', t,e United State! ,a! added $&',''' +anu*acturin( Eo ! L and o* t,o!e, Eu!t $',''' ,a-e co+e *ro+ o-er!ea! *ir+! +o-in( ,ere, accordin( to t,e De!,orin( Initiati-e" (5,at include! 11$ in t,e new Leno-o plant"2 5,atN! a decent nu+ er, ut it pale! e!ide t,e < +illion *actor) Eo ! t,at t,e Cureau o* La or Stati!tic! !a)! -ani!,ed etween &''' and &''9" And all t,o!e re!,orin( anecdote! +i(,t Eu!t e t,at L i!olated anecdote!" In Marc,, 0an 8atJiu! o* Oold+an Sac,! pored o-er t,e data on U"S" trade and +anu*acturin( and *ound t,at t,e +anu*acturin( (ain! !ince &'1' ,a-e +ainl) Eu!t een a c)clical ounce? ack *ro+ t,e rece!!ion and not,in( +ore" E-idence *or a !tructural renai!!ance i! !cant !o *ar,# ,e wrote" Aet t,e opti+i!t! counter t,at t,e lo(ic o* a +anu*acturin( co+e ack re+ain! compelling" Ce!ide! t,e !,rinkin( wa(e (ap etween 3,ina and t,e United State!, t,e producti-it) o* t,e A+erican worker keep! ri!in(" S,ippin( co!t! are ri!in(, +akin( out!ourcin( +ore co!tl)" And t,e !ur(e in !,ale (a! drillin( (i-e! t,e United State! a wealt, o* c,eap do+e!tic ener() to ol!ter indu!trie! !uc, a! petroc,e+ical!" All t,at could co+ ine to +ake U"S" *actorie! more competiti#e in t,e %ears a!ead, not Eu!t wit, Europe and 0apan, ut wit, t,e +anu*acturin( e,e+ot, in 3,ina" 5,i! !,i*t likel) wonNt +ean t,e United State! will ,a-e 19 +illion +anu*acturin( worker! a(ain, t,e wa) it did in t,e 19:'!" Hor one t,in(, auto+ation i! !till a power*ul *orce" And t,e t)pe! o* Eo ! t,at co+e ack will e -er) di**erent *ro+ t,e one! t,at -ani!,ed" Still, an) !i(ni*icant uptick in do+e!tic +anu*acturin( a*ter a decade!?lon( decline could ol!ter t,e econo+) and !pur inno-ation"

uq canada dollar
<anadian dollar strengt!ening no& $$$ momentum is neg ;eorge$<os! */ (Ka-id, 3orre!pondent S Wall Street 0ournal, 3anadian Kollar 8it! 3?Week 8i(, A*ter Stron( US, 3anada La or#, Wall Street 0ournal, <?7, ,ttp://online"w!E"co+/article/C5?3I?&'13'<'7?71'&&&",t+l, Keec,2 5IDI=5I ???5,e 3anadian dollar continued to extend it! gains a(ain!t t,e U"S dollar, outper*or+in( +o!t +aEor currencie! and rie*l) touc,in( a *re!, t,ree?week ,i(, Hrida) a*ter a pair o* !tron( e+plo)+ent report! *ro+ t,e U"S" and 3anada" 5,e U"S" dollar wa! recentl) at 361"'&'7 Hrida), *ro+ 361"'&<3 late 5,ur!da), accordin( to data pro-ider 3VO" 5,e (reen ack +o-ed a! low a! 361"'1<7 a*ter t,e relea!e o* t,e la or data, e*ore reco-erin( !o+e lo!!e! in t,e a*ternoon !e!!ion" 5,e net re!ult wa! anot,er !tron( da) *or t,e 3anadian dollar a*ter a (ain o* nearl) one cent in t,e prior da)4! !e!!ion" 3anada added 9$,''' new Eo ! in Ma), t,e i((e!t +ont,l) (ain in o-er 1' )ear!, w,ile +o-in( t,e Eo le!! rate one notc, lower to 7"1; *ro+ 7"&; in t,e prior +ont," Econo+i!t! expected 3anada to add 1$,''' Eo !, wit, no c,an(e to t,e une+plo)+ent rate, accordin( to Do)al Cank o* 3anada" 5,e U"S" added 17$,'' new Eo ! in Ma), w,ile it! une+plo)+ent rate +o-ed to 7"<;, *ro+ 7"$; in April" Expectation! were *or t,e U"S" to add 1<9,''' new Eo !, w,ile keepin( it! Eo le!! rate !tead) at 7"$;" BWe4-e a!icall) !ee a! +uc, !tren(t, a! )ou4re a le to (et out o* t,e!e recent +o-e!,B !aid 0o,n 3urran, !enior -ice pre!ident at 3anadianHorex in 5oronto" BOoin( *orward, t,e [3anadian\ +arket i! (oin( to *ocu! on t,e Cank o* 3anada policie! under new (o-ernor Step,en >oloJ, and t,at will dictate t,e currenc)4! +ediu+?ter+4! +o-e!,B ,e !aid"

lo& prices 8e%

Our argument is empiricall% true Lien ** (1at,), Kirector o* 3urrenc) De!earc, S OH5, 3o++odit) >rice! And 3urrenc) Mo-e+ent!#, In-e!topedia, :?&3, ,ttp://www"in-e!topedia"co+/article!/*orex/'</co++odit)currencie!"a!p, Keec,2 Cetween t,e )ear! &''<?&''9, *or exa+ple, t,e correlation etween t,e 3anadian dollar and oil price! wa! approxi+atel) D9B" In a da)?to?da) a!i!, t,e correlation can reak, ut o-er t,e lon( ter+ it ,a! een strong ecau!e t,e -alue o* t,e 3anadian dollar ,a! (ood rea!on to e !en!iti-e to t,e price o* oil" 3anada i! t,e !e-ent,?lar(e!t producer o* crude oil in t,e world and continue! to cli+ up t,e li!t, wit, production in oil !and! increa!in( re(ularl)" In &''', 3anada !urpa!!ed Saudi Ara ia a! t,e United State!4 +o!t !i(ni*icant oil !upplier" Un eknown!t to +an), t,e !iJe o* 3anada4! oil re!er-e! i! !econd onl) to t,o!e in Saudi Ara ia" 5,e (eo(rap,ical proxi+it) etween t,e U"S" and 3anada, a! well a! t,e (rowin( political uncertaint) in t,e Middle Ea!t and Sout, A+erica, +ake! 3anada one o* t,e +ore de!ira le place! *ro+ w,ic, t,e U"S" can i+port oil" Cut 3anada doe! not !er-ice onl) U"S" de+and" 5,e countr)4! -a!t oil re!ource! are e(innin( to (et a lot o* attention *ro+ 3,ina, e!peciall) !ince 3anada !tu+ led upon a new !ta!, o* oil a*ter a recla!!i*ication o* it! Al erta oil !and! to t,e Becono+icall) reco-era leB cate(or)" (Dead +ore in >eak Iil: W,at 5o Ko W,en 5,e Well! Dun Kr)"2 Hi(ure 1 !,ow! t,e clearl% positi#e relation!,ip etween oil and t,e 3anadian loonie " In *act, it !,ould co+e a! no !urpri!e t,at t,e price o* oil actuall) act! a! a leading indicator *or t,e price action o* t,e 3AK/USK" Since t,e traded in!tru+ent i! t,e in-er!e, or USK/3AK, it4! i+portant to note t,at a!ed on t,e ,i!torical relation!,ip, w,en oil price! (o up, USK/3AK *all! and w,en oil price! (o down, USK/3AK ri!e!" Lo&er prices crus! t!e <anadian dollar offatt */ (Mike, W,) Ko Iil >rice! and t,e 3anadian Kollar Mo-e 5o(et,er.#, C"A" in >olitical Science and Econo+ic! S Uni-er!it) o* We!tern Intario, M"A" in Econo+ic 5,eor) S Uni-er!it) o* Doc,e!ter, la!t +odi*ied <?&$, ,ttp://econo+ic!"a out"co+/od/price!exc,an(erate!/a/oilMandMdollar!",t+, Keec,2 V: I4-e noticed t,at t,e 3anadian Kollar and Iil >rice! alwa)! mo#e toget!er" I* t,e price o* crude oil (oe! down, t,e 3anadian dollar (oe! down (relati-e to t,e U"S" Kollar2" I* t,e price o* crude oil (oe! up, t,e 3anadian dollar i! wort, +ore" W,at4! t,e +ec,ani!+ at pla) ,ere. W,) doe! it ,appen. A: 5,ank )ou *or )our terri*ic Fue!tionb Ce*ore we e(in t,e anal)!i!, t,ere are two *act! we need to keep in +ind: Since oil i! an internationall) traded co++odit) and !ince 3anada i! !o !+all relati-e to t,e United State! and t,e EU, price c,an(e! in oil are cau!ed ) international *actor! out!ide o* 3anada" Since t,e de+and *or ot, oil and (a! are Fuite inela!tic in t,e !,ort run, a ri!e in oil price! cau!e! t,e dollar -alue o* t,e oil !old to ri!e" (5,at i!, w,ile t,e Fuantit) !old will reduce, t,e ,i(,er price will cau!e t,e total re-enue to ri!e, not *all2" 3anada export! around & +illion arrel! o* oil a da) to t,e United State!" I* t,e price o* a arrel o* oil i! 6$' U"S", t,at i! 61'' +illion (U"S"2 in purc,a!e! t,at occur e-er) da)" Cecau!e o* t,e +a(nitude o* !ale! in-ol-ed, an) c,an(e! to t,e price o* oil ,a! an i+pact on currenc) +arket" 8i(,er oil price! dri#e up t,e 3anadian dollar! t,rou(, one o* two +ec,ani!+!, w,ic, ,a-e t,e !a+e end i+pact" 5,e di**erence i! on w,et,er or not t,e oil i! priced in 3anadian or A+erican dollar!, ut t,e *inal i+pact i! identical"

lo& canada dollar 8e% to u"s"

De#alued <anadian dollar 4oosts U"S" manufacturing 2encer *3 (Kaniel, Cu!ine!! Editor S 8u**in(ton >o!t 3anada, 3anada Manu*acturin(: Indu!trial >lant! Ki!appearin( At 5wice 5,e >ace I* U"S", Stud) Hind!#, 8u**in(ton >o!t, 1?13, ,ttp://www",u**in(tonpo!t"ca/&'1&/'1/13/canada?+anu*acturin(?Eo !MnM1&'%93<",t+l, Keec,2 In 3anada, ,owe-er, anot,er *actor i! at pla) t,at +a) explain w,) +anu*acturin( lo!!e! are outpacin( t,e U"S": A strong dollar t,at i! +akin( (ood! and la our +ore expen!i-e on t,e (lo al +arket, puttin( pre!!ure on exporter!" B3ertainl) our co+petiti-ene!! in +anu*acturin( ,a! (one down a tre+endou! a+ount, not Eu!t #ersus t,e United State! w,ere t,ere ,a! een a !,arp re ound """ ut al!o -i!?a?-i! t,ird countrie! a! well,B Cank o* 3anada Oo-ernor Mark 3arne) !aid la!t !prin(" Wit, +anu*acturin( !a((in(, 3anadaN! lon( run o* trade !urplu!e! turned into occa!ional trade de*icit! in recent )ear!" At t,e !a+e ti+e, t,at trend ,a! een o**!et ) ,i(, ener() price!, w,ic, rai!e t,e -alue o* 3anadaN! oil and (a! export!" 5,e re!ult ,a! een a co+plicated +ix o* (ood and ad condition! *or 3anadian exporter! t,at +ake *or a -olatile econo+)" 3anada ,a! !,i*ted etween trade !urplu!e! and de*icit! t,ree ti+e! in t,e pa!t !ix +ont,!"

canada manufacturing impact 3nc

Aea8 <anadian dollar 8e% to <anada manufacturing $$$ it0s on t!e 4rin8 no& 2op Ne&s *9 (Di!in( 3anadian dollar would i+pact t,e countr)4! +anu*acturin( !ector#, 3? &3, ,ttp://topnew!"in/ri!in(?canadian?dollar?would?i+pact?countr)!?+anu*acturin(?!ector? &&$7'1', Keec,2 5,e ri!in( 3anadian dollar would e-entuall) i+pact t,e countr)4! alread) &o44ling +anu*acturin( !ector, a 3IC3 econo+i!t ,a! !aid" 3IC3 econo+i!t A-er) S,en*eld !aid, BLet4! not e linded ) near?ter+ +ont,l) (ain! in output into t,inkin( t,at currenc) (ain! are no lon(er an al atro!! around t,e neck o* 3anada4! *actor) !ector"B 5,e 3anadian Croadca!tin( S)!te+ reported on Monda) t,at a(ain!t t,e U" S" dollar, t,e 3anadian dollar, o*ten called t,e loonie *or t,e aFuatic ird on t,e ack, recentl) ,it 99"3: cent!, a &'?+ont, ,i(," CMI econo+i!t Kou( >orter recentl) recalculated ,i! (ro!! do+e!tic product e!ti+ate *or t,e *ir!t Fuarter *ro+ 3"7 percent to %"7 percent" Accordin( to t,e report! o* 3CS, 3anadian *actorie!, ,owe-er, are !till operatin( at &' percent elow t,eir output e*ore Kece+ er &''7, w,en t,e rece!!ion ,it" Ke+and *or t,e loonie i! likel) to increa!e in anticipation o* t,e Cank o* 3anada rai!in( intere!t rate! t,i! !prin(, !endin( it! -alue ,i(,er" (Wit, Input! *ro+ A(encie!2 PInsert <anada anufacturing 4ad impactQ

***canada stoc8 mar8et

canada stoc8 mar8et *nc

:ig! oil prices 8e% to t!e <anadian stoc8 mar8et Lam */ (Eric, 3orre!pondent S Cloo+ er(, 3anada Stock! Di!e a! 3rude >rice! Col!ter Iil, Oa! >roducer!#, Cloo+ er(, <?17, ,ttp://www" loo+ er("co+/new!/&'13?'<?17/canada? !tock!?ri!e?a!?crude?rall)? ol!ter!?oil?(a!?producer!",t+l, Keec,2 3anadian !tock! ro!e, *ollowin( t,e t,ird weekl) drop *or t,e enc,+ark index, a! a nine?+ont, ,i(, in t,e price o* crude 4oosted oil and (a! producer! and exi!tin( ,o+e !ale! ro!e in Ma)" 3al*rac Well Ser-ice! Ltd" and Canker! >etroleu+ Ltd" (C=12 added at lea!t %"% percent to pace (ain! a+on( ener() !,are!" 5ali!+an Ener() (5LM2 Inc" increa!ed 1"7 percent a*ter Lundin >etroleu+ AC e(an drillin( in a *ield co?owned ) t,e two co+panie! in t,e =ort, Sea" C&Oold 3orp" Eu+ped t,e +o!t in !ix week!, a,ead o* it! inclu!ion in an index o* (old +inin( !tock!" Do(er! 3o++unication! Inc" rallied 1"3 percent a*ter an anal)!t wit, 3anaccord Oenuit) Inc" rai!ed ,i! ratin( *or t,e !tock" 5,e Standard P >oorN!/5SQ 3o+po!ite Index (S>5SQ2 ro!e 1'1"$% point!, or '": percent, to 1&,&::"9' at % p"+" in 5oronto" 5,e (au(e !lipped 1"$ percent la!t week and ,a! lo!t 1"& percent t,i! )ear, +akin( it t,e t,ird?wor!t per*or+in( index a+on( de-eloped +arket! in t,e world, a,ead o* Au!tria and 8on( 1on(" We ,ad a i( !,akeout in t,e +arket la!t week, !o people are +o-in( in a*ter t,e weekend lookin( *or ar(ain!,# !aid Co Kecker, *und +ana(er wit, Aurion 3apital Mana(e+ent in 5oronto" 5,e *ir+ +ana(e! 36< illion (6$"9 illion2" Exi!tin( ,o+e !ale! are !ta iliJin(, puttin( to re!t !o+e o* t,e *ear! o* a ,ou!in( ur!t" 5,e 3anadian econo+) i! prett) re!ilient" 3rude i! at a ,i(, and t,at doe!nNt ,urt eit,er"# And $$$ t!at0s critical to alle#iate <!inese monopol% on rare eart! minerals $$$ <anada is 8e% Simms *9 (Ka-e, 3orre!pondent S 3C3 =ew!, In-e!tor! ru!, into rare eart, ele+ent +inin(#, 3anadian Croadca!tin( 3orporation, &?17, ,ttp://www"c c"ca/new!/ u!ine!!/!tor)/&'1'/'&/1&/*?rare?eart,?ru!,",t+l, Keec,2 3urrentl), 3,ina control! etween 9$ and 97 per cent o* world DEE! production" Cut it! announce+ent in Septe+ er, 0one! !aid, Bcau!ed a it o* panicB *or cu!to+er! out!ide 3,ina, w,o now Fue!tion w,ere t,e !uppl) will co+e *ro+" 5,at4! one rea!on w,) 5oronto? a!ed Vue!t Uraniu+4!
!,are price ,a! !oared recentl) to al+o!t 63 *ro+ *i-e cent! w,en it *ir!t li!ted on t,e 5SQ Renture Exc,an(e in 0anuar) &'':" Vue!t i! explorin( two depo!it! in nort,ea!t Vue ec near t,e order wit, La rador" 5,e !ite i! 1&$ kilo+eter! we!t o* t,e Roi!e)! Ca) nickel?copper?co alt depo!it currentl) ein( +ined ) Rale" DEE! aren4t actuall) t,at rare and, in *act, are a! co++on a! nickel or tin" 5,e na+e re*er! to t,e *act t,e) aren4t o*ten concentrated in depo!it! t,at are pro*ita le to de-elop" 3anada i! t,ree decade! e,ind 3,ina in de-elopin( t,e rare eart, indu!tr), 0one! !aid, ecau!e 3' )ear! a(o, 3,ina !aw t,e potential and

dra+aticall) increa!ed production" B5,i! cau!ed a !teep decline in co++odit) price and e**ecti-el) killed o** an) co+petition,B ,e explained" BSo t,at4! w,) t,e)4-e ,ad t,i! +onopol)" It ,a!n4t een econo+ical *or an) od) el!e to explore"B 5,at ,a! created an exploration ru!, t,at could eco+e an opportunit) *or 3anadian +inin( co+panie!" B3anada4! de*initel) (oin( to ene*it,B predicted 0one!" B3anada ,a! reall) een le!!ed wit, (reat (eolo(),B ,e !aid" 3anada ,a! 1'9 L or $< per cent L o* t,e potential depo!it! out!ide o* 3,ina" Vue ec, wit, %1 exploration
proEect!, and Intario, wit, &:, ,a-e t,e e!t potential, ut t,ere are po!!i le tar(et! in ot,er pro-ince! and territorie!, too" 5,ere4! no production in 3anada )et, ut t,ree exploration proEect! ,a-e een a le to identi*) re!er-e! at =ec,alac,o Lake in ="W"5", Stran(e Lake in Vue ec, and 8oida! Lake in Sa!katc,ewan" Al erta and >"E"I" are t,e onl) pro-ince! w,ere co+panie! are not )et acti-e" In-e!tor intere!t (rowin( B5,ere4! a ,u(e a+ount o* in-e!tor intere!t (i-en t,e opportunit) to in-e!t in t,e earl) !ta(e! w,en t,e reward! can e !u !tantial,B !aid 0one!" Vue!t ,a! two proEect! at Stran(e Lake" Initial re!ult! *ro+ it! exploration ,old pro+i!e, ut t,ere are !till c,allen(e!" A+on( t,e+ i! ne(otiatin( a partner!,ip wit, a lar(er co+pan) wit, a *acilit) to proce!! t,e ore into concentrate" 3a!,in !aid Vue!t ,a! BEu!t !tartedB tr)in( to *ind a potential partner" 0one! ,a! watc,ed in-e!tor intere!t in DEE! (row" 5o addre!! t,at, ,e u!ed Intierra4! data a!e in ad-ance o* a !peec, ,e wa! to (i-e at a +inin( in-e!t+ent con*erence in Rancou-er in 0anuar) to co+e up wit, a li!t o* 7& 3anadian co+panie! li!ted on t,e 5oronto Stock Exc,an(e and 5SQ Renture +arket wit, potential DEE propertie!" (See !ide ar"2 0one! !aid ,i! ai+ wa! to co+pile a li!t *or in-e!tor!, ut ,e4! not

S+all re!ource co+panie! are ,i(, ri!k" 5,eir proEect! +i(,t turn out not to e pro*ita le, and in ti+e! o* mar8et turmoil, in-e!tor! +i(,t *ind t,e) can4t !ell t,eir !,are! at an) price" Al!o, ecau!e t,e) are !+all, t,e) +a) e le!! a le to weat,er downturn! in t,eir indu!tr) or t,e wider econo+)"
reco++endin( an) o* t,e+" 8e e+p,a!iJed in-e!tor! +u!t do t,eir own due dili(ence"

-are eart! s!ortage triggers US)<!ina &ar <ommiso *9 (1at,arine 3o+i!!o, contri utin( writer *or =ew Scienti!t, I! 5,i! t,e Start o* Ele+ent War!.# Septe+ er &'1', ,ttp://www"new!cienti!t"co+/ lo(!/!,ort!,arp!cience/&'1'/'9/i!?t,i!?t,e?!tart?o*?t,e? ele+e",t+l2 3,ina ,a! Eu!t 37 percent o* t,e world4! e!ti+ated re!er-e! o* rare Eart, ele+ent! (DEE!2, ut a w,oppin( 97 per cent o* world production o* DEE! now co+e! *ro+ 3,inaG onl) a *ew ot,er countrie! ,a-e DEE! on t,eir territor), ut en-iron+ental and co!t i!!ue! ,a-e !o *ar +ade +inin( DEES unattracti-eG t,e i((e!t t,reat +a) co+e *ro+ t,e a-aila ilit) o* ele+ent! needed in a(riculture, +o!t particularl) p,o!p,oru! Warnin(! ,a-e alread) een rai!ed a out water war! (Water ten!ion!, i* not )et water war!, are ,ere,# 1$ April &'': 8S=W2" =ow t!e prospect of Ielement &arsM i! eco+in( +ore real" 3,ine!e cu!to+! o**icial! are lockin( !,ip+ent! to 0apan o* rare eart, ele+ent! (DEE!2 and co+panie! ,a-e een in*or+all) told not to export t,e+, Sa)! t,e =ew Aork 5i+e!" 5,e +o-e put! +ore pre!!ure on relation! alread) te!ted ) t,e capture o* a 3,ine!e *i!,in( oat captain in di!puted water! earlier t,i! +ont," 5,e captain wa! *inall) relea!ed on Hrida), !a)! t,e Hinancial 5i+e!, ut t,e an on export! appear! to re+ain in place" 5,e rucku! co+e! a+id +ountin( concern o-er t,e !uppl) o* DEE! *ro+ 3,ina (3,ina re!trict! rare?eart, +etal! export, !o 0apane!e de-i!e an alternati-e!,# 1$ Septe+ er &'1' 8S=W2" 2!e countr% !as 4een imposing export quotas for some time' per,ap! in an e**ort to pre!er-e !tockpile! to +eet (rowin( de+and at ,o+e, and al!o to process t!e ra& materials itself" 1at,arine 3o+i!!o write! in =ew Scienti!t t,at DEE! ,a-e u!e! in electronic!, +edicine, and de*en!e" 5,e) *ind t,eir wa) into e-er)t,in( *ro+ co+puter ,ard dri-e! to catal)tic con-erter!, wind tur ine! to ,) rid car!, !un(la!!e! to la!er!" At pre!ent <!ina !as an almost complete monopol% on mining -EEs " Ke!pite ,a-in( Eu!t 37 percent o* t,e worldN! e!ti+ated re!er-e!, a w,oppin( 97 per cent o* world production now co+e! *ro+ 3,ina, accordin( to a Criti!, Oeolo(ical Sur-e) (pd*2" 3o+i!!o note! t,at t!is is ma8ing t!e United State! uneas%" 5,e 8ou!e o* Depre!entati-e! re-iewed a ill la!t week t,at could end t,e U"S" dependenc% on <!ina" 5,e United State! ,a! it! own rare eart, +ine at Mountain >a!! in 3ali*ornia, ut it wa! clo!ed in &''& ecau!e o* en-iron+ental i!!ue! ( ut !ee Coein( ,elp! !earc, *or rare eart, +etal! in U"S",# && Septe+ er &'1' 8S=W2" DEE! are not t,e onl) t)pe o* ele+ent o-er w,ic, we can expect to !ee trou le" 5,ree )ear! a(o =ew Scienti!t reported on t,e alar+in( rate at w,ic, !o+e o* t,e worldN! re!er-e! o* rare +etal! are ein( u!ed up" 5,e report exa+ined ,ow lon( our !upplie! o* -ariou! +etal! will la!t and w,ere t,e) are located" 5,e Eart, clearl) ,a! in!u**icient re!ource! *or t,e (lo al population to li-e a! t,o!e t,e We!t do, and i* wealt,) countrie! do not c,an(e t,eir wa)!, t,at can onl% end in 4itter quarrels'M 3o+i!!o write!" Ki!pute! a out di+ini!,in( e!!ential ele+ent! +a) co+e to Idominate relations 4et&een countries'M accordin( to t,e c,ie* executi-e o* t,e U"1"N! Do)al Societ) o* 3,e+i!tr), Dic,ard >ike" Extinction Aittner ** (Lawrence S", E+eritu! >ro*e!!or o* 8i!tor) S State Uni-er!it) o* =ew Aork Al an) and Hor+er Editor S >eace and 3,an(e 0ournal, I! a =uclear War Wit, 3,ina >o!!i le.#, 11? &:, www",untin(tonnew!"net/1%%%<2 W,ile nuclear &eapons exi!t, t,ere re+ain! a dan(er t,at t,e) will e u!ed" A*ter all, *or centurie! national con*lict! ,a-e led to war!, wit, nation! e+plo)in( t,eir deadlie!t weapon!"

5,e current deterioration o* U"S" relation! wit, 3,ina +i(,t end up pro-idin( u! wit, )et anot,er exa+ple o* t,i! p,eno+enon" 5,e (at,erin( ten!ion etween t,e United State! and 3,ina i! clear enou(," Ki!tur ed ) 3,inaN! (rowin( econo+ic and +ilitar) !tren(t,, t,e U"S" (o-ern+ent recentl) c,allen(ed 3,inaN! clai+! in t,e Sout, 3,ina Sea, increa!ed t,e U"S" +ilitar) pre!ence in Au!tralia, and deepened U"S" +ilitar) tie! wit, ot,er nation! in t,e >aci*ic re(ion" Accordin( to Secretar) o* State 8illar) 3linton, t,e United State! wa! a!!ertin( our own po!ition a! a >aci*ic power"# Cut need t,i! lead to nuclear war. =ot nece!!aril)" And )et, t,ere are !i(n! t,at it could" A*ter all, ot, t,e United State! and 3,ina po!!e!! large num4ers o* nuclear &eapons" 5,e U"S" (o-ern+ent t,reatened to attack 3,ina wit, nuclear weapon! durin( t,e 1orean War and,
later, durin( t,e con*lict o-er t,e *uture o* 3,inaN! o**!,ore i!land!, Vue+o) and Mat!u" In t,e +id!t o* t,e latter con*rontation, >re!ident Kwi(,t Ei!en,ower declared pu licl), and c,illin(l), t,at U"S" nuclear weapon! would e u!ed Eu!t exactl) a! )ou would u!e a ullet or an)t,in( el!e"# I* cour!e, 3,ina didnNt ,a-e nuclear weapon! t,en" =ow t,at it doe!, per,ap! t,e e,a-ior o* national leader! will e +ore te+perate" Cut t,e loo!e nuclear t,reat! o* U"S" and So-iet (o-ern+ent o**icial! durin( t,e 3old War, w,en ot, nation! ,ad -a!t nuclear ar!enal!, !,ould con-ince u! t,at, e-en a! t,e +ilitar) ante i! rai!ed, nuclear !a er?rattlin( per!i!t!"

So+e pundit! ar(ue t,at nuclear weapon! pre-ent war! etween nuclear?ar+ed nation!G and, ad+ittedl), t,ere ,a-enNt een -er) +an)Lat lea!t not )et" Cut t,e 1ar(il War o* 1999, etween nuclear?ar+ed India and nuclear?ar+ed >aki!tan, !,ould con-ince u! t,at !uc, war! can occur" Indeed, in t,at ca!e, t,e con*lict al+o!t !lipped into a nuclear war" >aki!tanN! *orei(n !ecretar) t,reatened

t,at, i* t,e war e!calated, ,i! countr) *elt *ree to u!e an) weapon# in it! ar!enal" Kurin( t,e con*lict, >aki!tan did +o-e nuclear weapon! toward it! order, w,ile India, it i! clai+ed, readied it! own nuclear +i!!ile! *or an attack on >aki!tan" At t,e lea!t, t,ou(,, donNt nuclear weapon! deter a nuclear attack. Ko t,e). I -iou!l), =A5I leader! didnNt *eel deterred, *or, t,rou(,out t,e 3old War, =A5IN! !trate() wa! to re!pond to a So-iet con-entional +ilitar) attack on We!tern Europe ) launc,in( a We!tern nuclear attack on t,e nuclear?ar+ed So-iet Union" Hurt,er+ore, i* U"S" (o-ern+ent o**icial! reall) elie-ed t,at nuclear deterrence worked, t,e) would not ,a-e re!orted to c,a+pionin( Star War!# and it! +odern -ariant, national +i!!ile de*en!e" W,) are t,e!e -a!tl) expen!i-eLand pro a l) unworka leL+ilitar) de*en!e !)!te+! needed i* ot,er nuclear power! are deterred *ro+ attackin( ) U"S" nuclear +i(,t. I* cour!e, t,e otto+ line *or t,o!e A+erican! con-inced t,at nuclear weapon! !a*e(uard t,e+ *ro+ a 3,ine!e nuclear attack +i(,t e t,at t,e U"S" nuclear ar!enal i! *ar (reater t,an it! 3,ine!e counterpart" 5oda), it i! e!ti+ated t,at t,e U"S" (o-ern+ent po!!e!!e! o-er *i-e t,ou!and nuclear war,ead!, w,ile t,e 3,ine!e (o-ern+ent ,a! a total in-entor) o* rou(,l) t,ree ,undred" Moreo-er, onl) a out *ort) o* t,e!e 3,ine!e nuclear weapon! can reac, t,e United State!" Surel) t,e United State! would win# an) nuclear war wit, 3,ina" Cut w,at would t,at -ictor)# entail. A nuclear attack ) 3,ina would

i++ediatel) !lau(,ter at lea!t 1' +illion A+erican! in a (reat !tor+ o* la!t and *ire, w,ile lea-in( +an) +ore d)in( ,orri l) o* !ickne!! and radiation poi!onin(" 5,e 3,ine!e deat, toll in a nuclear war would e *ar ,i(,er" Cot, nation! would e reduced to !+olderin(, radioacti-e wa!teland!" Al!o, radioacti-e de ri! !ent alo*t ) t,e nuclear explo!ion! would 4lot out t!e sun and rin( on a nuclear &inter# around t!e glo4eLde!tro)in( a(riculture, creatin( worldwide *a+ine, and (eneratin( c,ao! and de!truction"

uq stoc8s
<anadian stoc8 mar8et clim4ing no& 2ila8 */ (0o,n, 3orre!pondent S Deuter!, 3A=AKA S5I31S?Hed opti+i!+, 5i+ 8orton! li*t 5SQ to 1?week ,i(,#, Deuter!, <?1:, ,ttp://www"reuter!"co+/article/&'13/'</1:/+arket!? canada?!tock!?idUSL&='EU1UD&'13'<1:, Keec,2 5IDI=5I, 0une 1: (Deuter!2 ? 3anada4! +ain !tock index cli+ ed to a one?week ,i(, on 5ue!da) a! po!iti-e econo+ic data and ,ope! t,at t,e U"S" Hederal De!er-e will !tick to it! !upporti-e +onetar) polic) dro-e (ain! in al+o!t e-er) +aEor !ector" 3o**ee c,ain 5i+ 8orton! Inc al!o oo!ted 3anada4! +ain !tock index ri!in( % percent on new! t,at it now *ace! pre!!ure *ro+ U"S" ,ed(e *und Scout 3apital Mana(e+ent to +ake c,an(e! a*ter recentl) outlinin( plan! to addre!! t,e concern! o* acti-i!t in-e!tor 8i(,*ield! 3apital" Senti+ent i+pro-ed *urt,er a*ter U"S" con!u+er price! ro!e in Ma) and a (au(e o* underl)in( price pre!!ure! indicated !i(n! o* !ta iliJin( a*ter a lon( decline" And $$$ momentum is neg Rin!ua */ (Weak co++odit) price! !end re!ource? a!ed 3anadian !tock +arket lower in Marc,#, %?%, ,ttp://www"(lo alti+e!"cn/content/77&7&%"!,t+lW"Uc+a>5$rF3:, Keec,2 Cut t,e future o* 3anadian !tock! re+ain! positi#e" Sc,wartJ elie-e! it4! Eu!t a +atter o* ti+e e*ore t,e +arket trend (oe! ack in *a-or *or c)clical !tock!" B5,e pendulu+ alwa)! !win(! *ro+ one !ide to t,e ot,er,B ,e !aid" B=ow it4! in *a-or o* non?c)clical co++odit)? a!ed in-e!t+ent!, t,at4! Eu!t t,e wa) it i!, ut at !o+e point !o+eone will rin( t,e ell and !a) it4! ti+e to (et ack into c)clical !tock!, and t,at will e -er), -er) po!iti-e *or t,e 3anadian +arket"B B=o one know! w,en it will ,appen, ut it will ,appen,B ,e added"

uq s!ortage
1es s!ortage no& $$$ <!ina !as cornered t!e mar8et SN *3 (@eit=ew!, Dare eart, +etal!: Will we ,a-e enou(,.#, 9?&%, ,ttp://www"Jeitnew!"or(/natural?!cience!/eart,?!cience/rare?eart,?+etal!?will?we?,a-e? enou(,, Keec,2 A recent MI5 !tud) proEected t,at neod)+iu+ de+and could (row ) a! +uc, a! 7'' percent o-er t,e next &$ )ear!G de+and *or d)!pro!iu+, al!o needed *or wind tur ine!, could increa!e ) &,<'' percent" 3,ina currentl) !upplie! 97 percent o* (lo al rare eart, +etal de+and, and 1'' percent o* ,ea-) rare eart, +etal! !uc, a! ter iu+ and d)!pro!iu+, u!ed in wind tur ine!" In &''$, it e(an re!trictin( export! to pre!er-e re!ource! and protect t,e en-iron+ent, cau!in( price! to !oar" 5oda), t,e United State! i! *99 percent dependent on i+port! *or rare eart, +etal!"

!ig! prices 8e%

<anadian stoc8s lin8ed to oil prices Rin!ua */ (Weak co++odit) price! !end re!ource? a!ed 3anadian !tock +arket lower in Marc,#, %?%, ,ttp://www"(lo alti+e!"cn/content/77&7&%"!,t+lW"Uc+a>5$rF3:, Keec,2 5,e 3anadian !tock +arket wa! on a downward !piral in Marc,, wit, anal)!t! attri utin( t,e poor per*or+ance to weak co++odit) price!" W,ile t,e 3anadian !tock +arket ,a! een on a con!i!tent down,ill !lide o-er t,e la!t *ew week!, it4! a !tark di**erence in t,e US +arket, w,ere !tock! were ,ittin( !trin( o* record clo!in( ,i(,!, oo!ted ) po!iti-e econo+ic data" 0e**re) Cradac!, +ana(in( director and port*olio +ana(er at Manuli*e A!!et Mana(e+ent Ltd, told Qin,ua t,at ,e elie-e! t,i! !lu+p i! due to t,e 3anadian !tock +arket4! co+po!ition, w,ic, i! +ore ,ea-il) geared toward! co++oditie!, lea-in( it !u!cepti le to t,e -olatile co++odit) price!" Cradac! !aid !o+e o* t,e co++oditie! wei(,in( down t,e 3anadian !tock +arket ri(,t now are ener() and (old !,are!, w,ic, account *or a out 9 percent and &$ percent o* t,e total !tock +arket -alue re!pecti-el)" W,ile international oil price! are ene*itin( *ro+ t,e re oundin( US econo+), Cradac! !aid t,e ke) i!!ue ,oldin( ack 3anadian ener() !tock! i! pricin( di**erential! due to lack o* pipeline takeawa) capacit) in 3anada, w,ic, led to an exce!! !uppl) o* do+e!tic oil and re!ulted in !lu((i!, ener() !tock! on 5oronto Stock Exc,an(e"

canada stoc8s 8e%

Equit% mar8ets are 8e% $$$ onl% &a% to Cumpstart mining 2!omas *3 (8elen, 3orre!pondent S Hinancial 5i+e!, Miner! read) to take punt on rare eart,!#, Hinancial 5i+e!, 1&?3', ,ttp://www"*t"co+/c+!/!/'/$e: 399&?%d1e?11e&?a99 ? ''1%%*ea %9a",t+lWaxJJ&QE 0* uS, Keec,2 5,e relati-el) !+all +arket *or rare eart,! i! one con!traint *or would? e +iner!, wit, t,e ele+ent! u!ed in onl) !+all Fuantitie! in end product!" Olo al de+and o* 11$,''' tonne! t,i! )ear i! *oreca!t to ri!e to &'','''?&%',''' tonne! ) &'&', accordin( to rare eart,! con!ultanc) I+coa" Kepre!!ed eFuit) +arket! ,a-e al!o put pressure on !o?called re!ource! Eunior! S t,e exploration and earl) !ta(e de-elop+ent co+panie! S acro!! t,e !ector" Hor re!ource! Eunior!, t,e elie* i! t,at a! +an) a! $'' !+all?cap exploration co+panie! will di!appear o-er t,e next 1& +ont,!, unle!! t,ere i! an i+pro-e+ent in t,eir a ilit) to rai!e eFuit) capital,# !a)! >eter 3a!,in, c,ie* executi-e o* Vue!t Dare Mineral!" In tr)in( to pick rare?eart, +iner! wit, etter lon(?ter+ pro!pect!, in-e!tor! and anal)!t! are increa!in(l) *ocu!in( on proEect! t,at tar(et production o* t,e !o?called ,ea-ie!# S a rarer !u !et o* t,e ele+ent!" And $$$ <anada is specificall% 8e% NNL *3 (=et=ew!Led(er, Dare Eart, Metal! i! c,an(in( it! na+e to 3anada Dare Eart, 3orporation#, 1&?19, ,ttp://www"netnew!led(er"co+/&'1&/1&/19/rare?eart,?+etal!?i!? c,an(in(?it!?na+e?to?canada?rare?eart,?corporation/, Keec,2 58U=KED CAA S Minin( =ew! S Dare Eart, Metal! i! c,an(in( it! na+e to 3anada Dare Eart,
3orporation !tated 5rac) A" Moore, >re!ident and 3EI o* t,e 3o+pan) reportin( on t,e re!ult! o* t,e Annual and Special Meetin( ,eld on Kece+ er 17, &'1&" All +otion! were pa!!ed wit, an o-erw,el+in( +aEorit) includin( t,e reappoint+ent o* t,e 3o+pan)N! *i-e director!G t,e na+e c,an(e to 3anada Dare Eart, 3orporation and a +odi*ication to t,e 3o+pan)N! Stock Iption >lan#, !tated Moore" Annual Oeneral Meetin( 5,e 3o+pan)N! *i-e director! are: DoEer Li, t,e 3o+pan)N! 3,air+anG 5rac) A" Moore, t,e 3o+pan)N! 3,ie* Executi-e I**icer and >re!identG Cill >urcellG >eter S,earin(G and Mic,ael Stare!, t,e 3o+pan)N! *or+er 3,ie* Executi-e I**icer and >re!ident" 5,e 3o+pan)N! Stock Iption >lan now allow! *or up to &:,$$&,%&: !,are! to e i!!ued to !enior per!onnel, con!ultant!, ad-i!or!, e+plo)ee!, o**icer! and director!" 5,e 3o+pan) will proceed to c,an(e it! na+e to 3anada Dare Eart, 3orporation to etter re*lect t,e importance o* 3anada in t,e glo4al rare eart, +arket"

%es &ar
-are eart! s!ortage creates protectionist tendencies =art!emore ** (3,ri!tine, Hellow S 3enter *or a =ew A+erican Securit), Kirector S =atural Securit) >ro(ra+, 3orre!pondent S Wa!,in(ton >o!t, M"A" in Securit) Studie! S Oeor(etown Uni-er!it), ELEME=5S IH SEU3UDI5A: MI5IOA5I=O 58E DIS1S IH U"S" KE>E=KE=3E I= 3DI5I3AL MI=EDALS#, 3enter *or a =ew A+erican Securit), 0une, ,ttp://www"cna!"or(/*ile!/docu+ent!/pu lication!/3=ASMMineral!M>art,e+oreM1"pd*, Keec,2 Mineral! are a !u Eect o* +uc, contention" In one ,and, t,e United State! re+ain! le!! prepared *or !uppl) di!ruption!, price !pike! and trade di!a(ree+ent! related to t,e (lo al +ineral! trade t,an +o!t expert! realiJe" In t,e ot,er ,and, pu lic concern o-er relia le acce!! to t,e +ineral! reFuired in ke) !ector! o* t,e U"S" econo+), in particular t,o!e needed to produce +ilitar) eFuip+ent, i! (rowin(" 5oo *reFuentl), ,owe-er, !uc, concern! are a!ed on inaccurate a!!u+ption!" A !o er and in*or+ed anal)!i! !u((e!t! t,ere are real -ulnera ilitie!, w,ic, place critical national !ecurit) and *orei(n polic) intere!t! at ri!k" In wor!t?ca!e !cenario!, !upplie! o* +ineral! t,at t,e United State! doe! not produce do+e!ticall) +a) e di!rupted, creatin( price !pike! and la(! in deli-er)" E-en !,ort o* +aEor !uppl) di!ruption!, !upplier countrie! can exert le-era(e o-er t,e United State! ) t,reatenin( to cut o** certain ke) +ineral !upplie!" 5,e United State! +a) al!o lo!e (round !trate(icall) i* it continue! to la( in +ana(in( +ineral i!!ue!, a! countrie! t,at
con!ider a!!ured acce!! to +ineral! a! *ar +ore !trate(icall) i+portant are increa!in(l) !ettin( t,e rule! *or trade in t,i! area" 3,inaN! ri!in( do+inance i! at t,e ,eart o* t,i! (rowin( pu lic de ate" It! &'1' cuto** o* rare eart, ele+ent!& S a uniFue !et o* +ineral! t,at are di**icult to proce!! )et critical to +an) ,i(,tec, application! S attracted particular attention" A*ter 0apan detained a 3,ine!e trawler captain o-er a !kir+i!, in t,e Ea!t 3,ina Sea, 0apane!e co+panie! reported week! o* !talled !,ip+ent! o* rare eart,! *ro+ 3,ina a+id ru+or! o* an o**icial e+ ar(o" 5,i! +a) !ound like a +inor trade di!pute, ut 3,ina currentl) control! production o* a out 9$ percent o* t,e worldN! rare eart,!, w,ic, are critical to uildin( la!er?(uidance !)!te+! *or weapon!, re*inin( petroleu+ and uildin( wind tur ine!" 3oincidin( wit, po!!e!!in( t,i! incredi le le-era(e o-er t,e re!t o* t,e world, 3,ina ,a!

al!o reduced it! export Fuota! *or t,e!e +ineral!" Hor it! part, t,e 3,ine!e (o-ern+ent contended t,at it did not
put an) *or+al export e+ ar(o in place, and t,at it! plan! to reduce export! !i+pl) re*lect t,e need to +eet (rowin( do+e!tic de+and *or rare eart,!" 0apan?3,ina relation! experienced *urt,er !train in t,eir alread) ten!e relation!,ip" In t,e United State!, +an) reporter!, polic) anal)!t! and deci!ion +aker! did not *ore!ee t,i! c,allen(e" Heelin( lind!ided, !o+e in t,e United State! c,aracteriJed t,e !ituation in a +anner t,at de+oniJed 3,ina rat,er t,an u!in( t,e opportunit) to etter under!tand t,e true nature o* U"S" !uppl) c,ain -ulnera ilitie!" 5,e &'1' rare eart,! ca!e and ot,er! are increa!in( intere!t in

critical +ineral! a+on( U"S" polic)+aker!" 3on(re!! ,eld ,earin(! on t,e !trate(ic i+portance o* +ineral!

etween &''7 and &'1', and t,e &'1' =ational Ke*en!e Aut,oriJation Act reFuired KIK to !tud) and report on it! dependence on rare eart, ele+ent! *or weapon!, co++unication! and ot,er !)!te+!"3 Kurin( a &''9 ,earin( on +ineral! and +ilitar) readine!!, Depu lican Depre!entati-e Dand) Hor e! o* Rir(inia called +ineral!, one o* t,o!e t,in(! t,at no one reall) talk! a out or worrie! a out until !o+et,in( (oe! wron(" ItN! at t,at point S t,e point w,ere we donNt ,a-e t,e !teel we need to uild MDA>! [Mine De!i!tant A+ u!, >rotected -e,icle!\ or t,e r,eniu+ we need to uild a 0SH [0oint Strike Hi(,ter\ en(ine t,at t,e !tockpile eco+e! criticall) i+portant"#% In Icto er &'1', Secretar) o* State 8illar) Dod,a+ 3linton !tated t,at it would e in our intere!t! co++erciall) and !trate(icall)# to *ind additional !ource! o* !uppl) *or rare eart, +ineral!, and !tated t,at 3,inaN! recent cut! to rare eart, export! !er-ed a! a wakeup call t,at ein( !o dependent on onl) one !ource, di!ruption could occur *or natural di!a!ter rea!on! or ot,er kind! o* e-ent! could inter-ene"#$ In 0anuar) &'11, Sen" Mark Ce(ic,, K?Ala!ka, Sen" Li!a Murkow!ki, D?Ala!ka, and Dep" Mike 3o**+an, D?3olo", wrote a letter to Ke*en!e Secretar) Do ert Oate! expre!!in( concern *or +ineral! reFuired *or producin( de*en!e eFuip+ent !uc, a! 0oint Kirect Attack Munition! (0KAM!2, w,ic, !tated, 3learl), rare eart, !uppl) li+itation! pre!ent a !eriou! -ulnera ilit) to our national !ecurit)" Aet earl) indication! are t,at KIK ,a! di!+i!!ed t,e !e-erit) o* t,e !ituation to date"#< Additionall), t,e Kepart+ent o* Ener() (KIE2 launc,ed a +ulti)ear e**ort to explore potential -ulnera ilitie! in !uppl) c,ain! *or +ineral! t,at will e critical to *our di!tinct area! o* ener() tec,nolo() inno-ation" W,ile concern i! (rowin(, t,e +edia and

polic)+aker! o*ten *ocu! too narrowl) on w,at +a) !ee+ t,e +o!t co+pellin( indicator! S u!uall) i+port dependence or !carcit) S in pre!cri in( !olution! to reduce U"S" -ulnera ilitie!, in particular to !uppl) di!ruption! in critical +ineral! !uc, a! rare eart,!" 5,i! *ocu! i! !parkin( protectionist attitudes, wit, !o+e worr)in( t,at i+port dependence po!e! an in,erent ri!k to t,e U"S" econo+)" Ki!cu!!ion o* +ineral! al!o *reFuentl) *ocu!e! on !uppl) !carcit) and re!ource depletion in a !olute ter+!" 8owe-er, ot, t,e r,eniu+ and rare eart, +ineral! di!ruption! o* t,e pa!t *i-e )ear! were tri((ered ) deli erate deci!ion! +ade ) political leader! to le-era(e t,eir po!ition! o* !tren(t,, not ) +arket *orce!, di!order or !carcitie! o* t,e!e

+ineral!" 3ountrie! o*ten re-ert to ,oardin(, pre!!urin( !upplier! and ot,erwi!e e,a-in( a! i* !carcitie! are pre!ent e-en w,en t,e) are not, a!ed !olel) on concern! t,at !,orta(e! are likel) in t,e near ter+" In *act, neit,er !carcit) nor i+port dependence alone i! !u**icient to !i(nal -ulnera ilit), and a co+ ination o* *actor! includin( concentration o* !upplier! i! +o!t o*ten reFuired *or +ineral i!!ue! to eco+e !ecurit) or *orei(n polic) pro le+!" And $$$ t!at spirals into nuclear &ar Land% F (Cen, Kirector o* De!earc, and Strate() S Atlantic Media 3o+pan), >u li!,er S 5,e Atlantic and =ational 0ournal, %?3, ,ttp://c,inaredux"co+/&''7/'%/'3/protectioni!+?and? war2 5,e greatest t!reat *or t,e &1!t centur) i! t,at t,e!e econo+ic *lare?up! etween t,e US and 3,ina will not e contained, ut +i(,t !pill o-er into t,e real+ o* militar% aggression etween t,e!e two world power!" Econo+ic con*lict 4reeds +ilitar) con*lict" 5,e !take! o* trade o-erride t,e ideolo(ical power o* t,e 5aiwan i!!ue" 3,inaN! a ilit) to continue (rowin( at a rapid rate take! precedence, !ince t,ere can e no !o-erei(nt) *or 3,ina wit,out econo+ic (rowt," 5,e United State!N role a! t,e worldN! !uperpower i! dependent on it! a ilit) to lead econo+icall)" A! +an) o* )ou will know *ro+ readin( t,i! lo(, I do not elie-e t,at war etween t,e US and 3,ina i! i++inent, or a *ore(one conclu!ion in t,e *uture" I certainl) do not ,ope *or war" Cut I ,a-e little dou t t,at protectioni!t policie! on ot, !ide! (reatl) increa!e t,e likeli,ood o* conflictS*ar +ore t,an increa!e! in +ilitar) ud(et! and anti?!atellite te!t! "

***canada econom%

canada econom% *nc

Oil prices underlie t!e 4ac84one of t!e <anadian econom% Simpson */ (Scott, 3orre!pondent S Rancou-er Sun, Ener() trade ke) to 3anadaN! econo+)#, Rancou-er Sun, $?&:, ,ttp://www"-ancou-er!un"co+/ u!ine!!/re!ource!/Mo-in(dEner()dtraded3anadadecono+)/ :%%$$1$/!tor)",t+l, Keec,2 Export! o* crude oil, +o!t o* it tra-ellin( to t,e U"S" -ia pipeline, account! *or rou(,l) &' per cent o* 3anadaN! total net export!, Scotia ank -ice?pre!ident and co++oditie! anal)!t >atricia Mo,r !aid in a recent inter-iew" 5,e !iJe o* our do+e!tic +arket, in ter+! o* w,at con!u+er! can reall) contri ute, i! Fuite !+all relati-e to our export!,: Mo,r !aid" We are an exportin( nation"# Wit,in our Scotia ank co++odit) price index, t,e wei(,t o* crude oil and re*ined petroleu+ product! i! 3D"( per cent o* 3anadian net export!, o* all co++oditie! and re!ource? a!ed +anu*actured (ood!" W,at I *ind i! t,e (eneral pu lic doe!nNt connect t,e dot! etween ,ow t,e econo+) i! doin( and t,e a ilit) o* (o-ern+ent to *und !ocial !er-ice!: uild ,o!pital!, uild road!, pro-ide pen!ion! to old?a(e pen!ioner!,# Mo,r !aid" 5,ere i! a direct connection ,ere etween ,ow we do a! an exportin( nation and our a ilit) to pro-ide !ocial !er-ice!" I t,ink itN! Fuite i+portant, and it doe!nNt !ee+ to e well under!tood"# >ipeline! ulti+atel) are t,e pac8 !orses o* t,e 3anadian econo+)" Mo,r i! clo!el) *ollowin( t,e pu lic de ate!, ot, ,ere and
!out, o* t,e order, o-er propo!ed pipeline! t,at would carr) we!tern 3anadian oil product!, includin( itu+en *ro+ t,e oil!and!, and create acce!! to +arket! e)ond t,e U"S" Midwe!t w,ere al+o!t all o* 3anadaN! oil i! !old" In a recent report, 5K Econo+ic! !u((e!ted i* +aEor pipeline con!truction and expan!ion proEect! are not uilt, 3anada would *or(o a! +uc, a! 61"3 trillion o* OK> (in &'1' 3anadian dollar!2 and 6&7< illion in taxe! *ro+ &'11?3$" A U"S" (o-ern+ent deci!ion i! expected t,i! )ear on 1e)!tone QL, a 67? illion pipeline t,at would connect ,ea-) crude producer! in Al ertaN! oil!and! to re*iner! alon( t,e U"S" Oul* 3oa!t in 5exa!" 5wo line! propo!ed *or Criti!, 3olu+ ia, En rid(eN! 6<? illion, 1,177?kilo+etre =ort,ern Oatewa) proEect *ro+ Cruder,ei+, Alta", to t,e C"3" central coa!t at 1iti+at and 1inder Mor(anN! plan to twin and expand t,e capacit) o* it! 5ran! Mountain line *ro+ Ed+onton to Curna ) Mountain, would (i-e producer! anot,er option: !,ippin( lar(e -olu+e! o* crude oil to re*iner! in A!ia" 5,ere i! an econo+ic incenti-e *or new pipeline!" 5,e) would carr) +uc, lar(er -olu+e! o* oil to t,e C"3" coa!t, and *ro+ t,ere to new +arket! in 0apan, 3,ina and Sout, 1orea, t,an 5ran! MountainN! exi!tin( line can acco++odate" 5,e) would (i-e Al erta producer! +ore le-era(e to c,a!e opti+al price! *or t,eir product rat,er t,an !ellin( into a U"S" +arket t,at !o+eti+e! i! (lutted and in an) ca!e i! le!! likel) in *uture to rel) on i+ported oil" En rid(e =ort,ern Oatewa) pre!ident 0o,n 3arrut,er! !aid in an inter-iew t,at i* we!tern 3anadian oil producer! were to (ain acce!! to +arket! in A!ia, t,e) could realiJe an a-era(e re-enue (ain o* 6& to 63 a arrel o-er t,e lon(er ter+" At a proEected $&$,''' arrel! per da) t,rou(, =ort,ern Oatewa), t,at would e a lot o* +one), per,ap! 61 +illion to 61"$ +illion in extra -alue *or eac, &%?,our !,ip+ent" We ,a-e een -er) *ortunate t,at we !at atop t,e worldN! lar(e!t +arket *or our oil,# 3arrut,er! !aid" 5,e United State! ,a! a world o* option! in ter+! o* w,ere t,e) acce!! oil, ut we onl) ,a-e one (*or !ellin( it2" We are t,e +o!t trade?dependent o* t,e O: countrie! and oil i! our lar(e!t, +o!t i+portant export and itN! tied to one +arket and t,at +arket ,a! +atured" So itN! critical t,at we acce!! alternati-e +arket!" I* cour!e we ,a-e to addre!! t,e ri!k !ide a! well" Cut t,ere are ,u(e ene*it!"# It,er anal)!t! ,a-e o !er-ed i* 3anadian producer! ,a-e t,e capacit) to !,i*t t,eir product o-er to u)er! in A!ia, t,e re-enue upli*t can (o !u !tantiall) ,i(,er, per,ap! a! +uc, a! 61' a arrel durin( t,o!e period! w,en t,e U"S" pipeline and re*iner) !)!te+ i! in a relati-e (lut or w,en re*inerie! are o**line *or +aintenance" W,en )ou eco+e dependent on a particular export outlet, i* t,e !uppl)?de+and alance eco+e! a+ple, t,en it eco+e! a u)erN! +arket and )ou ,a-e to accept di!count!" 5,atN! w,at ,a! ,appened to u!,# Mo,r !aid" =ot e-er)one a(ree! wit, t,i! !cenario" In April, econo+i!t Do )n Allan, an opponent o* =ort,ern Oatewa), relea!ed a !tud) !u((e!tin( pipeline con!traint! were not depre!!in( t,e price o* our oil relati-e to U"S" or world crude price! and t,at clai+! to t,e contrar) ,ad een c)nicall) concei-ed wit, +ade up nu+ er!# to win !upport *or t,e proEect" 5,e relati-el) poor Fualit) o* itu+en a! an oil co++odit) i! t,e real rea!on itN! c,eaper, !,e ar(ued" Citu+en i! a Eunk crude t,at reFuire! up(radin( and co+plex re*inin(" It i! alwa)! !old at a di!count" =atural (price2 di**erential! exi!t no +atter ,ow +uc, pipeline capacit) i! a-aila le"# E-en a! econo+i!t! de ate t,e -alue o* openin( new +arket!, +o!t critic! o* =ort,ern Oatewa), 1e)!tone QL and 5ran! Mountain are *ocu!ed on en-iron+ental ri!k!, includin( t,e po!!i ilit) o* a pipeline leak, a +arine !pill *ro+ an oil tanker, and t,e acceleration o* (lo al war+in( a! a re!ult o* extractin(, proce!!in( and re*inin( t,e expanded oil production t,e pipeline would acco++odate" Do ert

Man!ell, a Uni-er!it) o* 3al(ar) econo+ic! pro*e!!or w,o (a-e te!ti+on) on e,al* o* =ort,ern Oatewa) at =ational Ener() Coard ,earin(! on t,e proEect, call! oil and (a! t,e elep,ant in t,e roo+# w,en it co+e! to t,e 3anadian econo+)" 5,e re!ource !ector i! t,e lar(e!t pri-ate in-e!tor in t,e 3anadian econo+),# Man!ell !aid" It accounted *or one?t,ird o* all u!ine!! in-e!t+ent! in non?re!idential
con!truction" In ter+! o* a-era(e weekl) earnin(! ) !ector, it wa! ) *ar t,e ,i(,e!t" In ter+! o* e!ti+ate! o* Eu!t t,e oil and (a! co+ponent o* Eu!t t,e re!ource! !ector o-er t,e next &$ )ear!, itN! !o+et,in( like &$ +illion per!on )ear! o* e+plo)+ent *or 3anada"#

2!at causes Que4ec secession Nuec!terlein ?? (Konald, political !cienti!t and aut,or o* nu+erou! ook! on A+erican politic! and *orei(n polic), 3A=AKA KECA5ES A RADIE5A IH KIMES5I3 ISSUES#, Septe+ er 1999 ,ttp://donaldnuec,terlein"co+/1999/canada",t+l2

5,e *ourt, new! !tor), w,ic, did not (et Fuite t,e attention o* t,e ot,er t,ree, reported t,at t,e *ederal (o-ern+ent, ,eaded ) >ri+e Mini!ter 0ean 3,retien, plan! to !take out it! po!ition re(ardin( a new re*erendu+ t,at Vue ec will pro a l) ,old on independence !o+eti+e in , &'''" 3,retien !ee+! deter+ined to la) down two enc, +ark! *or t,i! re*erendu+: W,at !,ould e t,e wordin( o* a propo!al (i-en to Vue ec -oter! a! t,e) +ake a c,oice etween continued a!!ociation wit, 3anada, or independence. And w,at re!ult !,ould con!titute a clear +andate *or !eparation *ro+ 3anada. A )ear a(o t,e !upre+e court decided t,at t,e *ederal (o-ern+ent and t,e ot,er pro-ince! will e o li(ed to ne(otiate wit, Vue ec, i* t,ere i! a clear an!wer to a clear Fue!tion !tated in a re*erendu+" 3,retien ,a! now !et up a workin( (roup o* *ederal o**icial! to
plan Ittawa! !trate() around t,e!e i!!ue!" 8e ,ope! t,at Vue ecker! will reEect a clear Fue!tion a out pullin( out o* t,e 3anadian 3on*ederation" Iur -i!it to =o-a Scotia and =ew Crun!wick pro-ided in!i(,t into t,e reaction! o* 3anada4! Hrenc,?!peakin( population li-in( out!ide o* Vue ec" 5,e Acadian! o* =o-a Scotia, w,o were expelled ) t,e Criti!, (et,nic clean!in(2 two and a ,al* centurie! a(o ecau!e o* Critain! renewed war wit, Hrance, li-e in relati-e ,ar+on) wit, t,eir En(li!,?!peakin( nei(, or! t,ere, and in =ew Crun!wick w,ere t,e) nu+ er nearl) *ort) percent o* t,e population" I en(a(ed one Acadian *i!,er+en in con-er!ation, in En(li!,, and ,e !ee+ed *ir+ on t,e !eparation i!!ue:: BWe don4t a(ree wit, t,e Vue ecoi!" I* t,e) want to lea-e 3anada, let t,e+ (o" We like it etter t,i! wa)"B 8i! collea(ue! nodded in a(ree+ent" A! an A+erican w,o ,a! -i!ited 3anada +an) ti+e! o-er t,irt) )ear! and !tudied t,e ri!e o* Vue ec nationali!+, I *ind it di**icult to !u((e!t an outco+e o* t,e next round in t,e national unit) de ate" 3urrent opinion poll! in Vue ec !,ow t,at pro?independence *orce! are !o+ew,at elow

t,e $' percent +ar(in t,at would tri((er *or+al ne(otiation! wit, t,e re!t o* 3anada on t,e ter+! o* !eparation" 5,e current pre+ier, Lucien Couc,ard, i! a cra*t) nationali!t w,o will not put t,e Fue!tion to anot,er re*erendu+ unle!! ,e i! con-inced it will o tain a +aEorit) -ote" M) (ue!! i! t,at i* Couc,ard ,a! dou t! a out reac,in( at lea!t $' percent in *a-or o* independence, ,e will *ir!t call a pro-incial election and ,ope to increa!e t,e +aEorit) o* ,i! >arti Vue ecoi!" 5,at would (i-e ,i+ +ore con*idence a out winnin( a re*erendu+" An important factor influencing +an) Que4ec8ers &ill 4e t,eir de(ree o* satisfaction &it! t!e <anadian econom%" At pre!ent, pro!perit) rei(n! in +o!t part! o* t,e countr) and +an) Vue ec -oter! +a) worr) t,at t,eir pro-ince will !u**er econo+icall) i* it !eparate!" 3anada enter! t,e &1!t centur) wit, a !tron( econo+) and a central (o-ern+ent in *ir+ control o* parlia+ent" 5,at (o-ern+ent will u!e all it! in*luence to da+pen pro?independence !enti+ent in Vue ec, and we !,ould know in , &''' i* it or Vue ec nationali!t! are in t,e a!cendanc)" Leads to US -ussian &ar NAOI ?. (=ew World Irder Intelli(ence, Ma), ,ttp://www"!ur-i-ali!t!kill!"co+/Fue ec",t+/2 La+ont4! *oreca!t!, a!ed upon all o* t,i! input. 3anada will di!inte(rate !,ortl) a*ter Vue ec !eparate! -ia a Unilateral Keclaration o* Independence [Couc,ard t,reatened to do t,i! on April &:t,, 199<\" Vue ec will eco+e a !ociali!t, !o+ew,at a errant and unpredicta4le !tate &!ic! &ill ulti+atel) 4e refused entr% to NA62A ) t,e US and 3anada" 2!e <anadian pro#inces &ill sei5e more and more po&er from a &ea8ened 6ederal go#ernment' 4ecome indi#idual or re(ional B+ini?statesT t!emsel#es' and turn t!eir e%es sout!&ard" C3 and Al erta will wit,draw into B3a!cadiaB, a union o* t,o!e two pro-ince! wit, 3ali*ornia, Ire(on, Wa!,in(ton State, Ida,o and Ala!ka, *or+in( a loc wit, t,e nint,?lar(e!t econo+) in t,e world" C3 and Al erta will appl) *or ad+i!!ion into t,e US, and e accepted i++ediatel)" Manito a will ,ook up wit, Minne!ota around a Ded Di-er union" Sa!katc,ewan will Eoin wit, Montana, 3olorado, and W)o+in( in t,e Dock) Mountain 3orridor" Manito a and Sa!katc,ewan would e (i-en a!!ociate !tatu! wit, t,e US, dependin( ? a+on( ot,er t,in(! ? on ,ow cooperati-e t,e) are in *acilitatin( t,e export o* 3anadian water to t,e United State!" Intario would !ink into t,e e+ race o* t,e US Oreat Lake! !tate!" 3anada4! Atlantic >ro-ince! would *or+ an Ba!!ociationB wit, =ew En(land" 5,e US *ederal (o-ern+ent , La+ont a!!ert!, will not e B,app)B wit, t,i! turn o* e-ent! ? it will co+plicate !ecurit) and de*en!e arran(e+ent!, +ultipl) t,e di**icultie! in o !er-in( and *ul*illin( a wide ran(e o* current i? lateral a(ree+ent! and treatie! , etc" Cut it will e Bper!uadedB ) t,e addition o* -a!t water re!ource!, wood, i++en!e +ineral tro-e!, +ulti? illion arrel oil and tar?!and re!er-e!, etc, to

A+erica4! econo+ic a!e and !trate(ic re!er-e!" 5,e Du!!ian!, w,o ,a-e alwa)! re(arded 3anada a! a le!!? elli(erent B u**erB acro!! t,e Arctic etween t,e U"S" and t,e+!el-e! eco+e increa!in(l) re!ent*ul o* 3anada4! a !or tion into a 3ontinental Union" 5,e ,ardline co++uni!t/nationali!t *action ,a-in( triu+p,ed in Mo!cow, t,e) e(in ar+ed Bpro in(B *li(,t! acro!! t,e Arctic di-ide in an atte+pt to te!t out t,e e**ecti-ene!! o* t,e =IDAK radar earl)? warnin( !)!te+ a*ter Vue ec4! !eparation and 3anada4! !low collap!e" 6eeling e#en more t,reatened ) t,e (rowin( A+erican colo!!u!, t,e Dussians 4ecome e#en more aggressi#e and Btri((er ,app)B" 5,e !a+e treatie! t,at reduced US/USSD +i!!ile *orce! per+itted t,e Du!!ian! to increa!e t,eir terrain?,u((in( o+ er?launc,ed crui!e?+i!!ile !tockpile!, and t,e) take *ull ad-anta(e o* t,i!" 3anada, t,e Binternational diplo+atic u**erB, ,a! cea!ed to exi!t" 2!at0s t!e largest existential ris8 @ostrom 3 (=ick, >ro*e!!or o* >,ilo!op,) S Ix*ord Un-ier!it), Exi!tential ri!k#, 0ournal o* E-olution and 5ec,nolo(), Rol" 9, Marc,, ,ttp://www"nick o!tro+"co+/exi!tential/ri!k!"pd*2 A +uc, (reater exi!tential ri!k e+er(ed wit, t,e uild?up o* nuclear ar!enal! in t,e US and t,e USSD" An all?out nuclear war wa! a po!!i ilit) wit, ot, a !u !tantial pro a ilit) and wit, con!eFuence! t,at +i(,t ,a-e een per!i!tent enou(, to Fuali*) a! (lo al and ter+inal" 5,ere wa! a real worr) a+on( t,o!e e!t acFuainted wit, t,e in*or+ation a-aila le at t,e ti+e t,at a nuclear Armageddon &ould occur and t,at it +i(,t anni!ilate our species or permanentl% destro% !uman ci#ili5ation" Du!!ia and t,e US retain lar(e nuclear ar!enal! t,at could e u!ed in a *uture con*rontation, eit,er accidentall) or deli eratel)" 5,ere i! al!o a ri!k t,at ot,er !tate! +a) one da) uild up lar(e nuclear ar!enal!" =ote ,owe-er t,at a !+aller nuclear exc,an(e, etween India and >aki!tan *or in!tance, i! not an exi!tential ri!k, !ince it would not de!tro) or t,wart ,u+ankindN! potential per+anentl)"

uq econom%
<anadian econom% re4ounding no& $$$ momentum goes neg Isfeld */ (Oordon, 3orre!pondent S Hinancial >o!t, 3anadian econo+) +a) !ee turn o* *ortune! in !econd ,al* o* &'13#, Hinancial >o!t, <?13, ,ttp:// u!ine!!"*inancialpo!t"co+/&'13/'</19/canadian?econo+)?+a)?!ee?turn?o*?*ortune!? in?!econd?,al*?o*?&'13/, Keec,2 Econo+i!t! are reca!tin( t,eir *oreca!t! up&ard *or 3anada and ot,er countrie! a*ter di!appointin( per*or+ance! in &'1&" 5,o!e turn! o* *ortune ,in(e on a le!! cri!i!?c,allen(ed Europe and L criticall) L (rowin( econo+ic +o+entu+ in t,e United State!" omentum will pick up in t,e !econd ,al* o* t,i! )ear, a! t,e (lo al econo+) re(ain! con*idence on t,e ack o* a !tron(er, +ore rea!!urin( U"S" reco-er),# 5K Econo+ic! !aid 5ue!da) in it! Fuarterl) *oreca!t" 5,at opti+i!+ !,ould tran!late into relati-el) !tead) 1"7; (rowt, in 3anada t,i! )ear L co+pared to a 1":; ad-ance in &'1& L and *ollowed ) a pickup o* &"$; in &'1%, it !aid" 5,e 3anadian econo+) i! +akin( reassuring progress a*ter la!t )earN! (rowt, !lu+p,# 5K !aid in it! report, prepared ) c,ie* econo+i!t 3rai( Alexander and ,i! tea+" We ,a-e !een increa!ed e-idence o* a !o*t landin( in 3anadaN! ,ou!in( +arket alon(!ide a na!cent rotation o* (rowt, dri-er! toward! export!"# 5KN! outlook i! c,aracteriJed ) continued +oderate (rowt,, an export?dri-en acceleration next )ear, and a do+e!tic econo+) t,at c,u(! alon( at a +ore +ode!t pace"# E-en +ore opti+i!tic, DC3 Econo+ic! i! callin( *or 1"9; (rowt, t,i! )ear and &"9; in &'1%" 5,e *ir!t Fuarter o* &'13 !aw a +arked turnaround in t,e do+e!tic econo+), wit, 3anada realiJin( a !olid &"$; annualiJed (ain, !upported ) a !,arp turnaround in net trade, w,ic, added 1"% percenta(e point! to t,e Fuarterl) (rowt, rate L t,e lar(e!t contri ution !ince +id?&'11,# t,e ank !aid in a report to e relea!ed Wedne!da)"

oil 8e%
Oil spills o#er $$$ it0s propping up t!e <anadian econom% no& 2!e ;lo4e and ail */ (5,e ri(,t !ide o* 3anada4! weak oil price!#, &?1, ,ttp://www"t,e(lo eand+ail"co+/(lo e?in-e!tor/in-e!t+ent?idea!/t,e? ri(,t?!ide?o*? canada!?weak?oil?price!/article:1&3'$$/, Keec,2 5,e !teep di!count ,urt! t,e pro*ita ilit) o* t,e 3anadian indu!tr) and could put a da+per on in-e!t+ent in !o+e o* Al ertaN! i((e!t ener() proEect!" 5,at ,a! rai!ed *ear! o* a 4roader slo&do&n !ince t,e oil and (a! indu!tr) accounted *or 1$ per cent o* 3anadaN! capital in-e!t+ent a! recentl) a! &'11" 8owe-er, a new report *ro+ DC3 Econo+ic! !a)! t,at oil patc, in-e!t+ent will continue to pro-ide a ri(,t !pot *or t,e 3anadian econo+)" It al!o ar(ue! t,at t,ere i! (ood rea!on to t,ink t,at t,e !pread etween We!tern 3anadian oil and We!t 5exa! crude will narrow in t,e )ear! a,ead" And $$$ it0s a critical dri#er of t!e econom% ;ignac */ (3l_+ent, Senior Rice >re!ident and 3,ie* Econo+i!t S Indu!trial Alliance, Inc", Rice 3,air+an o* t,e 3ouncil on 3o+petiti-ene!! S World Econo+ic Horu+, Hor+er 3a inet Mini!ter S Vue ec, U"S" !,ale oil oo+ could re?write t,e 3anadian econo+)N! oil !tor)#, <?7, 5,e Olo e and Mail, ,ttp://www"t,e(lo eand+ail"co+/report?on? u!ine!!/econo+)/econo+)? la /u!?!,ale?oil? oo+?could?re?write?t,e?canadian?econo+)!?oil?!tor)/article1&%&3&7'/, Keec,2 Since 3anadaN! crude oil export! are a critical dri#er o* ,i(,?pa)in( Eo !, ro)altie!, taxe! and, ulti+atel), *ederal eFualiJation tran!*er!, all 3anadian! !,ould clo!el) +onitor t,e i+pact o* t,i! ener() re-olution !out, o* t,e order" In t,e !,ort ter+, like +an) pundit!, we elie-e t,at t,e current U"S" !,ale oil oo+ will ,elp t,e U"S"N! !till *rail econo+ic reco-er), and not (reatl) t,reaten 3anadian oil export! and oil !and! proEect!" 8owe-er, 3anadian political leader! !,ould re+ain -i(ilant a out t,e willin(ne!! o* 3apitol 8ill to aut,oriJe t,e 1e)!tone proEect, (i-en t,e !tron( oppo!ition *ro+ en-iron+ental (roup! re(ardin( t,e oil !and! car on *ootprint and t,e U"S"N! po!!i le ener() independence in !i(,t ) &'3'"

middle east

***iran sanctions

iran sanctions *nc

:ig! oil prices 4uffer t!e impact of sanctions ills */ (Do in, 8ead o* 3on!ultin( S Manaar Ener(), 8i(, oil price! can cu!,ion i+pact o* Iran !anction!#, 5,e =ational, %?&9, ,ttp://www"t,enational"ae/ u!ine!!/indu!tr)? in!i(,t!/ener()/,i(,?oil?price!?can?cu!,ion?i+pact?o*?iran?!anction!, Keec,2 5,i! (loo+) litan) !ee+! to -alidate t,e o !er-ation! o* !anction! !upporter! t,at, a! t,e W,ite 8ou!e clai+ed, !anction! are workin( or, a! t,e I!raeli *inance +ini!ter declared in Septe+ er, t,at Iran4! econo+) Bi! on t,e -er(e o* collap!eB" Cut !uc, a!!e!!+ent! underestimate Iran4! a ilit) to adapt, and it! leader!,ip4! willin(ne!! *or it! people to !u**er" E-en at reduced export le-el!, Iran i! ene*itin( *ro+ near?record oil prices" A! recentl) a! t,e 1999 oil price !lu+p, it wa! recei-in( Eu!t 6&$' per per!on in oil export re-enue!G in &'1&,t,at (rew to 6:7$" And &'114! in*lation?adEu!ted oil re-enue! o* around 69$ illion were t,e !econd?,i(,e!t t,e countr) ,a! e-er recei-ed, a*ter 197%" 5,e !anction! ,a-e laid are t,e Iranian ad+ini!tration4! re+arka le inco+petence and wa!te" 5,i!
,i!toric oil oo+ wa! !Fuandered on ,andout!, corruption and a !ur(e o* i+port! encoura(ed ) a wildl) o-er-alued exc,an(e rate" I* an)t,in(, t,e collap!e o* t,e rial ,a! returned it to a reali!tic rate, (i-en Iran4! continuin( ,i(, in*lation, +akin( do+e!tic indu!tr) +ore co+petiti-e" Ironicall), !anction! pre!!ure ,a! !purred 5e,ran4! *ractiou! polit) to take lon(?needed !tep!, up(radin( do+e!tic oil re*inin( and re+o-in( co!tl) ener() !u !idie!" 5,e econo+) !,rank 1"9 per cent la!t )ear ? !eriou!, ut ,ardl) co+para le to Oreece4! <": per cent *all" Iran4! rat,er di-er!i*ied and !el*?!u**icient econo+) i! +uc, etter?placed to

weat,er !anction! t,an IraF4! a*ter it! in-a!ion o* 1uwait in 199'" And $$$ t!at0s 8e% to pre#ent an Israeli stri8e USA 2oda% */ (Iran election deli-er! no nuclear an!wer: Iur -iew#, <?17, ,ttp://www"u!atoda)"co+/!tor)/opinion/&'13/'</17/iran?election?new?pre!ident?nuclear? editorial!?de ate!/&%3&979/, Keec,2 5,e new pre!ident4! reputation *or +oderation i! a!ed lar(el) on ,i! action! a! Iran4! nuclear ne(otiator *ro+ &''3 to &''$, w,en Iran -oluntaril) !u!pended uraniu+ enric,+ent" 8e ,a! !ince de*ended t,e !u!pen!ion a! a +ean! o* ad-ancin( t,e nuclear pro(ra+ ) reducin( external pre!!ure and u)in( ti+e to ea!e internal ten!ion!" 5,e pro(ra+ ,a! pro(re!!ed +uc, *urt,er !ince t,en and now i! widel) elie-ed to e wit,in +ont,! o* cro!!in( t,e line t,at ot, t,e I!raeli and A+erican (o-ern+ent! ,a-e !aid would prompt an attack on t,e nuclear *acilitie!, and wit, it ,i(, ri!k *or a full$on &ar" 5,at +o+ent will rin( -exin( c,oice! wit, *ate*ul outco+e!" 5o t,e extent t,at t,ere4! pro+i!e in Dow,ani4! election, it i! t,at ,i! in!tinct *or pra(+ati!+ could lead ,i+ to pre!! 1,a+enei to !top t,e pro(ra+ !,ort o* t,e We!t4! red line, lea-in( Iran capa le o* nucleariJin( ut not actuall) doin( it" 5,e U"S" and it! allie! !,ould o**er Dow,ani relief *ro+ !anction! in exc,an(e *or a credi le co++it+ent to t,at (oal " Cut t,e) will ,a-e to proceed wit, a !keptical e)e" Dow,ani i! not a +oderate a! +uc, a! ,e i! a !killed tactician likel) to continue Iran4! !tallin( tactic!" 2!at results in glo4al nuclear &ar organ ? (Kenni! Da), 8ankuk Uni-er!it) o* Horei(n Studie!, Huture!, Rolu+e %1, I!!ue 1', Kece+ er &''9, p(" <:3?<932 5,i! !cenario ,a! (ained e-en +ore plau!i ilit) !ince a 0anuar) &''7 Sunda) 5i+e! report [13\ o* an I!raeli intelli(ence leak t,at I!rael wa! con!iderin( a !trike a(ain!t Iran, u!in( low?)ield unker u!tin( nuke! to de!tro) IranN! !uppo!edl) !ecret under(round nuclear *acilitie!" In MooreN! !cenario, non?nuclear nei(, orin( countrie! would t,en re!pond wit, con-entional rocket! and c,e+ical, iolo(ical and radiolo(ical weapon!" I!rael t,en would retaliate wit, nuclear !trike! on !e-eral countrie!, includin( a pre?e+pti-e !trike a(ain!t >aki!tan, w,o t,en retaliate! wit, an attack not onl) on I!rael ut pre?e+pti-el) !trikin( India a! well" I!rael t,en

initiate! t,e ^^Sa+!on optionNN wit, attack! on ot,er Mu!li+ countrie!, Du!!ia, and po!!i l) t,e ^^anti?Se+iticNN citie! o* Europe" At t,at point, all$out nuclear &ar ensues as t!e U"S" retaliates &it! nuclear attac8s on -ussia and po!!i l) on <!ina a! well"11

!ig! prices 8e%

Onl% !ig!er oil prices s!ield Iran from sanctions @las *3 (0a-ier, 3orre!pondent S Hinancial 5i+e!, 8i(, oil price! !,ield Iran *ro+ !anction!#, Hinancial 5i+e!, %?17, >roFue!t, Keec,2 8i(, oil price! are insulating Iran *ro+ t,e full impact o* US and European !anction! on t,e !ale o* it! crude, pro-idin( 5e,ran wit, 4reat!ing space a! it prepare! *or a new round o* nuclear talk! wit, we!tern nation! next +ont," 5,e 3entre *or Olo al Ener() Studie! (3OES2, a London? a!ed t,ink?tank, e!ti+ate! t,at Iran will earn 6$< n !ellin( it! crude t,i! )ear ? it! t,ird?,i(,e!t earnin(! e-er ? e-en a*ter *actorin( in t,e lo!! o* rou(,l) a t,ird o* it! export -olu+e due to !anction!" 8owe-er, anal)!t! point out t,at 5e,ran i! *indin( di**icultie! in repatriatin( t,e *und! due to t,e !anction! on it! central ank" 8ellenic >etroleu+, a Oreece? a!ed re*iner, recentl) !topped i+portin( Iranian oil a! it wa! una le to tran!*er it! pa)+ent!" 5,e Iranian rial ,a! weakened !i(ni*icantl) a(ain!t t,e US dollar !ince Kece+ er ? a !i(n t,at 5e,ran *ace! di**icultie! o tainin( ,ard currenc)"

4uffering sanctions 8e%

Effecti#e sanctions in!i4it a moderate Iranian foreign polic% ilani */ (Mo,!en, >ro*e!!or o* >olitic! S Uni-er!it) o* Sout, Hlorida, Executi-e Kirector S 3enter *or Strate(ic and Kiplo+atic Studie!, Dou,ani4! Horei(n >olic)#, Horei(n A**air!, <?&$, ,ttp://www"*orei(na**air!"co+/article!/139$31/+o,!en?+ilani/rou,ani!?*orei(n?polic). cid/r!!?r!!Mx+l?rou,ani!M*orei(nMpolic)?'''''', Keec,2 5,ere are !till t,o!e w,o could derail Dou,aniN! a(enda" 5,e *ir!t i! A)atolla, Ali 1,a+enei" 5,e 1,ata+i pre!idenc) tau(,t Dou,ani t,at t,e I!la+ic Depu lic i! re!i!tant to re*or+, particularl) i* t,e pre!ident and t,e Supre+e Leader do not work colla orati-el)" 1,ata+i ne-er de-eloped a clo!e relation!,ip wit, t,e A)atolla, and !pent +uc, o* ,i! ener() *i(,tin( con!er-ati-e opponent! w,o -e,e+entl) oppo!ed ,i! re*or+!" Dou,ani, t,ere*ore, i! unlikel) to directl) c,allen(e 1,a+enei or initiate policie! ,e doe! not !upport, at lea!t earl) in ,i! pre!idenc)" 8e al!o ,a! een clo!e to 1,a+enei *or )ear!" 5o (o-ern, Dou,ani al!o ,a! to work wit, t,e con!er-ati-e! w,o ,a-e controlled e-er) ranc, o* IranN! (o-ern+ent *or t,e pa!t ei(,t )ear! and !till control t,e parlia+ent, Eudiciar), and +edia" And, +o!t i+portantl), ,e will ,a-e to !kirt around t,e power*ul De-olutionar) Ouard! and t,e !ecurit) *orce! t,at could !t)+ie ,i! a(enda" Si+pl) put, t,e pace o* c,an(e i! likel) to e !low" Dou,ani +i(,t o#ercome !o+e o* t,e!e c,allen(e! i* ,e i+pro-e! t,e countr)N! de-a!tated econo+)" Mi!+ana(e+ent, per-a!i-e corruption, ,i(, in*lation and une+plo)+ent, and sanctions ,a-e ,urt t,e !tandard li-in( o* all Iranian!" Econo+ic (rowt,, in turn, would reFuire t,e United State! and t,e European Union to li*t !o+e o* t,e !anction!
t,e) ,a-e i+po!ed on Iran" Dou,ani under!tand! t,at t,ere will e no !anction! relie* unle!! t,ere i! a c,an(e in t,e orientation o* IranN! *orei(n and nuclear policie!" Kurin( t,e ca+pai(n, Dou,ani pro+i!ed to rin( +oderation to IranN! *orei(n polic)" (5,e !uppo!ed *rontrunner, Saeed 0alili, w,o i! t,e current c,ie* o* IranN! nuclear ne(otiatin( tea+, !upported t,e !tatu! Fuo and pro+i!ed to Bre!i!tB t,e We!t" 8e recei-ed onl) 13 percent o* t,e popular -ote"2 5,e c,an(e in IranN! *orei(n polic) i! likel) to !tart wit, a c,ar+ o**en!i-e toward all o* IranN! nei(, or!, particularl) t,e Ara !tate! o* t,e >er!ian Oul*"

atU proliferation da
Sanctions empiricall% fail $$$ a decade of sanctions dispro#e efficac% $$$ onl% a ris8 t!e plan !ampers moderates Eat5man */ (1ennet,, Speciali!t in Middle Ea!tern A**air! S 3on(re!!ional De!earc, Ser-ice, Iran Sanction!#, 3on(re!!ional De!earc, Ser-ice, <?13, ,ttp://www"*a!"or(/!(p/cr!/+idea!t/DS&':71"pd*, Keec,2 5,ere i! a con!en!u! t,at U"S" and U"=" !anction! ,a-e not, to date, acco+pli!,ed t,eir core !trate(ic o Eecti-e o* co+pellin( Iran to -eri*ia l) li+it it! nuclear de-elop+ent to purel) peace*ul purpo!e!" C) all account!Lt,e United State!, t,e >$d1, t,e United =ation!, t,e International Ato+ic Ener() A(enc) (IAEA2LIran ,a! not co+plied wit, t,e applica le pro-i!ion! o* t,e U"=" Securit) 3ouncil re!olution! reFuirin( t,at outco+e" Hi-e round! o* >$d1 LIran talk! durin( &'1& and t,u! *ar in &'13, t,e late!t o* w,ic, took place in Al+at), 1aJak,!tan durin( April $?<, &'13, produced no reakt,rou(,!" 5,e talk! ,a-e centered on >$d1 propo!al! t,at Iran !u!pend enric,+ent o* uraniu+ to t,e &'; purit) le-el in exc,an(e *or a +ode!t ea!in( o* international !anction!" 5,e nuclear talk! are di!cu!!ed in (reater detail in 3DS Deport DL3&'%:, Iran: U"S" 3oncern! and >olic) De!pon!e!, ) 1ennet, 1atJ+an" And $$$ despite sanctions' Iran is ma8ing progress &it! its nuclear program Eat5man */ (1ennet,, Speciali!t in Middle Ea!tern A**air! S 3on(re!!ional De!earc, Ser-ice, Iran Sanction!#, 3on(re!!ional De!earc, Ser-ice, <?13, ,ttp://www"*a!"or(/!(p/cr!/+idea!t/DS&':71"pd*, Keec,2 A related i!!ue i! w,et,er t,e cu+ulati-e !anction! ,a-e directl) !et ack IranN! nuclear e**ort! ) +akin( it di**icult *or Iran to i+port needed +aterial! or !kill!" So+e U"S" o**icial! ,a-e a!!erted t,at, coupled wit, +i!take! and di**icultie! in Iran, !anction! ,a-e !lowed IranN! nuclear e**ort! ) +akin( it +ore di**icult and co!tl) *or Iran to acFuire ke) +aterial! and eFuip+ent *or it! enric,+ent pro(ra+"<1 8owe-er, International Ato+ic Ener() A(enc) (IAEA2 report! ,a-e !aid t,at IranN! capacit) to enric, uraniu+ +ore rapidl) continue! to expand, a! doe! it! !tockpile o* &'; enric,ed uraniu+" And, Kirector o* =ational Intelli(ence 0a+e! 3lapper te!ti*ied on Marc, 1&, &'13, t,at Iran i! expandin( t,e !cale, reac,, and !op,i!tication o* it! alli!tic +i!!ile ar!enal"

***iranian econom%

iranian econom% *nc

Lo& oil prices crus! t!e Iranian econom% 6ar5anegan ? (Mo,a++ad DeJa, >ro*e!!or S Kre!den Uni-er!it) o* 5ec,nolo(), 5,e e**ect! o* oil price !,ock! on t,e Iranian econo+)#, Ener() Econo+ic!, 31(12, Science Kirect, Keec,2 5,e Iranian econo+) i! !ig!l% #ulnera4le to oil price *luctuation!" 5,i! paper anal)Je! t,e d)na+ic relation!,ip etween oil price !,ock! and +aEor +acroecono+ic -aria le! in Iran ) appl)in( a RAD approac," 5,e !tud) point! out t,e a!)++etric e**ect! o* oil price !,ock!G *or in!tance, po!iti-e a! well a! ne(ati-e oil price !,ock! !i(ni*icantl) increa!e in*lation" We *ind a !tron( po!iti-e relation!,ip etween po!iti-e oil price c,an(e! and indu!trial output (rowt," Unexpectedl), we can onl) identi*) a +ar(inal i+pact o* oil price *luctuation! on real (o-ern+ent expenditure!" Hurt,er+ore, we o !er-e t,e #Kutc, Ki!ea!e# !)ndro+e t,rou(, !i(ni*icant real e**ecti-e exc,an(e rate appreciation" Iil and (a! re-enue! pla) strategic roles in t,e !tructure o* t,e Iranian econo+)" 8oldin( 1'; o* t,e world4! total pro-en oil re!er-e! and a! t,e !econd lar(e!t producer (a*ter Saudi Ara ia2 wit,in t,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! (!ee I>E3, &''$2, Iran ot, a**ect! t,e international oil +arket and i! roadl) a**ected ) it" Iran4! econo+) relies !ea#il% on crude oil export re-enue!, repre!entin( a out ?9B o* total export earnin(! and, on a-era(e, <'; o* (o-ern+ent re-enue! in annual ud(et! (3entral Cank o* Iran, &'':2" 5,e !,are o* oil -alue added in t,e OK> o* Iran a-era(ed a out &'; etween 197' and &''<" In t,i! !ituation, an) !,ock to (lo al oil +arket! can ,a-e a tre+endou! e**ect on t,e (o-ern+ent ud(et and t,e !tructure o* t,e econo+)" Hi(" 1 (!ource: 3entral Cank o* Iran (&'':2 and IHS?Kata a!e2 illu!trate! t,e co$mo#ement o* t,e Iranian OK> per capita wit, *luctuation! o* real oil price! !ince 197'" We can o !er-e t,at t,e *or+er -aria le i! linked to trend o* t,e latter" 5,e unique role o* oil re-enue! in t,e !tructure o* (o-ern+ent ud(et! and !ocial !ecurit) pro(ra+! di!tin(ui!,e! t,e Iranian econo+) *ro+ ot,er!" Ke!pite ,i(,er oil price! and re-enue! in recent )ear!, t,e Iranian (o-ern+ent ud(et de*icit! are !till a c,allen(in( i!!ue, in part due to t,e lar(e !cale o* !tate !u !idie! on ener() and co+e!ti le (ood!" >o!!i le !ource! o* *inancin( t,e annual ud(et de*icit! include i!!uin( !tate ond!, *orei(n orrowin(, pri-atiJation, and wit,drawal! *ro+ t,e Iil Sta iliJation Hund (ISH2" 5,e !,are! o* -ariou! !ource! o* *inancin( t,e ud(et de*icit! in Iran o-er &''$ to &''7 are pre!ented in 5a le 1" A! i! e-ident *ro+ t,i! ta le, +ore t,an 9'; o* annual ud(et de*icit! in Iran i! *inanced t,rou(, wit,drawal! *ro+ ISH" 5,i! i! like !pendin( oil re-enue! directl) and ,a! !tron( in*lationar) e**ect! t,rou(, increa!in( +one) !uppl) in t,e econo+)" 3on!iderin( t,e ,i(, ri(idit) o* current (o-ern+ent expenditure! in Iran, an) !i(ni*icant ne(ati-e oil price !,ock! will wor!en t,e ud(et de*icit o* t,e (o-ern+ent and create in*lationar) pre!!ure! *or t,e w,ole econo+)" Economic do&nturn causes Iranian las! out $$$ precipitates 4roader conflict 6is!man *3 (Alex, Ceware Iranian de!peration,# A =et =ew!, 1?17, ,ttp://www")netnew!"co+/article!/',73%',L?%17<<7$,''",t+l2 E-er) od) talk! a out t,e !prin(, ecau!e e-er)one i! con-inced t,at I!rael will e !trikin( Iran at t,at ti+e, a +o-e t,at will i(nite t,e Middle Ea!t" 5,e !cenario i! rat,er anal and e+er(e! in e-er) de*en!e panel in t,e (lo al +edia: 5,i! )ear, t,e Iranian! will co+plete t,e ta!k o* +o-in( t,eir nuclear proEect deep under(round, and *ro+ t,at +o+ent an aerial !trike would e +uc, le!! e**ecti-e" 8ence, a !trike appear! to e reFuired a! !oon a! i! po!!i le" 8owe-er, t,ere i! anot,er po!!i ilit) t,at i! +uc, +ore reali!tic, +uc, clo!er to +aterialiJin(, and unrelated to an attack on IranN! nuclear !ite!" 5,i! !cenario a!!ert! t,at t,e one! to *ir!t pull t,e tri((er will e t,e Iranian!, a(ain!t t,e ackdrop o* 5e,ranN! econo+ic c,oke,old and (rowin( (lo al

i!olation" Iran i! !tartin( to e pu!,ed into a corner in t,e *ace o* exi!tin( pre!!ure, and +ore !o a! re!ult o* pre!!ure! to e exerted -er) !oon" 5e,ranN! econo+ic collap!e i! alread) around t!e corner" 5,e re(i+e !ee! t,e t,ou!and! !tandin( in line at ank! t,e!e da)! in order to exc,an(e t,e local currenc) *or dollar! S ut t,ere are none" In t,e lack +arket, t,e (ap alread) !tand! at <';" =o od) can predict t!e 4rea8ing point t,at &ould prompt A!madineCad to act desperatel%G t,e point w,ere t,e a)atolla,! *eel t,reatened enou(, to re!ort to a +ilitar) pro-ocation t,at would ull) t,e world and exact !uc, ,i(, price a! to pro+pt t,e international co++unit) to li*t t,e c,oke,old" Extinction <!ossudo#s8% *9 (Mic,ael, >ro*e!!or o* Econo+ic! S Uni-er!it) o* Ittawa, Kirector S 3entre *or De!earc, on Olo aliJation, 5oward! a World War III Scenario. 5,e Dole o* I!rael in 5ri((erin( an Attack on Iran#, :?13, ,ttp://www"(lo alre!earc,"ca/index"p,pcontext/-aPaid/&'$:%2 Hor !e-eral )ear! now Iran ,a! een conductin( it! own war drill! and exerci!e!" W,ile it! Air *orce ,a! weakne!!e!, it! inter+ediate and lon(?ran(e +i!!ile! are *ull) operational" Iran4! +ilitar) i! in a !tate o* readine!!" Iranian troop concentration! are currentl) wit,in a *ew kilo+eter! o* t,e IraFi and A*(,an order!, and wit,in proxi+it) o* 1uwait" 5,e Iranian =a-) i! deplo)ed in t,e >er!ian Oul* wit,in proxi+it) o* US and allied +ilitar) *acilitie! in t,e United Ara E+irate!" It i! wort, notin( t,at in re!pon!e to Iran4! +ilitar) uild?up, t,e US ,a! een tran!*errin( lar(e a+ount! o* weapon! to it! non?=A5I allie! in t,e >er!ian Oul* includin( 1uwait and Saudi Ara ia" W,ile Iran4! ad-anced weapon! do not +ea!ure up to t,o!e o* t,e US and =A5I, Iranian *orce! would e in a po!ition to in*lict !u !tantial lo!!e! to coalition *orce! in a con-entional war t,eater, on t,e (round in IraF or A*(,ani!tan" Iranian (round troop! and tank! in Kece+ er &''9 cro!!ed t,e order into IraF wit,out ein( con*ronted or c,allen(ed ) allied *orce! and occupied a di!puted territor) in t,e Ea!t Ma)!an oil *ield" E-en in t,e e-ent o* an e**ecti-e ClitJkrie(, w,ic, tar(et! Iran4! +ilitar) *acilitie!, it! co++unication! !)!te+!, etc" t,rou(, +a!!i-e aerial o+ in(, u!in( crui!e +i!!ile!, con-entional unker u!ter o+ ! and tactical nuclear weapon!, a war wit, Iran, once initiated, could e-entuall) lead into a (round war" 5,i! i! !o+et,in( w,ic, US +ilitar) planner! ,a-e no dou t conte+plated in t,eir !i+ulated war !cenario!" An operation o* t,i! nature would re!ult in !i(ni*icant +ilitar) and ci-ilian ca!ualtie!, particularl) i* nuclear weapon! are u!ed" 5,e expanded ud(et *or t,e war in A*(,ani!tan currentl) de ated in t,e US 3on(re!! i! al!o intended to e u!ed in t,e e-entualit) o* an attack on Iran" Wit,in a !cenario o* e!calation, Iranian troop! could cro!! t,e order into IraF and A*(,ani!tan" In turn, +ilitar) e!calation u!in( nuclear weapon! could lead u! into a World War III !cenario, extendin( e)ond t,e Middle Ea!t 3entral A!ian re(ion" In a -er) real !en!e, t!is +ilitar) proEect, w,ic, ,a! een on t,e >enta(on4! drawin( oard *or +ore t,an *i-e )ear!, t!reatens t!e future of !umanit%" Iur *ocu! in t,i! e!!a) ,a! een on war preparation!" 5,e *act t,at war preparation! are in an ad-anced !tate o* readine!! doe! not i+pl) t,at t,e!e war plan! will e carried out" 5,e US?=A5I?I!rael alliance realiJe! t,at t,e ene+) ,a! !i(ni*icant capa ilitie! to re!pond and retaliate" 5,i! *actor in it!el* ,a! een crucial o-er t,e la!t *i-e )ear! in t,e deci!ion ) t,e US and it! allie! to po!tpone an attack on Iran"

uq econom%
2!is is an independent lin8 $$$ gro&t! exists no& 4ecause of !ig! oil prices ills */ (Do in, 8ead o* 3on!ultin( S Manaar Ener(), 8i(, oil price! can cu!,ion i+pact o* Iran !anction!#, 5,e =ational, %?&9, ,ttp://www"t,enational"ae/ u!ine!!/indu!tr)? in!i(,t!/ener()/,i(,?oil?price!?can?cu!,ion?i+pact?o*?iran?!anction!, Keec,2 5,i! (loo+) litan) !ee+! to -alidate t,e o !er-ation! o* !anction! !upporter! t,at, a! t,e W,ite 8ou!e clai+ed, !anction! are workin( or, a! t,e I!raeli *inance +ini!ter declared in Septe+ er, t,at Iran4! econo+) Bi! on t,e -er(e o* collap!eB" Cut !uc, a!!e!!+ent! underestimate Iran4! a ilit) to adapt, and it! leader!,ip4! willin(ne!! *or it! people to !u**er" E-en at reduced export le-el!, Iran i! ene*itin( *ro+ near?record oil prices" A! recentl) a! t,e 1999 oil price !lu+p, it wa! recei-in( Eu!t 6&$' per per!on in oil export re-enue!G in &'1&,t,at (rew to 6:7$" And &'114! in*lation?adEu!ted oil re-enue! o* around 69$ illion were t,e !econd?,i(,e!t t,e countr) ,a! e-er recei-ed, a*ter 197%" 5,e !anction! ,a-e laid are t,e Iranian ad+ini!tration4! re+arka le inco+petence and wa!te" 5,i!
,i!toric oil oo+ wa! !Fuandered on ,andout!, corruption and a !ur(e o* i+port! encoura(ed ) a wildl) o-er-alued exc,an(e rate" I* an)t,in(, t,e collap!e o* t,e rial ,a! returned it to a reali!tic rate, (i-en Iran4! continuin( ,i(, in*lation, +akin( do+e!tic indu!tr) +ore co+petiti-e" Ironicall), !anction! pre!!ure ,a! !purred 5e,ran4! *ractiou! polit) to take lon(?needed !tep!, up(radin( do+e!tic oil re*inin( and re+o-in( co!tl) ener() !u !idie!" 5,e econo+) !,rank 1"9 per cent la!t )ear ? !eriou!, ut ,ardl) co+para le to Oreece4! <": per cent *all" Iran4! rat,er di-er!i*ied and !el*?!u**icient econo+) i! +uc, etter?placed to

weat,er !anction! t,an IraF4! a*ter it! in-a!ion o* 1uwait in 199'" And $$$ onl% !ig!er oil prices maintain gro&t! @las *3 (0a-ier, 3orre!pondent S Hinancial 5i+e!, 8i(, oil price! !,ield Iran *ro+ !anction!#, Hinancial 5i+e!, %?17, >roFue!t, Keec,2 8i(, oil price! are insulating Iran *ro+ t,e full impact o* US and European !anction! on t,e !ale o* it! crude, pro-idin( 5e,ran wit, 4reat!ing space a! it prepare! *or a new round o* nuclear talk! wit, we!tern nation! next +ont," 5,e 3entre *or Olo al Ener() Studie! (3OES2, a London? a!ed t,ink?tank, e!ti+ate! t,at Iran will earn 6$< n !ellin( it! crude t,i! )ear ? it! t,ird?,i(,e!t earnin(! e-er ? e-en a*ter *actorin( in t,e lo!! o* rou(,l) a t,ird o* it! export -olu+e due to !anction!" 8owe-er, anal)!t! point out t,at 5e,ran i! *indin( di**icultie! in repatriatin( t,e *und! due to t,e !anction! on it! central ank" 8ellenic >etroleu+, a Oreece? a!ed re*iner, recentl) !topped i+portin( Iranian oil a! it wa! una le to tran!*er it! pa)+ent!" 5,e Iranian rial ,a! weakened !i(ni*icantl) a(ain!t t,e US dollar !ince Kece+ er ? a !i(n t,at 5e,ran *ace! di**icultie! o tainin( ,ard currenc)"

!ig! prices 8e%

Our argument is empiricall% true Ali%e# */ (Ca)ra+, C"A" S Va*FaJ Uni-er!it), M"A" S Sie(en Uni-er!it), De!earc, A!!i!tant S Ankara Strate(ic In!titute, Ca!ic 3,aracteri!tic! o* Iranian Econo+)#, Independent >olitical Anal)!i!, $?1', ,ttp://www"politicalanal)!i!"in*o/ a!ic?c,aracteri!tic!?o*?iranian? econo+)",t+l, Keec,2 =aturall), IranN! Econo+) +o!tl) a!ed on ener() ecau!e o* it! ric, oil and natural (a! re!ource!" =a+el), IranN! pro-en oil re!ource! are *ourt, in t,e world a*ter Saudi Ara ia, 3anada and ReneJuela, w,ile it ,a! !econd i((e!t natural (a! re!er-e! a*ter Du!!ia" Iran ,old! 137 illion arrel! oil, wit, a 9" 3; percent o* total oil re!er-e! o* World and 1"'%< trillion cu ic *eet natural (a!, w,ic, *or+! 1$"7; percent o* total natural (a! re!er-e! in t,e world" 5,e approxi+ate inco+e per capita o* countr) i! 6 13"''' and accordin( to data o* World Cank, Iran i! in t,e ,i(,?+iddle?inco+e countrie!# (roup" 5,e re-enue! *ro+ Ener() Sector (Iil and Oa!2 pro-ided increa!in( o* national inco+e per capita around 6 7"''' to o-er 6 13"''' in &'1&" In co+pare wit, ot,er countrie!, accordin( to a o-e?+entioned data, Iran i! !een !uc, a de-eloped countr) econo+icall)# countr)" 8owe-er, i* we take into account t,at Iran ,old! -er) ric, re!ource!, t,en inco+e and wel*are le-el o* !ociet) !,ould e +ore t,an t,e!e indicator!" 3on!iderin( t,at t,e 7'; o* t,e re-enue *ro+ t,e ener() !ector i! tran!*erred to t,e !tate ud(et, t,u! li-in( condition! o* !ociet) are expected to e +ore co+*orta le" 8owe-er, t,e current i+a(e o* countr) i! !een oppo!ite to t,i! pro*ile" A population o* Iran i! approac,in( 79 +illion and it ,a! ric, re!ource!, ,owe-er, it i! !een t,at t,e!e la our and ener() potential o* countr) cannot e tran!*or+ed opportunit) *or t,e countr)" Kurin( >ower o* Da*!anEani and 1,ata+i, planned econo+ic re*or+! ,a-e een applied and it wa! reac,ed to <; o* econo+ic (rowt, rate durin( t,o!e )ear!" In *act, sta4le gro&t! o* econo+) durin( &''&?&'': wa! mostl% related wit, ri!in( o* oil price!" IranN! econo+ic (rowt, rate ,a! *allen (raduall) !ince &'': to t,e!e da)!, ecau!e o* t,e e**ect o* !anction! t,at ,a! een !tarted"

%es las!out
Economic decline causes las!out $$$ experts pro#e ;entile *3 (Sal, >olitic! and International 3orre!pondent S >CS, War wit, Iran. Sanction!, oil e+ ar(o and t,reat to clo!e trade route add to ten!ion#, >CS, 1?$, ,ttp://www"p !"or(/wnet/need?to?know/t,e?dail)?need/war?wit,?iran?!anction!?oil?e+ ar(o? and?t,reat?to?clo!e?trade?route?add?to?ten!ion/1&791/, Keec,2 Do+ne) called t,e I a+a ad+ini!trationN! !trate() one o* en(a(e+ent,# parrotin(, al eit in !li(,tl) +ore (enial ter+!, Dick Santoru+N! clai+ t,at I a+a ,a! pur!ued a polic) o* appea!e+ent# wit, re!pect to Iran" A! it turn! out, ,owe-er, t,e econo+ic !anction! i+po!ed on Iran ) t,e I a+a ad+ini!tration and t,e international co++unit) +a) actuall) e workin( *or t,e *ir!t ti+e in decade!, weakenin( an alread) in!ecure re(i+e" 5,e econo+ic tur+oil ripplin( t,rou(, Iran, expert! !a), could lead t,e nationN! leader! eit,er to cooperate wit, t,e international co++unit) or L i* de!peration take! ,old L to las! out" 5,ere ,a! een wide!pread pu lic an(er in Iran a! international !anction! ,a-e dri-en up t,e co!t o* a!ic (ood! ) a! +uc, %' percent" 5,e Iranian currenc), t,e rial, ,a! tu+ led a(ain!t t,e dollar, and +an) o* t,e countr)N! lar(e!t patron! on t,e oil +arket ,a-e eit,er cut ack or pled(ed to di!continue t,eir purc,a!e! o* crude *ro+ Iranian exporter!" In a old +o-e on 5,ur!da), *or exa+ple, t,e European Union took a +aEor !tep toward i+ple+entin( a *ull e+ ar(o on Iranian oil" 3,ina and 0apan ,a-e al!o !aid t,e) plan to cut ack on Iranian oil i+port!" 5o(et,er, t,o!e t,ree countrie! repre!ent rou(,l) ,al* o* IranN! export! o* crude" Iran i! likel) to *ind ot,er cu!to+er!, or to increa!e export! to relia le patron! like 5urke), ut it will pro a l) ,a-e to o**er di!count! to !ta) co+petiti-e" And wit, econo+ic tur+oil and pu lic an(er continuin( to (rip t,e countr), anal)!t! !a), itN! onl) a +atter o* ti+e etween one o* two t,in(! ,appen!: Eit,er Iran doe! !o+e pro#ocati#e, to *lex it! +u!cle, or it reac,e! out to t,e international co++unit) to roker a deal on it! nuclear pro(ra+ in an atte+pt to ea!e t,e econo+ic !anction!" IranN! leader! ,a-e ,inted at ot, !trate(ie!" Hir!t, Iran conducted a !erie! o* pro-ocati-e +i!!ile te!t! in t,e re(ion" 5,en, it! leader! t,reatened to clo!e o** t,e Strait o* 8or+uJ, a +aEor !uppl) route crucial to (lo al trade and oil export!, wit, a na-al lockade" Critain ,a! called !uc, a +o-e ille(al, and Criti!, +ilitar) co++ander! pro+i!ed to u!e *orce to keep t,e Strait open i* nece!!ar)" 5,ere !,ould e no +i!calculation ) t,e Iranian! a out t,e i+portance t,at t,e international co++unit) attac,e! to keepin( t,e Strait! o* 8or+uJ open,# t,e Criti!, de*en!e !ecretar), >,ilip 8a++ond, !aid 5,ur!da)"

***qatar soft po&er

qatar soft po&er *nc

:ig! oil prices 8e% to Qatari soft po&er Einninmont */ (0ane, Senior De!earc, Hellow S Do)al In!titute o* International A**air!, Hro+ *oot all to +ilitar) +i(,t, ,ow Vatar wield! (lo al power#, 5,e Ouardian, &?&, ,ttp://www"(uardian"co"uk/co++enti!*ree/&'13/*e /'3/Fatar?tin)?(ul*?!tate?(lo al?*orce, Keec,2 Cut t,ere are al!o clear !trate(ie! e,ind Vatar4! ,i(,?pro*ile in-e!t+ent! and it! roader *orei(n?polic) acti-i!+, w,ic, ,a! +ade it a 8e% pla%er in t,e Ara Sprin( and e)ond" 5,e priorit) i! to !ecure t,e countr) S and t,e continuation o* t,e +onarc,) S *ro+ potential t,reat!" Second, a! it! con*idence (row!, t,e ro)al elite i! !eekin( to pla) a i((er role on t,e re(ional !ta(e" It want! to write it!el* into t,e ,i!tor) o* t,e Middle Ea!t at a ti+e o* ,u(e ,i!torical i+portance" 5,e +o!t !trai(,t*orward rea!on *or t,e!e o-er!ea! in-e!t+ent! i! to di-er!i*) t,e econo+)" More t,an ,al* o* OK>, and 7'; o* t,e (o-ern+ent4! re-enue, co+e! *ro+ (a! export!" 5,e!e !,ould la!t a lon( ti+e: t,eir re!er-e! are t,e t,ird lar(e!t in t,e world, a*ter Iran and Du!!ia, and t,eir population i! *ar tinier" (Wealt, i! ,ea-il) concentrated a+on( t,e e!ti+ated &$',''' citiJen!G a out *our ti+e! a! +an) i++i(rant! do +uc, o* t,e +undane work"2 Cut t,ere are !till ri!k!" E-en e*ore t,e (a! run! out, t,e US !,ale (a! re-olution and Au!tralia4! (rowin( (a! export! could rin( down price!, and tec,nolo(ical inno-ation! could po!t *urt,er un*ore!een ri!k!" 5,e)4-e al!o learned *ro+ t,e experience! o* ot,er Oul* countrie!, w,ic, ,a-e !een gro&t! slump S and dissent rise S w,en oil prices ,a-e fallen" S+artl), Vatar i! in-e!tin( a (ood deal o* it! +one) in ,u+an capital S education, !cienti*ic re!earc,, trainin(, art, *il+!" W,ile !o+e o* t,eir in-e!t+ent! are a out !trai(,t*orward econo+ic return!, ot,er! are a out countr)? randin(" In London, t,e S,ard, +o!tl) Vatari?owned, rin(! dra+atic -i!i ilit)" In >ari!, ) contra!t, +illion! o* euro! (o into econo+ic re(eneration in t,e anlieux, likel) to earn t,e (ratitude o* +an) une+plo)ed )out,, o*ten *ro+ Ara Mu!li+ countrie! o* =ort, A*rica w,ere Vatar ,a! a (rowin( in*luence" W,at4! +ore, ) +akin( t,e+!el-e! u!e*ul !ource! o* capital at a ti+e o* low (rowt, in t,e we!t, t,e Vatari! are al!o takin( out in!urance policie! wit, power*ul allie! w,o re(ard t,e+ a! i+portant *or t,e !ta ilit) not onl) o* t,e Middle Ea!t, ut o* we!tern econo+ie!" I* t,e rulin( Al 5,ani d)na!t) were e-er to *ace t,e kind o* t,reat! t,at 1uwait *aced in 199', lar(er (lo al pla)er! would ,a-e a +aEor !take in t,eir !ur-i-al" Vatar ,a! een t,e la!t o* t,e !ix Oul* +onarc,ie! to co+e into !uc, wealt," 0u!t o-er a decade a(o, it wa! !een a! a ackwater" Canker! recall t,e di**icult) Vatar4! !tate co+panie! *aced in (ettin( an)one to lend t,e+ +one)" Expatriate! w,o went t,ere were !een a! rat,er eccentric" Cut etween 199: and &'':, world (a! price! tripled and t,e new Vatar wa! orn" It! u!e o* wealt, i! a case stud% in !o*t power and t,e acFui!ition o* in*luence " Al? 0aJeera now win! (lo al accolade! *or it! cuttin(?ed(e co-era(e o* t,e Ara Sprin(" It ,a! een t,e onl) Ara roadca!ter to +ake !eriou! inroad! wit, we!tern audience!, c,allen(in( t,e !tereot)pe t,at (lo ali!ation +u!t +ean we!terni!ation" 5,e !,irt! o* Carcelona H3, a tea+ t,at *or )ear! accepted no !pon!or!,ip, now oa!t t,e lo(o o* Vatar Houndation, an or(ani!ation ,eaded ) t,e e+ir4! wi*e, S,eik,a MoJa," And $$$ t!at0s 8e% to mediate conflict in Le4anon $$$ pre#ents escalation 2!e Dail% Star *3 (Vatar ,oldin( rein! o* re(ional politic! a+id Ara tur+oil#, &?7, ,ttp://www"dail)!tar"co+"l /=ew!/Middle?Ea!t/&'1&/He ?'7/1<&%%<?Fatar?,oldin(?rei(n!? o*?re(ional?politic!?a+id?ara ?tur+oil"a!,xWixJJ1l!0F()FI2 5,e tin) Oul* !tate ,a! al!o led mediation e**ort! in Le anon, Sudan, Eritrea and KEi outi, and i! al!o pro+otin( an A*(,an peace deal" BAll indication! point to t,e *act t,at Ko,a ,a! eco+e

t,e capital o* Ara politic! and diplo+ac),B !aid E+irati anal)!t A dulka,leF A dulla," B5,i! will continue in t,e *ore!eea le *uture"B In Monda), Ko,a ,elped clinc, a deal etween ri-al >ale!tinian *action! 8a+a! and Hata, to na+e >ale!tinian pre!ident Ma,+oud A a! a! ,ead o* an interi+ (o-ern+ent ta!ked wit, or(ani!in( lon(?o-erdue (eneral election!" Hor +ont,!, t,e two *action! *ailed to a(ree on t,e crucial political appoint+ent, t,reatenin( t,e *ra(ile truce !i(ned etween t,e+ la!t April" Vatar ,a! al!o t,rown it! !upport e,ind t,e Ara upri!in(! t,at !wept t,e re(ion, un!eatin( autocrat! in 5uni!ia, E()pt and Li )a" In Ae+en, >re!ident Ali A dulla, Sale, i! al!o on t,e -er(e o* !teppin( down" Vatar openl) acknowled(ed !endin( troop! to Li )a in !upport o* re el! *i(,tin( to o-ert,row lon(ti+e leader Moa++ar Oad,a*i" Vatar Bunder!tood at an earl) !ta(e t,at t,ere wa! a new !)!te+ in t,e +akin( in t,e Middle Ea!t,B !aid director o* t,e Crookin(! Ko,a 3entre Sal+an S,aik,, notin( t,at Bit took t,e initiati-e to en!ure re(ional !ta ilit) a! +uc, a! po!!i le"B Vatar4! e+ir, S,eik, 8a+ad in 1,ali*a al?5,ani, i! a clo!e US all) w,o ,a! +ana(ed to +aintain !tron( tie! wit, Iran, de!pite ,ei(,tened ten!ion! wit, t,e I!la+ic repu lic4! ot,er Oul* nei(, our! and We!tern power! o-er it! nuclear pro(ra++e" Vatar4! diplo+atic initiati-e! reac, *urt,er e)ond t,e Oul* to A*rica and Sout, A!ia" La!t )ear, Ko,a rokered a peace a(ree+ent etween t,e Sudane!e (o-ern+ent and re el! in Kar*ur, t,ou(, t,e deal *ailed to take e**ect on t,e (round" In &'':, it rokered a deal etween ri-al Le ane!e *action! to end an 1:?+ont, political *eud t,at exploded into deadl) !ectarian -iolence t,at t,reatened to pu!, t,e countr) toward! ci#il &ar" Vatar4! +ediation e**ort! al!o ,elped Eritrea and KEi outi re!ol-e t,eir order di!pute in &'':" Vatar i! al!o pla)in( a crucial role in pro+otin( a A*(,an peace deal and i! ,o!tin( talk! etween t,e US and 5ali an o**icial!" >aki!tani >ri+e Mini!ter Aou!u* DaJa Oilani arri-ed in Vatar on Monda) *or di!cu!!ion! a out e**ort! to rin( an end to A*(,ani!tan4! 11?)ear con*lict" BVatar continue! it! effecti#e diplomac% """ wit,in a co+plicated (eopolitical en-iron+ent,B !aid S,aik," Meanw,ile, Vatar4! in*luential tele-i!ion new! c,annel Al?0aJeera ,a! c,an(ed t,e *ace o* Ara 5R Eournali!+ !ince it! launc, in 199<, wit, ,ard?,ittin( reportin( on Middle Ea!t con*lict! and contro-er!ial de ate!" S+aller countrie!, !uc, a! Vatar and to a !+aller extent t,e United Ara E+irate!, B,a-e *illed in t,e (leader!,ip2 (ap!B le*t ) t,e traditional diplo+atic power?,ou!e! o* t,e re(ion, !aid A dulla, re*errin( to Saudi Ara ia and E()pt" 8owe-er, Bit i! di**icult to a!!u+e t,at Vatar4! role! are not appro-ed and !upported ) Saudi Ara ia" At lea!t !o+e o* t,e+B i* not all, !aid t,e anal)!t" BSaudi Ara ia4! +ain pro le+ lie! wit,in it! own wall! ?? an a(ein( leader!,ip wit, a di**icult) in re!pondin( and adEu!tin( to de-elop+ent! de!pite it! lar(e diplo+atic capa ilitie!,B ,e added" Vatar Bal!o reali!e! t,at it need! u!e*ul partner!,ip! in it! diplo+atic e**ort!" 5,i! i! w,) it relie! on !upport *ro+ it! allie! !uc, a! Saudi Ara iaB on co+plex political i!!ue! !uc, a! S)ria, !aid S,aik," Ko,a ,a! )et to +ake a reakt,rou(, in it! e**ort! to rid(e a widenin( (ap etween Wa!,in(ton and 5e,ran, w,o ,a-e not ,ad *or+al diplo+atic tie! !ince t,e 19:'!" Le4anese insta4ilit% causes glo4al &ar Stuart . (0a+e!, Strate(i!t, =e(otiator S Alt3"co"uk, Le anon S t,e !tru((le continue!# www"alt3"co"uk/di!cu!!ionM*ile!/le anon",t+2 W,) i! t,i! i+portant. W,) i! Le anon, w,ic, i! a !+all countr), !o i+portant to t,e re!t o* t,e world. W,) !,ould t,e world pa) attention to t,e undenia le pli(,t o* Le anon. 5,e world !,ould pa) attention ecau!e Le anon i! !o cruciall) placed" It i! al!o a de+ocrac) in a re(ion in*a+ou! *or it! extre+i!t in!pired in!ta ilit)" 5,e +urderou! extre+i!t! w,o in!pire !uc, in!ta ilit) are doin( e-er)t,in( in t,eir con!idera le power to +aintain and !pread t,i! in!ta ilit) in t,e !ure knowled(e t,at !ta ilit) will create (rowt, S and t,e) t,e+!el-e! will not e reFuired" 5,e extre+i!t! li-e to de!tro)" 5o !u!tain t,e+!el-e! t,e) +u!t !pread t,eir de!truction" I* t,e ra-e !oul! o* Le anon *all a w,o will e next. 5,e e)e! o* t,e extre+i!t! will t,en turn to t,o!e ric, !tate! on t,e perip,er) o* t,e re(ion S and t,e) will !trip t,o!e !tate! are to *eed t,eir addiction and lea-e !uc, a trail o* de!truction t,at will e trul) un eara le,

t,at will e trul) !,a+e*ul" Le4anon is crucial to t!e sta4ilit% of t!e entire Middle Ea!t re(ion" It i! crucial to t,e !ta ilit) o* t,e &orld" 5,i! i! w,ere a !tand +u!t e taken le!t t,e extre+i!t!, and t,e +ad+en *ro+ external !tate! w,o in!pire t,e extre+i!t!, (ain too +uc, !tren(t,, too +uc, +o+entu+" Le anon +a) e a !+all countr) )et ,ere i! w,ere t,e ,eart o* t,e world will eit,er eat !tron(l) or will cea!e to eat at all" I* t,ere i! a wider in!ta ilit) t,ere will onl) e a wider de!truction S and will e too +uc, to !top"

uq soft po&er
Ne& emir 4oosts soft po&er $$$ 4ut collapse is possi4le -euters */ (=ew e+ir !een +aintainin( Vatar4! role a! power roker#, <?&$, ,ttp://www"reuter!"co+/article/&'13/'</&$/u!?Fatar?crownprince? idUSCDE9$I'<R&'13'<&$2 (Deuter!2 ? Vatar4! new e+ir S,eik, 5a+i+ in 8a+ad al?5,ani i! widel) expected to pu!, a,ead wit, ,i! *at,er4! dri-e t,at tran!*or+ed t,e wealt,) Oul* Ara (a! exporter into a re(ional po&er 4ro8er" A (raduate o* Critain4! pre!ti(iou! Sand,ur!t +ilitar) acade+), 33?)ear?old S,eik, 5a+i+ i! !aid to e a war+ and a**a le pra(+ati!t a! well a! ein( an a-id *an o* Critain4! Manc,e!ter United w,o enEo)! pla)in( tenni! and ot,er !port!" Cut w,ile Vatar4! pre-iou! e+ir eca+e widel) reco(niJed on t,e world !ta(e in recent )ear!, t,e per!onalit) and a+ ition! o* ,i! !on and ,eir S,eik, 5a+i+ were +ore o* a +)!ter)" So+e anal)!t! ,a-e de!cri ed t,e new e+ir a! ein( +ore con!er-ati-e in te+pera+ent t,an ,i! <1?)ear?old *at,er, S,eik, 8a+ad in 1,ali*a al?5,ani, rai!in( Fue!tion! a out t,e direction t,e countr) will take durin( ,i! rei(n" Aet ot,er! !a) ,e i! a li eral +ore prone to li!tenin( to de+and! *ro+ )oun( Vatari! w,o +a) wi!, *or political re*or+, or are worried ) t,e countr)4! clo!e tie! to t,e United State! and it! ro u!t !upport *or upri!in(! in Li )a and t,en in S)ria" B8e +a) ,a-e !)+pat,ie! to !o+e con!er-ati-e wa)! o* t,inkin(,B !aid Mic,ael Step,en!, re!earc,er at t,e Do)al United Ser-ice! In!titute a!ed in Ko,a" BCut to e a ruler in Vatar, )ou ,a-e to under!tand t,at t,ere are con!er-ati-e *orce! in t,e countr), and +ake conce!!ion! to t,e+"B S5DI=O LEOA3A 5,ou(, little i! known a out 5a+i+4! inclination!, t,e *act t,at ,e i! t,e !on o* Vatar4! e+ir and *ir!t lad) S,eik,a MoJa, int =a!!er al?Mi!!ned !u((e!t! an intere!t in continuin( t,eir le(ac), e!peciall) in diplo+atic power rokin( and t,e promotion o* Qatari soft po&er t,rou(, t,e media and sport" B5,e +o!t i+portant ta!k a,ead o* ,i+ will e to continue t,e !tron( le(ac) o* ,i! *at,er, and ,e under!tand! t,at,B Step,en! !aid" W,en S,eik, 5a+i+4! *at,er, S,eik, 8a+ad in 1,ali*a al?5,ani, o-ert,rew ,i! *at,er in a 199$ loodle!! palace coup, Vatar wa! a ackwater" =ow it i! o*ten at t,e *ore*ront o* world diplo+ac) and a !tate in t,e +id!t o* enor+ou! do+e!tic tran!*or+ation a! it prepare! to ,o!t t,e &'&& !occer World 3up"

!ig! prices 8e%

:ig! oil prices are 8e% to Qatar0s econom% @loom4erg *3 (Vatar Econo+) Expand! 1%"7; a! Oa! Iutput and Iil >rice! Di!e#, 3?&:, ,ttp://www" loo+ er("co+/new!/&'1&?'3?&:/Fatar?econo+)?expand!?1%?7?a!?(a!?output? and?oil?price!?ri!e",t+l, Keec,2 VatarN! econo+) (rew an annual 1%"7 percent in t,e *ourt, Fuarter a! natural (a! output ro!e and oil price! increa!ed" Deal (ro!! do+e!tic product ro!e to 9$"$ illion ri)al! (6&<"& illion2 co+pared wit, :3"3 illion ri)al! a )ear earlier, t,e !tati!tic! aut,orit) !aid in an e?+ailed !tate+ent toda)" 5,e econo+) expanded 1% percent *or t,e )ear" Vatar, t,e worldN! i((e!t producer o* liFue*ied natural (a!, increa!ed it! capacit) to +ake t,e *uel to an annual 77 +illion ton! la!t )ear wit, t,e !tart o* it! 1%t, liFue*action plant" It al!o opened t,e worldN! lar(e!t plant t,at con-ert! (a! into liFuid *uel! !uc, a! die!el and Eet *uel" Iil price! a-era(ed 6111 a arrel in London la!t )ear, up *ro+ 6:' a )ear earlier" Econo+ic (rowt, +a) ease to $ percent t,i! )ear a! expan!ion o* t,e e+irateN! ener() indu!tr) slo&s, t,e econo+ic plannin( oard !aid in Icto er" Vatar doe!nNt plan an) +ore (a! liFue*action plant! a+id a +oratoriu+ on new de-elop+ent o* t,e =ort, Hield, t,e worldN! i((e!t (a! re!er-oir" 5,e (ro!! do+e!tic product (rew 3$"9 percent in no+inal ter+! to 171": illion ri)al! and increa!ed 3< percent to <31"< illion ri)al! *or t,e )ear, t,e !tati!tic! aut,orit) !aid" Iil and (a! accounted *or $:"3 percent o* t,e countr)N! no+inal OK> in &'11, t,e aut,orit) !aid" And $$$ t!at0s 8e% to its soft po&er Eania *3 (El!a, Sta** Writer S 8ar-ard >olitical De-iew, Vatar Di!in(#, 8ar-ard >olitical De-iew, $?1%, ,ttp://,ar-ardpolitic!"co+/world/Fatar?ri!in(/, Keec,2 Wit, immense &ealt!, a no-el rand, and a di!tincti-e *orei(n polic) a(enda, Vatar ,a! e+er(ed a! a ri!in( power in t,e >er!ian Oul*" A etted ) 13 percent o* t,e worldN! total natural (a! re!er-e! and t,e pree+inence o* it! national new! outlet, Al?0aJeera, Vatar ,a! de+on!trated a uniFue capacit) *or pro+ul(atin( it! own !o*t power" Indeed, wit, traditionall) do+inant
!tate! !uc, a! E()pt and S)ria en(ro!!ed in internal con*lict! and political tur+oil, Vatar i! takin( ad-anta(e o* a !,i*tin( (eopolitical land!cape" Cecau!e VatarN! a(enda and !trate(ic o Eecti-e! re+ain a+ i(uou!, one +u!t wonder w,et,er it! current pro+inence i! +erel) a tran!itor) p,eno+enon or i* it !i(nal! t,e arri-al o* a new do+inant *orce in t,e Middle Ea!t" Acti-i!+ in t,e Ara Sprin( A catal)!t *or t,e Ara Lea(ueN! !upport *or inter-ention in Li )a, Vatar wa! al!o t,e *ir!t Ara countr) to reco(niJe t,e 5ran!itional =ational 3ouncil e!ta li!,ed ) re el *orce!" Kurin( Oadda*iN! o-ert,row, Vatar not onl) !upplied *inancial and lo(i!tical !upport to in!ur(ent!, ut al!o put !e-eral ,undred !pecial?*orce! per!onnel on t,e (round" 5,e!e in!tance! o* inter-ention +ark a !u !tantial departure *ro+ a Vatari *orei(n polic) t,at traditionall) ex,i ited a neutral di!po!ition" 8owe-er, accordin( to Kr" I ra,i+ S,arFie,, Keput) Kirector o* t,e Crookin(! Ko,a 3enter, t,i! a(enda e+er(ed *ro+ an ideolo(ical !,i*t a+on( nei(, orin( Middle Ea!tern !tate! w,ere ) +o!t (o-ern+ent! are increa!in(l) le!! a-er!e to inter-entioni!+" El!ew,ere, Vatar, ot, independentl) and t,rou(, t,e Oul* 3ooperation 3ouncil (O332, ,a! undertaken an acti-i!t role" Wit,in t,e O33, !u!tained rapproc,e+ent and clo!e colla oration etween Vatar and Saudi Ara ia ,a-e allowed Vatari! to act wit, unprecedented !tren(t," Alt,ou(, t,e) are traditional ri-al!, t,e two nation! ,a-e een ound ) +utual intere!t!" 0u!tin Kar(in, currentl) a De!earc, A!!ociate wit, 5,e Ku ai Initiati-e and a Hul ri(,t Sc,olar !tud)in( t,e >er!ian Oul*, c,aracteriJed t,e!e !tate! a!, le!! willin( to allow intra?Oul* i!!ue!# to i+pede cooperation" 5,e O33? rokered deal t,at ea!ed Ali A dulla, Sale, out o* power in Ae+en and pro?+onarc,) inter-ention in Ca,rain exe+pli*) t,i!" More recentl), a +eetin( wit, t,e Hriend! o* S)ria oppo!ition +o-e+ent in I!tan ul re!ulted in a Eoint pled(e ) Vatar and Saudi Ara ia to pro-ide *inancial aid and weaponr) to re el!" Deconcilin( t,e Irreconcila le 5,rou(, it! newl) acFuired po!ition in international politic!, Vatar ,a! een a le to de-elop !trate(ic partner!,ip! wit, +an) actor!, alancin( relation!,ip! etween !ee+in(l) irreconcila le (roup!" Indeed, Vatar ,a! lon( enEo)ed U"S" protection and *riend!,ip, e-en ,o!tin( !e-eral A+erican +ilitar) a!e!" Si+ultaneou!l), Vatar +aintain! a+ica le relation!,ip! wit, (roup! con-entionall) oppo!ed to U"S" intere!t!" VatarN! !upport o* I!la+i!t +o-e+ent! includin( t,e Mu!li+ Crot,er,ood ,a! een -iewed wit, !u!picion ) U"S" ad+ini!tration!" Vatar al!o ,a! clo!e and relati-el) con(enial relation! wit, Iran and, partiall) !te++in( *ro+ it! connection! wit, 5ali an leader!,ip, it *acilitated t,e propo!ed 5ali an o**ice in Ko,a, encoura(in( now !talled ne(otiation! to end t,e A*(,ani!tan con*lict" In E()pt, Vatar ,a! clo!e tie! wit, t,e Mu!li+ Crot,er,ood and i! a !u !tantial, )et opaFue !ource o* *und! to a**iliated political partie!" Vatar ,a! lon( u!ed economic tools to e!ta li!, and +aintain

alliance! out!ide o* traditional political or diplo+atic *ra+ework!" >re-iou!l), due to ri-alr) wit, Saudi Ara ia, Vatar !ou(,t to *or+ independent relation! wit, it! nei(, or! in w,at Kar(in de!cri ed a! an alternati-e power loc"# In t,e Kolp,in Oa! >roEect, initiated in 1999,

Vatar !pear,eaded t,e con!truction o* a natural (a! pipeline to e!ta li!, clo!er tie! wit, t,e United Ara E+irate! and I+an" Vatar ,a! al!o i+pro-ed *riend!,ip! wit, it! Oul* nei(, or! ) !ellin( natural (a! elow +arket price" >arallelin( t,i!, wit, (oodwill accu+ulated *ro+ it! econo+ic and +ilitar) aid durin( t,e Li )an De-olution, Vatar ,a! +o-ed toward e!ta li!,in( !tron( partner!,ip! wit, Li )aN! ener() !ector"

***4a!rain econom%

4a!rain econom% *nc

Lo& oil prices crus! t!e @a!raini econom% $$$ creates insta4ilit% -euters */ (Ca,rain parlia+ent appro-e! 11 pct ri!e in &'13 ud(et !pendin(#, <?&$, ,ttp://www"(ul* a!e"co+/new!/ a,rain?parlia+ent?appro-e!?11?pct?ri!e?in?&'13? ud(et? !pendin(/&39$1&, Keec,2 5,e tin) i!land !tate *ace! di**icult c,oice! etween oo!tin( !tate !pendin( to support t,e econo+) in t,e *ace o* political unre!t, and (rapplin( wit, a ri!in( !tate ud(et de*icit, ) *ar t,e lar(e!t in t,e !ix?nation Oul* 3ooperation 3ouncil a! a proportion o* Ca,rain4! econo+)" Ca,rain expanded it! ori(inal &'1& expenditure plan ) nearl) 19 percent in Septe+ er &'11 a*ter prote!ter!, in!pired ) re-olt! el!ew,ere in t,e Ara world, took to t,e !treet! o* Mana+a de+andin( political re*or+!" 5,e International Monetar) Hund warned in Ma) t,at t,e i!land needed to re*or+ it! pu lic *inance! in t,e +ediu+ ter+ to a-oid it! de t urden eco+in( unsustaina4le" So*tne!! in oil price! i! one t!reat" Ca,rain now expect! !tate re-enue to dip to &"79 illion dinar! in eac, o* t,e )ear! &'13 and &'1% *ro+ an actual 3"' illion la!t )ear, a!ed on an a-era(e ud(eted oil price o* 69' per arrel" It predict! a ud(et de*icit o* :33"& +illion dinar! in &'13, widenin( to 91%"% +illion in t,e *ollowin( )ear" La!t =o-e+ er4! initial ud(et plan ,ad *oreca!t !,ort*all! o* <<&"' +illion dinar! and 7$&"9 +illion" 5,e actual de*icit in &'1& widened !e-en*old to &&7 +illion dinar!, t,ou(, it wa! !till !+aller t,an t,e (o-ern+ent4! ori(inal proEection" 5,e oil price w,ic, t,e countr) need! to alance it! ud(et reac,ed a critical le-el o* 611$ per arrel in &'1&, +akin( Ca,rain #ulnera4le to an) sustained decline in oil price!, t,e IMH !aid" 5,e countr) relie! on output *ro+ t,e A u Sa*a oil*ield !,ared wit, Saudi Ara ia ? w,ic, supports Ca,rain4! Sunni ruler! politicall) ? *or !o+e 7' percent o* it! ud(et re-enue" Anal)!t! elie-e Mana+a4! !,are o* t,e oil could e rai!ed i* it! ud(et run! into trou le" @a!rain insta4ilit% spills o#er $$$ ensures Iranian ad#enturism' economic collapse' and =a8istan ta8eo#er =earson ** (>eter, Oeneral S U"S" Ar+), Hor+er Keput) 3o++ander o* SIU583IM S =A5I, Ca,rain and t,e Ara Sprin(: ti+e *or !o+e reali!+#, 5,e 5ele(rap,, Au(u!t, ,ttp://www"tele(rap,"co"uk/new!/worldnew!/+iddleea!t/ a,rain/:<:1::$/Ca,rain?and?t,e? Ara ?Sprin(?ti+e?*or?!o+e?reali!+",t+l2 At t,i! point, itN! wort, con!iderin( w,at would ,a-e een t,e con!eFuence! i* Ca,rain ,ad deteriorated into ci-il war: Iran would ,a-e een e+ oldenedG Sunni Ara ! in Oul* !tate!, nota l) Saudi Ara ia, would ,a-e *elt increa!in(l) in!ecure and al+o!t certainl) taken actionG t,e world econo+) would ,a-e taken a 8noc8 *ro+ t,e i+pact o* ,i(,er oil price!G t,e We!t would ,a-e lo!t a *ir+l) we!tern?lookin( all)G and extre+e I!la+i!t ele+ent! in >aki!tan and around t,e world would ,a-e *elt e+ oldened" In!tead, Ca,rainN! !ecurit) *orce! inter-ened and ot,er Oul* !tate!, led ) t,e Saudi!, occupied ke) !trate(ic in!tallation!" E-en a! order wa! ein( re!tored, !adl) at t,e co!t o* two doJen li-e!, t,e realit) o* !ectarian -iolence loo+ed" Deportin( wa! one !ided" Hor exa+ple, it ne-er reac,ed t,e pu lic do+ain t,at Sunni! needin( +edical treat+ent at t,e Sal+ani)a ,o!pital were pre?!creened out" So+e arri-in( in a+ ulance! were attacked" Sunni +i(rant worker! *ro+ t,e Indian !u ?continent were al!o attacked" Hour were killed and one ,ad ,i! ton(ue cut out" Wit, a S,ia population on it! Oul* coa!t, t,ere wa! and re+ain! little pro!pect o* Saudi Ara ia acFuie!cin( in t,e e!ta li!,+ent o* a S,ia?do+inated !tate on it! door!tep" A tran!ition to *ull de+ocrac) would in realit) e a tran!ition to !o+et,in( -er) di**erent" In ,i! rilliant ook on t,e art o* war in t,e +odern world, Oeneral Sir Dupert S+it, ar(ued t,at t,e paradi(+ o* indu!triali!ed war*are etween nation !tate! ,a! (i-en wa) to

w,at ,e called Bwar a+on(!t t,e peopleB" I(nitin( S,ia?Sunni ten!ion! in Ca,rain would ine-ita l) ,a-e repercu!!ion! across a region t,at i! (eo?!trate(icall) t,e +o!t *ra(ile and dan(erou! in t,e world" Ince !tarted, it could e )ear! and +ore pro a l) decade! e*ore a new eFuili riu+ i! *ound" A! 3lau!ewitJ wrote, t,e onl) deci!i-e -ictor) i! t,e la!t one" So+eti+e!, per,ap!, itN! +ore prudent to ,an( on to w,at )ou ,a-e and +ake t,e e!t o* it" Ca,rainN! ruler! will ,a-e learned t,e le!!on! *ro+ t,e earlier part o* t,e )ear and will, no dou t, re*lect durin( Da+adan on ,ow e!t to take *orward t,eir countr)" In t,e *uture, it will e !een a! a +aEor water!,ed in t,at nationN! ,i!tor) *ro+ w,ic, t,ere wa! no (oin( ack" It! (o-ern+ent ,a! taken t,e unprecedented !tep o* in-itin( U= ,u+an ri(,t! expert! to *ind out w,at ,appened at t,e >earl Dounda out and a*terward!, learn *ro+ t,e +i!take! o* t,e pa!t and turn a new pa(e" A !ta le Ca,rain wit, law! and practice! t,at are *air and accepta le to all ar t,e extre+i!t! would not onl) e in t,e intere!t! o* all t,e Ca,raini citiJen! ut, clearl), o* t,e wider re(ion and e)ond" =a8istan coup causes glo4al nuclear &ar organ F (Step,en 0", Hor+er Me+ er S Criti!, La our >art) Executi-e 3o++ittee, Aut,or S 5,e Mind o* a 5errori!t Hunda+entali!t S t,e 3ult o* Al Vaeda#, Cetter Anot,er 5ali an A*(,ani!tan, t,an a 5ali an =U3LEAD >aki!tan#, 3?%, ,ttp://eJinearticle!"co+/.Cetter? Anot,er?5ali an?A*(,ani!tan,?t,an?a?5ali an?=U3LEAD?>aki!tan.Pid/%7$:':2 Oi-en t,e weakenin( a!e o* t,e traditional, !ecular oppo!ition partie!, condition! would e ripe *or a coup dN_tat ) t,e *unda+entali!t win( o* t,e Ar+) and ISI, leanin( on t,e radicali!ed +a!!e! to take power" So+e *or+ o* radical, +ilitar) I!la+ic re(i+e, w,ere le(al power! would !,i*t to I!la+ic court! and *or+! o* !,ira law would e likel)" Alt,ou(,, e-en t,en, t,i! +i(,t not take place out!ide o* a protracted cri!i! o* up,ea-al and ci-il war condition!, +ixin( *unda+entali!t +o-e+ent! wit, nationali!t upri!in(! and !ectarian -iolence etween t,e Sunni and +inorit) S,ia population!" 5,e ni(,t+are t,at i! now IraF would take on (ot,ic proportion! acro!! t,e continent" 5,e prop,e!) o* an arc o* ci-il war o-er Le anon, >ale!tine and IraF would !pread to !out, A!ia, !tretc,in( *ro+ >aki!tan to >ale!tine, t,rou(, A*(,ani!tan into IraF and up to t,e Mediterranean coa!t" Undou tedl), t,i! would al!o !pill o-er into India ot, wit, re(ard! to t,e Mu!li+ co++unit) and 1a!,+ir" Corder cla!,e!, terrori!t attack!, !ectarian po(ro+! and in!ur(enc) would reak out" A new war, and po!!i l) nuclear &ar, etween >aki!tan and India could not 4e ruled out" Ato+ic Al Vaeda S,ould >aki!tan reak down co+pletel), a 5ali an?!t)le (o-ern+ent wit, !tron( Al Vaeda in*luence i! a real po!!i ilit)" Suc, deep c,ao! would, o* cour!e, open a >andora4! ox# *or t,e re(ion and t,e world" Wit, t,e po!!i ilit) o* un!ta le clerical and +ilitar) *unda+entali!t ele+ent! ein( in control o* t,e >aki!tan nuclear ar!enal, not onl) t,eir u!e a(ain!t India, ut I!rael eco+e! a po!!i ilit), a! well a! t,e acFui!ition o* nuclear and ot,er deadl) weapon! !ecret! ) Al Vaeda" In-adin( >aki!tan would not e an option *or A+erica" 5,ere*ore a nuclear &ar &ould now a(ain 4ecome a real strategic possi4ilit%" 5,i! would rin( a !,i*t in t,e tectonic plate! o* (lo al relation!" It could u!,er in a new 3old War wit, 3,ina and Du!!ia pitted a(ain!t t,e US"

uq econom%
@a!rain econom% gro&ing no& $$$ outloo8 is positi#e ;AN */ (Olo al Ara =etwork, Ca,rain: Econo+) +akin( !tead) pro(re!! toward! re(ainin( lo!t +o+entu+#, <?&7, ,ttp://www"en(li!,"(lo alara network"co+/&'13'$1&1&9%7/Econo+ic!/ a,rain?econo+)? treadin(?care*ull)",t+l2 Ca,rainN! econo+) i! +akin( stead% progress toward! re(ainin( lo!t +o+entu+ *ollowin( t,e (lo al *inancial cri!i! and ci-il unre!t in &'11" 8owe-er, t,e reco-er) will need to e managed carefull% i* pa!t lo!!e! are to e *ull) recouped, Olo al Ara =etwork report! accordin( to ICO" W,ile (rowt, in &'11 wa! Eu!t under ,al* o* t,at in &'1' S &"&; co+pared to %"$;, accordin( to t,e International Monetar) Hund (IMH2 S anal)!t! expect OK> (rowt, to gain momentum" Horeca!t! ) ot, local and *orei(n expert! put t,e rate o* expan!ion at around 3"$;, *ar etter t,an +o!t We!tern econo+ie! and in line wit, t,e IMHN! (lo al outlook" 5,e econo+) wa! (i-en a -ote o* con*idence in late 0ul) ) Hitc, Datin(!, w,ic, +aintained it! a!!e!!+ent o* t,e countr)N! lon(?ter+ *orei(n currenc) i!!uer de*ault ratin( (IKD2 at CCC# and local currenc) IKD at CCCd#" 5,e report al!o up(raded t,e 1in(do+N! outlook to sta4le, an i+pro-e+ent t,e *ir+ !aid re*lected a !tron(er econo+ic per*or+ance" W,ile Hitc, Datin(! noted t,e !ta ilit) o* t,e *inancial !ector, w,ic, it !aid ,ad een little a**ected ) t,e lon(? runnin( unre!t, it did !a) t,at i* *urt,er da+a(e i! done to Ca,rainN! i+a(e a! a u!ine!!? *riendl) de!tination, t,ere would e t,e potential *or ne(ati-e !pillo-er! to ke) indu!trie!, !uc, a! t,e ankin( !ector" 5,i! potential *or renewed downward pre!!ure will e !o+ew,at o**!et ) increa!ed (o-ern+ent !pendin(, acked in part ) t,e pro+i!e o* 61' n in !upport *ro+ ot,er O33 !tate!, ,elpin( to dri-e econo+ic (rowt, and potentiall) deli-er ke) de-elop+ental initiati-e!"

!ig! prices 8e%

@a!rain0s econom% is !ig!l% dependent on oil <IA */ (3IA World Hact ook, Ca,rain Econo+) >ro*ile &'13#, &?&1, ,ttp://www"index+undi"co+/ a,rain/econo+)Mpro*ile",t+l2 Ca,rain i! one o* t,e +o!t di-er!i*ied econo+ie! in t,e >er!ian Oul*" 8i(,l) de-eloped co++unication and tran!port *acilitie! +ake Ca,rain ,o+e to nu+erou! +ultinational *ir+! wit, u!ine!! in t,e Oul*" A! part o* it! di-er!i*ication plan!, Ca,rain i+ple+ented a Hree 5rade A(ree+ent (H5A2 wit, t,e US in Au(u!t &''<, t,e *ir!t H5A etween t,e US and a Oul* !tate" Ca,rain4! econo+), ,owe-er, continue! to depend ,ea-il) on oil" >etroleu+ production and re*inin( account *or +ore t,an <'; o* Ca,rain4! export receipt!, 7'; o* (o-ern+ent re-enue!, and 11; o* OK> (exclu!i-e o* allied indu!trie!2" It,er +aEor econo+ic acti-itie! are production o* alu+inu+ ? Ca,rain4! !econd i((e!t export a*ter oil ? *inance, and con!truction" Ca,rain co+pete! wit, Mala)!ia a! a worldwide center *or I!la+ic ankin( and continue! to !eek new natural (a! !upplie! a! *eed!tock to !upport it! expandin( petroc,e+ical and alu+inu+ indu!trie!" In &'11 and continuin( into &'1&, Ca,rain experienced econo+ic !et ack! a! a re!ult o* do+e!tic unre!t" Ca,rain4! reputation a! a *inancial ,u o* t,e Oul* ,a! een da+a(ed, and t,e countr) now ri!k! lo!in( *inancial in!titution! to ot,er re(ional center! !uc, a! Ku ai or Ko,a" Econo+ic policie! ai+ed at re!torin( con*idence in Ca,rain4! econo+), !uc, a! t,e !u!pen!ion o* an expatriate la or tax, will +ake Ca,rain4! *ore+o!t lon(?ter+ econo+ic c,allen(e! ? )out, une+plo)+ent and t,e (rowt, o* (o-ern+ent de t ? +ore di**icult to addre!!" :ig! prices are 8e% to 4alance t!e @a!raini 4udget -euters ** (Ca,rain plan! ,e*t) ud(et outla)! in &'11?&'1&#, 1?<, ,ttp://www"ara ian u!ine!!"co+/ a,rain?plan!?,e*t)? ud(et?outla)!?in?&'11?&'1&? 3717::",t+l, Keec,2 Ca,rain plan! to !pend C8K$"3 n (61%"1 n2 o-er t,e next two )ear! and oil price! need to ri!e to 697?61'' per arrel to alance it! ud(et, t,e *inance +ini!tr) !aid on 5,ur!da)" Suc, a !pendin( le-el would e (reater t,an anal)!t!4 expectation! and proportionatel) exceed t,e 6$": n outla)! initiall) *ore!een *or t,e &'1' ud(et" Hacin( a ri!in( !u !idie! ill and dra((ed down ) it! !tru((lin( ankin( !ector, t,e !+all non I>E3 ener() producer ,a! t,e weake!t *i!cal po!ition a+on( Oul* Ara nation!" 5,e i!land kin(do+4! *inance +ini!tr) expect! re-enue! o* 611"<7 n a!ed on an oil price e!ti+ate o* 6:' per arrel *or it! two )ear dra*t ud(et *or &'11 and &'1&, it !aid in a !tate+ent" Hinance Mini!ter S,eik, A,+ed in Mo,a++ed al 1,ali*a wa! cited in t,e Oul* Kail) =ew! on 5,ur!da) a! !a)in( t,at t,e (o-ern+ent will co-er t,e expected de*icit t,rou(, loan! and I!la+ic ond!, or !ukuk" 5,e &'11 ud(et de*icit i! !et at 69::"$+, well elow an ori(inal plan o* 63"% n *or &'1', w,ic, anal)!t! now elie-e will e !,arpl) under!,ot due to t,e con!er-ati-e oil price e!ti+ate! it wa! a!ed on" 5,e !,ort*all i! !et to ri!e to 61"1< n in &'1&"

***gcc stoc8 mar8et

gcc stoc8 mar8et *nc

:ig! oil prices are 8e% to ;<< stoc8 mar8et gro&t! $$$ t!at0s #ital to t!eir economies Arouri ? (Mo,a+ed El 8edi, >ro*e!!or o* Econo+ic! S Uni-er!it_ dNIrl_an!, 8ow do oil price! a**ect !tock return! in O33 +arket!. An a!)++etric cointe(ration approac,#, Au!trian A!!ociation *or Ener() Econo+ic!, ,ttp://www"aaee"at/&''9? IAEE/upload!/*ullpaperMiaee'9/>M$%<MHouFuauM0ulienM:?0ul?&''9,;&'1$:$&"pd*, Keec,2 5a le 1 pre!ent! !o+e 8e% financial indicators *or t,e !tock +arket! in O33 countrie!" 5,e O33 wa! e!ta li!,ed in 19:1 and it include! !ix countrie!: Ca,rain, I+an, 1uwait, Vatar, Saudi Ara ia and United Ara E+irate! (UAE2" O33 countrie! ,a-e +an) co++on pattern!" 5o(et,er, t,e) produce a out &'; o* all world oil, control 3<; o* world oil export! and po!!e!! %7; o* t,e world oil pro-en" Iil export! lar(el) determine earnin(!, (o-ern+ent!N ud(et re-enue! and expenditure! and a((re(ate de+and" 5,e contri ution! o* oil to OK> ran(e *ro+ &&; in Ca,rain to %%; in Saudi Ara ia" Moreo-er, 5a le 1 indicate! t,at *or t,e t,ree lar(e!t econo+ie! in O33 countrie!, Saudi Ara ia, UAE, and 1uwait, t,e !tock +arketN! liFuidit) indicator i! po!iti-el) a!!ociated wit, t,e oil i+portance indicator in t,e!e econo+ie!" [5ACLE IMI55EK\ Hurt,er+ore, O33 countrie! are i+porter! o* +anu*actorie! product! *ro+ de-eloped and e+er(in( countrie!" 5,ere*ore, oil price *luctuation! can indirectl) impact O33 +arket! t,rou(, t,eir in*luence on price! o* i+ported product! and t,en increa!e! in oil price! are o*ten indicati-e o* in*lationar) pre!!ure in t,e O33 econo+ie! w,ic, in turn could indicate t,e *uture o* intere!t rate! and in-e!t+ent o* all t)pe!" 5,u!, oil price *luctuation! !,ould a**ect corporate output and earnin(!, do+e!tic price le-el! and !tock +arket !,are price! in O33 countrie!" 8owe-er, unlike net oil i+portin( countrie! w,ere t,e expected link etween oil price! and !tock +arket! i! ne(ati-e, t,e tran!+i!!ion +ec,ani!+ o* oil price !,ock! to !tock +arket return! are a+ i(uou! and t,e total i+pact o* oil price !,ock! on !tock return! depend! on w,ic, o* t,e po!iti-e and ne(ati-e e**ect! counterwei(, t,e ot,er" ;<< economic sta4ilit% is t!e l%nc!pin of emerging mar8et trade 6- ** (ME=A Hund De-iew, pu lication co-erin( Middle Ea!t and =ort, A*rican a!!et +ana(e+ent, 5,e E+er(in( =ew Irder#, :?%, ,ttp://www"+ena*undre-iew"co+/t,e? e+er(in(?new?order/2 E=IDMIUS (rowt, in e+er(in( +arket! in recent )ear! ,a! now (i-en ri!e to a new p,eno+enon o* !ur(in( intra?e+er(in( +arket trade, accordin( to a recent report produced ) t,e Econo+i!t Intelli(ence Unit" Su!tained econo+ic (rowt, in t,e O33 countrie!, dri-en in part ) (o-ern+ent !pendin(, ,a! *uelled inten!e intere!t in t,e re(ion" It ,a! al!o ,elped to spar8 t,e e+er(ence o* strengt!ening relations!ips etween it and ot,er part! o* t,e de-elopin( world, particularl) A!ia, t,e EIU re!earc,, titled O33 trade and In-e!t+ent Hlow!, 5,e E+er(in( Market Sur(e, *ound" 5,irt) )ear! a(o t,e IE3K accounted *or al+o!t :$ percent o* all t,e O33N! trade" 5,i! e(an to c,an(e in t,e la!t &' to 3' )ear! wit, e+er(in( +arket! eco+in( increa!in(l) i+portant to t,e re(ion" C) &''9 t,e e+er(in( +arket !,are o* O33 trade ,ad reac,ed %$ percent, ri!in( at an a-era(e o* 11 percent a )ear etween 19:' and &''9, co+pared to Eu!t *i-e percent a )ear *or t,e IE3K" 5,e (rowt, in i+portance o* e+er(in( +arket! to O33 trade i! a re!ult o* -er) ,i(, (rowt, rate! acro!! de-elopin( countrie!, w,ic, ,a! rou(,t wit, it a ri!e in di!po!a le inco+e and increa!in( con!u+ption pattern!, accordin( to A)e!,a Sa a-ala, deput) editor o* 5,e Econo+i!t S Middle Ea!t P =ort, A*rica" In t,e *lip !ide o* t,i! ,a! een a reduction in (rowt, o-er t,e pa!t *ew )ear! in de-eloped +arket!, w,ic,

,a! added to t,e i+portance *or e+er(in( +arket! o* *indin( new trade partner!" E+er(in( +arket! are lookin( to eac, ot,er ot, to *ill t,i! trade (ap le*t ) t,e de-eloped world and ecau!e ot,er e+er(in( +arket! can pro-ide product! and !er-ice! t,at t,e de-eloped world cannot, or at lea!t not at a !i+ilar price" 3,ina and India are t,e most important dri-er! o* intra?e+er(in( +arket de+and wit, t,e O33" 3,ina e!peciall) ,a! experienced a !,i*t *ro+ ein( a !olel) export oriented econo+) toward! (rowin( do+e!tic de+and" 2!at0s 8e% to Indian gro&t! =urd% *3 (Mark, Senior Executi-e De!earc, Hellow S Accenture, 3,ie* Econo+i!t S Accenture In!titute *or 8i(, >er*or+ance, 5,e Di!e o* E&E Inte(ration: 8ow 5rade and In-e!t+ent Cetween E+er(in( Market! I! De!,apin( Olo al 3o+petition#, Accenture De!earc, Deport, 0anuar), ,ttp://www"accenture"co+/Site3ollectionKocu+ent!/Accenture?5,e?Di!e?o*?E&E? Inte(ration"pd*2 E-en e+er(in( econo+ie! t,at ,a-e !tron( ,i!toric trade link! wit, de-eloped econo+ie! are eco+in( +ore integrated wit, ot,er e+er(in( econo+ie!" Hor exa+ple, t,e !,are o* CraJilN! export! de!tined *or e+er(in( econo+ie! ,a! increa!ed to <3 percent, co+pared wit, %: percent in &'''" Si+ilarl), a decade a(o, 3< percent o* export! *ro+ A*rica went to e+er(in( econo+ie!G now t,at *i(ure !tand! at %$ percent" India, one o* t,e *a!te!t (rowin( e+er(in( econo+ie!, increa!ed t,e !,are o* it! export! to e+er(in( econo+ie! ) nearl) 39 percenta(e point! durin( &'''?&'1'" (See Hi(ure &"2 Hour o* IndiaN! top *i-e export de!tination! were e+er(in( econo+ie! in &'1', wit, t,e United Ara E+irate! toppin( t,e li!t" 5,e countr)N! trade wit, 3,ina i! al!o oo+in(" Export! to 3,ina were wort, +ore t,an 617 illion in &'1', a &&?*old increa!e !ince &''' w,en Indian export! to 3,ina a+ounted to le!! t,an 61 illion" Indian gro&t! stops Indo)=a8 nuclear &ar $$$ goes glo4al @outon *9 (Mar!,all M", >re!ident S 3,ica(o 3ouncil on Olo al A**air!, A+ericaN! Intere!t! in India#, 3=AS Workin( >aper, Icto er, ,ttp://www"cna!"or(/*ile!/docu+ent!/pu lication!/3=ASMUSIntere!t!inIndiaM Couton"pd*2 In Sout, A!ia, t,e +o!t i++ediatel) co+pellin( U"S" intere!t i! pre-entin( terrori!t attack! on t,e U"S" ,o+eland ori(inatin( in or *acilitated ) actor! in Sout, A!ia, particularl) in A*(,ani!tan and >aki!tan" 5o a-ert t,at po!!i ilit), t,e United State! al!o ,a! an intere!t in t,e !ta ilit) and de-elop+ent o* ot, countrie!" At t,e !a+e ti+e, t,e United State! ,a! a -ital intere!t in pre-entin( con*lict etween >aki!tan and India, i++ediatel) ecau!e !uc, a con*lict would do (reat da+a(e to U"S" e**ort! in A*(,ani!tan and >aki!tan (!uc, a! t,e di-er!ion o* >aki!tani +ilitar) attention awa) *ro+ t,e in!ur(enc)2 and ecau!e it would po!e t,e !e-ere ri!k o* nuclear e!calation" Hinall), t,e United State! ,a! an intere!t in peace and !ta ilit) in Sout, A!ia a! a w,ole" In!ta ilit) and -iolence in nearl) e-er) one o* IndiaN! nei(, or!, not to +ention in India it!el*, could, i* unc,ecked, under+ine econo+ic and political pro(re!!, potentiall) de!ta iliJin( t,e entire re(ion" At pre!ent, a Sout, A!ia do+inated ) a politicall) !ta le and economicall% d%namic India is a ,u(el) i+portant counter&eig!t to t,e pre-alent in!ta ilit) and conflict all around IndiaN! perip,er)" I+a(inin( t,e counter*actual !cenario, a Sout, A!ian re(ion, includin( India, t,at i! *ailin( econo+icall) and !tu+ lin( politicall), i! to i+a(ine in!ta ilit) on a !cale t,at would ,a-e (lo al con!eFuence!, includin( da+a(e to t,e (lo al econo+), ,u(e di!location! o* people and ,u+anitarian cri!i!, increa!in( extre+i!+ and terrori!+, and +uc, (reater potential *or unc,ecked inter!tate and ci-il con*lict"

uq gcc stoc8s ) econom%

;ulf stoc8 mar8ets gro&ing no& $$$ momentum is neg 4ut maintaining !ig! oil prices 8e% Al Asoomi */ (Kr" Mo,a++ad, 3olu+ni!t S Oul* =ew!, >ro!pect! *or Oul* !tock +arket! in &'13#, Oul* =ew!, 1?9, ,ttp://(ul*new!"co+/ u!ine!!/+arket!/pro!pect!?*or?(ul*?!tock? +arket!?in?&'13?1"11&97<%, Keec,2 I* t,i! wa! t,e ca!e t,at di!tin(ui!,ed t,e per*or+ance o* O33 +arket! la!t )ear, +ore i+portantl) i! t,e pro!pect! o* O33 !tock +arket! in &'13, !o a! to identi*) prioritie! *or in-e!tor! and in-e!t+ent and *und co+panie!" It !ee+! t,at all O33 *inancial +arket! are expected to rise durin( t,i! )ear, i* t,e i+pact o* !o+e *actor! L t,at will e re*erred to later L ,a! eco+e le!!, notin( t,at t,e (ap etween t,e O33 +arket! +a) !,rink due to t,e !tron( con-er(ence?expected to e ac,ie-ed wit, re(ard to t,e per*or+ance o* t,e!e +arket! in &'13" A! *or *actor! t,at +a) po!iti-el) and ne(ati-el) a**ect Oul* +arket!, w,ic, +u!t e taken into account, +ainl) lie in !e-eral po!iti-e *actor!, !uc, a! di-idend di!tri ution! ) co+panie! *or t,e )ear &'1&, and t,e expected di!tri ution! in V1 &'13 w,ere pro*it! are proEected to e rewardin( t,ank! to (rowin( corporate pro*it!, includin( t,e pro*it! o* co+panie! li!ted on !tock +arket! wit, low per*or+ance la!t )ear, !uc, a! Vatari and Ca,raini +arket!" A+on( po!iti-e *actor! i! t,e i!!ue o* oil price !ta ilit) at !ig! rates and positi#e prospects *or Oul* econo+ie!, w,ic, are expected to ac,ie-e (ood (rowt, rate! o* %?7 per cent in &'13" 5,i! will re!ult in a ri!e in t,e per*or+ance and pro*it! o* co+panie!, a! well a! t,e ,u(e increa!e in in t,e -olu+e o* expenditure in O33 ud(et! *or &'13, w,ic, will lead to !ti+ulatin( non?oil !ector! and ca!, increa!e in t,e +arket!"

uq em trade ) india econom%

Emerging mar8et trade is gro&ing no& $$$ 4oosting India $$$ prefer predicti#e e#idence Jones */ (3laire, Econo+ic Deporter S Hinancial 5i+e!, E+er(in( +arket! to tran!*or+ trade *low!#, Hinancial 5i+e!, &?&7, >roFue!t, Keec,2 Export! etween leadin( e+er(in( +arket! will dri-e (lo al (rowt, in t,e co+in( decade!, tran!*or+in( international trade *low!, accordin( to a report pu li!,ed on Wedne!da)" 5,e report, co+piled ) 8SC3 and Ix*ord Econo+ic!, predict! t,at intra?e+er(in( +arket trade i! !et to gro& rapidl% in t,e )ear! to &'3' a! t,e!e econo+ie! (row wealt,ier and do+e!tic de+and ri!e!" BE+er(in( +arket! are de-elopin( at a p,eno+enal pace and are !et to res!ape world trade pattern! o-er t,e next &' )ear!,B !aid 0a+e! E++ett, o* 8SC3" Export (rowt, would e strongest in India, Rietna+ and 3,ina, all o* w,ic, are expected to po!t dou le?di(it annual (rowt, o-er t,e next !e-en )ear!"

!ig! prices 8e%

6alling oil prices are t!e onl% c!allenge to ;<< gro&t! Deutsc!e @an8 D (O33 ? a new kind o* !o*t power wit, in*luence o-er world *inancial +arket!#, &?:, ,ttp://www"d re!earc,"co+/>DIK/KCDMI=5ED=E5ME=? >DIK/>DIK''''''''''&&'9:1"pd*, Keec,2 De(ardle!! o* t,e ro u!t outlook *or t,e near ter+, t,e O33 countrie! ,a-e t,eir !,are o* econo+ic c,allen(e! and ri!k!" Ke!pite increa!ed di-er!i*ication e**ort!, t,e re(ion !till relie! predominantl% on ,)drocar on indu!trie!" E-en t,ou(, real non?,)drocar on (rowt, i! continuin( to outpace ,)drocar on (rowt, (in all O33 countrie! except Vatar2, ,)drocar on re-enue! !till repre!ent around :%; o* total (o-ern+ent re-enue!" 5,i! +ake! t,e re(ion #ulnera4le to ener() price *luctuation! and (eopolitical ri!k!" In a down!ide !cenario, i* a rece!!ion in t,e US led to a !,arp decline in oil price!, t,i! would ,a-e a significant impact on t,e O33 econo+ie!, alt,ou(, t,e downturn would e +iti(ated ) +aEor in*ra!tructure proEect! alread) underwa) or propo!ed" And $$$ empirics pro#e our argument E2 */ (Econo+ic 5i+e!, 8i(,er oil price! ,a-e ene*itted Oul* econo+ie!#, %?1&, ,ttp://article!"econo+icti+e!"indiati+e!"co+/&'13?'%?1&/new!/3:%91731M1M,i(,?oil?price!? !eet,ara+an?Fatar, Keec,2 KUCAI: 8i(,er oil price! ,a-e 4enefited t,e Oul* 3ooperation 3ouncil (O332 econo+ie! in recent )ear! wit, Saudi Ara ia4! re-enue! in &'11 alone reac,in( USK &9< illion a(ain!t t,e ud(et o* USK 1%% ilion, a leadin( anker in t,e re(ion ,a! !aid" D Seet,ara+an, Oroup 3EI, Ko,a Cank, !aid in &'1&, Saudi Ara ia4! re-enue! reac,ed USK 33'"% illion a(ain!t ud(et o* USK 1:7"& illion" BVatar ,ad a ro u!t USK 1$ illion !urplu! in t,e &'11?1& de!pite a !ur(e in !pendin( on pu lic !ector wa(e!" Vatar al!o ,ad a ud(et !urplu! o* USK &1 illion durin( April? Septe+ er &'1&,B Seet,ara+an !aid" 8e wa! !peakin( at t,e Cloo+ er( Ko,a 3on*erence recentl)"

8e% to econom%
Stoc8 mar8ets 8e% to Ara4 economies @ataina! */ (LoNai, 3orre!pondent S I+an Kail) I !er-er, 5,e role o* !tock +arket! in econo+ic de-elop+ent#, I+an Kail) I !er-er, 3?&7, ,ttp://+ain"o+ano !er-er"o+/node/1<$<3&, Keec,2 5,ere +i(,t e no con!en!u! a out t,e i+portant role pla)ed ) Stock +arket! in an) (i-en econo+) and t,e a ilit) o* t,e!e +arket! in !teerin( t,at econo+) into certain econo+ic c)cle! t,at en!ure en,ancin( t,e (rowt, o* national econo+ie!" Stock +arket! al!o pla) an i+portant role in !,apin( t,e *inancial, econo+ic and +onetar) policie!, plan! and pro(ra++e!" 5,e e!ta li!,+ent o* !tock +arket! in Ara countrie! ca+e in line wit, t,e Ara (o-ern+ent!4 policie! and pro(ra++e!" It ca+e al!o a*ter !uc, (o-ern+ent! reali!ed t,e i+portance o* t,e role pla)ed ) !uc, +arket! in en,ancin( t,e co+pre,en!i-e de-elop+ent proce!!e! takin( place in t,eir countrie! e!peciall) t,e capital +arket experience in +an) countrie! ,a! een -er) !ucce!!*ul" It i! a trut, uni-er!all) acknowled(ed t,at econo+ic de-elop+ent at an) countr) would reFuire lar(e capital! to ac,ie-e t,e pro!pecti-e (rowt, rate! in t,eir ud(et!" Stock +arket! +a) t,ere*ore eco+e t,e ideal +ean *or collectin( *und! and c,annelin( t,e+ into t,e di**erent in-e!t+ent c,annel!" 5,e) +a) al!o act a! co++unication link! a+on( t,e !ector! t,at ,a-e !urplu!e! and ot,er !ector! t,at are in need *or liFuidit) to *und t,eir in-e!t+ent!" 5,i! alance will de*initel) rin( ene*it! to an) countr)" 5,e +ain role o* t,e !tock +arket! i! t,u! to a-ail *und! needed to *inance t,e proEect! pro+oted ) exi!tin( or under de-elop+ent at rea!ona le ter+! t,at rin( ene*it! *or e-er)one" Kue to lack o* *inancial re!ource! and low capital!, e!peciall) in countrie! w,o!e *inancial re!ource! are li+ited, !tock +arket! +a) e t,e onl) !ource and +ain pro-ider *or t,e capital! o* !uc, proEect!" 5,e +ain rea!on! e,ind +an) co+panie!4 reliance on t,e *und! pro-ided ) t,e !tock +arket! in e+er(in( econo+ie! to *inance proEect include t,e lack o* capital! and ,i(, ri!k" 5,e!e *actor! li+it t,e a ilit) o* !uc, co+panie! to (et t,e reFuired *inance *ro+ co++ercial ank!" Moreo-er, in +o!t ca!e! t,e *inance !,ould e +ade in *orei(n currenc)" 5,e ,i(, ri!k a!!ociated wit, *undin( in local currenc), di**icult) in a-ailin( *und and *orei(n exc,an(e ri!k! +ake t,e re(ional and international ank! una le in +an) ca!e! to pro-ide !uc, *inance" A! *or de-elopin( and Ara countrie!, +one) +arket! are !till in e+er(in( and de-elopin( p,a!e!" 5,e Ara ankin( and *inancial !)!te+, w,ic, +ainl) con!i!t! o* ank! and *inancial 3oN!, i! -er) acti-e in o**erin( *inance to new !et up 3oN!"

8e% to india
;<< trade is 8e% to India0s econom% E2 */ (Econo+ic 5i+e!, 4O33?India trade can (i-e opportunitie! *or SME!4#, <?17, ,ttp://article!"econo+icti+e!"indiati+e!"co+/&'13?'<?17/new!/%''&77%$M1Mindian?!+e!? !eet,ara+an?do,a? ank?(roup?ceo2 KUCAI: S+all and Mediu+ Enterpri!e! (SME!2 are one o* t,e *a!te!t (rowin( u!ine!! !e(+ent! in t,e Oul* 3ooperation 3ouncil (O332 countrie! and en,anced ilateral trade etween India and t,e re(ion pre!ent! #ital opportunities *or entrepreneur!, a leadin( anker ,a! !aid" BO33?India ilateral trade ,a! increa!ed *ro+ 61%$ illion in &'11?1& to 61$: illion to &'1& ? &'13 re*lectin( a (rowt, o* 9 per cent,B !aid D Seet,ara+an, Oroup 3EI o* Ko,a Cank" BIncrea!in( ilateral trade can (i-e opportunitie! *or SME! to explore O33 +arket" Orowin( opportunitie! etween O33 and Indian SME! i! #ital *or 4ilateral sustaina4ilit%,B Seet,ara+an !aid" BSME i! one o* t,e *a!te!t (rowin( !e(+ent! in O33" It contri ute! to o-er <' per cent o* t,e UAE4! OK> and pro-ide! around :< per cent o* t,eir e+plo)+ent in t,e pri-ate !ector,B ,e added" Ela oratin( on t,e ilateral trade relation!,ip, t,e 3EI !aid: BW,en co+pared to pre-iou! )ear in &'1&?&'13 t,e export! to India ,a! increa!ed *ro+ UAE, Saudi Ara ia, Vatar and 1uwait"B Ce!ide! t,i!, UAE, Saudi Ara ia, I+an and Ca,rain ,a-e increa!ed t,eir i+port *ro+ India and t,e latter i! al!o in talk! wit, O33 +e+ er! to conclude a *ree trade a(ree+ent"

***saudi insta4ilit%

saudi insta4ilit% *nc

:ig! oil prices 8e% to maintain Saudi sta4ilit% <are% *3 (Olen, Deporter S Cloo+ er(, 5,e Saudi! =eed 5,o!e 8i(, Iil >rice!#, Cloo+ er( Cu!ine!!week, &?&3, ,ttp://www" u!ine!!week"co+/article!/&'1&?'&?&3/t,e?!audi!?need? t,o!e?,i(,?oil?price!, Keec,2 5,e e-ol-in( price tar(et! ,a-e e-er)t,in( to do wit, t,e Saudi!N I4udget needsM in re!pon!e to t,e Ara Sprin(, !a)! Do in Mill!, an anal)!t at Manaar Ener() 3on!ultin( in Ku ai" In He ruar) &'11, 1in( A dulla, returned ,o+e *ro+ +edical treat+ent in t,e U"S" to announce a !pendin( plan t,at would quiet t,e resti#e parts o* t,e Saudi population" C) t,e end o* &'11N! *ir!t Fuarter t,e kin(do+ ,ad allocated 613' illion in additional !pendin( to uild ,o+e! and co+ at )out, une+plo)+ent" Oo-ern+ent !pendin( increa!ed &: percent la!t )ear to :'% illion ri)al! (6&1% illion2, w,ile (o-ern+ent re-enue !ur(ed $1 percent, to 1"1 trillion ri)al!, accordin( to Mini!tr) o* Hinance Kata" 5,e !pendin( ,a! ac,ie-ed it! political purpose: 5,e 8ou!e o* SaudN! ei(,t?decade rule !ur-i-ed un!cat,ed a! 8o!ni Mu arak and Mua++ar Vadda*i were toppled, de!pite !poradic prote!t! in t,e S,iite area! o* Saudi Ara iaN! Ea!tern >ro-ince" 5,e Saudi econo+) expanded <": percent in &'11, central ank data !,ow" Oo-ern+ent e+plo)ee! were e-en awarded two +ont,! in onu! pa) la!t )earLan act o* (enero!it) t,at co!t t,e (o-ern+ent an extra &&% illion ri)al! o-er ud(eted expen!e!" Iil !ale! +ake up D9 percent o* Saudi (o-ern+ent re-enue, !a)! Hai!al 8a!an, ,ead o* re!earc, at 1uwait? a!ed Olo al In-e!t+ent 8ou!e" 5wo )ear! a(o t,e kin(do+ needed an oil price per arrel o* around 67' in order to pa) *or it! ud(et wit,out tippin( into de*icit" Hor &'11, t,e Saudi!N reak?e-en oil price wa! e!ti+ated ) t,e International Monetar) Hund to ,a-e ri!en to 6:' a arrel, a *i(ure t,at will increa!e to 69: a arrel ) &'1<" Saudi Ara ia will ,a-e to keep !pendin( ,ea-il) i* it i! to create 3 +illion Eo ! o-er t,e next t,ree )ear!, 1in( A dulla,N! !tated (oal" 5,e Saudi! are !pendin( on de*en!e too: t,e U"S" ,a! a(reed to !ell t,e countr) :% H?1$ *i(,ter Eet! *or 6&9"% illion"

!ig! prices 8e%

:ig! oil prices are 8e% to maintain t!e Saudi social compact Allam *3 (A eer, 3orre!pondent S Hinancial 5i+e!, Saudi Ara ia: In a re!tle!! real+#, Hinancial 5i+e!, :?&<, >roFue!t, Keec,2 5,e do+e!tic !ituation co+pound! t,e pro le+!" An a(ein( +onarc,) re!i!tant to political c,an(e +u!t *ocu! on appeasing a )oun( population ? increa!in(l) connected to t,e out!ide world ? concerned a out tran!parenc) in (o-ern+ent deci!ion?+akin(G t,e di!tri ution o* t,e countr)4! re!ource!, includin( oil wealt, and landG and a deart, o* Eo !" Iil price!, currentl) a o-e 611' a arrel, ,a-e pro-ided Saudi Ara ia wit, a fiscal cus!ion" 5,e central ank4! net *orei(n a!!et! ro!e to a record 6$91 n in 0une *ro+ rou(,l) ,al* t,at le-el *i-e )ear! a(o" 5,e International Monetar) Hund4! &'1& econo+ic (rowt, *oreca!t i! < per cent, a contra!t wit, t,e outlook *or !tru((lin( we!tern !tate!" Cut t,e countr) i! !till !ea#il% dependent on oilG non?oil export! repre!ented onl) 1& per cent o* t,e total la!t )ear" Oil prices underpin Saudi political sta4ilit% Ste#ens *3 (>aul, >ro*e!!or E+eritu! o* >etroleu+ >olic) and Econo+ic! S Kundee Uni-er!it), Senior De!earc, Hellow *or Ener() S 3,at,a+ 8ou!e, C"A" in Econo+ic! and Middle Ea!t S 3a+ rid(e Uni-er!it), 3on!ultin( >ro*e!!or S Uni-er!it) 3olle(e London (Au!tralia2, Iil >rice!: Ener() In-e!t+ent, >olitical Sta ilit) in t,e Exportin( 3ountrie! and I>E3N! Kile++a#, Icto er, ,ttp://www"c,at,a+,ou!e"or(/!ite!/de*ault/*ile!/pu lic/De!earc,/Ener(), ;&'En-iron+ent;&'and;&'Ke-elop+ent/1'1&ppMopec"pd*, Keec,2 Cut a! de!perate a! all t,at !ound! *or petro?,awk!, t,e) !till !ee !o+e li(,t at t,e end o* t,e Saudi tunnel, wit, re(ard to t,e price tar(et! +entioned earlier" A! indicated, e-en Di)ad, need! to increa!e price! to around 69:/ to *inance t,e current 61&9 illion o* !ocial !pendin( unle!! it i! to !tart runnin( down t,e *inancial re!er-e!" 5,at ine-ita l) reduce! it! roo+ *or pricin( +anoeu-re, (i-en t,at t,e co!t! o* social appeasement will continue to ri!e inexora l) in *uture" Ko+e!tic !ocial !pendin( ,a! increa!ed fourfold in le!! t,an a decade acro!! t,e Middle Ea!t, accordin( to In-e!co nu+ er!, w,ile 8SC3 e!ti+ate! t,at Saudi Ara ia will need 61''/ in &'13 to reak e-en, let alone (enerate an) kind o* !urplu!" More i+portantl), Saudi Ara ia al!o need! to con!ider t,e proxi+ate po!ition o* it! *ellow O33 !tate!" Vatar can (o lower t,an an)one at 6$:/ t,ank! to it! tin) population and -a!t re!ource ric,e!, ut 1uwait i! likel) to *ind an)t,in( le!! t,an 6:$/ -er) di**icult" E-en t,e United Ara E+irate! need! to take a !eriou! look at it! ud(et!, (i-en t,at t,e) are currentl) alanced at 61'7/ in A u K,a i" A! t,e!e are t,e onl) pro!pecti-e allie! Saudi Ara ia ,a! le*t in I>E3, it will tread care*ull) to +ake !ure t,e) are not expo!ed to tu+ lin( price! (*or too lon(2" It i! +ore t,an clear t,at t,e Ara upri!in(! are !till -er) +uc, on(oin(" Sala*i!t (ain! are one part o* t,e de ate, ut !eriou! Fue!tion! re+ain a! to w,et,er *uture !ucce!!ion can e internall) +ana(ed acro!! t,e re+ainin( +onarc,ie!, or w,et,er popular political pre!!ure! would +ount in t,e Oul* !tate!" So, a! te+ptin( a! a *ull?!cale pricin( war +i(,t e *or Saudi Ara ia to rin( Iran and Du!!ia into line and put a !panner in uncon-entional work!, de*endin( price and! clo!er to 69'/ t,an 6:'/ would e welco+e new! acro!! t,e Oul*"

***c!ina

***c!inese liquidit%

c!inese liquidit% *nc

Oil prices increase t!e <!inese mone% suppl% -attia *3 (Donald A", >ro*e!!or o* Econo+ic! S Uni-er!it) o* We!tern S)dne), LiFuidit) and 3rude Iil >rice!: 3,inaN! In*luence I-er 199<?&'11#, Ki!cu!!ion >aper &'1&?'$, Uni-er!it) o* 5a!+ania, S38IIL IH E3I=IMI3S A=K HI=A=3E, ,ttp://eprint!"uta!"edu"au/1$'<&/1/&'1&?'$MMK>MRe!pi(nani"pd*, Keec,2 ccc=ote: M& i! a +ea!ure o* +onetar) polic) Wit,in t,e *ra+ework ad-anced ) 1ilian (&''92 t,at identi*ie! t,e !uppl) and de+and !ide *actor! dri-in( oil price c,an(e! we introduce t,e in*luence o* liFuidit) in 3,ina and in ot,er +aEor countrie! on oil price c,an(e!" It i! !,own t,at +o-e+ent in 3,inaN! +one) !uppl) dri-e! t,e +o-e+ent in world +one) !uppl) o-er t,e la!t twent) )ear!" 3,inaN! +one) !uppl) i! significantl% associated wit, real increa!e! in t,e price o* oil, w,erea! U"S", EuroJone, and 0apane!e +one) !upplie! are not" It i! !,own t,at increa!ed liFuidit) in 3,ina relati-e to t,at in t,e U"S", Europe and 0apan !i(ni*icantl) rai!e! real oil price! o-er 199<:1?&'11:1&" Hollowin( a !,arp *all in t,e la!t ,al* o* &'':, real oil price ro!e !tron(l) o-er &''9?&'1'" 5,i! ri!e wa! +o!tl) due to !tron( e**ect! o* !,ock! *ro+ 3,inaN! real M& (e!peciall) durin( &''92 and (lo al real a((re(ate
de+and !,ock! (e!peciall) durin( &'1'2"In re!pon!e to an unanticipated increa!e in 3,inaN! real M& (rowt, t,ere are !i(ni*icant increa!e! in real oil price! t,at uild up o-er !ix +ont,! and t,en per!i!t" In contra!t, inno-ation! to U"S", 0apane!e or EuroJone real M& do not !i(ni*icantl) a**ect real oil price" Structural !,ock! are lar(e *or ot, O3 real M& and 3,inaN! real M&" 8owe-er, t,e cu+ulati-e i+pact o* real O3 M& !,ock! on real oil price! i! !+all in contra!t to a lar(e cu+ulati-e e**ect o* 3,inaN! real M& on t,e real price o* crude oil" I-er 199<:1?&'11:1& a po!iti-e (lo al real acti-it) !,ock ,a! an e**ect on real oil price! t,at uild! up *or !e-eral +ont,! and i! !i(ni*icant o-er t,e *ir!t !ix +ont,!, a*ter w,ic, t,e e**ect (raduall) erode!" An unanticipated ne(ati-e inno-ation in (lo al oil production cau!e! t,e real price o* oil to increa!e !li(,tl) *or !e-eral +ont,! ut t,e e**ect i! tran!itor) and doe! not per!i!t" An increa!e in precautionar) de+and *or crude oil cau!e! !i(ni*icant and !u!tained increa!e! in real oil price!" 5,e e,a-iour o* 3,inaN! M& and t,at o* ot,er +aEor countrie! i! exa+ined in Section &" 5,e !tructural -ector autore(re!!i-e +odel *or anal)!i! o* real crude oil price! i! di!cu!!ed in Section 3" 5,e e+pirical re!ult! are pre!ented in Section %" Section $ conclude!" &" 3,ina M& and Olo al M& 5,e (rowin( i+portance o* 3,inaN! +one) !uppl) *or (lo al liFuidit) i! illu!trated in Hi(ure 1" In Hi(ure 1a t,e lo( o* M& +one) !upplie! in 3,ina, U"S", EuroJone, 0apan, t,e U"1" and SwitJerland o-er 199<:'1?&'11:1& are pre!ented" In Hi(ure 1 t,e lo( o* (lo al M& i! !,own" Olo al M& i! taken to e t,e !u+ o* t,e M& in 3,ina and in t,e O3" 5,rou(,out t,e paper we take t,e O3 to e t,e U"S", EuroJone and 0apan" 5,e ri!e o* 3,inaN! +one) !uppl) a! !,are o* (lo al +one) !uppl) ,a! een +arked" In 199< 3,inaN! M& +ea!ured in U"S" dollar! onl) account *or le!! t,an $; o* (lo al M&, ,owe-er ) &'11 t,i! !,are increa!ed to &:;" In ter+! o* (rowt, rate, 3,inaN! M& +ea!ure in USK account *or 7$; o* t,e increa!e in (lo al M& re(i!tered etween 199< and &'11" Hor t,i! rea!on, t,e upward trend in (lo al M& in Hi(ure 1 i! due to t,e e,a-iour o* 3,inaN! M&" 3,ine!e M& (rowt, rate ,a! dri-en (lo al M& (rowt, !ince at lea!t &'''" 5,e e,a-iour o* 3,inaN! no+inal OK> i! !i+ilar to t,at o* 3,inaN! no+inal M& and i! !tron(l) upward" 5,i! pattern i! illu!trated in Hi(ure 1c" Hro+ 199< to &'11 3,inaN! no+inal OK> (in USK2 increa!ed on a-era(e ) 1$; per )ear and M& (in USK2 increa!ed on a-era(e ) 19"$; per )ear" 5,e no+inal oil price and O3 M& and 3,ina M& are !,own in Hi(ure 1d" In Hi(ure 1d 3,inaN! M& i! !tron(l) upward and t,e O3 M& i! +uc, *latter" =o+inal 3,inaN! M& trend! +uc, clo!er to oil price! t,an t,e O3 M&" Oi-en t,e!e *act! and t,e ar(u+ent +ade ) Coden!tein, Ouerrieri and 1ilian (&'1&G pa(e $12 a t,ere i! con!en!u! t,at causalit% in t,i! relation!,ip (re*errin( to +onetar)

polic) and oil price!2 run *ro+ t,e e-ent o* oil +arket to +onetar) polic) a! well o* !,i*t! o* +onetar) polic) to t,e !uppl) o* oil and de+and o* oil in (lo al +arket!#, we elie-e t,at a credi le ,)pot,e!i! i! t,e ar(u+ent t,at 3,inaN! expan!i-e +one) !uppl) i! in part re!pon!i le *or ,i(,er oil price!" 5,e !iJea le nature o* 3,inaN! M& expan!ion relati-e to t,at o* t,e O3 i! al!o apparent in real ter+!" In Hi(ure 1e, 3,inaN! real M& ,a! a +uc, !tron(er upward trend t,an t,e O3N! real M& (t,e de*lator i! t,e U"S" >>I index *or co++oditie!2" Ca!ed on an index o* 1'' in 199<, ) &'11:1& 3,inaN! real M& index i! 3%' and t,e O3N! real M& index i! 1$'" 2!at0s critical to a#ert a <!inese economic collapse =ar8er */ (0a+e!, >ro*e!!or o* Hinance, 3,inaN! Mone) Market 0itter!#, 5,e Kiplo+at, <?19, ,ttp://t,ediplo+at"co+/paci*ic?+one)/&'13/'</19/c,ina!?+one)?+arket?Eitter!, Keec,2 A*ter t,e Kra(on Coat *e!ti-al, t,e >eopleN! Cank o* 3,ina (>Co32 did not !tep in to inEect !i(ni*icant liFuidit) into t,e +one) +arket!, a! +an) ,ad expected (,oped2" S8ICID +one) +arket rate! re+ained ,i(,, and on Hrida) o* la!t week, t,e ti(,tne!! e-en a**ected 3,inaN!

Mini!tr) o* Hinance S w,ic, *ailed to place o-er a t,ird o* it! planned de t" Expectation! *or a >CI3 re!cue# (liFuidit) inEection2 recei-ed cold water on Sunda), a! a ke) new!paper linked to t,e central ank !u((e!ted t,at no action would e *ort,co+in( and la+ed t,e ank!N pain on t,eir own ad practice! and liFuidit) +ana(e+ent" 5,en on Monda) o* t,i! week (17t, 0une2 t,e o-erni(,t rate did *all ack !o+ew,at, ut ot,er rate!, includin( t,e 7?da) rate, re+ained ,i(," It i! clear t,at liFuidit) re+ain! tig!t, and +arket! are ner#ous" A! predicted in t,e weekend new!paper report, 5ue!da) 1:t, indeed !aw t,e >CI3 take no deci!i-e action durin( it! open?+arket operation!, and now t,e +arket! are waitin( to !ee w,at ,appen! t,i! 5,ur!da)" So+e are callin( *or a cut to t,e DeFuired De!er-e Datio (DDD2, w,ic, would unlea!, ca!, *or t,e ank!G ot,er! are ,opin( t,at t,e >CI3 will inEect liFuidit) into t,e +one) +arket! t,rou(, it! nor+al# operation!" Eit,er wa), w,at wit, t,e MIH and AKC3 ot, *ailin( in t,eir de t auction! and on(oin( ti(,tne!! a,ead o* +ont, and Fuarter end, t,ere i! de*initel) !o+et,in( curiou! (oin( on" It i! clear t,at t,e >CI3 i! takin( a (!o+ew,at2 !urpri!in(l) tig!t stance on 3,inaN! liFuidit) !ituation, pro a l) to en*orce !o+e di!cipline onto 3,inaN! lender!" 5,i! i! occurrin( a(ain!t a ackdrop o* ur(entl) reFuired econo+ic re*or+ (endin( t,e increa!in(l) ine**ecti-e credit?*uelled o-erin-e!t+ent oo+ in *a-our o* +ore alanced con!u+ption?dri-en (rowt,, controllin( t,e liFuidit) *uelled ,ou!in( u le etc2 and slo&ing gro&t!" 5,e >CI3 i! a ke) proponent o* *inancial and econo+ic re*or+! ut ,a! een !tuck trapped in t,e wider (o-ern+entN! dile++a etween *allin( (rowt, and *ailin( re alancin( *or )ear!" A! t,e (o-ern+ent tried to rein in lendin( a*ter t,e +onetar) *lood in &''9/1', ank! and ot,er *inancial in!titution! turned to t,e le!! re(ulated !,adow ankin(# area!, a! >aci*ic Mone) co-ered la!t )ear" 3rackin( down on !,adow ankin( ,a! pro-en Eu!t a! di**icult, wit, an i+pre!!i-e arra) o* product! and +et,od! ein( created to a-oid t,e re(ulator!" =ow !,adow ankin(# i! con!idered a lar(e and i++ediate worr), a! Hitc,N! top 3,ina expert 3,arlene 3,u ,a! een loudl) !i(nallin(" Ulti+atel) t,e *ailure to rein in credit, w,et,er in t,e *or+al or !,adow# ankin( area!, ,a! actuall) een due to a lack o* (o-ern+ent willin(ne!! to *ace t,e ine-ita le con!eFuence o* doin( !o S !lower (rowt," =ow 3,inaN! econo+) i! slo&ing a(ain a! credit and liFuidit) are ti(,tened, and pressures are 4uilding" 5,e i++ediate i!!ue! !ee+ to e e+er(in( in t,e +one) +arket!, and it i! ,ere w,ere t,e call! *or )et anot,er loo!enin(# are now ein( ,eard" Hor now rate! re+ain ,i(,, and t,e call! *or t,e >CI3 to act are (ettin( louder" <!inese economic collapse causes Aorld Aar 2!ree =late / (5o+, >ro*e!!or o* 3o++unication! and >u lic Speakin( S U3LA, Strait! 5i+e!, <?&:2 Cut i+a(ine a 3,ina di!inte(ratin( ?? on it! own, wit,out neo?con or 3IA pro+ptin(, +uc, le!! outri(,t +ilitar) in-a!ion ?? ecau!e t,e econo+) (a(ain!t all prediction!2 !uddenl) collap!e!" 5,at would knock A!ia into c,ao!" De*u(ee! ) t,e (aJillion! would ,ead *or Indone!ia and ot,er poorl) order?patrolled place!, w,ic, don4t want t,e+ and can4t ,andle t,e+G !o+e in 0apan +i(,t lick t,eir c,op! *or World War II Dedux and look to annex a !lice o* 3,ina" 5,at would !end !+all ut !ucce!!*ul Sin(apore and Mala)!ia ?? once 0apane!e colonie! ?? into a !olute ner-ou! reakdown!" India +i(,t +ake a (ra *or 5i et, and w,ile it doe!, >aki!tan *or 1a!,+ir" Sa% !ello to Aorld Aar III A!ia?!t)leb 5,at4! w,) wi!e polic) encoura(e! 3,ine!e !ta ilit), !ecurit) and econo+ic (rowt, ?? t,e -er) direction t,e W,ite 8ou!e now !ee+! to pre*er"

c!inese liquidit% !ig! prices 8e%

Oil price increases !elp liquidit% in <!ina -attia *3 (Donald A", >ro*e!!or o* Econo+ic! S Uni-er!it) o* We!tern S)dne), LiFuidit) and 3rude Iil >rice!: 3,inaN! In*luence I-er 199<?&'11#, Ki!cu!!ion >aper &'1&?'$, Uni-er!it) o* 5a!+ania, S38IIL IH E3I=IMI3S A=K HI=A=3E, ,ttp://eprint!"uta!"edu"au/1$'<&/1/&'1&?'$MMK>MRe!pi(nani"pd*, Keec,2 ccc=ote: M& i! a +ea!ure o* +onetar) polic) 5,e identi*)in( re!triction! in t,e !)!te+ (32 i+pl) t,at !,ock! to (lo al oil production and (lo al real a((re(ate de+and, and real oil price will influence real M& in t,e O3 and in 3,ina, and not t,e re-er!e" In !)!te+ (32, !,ock! to real +one) !uppl) in t,e O3 and in 3,ina will not in*luence oil !uppl), real a((re(ate de+and and t,e real price o* oil in t,e !a+e +ont," We a!!u+e t,at 3,inaN! M& depend! conte+poraneou!l) on O3 M&" 3,inaN! M& i! !u !tantiall) !+aller t,an O3 M& o-er +o!t o* t,e !a+ple and 3,inaN! lender! and +onetar) aut,oritie! are +ore likel) to !ee (at lea!t in partial data relea!e2 conte+poraneou!l) (lo al +onetar) +o-e+ent! (t,an t,e oppo!ite2" :ig! oil prices structurall% guarantee liquidit% ;rinda */ (Ha rice, Hor+er 3EI S ILQ Inc", C"A" Su++a 3u+ Laude in Econo+ic! S >rinceton Uni-er!it), Winner S 8al ert W,ite >riJe *or Mo!t Ki!tin(ui!,ed >rinceton Econo+ic! Student, Winner S Wol*e Callei!en Me+orial >riJe *or Ce!t >rinceton Econo+ic! 5,e!i!, Macro >er!pecti-e! on Olo al LiFuidit): 8ow 3,ine!e Har+er! and Iil S,eik! are Su !idiJin( A+erican 3on!u+ption and it! I+plication!#, &?&3, ,ttp://www"*a rice(rinda"co+/political?econo+)/+acro?per!pecti-e!?on?(lo al?liFuidit)?,ow? c,ine!e?*ar+er!?and?oil?!,eik!?are?!u !idiJin(?a+erican?con!u+ption?and?it!?i+plication!/, Keec,2 So w,at doe! t,i! all +ean. I* )ou are an entrepreneur tr)in( to rai!e +one) S t,i! i! a -er) (ood ti+e to do !ob 5,e *act t,at oil price! are likel) to !ta) ,i(, !u((e!t! t,at t,e liquidit% glut i! likel) to endure *or Fuite !o+e ti+e, ut )ou ne-er know !o take t,e +one) w,ile itN! a-aila leb Hro+ an econo+ic per!pecti-e, I t,ink t,i! explain! cleanl) w,) we ,a-e !een a!!et price in*lation wit,out !eein( real core in*lation" 5,e la!t ti+e t,i! ,appened wa! in 197:?1979 durin( t,e la!t oil !,ock" >eterN! contrarian t,inkin( i! t,at t,i! !u((e!t! t,at !,ort ter+ intere!t rate! are not (oin( to (o down an)ti+e !oon" 5,e a!!et price in*lation and exce!! (lo al liFuidit) !u((e!t t,at central ank! !,ould pro a l) ,a-e a +ore +onetari!t !tance and i* an)t,in( +i(,t ,a-e to increa!e !,ort ter+ intere!t rate!" Ce*ore Rolker t,e Hed wa! e!!entiall) !a)in(: In*lation i! 1';, our intere!t rate! are 1';, we are neutral"# Rolker ca+e in and e!!entiall) !aid in*lation i! 1';, ut a!!et and +onetar) in*lation i! !o +uc, ,i(,er t,at intere!t rate! !,ould e &';"# 8e rou(,t core and a!!et in*lation under control at t,e co!t o* a !e-ere rece!!ion t,at !et t,e !ta(e *or t,e expan!ion t,at ,a! e!!entiall) (one una ated e-er !ince except *or a *ew -er) +ild rece!!ion!"

c!inese liquidit% liquidit% 8e%

ore liquidit% is 8e% $$$ t!e alternati#e is economic slo&do&n -a4ino#itc! */ (Si+on, 3orre!pondent S Hinancial 5i+e!, >Co3 da!,e! ,ope! o* 3,ina liFuidit) oo!t#, Hinancial 5i+e!, <?19, >roFue!t, Keec,2 3,ina4! credit crunc, &orsened on 5,ur!da) a*ter t,e central ank re u**ed plea! to inEect +ore ca!, in to t,e *inancial !)!te+, addin( to t,e trou le! o* o-er!tretc,ed lender!" S,ort?ter+ +one) +arket rate! !ur(ed to all?ti+e ,i(,!" 5,e !e-en?da) ond repurc,a!e rate, a ke) (au(e o* liFuidit) in 3,ina, Eu+ped &7' a!i! point! to 1'": per cent, nearl) triple w,ere it !tood Eu!t two week! a(o" Inter ank lendin( rate! were al!o pu!,ed ,i(,er and t,e pain !pread to t,e !tock +arket" 5,e S,an(,ai 3o+po!ite Index, t,e countr)4! +ain !tock index, *ell 1"% per cent in t,e +ornin( tradin( !e!!ion, al!o pre!!ured ) t,e new! t,at t,e US Hederal De!er-e +i(,t !tart to unwind it! +onetar) polic) ea!in( later t,i! )ear" 3,ina4! credit !FueeJe occurred de!pite *re!, !i(n! t,at t,e world4! !econd?lar(e!t econo+) ,a! !lowed *urt,er" A !ur-e) o* t,e 3,ine!e +anu*acturin( !ector pu li!,ed ) 8SC3 indicated t,at indu!trial output pro a l) contracted in 0une" 8SC34! *la!, purc,a!in( +ana(er!4 index *ell to %:"3 in 0une *ro+ %9"& in Ma), pointin( to a !teeper decline in (rowt," 5,e +ain rea!on *or t,e lac8 of liquidit% ,a! een t,e central ank4! reluctance to pu+p liFuidit) into t,e +one) +arket, wron(*ootin( ank! t,at ,ad expected CeiEin( would continue to !upport t,e+ wit, lar(e ca!, inEection!"

xinCiang terrorism *nc

:ig! oil prices are 8e% to assuage anger against migrations to RinCiang Oster *9 (S,ai, 3orre!pondent S Wall Street 0ournal, 3,ina Launc,e! Ener() 5ax in QinEian(#, Wall Street 0ournal, <?&, >roFue!t, Keec,2 CEI0I=O??3,ina i! introducin( a $; tax t,at t,e countr)4! ener() co+panie! +u!t pa) on oil and natural (a! produced in QinEian(, part o* CeiEin(4! e**ort! to i+pro-e t,e econo+ic pro!pect! in t,e poor we!tern re(ion, w,ere local et,nic Mu!li+! ,a-e rioted against :an <!inese and w,ere t,e wind*all *ro+ t,e de-elop+ent o* ric, re!ource! ,a! een scant" 5,e new natural re!ource tax, w,ic, will e-entuall) e rolled out nationwide, will increa!e t,e local (o-ern+ent4! co**er!, ut it will ,urt t,e pro*it! o* 3,ina4! two i((e!t oil and natural?(a! co+panie!??>etro3,ina 3o" and 3,ina >etroleu+ P 3,e+ical 3orp", al!o known a! Sinopec" QinEian( i! i+portant *or 3,ina4! ener() need!: It i! t,e !ource o* 13; o* it! crude?oil production and &9; o* it! natural?(a! output" Iil and natural?(a! production accounted *or nearl) 3'; o* t,e econo+ic output o* QinEian( la!t )ear, a -a!t area rin(ed ) ,i(, +ountain! and de!ert! t,at ,a! !een increa!in( migration o* 3,ina4! +aEorit) et,nic (roup, t,e 8an, !ince t,e 19$'! a! part o* CeiEin(4! pu!, to !olidi*) control o* t,e re(ion" Cut de!pite t,e re(ion4! -a!t +ineral wealt, and ,u(e *ood and cotton *ar+!, QinEian(4! de-elop+ent ,a! la((ed e,ind t,e re!t o* 3,ina, and +uc, o* it! wealt, ,a! *lowed di!proportionatel) to t,e 8an" W,ile oil and (a! co+panie! pa) inco+e tax to CeiEin(, local (o-ern+ent! ,a-e collected onl) a +ode!t re!ource tax a!ed on -olu+e in!tead o* -alue" 5,i! +eant t,at a! t,e (lo al co++odit) oo+ powered ) 3,ina4! own ri!e pu!,ed oil and natural?(a! price! ,i(,er, re!ource?tax re-enue *or local (o-ern+ent! !aw little ene*it" In &''7, oil and (a! accounted *or 1"<; o* QinEian(4! tax re-enue, !aid econo+i!t An 5i*u wit, Den+in Uni-er!it) in CeiEin(" 5,e new tax will e a!ed on #alue and i! e!ti+ated to increa!e QinEian(4! re-enue *ro+ natural re!ource! to *i-e ti+e! it! current le-el" Ince t,e QinEian( pilot pro(ra+ i! rolled out nationall), local (o-ern+ent!4 re!ource re-enue could increa!e to 6$"& illion a )ear *ro+ around 6:'' +illion annuall) now, accordin( to an e!ti+ate ) con!ultanc) Eura!ia Oroup" Suc, re-enue i! e!peciall) needed in QinEian(, ,o+e to 3,ina4! Mu!li+ Ui(,ur +inorit)" In 0ul) &''9, *riction etween 8an +i(ratin( into QinEian( and Ui(,ur! oiled o-er into riot! t,at le*t 197 dead" Widenin( inco+e (ap! etween Ui(,ur! and 8an exacer ated lon(?!i++erin( re!ent+ent o-er cultural and reli(iou! i!!ue!" In t,e wake o* t,e riot!, t,e pro-incial (o-ern+ent increa!ed t,e !ecurit) ud(et ) nearl) 9'; to &":9 illion )uan (6%&3 +illion2 in &'1'" And $$$ t!e impact is terrorism :a%s D (0e**re), Hor+er >ro*e!!or and Lecturer on Ea!t A!ian A**air!, 5EDDIDISM, 5EDDIDIS5 ODIU>S A=K A=5I?5EDDIDIS5 EHHID5S I= I= QI=0IA=O#, Hact! and Ketail!, Icto er, ,ttp://*act!anddetail!"co+/c,ina"p,p. ite+id/1''%Pcatid/$P!u catid/:9W77':, Keec,2 CeiEin( la+e! out!ide a(itator! and *orei(n? a!ed terrori!t (roup! *or t,e unre!t, !peci*icall) t,o!e *ro+ t,e Ea!t 5urki!tan I!la+ic Mo-e+ent w,o it !a)! ,a-e trained in +ilitant ca+p! in >aki!tan" Aet CeiEin( ,a! pro-ided no direct e-idence, and anal)!t! !a) t,e) !u!pect it! clai+! are dri-en +ore ) ideolo() t,an proo*" Ui(,ur acti-i!t! !a) ,ar!, crackdown! onl) lead to (reater an(er a+on( )oun( Ui(,ur! w,o alread) *eel culturall) and econo+icall) !idelined ) wa-e! o* 8an +i(ration to t,e re(ion" Septe+ er 11t, and t,e war on terrori!+, (a-e 3,ina an opportunit) to ca!t a
localiJed Ui(,ur !eparati!t +o-e+ent a! an international terrori!t t,reat" 3,ina de!cri ed it!el* a! a -icti+ o* international terrori!+,# la+ed unre!t in QinEian( on I!a+a in Laden and a!ked t,e United State! to include E5IM on it! li!t! o* terrori!t or(aniJation!" At *ir!t Wa!,in(ton re*u!ed ut w,en it !ou(,t !upport *or it! acti-itie !in A*(,ani!tan and t,e in-a!ion o* IraF it c,an(ed it! po!ition and included t,e (roup on t,e terrori!t li!t" 0a+e! Mi*lor, a pro*e!!or at Oeor(etown and expert on QinEian(, told =ational Oeo(rap,ic t,at +an) o**icial! elie-e RinCiang faces a serious terrorist t!reat ecau!e

t,at i! w,at t,e) are con!tantl) told"# In one !peec, I!a+a in Laden called 3,ine!e pa(an Cudd,i!t!"# It i! ,ard to (a(e t,e !upport o* Al?Vaida and I!a+a in Laden ecau!e t,e <!inese uslims are !o a*raid to !peak t,eir +ind!" Cut !o+e ,a-e expressed s%mpat!% for t!e 2ali4an and !aid t,ere i! not !olid proo* to link I!a+a in Laden wit, Septe+ er 11t," See Separate Article: 5EDDIDIS5 A55A31S I= QI=0IA=O

We !ite! and De!ource! Oood We !ite! and Source!: Wikipedia article Wikipedia G Clo( wit, !tu** on QinEian( c,ina"not!pecial"or( G A out QinEian( (3,ine!e (o-ern+ent !ite2 a outxinEian(" G 8i!tor) and Ke-elop+ent o* QinEian( (3,ine!e (o-ern+ent !ite2 new!"xin,uanet"co+ G Ui(,ur! and QinEian( 3ouncil on Horei(n Delation! G Mu!li+! in 3,ina: I!la+ in 3,ina i!la+inc,ina"wordpre!!"co+ G 3laude >icken! 3ollection ,ar-ard"edu/li rarie! G I!la+ Awarene!! i!la+awarene!!"net G Wikipedia article Wikipedia G A!ia 5i+e! ati+e!"co+ G QinEian( 8i!tor) Wikipedia article Wikipedia G Oreat Oa+e In*o !ra!"or( G Oreat Oa+e in A*(,ani!tan ati+e!"co+ " Cook on t,e Oreat Oa+e: 5,e Ku!t o* E+pire: 5,e Dace *or Ma!ter) in t,e A!ian 8eartland ) 1arl E" Me)er (3entur) Houndation/>u lic A**air!, &''32" Separati!+ and 8u+an Di(,t!: Wikipedia article on 5errori!+ in 3,ina Wikipedia G All Vuiet on t,e We!tern Hront. !ilkroad!tudie!"or( 8u+an Di(,t! in QinEian( 8u+an Di(,t! Watc, article ,rw"or( G 8u+an Di(,t! in QinEian( 8u+an Di(,t! Watc, article ,rw"or( G 8u+an Di(,t! in QinEian( 8u+an Di(,t! Watc, article ,rw"or( G U)(,ur 8u+an Di(,t! Oroup!: U"S"? a!ed 5akla+akan Ui(,ur 8u+an Di(,t! A!!ociationG Oer+an? a!ed Ea!t 5urke!tan In*or+ation 3enterG Oer+an)? a!ed World U)(,ur 3on(re!!G and De i)a 1adeerN! U)(,ur A+erican A!!ociation: World U)(,ur 3on(re!! u)(,urcon(re!!"or( G U)(,ur A+erican A!!ociation u)(,ura+erican"or( G U)(,ur 8u+an Di(,t! >roEect u,rp"or( Ui(,ur and QinEian( Expert!: Kru Oladne) o* >o+ona 3olle(eG =icola! CeFuelin o* 8u+an Di(,t! Watc,G and 0a+e! Mi*lor, a pro*e!!or at Oeor(etown Uni-er!it)" 5ra-el Warnin(! U"S" State Kepart+ent Ad-i!orie!: 5ra-el"State"(o- Criti!, tra-el warnin(!: *co"(o-"uk " Au!tralian tra-el warnin(!: d*at"(o-"au/tra-el " 5ra-el Ad-i!e We Site! : Lonel) >lanet Lonel) >lanet Lonel) >lanetN! 5,orn 5ree 5,orn 5ree Link! in t,i! We !ite: QI=0IA=O Hact!anddetail!"co+/3,ina G QI=0IA=O EADLA 8IS5IDA Hact!anddetail!"co+/3,ina G QI=0IA=O LA5ED 8IS5IDA Hact!anddetail!"co+/3,ina G QI=0IA=O A=K 38I=A Hact!anddetail!"co+/3,ina G QI=0IA=O SE>ADA5ISM A=K 8UMA= DIO85S Hact!anddetail!"co+/3,ina G 5EDDIDISM I= QI=0IA=O Hact!anddetail!"co+/3,ina G Hact!anddetail!"co+/3,ina G QI=0IA=O DII5S I= &''9 Hact!anddetail!"co+/3,ina G UIO8UDS Hact!anddetail!"co+/3,ina G 8IDSEME= A=K SMALL MI=IDI5IES I= QI=0IA=O Hact!anddetail!"co+/3,ina G QI=0IA=O, UDUMVI Hact!anddetail!"co+/3,ina G QI=0IA=O" 1AS8OAD Hact!anddetail!"co+/3,ina G QI=0IA=O 1ADA1IDUM 8IO8WAA Hact!anddetail!"co+/3,ina G DII5S A=K KEMI=S5DA5II=S I= 38I=A Hact!anddetail!"co+/3,ina G >ILI3E I= 38I=A Hact!anddetail!"co+/3,ina G 8UMA= DIO85S I= 38I=A Hact!anddetail!"co+/3,ina G KISSIKE=5S, >ILI5I3AL A35IRIS5S A=K >ILI5I3AL >DISI=EDS I= 38I=A Hact!anddetail!"co+/3,ina G 5EDDIDISM A=K CIMCI=OS I= 38I=A Hact!anddetail!"co+/3,ina >LA3ES I= QI=0IA=O : QinEian( 5ouri!+ Ad+ini!tration, 1< Sout, 8etan Dd, :3'''& Uru+Fi, QinEian( 3,ina, tel" ('2? 991?&:&?791&, *ax: ('2? 991?&:&?%%%9" We Site! : Wikipedia Wikipedia Oo-ern+ent !ite QinEian("(o- G >,oto! and Vanat! : S)naptic S)naptic Wikipedia article on Fanat! Wikipedia G 5urpan : 5urpan 5ouri!+ Ki-i!ion, %1 Vin(nian Dd, :3:''' 5urpan" QinEian( 3,ina, tel" ('2? 99$?$&3?7'<, *ax: ('2? 99$?$&&?7<: G Uru+Fi : Uru+Fi 5ouri!+ Cureau, 3& Ouan(+in( Dd, :3'''& Uru+Fi, QinEian( 3,ina, tel" ('2?991?&:3? &&1&, *ax: ('2? 991?&:1?93$7 We Site!: 5ra-el 3,ina Ouide 5ra-el 3,ina Ouide G 3,ina Map Ouide 3,ina Map Ouide G Oettin( 5,ere Site! : Uru+Fi i! acce!!i le ) air and u! and lie! at t,e end on t,e +ain ea!t?we!t train line *ro+ CeiEin(" It i! connected to 1a!,(ar and ot,er QinEian( citie! to !out,we!t ) a new train t,at e(an operatin( in t,e earl) &'''!"5ra-el 3,ina Ouide (click tran!portation2 5ra-el 3,ina Ouide 5ian S,an : Wikipedia Wikipedia G Link! in t,i! We !ite: QI=0IA=O, UDUMVI Hact!anddetail!"co+/3,ina 1a!,(ar 5ra-el 3,ina Ouide 5ra-el 3,ina Ouide G Lonel) >lanet Lonel) >lanet G 3,ina Ri!ta 3,ina Ri!ta G Oettin( 5,ere: 1a!,(ar i! acce!!i le ) air and u! and connected to Uru+Fi and t,e re!t o* 3,ina ) a new train t,at e(an operatin( in &''%" 5,ere are two dail) train! etween 1a!(,ar and Uru+Fi t,at co-er t,e 1,$9: kilo+eter di!tance in a out &% ,our!, 5,ere are al!o *li(,t! on QinEian( Airline! 7$7! e-er) e-enin(" We !ite: 3=I=HI"net 5ra-el 3,ina Ouide (click tran!portation2 5ra-el 3,ina Ouide Lonel) >lanet (click Oettin( 5,ere2 Lonel) >lanet G Link! in t,i! We !ite: QI=0IA=O" 1AS8OAD Hact!anddetail!"co+/3,ina G QI=0IA=O 1ADA1IDUM 8IO8WAA Hact!anddetail!"co+/3,ina 5errori!t Oroup! in QinEian( Man) !c,olar! t,ink t,at t,ere i! no or(aniJed I!la+ic terrori!t (roup in QinEian( and t,e -ariou! o+ in(! and attack! ,a-e een local in nature and carried out ) indi-idual! or !+all (roup! t,at ,ad !o+e local (rie-ance" At +o!t t,ere are !e-eral !+all (roup! wit, !i+ilar (oal!" I* t,ere i! a lar(e or(aniJed (roup it appear! to lack t,e per!onnel and weaponr) to carr) out a !op,i!ticated attack" 0a+e! Millward o* Oeor(etown Uni-er!it) told t,e Wa!,in(ton >o!t, 5,e de(ree o* or(aniJation o* Ui(,ur (roup! or Ea!t 5urke!tan !eparati!t (roup! i! a i( Fue!tion a+on( +an) expert! out!ide o* 3,ina"# CeiEin( ,a! !aid t,ere are +ore t,an $' terrori!t# (roup! *i(,tin( *or independence in QinEian( and clai+! t,at 1,''' +e+ er! o* 1' di**erent (roup! ,a-e under(one trainin( at ca+p! in A*(,ani!tan, wit, !o+e

t!e pro4lem in RinCiang is not a reli(iou! pro le+ ut a ci#il rig!ts pro4lem! t,at ,a! to do &it! Uig!urs feeling discriminated against and not getting Co4 opportunities" 5,e 3,ine!e -iew t,e pro le+ di**erentl)"
returnin( to QinEian( and el!ew,ere in 3,ina and !et up !ecret cell!" Millward and +an) We!tern anal)!t! !a)

Au 0ianron( o* t,e In!titute o* Dural Ke-elop+ent in t,e 3,ine!e Acade+) o* Science! told t,e Wa!,in(ton >o!t: 5,e +ain and core i!!ue i! !eparati!+, alt,ou(, it co+ ine! !o+e *ar+er and land pro le+!"""We cannot re(ard t,i! purel) a! citiJen! tr)in( to protect t,eir ri(,t!"# W,ene-er t,ere i! an attack or an arre!t t,e 3,ine!e (o-ern+ent !a)! t,at t,e attacker! or t,e people arre!ted are +e+ er! o* t,e E5IM (See Celow2 or are Ui(,ur !eparati!t ut o**er no e-idence to ack up t,eir clai+! ot,er t,an t,o!e in-ol-ed were Ui(,ur!" Al? Vaida, QinEian( and 3,ina CeiEin( doe! ,a-e Eu!ti*ia le concern!" RinCiang 4orders

=a8istan and Afg!anistan' t!e !ome of +an) Mu!li+ extre+i!t and +e+ er! *or Al$ Qaida and t!e 2ali4an" Man) t,ink t,e intere!t! o* CeiEin( would e etter !er-ed i* t,e (o-ern+ent *ocu!ed crackdown! and t,eir para+ilitar) acti-it) on >aki!tan? a!ed +ilitant (roup! t,at !lip acro!! t,e order into QinEian( and talk t,e +ore +oderate a Ui(,ur (roup!" A+erican !ource! elie-e t,at +a) e <'' or 7'' Uig!urs passed t!roug! t!e Al$Qaeda Afg!anistan camps and/or *ou(,t wit, t,e 5ali an" 5,o!e t,at were captured were )oun( and in t,eir &'! and 3'! de!cri ed a! -er) nai-e" 5,e) +o!tl) didnNt want ,a-e an)t,in( to do wit, Al?Vaeda and were (enerall) !upporti-e o* t,e United State! ecau!e it pre!!ured 3,ina" 2!at causes A D t!eft 6erguson + (3,arle! K", >re!ident S Hederation o* A+erican Scienti!t!, >roEect Kirector o* t,e Independent 5a!k Horce on U"S" =uclear Weapon! >olic) S 3ouncil on Horei(n Delation!, AdEunct >ro*e!!or in Securit) Studie! S Oeor(etown Uni-er!it), Hor+er Scienti!t?in?De!idence S Montere) In!tituteN! 3enter *or =onproli*eration Studie!, M"A" and >,"K" in >,)!ic! S Co!ton Uni-er!it), 5,e Hour Hace! o* =uclear 5errori!+#, =uclear 5,reat Initiati-e, Montere) In!titute, 3enter *or =onproli*eration Studie!, ,ttp://Ee**re)*ield!"net/%&7/Site/Clo(/3'H<7A'3?1:&3?%H37?9EHK? A733&1H<K3:KM*ile!/anal)!i!M%*ace!"pd*, Keec,2 <!ina !as een (raduall) moderni5ing its nuclear arsenal" 8owe-er, at t,i! ti+e, it is unclear &!et!er t!is moderni5ation program &ill in$ crease or decrea!e securit% ris8s t!at terrorists mig!t exploit" W,ile more <!inese nuclear &eapons mig!t mean more opportunities for t!eft, a +oderniJed *orce +i(,t incorporate +ore up?to?date

!ecurit) proce? dure!" Isolated storage and transportation lin8s could pose increased ris8s for an% nation0s nuclear &eapons !ecurit) program" 3,ina i! e? lie-ed to a!!e+ le nuclear war,ead! at a nu+ er o* nuclear *acilitie!, and t,e Lop Nur te!t !ite ma% contain a storage facilit% for <!inese nuclear &eapons (alt,ou(, it i! pro a l) unu!ed, !ince 3,ina ,a! not te!ted a nuclear weapon !ince 199<2"$< Lop Nur is re+otel) located in nort,we!t RinCiang pro#ince' &!ere nationali!t/separatist organi5ations !a#e 4een campaigning for autonom% *ro+ CeiEin(" Alt,ou(, QinEian( !eparati!t (roup! ,a-e not openl) expre!!ed intere!t in acFuirin( nuclear weapon!, !o+e report! ,a-e alle(ed t,at Uig!ur separatists ma% !a#e stolen radioacti#e sources from Lop Nur in 1993"$7 It i! di**icult to o**er an o-erall a!!e!!+ent o* t,e !ecurit) o* 3,inaN! nuclear ar+! a(ain!t terrori!t! ecau!e CeiEin( ,a! a lon(?!tandin( prac? tice o* not pu li!,in( !en!iti-e in*or+ation" In addition, <!ina s!o&s little concern (at lea!t openl)2 t!at nuclear terrorism can occur on <!i$ nese soil" W,ile t,i! lack o* concern +a) e Eu!ti*ied, t!e <!inese go#$ ernment still !as to factor in securit% t!reats posed 4% RinCiang separatists and ot,er (roup! t,at +a) en(a(e in terrori!+ in 3,ina" =onet,ele!!, t,e do+inant role o* t,e 3,ine!e 3o++uni!t >art) and it! !ecurit) ap? paratu! in 3,ine!e !ociet), and t,e li+ited pre!ence o* terrori!t (roup! in 3,ina, appear to reduce !u !tantiall) t,e dan(er t,at a terrori!t or? (aniJation +i(,t (ain control o* an intact nuclear weapon in t,at countr)" RinCiang terrorism causes extinction <ui *3 (0ia, =o +erc) *or terrori!t act! in QinEian(#, 3,ina Kail), 3?:, ,ttp://www"c,inadail)apac"co+/article/no?+erc)?terrori!t?act!?xinEian(, Keec,2 an% incidents of terrorism?related -iolence t!at !appened in t!e region in t!e last %ear actuall) !ad an international origin, @,an( 3,unxian, a deput) to t,e =ational >eople4! 3on(re!! and t,e >art) !ecretar) o* QinEian(, !aid on t,e !ideline! o* t,e annual =>3 !e!!ion B2!e infiltration of t,ree o#erseas forces of separatists' extremists and terrorists, t,e !ocial !ituation in near ) countrie! and international anti?terrori!+ acti-itie! +a) ,a-e directl) or indirectl)
pro+pted !uc, incident!,B @,an( !aid" 5,ree -iolent attack! were carried out in !out,ern QinEian(4! 1a!,(ar and 8otan la!t )ear and anot,er ,appened la!t +ont," In He &:, nine terrori!t! ar+ed wit, kni-e! !uddenl) attacked a crowd on a pede!trian !treet on Qin(*u road, in 1a!,(ar pre*ecture4! Aec,en( count), and killed 13 people" Se-en terrori!t! were !,ot dead at t,e !cene and two were arre!ted" 5,e incident wa! a terrori!t attack tar(etin( ci-ilian!, t,e re(ional in*or+ation o**ice !aid" 5,e Aec,en( incident ,a! een properl) dealt wit, and !ocial order ,a! een re!tored, @,an( !aid" @,an( !aid -iolent terrori!t! don4t ,a-e t,e +ind!et o* nor+al people and t,e (o-ern+ent will not tolerate terrori!t! a! t,eir -iolent acti-itie! tar(et ci-ilian!" B5,eir act! are a(ain!t t,e ,u+an race" 5,e) wa-e kni-e! at old people, wo+en and c,ildren wit, extre+el) rutal +ean!" It4! not a reli(iou! pro le+, nor i! it an et,nic pro le+"B QinEian( ,a! witne!!ed a leap*ro( in it! econo+ic de-elop+ent in recent )ear!, ut de-elop+ent doe!n4t nece!!aril) rin( !ta ilit), !aid =ur Cekri, a deput) to t,e =>3 and c,air+an o* QinEian( !aid on Wedne!da)" QinEian(4! OK> ro!e ) 1&"3 percent )ear?on?)ear and reac,ed <<' illion )uan (61'$ illion2 la!t )ear" A-era(e per capita inco+e o* ur an re!ident! in t,e re(ion increa!ed to 1$,$1% )uan in &'11, a 13"7?percent ,ike )ear?on?)ear, and t,e a-era(e per capita inco+e o* rural re!ident! increa!ed ) 17"& percent to reac, $,%%& )uan" BMeanw,ile, wit,out a !ta le !ocial en-iron+ent, t,e re(ion could not e *urt,er de-eloped,B ,e added" BMaintainin( t,e re(ion4! !ta ilit) i! !till a (ri+ and o-erw,el+in( ta!k"B 8e !aid t,at terrorist

organi5ations' suc! as t!e East 2ur8istan Islamic o#ement ca+pai(nin( *or QinEian(4! independence in nei(, orin( >aki!tan, !a#e countless lin8s &it! terrorists &it!in t!e region, w,ic, co-er! one?!ixt, o* 3,ina4! land+a!! and order! ei(,t countrie!, includin( >aki!tan, A*(,ani!tan and India" BRiolent acti-itie! ) indi-idual terrori!t! will not a**ect t,e clo!e *riend!,ip etween 3,ina and >aki!tan,B =ur !aid" BAnti?terrori!+ i! a (lo al ta!k, a! terrori!+ i! t,reatenin( t,e li-e! o* all people in t,e world"B

xinCiang terrorism %es insta4ilit%

igrations are t!e onl% cause of insta4ilit% Demic8 ? (Car ara, 3orre!pondent S Lo! An(ele! 5i+e!, 3,ina4! *lood o* *ortune !eeker! un!ettle! QinEian(#, 5,e Lo! An(ele! 5i+e, 7?11, ,ttp://article!"lati+e!"co+/&''9/Eul/11/world/*(?c,ina?we!t11, Keec,2 W,at Liu didn4t realiJe w,en ,e oarded t,e train wa! t,at et!nic tensions in RinCiang &ere exploding' fueled in part 4% t,e &est&ard migration o* people like ,i+!el*" At lea!t 1:' people ,a-e een con*ir+ed dead in !treet *i(,tin( etween t,e 8an, 3,ina4! do+inant et,nic (roup, and t,e nati-e Ui(,ur! o* QinEian(" -ecord num4ers of migrants !a#e 4een pouring into RinCiang, !purred ) t,e (lo al *inancial cri!i! t,at i! clo!in( down export? dri-en *actorie! in t,e ea!t and curtailin( new con!truction in CeiEin( and S,an(,ai" 5,e 3,ine!e (o-ern+ent !a)! 1"& +illion people +i(rated ,ere la!t )ear" And t,at4! not countin( t,e ,undred! o* t,ou!and! w,o co+e to pick cotton and potatoe!, recruited ) t,e Fua!i?+ilitar) QinEian( >roduction and 3on!truction 3orp!, w,ic, ,a! exten!i-e *ar+land" 5,i! )ear e!peciall), local go#ernments fearing social unrest caused 4% unemplo%ment !a#e pla%ed a role in organi5ing trips" 5,e cit) o* 3,on(Fin( in central 3,ina announced t,at it wa! !endin( 1'',''' people to QinEian( t,i! )ear" In Marc,, one count) in =in(xia, in nort,ern 3,ina, ,eld a lar(e cere+on) *or 3,&'' pea!ant! w,o were ein( !ent out" In e**ect, t!e% c!ose to export insta4ilit% to &estern <!ina" 2!e Uig!urs, a 5urkic people w,o!e +aEorit) ,ere ,a! een !lippin( awa), complain t,at t!e outsiders are go44ling up t!e 4est Co4s" Man) emplo%ers ,ere refuse to !ire Uig!urs for e-en t,e +o!t +enial po!ition!, w,et,er pic8ing cotton or workin( in +ine!"

xinCiang terrorism %es terrorism

2errorism is li8el% $$$ socioeconomic issues are 8e% ;iglio *3 (Ka-ide, Separati!+ And 5,e War In 5error In 3,inaN! QinEian( Ui(,ur Autono+ou! De(ion#, 5,e!i! >re!ented in 3o+pletion o* a 3erti*icate?o*?5rainin( in United =ation! >eace Support Iperation!, >eace Iperation! 5rainin( In!titute, &/&&/&'1&, ,ttp://+edia"peaceop!trainin("or(/t,e!e!/(i(lio"pd*, Keec,2 Koe! t,e a o-e rule out all po!!i ilit) o* QinEian( turnin( into anot,er Her(,ana Ralle), t,e 3entral A!ia ,ot ed o* I!la+ic radicali!+. =ot entirel)" 5,e 3,ine!e aut,oritie! ,a-e t,e not !o unrea!ona le concern t,at due to a presumed S alt,ou(, not entirel) pro-ed ? connection 4et&een #eterans of t!e Afg!an &ar and separatists in RinCiang , t,at t!e independence mo#ement is 4eing armed and influenced 4% outside po&ers " 5,e A*(,an war !,ould not e undere!ti+ated in ter+! o* t,e i+pact it ,a! ,ad on di!a**ected I!la+ic )out," A! an ideolo(ical e-ent, t!e Afg!an conflict clearl) !ad a po&erful effect on t!ose &!o now see8 to create an Islamic state in East 2ur8istan " A nu+ er o* RinCiang uslims are known to ,a-e trained and foug!t alongside t!e uCa!ideen in Afg!anistan to(et,er wit, ot,er co++itted re-olutionarie! *ro+ a nu+ er o* I!la+ic !tate!" It i! t,ere*ore plau!i le t,at !o+e o* t,e QinEian( Mu!li+! w,o *ou(,t in A*(,ani!tan ,a-e returned to take up ar+! a(ain!t t,e 3,ine!e" 3ertainl), radical I!la+ic international contact! were con!olidated in A*(,ani!tan and t,e end o* t,at con*lict ,a! created a pool o* well?trained, reli(iou!l) +oti-ated, *i(,ter! and a -a!t a+ount o* !urplu! weapon!" 5,ere i! a -irtuall) uncontrolla le trade in weapon! *ro+ A*(,ani!tan to t,e order re(ion! o* >aki!tan, 1a!,+ir, 5aEiki!tan and to cri+inal ele+ent! el!ew,ere in t,e re(ion" S+u((lin( o* all kind! o* contra and i! ende+ic t,rou(,out t,e area and centurie!?old tri al connection! +ake it unrea!ona le to di!+i!! t,e in*luence o* out!ider!# in t,e QinEian( con*lict" It t,ere*ore re+ain! to e pro-ed t,at t!e separatist mo#ement in RinCiang is 4eing managed or manipulated 4% foreigners" A! *ar a! clue! o* a po!!i le radicaliJation are concerned, +an) Ui(,ur! ,a-e *or in!tance, little knowled(e o* w,at ,a! een t,e lit+u! te!t o* Mu!li+ Jealotr), t,e >ale!tinian i!!ue" Moreo-er, w,ile in all t,e !tate+ent! t,at ,a-e attri uted to in Laden !ince 9/11 ,e ,a! repeatedl) tried to rall) Mu!li+! ) +entionin( t,e inEu!tice! done to Mu!li+! in place! like >ale!tinian territorie!, 3,ec,n)a and IraF, ,e ,a! ne-er +entioned Ea!t 5urki!tan" In !,ort, w,erea! t,ere ,a! clearl) een a (rowin( awarene!! o* t,eir et,no?reli(iou! root! a+on(!t t,e Mu!li+! o* QinEian( in recent )ear!, it i! not apparent t,at t,i! can e eFuated wit, t,e e(innin( o* an I!la+ic *unda+entali!t +o-e+ent" 5,e increa!e in uslim unrest in RinCiang indicates t!at t!e roots of &idespread discontent and unre!t among Uig!urs, appear to lie in current socioeconomic inequalities rat,er t,an in t,e in*luence o* *orei(n I!la+i!t +o-e+ent!"

***europe

***4ritis! de4t

4ritis! de4t *nc

:ig! oil prices 8e% to maintain inflation in t!e @ritis! pound -euters */ (U1 in*lation ,old! !tead), oil price pre!!ure! ea!e#, %?1<, ,ttp://www"reuter!"co+/article/&'13/'%/1</u!? ritain?in*lation?idUSCDE93H'9:&'13'%1<, Keec,2 (Deuter!2 ? Criti!, con!u+er price in*lation !eld stead% in Marc, at it! !ig!est le#el !ince la!t Ma), w,ile lower oil price! !u((e!ted *uture ri!e! in in*lation +a) e smaller t,an *eared, o**icial data !,owed on 5ue!da)" Annual con!u+er price in*lation ,eld at &": percent, t,e !a+e a! in He ruar) and a o-e t,e Cank o* En(land4! & percent tar(et, alt,ou(, t,e *inance +ini!ter ,a! (i-en t,e ank leewa) to *ocu! +ore on (rowt, and allow *or !uc, in*lation o-er!,oot!" 5,e central ank expect! in*lation to exceed 3 percent later t,i! )ear, and +an) econo+i!t! a(ree, !eein( upward pre!!ure *ro+ *ood price!, water and ener() ill! and t,e e**ect o* !terlin(4! !,arp *all earlier t,i! )ear" Cut 5ue!da)4! data included !i(n! o* ea!in( price pre!!ure! in !o+e Fuarter!, wit, +anu*acturer!4 crude oil input co!t! droppin( at t,e *a!te!t annual rate !ince 0ul) and co!t! *or +etal! i+port! al!o *allin(" BI do t,ink )ou are (oin( to !ee !o+e increa!e! in in*lation o-er t,e cour!e o* t,e next t,ree or *our +ont,! """ ( ut2 we4-e !een lower oil price! and t,at could actuall) limit t!e pea8 in in*lation,B !aid Keut!c,e Cank econo+i!t Oeor(e Cuckle)" Sterlin( and ond price! did not +o-e a*ter t,e data" 5,e Cank o* En(land will pu li!, new in*lation *oreca!t! next +ont,, and !o+e econo+i!t! t,ink t,i! could ,elp reak t,e deadlock at t,e central ank o-er w,et,er to re!tart it! pro(ra+ o* a!!et purc,a!e! to ,elp Critain4! !ta(nant econo+)" BWit, t,e +arked retreat in oil and co++odit) price! currentl) dilutin( t,e up!ide ri!k! to con!u+er price in*lation, it look! e-er +ore likel) t,at t,e Cank o* En(land will !ooner or later undertake +ore !ti+ulati-e action,B !aid 8oward Arc,er o* I8S Olo al In!i(,t" 2!at sol#es UE de4t $$$ experts agree @ootle *3 (Do(er, Hor+er 3,ie* Econo+i!t S 8SC3, Hor+er Me+ er S U1 5rea!ur) >anel o* Econo+ic Horeca!ter!, 3olu+ni!t S 5,e 5ele(rap,, Hor+er Lecturer in Econo+ic! S Ix*ord Uni-er!it), A do!e o* in*lation could !tart to look like a cure *or our current ill!#, 5,e 5ele(rap,, 7?&9, ,ttp://www"tele(rap,"co"uk/*inance/co++ent/ro(er ootle/9%3<7%'/A?do!e?o*?in*lation? could?!tart?to?look?like?a?cure?*or?our?current?ill!",t+l, Keec,2 8i(,er in*lation appear! to o**er a credi le alternati-e" Since +o!t de t i! *ixed in no+inal ter+!, a! pa) and price! (and t,ere*ore +one) OK> and tax receipt!2 (o up, t,e ratio o* de t to inco+e *all!" Accordin(l), in*lation i! t,e cla!!ic wa) to &ipe out de t" Cut in*lation doe! not o**er a painle!!

!olution" 5,e ero!ion o* !o+eoneN! de t i! counter? alanced ) t,e *orced ero!ion o* !o+eone el!eN! a!!et!" Moreo-er, i* in*lation were let rip, +arket intere!t rate! would ri!e" I* t,e) *ull) and i++ediatel) re*lected ,i(,er in*lation t,en not,in( would e (ained" Ke t would e reduced ) t,e ero!ion o* real capital -alue ut t,i! would e exactl) o**!et ) t,e increa!e in intere!t pa)+ent!" Ad+ittedl), a (o-ern+ent could !till ac,ie-e a de t reduction" Hor a !tart, t,e initial ur!t o* unanticipated in*lation would catc, unaware! all t,o!e people w,o ,ad alread) lent to t,e (o-ern+ent at *ixed rate!" W,atN! +ore, t,e (o-ern+ent could take !tep! to re!trict t,e increa!e in intere!t rate! *or new orrowin(" I**icial !,ort?ter+ intere!t rate! are !et at w,ate-er t,e central ank de!ire!" Delated Article! Inl) Mario Kra(,i4! E3C can a-ert (lo al cala+it) e*ore t,e )ear i! out &9 0ul &'1& E3C could take ,aircut on Oreek ond! in 4la!t c,ance4 plan &9 0ul &'1& U14! ad OK> *i(ure! are onl) ,al* t,e !tor) &: 0ul &'1& 4Sla!, intere!t rate! to ';4 &: 0ul &'1& Oer+an! 4 etter o** wit,out euro4 ? poll &9 0ul &'1& Week a,ead: Au(u!t < ?1' &9 0ul &'1& I* t,e ank continued to +aintain t,e+ at near?Jero t,en t,i! would al!o keep ond )ield! low, e!peciall) at t,e !,ort end" Moreo-er, t,e (o-ern+ent can *orce *inancial in!titution! to ,old a certain +ini+u+ proportion o* t,eir a!!et! in (o-ern+ent de t" And it can !ell de t to t,e central ank rat,er t,an t,e +arket!" 5o !o+e extent, t,e aut,oritie! ,ere ,a-e alread) ene*ited *ro+ t,e!e ru!e!" 5,i! ,a! pro+pted +ore c)nical o !er-er! to conclude t,at t,e)

,a-e een operatin( a deli erate polic) o* in*lation a! a wa) o* eroding t,e de t urden" Hor once, I t,ink t,i! c)nici!+ (oe! too *ar" A! in*lation *all! later t,i! )ear, I *eel !ure t,at ot, t,e Cank o* En(land and t,e Oo-ern+ent will e reEoicin(" A !eriou! polic) o* tr)in( to reduce t,e de t urden t,rou(, in*lation lie! a! an option in t,e *uture" Intere!tin(l), a li!t o* t,e econo+i!t! w,o ,a-e !upported it read! like a roll?call o* t,e top na+e! in (lo al +acro?econo+ic!" I know w,at )ou are t,inkin(: In t,at ca!e, it +u!t e wron(#" I ,a-e con!idera le !)+pat,) wit, t,i! a!!e!!+ent" W,at t,e prota(oni!t! ,a-e in +ind i! t,at t,e (o-ern+ent would rai!e it! in*lation

tar(et, !a) to %pc to $pc, and t,e Cank would t,en e o li(ed to launc, a +a!!i-e pro(ra++e o* Vuantitati-e Ea!in( to increa!e in*lation" It would pro a l) e ,elped ) a s!arp fall o* t,e pound" Cut, Eu!t a! in t,e pa!t it ,a! pro-ed di**icult to contain in*lation, !o in toda)N! cli+ate it would e di**icult to rai!e it S a! t,e 0apane!e ,a-e di!co-ered" =e-ert,ele!!, (i-en !u**icient deter+ination it could e done" So w,) not do it. Excessi#e @ritis! de4t forces militar% cuts $$$ t!ese de#astate t!e -o%al Na#% argolis *9 (Eric, 3olu+ni!t S =ew Aork 5i+e!, International 8erald 5ri une, Lo! An(ele! 5i+e!, and 5i+e! o* London, 3ontri utor S 8u**in(ton >o!t and 3==, Will 1' Kownin( Street Scuttle t,e Do)al =a-).#, 1'?19, ,ttp://www"lewrockwell"co+/+ar(oli!/+ar(oli!&1'",t+l, Keec,2 5,i! week, t,e Do)al =a-) *ace! t,e most perilous en(a(e+ent in it! !plendid ,i!tor), and one *ro+ w,ic, it +a) not e+er(e -ictoriou!" W,at Spani!, and Hrenc, cannon all!, and Oer+an 1$in !,ell! *ailed to acco+pli!,, t,e pen! o* London4! ean counter! +a) ac,ie-e L scuppering t,e Do)al =a-) and !endin( it! *ine!t -e!!el! to t,e 4rea8erVs %ards" 5,e a(e o* ro+ance i! o-er" 5,e Do)al =a-)4! ud(et i! reportedl) to e cut ) at lea!t 1';, per,ap! *ar +ore" Critain4! new 3on!er-ati-e?Li eral?Ke+ coalition o* Ka-id 3a+eron and =ick 3le(( -ow to !la!, t,e +on!trou! de*icit it in,erited *ro+ t,e *or+er Clair?Crown La our (o-ern+ent t,at le*t Critain drownin( in red ink" Hor !uppo!ed !ociali!t!, Clair and Crown !pent like drunken !ailor! on t,e war! in A*(,ani!tan and IraF, and on tr)in( to keep up +ilitaril) wit, t,e United State!" 3a+eron ,a! !poken o* &'?&$; cut! in (o-ern+ent acro!! t,e oard" In !pite o* earlier denial!, +ilitar) !pendin( will e a c,oice tar(et" =ew aircra*t carrier! and nuclear !u +arine! +a) e canceled, po!tponed, or !,arpl) reduced in nu+ er" An effecti#e -o%al Na#% sol#es nuclear &ar @lac8!am F (0ere+), Rice >re!ident S Do)al United Ser-ice! In!titute, Editor S 5,e =a-al De-iew, Hor+er Keput) 3,ie* o* t,e Ke*ence Sta** *or EFuip+ent 3apa ilit), and Hor+er >re!ident S EAKS U1, 5,e Do)al =a-) at t,e Crink: Do)al United Ser-ice! In!titute *or Ke*en!e Studie!#, Do)al United Ser-ice! In!titute *or Ke*en!e Studie!, DUSI 0ournal, 1$&"&2 ccc=ote: D= / Do)al =a-) Since SKD, t,e !trate(ic ,oriJon ,a! eco+e !i(ni*icantl) darker" In addition to t,e !u !tantial t,reat o* unconditional terrori!+, a -ariet) o* pro le+atic re(i+e! *ro+ Du!!ia to t,e Middle Ea!t, 3entral A!ia and We!t A*rica ,a-e t,e a ilit) to ,old t,e =ation ,o!ta(e o-er acce!! to *ood, ener() and raw +aterial!" Since 9/11, !trate(ic ri!k a!!e!!+ent u!uall) !tart! wit, t,e now *a+iliar t,reat! *ro+ unconditional l!la+i!t terror w,ic, ,a-e replaced Co+ ! and Du!!ian! a! pri+e pu lic concern! in international a**air!" Mariti+e tra**ic !ur-eillance and interdiction are a ,u(e and in-i!i le part o* pre?e+ptin( terrori!t Weapon! o* Ma!! Ke!truction (WMK2" l!la+i!t terror connect! to latent We!tern ener() in!ecurit) -ia -ariou! !ort! o* re(i+e! ,o!tile to t,e We!t in t,e Middle Ea!t and central A!ia, and wit, nuclear di+en!ion! accu+ulatin(" 5,e !ea ed re+ain! lar(el) unexplored, ut exploration +a) well )ield i+portant re!ource! wit,in t,e co++on ,erita(e, w,ic, are -er) likel) to e cau!e! o* di!pute" Latent t,reat! to Criti!, *ood !ecurit), a !ent *or two (eneration!, al!o loo+, in part in con!eFuence o* t,e down(radin( o* t,e !trate(ic !tatu! o* do+e!tic *ood production, lo!! o* do+e!tic *i!,erie! and t,e lo!! o* Critain4! !pecial !tatu! in t,e antipodean +arket!" Cot, ener() and *ood !ecurit) al!o ,a-e +ariti+e leadin( ed(e!" Hurt,er+ore, (eo!trate(icall), Critain i! located at t,e centre o* t,e people o* t,e world" 5ake a co+pa!! pi-otin( on t,e 5,a+e! e!tuar) and radiu! to t,e 3ape o* Oood 8ope" 5,e circle it t,en !weep! e+ race! +o!t o* t,e people on eart," 5,i! correctl) !tate! t,e pro!pect o* war a+on( t,e people" It ,a! a ,u(e and ineradica le +ariti+e di+en!ion, ut it al!o
tell! t,e new air/land/!ea !tor) t,at will reno-ate t,e concept o* 4Eoint4 operation! (!ee Hallac) % a o-e2"3 5,e t,ree en-elope! are inextrica l) interconnected" I* Oreat Critain i! t,e 1eep, t,en t,e Caile) i! no lon(er t,e 3,annel: it i! t,e cur!or etween t,e Oer+an and Du!!ian !p,ere! o* in*luenceG and t,e Moat extend! to t,e end! o* t,e eart," All +u!t e en(a(ed i* an) i! to e kept

!a*e" In !o doin(, t,e (eo!trate(ic in*luence o* t,e !ea?lane! doe! not c,an(e, and *or t,e We!t, t,e control o* t,e two !,ip canal! (>ana+a and SueJ2 and t,eir approac,e!, t,e *i-e ke) c,oke point! (3,annelG Oi raltarG Ded SeaG 8or+uJG Malacca Strait!2 and t,e two 3ape pa!!a(e! (8orn and Oood 8ope2 w,ic, lock up t,e world, are undi+ini!,ed prioritie!" 5,e Criti!, people t,ere*ore re+ain a! dependent a! e-er, and ar(ua l) +ore !o, on +ariti+e tradeG ut ecau!e t,eir per!onal link! to !ea*arin( are now +ini+al, paradoxicall), awarene!! o* t,i! dependence ,a! !,runk al!o" 5,e) !u**er *ro+ !ea lindne!!"% 5o t,i! (eneral picture i! added anot,er, +ore !peci*ic and +ore recent" 5,e explo!ion o* econo+ic acti-it) in t,e de+o(rap,ic !uperpower!

o* India and 3,ina will put *urt,er pre!!ure on ener() re!ource!, *ood !upplie! and +ariti+e tra**ic to !uppl) ot, (around :' per cent o* *o!!il *uel (oe! ) !ea2" >re!!ure! in ti(,t +arket! all around are produced ) recent 3,ine!e and !oon Indian de+and *or all co++oditie! a! t,e de+o(rap,ic !uperpower! o* t,e twent)?*ir!t centur) a!pire to and !in(le?+indedl) pur!ue We!tern !tandard! o* li-in(" 3,ina4! take?o** i! a principal unintended con!eFuence o* 9/11, w,ic, ,alted t,e t,en a rupt deterioration in Sino?A+erican relation!" 5,e Indian and 3,ine!e =a-ie! are (rowin( Fuickl)" Cot, are addin( !i(ni*icant !ur*ace co+ atant and +ariti+e air capa ilit) potential!" In India a new aircra*t carrier i! uildin( wit, II3 (initial operatin( capa ilit)2 &'11, to(et,er wit,
around t,irt) ot,er war!,ip!" In t,e 3,ine!e ca!e, re? uildin( i! t,ou(,t to e t,e +o!t likel) initial route, t,rou(, di!creet reacti-ation o* *or+er So-iet/Ukrainian -e!!el, t,e Rar)a( (1uJnet!o- cla!! *ro+ t,e *inal da)! o* t,e USSD2 t,u! addin( to it! alread) con!idera le !u +arine na-)"$ 5,e de+on!trated (rowt, and t,e expected *uture (rowt, in Indian and 3,ine!e na-al power +a) inten!i*) t,e i+pact o* t,e i!!ue! indicated in t,e (eneral picture, ot, wit, re!pect to t,e reFuire+ent *or expeditionar) inter-ention operation! and t,at *or +ariti+e !ecurit)" 5,i! de+on!trate! t,e need *or t,e D= to continue to

+aintain it! power proEection *orce! ut al!o *or increa!ed patrollin( and lar(e?!cale !ea a!in( to underpin !o-erei(n and coalition action! and to ear our proper !,are o* t,e co++unal urden, now and in t,e *uture"

uq inflation
@ritis! inflation !ig! 4ut slo&ing $$$ maintaining external pressures 8e% -2E Ne&s */ (Criti!, in*lation !ee! !,arp ri!e in Ma)#, <?1:, ,ttp://www"rte"ie/new!/ u!ine!!/&'13/'<1:/%$7&99? ritain?in*lation?ri!e/, Keec,2 Criti!, in*lation ro!e !ig!er t,an expected la!t +ont, a! a re!ult o* !oarin( air *are! and +ore expen!i-e clot,in( and *ootwear" 3on!u+er >rice! Index in*lation cli+ ed to &"7; in Ma), *ro+ &"%; in April, t,e countr)N! I**ice *or =ational Stati!tic! !aid" 8owe-er w,ile in*lation i! expected to peak at a out 3; in co+in( +ont,!, econo+i!t! elie-e it will t,en e(in a B!low ut !tead)B dri*t down" La!t +ont,4! !ur(e in in*lation wa! ,i(,er t,an *oreca!t! *or a &"<; readin(, a! price ri!e! re ounded a*ter a !,arp *all in in*lation in April"

!ig! prices 8e%

Inflation and oil lin8ed Douglas */ (0a!on, 3orre!pondent S Wall Street 0ournal, U"1" In*lation 3ool! on Hall in Iil >rice!#, Wall Street 0ournal, $?&1, ,ttp://online"w!E"co+/article/SC1'''1%&%1&7::73&%7:7''%$7:%9<$9'711'9917%",t+l, Keec,2 LI=KI=LIn*lation in t,e U"1" slo&ed in April a! a *all in crude oil price! rippled t,rou(, t,e (lo al econo+)" Cut wit, price! !till ri!in( +uc, *a!ter t,an wa(e!, t,ere are *ear! t,at a continued !FueeJe on con!u+er!4 !pendin( power could ,old ack an econo+ic reco-er)" 5,e I**ice *or =ational Stati!tic! 5ue!da) !aid t,e annual rate o* in*lation *ell to it! lowe!t le-el !ince Septe+ er &'1&" I=S o**icial! attri4uted t,e !lowdown to a <":; *all in t,e price o* oil etween Marc, and April, dra((in( down (a!oline and die!el price!" Strong causal relations!ip 4et&een oil and inflation $$$ researc! pro#es 23U *9 (5utor&U, in*lation and oil price!#, 11?13, ,ttp://www"tutor&u"net/econo+ic!/content/topic!/in*lation/oliMprice!",t+, Keec,2 8ow !tron( i! t,e relation!,ip etween c,an(e! in crude oil price! and in*lation. In t,eor) t,e causal relations!ip i! *airl) clear" An increa!e in oil price! !uc, a! t,at !een in t,e !econd ,al* o* &''' cau!e! an inward !,i*t in !,ort run a((re(ate !uppl) and put! up&ard pressure on t,e price le-el S in ot,er word! a !,arp Eu+p in t,e price o* crude oil cau!e! an exo(enou! inflationar% s!oc8 and t,e i+pact will e (reate!t w,en a countr) i! (a2 a lar(e?!cale i+porter o* oil and ( 2 ,a! +an) indu!trie! t,at u!e oil a! an e!!ential input in t,e production proce!!" De!earc, !u((e!t! t,at a 63?% ri!e in oil price! can e expected to add directl) a out '"1; to U1 con!u+er price in*lation a*ter a out two )ear!" 5,i! i! not in it!el* a +aEor contri utor to ,i(,er price!"

inflation 8e%
Inflation is 8e% to ena4le &riting off t!e de4t #ia moneti5ation A!itta8er *3 (0o,n, >ro*e!!or o* Econo+ic! S Lanca!ter Uni-er!it), Vuantitati-e ea!in(: can we expect in*lation.#, 5,e Econo+ic! =etwork, 0anuar), ,ttp://www"econo+ic!network"ac"uk/trueM!,owca!e/Fuantitati-eMea!in(, Keec,2 5,i! in*lation worr) ari!e! *ro+ t,e clai+ t,at VE con!titute! B+oneti!ationB o* (o-ern+ent de t S t,e Cank o* En(land i! pa)in( *or (o-ern+ent !pendin( wit, new B+one)B (ca!, re!er-e!2" 5,e increa!e in ank re!er-e! +ean! an increa!e in t,e +onetar) a!e, M' (de*ined a! anknote! and coin plu! ank re!er-e!2 and t,e Fuantit) t,eor) o* +one) !a)! t,at t,e price le-el ri!e! rou(,l) in proportion to t,e +one) !uppl), +ea!ured a! M' or !o+e roader +ea!ure !uc, a! M% w,ic, include! depo!it! in ank!" 5,e pro le+ wit, t,i! rea!onin( i! t,at it i(nore! t,e +ec,ani!+ ) w,ic, in*lation i! cau!ed" In*lation i! ri!in( price! o* (ood!, and it i! cau!ed ) exce!! de+and *or (ood!, !o+et,in( t,at i! nota l) a !ent at pre!ent" 3on!i!tent wit, t,i!, M% ,a! ,ardl) een (rowin( at all ecau!e ank lendin( i! not (rowin(" I* and w,en in*lation t,reaten! to return, t,e Cank !a)! it will e wit,drawin( VE" E-en wit,out a wit,drawal o* VE, t,ere i! not,in( to pre-ent t,e Cank ac,ie-in( ,i(,er intere!t rate! ) rai!in( it! ank rate on ank re!er-e! and it! repo loan!" 8a-in( !aid t,at, in*lation i! t,e one sure &a% in w,ic, t,e (o-ern+ent could &rite off !o+e o* it! de t, a! de!cri ed a o-e in Section &"3" W,en t,e U1 econo+) doe! e-entuall) return to !u!taina le econo+ic (rowt,, t,e (o-ern+ent +a) t,u! e te+pted to lean on t,e Cank o* En(land to continue it! B!o*tB +onetar) polic) *or lon(er t,an i! !trictl) con!i!tent wit, it! in*lation tar(et"

cuts 4ad
<uts destro% t!e -o%al Na#% a5ura8 ** (@ i(niew, C"A" and M"A" in 8i!tor) and >,"K" 3andidate in 8i!tor), 3olu+ni!t S A+erican 5,inker, 5,e Holl) o* t,e U"1"4! Ke*en!e 3ut!#, A+erican 5,inker, 7?31, ,ttp://www"a+ericant,inker"co+/&'11/'7/t,eM*oll)Mo*Mt,eMuk!Mde*en!eMcut!",t+l, Keec,2 Hir!t, t,e context" 5,e la!t ud(et ) Oordon Crown4! (o-ern+ent included t,e lar(e!t ud(et de*icit in Criti!, ,i!tor)" 8i! 3a inet le*t Critain deep in a de t !o lar(e t,at (o-ern+ent !pendin( reduction! were necessar% (t,e Criti!, people are alread) taxed too ,ea-il)2" Cut reduction! o* de*en!e !pendin( are onl) weakenin( t,e Criti!, +ilitar) and +akin( Critain le!! !a*e, w,ile
!a-in( little +one)" 5,e HA&'11/1& de*en!e ud(et i! f%' illion" Under t,e current (o-ern+ent4! plan!, it will e reduced to Eu!t f33 illion in HA&'1%/1$" 5,at i! a 1/< cut, w,ic, i! +uc, i((er t,an w,at Ke*en!e Secretar) Lia+ Hox wa! ori(inall) prepared to tolerate ut !+aller t,an w,at 3,ancellor Oeor(e I! orne ori(inall) de+anded" 5,i! f7? illion cut i! too !+all to !i(ni*icantl) reduce, let alone eli+inate, t,e ud(et de*icit" Cut it will !i(ni*icantl) weaken a +ilitar) w,o!e ud(et i! alread) too !+all" 5,e U"1"4! OK> i! rou(,l) f1"% trillion (p" &&2G t,e de*en!e ud(et con!titute! onl) &":$7; o* t,at" 5,e!e cut! ,a-e een ordered ecau!e wi!,)?wa!,) B3on!er-ati-e!B like >ri+e Mini!ter 3a+eron and t,e Li Ke+! in t,e 3a inet, led ) =ick 3le((, ,a-e de+anded t,e+" 5,e) don4t care i* Critain i! !a*e, and 3le(( o-ertl) !upport! di!ar+a+ent" Meanw,ile, t,e) ,a-e Brin(?*encedB (i"e", !,ielded *ro+ ud(et cut!2 t,e loated Kepart+ent o* 8ealt,, includin( t,e d)!*unctional =8S (w,ic, ,a! an internal Fuan(o co!tin( f<' illion per )ear2 and t,e u!ele!! *orei(n aid ud(et" Indeed, t,e Criti!, (o-ern+ent plan! to increa!e ot," So, w,ile t,e MIK i! *orced to +ake dra!tic cut!, t,e loated KI8 and t,e Kept" o* International Ke-elop+ent are not onl) !,ielded *ro+ cut!, ut e-en recei-in( +ore o* taxpa)er!4 +one) to wa!te" W,at !peci*ic cut! will t,e MIK ,a-e to +ake. 5,e DAH4! co+ at Eet *leet

will e cut in !alf, con!i!tin( onl) o* 5)p,oon! and a !+all nu+ er o* o !olete 5ornado! " 8arrier! o* t,e DAH and t,e D= were retired in late &'1', t,u! lea-in( t,e D= wit,out an) attack Eet! (let alone *leet de*en!e Eet! ?? t,e!e were retired ) Clair in &''<2 and t,u! an) con-entional lon(?ran(e?!trike capa ilit)" 5,e Criti!, Ar+) will ,a-e to cut t,eir tank and !el*? propelled ,owitJer *leet! ) %';, e-en t,ou(, t,e)4re alread) too !+all (e-en weak countrie! like >oland ,a-e i((er tank *leet!2 and ,a-e pro-en indi!pen!a le in IraF and A*(,ani!tan" 5,e D=4! *ri(ate *leet will e drasticall% cut, and t,e carrier Ark Do)al ,a! een retired" In t,e *uture, t,e D= will ,a-e onl) !e-en A!tute cla!! !u +arine! and !ix KKO! alon(!ide a !+all nu+ er o* *ri(ate!G ack in &''$, t,e D= ,ad ei(,t attack !u +arine!, ei(,t KKO!, and !e-enteen *ri(ate!" In 1997, under 0o,n MaEor, it ,ad twel-e attack !u ! and 3$ !ur*ace co+ atant!" 5,e D=4! *uture aircra*t carrier! ,a-e een dela)ed until &'&', and w,en t,e) are co++i!!ioned, po!!i l) onl) one o* t,e+ will e *it to operate catapult?launc,ed aircra*t !uc, a! t,e H?3$3" 5,e ot,er +i(,t not e co++i!!ioned at all, and i* it i!, it +i(,t e onl) a ,elicopter? carrier" So t,e one (enuine aircra*t carrier will not alwa)! e a-aila leG it will ,a-e to under(o a re*it *ro+ ti+e to ti+e" And w,en it doe!, t,ere will e no ot,er aircra*t carrier a-aila le"

***nor&a% econom%

nor&a% econom% *nc

Oil prices 8e% to Nor&a%Vs econom% -euters */ (=orwa)4! econo+ic !tar e(in! to lo!e it! !,ine#, <?&7, ,ttp://www"reuter!"co+/article/&'13/'</&7/norwa)?econo+)?idUSL3='H'3%U&'13'<&7, Keec,2 Iil price! are al!o eco+in( a 4ig ris8 a! =orwa)4! -a!t petroleu+ !ector, w,ic, account! *or al+o!t a quarter of t!e econom% and !alf of exports" Alt,ou(, oil in-e!t+ent! are at a record ,i(,, oil price! ,a-e *allen to 61'' a arrel *ro+ la!t )ear4! 611& a-era(e and a !u!tained *all to around 6:' le-el! !een a! recentl) a! &'1', would EeopardiJe +an) proEect!, econo+i!t! !a)" Statoil ,a! alread) dela)ed a 61$"$ illion Arctic in-e!t+ent ecau!e o* co!t! and !aid it wa! re-iewin( !e-eral proEect!" =I 3DISIS 5,e econo+) i! !till expected to (row a re!pecta le &"$ percent t,i! )ear, ri!in( to &"7$ percent in &'1%, accordin( to t,e central ank" Oo-ernor Ie)!tein Il!en ,a! een tr)in( to cal+ ner-e!, e-en a! t,e ank c,opped ack *oreca!t!" BI wouldn4t !a) people !,ould e worried, I would !a) t,e) !,ould Eu!t enEo) li*e,B Il!en !aid" =e-ert,ele!!, t,ere ,a-e een call! *ro+ union! *or t,e (o-ern+ent to !tart preparin( *or a +ore !eriou! !lowdown" BWe are not in cri!i!""" we are not t,ere )et ut it i! ti+e to !tart plannin( and (ettin( read),B !aid Stein Dee(aard, t,e c,ie* econo+i!t o* LI, =orwa)4! i((e!t trade union (roup" BHro+ 3?% percent (rowt, we !lowed to &?3 percent" We4ll e worried w,en it (oe! elow"B La our >ri+e Mini!ter 0en! Stolten er(, w,o i! runnin( *or reelection in Septe+ er, ,a! acknowled(ed t,at t,e econo+) i! !,owin( Balar+in(B !i(n! and t,at ,i! (o-ern+ent would e prepared to act i* nece!!ar)" 5,e (o-ern+ent i! not !,ort o* +one) and ,a! plent) o* roo+ to +o-e" It run! a ud(et !urplu! wort, 11 percent o* OK> t,ank! to t,e world4! ,i(,e!t oil tax, and !it! on a wealt, *und wort, 67&' illion, or a out 61%%,''' per +an, wo+an and c,ild" Nor&egian oil &ealt! 8e% to t!e euro5one Eurone&s ** (=orwa) +a) ,elp euro Jone i* a!ked#, 1'?&%, ,ttp://www"euronew!"co+/&'11/1'/&%/norwa)?+a)?,elp?euro?Jone?i*?a!ked/, Keec,2 =orwa) !a)! it would con!ider u!in( !o+e o* it! =ort, Sea oil &ealt! to strengt!en t,e euro Jone re!cue *und i* a!ked" =orwa)N! *inance +ini!ter Si( Eoern 0o,n!en !aid t,e) would deal wit, an) !uc, reFue!t in a !eriou! and t,orou(, +anner#" In-e!tin( in ond! i!!ued ) t,e EUN! EHSH cri!i! *und lie! wit,in t,e +andate t,at t,e Oo-ern+ent >en!ion Hund ,a! toda),# 0o,n!en !aid, addin( t,at an) in-e!t+ent deci!ion would e up to t,e *undN! +ana(er!" 5,e ar+ o* =orwa)N! central ank t,at +ana(e! t,e countr)N! !o-erei(n wealt, *und L known a! t,e Oo-ern+ent >en!ion Hund L !aid it would appl) t,e !a+e ri!k and pro*ita ilit) !tandard! to an) !uc, place+ent a! it doe! to it! ot,er in-e!t+ent!" 5,e European Hinancial Sta ilit) Hacilit) want! !o-erei(n wealt, *und! to !uppl) collateral !o it can orrow +one) *or purc,a!in( Italian or Spani!, (o-ern+ent ond! on t,e !econdar) +arket" 5,ank! to taxe! on oil and (a!, owner!,ip o* oil *ield!, and it! !take in ener() co+pan) Statoil =orwa) ,a! uilt up an in-e!t+ent *und t,e eFui-alent o* nearl) %'' illion euro!" Euro5one collapse causes glo4al nuclear &ar ;ommes ** (5,o+a!, >u li!,er S >eri!cope >o!t, C"A", 0"K", and M"A" S 3olu+ ia Uni-er!it), Hor+er Senior Editor S 3olu+ ia Law De-iew, EuroJone in cri!i!: 5,e deat, o* t,e euro could tri((er World War III#, 1&?9, ,ttp://www"peri!copepo!t"co+/&'11/1&/euroJone?in?cri!i!?t,e? deat,?o*?t,e?euro?could?tri((er?world?war?iii/, Keec,2

At t,e ri!k o* ein( accu!ed o* !care+on(erin(, INll !tate +) point !i+pl) and up *ront: 5,in(! in Europe are not a! ad a! t,e) !ee+ S t,e)Nre wor!e" And t,ou(, t,e co++entariat i! Fueuin( up to predict t,e i++inent de+i!e o* t,e euro currenc) and to la+ent t,e on(oin( rece!!ion, t,atN! not e-en t,e ,al* o* it: WeNre lookin( at Aorld Aar III" A! +aEor corporation! !tart drawin( up contin(enc) plan! *or a world wit,out t,e euro and a! weakne!!e! in (o-ern+ent *inance! eco+e e-er +ore (larin(, t,e end o* t,e euro currenc) eco+e! an increa!in(l) reali!tic pro!pect" Delated, t,e total a !ence o* u!ine!! (rowt,, or tradin( a+on( European nation! rai!e! t,e Fue!tion o* w,at ene*it! a uni*ied tradin( lock o**er!" 5,e dri-in( +oti-e e,ind t,e ori(inal 3oal and Steel alliance t,at ulti+atel) eca+e toda)N! European Union wa! a de!ire a+on( nation!, trau+ati!ed ) t,e wor!t war in t,eir collecti-e ,i!tor), to pro-ide a deterrent a(ain!t anot,er war" M) concern i! t,at t,at trau+a ,a! *aded, and t,at t,e *ear o* war ,a! een replaced ) t,e *ear o* rece!!ion" A! an)one wit, e-en a *leetin( *a+iliarit) wit, European ,i!tor) can con*ir+, our! i! not exactl) a ,i!tor) o* lo-e and peace" In *act, t,e period !ince t,e end o* World War II ,a! een pro a l) t,e lon(e!t period o* relati-e peace t,e re(ion ,a! e-er known" Ar(ua l), itN! no coincidence t,at t,at period o* peace ,a! coincided exactl) wit, t,e e-er !tren(t,enin( tie! t,at ,a-e een *or(ed etween European nation! o-er t,e!e pa!t <' )ear!" I* t,e ond! t,at tie European nation! to(et,er are weakened, t,e incenti-e! to a-oid total &ar dwindle" And it! not a! dra+atic or *ar *etc,ed a t,eor) a! it +a) at *ir!t !ound" 5,e end o* t,e euro currenc) and a re-er!ion to national currencie! could Fuite po!!i l) pro-ide t,e i+petu! *or a *urt,er di!!olution o* t,e union" 5,e unra-elin( o* pain!takin(l) ne(otiated tie! eco+e! ea!ier and ea!ier a! eac, !trand *ra)! and reak!" 3o+ ine t,i! unra-elin( wit, an on(oin( or e-en deepenin( rece!!ion, and it all +ake! *or a co+ u!ti le at+o!p,ere" Un*ortunatel), it i! ,u+an nature to la+e ot,er! *or our woe!" In an en-iron+ent o* une+plo)+ent, au!terit), and (eneral re!ent+ent, it i! not di**icult to i+a(ine nation! !tartin( to point t!e finger at t,eir nei(, our!" And wit,out t,e uni*)in( e**ect o* a co++on currenc), t,ri-in( tradin( relation!, *ree +o-e+ent o* people!, and co++on intere!t!, Europe would *ind it!el* increa!in(l) suscepti4le to &ar" Moreo-er, a! !o *ew European! in +) (eneration, let alone !u !eFuent (eneration!, ,a-e e-en t,e !li(,te!t inklin( a out ,ow ,orri*ic war i!, it +a) e te+ptin( to con!ider it a! a !olution to pro le+!, or at +ini+u+ an accepta le re!pon!e to percei-ed !li(,t!"

uq econom%
Nor&egian econom% gro&ing no& $$$ momentum is neg o!sin */ (Sale,a, =orwe(ian Detail Sale! Orow a! 8ou!e,old! 8elp Econo+)#, Cloo+ er( Cu!ine!!week, <?&:, ,ttp://www" u!ine!!week"co+/new!/&'13?'<?&:/norwe(ian?retail?!ale!? (row?a!?,ou!e,old!?,elp?econo+), Keec,2 =orwe(ian retail !ale! ro!e in Ma) and une+plo)+ent wa! unc,an(ed t,i! +ont,, !i(nalin( t,at ,ou!e,old !pendin( in we!tern EuropeN! i((e!t oil producer +a) ,elp t,e econo+) &eat!er t!e recession in t,e euro area" Detail !ale!, excludin( +otor -e,icle!, increa!ed 1": percent in t,e +ont,, a*ter *allin( '"< percent in April, I!lo? a!ed Stati!tic! =orwa) !aid toda)" 5,at co+pare! wit, t,e '"$ percent +edian e!ti+ate o* !e-en econo+i!t! in a Cloo+ er( !ur-e)" =orwe(ian con!u+er! increa!ed !pendin( a! (rowt, in une+plo)+ent ,a! !talled in t,e pa!t +ont,!" A report toda) *ro+ t,e la or and wel*are o**ice !,owed t,at !ea!onall) adEu!ted une+plo)+ent rate wa! unc,an(ed at &"$ percent in 0une" 5,e krone !tren(t,ened a! +uc, a! '"% percent a(ain!t t,e euro e*ore tradin( '"& percent ,i(,er at 7":<7< a! o* 1':3: a"+" in I!lo"

!ig! prices 8e%

:ig! prices 8e% to t!e Nor&egian econom% Eremer *3 (0o!iane, 3orre!pondent S Cloo+ er(, =orwa) 8a! 5oo Muc, o* a Oood 5,in(#, Cloo+ er( Cu!ine!!week, 9?&', ,ttp://www" u!ine!!week"co+/article!/&'1&?'9?&'/norwa)? ,a!?too?+uc,?o*?a?(ood?t,in(, Keec,2 =orwa) i! EuropeN! !econd?lar(e!t oil producer, and it! ener() oo+ ,a! turned !o+e *i!,in( -illa(e! into a**luent town! wit, li-in( co!t! ri-alin( @uric, and 5ok)o" Le!! welco+e ,a! een t,e =ordic nationN! !tatu! a! EuropeN! +o!t expen!i-e place to do u!ine!!" 5,atN! ,o lin( t,e a ilit) o* town! and re(ion! *ar *ro+ =orwa)N! oil re!ource! to attract and keep new indu!trie!" I would like to ,a-e a it +ore t,an one le( to !tand on toda) and in t,e *uture,# !a)! 8ilde CEgrnland, a pro*e!!or o* econo+ic! at t,e =orwe(ian Cu!ine!! Sc,ool in I!lo" W,at weNre doin( now i! cuttin( awa) at one o* t,e le(!"# 5,ank! in part to t,e =orwe(ian econo+)N! !ea#% reliance on t,e oil indu!tr), a-era(e +anu*acturin( la or co!t! are a out 6$7"$' an ,our, 31 percent ,i(,er t,an in Oer+an) and <$ percent ,i(,er t,an in t,e U"S", accordin( to t,e U"S" Kepart+ent o* La or" 5,e oil co+panie! pa) top dollar *or worker!, w,o enEo) t,e worldN! ,i(,e!t !alarie!, wit, annual pa)c,eck! a-era(in( 61:',3'', accordin( to a report *ro+ 8a)! Iil and Oa!" ItN! ,ard *or non?oil co+panie! to co+pete *or worker!" 3o+plicatin( li*e *or exporter!, =orwa)N! krone ,a! !ur(ed &% percent a(ain!t a a!ket o* currencie! *ro+ it! tradin( partner! in t,e pa!t t,ree and a ,al* )ear! a! in-e!tor! !eek an oil?ric, ,a-en *ro+ t,e (lo al *inancial cri!i!" 5,e dominance o* oil i! *elt in t,e !tock +arket" I* t,e &' i((e!t li!ted co+panie!, onl) one non?oil?related co+pan), Al(eta, a +aker o* cancer dru(!, wa! *ounded in t,e pa!t %' )ear!" A+on( t,e re+ainin( i( co+panie!, ,al* are eit,er directl) in-ol-ed in oil production or pro-ide oil !er-ice! !uc, a! ri(! and eFuip+ent" Oil prices 8e% to Nor&egian econom% $$$ t!e%Vre dependent Leso#a ** (>ol)a, 3orre!pondent S Wall Street 0ournal, Iil !u!tain! =orwa) a! EU wallow! in de t#, Wall Street 0ournal, :?1:, ,ttp://www"+arketwatc,"co+/!tor)/oil?!u!tain!?norwa)?a!? eu?wallow!?in?de t?&'11?':?1:, Keec,2 ISLI (MarketWatc,2 L Cle!!ed wit, lar(e petroleu+ re!er-e!, =orwa) i! ridin( a &a#e of prosperit% rou(,t ) ,i(, oil price! and ro u!t pu lic *inance! w,ile t,e re!t o* Europe i! +ired in a de t cri!i!" 5,i! Scandina-ian nation o* %"9 +illion i! t,e i((e!t oil producer and exporter in we!tern Europe, wit, +o!t o* t,e oil production takin( place o**!,ore in t,e =ort, Sea" =orwa) wa! al!o t,e worldN! !econd lar(e!t exporter o* natural (a! a*ter Du!!ia la!t )ear, w,en crude oil, natural (a! and pipeline tran!port !er-ice! +ade up nearl) $'; o* it! export! -alue" WeNre a commodit%$4ased econom%,# !aid Snorre E-Een, !enior econo+i!t at Hoku! Cank, in a recent inter-iew in ,i! o**ice o-erlookin( t,e >arlia+ent uildin( in I!lo" It all stems *ro+ t,e oil price and t,e !tron( ter+! o* trade" Export price! ,a-e increa!ed !u !tantiall), w,ile i+port price! ,a-e re+ained *airl) !ta le"#

***u8 elections

u8 elections *nc
:ig! oil prices !urt t!e UE econom% illard *3 (Step,en, Senior Econo+i!t in Monetar) Anal)!i! S Cank o* En(land, Iil !,ock! and t,e U1 econo+): t,e c,an(in( nature o* !,ock! and i+pact o-er ti+e#, Cank o* En(land, 3? &3, ,ttp://www")ork"ac"uk/re!/++*/docu+ent!/Anal)ticalM<$&%<17M1"pd*, Keec,2 3,art < !u++ari!e! t,e a o-e c,art! in a two?di+en!ional *or+ ) !,owin( t,e +edian i+pact on t,e le-el o* U1 real OK> a*ter *our Fuarter! to eac, o* an oil !uppl), (lo al de+and and oil? !peci*ic de+and !,ock t,at rai!e oil price! ) 1';" 5,e re!pon!e o* U1 OK> to an oil !uppl) !,ock t,at increa!e! price! ) 1'; i! negati#e t,rou(,out t,e period, alt,ou(, t,e i+pact *all! dra+aticall) a*ter 19:<" 8owe-er, t,e sensiti#it% o* U1 OK> to oil price !,ock! !ee+! to ,a-e increased *ro+ &''%" Meanw,ile, t,e re!pon!e o* U1 OK> to world de+and dri-en oil price !,ock! i! +uc,, !+aller t,rou(,out t,e period, and at ti+e! !li(,tl) po!iti-e and t,ere i! noticea l) le!! -ariation in t,e !en!iti-it) o* U1 OK> to t,i! t)pe o* oil price !,ock" In contra!t, t,e !,ock! de!cri ed a! ^oil?!peci*ic de+andN are *ound to ,a-e a con!i!tentl) po!iti-e i+pact on U1 OK> t,rou(,out" 5,e increa!e in !en!iti-it) o* U1 OK> to t,i! t)pe o* !,ock al!o increa!ed noticea l) a*ter &''%" 5a le A pro-ide! t,e a-era(e re!pon!e! *or t,e w,ole !a+ple, and t,ree !u ?!a+ple! 197<?19:< and 19:<?&''% and &''%?&'11" 5,i! ,i(,li(,t! t,at, in line wit, t,e earlier literature, t,e i+pact! o* all t,ree !,ock! a*ter 19:< appear !+aller t,an e*ore, alt,ou(, t,e !en!iti-it) o* U1 output to oil !uppl) and oil?!peci*ic de+and !,ock! ,a! (enerall) increa!ed !ince &''%" =oor @ritis! economic performance 8e% to <onser#ati#e #ictor% in t!e next election ;anes! */ (0anan, 3orre!pondent S Hinancial 5i+e!, Econo+ic (rowt, will not decide t,e next election#, Hinancial 5i+e!, %?3', >roFue!t, Keec,2 Cut t,e political c)cle doe! not track t,e econo+ic c)cle !o unwa-erin(l)" In!tead, a !tron( econo+) could relax #oters into experimenting wit, a La our part) t,e) do not reall) tru!t" 5,e ot,er extre+e ? outri(,t rece!!ion ? would !urel) !ee o** t,e 3on!er-ati-e! too" 5,e electoral !weet !pot, t,en, i! actuall) tepid, !,u**lin( (rowt,, real enou(, to e priJed ut too *ra(ile to co+*orta l) wit,!tand political up,ea-al" 5,e '"3 per cent added in t,e *ir!t Fuarter o* t,i! )ear i! !o+et,in( like it" 5,ere i!, not t,at t,e 5orie! know it, !uc, a t,in( a! too +uc, (rowt," 3on!er-ati-e +ini!ter! w,o pri-atel) predict t,at t,e econo+) will reco-er t,i! )ear, i+pro-e in &'1% and reall) (lea+ ) &'1$ !,ould ,ope t,e) are &rong" Cecau!e it *ailed to !ur-i-e *ir!t contact wit, realit), we *or(et ,ow du iou! t,e 5orie!4 ori(inal plan *or winnin( in &'1$ wa!" A*ter ,ittin( t,eir de t and de*icit tar(et! in a !in(le ter+, t,e) would pro**er a pre?election tax cut in a *louri!,in(, Bre alancedB econo+) and count on ein( rewarded *or t,eir ac,ie-e+ent!" Cut people -ote on t,e *uture" 5,e) were alwa)! likel) to pocket t,e pain!takin( work done ) t,e 5orie! and turn to La our, a part) t,e) ,old in le!! di!ta!te, to win t,e peace" >reci!el) ecau!e t,e econo+) ,a! *lunked t,e (o-ern+ent4! expectation!, and it! *i!cal (oal! are e,ind !c,edule, Mr 3a+eron *ind! ,i+!el* eFuipped wit, a more potent stor% to tell at t,e next election" M) e+er(enc) !ur(er) on t,e Criti!, econo+) i! not done, ,e will !a), !o don4t let +) ,a+?*i!ted opponent! an)w,ere near t,e operatin( t,eatre" 5,e 3on!er-ati-e! ,a-e *ailed t,eir wa) to a cannier election !trate(), one t,at pla)! to -oter!4 ani+al dread!, not t,eir non?exi!tent capacit) *or (ratitude" <onser#ati#e =art% rule 8e% to pri#ati5e t!e N:S $$$ La4our re#erses it

irror */ (5orie!4 ,idden pri-ati!ation plan re-ealed#, &?&$, ,ttp://www"+irror"co"uk/new!/uk?new!/n,!?torie!?,idden?pri-ati!ation?plan?17&9<:1, Keec,2 5,e +a!!i-e !tep toward! *ull pri-ati!ation o* t,e =8S i! ein( +ade in re(ulation! neaked out earlier t,i! +ont, S expo!ed ) t,e Kail) Mirror toda)" 5,e new rule! i+po!e co+pul!or) co+petiti-e +arket!# on t,e entire ,ealt, !er-ice" 5,e c,an(e! are planned under t,e o-er,aul launc,ed ) 5or) *or+er 8ealt, Secretar) Andrew Lan!le)" 8e clai+ed t,ere wa! not,in( in it to pro+ote or per+it t,e tran!*er o* =8S acti-itie! to t,e pri-ate !ector#" Cut now all !er-ice! are to e o**ered to t,e ,i(,e!t idder *ro+ April 1" 5,e +o-e would allow an) Fuali*ied pro-ider# includin( (iant! !uc, a! Rir(in 3are to out id local ,o!pital!" 3ritic! *ear t,e rule! will let co+panie! a!!et?!trip =8S *acilitie!" La our ,a-e warned *ir+! could c,err)?pick t,e ea!ie!t, +o!t pro*ita le, procedure!, lea-in( t,e =8S to pick up t,e ta *or trick) and expen!i-e !ur(er)" 5,e Oo-ern+ent !a)! it ,a! onl) put !er-ice! out *or co+petition on Fualit), not price#" M>! ,a-e until Marc, 31 to o-erturn t,e planned rule!" 0a+ie Deed, La ourN! S,adow 8ealt, Mini!ter, conde+ned >M Ka-id 3a+eron and ,i! deput) =ick 3le(( o-er t,e c,an(e" 8e !aid: 5,e!e new rule! put pri-ate co+panie! and t,e +one) +oti-e at t,e ,eart o* our =8S" La our will #igorousl% oppose t!em S t,e) (o e-en *urt,er t,an we *eared la!t )ear w,en t,e Oo-ern+entN! de!tructi-e =8S re?or(ani!ation !tru((led t,rou(, >arlia+ent" Mini!ter! concealed t,eir true intention!" >eople will not *or(i-e Ka-id 3a+eron and =ick 3le(( *or !ellin( o** t,e =8S to t,e ,i(,e!t idder"# And $$$ t!e N:S is modeled glo4all% =olloc8 */ (All)!on, >ro*e!!or o* >u lic 8ealt, De!earc, and >olic) S Uni-er!it) o* London, Kirector S Uni-er!it) o* Edin ur(, 3entre *or International >u lic 8ealt, >olic), Hor+er 8ead o* >u lic 8ealt, >olic) S Uni-er!it) 3olle(e London, W,) we need a political ca+pai(n to rein!tate t,e =8S in En(land#, 3entre *or La our and Social Studie!, 3?&<, ,ttp://cla!!online"or("uk/ lo(/ite+/w,)?we?need?a?political?ca+pai(n?to?rein!tate?t,e?n,!, Keec,2 5,e ill pa!!ed into law wit,out an electoral +andate ecau!e no +aEor political part) or parlia+entar) in!titution in En(land wa! willin( or a le to de*end t,e =8S" It wa! a con!titutional outra(e" It! pa!!in( +arked t,e end o* a =ational 8ealt, Ser-ice in En(land t,at *or +ore t,an !ixt) )ear! !er-ed a! one o* t,e +o!t !ucce!!*ul models in t,e world, widel) praised and copied" 5,e U1 =8S wa! created ) national con!en!u! in order to en!ure t,at e-er) citiJen wa! (uaranteed ,ealt, care" Underpinnin( t,e!e arran(e+ent! wa! t,e !ecretar) o* !tateN! core dut) to pro-ide or !ecure a co+pre,en!i-e ,ealt, !er-ice, a dut) repealed ) t,e *ir!t clau!e o* t,e 8ealt, and Social 3are Act" Depeal wa! t,e *ulcru+ o* t,e *ree +arket a(enda ecau!e t,e dut) co+pelled t,e +ini!ter to allocate re!ource! accordin( to need in!tead o* lea-in( allocation to +arket *orce! and unaccounta le or(ani!ation!" In t,e a !ence o* a +ini!terial re!pon!i ilit), it now eco+e! po!!i le to lur t,e oundarie! etween *ree ,ealt, care and c,ar(ea le ,ealt, and !ocial care" Man) =8S !er-ice! are ein( tran!*erred to local aut,oritie!, w,ic, can c,ar(e *or care" 5,e Act al!o a oli!,e! rule! t,at +ake certain ,ealt, !er-ice! +andator)" Under t,i! !)!te+, pla)er! in t,e ,ealt, care +arket can c,oo!e t,e !er-ice! t,e) wi!, to pro-ide and t,e patient! *or w,o+ t,e) pro-ide" 5,e principle i! not, a! t,e coalition repeatedl) clai+ed, increa!ed patient c,oice ut increa!ed c,oice o* patient" 5,e =8S ,a! een an international model ecau!e it pro-ided w,at no ot,er countr) in t,e world ,a! ac,ie-ed at t,e !a+e co!t: uni-er!al ,ealt, care in t,e *or+ o* eFual acce!! to co+pre,en!i-e care irre!pecti-e o* per!onal inco+e" And $$$ pri#ati5ation is 8e% to glo4al !ealt!care effecti#eness

;ilro% *9 (Leonard, Kirector o* Oo-ern+ent De*or+ S Dea!on HoundationLocal Oo-ern+ent >ri-atiJation 1'1#, Dea!on Houndation, 3?1<, ,ttp://rea!on"or(/new!/!,ow/local?(o-ern+ent? pri-atiJation?1'1, Keec,2 In t,e &1!t centur), (o-ern+ent4! role i! e-ol-in( *ro+ !er-ice pro-ider to t,at o* a pro-ider or roker o* !er-ice!, a! t,e pu lic !ector i! increa!in(l) rel)in( *ar +ore on network! o* pu lic, pri-ate and non?pro*it or(aniJation! to deli-er !er-ice!"& Rirtuall) e-er) local (o-ern+ent !er-iceL*ro+ road +aintenance, *leet operation! and pu lic work! to education, correction! and pu lic ,ealt, !er-ice!L,a! een successfull% pri#ati5ed at !o+e point in ti+e !o+ew,ere in t,e world" 5,i! trend i! not confined to an) particular re(ion, or to (o-ern+ent! do+inated ) eit,er +aEor political part)" 5,e rea!on *or t,e wide!pread appeal o* pri-atiJation i! !i+ple: it &or8s" Kecade! o* !ucce!!*ul pri-atiJation policie! ,a-e pro-en t,at pri-ate !ector inno-ation and initiati-e can do certain t,in(! etter t,an t,e pu lic !ector" >ri-atiJation al!o oo!t! t,e local econo+) and tax a!e, a! pri-ate co+panie! under (o-ern+ent contract pa) taxe! into (o-ern+ent co**er! and o**er e+plo)+ent to co++unitie!" >ri-atiJationL!o+eti+e! re*erred to a! contractin( out, out!ourcin(, co+petiti-e !ourcin( or pu lic?pri-ate partner!,ip!Li! reall) an u+ rella ter+ re*errin( to a ran(e o* polic) c,oice! in-ol-in( !o+e !,i*t in re!pon!i ilit) *ro+ t,e (o-ern+ent to t,e pri-ate !ector, or !o+e *or+ o* partner!,ip to acco+pli!, certain (oal! or pro-ide certain !er-ice!" It co-er! e-er)t,in( *ro+ !i+ple contractin( to a!!et !ale! and Eoint -enture! (!ee text ox elow on co++on *or+! o* pri-atiJation2" 5,ou(, o*ten in-ol-in( (o-ern+ent! partnerin( wit, *or?pro*it *ir+! to deli-er !er-ice!, pri-atiJation can al!o in-ol-e partnerin( wit, non?pro*it or(aniJation! or -olunteer!" All *or+! o* pri-atiJation are !i+pl) polic) tool!Lt,e) can e e**ecti-e w,en u!ed well and ine**ecti-e w,en u!ed incorrectl)" 5,e rea!on pri-atiJation work! i! !i+ple: it introduce! co+petition into an ot,erwi!e +onopoli!tic !)!te+ o* pu lic !er-ice deli-er)" Oo-ern+ent! operate *ree *ro+ co+petiti-e *orce! and wit,out a otto+ line" 5,u!, pro(ra+ !tructure! and approac,e! o*ten !ta(nate, and !ucce!! i! not alwa)! -i!i le and i! ,ard to replicate" Wor!e, !ince ud(et! are not linked to per*or+ance in a po!iti-e wa), too o*ten poor per*or+er! in (o-ern+ent (et rewarded a! ud(et increa!e! *ollow *ailure" 3o+petition done ri(,t dri-e! down co!t! and incenti-iJe! per*or+ance" >ri-ate *ir+! operatin( under (o-ern+ent contract! ,a-e !tron( incenti-e! to deli-er on per*or+anceLa*ter all, t,eir otto+ line would e ne(ati-el) i+pacted ) t,e cancellation o* an exi!tin( contract or lo!in( out to a co+petitor w,en t,at contract i! !u !eFuentl) re? id" In t,e (o-ern+ent4! !ide, appl)in( co+petition *orce! +ana(e+ent to identi*) t,e true co!t o* doin( u!ine!!, and, wit, e**icienc) a! a (oal, co+pel! an a(enc) to u!e per*or+ance +ea!ure+ent to track and a!!e!! Fualit) and -alue" At it! root co+petition pro+ote! inno-ation, e**icienc) and (reater e**ecti-ene!! in !er-in( t,e !,i*tin( de+and! o* cu!to+er!" I*tenti+e!, t,i! allow! contractor! to pro-ide co+para le or e-en !uperior wa(e! and ene*it! w,ile reducin( !er-ice co!t! and i+pro-in( !er-ice le-el!" 2!at sol#e 4ioterrorism 6raser * (Mic,ael D", Hor+er Keput) Executi-e Kirector S =ational A!!ociation o* 3ount) and 3it) 8ealt, I**icial!, 3EI S A!!ociation o* Maternal and 3,ild 8ealt, >ro(ra+!, >,"K" S Uni-er!it) o* Ma!!ac,u!ett! at A+,er!t, Ele+ent! o* E**ecti-e Cioterrori!+ >reparedne!!: A >lannin( >ri+er *or Local >u lic A(encie!#, =ational A!!ociation o* 3ount) and 3it) 8ealt, I**icial!, 0anuar), ,ttp:// ioterrori!+"!lu"edu/ t/ke)Mre*/=A338I/e**ecti-e"pd*, Keec,2 Alt,ou(, t,e pro a ilit) o* a ioterrori!t attack in +o!t part! o* t,e United State! i! t,ou(,t to e low, ioterrori!+ ,a! eco+e one o* t,e +an) co+plex pu lic ,ealt, t,reat! *acin( t,e nationN! pu lic ,ealt, !)!te+" W,ile pu lic ,ealt, re!pon!i ilit) *or re!pondin( to ioterrori!+ and ot,er pu lic ,ealt, e+er(encie! di**er! nationwide, al+o!t all !tate! rel% to !o+e extent upon local pu lic ,ealt, a(encie! to identif% and respond to ioterrori!+, and to protect t,e

,ealt, o* t,eir co++unitie!"1 I* a ioterrori!t e-ent occur! in t,i! countr), it will un*old at t,e local le#el, and local pu lic ,ealt, o**icial! will e accounta le *or t,e appropriate pu lic ,ealt, re!pon!e in t,eir co++unitie!" A! part o* t,eir plannin( acti-itie!, +an) local ,ealt, o**icial! ,a-e !ou(,t to deter+ine t,e crucial ele+ent! o* ioterrori!+ preparedne!!" Ele+ent! o* E**ecti-e Cioterrori!+ >reparedne!! wa! de-eloped to a!!i!t local pu lic ,ealt, o**icial! and t,eir partner! in identi*)in( t,eir pu lic ,ealt, and !a*et) role! w,en re!pondin( to ioterrori!+" Alt,ou(, t,i! docu+ent *ocu!e! on local pu lic ,ealt, a(encie!, it i! i+portant to note t,at t,e pu lic ,ealt, re!pon!e to a ioterrori!t e-ent i! part o* a lar(er re!pon!e t,at will in-ol-e cri+inal in-e!ti(ation and ot,er e+er(enc) +ana(e+ent aut,oritie! at t,e local, !tate, and *ederal le-el!" 5,i! pu lication wa! created to ,elp local pu lic ,ealt, a(encie! e(in to coordinate t,eir piece o* t,i! lar(er re!pon!e, and Eointl) plan re!pon!e acti-itie! wit, partner! in nei(, orin( local and !tate pu lic ,ealt, !)!te+!" Extinction at!en% F (0a!on, Hor+er A!!ociate S Ix*ord Uni-er!it), M>0 S 0o,n! 8opkin! Uni-er!it), Deducin( t,e Di!k o* 8u+an Extinction#, Di!k Anal)!i!, &7($2, p(" 133$?13%%2 Of current extinction ris8s' t!e most se#ere ma% 4e 4ioterrorism " 5,e knowled(e needed to en(ineer a -iru! i! +ode!t co+pared to t,at needed to uild a nuclear weaponG t,e nece!!ar) eFuip+ent and +aterial! are increa!in(l) acce!!i le and ecau!e iolo(ical a(ent! are !el*?replicatin(, a weapon can ,a-e an exponential e**ect on a population (Warrick, &''<G Willia+!, &''<2" $ 3urrent U"S" iode*en!e e**ort! are *unded at 6$ illion per )ear to de-elop and !tockpile new dru(! and -accine!, +onitor iolo(ical a(ent! and e+er(in( di!ea!e!, and !tren(t,en t,e capacitie! o* local ,ealt, !)!te+! to re!pond to pande+ic! (La+, Hranco, P S,uler, &''<2" 5,ere i! currentl) no independent od) a!!e!!in( t,e ri!k! o* ,i(,?ener() p,)!ic! experi+ent!" >o!ner (&''%2 ,a! reco++ended wit,drawin( *ederal !upport *or !uc, experi+ent! ecau!e t,e eneht! do not !ee+ to e wort, t,e ri!k!"

!ig! prices 8e%

:ig! oil prices !urt t!e UE econom% illard *3 (Step,en, Senior Econo+i!t in Monetar) Anal)!i! S Cank o* En(land, Iil !,ock! and t,e U1 econo+): t,e c,an(in( nature o* !,ock! and i+pact o-er ti+e#, Cank o* En(land, 3? &3, ,ttp://www")ork"ac"uk/re!/++*/docu+ent!/Anal)ticalM<$&%<17M1"pd*, Keec,2 In !u++ar), we *ind t,at t,e i+pact o* oil !,ock! on U1 output and in*lation -arie! accordin( to t,e !ource o* t,e underl)in( !,ock, t,at oil !uppl) !,ock! are a!!ociated wit, larger negati#e impacts on output and po!iti-e i+pact! on in*lation and t,at de+and !,ock! are a!!ociated wit, !+aller, !o+eti+e! po!iti-e e**ect! on output and in*lation" 5,e!e *indin(! are in line wit, t,e (eneral pattern o* other studies (e(, Cau+ei!ter, >eer!+an and Ran Do a)! (&''922" W,ile con!i!tent wit, ot,er !tudie!, t,e *indin( t,at an econo+) o* t,e United 1in(do+N! !iJe, w,ic, i! !+all relati-e to t,e re!t o* t,e world, would re!pond di**erentl) to di**erent t)pe! o* oil !,ock wa! not clear a priori" Al!o con!i!tent wit, +an) !tudie! i! t,e *indin( t,at t,e i+pact o* oil !uppl) !,ock! on output and in*lation *ell around t,e +id?19:'!, !peci*icall) 19:<" 5,e ti+e? -ar)in( para+eter! in our world RAD al!o !upport t,e -iew t,at one i+portant rea!on *or t,i! decline +a) e c,an(e! in t,e world oil +arket it!el*, in particular t,at -ariation in world oil production *ell dra+aticall) a*ter 19:< S and t,i! i! o*ten +a!ked ) an apparent increa!e in t,e !en!iti-it) o* oil price! to c,an(e! in oil !uppl)" Cut, our introduction o* ti+e?-ar)in( para+eter! into our anal)!i! o* t,e re!pon!e o* U1 acti-it) and price! to oil !,ock! re-eal! anot,er c,an(e o-er ti+e: t,e increased sensiti#it% o* U1 -aria le! to oil !,ock! !ince t,e +id?&'''!" 5,i! i! not a pattern noted in !tudie! o* ot,er econo+ie!, ut it! ti+in( doe! coincide wit, t,e uniFue tran!ition pat, o* t,e U1 *ro+ a net exporter o* oil to a net i+porter around &''%" $ 3onclu!ion! In t,i! paper, we ,a-e !tudied t,e c,an(in( nature o* oil price !,ock! and t,eir i+pact on t,e U1 econo+) o-er ti+e *ro+ t,e +id?197'! to &'11" We identi*ied !,ock! to t,e world oil price *ro+ t,ree t)pe! o* underl)in( !ource: oil !uppl), world de+and and oil?!peci*ic de+and" And we allowed *or ti+e?-ariation in t,e re!pon!e! o* world -aria le! to t,e!e !,ock! a! well a! in t,e re!pon!e! o* U1 output and price! to t,e!e !,ock!" We *ound t,at t,e !ource o* t,e underl)in( !,ock to oil price! doe! +atter *or t,e re!pon!e o* t,e U1 econo+)" Iil !uppl) !,ock! lead to lar(er falls in output and increa!e! in price!, wit, t,e e**ect! eco+in( +uc, !+aller *ro+ t,e +id?19:'! onward!" World de+and !,ock! were a!!ociated wit, a ri!e in oil price! ut a *all in in*lation prior to &''<, !ince w,en t,e) ,a-e een a!!ociated wit, a ri!e in in*lation" World de+and and oil de+and !,ock! ,a-e a !+all e**ect on U1 OK> (rowt,: !o+eti+e! po!iti-e, !o+eti+e! ne(ati-e" Iil de+and !,ock! ,a-e a +uc, !+aller e**ect on in*lation t,an oil !uppl) and world de+and !,ock!" A! a !+all econo+), all inno-ation! in t,e oil price are (enerall) con!idered a! exo(enou! to U1 econo+ic acti-it)" 5,at +a) tend to !u((e!t t,at t,e exact !ource o* t,e exo(enou! oil !,ock i! o* little rele-ance *or polic)?+aker!" 8owe-er, t,e *indin(! in t,i! paper !u((e!t t,at e-en i* t,e !,ock i! !till exo(enou! under!tandin( it! cau!e! i! i+portant, a! t,e ulti+ate i+pact *or t,e U1 i! likel) to e di**erent"

n!s modeled
N:S is modeled 2!e Economist ? (Hixin( 8ealt,care: 5,e >ro*e!!ional!4 >er!pecti-e#, ,ttp://www"eiu"co+/!iteMin*o"a!p.in*oMna+e/*ixin(M,ealt,carePpa(e/noad!, Keec,2 E-er) od) wonder! w,at t,e *uture o* ,ealt,care will look like" Acro!! t,e world, t,e i!!ue i! rarel) out o* t,e new!" In t,e US, t,e new pre!ident, Carack I a+a, ,a! un-eiled plan! to i+ple+ent uni-er!al ,ealt,care co-era(e" In t,e U1, t,e lon(?e!ta li!,ed (and &idel% copied2 =ational 8ealt, Ser-ice i! re!pondin( to pre!!ure to c,an(e" In de-elopin( countrie!, (o-ern+ent! are explorin( wa)! to pro-ide etter care and !ati!*) t,e need! o* (rowin( +iddle cla!!e!" 5,e *ocu! on ,ealt,care ,a! co+e a out ecau!e ,ealt,care !)!te+! worldwide are ein( !tretc,edL ) t,e ,i(, co!t! o* trainin(, !er-ice! and treat+ent!, ) increa!ed patient de+and!, and ) i( de+o(rap,ic and li*e!t)le !,i*t!" 5,e current (lo al econo+ic downturn ,a! put e-en +ore pre!!ure on ,ealt,care, and lea-e! le!! roo+ *or error" 8ealt,care !)!te+! e-er)w,ere need to e up(raded, and in !o+e ca!e! co+pletel) rei+a(ined" 5,e Fue!tion i! not w,et,er t,i! need! to ,appen, ut ,ow it !,ould e done"

***u8 manufacturing *nc

:ig! oil prices !urt UE manufacturing @@< *3 (U1 +anu*acturin( cur ed ) ,i(, oil price!#, 3?1, ,ttp://www" c"co"uk/new!/ u!ine!!?17&173<9, Keec,2 Orowt, in t,e U14! +anu*acturin( !ector wa! !eld 4ac8 ) ri!in( oil co!t! la!t +ont,, a !ur-e) ,a! indicated, wit, price! *aced ) *ir+! ri!in( at t,e fastest rate in 19 )ear!" 5,e Markit/3I>S >urc,a!in( Mana(er!4 Index (>MI2 *or +anu*acturin( !lipped to $1"&, down *ro+ $& in 0anuar)" A readin( a o-e $' i+plie! t,at t,e !ector i! (rowin(" 5,e price o* Crent crude ro!e 1'; la!t +ont, to 61&$ a arrel on worrie! o-er t,e e**ect o* oil !anction! on Iran" 5,at price wa! a 1'? +ont, ,i(,, and Crent wa! Eu!t !,ort o* t,at on 5,ur!da), tradin( at 61&3 a arrel" Econo+i!t! !till ,ope t,e U1 econo+) will expand in t,e *ir!t t,ree +ont,! o* t,i! )ear and e!cape a tec,nical rece!!ion ? de*ined a! two !ucce!!i-e Fuarter! o* ne(ati-e (rowt," In t,e la!t t,ree +ont,! o* &'11, t,e U1 econo+) !,rank ) '"&;, wit, t,e +anu*acturin( !ector contractin( al+o!t 1; in t,e period" Markit econo+i!t Do Ko !on !aid t,at a ,i(,er oil price *ed t,rou(, in to all !ort! o* co!t! *aced ) +anu*acturer!, !uc, a! t,e price o* c,e+ical!, ener() and tran!portation"

***euro5one interest rates *nc

:ig! oil prices are 8e% to !ig! European interest rates -atti D (Donald A", >ro*e!!or o* Econo+ic! S Uni-er!it) o* Mi!!ouri?3olu+ ia, Iil price !,ock! and Stock +arket! in t,e U"S" and 13 European 3ountrie!#, Ener() Econo+ic!, 3'($2, p(" &$:7?&<':, Septe+ er, Science Kirect, Keec,2 Iil price !,ock! ,a-e a !tati!ticall) !i(ni*icant i+pact on real !tock return! conte+poraneou!l) and/or wit,in t,e *ollowin( +ont, in t,e U"S" and 13 European countrie! o-er 19:<:1S&''$:1&" =orwa) a! an oil exporter !,ow! a !tati!ticall) !i(ni*icantl) po!iti-e re!pon!e o* real !tock return! to an oil price increa!e" 5,e +edian re!ult *ro+ -ariance deco+po!ition anal)!i! i! t,at oil price !,ock! account *or a !tati!ticall) !i(ni*icant <; o* t,e -olatilit) in real !tock return!" Hor +an) European countrie!, ut not *or t,e U"S", increa!ed -olatilit) o* oil price! !i(ni*icantl) depre!!e! real !tock return!" 5,e contri ution o* oil price !,ock! to -aria ilit) in real !tock return! in t,e U"S" and +o!t ot,er countrie! i! (reater t,an t,at o* intere!t rate" An increa!e in real oil price i! a!!ociated wit, a significant increase in t,e !,ort?ter+ intere!t rate in t,e U"S" and ei(,t out o* 13 European countrie! wit,in one or two +ont,!" 3ounter to *indin(! *or t,e U"S" and *or =orwa), t,ere i! little e-idence o* a!)++etric e**ect! on real !tock return! o* po!iti-e and ne(ati-e oil price !,ock! *or oil i+portin( European countrie!"

***united states

stoc8 mar8et *nc

:ig! oil prices 4oost t!e Do& $$$ t!eir aut!ors are &rong Aala%at ** (=adee+, Editor S 5,e Market Iracle, 3rude Iil >rice I+pact on Stock Market 5rend!#, 5,e Market Iracle, 3?&:, ,ttp://www"+arketoracle"co"uk/Article&7&13",t+l, Keec,2 5,e con!en!u! -iew a! iterated on a near dail) a!i! in t,e +ain!trea+ pre!! and on t,e internet i! t,at ri!in( oil price! are (enerall) eari!, *or t,e !tock +arket, and *allin( oil price! are (enerall) ulli!," 8owe-er, t,e elow (rap, o* t,e Kow and 3rude Iil price illu!trate! t,at +o!t o* t,e ti+e t,e oil price and t,e !tock +arket (Kow 0one! index2 can e expected to trend in t,e same direction" 5,i! clearl) i+plie! t,at +o!t o* t,e ti+e a ri!in( oil price i! a!!ociated wit, economic gro&t! and t,u! ri!in( *uture pro!pect! *or corporate earnin(! are di!counted ) ri!in( !tock price!" W,erea! a *allin( oil price i! a!!ociated wit, weaker *uture econo+ic acti-it) and t,u! i+plie! lower *uture corporate earnin(! w,ic, i! a(ain di!counted in t,e pre!ent" A! +entioned earlier, ri!in( oil price! are part o* an in*lationar) +e(a?trend, w,ic, +ean! t,at a! ,i(,er oil price! trend ,i(,er, t,e a!!ociated co!t! can e expected to e pa!!ed into con!u+er! in an orderl) +anner, t,u! t,e peak oil +e(a?trend i! 4ullis! *or no+inal !tock price!" 5,e onl) *l) in t,e oint+ent i! t,at a! illu!trated ) t,e oil price trend durin( t,e *ir!t ,al* o* &'':, w,en t,ere wa! a !eriou! di-er(ence etween t,e !tock +arket and t,e oil price a! +ania (ripped t,e +arket t,at !ent in*lation !oarin(, and t,u! a! t,e oil price !oared t,e !tock +arket entered into a !e-ere ear +arket" 8owe-er t,i! di-er(ence did not per!i!t a! oil price u le ur!t !endin( t,e oil price literall) cra!,in( lower, pla)in( catc, up to t,e !tock! ear +arket into t,e Marc, &''9 low" 3onclu!ion A ri!in( trend *or oil price! i! 4ullis! *or t,e !tock +arket a! lon( a! it doe! not in-ol-e a para olic +ania dri-en !pike t,at i! likel) to kill *uture econo+ic de+and and i! t,u! di!counted in t,e pre!ent ) t,e !tock +arket trendin( lower, wit, t,e oil price! !oon catc,in( up to t,e !tock price decline a! occurred durin( t,e !econd ,al* o* &'':" 5,e current !ituation wit, oil price! ,o-erin( Eu!t a o-e 61'', i! not eari!, *or t,e !tock +arket a! lon( a! t,e oil price doe! not,in( +ore t,an Eu!t trend ,i(,er rat,er t,an enter into a +ania dri-en !pike *or in!tance to !a) 61$' ) +id !u++er, t,ere*ore a (radual uptrend i! unlikel) to i+pact ne(ati-el) on t,e !tock +arket" In-er!el) a weak oil price i! likel) to e 4earis! *or t,e !tock +arket" 8owe-er t,e current outlook i! at wor!t !u((e!ti-e o* oil price! con!olidatin( e*ore trendin( ,i(,er and t,ere*ore continue to !upport a ulli!, outlook *or !tock price!" 2!at0s spills o#er $$$ it0s 8e% to t!e 4roader econom% <o% */ (>eter, Econo+ic! Editor S Cloo+ er( Cu!ine!!week, C"A" in 8i!tor) S 3ornell Uni-er!it), 5,e Stock Market and t,e Econo+)4! Apparent Ki!connect#, Cloo+ er(, 3?1%, ,ttp://www" u!ine!!week"co+/article!/&'13?'3?1%/t,e?!tock?+arket?and?t,e?econo+)!? apparent?di!connect, Keec,2 W,en ,eN! talkin( to ,i! *ellow econo+i!t!, Do(er Har+er de!cri e! t,e !tock +arket and t,e econo+) a! co$integrated rando+ walk!"# Hor la) audience! ,e pre*er! a clari*)in( +etap,or: two !ta((erin( drunk! connected ) a lon( rope" So+eti+e! t,e !tock +arket and t,e econo+) (o in t,e !a+e direction, !o+eti+e! not" Cut tied to(et,er a! t,e) are, t,e) can ne-er (et too *ar apart" 5,e relation!,ip ,a! een quite strong,# !a)! Har+er, a Criton w,o teac,e! at t,e Uni-er!it) o* 3ali*ornia at Lo! An(ele!" ItN! one o* t,e most sta4le t,in(! IN-e !een in t,e po!twar period"# 1eep t,o!e lurc,in( lu!,e! in +ind a! )ou tr) to +ake !en!e o* t,e Kow 0one! indu!trial a-era(e" It !et record! *i-e da)! in a row in earl) Marc,
e-en t,ou(, une+plo)+ent re+ain! ,i(,, corporate pro*it! !ee+ to e toppin( out, and acro!!?t,e? oard *ederal !pendin( cut! are e(innin( to ite into (rowt," Will t,e rall) in !tock! in!pire con*idence and pull t,e real econo+) ,i(,er. Will t,e !lu((i!, econo+) dra( Wall Street ack to realit). Ir i! t,ere !till enou(, !lack in t,e rope *or t,e two to !ta((er alon( in di**erent direction! *or a w,ile. Ala!, t,e c,ance t,at Kow record! will w,ip up ent,u!ia!+ *or etter ti+e! a,ead !ee+! !li+" Irdinar) A+erican! !ee a c,a!+ !eparatin( Wall Street *ro+ Main Street" >ro*it!, w,ic, !upport !tock price!, ,a-e een uo)ed ) *orei(n (rowt, and ) t,e !uppre!!ion o* do+e!tic wa(e!" Sentier De!earc, !a)! t,e inco+e o* t,e +edian U"S" ,ou!e,old a*ter in*lation wa! %"$ percent lower in 0anuar) &'13 t,an in 0une &''9, t,e +ont, t,e *ee le reco-er) tec,nicall) e(an" 5,e econo+)N! output i! !till $": percent elow potential, and t,e une+plo)+ent rate ,a! een ,i(,er t,an 7 percent *or +ore t,an *our )ear!" 5,e ud(et cla!,e! in Wa!,in(ton arenNt Eu!t political t,eaterG t,e)Nre *i(,t! o-er a !,rinkin( pie" A! lon( a! t,ereN! a wed(e etween our a+ ition! and our +ean!, t,e cri!e! will keep co+in( ack, I (uarantee it,# !a)! 0an Di-kin, co?aut,or o* a new 8ar-ard Cu!ine!! Sc,ool report, 3o+petiti-ene!! at a 3ro!!road!" 8e !ee! t,e po!!i ilit) o* a downward !piral in w,ic, A+erican u!ine!!e! look el!ew,ere *or (rowt,, w,ic, could turn politician! and t,e pu lic a(ain!t t,e+, +akin( t,e+ e-en +ore likel) to !eek opportunitie! out!ide t,e U"S" Market!

are !tran(e,# !a)! 0o,n Deed, w,o !,ould know" 8e ran 3iticorp *ro+ 19:% to 199: and !ta)ed on a! co?c,air+an and co?c,ie* executi-e o**icer *or two )ear! a*ter t,e +er(er wit, 5ra-eler! t,at created 3iti(roup" At 7%, ,eN! c,air+an o* MI5 3orp", t,e (o-ernin( od) o* Ma!!ac,u!ett! In!titute o* 5ec,nolo()" Deed contri uted to a new MI5 report called >roduction in t,e Inno-ation Econo+)" 5,e *inancial co++unit) ,a! c,an(ed dra+aticall),# ,e !a)!" 5,e i( ank! are *ocu!ed on creatin( in-e!t+ent product! rat,er t,an on allocatin( capital to orrower!, !a)! Deed, !o +anu*acturer! ,a-e trou le (ettin( t,eir attention, and U"S" production !u**er! a! a re!ult" 5,e alternate po!!i ilit) i! t,at t,e econo+) will pull t,e +arket downward, ut t,at i!nNt ,appenin(, eit,er, t,ank! +o!tl) to t,e !trenuou! e**ort! o* t,e Hederal De!er-e" Under 3,air+an Cen Cernanke, t,e Hed i! keepin( intere!t rate! !uperlow to encoura(e in-e!t+ent in ,ou!e!, *actorie!, eFuip+ent, and !o*tware and to +ake it ea!ier *or ,ou!e,old! to keep !pendin( a! t,e) pa) o** t,eir de t!" 5,e Hed i! al!o tr)in( to u!e loo!e +onetar) polic) to co+pen!ate *or t,e ti(,tne!! o* *i!cal polic), i"e", taxin( and !pendin(, w,ic, are under t,e control o* t,e pre!ident and 3on(re!!" Cud(et de*icit! are !,rinkin( rapidl)G in He ruar), e-en e*ore !eFue!tration took e**ect, (o-ern+ent e+plo)+ent *ell ) 1','''" Cond )ield! are !o low t,at !a-er! w,o u!ed to keep t,eir +one) in, !a), 5rea!urie! are ein( dri-en into t,e !tock +arket in !earc, o* po!iti-e return!" 5,e) ,a-e no c,oice" 5,e !tock +arket i!nNt Eu!t a ,ot,ou!e *lower t,atN! kept ali-e ) t,e tender +ini!tration! o* t,e Hed" Market rallie! can e !el*?perpetuatin(: 5,e ,i(,er price! (o, t,e +ore !tock! people want to u) (a! oppo!ed to +ilk or +o-ie ticket!2" A! 0o,n Ma)nard 1e)ne! o !er-ed, t,e !tock +arket i! like a eaut) conte!t in w,ic, )our own opinion doe!nNt +atterG )ou pick t,e *ace t,at )ou t,ink ot,er! will c,oo!e" 5,at !aid, econo+ic (rowt, ,a! to e Eu!t ri(,tLtepidL*or !tock price! to keep ri!in(, !a)! Ka-id Do!en er(, c,ie* econo+i!t and !trate(i!t at 5oronto? a!ed wealt, +ana(er Olu!kin S,e** d A!!ociate! (OS2" I* t,e econo+) !lip! into rece!!ion, e-en t,e Hed wonNt e a le to keep t,e +arket alo*t" In t,e ot,er ,and, i* t,e econo+) *inall) catc,e! *ire, in-e!tor! will conclude t,at t,e HedN! extre+e unction will e-entuall) e wit,drawn" 5,e)Nll !ell ond! in anticipation, dri-in( up intere!t rate! and po!!i l) pu!,in( down !tock!, Do!en er( !a)!" 5,at would e an ec,o o* 199%La (ood )ear *or t,e econo+) and a di!a!trou! one *or ond in-e!tor!G t,e 3'?)ear 5rea!ur) ond )ield Eu+ped *ro+ < percent in =o-e+ er 1993 to : percent in =o-e+ er 199% a! ond price! plun(ed" 5,e Kow +ana(ed to ri!e a little le!! t,an $ percent" Do!en er( i!nNt in t,e ca+p t,at !a)! t,e Hed i! irre!pon!i l) in*latin( a!!et u le!, nor doe! ,e t,ink !tock price! are o-er-alued" 8i! worr) i! !i+pl) t,at no one el!e i! particularl) worriedL t,at t,e !tock +arketN! ri!e ,a! een !o !tead), cal+, and untrou led" Ex,i it A: 5,e +arketN! prediction o* !tock +arket -olatilit) i! ack to t,e low! o* &''< and &''7 (ri(,t e*ore, a,e+, t,e i((e!t cri!i! !ince t,e Kepre!!ion2" Sa)! Do!en er(: I* t,ereN! a u le ri(,t now, itN! in co+placenc)"# Exce!!i-e co+placenc) doe! put one on ed(e" Ou((en,ei+ >artner! 3,ie* In-e!t+ent I**icer Scott Minerd went to t,e World Econo+ic Horu+ in Ka-o!, SwitJerland, t,i! )ear wit, a (ood *eelin( t,at t,e (lo al cri!i! t,at roke out in &'': wa! *inall) o-er" W,at unner-ed ,i+ wa! t,at e-er)one ,e +et in t,e !ki town !ee+ed to *eel t,e !a+e wa)" Sa)! Minerd: I walked awa) *ro+ Ka-o! +ore ner-ou! t,an IN-e een !ince ack in &''7" I ,ate it w,en e-er) od) a(ree! wit, +e"# Ou((en,ei+ >artner! i! placin( a et t,at -olatilit) will ri!e ) in-e!tin( in an exc,an(e?

5,e !tock +arketN! i+portance i! +ore !)+ olic t,an econo+ic" Inl) a ,and*ul o* co+panie! u!e it to rai!e +one) in a t)pical )ear, and +o!t *a+ilie! ,a-e +ore wealt, in real e!tate t,an in !tock!" W,at ,i(,er !tock price! do i! !i(nal to 3EI! t,at in-e!tor! want t,e+ to put t,eir +one) to work" Har+er ar(ue! t,at ri!in( !tock price! +a) )et rou!e dor+ant ani+al !pirit! and get t!e econom% going a(ain" I* t,atN! !o, t,en t,e HedN! !trate() will ,a-e worked" I* not, Wall Street could e in *or trou le" Ine wa) or t,e ot,er, t,o!e two drunk! are in!epara le"
traded *und tied to t,e 3,ica(o Coard Iption! Exc,an(eN! (3CIE2 Rolatilit) Index"

US economic decline causes perceptual &ea8ness t!at leads to nuclear &ar O0:anlon *3 (Mic,ael, Kirector o* De!earc, and Senior Hellow S Crookin(! In!titution, 5,e Deal =ational Securit) 5,reat: A+ericaN! Ke t#, Lo! An(ele! 5i+e!, 7?3, ,ttp://article!"lati+e!"co+/&'1&/Eul/'3/opinion/la?oe?o,anlon?*i!cal?re*or+?&'1&'7'32 La!tl), A+erican econo+ic weakne!! undercut! U"S" leader!,ip a road" It,er countrie! !en!e our weakne!! and wonder a out our purported decline" I* t,i! perception eco+e! +ore wide!pread, and t,e ca!e t,at we are in decline eco+e! +ore per!ua!i-e, countrie! will e(in to take action! t,at re*lect t,eir !keptici!+ a out A+erica4! *uture" Allie! and *riend! will dou t our co++it+ent and +a) pur!ue nuclear weapon! *or t,eir own !ecurit), *or exa+pleG ad-er!arie! will !en!e opportunit) and e le!! re!trained in t,rowin( around t,eir wei(,t in t,eir own nei(, or,ood!" 5,e crucial >er!ian Oul* and We!tern >aci*ic re(ion! will likel) eco+e le!! !ta le" aCor &ar &ill 4ecome +ore li8el%"

***russia

***putin sta4ilit%

putin sta4ilit% *nc

:ig! oil prices 8e% to =utin0s political sta4ilit% Juda! */ (Cen, Hellow S European Sta ilit) Initiati-e, Mo!cow 3orre!pondent S Deuter!, Du!!ian >olitic! De!earc, Hellow S European 3ouncil on Horei(n Delation!, C"A" in Modern 8i!tor) and >olitic! S Ix*ord Uni-er!it), Hi-e 5rap! *or >utin#, OLICAL 5DA=SI5II=S >DIS>EDI5A S5UKIES, Le(atu+ In!titute, Marc,, ,ttp://www"li"co+/doc!/de*ault? !ource/pu lication!/*i-e?trap!?*or?putin??? en?Euda,?+arc,?&'13?(le(atu+?in!titute2"pd*, Keec,2 More recentl), >utin ,a! a andoned care*ull) alanced ud(et!, lar(el) *or political rea!on!" Alt,ou(, currenc) re!er-e! re+ain ,i(,LDu!!ia ,a! t,e t,ird lar(e!t re!er-e! in t,e worldLand (o-ern+ent orrowin( i! !till relati-el) low, !tate !pendin( ,a! een ri!in( !teadil) !ince t,e &''9 cri!i!, and now account! *or %1 percent o* OK>"%1 Cetween &''7 and &'1', *undin( *or t,e Du!!ian pro-ince! increa!ed ) 6$: illion, ri!in( *ro+ $"7 percent to 9"& percent o* OK>"%& A(ain in &'1', pen!ion! were ,iked $' percent" 5,e *ollowin( )ear pen!ion! were rai!ed ) 1' percent a(ain wit, a <"$ percent acro!! t,e oard increa!e in pu lic !ector wa(e!"%3 5,e 1re+lin ,a! al!o announced a ten?)ear, 6<13 illion !pendin( pro(ra++e *or t,e +ilitar), a polic) lar(el) de!i(ned to +aintain e+plo)+ent in Du!!iaN! +an) !in(le?indu!tr) +ilitar) production town!"%% Kurin( t,e &'1& ca+pai(n, >utin dou led +ilitar) and police !alarie! and pro+i!ed 61<' illion wort, o* (i-eawa)!"%$ A! a re!ult, t,e 1re+lin now +u!t rel) on a +uc, !ig!er oil price in order to alance it! ud(et" In &''7, 6%' a arrel would ,a-e !u*hced"%< C) &'1&, +ore t,an 611' wa! reFuired"%7 S,ould t,e price o* oil now *all *or an) !u !tantial len(t, o* ti+e, Du!!ia could e *orced to return to lar(e !cale orrowin(, e-en cut eneht! or i+ple+ent !o+e *or+ o* au!terit), t,u! undermining support *or t,e re(i+e in t,e pro-ince! and a+on( low?wa(e earner!" It i! ironic, ut >utinN! !upport now depends upon t,e one t,in( ,e cannot control: t,e price o* oil" 5,i! econo+ic populi!+ look! particularl) reckle!! in t,e li(,t o* Du!!iaN! unre*or+ed pen!ion !)!te+, it! !lowin( (rowt, and it! !,rinkin( trade !urplu!" I* no alteration! are +ade, (o-ern+ent expenditure on pen!ion! alone will ri!e *ro+ 9 percent o* OK> to 1% percent o* OK> ) &'3'"%: Addin( *urt,er uncertaint) i! t,e *act t,at Du!!ia i! !lowl) runnin( out o* c,eap oil" It! current re!er-e! are o* declinin( Fualit) and it! ,u(e potential held! lie in extre+el) di*hcult terrain in Ea!tern Si eria or under t,e Arctic Icean" Si+ilar pro le+! are loo+in( in t,e (a! !ector a! L=O and !,ale (a! po!e lon(?ter+ pro le+! *or OaJpro+N! u!ine!! +odel" Du!!ia i! !et to !ta) an ener() !uperpower, ut t,e e!t )ear! o* t,e dou le oo+#L,i(, oil production and ,i(, oil price!Lare o-er" At t,e a R5C ank in-e!tor con*erence in &'1& t,ere wa! +uc, talk a out Du!!ian (rowt, !lowin(, per,ap! a! low a! an annual & percent" A! a re!ult o* t,e!e c,an(e!, econo+ic polic), once a !ource o* !ta ilit) and con!en!u!, ,a! increa!in(l) di-ided t,e Du!!ian political and u!ine!! elite" =ot !ince t,e arre!t o* Mik,ail 1,odorko-!k) in &''3 ,a-e t,ere een !uc, -ocal di!a(ree+ent!" Alexe) 1udrin, t,e *or+er hnance +ini!ter, ,a! pu licl) warned t,at unle!! t,e 1re+lin rei(n! in !pendin( it will e expo!ed to dan(erou! econo+ic !,ock!" I(or Sec,in, c,ie* executi-e o* t,e !tate ener() (iant Do!ne*t, ,a! al!o (one out o* ,i! wa) to o !truct Med-ede-N! a+ itiou! pri-atiJation a(enda" It,er leadin( o*hcial! ,a-e een openl) at odd! wit, one anot,er a! well" 5,e!e itter di!pute! are corrodin( >utinN! once unc,allen(ed role a! ar iter in c,ie*" =ot onl) i! t,e Du!!ian econo+) -ulnera le to an econo+ic cri!i! t,ank! to !tate !pendin(, in ot,er word!, ut t,e Du!!ian pre!ident i! #ulnera4le too" =utinVs leaders!ip sol#es nuclear moderni5ation @ugri% */ (Mak!)+, 3orre!pondent S Ukrainian Week, Du!!ia i! Ar+in( It!el*, ut A(ain!t W,o+.#, Ukrainian Week, 3?31, ,ttp://ukrainianweek"co+/World/7<'3', Keec,2

5,e inten!i*ication o* +ilitar) re*or+! wa! an ideological cornerstone o* >utinN! &'1& pre!idential ca+pai(n" In a pro(ra++atic article, ,e wrote a out a new (lo al trend: increa!in(l) *reFuent atte+pt! to re!ol-e econo+ic i!!ue! and o tain acce!! to re!ource! t,rou(, *orce" 5,u!, ,i! clai+ i! t,at Du!!ia !,ould not lead an)one into te+ptation ) ein( weak#" A! ,e wa! preparin( ,i! return to t,e pre!idenc), >utin announced unprecedented programmes to de-elop t,e Ar+ed Horce! and +oderniJe t,e de*ence indu!trial co+plex#, declarin( t,at !o+e &3 trillion rou le! (US 67$' n2 would e allocated to t,i! end in t,e next decade" 5ellin(l), t,e ke) pro(ra++atic t,e!e! in t,e article e(in wit, !tre!!in( t,e need to re*or+ !trate(ic anal)!i! *or national de*ence" 5,e (oal i! to ,a-e *ore!i(,t, an a ilit) to e!ti+ate t,reat! 3'?$' )ear! in ad-ance" A! *ar a! a !ecurit) !trate() i! concerned, t,e 1re+lin ,a! e+ raced t,e cla!!ical t,eor) o* nuclear contain+ent a! it! +ain +ec,ani!+" At t,e !a+e ti+e, Du!!ia will e *ollowin( a conte+porar) worldwide trend o* producin( ,i(,?preci!ion lon(? ran(e con-entional weapon! t,at can al!o later e u!ed *or !trate(ic contain+ent purpo!e!" DEAK ALSI: Ko t,e Du!!ian! Want War. Mo!cowN! emp!asis on nuclear contain+ent *orce! it to *ollow t,e cla!!ical (eopolitical conception! o* air *orce# and na-al *orce#" 8ence, !trate(ic o+ er!, Eoined ) drone! and *i*t,?(eneration *i(,ter aircra*t, will *or+ t,e core o* it! Air Horce" 5,e =a-) will e +oderniJed wit, an e+p,a!i! on lon(?ran(e !u +arine! and !ecurin( an oceanic *leet# wit, a !trate(ic pre!ence in re(ion! o* intere!t" In Marc, &'1&, Rice?Ad+iral Riktor 3,uriko-, Du!!iaN! Air Horce 3o++ander, con*ir+ed t,e deci!ion to ,a-e a per+anent operational unit o* *i-e to !ix !,ip! *ro+ Du!!iaN! Clack Sea *leet !tationed in t,e Mediterranean and !aid t,at !i+ilar unit! +a) e *or+ed to na-i(ate t,e >aci*ic and Indian Icean!" Accordin( to ot,er !ource!, Du!!ia wa! in ne(otiation! wit, Rietna+ t,i! winter a out openin( +ilitar) a!e! t,ere" >utin i! critical o* +oderniJation in t,e *or+ o* !pot purc,a!e!# o* We!tern eFuip+ent (!uc, a! t,e acFui!ition o* Hrenc, Mi!tral aircra*t carrier!2 and !upport! t,e +oderniJation o* Du!!iaN! own +ilitar) indu!trial !ector" :ig!$priorit% weaponr) and co+ at eFuip+ent *or Du!!iaN! Ar+ed Horce! include modern nuclear arms (+an) o* t,e exi!tin( +i!!ile! ,a-e een in !er-ice *or o-er &' )ear! and +u!t e up(raded2 and air and !pace de*ence !)!te+!, co+plete wit, new anti?aircra*t ar+a+ent!G ,i(,?tec, co++unication!, reconnai!!ance and control !)!te+!G un+anned drone!G per!onal co+ at protection !)!te+!G ,i(,?preci!ion weapon! and t,e +ean! to counteract t,e+" Du!!iaN! Ar+ed Horce! are to *ocu! on nuclear contain+ent and con-entional ,i(,?preci!ion weapon!, de-elopin( oceanic na-al *orce!, t,e Air Horce and !pace de*ence" 5,e (oal i! to create a co++on national !)!te+ o* air and !pace de*ence" 5o(et,er wit, nuclear contain+ent *orce!, it will counter t,e antiaircra*t !)!te+! o*, a o-e all, t,e USA and =A5I" Oeo(rap,icall), Du!!ia will e a (uarantor o* !ta ilit)# in Eura!ia: an collecti-e !ecurit) !)!te+ *or t,e Eura!ian !pace# a!ed on t,e 3ollecti-e Securit) 5reat) Ir(aniJation i! in t,e work!, and t,e =ort, (pri+aril) t,e re!ource? ric, Arctic2 and t,e A!ian?>aci*ic re(ion will e ,i(,?priorit) re(ion! *or t,e 1re+lin" 2!at pre#ents accidental nuclear use os!er / (Ka-id, Senior >olic) Anal)!t in =uclear Weapon! >olic) S DA=K, Exce!!i-e Horce#, DA=K 3orporation, Hall, ,ttp://www"rand"or(/pu !/periodical!/rand? re-iew/i!!ue!/*all&''3/*orce",t+l, Keec,2 Du!!ian !trate(ic nuclear *orce! re+ain t,e onl) current t,reat to t,e national existence o* t,e United State!" Alt,ou(, t,e ri!k o* deli erate attack *ro+ Du!!ia ,a! !,arpl) *allen !ince t,e end o* t,e 3old War, t,e ri!k o* an accidental or unaut!ori5ed u!e o* Du!!ian nuclear *orce! ,a! ar(ua l) risen" Hor exa+ple, Du!!iaN! earl)?warnin( !)!te+ ,a! !e-erel) deteriorated, a! ,a! t,e countr)N! a ilit) to keep it! +o ile (and t,u! !ur-i-a le2 nuclear *orce! deplo)ed" 5,ere are additional concern! a out t,e !tate o* Du!!iaN! co++and?and?control !)!te+ and t,e ri!e o* !eparati!t -iolence" =one o* t,e nuclear ar+! control treatie! a*ter t,e 3old War ,a-e dealt wit, t,e i!!ue o* accidental or unaut,oriJed u!e o* nuclear weapon!" In!tead, t,e!e treatie! ,a-e

concentrated on reducin( t,e total nu+ er o* nuclear war,ead! eac, !ide wield!" W,ile t,e!e reduction! are extre+el) i+portant *or i+pro-in( t,e o-erall U"S"?Du!!ian relation!,ip, t,e) do little to ea!e t,e ri!k! o* an accidental or unaut,oriJed nuclear launc," 5,i! i! ecau!e t,o!e ri!k! !te+ *ro+ t,e nuclear po!ture! and underl)in( nuclear doctrine! o* eac, nation, w,ic, re+ain *ir+l) rooted in t,e ,o!tile relation!,ip *or(ed durin( t,e 3old War" -ussian accidental launc! causes extinction int5 * (Morton, Hor+er 3,air S Hund *or In-e!ti(ati-e 0ournali!+ and Deporter S Wa!,in(ton >o!t, 5wo Minute! to Launc,#, 5,e A+erican >ro!pect, ,ttp://www"pro!pect"or(/c!/article!.article/twoM+inute!MtoMlaunc,2 8air?tri((er alert +ean! t,i!: 5,e +i!!ile! carr)in( t,o!e war,ead! are ar+ed and *ueled at all ti+e!" 5wo t,ou!and or !o o* t,e!e war,ead! are on t,e intercontinental alli!tic +i!!ile! (I3CM!2 tar(eted ) Du!!ia at t,e United State!G 1,:'' are on t,e I3CM! tar(eted ) t,e United State! at Du!!iaG and approxi+atel) 1,''' are on t,e !u +arine? a!ed +i!!ile! tar(eted ) t,e two nation! at eac, ot,er" 5,e!e +i!!ile! would launc, on receipt o* t,ree co+puter?deli-ered +e!!a(e!" Launc, crew!??on dut) e-er) !econd o* e-er) da)??are under order! to !end t,e +e!!a(e! on receipt o* a !in(le co+puter?deli-ered co++and" In no +ore t,an two +inute!, i* all went accordin( to plan, Du!!ia or t,e United State! could launc, +i!!ile! at predeter+ined tar(et!: Wa!,in(ton or =ew AorkG Mo!cow or St" >eter! ur(" 5,e earl)?warnin( !)!te+! on w,ic, t,e launc, crew! rel) would detect t,e ot,er !ide4! +i!!ile! wit,in ten! o* !econd!, cau!in( t,e intended??or accidental??ene+) to +ount retaliator) !trike!" BAit!in a !alf$!our' t!ere could 4e a nuclear &ar t!at &ould extinguis! all of us ,B explain! Cruce Clair" BIt would e, a!icall), a nuclear war ) c,eckli!t, ) rote"B

putin sta4ilit% nuclear moderni5ation 8e%

Nuclear moderni5ation 8e% to pre#ent -ussian miscalculation os!er / (Ka-id, Senior >olic) Anal)!t in =uclear Weapon! >olic) S DA=K, Exce!!i-e Horce#, DA=K 3orporation, Hall, ,ttp://www"rand"or(/pu !/periodical!/rand? re-iew/i!!ue!/*all&''3/*orce",t+l, Keec,2 Ke!pite t,e!e po!iti-e !tep!, t,e gra#e ris8 o* accidental or unaut,oriJed u!e o* nuclear weapon! persists *or t,ree rea!on!" Hir!t, ot, t,e United State! and Du!!ia retain t,eir 3old War po!ture! o* keepin( t,eir nuclear *orce! on ,i(, alert L read) to launc, wit,in a *ew +inute!" In,erent in t,e!e po!ture!, w,ic, pro+i!e t,e rapid deli-er) o* a +a!!i-e nuclear retaliator) !trike, i! t,e di!tinct ri!k o* an accidental or unaut,oriJed launc," Second, Du!!iaN! econo+ic di**icultie! ,a-e exacer ated t,e pro le+" 5,e countr)N! +o ile nuclear *orce! L *ro+ truck? a!ed and rail? a!ed intercontinental alli!tic +i!!ile! to !u +arine? a!ed alli!tic +i!!ile! L ,a-e een deci+ated in ot, !iJe and readine!!" Har *ro+ en,ancin( U"S" !ecurit), t,e!e -ulnera ilitie! could pu!, Du!!ia toward a !trate() o* Fuickl) launc,in( it! re+ainin( *orce! at t,e *ir!t !i(n o* an attack, to en!ure t,eir utilit)" 5,e econo+ic di**icultie! ,a-e al!o le*t t,e earl)?warnin( !)!te+ in tatters and t,e +ilitar) wit, +orale and di!cipline pro le+!" An eroded co++and?and?control !)!te+ ,a! increa!ed t,e ri!k t,at nuclear *orce! could e launc,ed ) terrori!t! or ro(ue co++ander!" And $$$ specificall% -ussian space$4ased earl%$&arning is failing no& os!er / (Ka-id, Senior >olic) Anal)!t in =uclear Weapon! >olic) S DA=K, Exce!!i-e Horce#, DA=K 3orporation, Hall, ,ttp://www"rand"or(/pu !/periodical!/rand? re-iew/i!!ue!/*all&''3/*orce",t+l, Keec,2 5,e t,ird !cenario i! a nuclear weapon launc,ed intentionall) ut a!ed on incorrect or inco+plete in*or+ation" I* earl)?warnin( !)!te+! +al*unction, t,e) could !i(nal t,at an attack i! i++inent w,en in *act it i! not" Ir a nont,reatenin( e-ent +i(,t e misconstrued a! an attack" Wit,out a clear, accurate picture o* w,at i! ,appenin( around t,e (lo e, Du!!ia +i(,t confuse a eni(n e-ent (!uc, a! a !pace launc,2 *or a nuclear attack" Kurin( t,e 3old War, Du!!ia and t,e United State! eac, de-eloped a two?tiered earl)?warnin( !)!te+ (u!in( radar on land and in*rared !en!or! in !pace2 to (uard a(ain!t !uc, e-ent!" Cut Du!!iaN! !pace? a!ed !)!te+ i! now e!!entiall) out of order, lea-in( t,e countr) wit, onl) a fla&ed radar !)!te+ and (reatl) increa!in( t,e c,ance t,at an erroneou! indication o* attack could e +i!taken a! real" 5,ank*ull), t,i! concern i! +iti(ated !o+ew,at ) t,e i+pro-ed !tate o* U"S"?Du!!ian relation!" U"S" and Du!!ian political leader! toda) are le!! likel) to elie-e t,e) are under deli erate nuclear attack t,an t,e) were durin( t,e ten!e period! o* t,e 3old War" Ke!pite t,e end o* t,e 3old War and real i+pro-e+ent! in relation!, ot, countrie! continue to -iew eac, ot,er in nuclear ter+!" 5,e ri!k o* accidental or unaut,oriJed u!e o* nuclear weapon! re+ain! unaccepta4l% !ig!" Li+itin( t,e!e dan(er! will reFuire not +erel) operational c,an(e! in t,e U"S" and Du!!ian nuclear po!ture! ut ,i(,er le-el! o* tru!t and cooperation"

putin sta4ilit% !ig! prices 8e%

<rude oil prices are 8e% to =utin0s political sta4ilit% Adomanis */ (Mark, 3ontri utor S Hor e!, 3rude Iil I! Still Deall) Expen!i-e, So Du!!ia Will >ro a l) Sta) Sta le#, Hor e!, 3?1%, ,ttp://www"*or e!"co+/!ite!/+arkado+ani!/&'13/'3/1%/crude?oil?i!?!till?reall)?expen!i-e? !o?ru!!ia?will?pro a l)?!ta)?!ta le/, Keec,2 I *ull) a(ree t,at a !u !tantial and !u!tained *all in t,e price o* oil would e prett) damaging for =utin, Eu!t a! a !u !tantial and !u!tained increa!e in t,e )ield on 5rea!ur) Cill! would e a prett) !eriou! pro le+ *or t,e United State! or a !u !tantial *all in !o) price! would e a !eriou! pro le+ *or CraJil" It doe!nNt take a rocket !cienti!t to !ee t,at a !u !tantial portion o* >utinN! popularit) rests on dollin( out natural re!ource rent!, and i* t,o!e rent! were !uddenl) to di!appear t,en, )e!, t,e 1re+lin would e in real trou le" Cut )ou can look at al+o!t an) countr) in t,e world and i+a(ine a !cenario in w,ic, t,e increa!e or decrea!e in price o* an i+portant co++odit) or *inancial in!tru+ent would pro-e ruinou!: t,e) ke) Fue!tion i! ,ow likel) !uc, a !cenario i!"

putin sta4ilit% putin 8e%

=utin is 8e% to -ussian nuclear moderni5ation QuWnelle *3 (CenEa+in, I=SIKE >U5I=4S AMCI5IIUS >US8 5I MIKED=I@E 58E DUSSIA= MILI5ADA#, Worldcrunc,, 7?1', ,ttp://www"worldcrunc,"co+/world?a**air!/in!ide? putin?!?a+ itiou!?pu!,?to?+oderniJe?t,e?ru!!ian?+ilitar)/c1!$:39/, Keec,2 BModerniJation i! ,appenin(" We are graduall% eFuippin( our!el-e! wit, new weapon!,B re!pond! Rice?Ad+iral Riktor 5c,irko-, t,e (eneral co++ander o* t,e Caltic *leet" ModerniJin( i! a priorit% *or t,e entire ar+), and >utin ,a! pro+i!ed a Brear+a+ent like no ot,er"B So+e &3,''' illion ru le!, or nearl) <'' illion Euro!, will e !pent o-er 1' )ear! in t,e Du!!ian +ilitar)?indu!trial +ac,ine" More t,an 1'; o* t,i! !u+ will e de-oted to t,e *ir!t and onl) atte+pt at a +aEor o-er,aul o* it! *actorie!" 5,e ,ead o* t,e 1re+lin ,a! certainl) !et ,i! a+ ition! ,i(,: ) &'&', ,e i! ai+in( to tran!*or+ 1 +illion underpaid, undereFuipped and under+oti-ated +en into a pro*e!!ional ar+) o* 1%$,''' !oldier!" So+e %'' +odern alli!tic +i!!ile! !,ould e deli-ered, a! well a! ei(,t !trate(ic !u +arine!, &' +ultipurpo!e !u +arine!, $' !ur*ace -e!!el!, o-er a 1'' piece! o* +ilitar) !pacecra*t eFuip+ent, <'' +odern plane!, 1,''' ,elicopter! and &: new anti?aircra*t +i!!ile!" 3ur in( corruption 5,e *i(ure! lea-e expert! perplexed" Mo!t o* t,e+, ,owe-er, prai!e >utin4! propo!ed re*or+!, w,ic, are ein( orc,e!trated ) t,e Mini!ter o* Ke*en!e, Anatoli) Serd)uko-" 8owe-er, t,e plan! are Bi+po!!i leB to re!pect *ro+ a tec,nical !tandpoint, !a)! Alexandre 1ona-olo-, an independent expert" B5,e +ilitar)?indu!trial e!tate i! li-in( too +uc, o** o* t,e ruin! o* t,e So-iet era, and i! t,ere*ore incapa le o* producin( a +odern ar+),B ,e explain!" =utin sol#es -ussian militar% moderni5ation -2 *3 (>utin order! de*en!e indu!tr) +oderniJation recallin( pre?WWII ad-ance!#, :?31, ,ttp://rt"co+/politic!/+oderniJation?!i+ilar?pre?wwii? reakt,rou(,?'%%/, Keec,2 Du!!ian >re!ident ,a! ordered top !tate o**icial! to create t,e condition! *or 4rea8t!roug!s in t,e de*en!e indu!tr) !i+ilar to t,o!e ac,ie-ed ) t,e So-iet Union in t,e 193'!" Speakin( at a !e!!ion o* t,e Securit) 3ouncil S Du!!iaN! top od) *or coordination o* e**ort! o* -ariou! !tate !tructure! S >utin !aid t,at t,e countr) need! to rene& it! indu!trial a!!et! and ac,ie-e a maCor moderni5ation o* t,e entire ar+! indu!tr)" I-er t,e pa!t 3' )ear!, t,e Du!!ian de*en!e indu!tr) ,a! +i!!ed !e-eral opportunitie! *or +oderniJation, >utin !aid: =ow we ,a-e to catc, up"# In e!!ence, we !,ould +ake a reakt,rou(, in t,e +oderniJation o* our de*en!e econo+), like t,e one t,at ,appened in t,e t,irtie! in t,e la!t centur),# ,e !aid, addin( t,at t,e countr) need! to increa!e ad-ance! in t,e re!earc, and en(ineerin( !p,ere! in order to produce new t)pe! o* weapon!" >utin al!o announced t,at price! *or Du!!ian?+ade weapon! would now e deter+ined ) t,e (o-ern+ent, under t,e per!onal direction o* >ri+e Mini!ter K+itr) Med-ede-" All ar+!?producin( co+panie! will under(o e**icienc) c,eck! in t,e near *uture, ,e !aid"

***russia econom%

russia econom% *nc

Oil prices 8e% to t!e -ussian econom% Sc!uman *3 (Mic,ael, A!ia and Econo+ic! 3orre!pondent S 5IME, C"A" in A!ian 8i!tor) and >olitical Science S Uni-er!it) o* >enn!)l-ania, M"A" in International A**air! S 3olu+ ia Uni-er!it), W,) Rladi+ir >utin =eed! 8i(,er Iil >rice!#, 5i+e, 7?$, ,ttp:// u!ine!!"ti+e"co+/&'1&/'7/'$/w,)?-ladi+ir?putin?need!?,i(,er?oil?price!/, Keec,2 Cut Rladi+ir >utin i! not one o* t,e+" 5,e econo+) t,at t,e Du!!ian >re!ident ,a! uilt not onl) run! on oil, ut run! on oil priced extremel% !ig!" Hallin( oil price! +ean! ri!in( pro le+! *or Du!!ia S ot, *or t,e !tren(t, o* it! economic performance, and po!!i l), t,e !tren(t, o* >utin ,i+!el*" Ke!pite t,e *act t,at Du!!ia ,a! een la eled one o* t,e worldN! +o!t pro+i!in( e+er(in( +arket!, o*ten +entioned in t,e !a+e reat, a! 3,ina and India, t,e Du!!ian econo+) i! actuall) Fuite di**erent *ro+ t,e ot,er!" W,ile India (ain! (rowt, ene*it! *ro+ an expandin( population, Du!!ia, like +uc, o* Europe, i! a(in(G w,ile econo+i!t! *ret o-er 3,inaN! exce!!i-e dependence on in-e!t+ent, Du!!ia adl) need! +ore o* it" Mo!t o* all, Du!!ia i! little +ore t,an an oil state in di!(ui!e" 5,e countr) i! t,e lar(e!t producer o* oil in t,e world ()e!, i((er e-en t,an Saudi Ara ia2, and Du!!iaN! dependence on crude ,a! een increasing" A out a decade a(o, oil and (a! accounted *or le!! t,an ,al* o* Du!!iaN! export!G in recent )ear!, t,at !,are ,a! ri!en to two?t,ird!" Mo!t o* all, oil pro-ide! +ore t,an ,al* o* t,e *ederal (o-ern+entN! re-enue!" W,atN! +ore, t,e econo+ic +odel >utin ,a! de!i(ned in Du!!ia relies ,ea-il) not Eu!t on oil, ut ,i(, oil price!" Iil lu4ricates t,e Du!!ian econo+) ) +akin( po!!i le t,e increa!e! in (o-ern+ent lar(e!!e t,at ,a-e *ueled Du!!ian con!u+ption" Cud(et !pendin( reac,ed &3"<; o* OK> in t,e *ir!t Fuarter o* &'1&, up *ro+ 1$"&; *our )ear! earlier" W,at t,at +ean! i! >utin reFuire! a ,i(,er oil price to +eet ,i! !pendin( reFuire+ent! toda) t,an ,e did Eu!t a *ew )ear! a(o" De!earc, *ir+ 3apital Econo+ic! *i(ure! t,at t,e (o-ern+ent ud(et alanced at an oil price o* 6$$ a arrel in &'':, ut t,at now it alance! at clo!e to 61&'" Iil price! toda) ,a-e *allen *ar elow t,at, wit, Crent near 61'' and U"S" crude le!! t,an 69'" 5,e *art,er oil price! *all, t,e +ore pre!!ure i! placed on >utinN! ud(et, and t,e ,arder it i! *or ,i+ to keep !preadin( oil wealt, to t,e (reater population t,rou(, t,e (o-ern+ent" Wit, a lar(e !wat, o* t,e populace an(ered ) ,i! re?election to t,e nationN! pre!idenc) in Marc,, and prote!t! eruptin( on t,e !treet! o* Mo!cow, >utin can ill?a**ord a !i(ni*icant low to t,e econo+), or ,i! a ilit) to u!e (o-ern+ent re!ource! to *ir+ up ,i! popularit)" -ussian economic decline causes nuclear &ar 6ilger ? (S,eldon, 3orre!pondent S 8u**in(ton >o!t, Du!!ian Econo+) Hace! Ki!a!trou! Hree Hall 3ontraction#, ,ttp://www"(lo alecono+iccri!i!"co+/ lo(/arc,i-e!/3$<2 In -ussia, ,i!toricall), economic ,ealt, and political sta4ilit% are intert&ined to a de(ree t,at i! rarel) encountered in ot,er +aEor indu!trialiJed econo+ie!" It wa! t,e econo+ic !ta(nation o* t,e *or+er So-iet Union t,at led to it! political down*all" Si+ilarl), Med-ede- and >utin, ot, inti+atel) acFuainted wit, t,eir nation4! ,i!tor), are unFue!tiona l) alar+ed at t,e pro!pect t,at Du!!ia4! econo+ic cri!i! will endan(er t,e nation4! political !ta ilit), ac,ie-ed at (reat co!t a*ter )ear! o* c,ao! *ollowin( t,e de+i!e o* t,e So-iet Union" Alread), !trike! and prote!t! are occurrin( a+on( rank and *ile worker! *acin( une+plo)+ent or non?pa)+ent o* t,eir !alarie!" Decent pollin( de+on!trate! t,at t,e once !upre+e popularit) ratin(! o* >utin and Med-ede- are erodin( rapidl)" Ce)ond t,e political elite! are t,e *inancial oli(arc,!, w,o ,a-e een *orced to dele-era(e, e-en unloadin( t,eir )ac,t! and executi-e Eet! in a de!perate atte+pt to rai!e ca!," S,ould t,e Du!!ian econo+) deteriorate to t,e point w,ere econo+ic collap!e i! not out o* t,e Fue!tion, t,e i+pact will (o *ar e)ond t,e o -iou! accelerant !uc, an outco+e would e *or t,e Olo al Econo+ic 3ri!i!" 5,ere i! a (eopolitical di+en!ion t,at i! e-en

+ore rele-ant t,en t,e econo+ic context" Ke!pite it! econo+ic -ulnera ilitie! and percei-ed decline *ro+ !uperpower !tatu!, Du!!ia re+ain! one o* onl) two nation! on eart, wit, a nuclear ar!enal o* !u**icient !cope and capa ilit) to de!tro) t,e world a! we know it" Hor t,at rea!on, it i! not onl) >re!ident Med-ede- and >ri+e Mini!ter >utin w,o will e l)in( awake at ni(,t! o-er t,e pro!pect t,at a national econo+ic cri!i! can tran!*or+ it!el* into a -irulent and de!ta iliJin( !ocial and political up,ea-al" It Eu!t +a) e po!!i le t,at U"S" >re!ident Carack I a+a4! national !ecurit) tea+ ,a! alread) rie*ed ,i+ a out t,e con!eFuence! o* a +aEor econo+ic +eltdown in Du!!ia *or t,e peace o* t,e world" A*ter all, t,e +o!t recent national intelli(ence e!ti+ate! put out ) t,e U"S" intelli(ence co++unit) ,a-e alread) concluded t,at t,e Olo al Econo+ic 3ri!i! repre!ent! t,e (reate!t national !ecurit) t,reat to t,e United State!, due to it! *acilitatin( political in!ta ilit) in t,e world" Kurin( t,e )ear! Cori! Aelt!in ruled Du!!ia, !ecurit) *orce! re!pon!i le *or (uardin( t,e nation4! nuclear ar!enal went wit,out pa) *or +ont,! at a ti+e, leadin( to *ear! t,at desperate personnel &ould illicitl) sell nuclear &eapons to terrorist organi5ations" I* t,e current econo+ic cri!i! in Du!!ia were to deteriorate +uc, *urt,er, ,ow !ecure would t,e Du!!ian nuclear ar!enal re+ain. It +a) e t,at t,e *inancial i+pact o* t,e Olo al Econo+ic 3ri!i! i! it! lea!t dan(erou! con!eFuence"

russia econom% uq econom%

Econom% gro&ing no& despite slig!tl% lo&er oil prices $$$ 4ut an% furt!er decrease crus!es it 7O- */ (Roice o* Du!!ia, 3itin( K+itr) Sorokin, >ro*e!!or S Du!!ian Hinancial Uni-er!it), and Rladi+ir Sokolo-, A!!ociate >ro*e!!or S Mo!cow 8i(, Econo+ic! Sc,ool, Du!!iaN! econo+) !ta le and (rowin(#, 1?9, ,ttp://en(li!,"ru-r"ru/&'13M'1M'9/Du!!ia?!?econo+)?!ta le?and? (rowin(/, Keec,2 B5rue, t,e ackdrop o* (lo al econo+ic in!ta ilit) and t,e EuroJoneN! de t cri!i! +ake Du!!ian econo+ic *i(ure! look reall% good" Spurred ) *ear! o-er S)ria, t,e oil price i! !oarin(, +akin( *or a reduction o* Du!!iaN! de*icit and addin( !tren(t, to t,e Du!!ian rou le"B E-en a!ed on a lower oil price, t,i! )earN! de*icit wa! expected to a+ount to Eu!t 1"$; o* t,e OK>" We ,a-e an opinion *ro+ >ro*e!!or K+itr) Sorokin o* t,e Du!!ian (o-ern+entN! Hinancial Uni-er!it): BIur de*icit *i(ure i! wa) lower t,an t,o!e in t,e United State! and t,e leadin( European econo+ie!" 3o+ ined wit, our -a!t *inancial re!er-e!, t,i! !,ould allow u! to !o+ew,at ea!e our +onetar) polic) and rai!e t,e de*icit ceilin( in order to !ti+ulate in-e!t+ent" At lea!t !o !a)! t,e Du!!ian Econo+) Mini!tr)"B 5,e re!er-e! +entioned ) Kr Sorokin a+ount to ,al* a trillion US dollar!, w,ic, i! +ore t,an ,a! een a+a!!ed ) all t,e ot,er po!t?So-iet !tate! co+ ined" Oreater !pendin( i! indeed an option" A!!ociate >ro*e!!or Rladi+ir Sokolo- lecture! at Mo!cowN! 8i(, Econo+ic Sc,ool: BDu!!iaN! plan! to !,arpl) !tep up it! expenditure on de*ence ) no +ean! t,reaten it! inno-ation pro(ra++e!" In t,e US, *or in!tance, de*ence !pendin( u!uall) dri-e! inno-ation in +an) area!" I elie-e Du!!ia i! no di**erent in t,i! re!pect"B In &'1&, Du!!iaN! in*lation wa! kept to a +oderate <"<;" 5,e )ear &'13 !,ould rin( an e-en lower in*lation *i(ure" I**icial! al!o !peak a out a re-er!e o* t,e capital *li(,t" And $$$ <a4inet res!uffle increases gro&t! prospects $$$ oil is t!e l%nc!pin -IA No#osti */ (Econo+ic De!,u**le Seek! to Coo!t Hla((in( Orowt,#, <?&7, ,ttp://en"ria"ru/ru!!ia/&'13'<&7/1:191%%:1/Econo+ic?De!,u**le?Seek!?to?Coo!t?Hla((in(? Orowt,",t+l, Keec,2 MIS3IW, 0une &7 (8oward A+o! and Rladi!la- Hedotkin, DIA =o-o!ti2 S A re!,u**le o* Du!!iaN! top econo+ic o**icial! ,a! een de!i(ned to sta#e off loo+in( !ta(nation, wit, a new +ini!ter likel) to tr) and reak wit, t,e policie! o* ,i! predece!!or de!pite po!!i le oppo!ition *ro+ t,e 1re+lin, accordin( to expert! !ur-e)ed ) DIA =o-o!ti" Alexei Ul)uka)e-N! widel) expected appoint+ent to ,ead t,e Mini!tr) o* Econo+ic Ke-elop+ent wa! o**iciall) announced Monda)G ,e replace! Andrei Celou!o-, w,o will eco+e an econo+ic ad-i!or to >utin" 8owe-er, Ul)uka)e- i! *acin( an up!ill struggle a! Du!!iaN! econo+ic (rowt, !low! a+id !lidin( co++odit) price!" And ,e +a) *ace o !truction *ro+ Celou!o-, w,o i! t,e late!t +ini!ter to e tran!*erred to t,e !o?called !,adow (o-ern+ent o* ad-i!or! around >utin t,at i! an alternati-e power a!e to Du!!iaN! o**icial (o-ern+ent ,eaded ) >ri+e Mini!ter K+itr) Med-ede-"

russia econom% !ig! prices 8e%

Oil profits 8e% to -ussian econom% $$$ controls F9B of export re#enue Aron */ (Leon, De!ident Sc,olar and Kirector o* Du!!ian Studie! S A+erican Enterpri!e In!titute, >,"K" S 3olu+ ia Uni-er!it), 5,e political econo+) o* Du!!ian oil and (a!#, A+erican Enterpri!e In!titute, $?&9, ,ttp://www"aei"or(/outlook/*orei(n?and?de*en!e? polic)/re(ional/europe/t,e?political?econo+)?o*?ru!!ian?oil?and?(a!/, Keec,2 Hro+ le!! t,an $' percent in t,e +id?199'!,[1%\ t,e !,are o* co++oditie! in Du!!ian export! ,a! (rown to F9 percent toda), wit, oil accountin( *or +ore t,an ,al* o* t,e export inco+e" [1$\ Depre!entin( up to 3' percent o* t,e countr)N! OK> and ,al* o* it! OK> (rowt, !ince &''', [1<\ ,)drocar on! pro-ided at lea!t ,al* o* t,e !tateN! ud(et re-enue! la!t )ear"[17\ Hi-e )ear! a(o, Du!!ia needed oil price! o* 6$' to 6$$ a arrel to alance it! ud(et, ut Alexei 1udrin, *or+er *ir!t deput) pri+e +ini!ter and *inance +ini!ter, e!ti+ated t,e reake-en price at 6117 per arrel la!t )ear"[1:\ Du!!iaN! dependence on ener() export!Land, con!eFuentl), it! econo+)N! #ulnera4ilit% to co++odit) price *luctuationLwa! ,i(,li(,ted ) t,e &''9 world *inancial cri!i!" A! oil plun(ed *ro+ 61%7 to 63% per arrel, t,e re!ource? a!ed econo+) contracted ) al+o!t : percentLt,e lar(e!t drop a+on( t,e O&' top indu!trial nation!" Du!!ia ,a! e(un to ex,i it t,e !i(n! o* w,at econo+i!t! call t,e Kutc, di!ea!e,# w,en o-erreliance on co++odit) export! depre!!e! ot,er !ector! o* t,e econo+) ) !tar-in( t,e+ o* in-e!t+ent! and +oderniJation w,ile t,e increa!in( -alue o* t,e national currenc) +ake! export! o* ot,er (ood! and !er-ice! +ore expen!i-e and t,u! le!! co+petiti-e in world +arket!" Indu!trial !ta(nation ,a! e-en !pread to t,e +ilitar)?indu!trial co+plex, w,ic,, like in So-iet ti+e!, continue! to e t,e !tateN! *a-orite !ector and enEo)! it! continuou! and -er) (enerou! !upport" Ke!pite t,i!, accordin( to a recent !ur-e), onl) &' percent o* t,e Du!!ian de*en!e enterpri!e Fuali*ied a! +odern"#[19\ A! in -irtuall) e-er) ot,er petro?(a! !tate, t,e ri!e o* t,e Du!!ian one ,a! een attended ) corruption likel) unprecedented e-en in t,e countr)N! *ar?*ro+?pri!tine ,i!tor)" Renalit) and extortion ,a-e co+e clo!e to !u -ertin( or e-en paral)Jin( (o-ernance, !ocial in!titution!, Eu!tice, and entrepreneurial acti-it)" In 5ran!parenc) InternationalN! &'1& 3orruption >erception Index, Du!!ia wa! 133rd a+on( 17< countrie!, wor!e t,an Celaru!, Rietna+, and Sierra Leone and on par wit, 8ondura!, Iran, and 1aJak,!tan"[&'\ Aet t,e +o!t dan(erou! political le(ac) o* t,e Du!!ian petro?(a! !tate i! t,e centralit% o* oil and (a! re-enue!, w,ic, a+ounted to 6&1$ illion la!t )ear,[&1\ to t,e lo)alt) o* two (roup! t,at are e!!ential *or t,e re(i+eN! !ur-i-al: t,e lower?inco+e and elite !e(+ent!" 5rillion?ru le tran!*er! ,elp to +aintain !ocial peace in w,at i! known a! Du!!ia?&#[&&\Lpoorer re(ion!, e!peciall) t,e -olatile and increa!in(l) -iolent Mu!li+ =ort, 3auca!u!, !+all town! and rural area!, and t,e ru!tin( +onotown!# (one?co+pan) town!2 o* Stalini!t indu!trialiJation"[&3\ Oil price drop anni!ilates t!e -ussian econom% -IA No#osti */ (6<' Iil >rice Will Eat up Du!!iaN! Iil Hund S Sur-e)#, 1?&9, ,ttp://en"rian"ru/ u!ine!!/&'13'1&9/1791':3:1",t+l, Keec,2 MIS3IW, 0anuar) &9 (DIA =o-o!ti2 S Du!!iaN! Iil Wealt, Hund will e totall) con!u+ed i* world oil price! plun(e to 6<' per arrel and !ta) at t,at le-el *or a )ear, expert! *ro+ t,e Du!!ian Sc,ool o* Econo+ic! (RSE2 !aid on 5ue!da)" 5,at !cenario pre!ent! a s!oc8 not onl) *or t,e ud(et !)!te+ ut al!o *or t,e econo+) a! a w,ole,# expert! *ro+ t,e 8i(,er Sc,ool o* Econo+ic!4 Ke-elop+ent 3enter !aid in t,eir !tre!!?te!t !ur-e)" 5,e !tark warnin( ec,oe! t,e >recariou! Sta ilit) !cenario outlined ) *or+er Du!!ian Hinance Mini!ter 1udrin at t,e World Econo+ic Horu+ at Ka-o! la!t week, w,ic, predicted an oil price plun(e to 6<' per arrel, *orcin( t,e Du!!ian (o-ern+ent to pre!er-e !ocial !ta ilit) at t,e expen!e o* econo+ic

de-elop+ent" La!t week4! Ka-o! *oru+ wa! pre!ented wit, t,ree roadl) pe!!i+i!tic !cenario! *or Du!!iaN! econo+ic de-elop+ent, a!ed on a poll o* o-er 3$' Du!!ian and *orei(n econo+i!t! and deci!ion?+aker! w,o warned t,at t,e Du!!ian econo+) re+ained acutel% #ulnera4le to world ener() price! and could eco+e +ore ri!k) *or in-e!t+ent" World price! *or enc,+ark Crent crude ,a-e een ,o-erin( at a out 611' per arrel in recent +ont,!, a le-el >ri+e Mini!ter K+itr) Med-ede- !aid wa! opti+al *or ot, oil con!u+er! and producer!" 1udrin warned on Monda) t,at t,e euroJone !o-erei(n de t cri!i! wa! continuin( and t,e (lo al cri!i! could wor!en a! !oon a! t,e end o* t,i! )ear, w,ic, would certainl) cau!e a plun(e in de+and *or oil and ,ence oil price!" 5,at could undermine t,e Du!!ian econo+), w,ic, continue! to depend !ea#il% on raw +aterial export!" 5,e Du!!ian &'13 ud(et i! a!ed on an oil price o* 697 per arrel" A!ide *ro+ Iil Wealt, Hund depletion, Du!!iaN! OK> would contract ) $"9 percent co+pared wit, &'1& w,ile ud(et re-enue! [would *all\ ) 3 trillion ru le! (61'' illion2 or &3 percent,# t,e RSE Ke-elop+ent 3enter !ur-e) !aid" 5,e ud(et de*icit would widen to 3"$ trillion ru le! (<"% percent o* OK>2 and t,e ru leN! a-era(e )earl) rate would *all to 3$"$ ru le! to t,e dollar in &'13"# :ig! oil prices sol#e Dutc! disease $$$ creates resilienc% ;rin8e#ic! *3 (Rlad, Econo+ic 3o++entator S DIA =o-o!ti, 8i(, Iil >rice! Ipen Window o* Ipportunit)# *or Du!!ian Econo+)#, DIA =o-o!ti, 1?&7, ,ttp://en"rian"ru/anal)!i!/&'1&'1&7/17'99%<':",t+l, Keec,2 Speakin( at a new! con*erence at DIA =o-o!ti on 5,ur!da), Idd >er Crekk, !enior re!ident repre!entati-e o* t,e IMH o**ice in Du!!ia, !aid t,at ,i(, oil price! ,a-e opened a &indo& of opportunit%# *or Du!!ia to take +ea!ure! to strengt!en and protect it! econo+)" 5o take *ull ad-anta(e o* t,i! opportunit), t,e Du!!ian (o-ern+ent +u!t undertake a co+plete econo+ic tran!*or+ation S keepin( in*lation at 3;?$;, cuttin( ud(et expen!e!, i+pro-in( t,e *inancial !ector, creatin( an attracti-e in-e!t+ent cli+ate and e-entuall) reducin( t,e dependence o* it! econo+) on t,e export o* raw +aterial!" In ot,er word!, Mo!cow +u!t pur!ue co+pre,en!i-e econo+ic +oderniJation, *unded ) it! oil and (a! re-enue!" Oil price collapse ris8s social sta4ilit% $$$ itVs on t!e 4rin8 no& Aron *3 (Leon, De!ident Sc,olar and Kirector o* Du!!ian Studie! S A+erican Enterpri!e In!titute, >,"K" S 3olu+ ia Uni-er!it), A 1re+lin +ade o* !and#, A+erican Enterpri!e In!titute, $?<, ,ttp://www"aei"or(/article/*orei(n?and?de*en!e?polic)/re(ional/europe/a? kre+lin?+ade?o*?!and/, Keec,2 In t,e !,ort ter+, Du!!ia4! +o!t !eriou! ri!k !te+! *ro+ a near$fatal dependence on t,e price o* oil" 5wel-e )ear! o* >utini!+ ,a-e +o-ed Du!!ia perilou!l) clo!e to ein( a petrostate, wit, all t,e political, econo+ic, and !ocial nicetie! t,o!e are known *or" Accordin( to UCS anal)!t!, a 61' c,an(e in oil4! per? arrel price c,an(e! t,e price *or alancin( t,e ud(et ) 1 percent o* Du!!ia4! OK>" La!t Septe+ er, Alexei 1udrin, t,en *inance +ini!ter and deput) pri+e +ini!ter, e!ti+ated t,at i* t,e price *all! to 6<' a arrel, Du!!ia4! econo+) would re(i!ter Jero (rowt, or e-en contract" 5o alance t,e national ud(et in &''%, Du!!ia needed oil at 6&7 dollar! a arrel" La!t )ear t,e reak?e-en point wa! 611$" 5,u! *ar, t,e proEection *or t,i! )ear i! 6117" 5,i! i! w,) Du!!ia i! likel) to *ace a !e-ere *i!cal cri!i! a! earl) a! &'1%, e-en wit, t,e world4! t,ird?lar(e!t ,ard currenc) re!er-e!" In t,e word! o* one o* Du!!ia4! +o!t re!pected econo+i!t!, Ser(ei Ourie- in a recent talk at t,e 3enter *or Strate(ic and International Studie! in Wa!,in(ton, t,e !tate +a) Brun out o* ca!,B to pa) *or t,e ,u(e increa!e! in t,e de*en!e ud(et and t,e !ocial co++it+ent! >utin ratc,eted up on t,e wa) to reelection, *ir!t and *ore+o!t t,e pen!ion! o* retirin( a ) oo+er!" Ae!, countrie! can ti(,ten t,eir elt!" Cut t,i! ta!k, politicall) ri!k) enou(, e-en in +ature de+ocracie! like Hrance or Critain, could e fatal w,en

+illion! +a) elie-e t,at t,e pre!ident4! election wa! *raudulent and ,i! rule ille(iti+ate" 5,e re(i+e4! wor!t ni(,t+are i! t,at +illion! o* an(r) pen!ioner! +a) Eoin t,e ,undred! o* t,ou!and! o* +iddle?cla!! prote!ter!"

russia econom% econom% 8e% to sta4ilit%

-ussian economic gro&t! is 8e% to sta4ilit% Adomanis *3 (Mark, 3ontri utor S Hor e!, Du!!ia4! Econo+) i! Still Orowin(, and W,) 5,i! Matter!#, Hor e!, $?&%, ,ttp://www"*or e!"co+/!ite!/+arkado+ani!/&'1&/'$/&%/ru!!ia!? econo+)?i!?!till?(rowin(?and?w,)?t,i!?+atter!/, Keec,2 IN-e lon( een o* t,e opinion t,at a re(i+e like >utinN! t,at i! !o clearl) a!ed on Iperformance legitimac%'M (rowin( wa(e! and (enerall) i+pro-ed !tandard! o* li-in(, i! extre+el) #ulnera4le to a (enuine econo+ic downturn"c A (ood deal o* >utinN! popularit) i! due to t,e *act t,at, ecau!e o* !u!tained, lon(?ter+ (rowt, in t,e price! o* oil and natural (a!, ,eN! een in a po!ition to di!pen!e an aw*ul lot o* lar(e!! in t,e *or+ o* ,i(,er wa(e! *or pu lic !ector worker!, lar(er pen!ion! *or retiree!, !u !idie! *or *a+ilie! wit, )oun( c,ildren, and a -irtuall) endle!! li!t o* loan!, credit!, tax write?o**!, and tar(eted# in-e!t+ent!" In -er) !i+ple ter+!, t,e econo+ic pie ,a! een (rowin(, t,e !tate !till ,a! control o-er a ,ealt,) portion o* it, and >utin ,a! t,ere*ore een in a po!ition to t,row a lot o* +one) at an) pro le+" 5,i! !ort o* politic! i! onl) !u!taina le !o lon( a! t,e econo+ic pie i! actuall) (rowin(: t,e +inute t,at (rowt, !ta(nate!, +uc, le!! turn! ne(ati-e, t,e (o-ern+ent *ind! it impossi4le to plea!e all o* t,e co+petin( intere!t! at t,e !a+e ti+e" 8ard deci!ion! ,a-e to e +ade a out w,ic, (roup ene*it! and w,ic, ,a! to !u**er, and t,e (roup! on t,e wron( !ide o* t,e calculation are o -iou!l) not (oin( to e plea!ed a out it" Indeed dependin( on Eu!t ,ow an(r) t,e lo!er! in t,e re!ource allocation (a+e (et, t,e) can ea!il) tran!*or+ *ro+ (roup t,at wa! ea!il) co?opted wit, carrot! into one t,at ,a! to e acti-el) repre!!ed wit, !tick!" So one o* t,e +o!t i+portant Fue!tion! t,at a out Du!!ia, likel) t,e !in(le +o!t i+portant Fue!tion a out t,e countr)N! lon(? ter+ traEector) a! well a! it! i++ediate political *uture, i! i! t,e econo+) (rowin(.# I* t,e econo+) i! in *act (rowin(, t,en current !)!te+N! internal lo(ic will keep it operatin(" >er,ap! awkwardl), per,ap! rutall), per,ap! e-en un!u!taina l), ut operatin( nonet,ele!!" I* t,e econo+) i! not (rowin(, i* t,e 1re+lin ,a! to tr) and placate +ultitudinou! intere!t (roup! wit, a !,rinkin( pile o* +one), t,en t,e !)!te+ will sei5e up and cras!" 5,i! i! w,) I o Eect to a (enerall) Fuite rea!ona le and in*or+ati-e Econo+i!t !tor) a out t,e +ake?up o* Du!!iaN! new ca inet" A! t,e article !a)!: 5,e ca inet will !oon *ace a pain*ul dile++a in econo+ic polic)" S,ould it *a-our t,e ,and*ul o* extraordinaril) power*ul u!ine!!+en clo!e to Mr >utin and t,e +ana(er! o* lar(e, !tate?run co+panie!, or t,e countr)N! rural and workin(?cla!! population, w,ic, Mr >utin increa!in(l) percei-e! a! ,i! electoral a!e. Cot, (roup! are e!!ential to t,e !ta ilit) o* Mr >utinN! rule, )et are *i(,tin( o-er t,e !a+e !,rinkin( econo+ic pie" I a(ree t,at t,ere are !eriou! and (rowin( ten!ion! etween >utinN! electoral a!e (real Du!!ian!# i* we appl) t,e ,ackne)ed *or+ulation !o o*ten u!ed in A+erican politic!2 and t,e oli(arc,! w,o do+inate t,e ,i(,e!t le-el! o* t,e -ertical o* power"# I e-en a(ree wit, t,e articleN! contention t,at t,e!e ten!ion! are, at a a!ic le-el, irreconcila le: t,e !ort! o* policie! t,at oo!t t,e oli(arc,! ,ar+ t,e workin( cla!! and t,e !ort! o* politic! w,ic, ene*it t,e workin( cla!! ,ar+ t,e oli(arc,!" Cut i! t,e econo+ic pie actuall) !,rinkin(. =o, itN! clearl) not !,rinkin(" Indeed itN! not onl) (rowin(, itN! (rowin( +ore Fuickl) t,an in +o!t o* Du!!iaN! nei(, or!" 5,i! all +i(,t !ee+ like a +inor tec,nicalit) or an undul) le(ali!tic readin( o* a !i+ple lo( po!t, ut a! IN-e tried to explain a o-e itN! actuall) o* t,e ut+o!t i+portance" Du!!iaN! political !ta ilit) i! predicated on a (rowin( econo+), and t,e econo+) i! currentl) (rowin( at a ,ealt,) (i* not o-erw,el+in(2 clip" 5,i! i! not to !a) t,at Du!!iaN! econo+) will (row *ore-er or t,at it wonNt e ad-er!el) i+pacted ) t,e increa!in(l) c,aotic and dan(erou! cri!i! in t,e EuroJone, itN! !i+pl) to !a) t,at, at t,e +o+ent, t,e !)!te+ i! not ein( *orced to deal wit, a !,rinkin( econo+ic pie" 5,e current pace o* (rowt, !ee+! !u**icient to pre!er-e t,e road continuit) o* t,e current political arran(e+ent" 5,i! will not alwa)! e t,e ca!e, ut i* I were *orced to wa(er I would !a) t,at t,e 1re+lin will +uddle t,rou(, *or at lea!t anot,er *ew )ear!"

***russia stoc8 mar8et *nc

:ig! oil prices 8e% to -ussian stoc8 mar8et 1a!oo 6inance */ (Du!!ia E5H See! 8ea-) In*low! a! Iil >rice! De ound#, $?1<, ,ttp://*inance")a,oo"co+/new!/ru!!ia?et*?!ee!?,ea-)?in*low!?17%331:%9",t+l, Keec,2 In-e!tor! are di!appointed in t,e Du!!ian +arket,# !aid Alexei AaJiko-, ,ead o* re!earc, at Aton 3apital LL3, in a Cloo+ er( report" 5,e +arket ,a! a ,i(, dependenc) on oil price!"# DSQ i! down a out 9; )ear to date" 5,e E5H ,a! trended lower !ince earl) &'11 and re+ain! well elow it! pre?cri!i! ,i(," 5,e +arketN! poor per*or+ance ,a! wei(,ed on CDI3 E5H! t,at in-e!t in CraJil, Du!!ia, India and 3,ina" [Du!!ia E5H! La( Ce,ind It,er CDI3 Econo+ie!\ Aet !o+e in-e!tor! are tappin( DSQ *or a reco-er) in Du!!ian !tock!, note! 3,ri! 8e+p!tead, director o* E5H execution !er-ice! at Wallac,Cet, 3apital" DSQ ,a! (at,ered net in*low! o* 63&7 +illion !ince Ma) 9, accordin( to IndexUni-er!e data" 5,e E5H i! not *or t,e *aint o* ,eart" Hor exa+ple, DSQ *ell 73"<; in &'':, t,en rallied 139"&; in &''9" 5,e Du!!ian !tock +arket i! one o* t,e +o!t -olatile in t,e world a A! !uc,, we t,ink DSQ i! !uita le onl) a! a !atellite ,oldin( *or t,e +o!t ri!k?tolerant in-e!tor!,# !a)! Mornin(!tar anal)!t >atricia Ie) in a pro*ile o* t,e E5H" 5,e extre+e -olatilit) o* Du!!ian !tock! can e partiall) explained ) t,e *act t,at t,e Du!!ian econo+) i! ,ea-il) dependent on oil and (a! export! and a! !uc, i! !en!iti-e to *luctuatin( ener() price!,# !,e added"

***arctic drilling *nc

<ontinued !ig! oil prices cause -ussia to drill in t!e Arctic ;ordon */ (Ke ora,, Senior A!!ociate S 3arne(ie Endow+ent Ener() and 3li+ate >ro(ra+, Hor+er 3o?Kirector o* t,e 5ran!portation and En-iron+ent >ro(ra+ S Aale Uni-er!it), Me+ er S =ational Acade+) o* Science!, Ipportunitie! and 3,allen(e! 3on*rontin( Du!!ian Iil#, 3arne(ie Endow+ent, $?&:, ,ttp://carne(ieendow+ent"or(/&'13/'$/&:/opportunitie!? and?c,allen(e!?con*rontin(?ru!!ian?oil/, Keec,2 Du!!ia will al!o likel) ,a-e to recon!ider de-elop+ent in t,e Arctic" Kue to t,e extraordinar) co+plexit) o* extractin( oil in t,e Arctic, de-elopin( in t,i! extre+e en-iron+ent i! predicated on ,i(,, !ta le oil price!" Aet t,e U"S" Ener() In*or+ation Ad+ini!tration *oreca!t! t,at (lo al oil price! t,rou(, &'%' could *luctuate *ro+ a! low a! 6<' dollar! per arrel to a! ,i(, a! 6&$' dollar! per arrel" E!ti+ate! in t,i! ti+e *ra+e ,a-e (lo al oil !upplie! !wellin( ) at lea!t < +illion arrel! per da)Lor e-en twice t,at production rate" Alt,ou(, political in!ta ilit) in t,e Middle Ea!t and t,e uptick in (lo al de+and are +akin( it unlikel) t,at oil price! will collap!e, t,e uncertaint) !u((e!t! t,at co!tl) *ora)! into t,e Arctic !,ould e per+anentl) placed on ,old" Si+ilar pro le+atic *oreca!t! can e +ade *or c,allen(in( extra?,ea-) itu+en and kero(en oil re!ource!"

mineralsXXX
Lee4 */ (Step,en, C"S" in Econo+ic! S Uni-er!it) o* >enn!)l-ania, M"A" in Mat,, >,"K" in >!)c,olo(), 3EI S Lee Oroup, 3ontri utor S Hor e!, Kan(erou! Scenario Hor S)ria, Iil And War Wit, Du!!ia#, Hor e!, $?&:, ,ttp://www"*or e!"co+/!ite!/(reat!peculation!/&'13/'$/&:/dan(erou!?!cenario?*or?!)ria?oil? and?war?wit,?ru!!ia/2 Du!!iaN! recent econo+ic -olatilit) !te+! *ro+ t,e price o* oilLit! +o!t i+portant export, ) a wide +ar(in, and t,e a!i! *or price action in !e-eral ot,er co++oditie! t,at Du!!ia al!o export!" 8i(,er oil price! rai!e price! *or +ined and +anu*actured co++oditie! alikeL*ro+ palladiu+ and nickel to c,e+ical!Lall o* w,ic, need ener() (and petroleu+2 to produce"

A66

***UNIQUENESS

uq s!ale production no&

U"S" production !as outpaced consumption s!ale reser#es Ailmot!' */ (Ada+, t,e Ikla,o+an, Wil+ot,: U"S" oil production outpace! i+port! *or *ir!t ti+e in 1< )ear!#, 0une 7, &'13, ,ttp://new!ok"co+/wil+ot,?u"!"?oil?production?outpace!? i+port!?*or?*ir!t?ti+e?in?1<?)ear!/article/3:%&$:$, Eld2 5,e United State! took anot,er 4ig step to&ard energ% independence la!t week" Hor t,e week endin( Ma) 31, t,e countr) produced 3&,''' +ore arrel! o* oil a da) t,an it i+ported, +arkin( t,e *ir!t ti+e !ince 0anuar) 1997 t,at do+e!tic production outpaced i+port!" 5,e report *ro+ t,e U"S" Ener() In*or+ation Ad+ini!tration !,owed t,at producer! in t,e United State! reco-ered 7"3 +illion arrel! o* oil per da) la!t week, up :,''' arrel! per da)" At t,e !a+e ti+e, oil i+port! dropped $%9,''' arrel! per da) to 7"&7 +illion" A*ter cli+ in( *or decade!, oil i+port! ,a-e dropped +ore t,an 7& percent !ince &''$ a! do+e!tic producer! ,a-e co+ ined ,oriJontal drillin( wit, ,)draulic *racturin( to extract oil *ro+ !,ale and ot,er den!e rock!" Ko+e!tic oil production i! up %< percent *ro+ &'':" Exports passed imports t!at &ill lo&er prices @loom4erg' */ (Mo+in( @,ou, 3rude Iutput Exceed! I+port! *or Hir!t 5i+e in 1< Aear!#, 0un $, &'13 $:3& >M E5, ,ttp://www" loo+ er("co+/new!/&'13?'<?'$/crude?output?exceed!? i+port!?*or?*ir!t?ti+e?in?1<?)ear!",t+l, Eld2 U"S" do+e!tic crude?oil production exceeded i+port! la!t week *or t,e *ir!t ti+e in 1< )ear! , a (o-ern+ent report !,owed" Iutput wa! 3&,''' arrel! a da) ,i(,er t,an i+port! in t,e !e-en da)! ended Ma)
31, accordin( to weekl) data toda) *ro+ t,e Ener() In*or+ation Ad+ini!tration, t,e Ener() Kepart+entN! !tati!tical ar+" >roduction ,ad een lower t,an international purc,a!e! !ince 0anuar) 1997" A co+ ination o* ,oriJontal drillin(

and ,)draulic *racturin(, or *rackin(, ,a! unlocked !upplie! trapped in !,ale *or+ation! in !tate! includin( =ort, Kakota, Ikla,o+a and 5exa!" 5,e !ur(e in oil and (a! production ,elped t,e U"S" +eet :: percent o* it! own ener() need! in He ruar), t,e ,i(,e!t +ont,l) rate !ince April 19:< , EIA data !,ow" 3rude in-entorie! cli+ ed to t,e ,i(,e!t le-el in :& )ear! in t,e week ended Ma) &%" IIt &ill !elp U"S" energ% independence and ,elp our trade alance Fuite a it,# !aid Mic,ael L)nc,, pre!ident o* Strate(ic Ener() P Econo+ic De!earc, in Winc,e!ter, Ma!!ac,u!ett!" Aou ,a-e to wonder i* )ou are (oin( to !ee do&n&ard pressure on prices"# 5,e U"S" pu+ped 7"3 +illion arrel! a da) o* oil la!t week, up :,''' arrel! *ro+ t,e prior week, t,e EIA !aid in it!
Weekl) >etroleu+ Statu! Deport" I+port! *ell $%9,''' arrel! a da) la!t week to 7"&7 +illion"

2!at0s depicti#e of an o#erall trend @loom4erg' */ (Mo+in( @,ou, 3rude Iutput Exceed! I+port! *or Hir!t 5i+e in 1< Aear!#, 0un $, &'13 $:3& >M E5, ,ttp://www" loo+ er("co+/new!/&'13?'<?'$/crude?output?exceed!? i+port!?*or?*ir!t?ti+e?in?1<?)ear!",t+l, Eld2 5,i! i! an exten!ion o* trend! t,at ,a-e een well e!ta li!,ed o-er t,e la!t *ew )ear! ,# !aid 5i+ E-an!, an ener() anal)!t at 3iti Huture! >er!pecti-e in =ew Aork" 5,e U"S" +arket i! +uc, +ore co+*orta l) !upplied t,an a *ew )ear! a(o" We ,a-e a reduced need *or i+port!"# >roduction cli+ ed %& percent o-er t,e pa!t *i-e )ear! and reac,ed a &1?)ear ,i(, o* 7"37 +illion arrel! a da) in t,e week ended Ma) 3" I+port! ,a-e tu+ led &< percent !ince Ma) &'':" 3rude *uture! *or 0ul) deli-er) (ained %3 cent!, or '"$ percent, to !ettle at
693"7% a arrel on t,e =ew Aork Mercantile Exc,an(e" >rice! ,a-e !lu+ped 3$ percent !ince !ettlin( at an all?ti+e ,i(, o* 61%$"&9 on 0ul) 3, &'':" U"S" petroleu+ i+port! *ell to 6&9"< illion in April, t,e lowe!t le-el !ince =o-e+ er &'1', t,e 3o++erce Kepart+ent reported )e!terda)"

Increased demand &on0t raise prices production &ill 8eep t!em lo& Ru and @ell' */ (3on(lin, Senior Editor?Econo+ic!, Laura, Stati!tic! Editor, Iil and Oa! 0ournal, Olo al, US oil u!e to cli+ in &'13 a! econo+ie! continue to !tru((le#, '7/'1/&'13, ,ttp://www"o(E"co+/article!/print/-olu+e?111/i!!ue?7/!pecial?report?+id)ear?*oreca!t/(lo al? u!?oil?u!e?to?cli+ ?in?&'13?a!?econo+ie!",t+l, Eld2 Ke+and *or oil and (a! in t,e US will cli+ t,i! )ear, ol!tered ) i+pro-in( econo+ic condition!" US crude oil and lea!e conden!ate production i! expected to ri!e 13":; to 7"% +illion /d in

&'13" 5,e ri!e in production &ill more t!an offset t!e increase in demand , pu!,in( i+port! down" Worldwide oil de+and will (row '"9;, and (lo al oil !uppl) will cli+ '":;" Ke+and *ro+ 3,ina will po!t t,e lar(e!t increa!e" =ort, A+erican +e+ er! o* t,e Ir(aniJation *or Econo+ic 3ooperation and Ke-elop+entL 3anada, Mexico, and t,e USLwill contri ute +o!t o* t,e output (rowt, " Iil !uppl) *ro+ +e+ er! o* t,e
Ir(aniJation o* >etroleu+ Exportin( 3ountrie! will !lip to an a-era(e 37"3 +illion /d t,i! )ear *ro+ 37"< +illion /d la!t )ear"

U"S" s!ale !as 4ig potential Ru and @ell' */ (3on(lin, Senior Editor?Econo+ic!, Laura, Stati!tic! Editor, Iil and Oa! 0ournal, Olo al, US oil u!e to cli+ in &'13 a! econo+ie! continue to !tru((le#, '7/'1/&'13, ,ttp://www"o(E"co+/article!/print/-olu+e?111/i!!ue?7/!pecial?report?+id)ear?*oreca!t/(lo al? u!?oil?u!e?to?cli+ ?in?&'13?a!?econo+ie!",t+l, Eld2 IO0 expect! US production o* crude oil and lea!e conden!ate to ri!e 13":; to 7"% +illion /d in &'13 *ro+ <"$ +illion /d la!t )ear" In t,e *ir!t < +ont,! o* t,i! )ear, production increa!ed 1%"$;
*ro+ a )ear earlier to 7"17 +illion /d" >roduction increa!e! in !tate! !uc, a! =ort, Kakota, 5exa!, Loui!iana, and Ikla,o+a o**!et decline! in Ala!ka, w,ere output *ell to $%',''' /d *ro+ $$<,''' /d in t,e *ir!t ,al* o* &'1&" Iutput *ro+ ti(,t oil pla)!, +ainl) t,e >er+ian a!in, Ea(le Hord, and Cakken !,ale, i! expected to account *or +o!t o* t,e annual increa!e" EIA, in it! late!t S,ort? 5er+ Ener() Iutlook, predicted t,at oil production *ro+ t,e US Oul* o* Mexico will increa!e ) 13','''

/d durin( &'13 and t,at production *ro+ t,e non?Oul* Lower %: will increa!e ) :1',''' /d" 5,e *oreca!t *or Oul* o* Mexico production (rowt, wa! tri++ed due to +aintenance at t,e C>?operated >a!ca(oula (a! proce!!in( plant durin( Ma) and earl) 0une" Ala!ka oil production i! *oreca!t to decrea!e ) 3',''' /d in &'13, accordin( to EIA" Annual +aintenance on t,e 5ran!?Ala!kan pipeline !)!te+ reduced Ala!kan =ort, Slope !uppl)" =atural (a! liFuid! production will e up &"1; t,i! )ear, a-era(in( &"%$ +illion, accordin( to IO0"

uq #ene5uelan production do&n

Economic factors pre#ent 7ene5uelan production increases ;Celten' +)**/13 (5o+, corre!pondent *or =ational >u lic Dadio, >ea od) Award winner in Eournali!+, ReneJuela4! =ext Leader Hace! 5ou(, 3,oice In Iil >ro(ra+#, %/11/&'13, =>D, ,ttp://www"npr"or(/&'13/'%/11/17<:%3$<7/-eneJuela?!?next?leader?*ace!?tou(,?c,oice?on? oil?pro(ra+, 01a,n2 A! ReneJuela4! pre!ident, 8u(o 3,a-eJ t,ou(,t in (randio!e ter+!, and ,i! countr)4! -a!t oil ric,e! ena led ,i+ to act on ,i! -i!ion" Cut 3,a-eJ died e*ore ,e ,ad to deal wit, t,e *law! in ,i! +odel, and !o+e ,ard c,oice! await ,i! !ucce!!or" 1e) to 3,a-eJ4! notion o* B&1!t 3entur) Sociali!+B wa! t,e redi!tri ution
o* ReneJuela4! oil earnin(!" 5,e countr)4! oil re!er-e! L e!ti+ated ) t,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! to e t,e lar(e!t in t,e world L are wort, ten! o* illion! o* dollar! a )ear in potential re-enue" Kurin( ,i! pre!idenc), 3,a-eJ di-erted +uc, o* t,at potential or le!!2" 8e

wealt, to ReneJuelan con!u+er! in t,e *or+ o* c,eap (a!oline (1: cent! per (allon propped up t,e 3a!tro re(i+e in 3u a, and ,e o**ered ReneJuelan oil on ,i(,l) pre*erential ter+! to 1: 3ari ean and Latin A+erican countrie! t,rou(, an ener() alliance ,e called >etro3ari e" Iil production in ReneJuela declined !,arpl) under t,e 3,a-eJ ad+ini!tration, ,owe-er, lar(el) due to inadeFuate in-e!t+ent in t,e ener() in*ra!tructure, ine**iciencie! in oil indu!tr) +ana(e+ent, and t,e replace+ent o* !killed oil tec,nician! and +ana(er! wit, political lo)ali!t! " >etro3ari e Initiati-e 5,e
drop in oil production L +ore t,an 7 percent Eu!t in t,e *ir!t Fuarter o* &'13 L i! !e-ere enou(, to call into Fue!tion w,et,er t,e 3,a-i!ta oil wel*are pro(ra+! can e !u!tained" Hor t,e 3ari ean and Latin A+erican countrie! t,at ,a-e een ene*itin( *ro+ t,e >etro3ari e pro(ra+, it i! a ti+e o* (reat anxiet)" 3,a-eJ !aw t,e ener() alliance a! a wa) to *ree t,e +e+ er !tate! *ro+ U"S" ener() i+periali!+" B5,ere4! no one w,o can !low our e-er?*a!ter +arc, toward our (reat ,i!torical (oal!,B ,e !aid, de*inin( >etro3ari e a! Bener() unit)"B Hor poor countrie!, t,e >etro3ari e deal wa! irre!i!ti le" 5)picall), t,e) ,ad to pa) ca!, *or onl) ,al* t,e oil t,e) recei-ed" 5,e re!t t,e) (ot on credit, *inanced o-er &$ )ear! at 1 percent" A+on( t,o!e w,o ea(erl) !i(ned up *or t,e pro(ra+ wa! 8aiti" BAn) countr) t,at would ene*it *ro+ !uc, a credit would take ad-anta(e o* it,B !a)! Den_ 0ean?0u+eau, 8aiti4! +ini!ter o* ener()" B5,ere4! not e-en a need to Eu!ti*) t,i!" 8aiti i! a !tru((lin( econo+), and t,i! i! a (reat ad-anta(e *or u!" We con!ider it extre+el) i+portant"B

<!a#e50s lac8 of rein#estment in t!e industr% &ill cripple its future producti#e capacit% ;Celten' +)**/13 (5o+, corre!pondent *or =ational >u lic Dadio, >ea od) Award winner in Eournali!+, ReneJuela4! =ext Leader Hace! 5ou(, 3,oice In Iil >ro(ra+#, %/11/&'13, =>D, ,ttp://www"npr"or(/&'13/'%/11/17<:%3$<7/-eneJuela?!?next?leader?*ace!?tou(,?c,oice?on? oil?pro(ra+, 01a,n2
In t,e Ko+inican Depu lic, >etro3ari e wa! ke) to t,e countr)4! &'':?&''9 *inancial !ta iliJation pro(ra+" BC) allowin( u! to de*er t,e oil pa)+ent!, it wa! a i(, i( t,in( *or t,e (o-ern+ent,B !a)! 0uan 3arlo! Du!!o o* t,e >onti*icia Uni-er!idad 3atUlica in Santo Ko+in(o" 5o e !ure, t,ere were !trin(! attac,ed: 3,a-eJ wanted t,e >etro3ari e countrie! to !upport ,i! ideolo(ical cru!ade a(ain!t t,e U"S" So+e did !o ent,u!ia!ticall)" It,er! lar(el) i(nored t,e 3,a-i!ta r,etoric" BA lot o* t,e!e countrie! looked at t,i! t,in( in a practical +anner,B !a)! 0ere+) Martin, director o* t,e ener() pro(ra+ *or t,e In!titute o* t,e A+erica! at t,e Uni-er!it) o* 3ali*ornia, San Kie(o" B5,e) were a le to !to+ac, t,e ideolo() a! lon( a! t,e) could (et !uc, a wonder*ul *inancial deal"B Hor countrie! !uc, a! 8aiti, 0a+aica and t,e Ko+inican Depu lic, t,e c,eap oil *ro+ ReneJuela could not ,a-e co+e at a etter ti+e, wit, ener() price! ri!in( and t,e world econo+) in cri!i!" BMo!t o* t,e!e countrie! ,a-e no do+e!tic !upplie! o* oil and (a!,B Martin note!" BI* t,e) do, it4! +ini+al" 5,e!e are ener()?!tar-ed countrie!" And !o t,e) eca+e a !olutel) addicted [to t,e >etro3ari e pro(ra+\"B W,at Koe! ReneJuela Oet. Cut w,et,er t,e deal i! (ood *or ReneJuela i! anot,er Fue!tion" BIn +) econo+ic +ind, I would !a), 4W,) are t,e) willin( to !acri*ice t,i! +uc,.4 B !a)! Du!!o" 5,e Ko+inican Depu lic i! repa)in( it! oil de t to ReneJuela partl) in !trin( ean!" 0or(e >iYon, w,o pre-iou!l) worked in Latin A+erica *or t,e A+oco and S,ell co+panie!, note! t,at all t,e oil t,at ReneJuela pro-ide! on ea!) credit ter+! to ot,er countrie! could ,a-e een !old *or ca!, on t,e (lo al +arket" B5o ReneJuela, *ro+ a ca!,?*low point o* -iew, t,i! repre!ent! clo!e to 6$ illion a )ear o* re-enue t,at t,e)4re +i!!in(,B >iYon !a)!" 5,e !tate?owned oil co+pan) >etroleo! de ReneJuela, S"A" al!o donated oil to low?inco+e *a+ilie! in t,e United State!" 5,ere were t,e oil !u !idie! *or 3u a" >lu!, t,ere4! all t,e oil t,at (oe! *or c,eap (a!oline *or ReneJuelan dri-er!" BIn realit), >KRSA +ake! +one) *ro+ onl) a !+all proportion o* t,e oil it produce!,B !a)! independent ener() econo+i!t Do(er 5i!!ot, w,o !pecialiJe! in t,e Latin A+erican ener() +arket" B=ow, can t,at continue. I don4t t,ink !o"B ReneJuela4! pro le+ i! t,at it! oil production

i! declinin(, in part ecau!e o* t,e lack o* rein-e!t+ent and t,e politiciJation o* >KRSA operation! under t,e 3,a-eJ (o-ern+ent" Unle!! oil price! +o-e !,arpl) ,i(,er, t,e countr) will *ace a !i(ni*icant lo!! o* oil re-enue" BIn 1997, >KRSA wa! producin( 3"$ +illion arrel! a da),B note! >iYon, now
an ener() anal)!t at t,e Uni-er!it) o* 5exa! at Au!tin" B5oda) t,e) are a out &": +illion arrel! a da)" It !,ow! )ou w,at a ad Eo t,e ReneJuelan (o-ern+ent ,a! done in +ana(in( t,eir national oil co+pan)"B 3,a-eJ died e*ore ,e ,ad to con*ront t,e econo+ic and political pro le+! certain to pla(ue ,i! !ucce!!or" ReneJuela4! next pre!ident won4t e a le to +aintain t,e

oil indu!tr), !u !idiJe (a!oline at ,o+e, !pend oil re-enue on !ocial pro(ra+! and !,are ReneJuela4! oil wealt, wit, ,i! 3ari ean and Latin nei(, or!" So+et,in( ,a! to (i-e " I* it4! a c,oice
etween !er-in( do+e!tic need! and +aintainin( t,e !weet,eart oil deal! wit, ot,er countrie!, t,e >etro3ari e nation! +a) e in *or a di!appoint+ent"

7ene5uela &ill cut production to maintain prices A6=' ()3D/13, (AH>, ReneJuela open to oil production cut to +aintain price!: +ini!ter#, 3,annel=ew! A!ia, ,ttp://www"c,annelnew!a!ia"co+/new!/ u!ine!!/international/-eneJuela? open?to?oil?production?cut?to?/<:9<:<",t+l, 01a,n2 3ADA3AS: ReneJuela would e open to an oil production cut i* t,e Ir(ani!ation o* >etroleu+ Exportin( 3ountrie! (I>E32 decided it wa! nece!!ar) to ,elp +aintain price! , Ener() Mini!ter Da*ael
Da+ireJ !aid Monda)" BWe ,a-e a Eoint production le-el o* 3' +illion arrel! per da)""" t,at we can +aintain in order to keep price! at 61'' a arrel,B Da+ireJ !aid a,ead o* an I>E3 +eetin( in Rienna later t,i! week" Cut Da+ireJ added: BI* durin( t,e di!cu!!ion! *ear! are expre!!ed t,at !uc, a le-el o* production could a**ect price!, we would e open to a cut in production"B Da+ireJ wa! due to ,ead to t,e Au!trian capital on 5ue!da) a,ead o* t,e +eetin( wit, ,i! I>E3 counterpart!, w,ic, e(in! on 5,ur!da)" 5,e oil cartel account! *or 3$ percent o* world oil production" I>E3 oo!ted production to 3'"&1 +illion arrel! a da) in April *ro+ &9"93 +illion in Marc, w,ile +aintainin( a *lat *oreca!t *or (lo al de+and" =ew Aork4! +ain contract, We!t 5exa! Inter+ediate li(,t !weet crude *or deli-er) in 0ul), dropped $% cent! to 693"<1 a arrel Monda) a*ternoon and Crent =ort, Sea crude *or 0ul) deli-er) !,ed 19 cent! to 61'&"%$" 5,e ReneJuelan +ini!ter, w,o al!o ,ead! t,e !tate?owned >KRSA oil co+pan), !aid t,e

(oal o* t,e +eetin( wa! to Bde*end t,e price o* oil,B addin( t,at *or 3araca!, t,e tar(et price wa! B61'' a arrel, at a +ini+u+"B 8e !aid !o+e I>E3 +e+ er countrie! were o-erproducin( *or B(eopolitical rea!on! ,B ut
did not na+e an) !peci*ic !tate!" ReneJuela ,a! t,e world4! lar(e!t pro-en oil re!er-e!, accordin( to I>E3" 5,e (o-ern+ent !a)! ReneJuela produce! t,ree +illion arrel! o* oil per da), alt,ou(, I>E3 !a)! t,e *i(ure i! &"3 +illion" Iil production account! *or 9' percent o* t,e countr)4! ,ard currenc) re-enue"

Diesel$fuel plants &ill result in production cut4ac8s @usiness&ee8' .)**/13 (Cloo+ er( Cu!ine!!week, ReneJuelaN! =ew Kie!el?Hired >ower >lant! Ma) Deduce Iil Export!#, </11/&'13, ,ttp://www" u!ine!!week"co+/new!/&'13?'<? 11/-eneJuela?!?new?die!el?*ired?power?plant!?+a)?reduce?oil?export!, 01a,n2 ReneJuela, Sout, A+ericaN! i((e!t oil exporter, i! oo!tin( power (eneration *ro+ petroleu+ product! ) a out 1' percent a! it !eek! to end lackout!, potentiall) reducin( !,ip+ent! a road" ReneJuela i! addin( a out 1"& (i(awatt o* die!el?*ueled electricit) capacit) in &'13 to a-oid anot,er rece!!ion cau!ed ) drou(,t, Electricit) Mini!ter 0e!!e 3,acon !aid in an inter-iew in 3araca! toda)"
Kie!el i! a !,ort?ter+ !olution e*ore we de-elop clean !ource! o* ener() and +o-e t,er+al plant! to natural (a!,# !aid 3,acon, w,o took o**ice in April" Hallin( oil production and ri!in( !ale! to t,e local power !ector are likel) to

reduce !tate?run >etroleo! de ReneJuelaN! oil export! ) a out &'',''' arrel! a da) , AleEandro
Ori!anti and AleEandro ArreaJa, =ew Aork? a!ed anal)!t! wit, Carcla)! >lc !aid in a note to client! )e!terda)" Iil pro-ide! 9< percent o* ReneJuelaN! *orei(n earnin(!, w,ic, are u!ed to i+port t,e +aEorit) o* (ood! con!u+ed in t,e Sout, A+erican nation" In addition to t,er+al plant!, t,e !tate power co+pan) known a! 3or poelec i! addin( a out :'' +e(awatt! o* new

capacit) *ro+ ,)dropower and wind, to

rin( total national in!talled capacit) to around 3' (i(awatt! ) t,e end o* t,i! )ear, 3,acon added" 5,e *ir!t tur ine o* t,e &"&?(i(awatt 5aco+a ,)dropower plant will e(in operation! in 0ul)" 5,e +ini!tr) i! co+ple+entin( new (eneration proEect! wit, +ea!ure! to +oderate de+and" =o a+ount o* new capacit) will e enou(, i* we donNt eco+e e**icient con!u+er!,# ,e !aid" ReneJuela ,a! t,e worldN! c,eape!t electricit) and Latin A+ericaN! ,i(,e!t per?capita electricit) con!u+ption, accordin( to t,e +ini!tr)" 5,e (o-ern+ent want! to reduce de+and (rowt, ) a out a t,ird to 3 to % percent a )ear ) o-er,aulin( price! and in!tallin( +ore +eter!, t,e +ini!ter !aid"

Structural factors pre#ent in#estment in production capa4ilities 7ene5uela0s econom% is too &ea8 N12' /)D/13, (Kwindlin( >roduction 8a! Led to Le!!er Dole *or ReneJuela a! MaEor Iil >ower#, =ew Aork 5i+e!, 3/:/&'13, ,ttp://www"n)ti+e!"co+/&'13/'3/'9/world/a+erica!/-eneJuela!?role?a!?oil?power? di+ini!,ed",t+l.Mr/', 01a,n2 8IUS5I= L >re!ident 8u(o 3,T-eJ reli!,ed u!in( ReneJuelaN! oil wealt, to proEect power internationall), nud(in( I>E3 to rai!e oil price! w,en ,e could, !,owerin( allie! like 3u a and =icara(ua wit, !u !idiJed oil !,ip+ent!, and +ockin( t,e United State! w,ile !ellin( it ,i! crude " Cut Mr" 3,T-eJN! deat, on 5ue!da) ,a! ,ad !urpri!in(l) little i+pact on (lo al oil +arket!, ,i(,li(,tin( ,ow ReneJuelaN! dwindlin( crude production and export! ,a-e undercut it! (lo al power in recent )ear! "

International oil price! ,a-e arel) +o-ed !ince Mr" 3,T-eJ died" I>E3

,a! decided to increa!e !,ip+ent! to t,e United State! and Europe t,i! +ont,, u!in( oil *ro+ Saudi Ara ia and ot,er Oul* !tate!" Iil co+pan)
executi-e!, lon( *ru!trated ) Mr" 3,T-eJN! nationaliJation!, are -oicin( onl) tepid ,ope! t,at t,e) could po!!i l) return in *ull *orce to w,at wa! once one o* t,eir crown Eewel!" ReneJuelaN! annual oil production ,a! declined !ince Mr" 3,T-eJ

took o**ice in 1999 ) rou(,l) a Fuarter, and oil export! ,a-e dropped ) nearl) a ,al*, a +aEor econo+ic t,reat to a countr) t,at depend! on oil *or 9$ percent o* it! export! and %$ percent o* it! *ederal ud(et re-enue!"
ReneJuelaN! clout on I>E3 and on world oil price! ,a! een (reatl) di+ini!,ed ecau!e o* it! ina ilit) to exploit it! enor+ou! re!ource!,# !aid Mic,ael L)nc,, pre!ident o* Strate(ic Ener() and Econo+ic De!earc,, a con!ultanc)" In t,e 199'!, t,eir production wa! oo+in( and t,e) could t,u+ t,eir no!e at Saudi Ara ia and (et awa) wit, it, ut now t,e) ,a-e eco+e I>E3N! poor cou!in"# In a *unda+ental (eopolitical turn, ReneJuela now relie! *ar +ore on t,e United State! t,an t,e

United State! relie! on ReneJuela" ReneJuela depend! on t,e United State! to

u) %' percent o* it! export! ecau!e Oul* o* Mexico re*inerie! were de!i(ned to proce!! low?Fualit) ReneJuelan and Mexican crude! t,at +o!t re*inerie! around t,e world cannot ea!il) ,andle" Cut in recent )ear!, t,e United State! ,a! een replacin( it! i+port! o* Latin

A+erican crude! wit, oil *ro+ 3anadian oil !and! *ield! , w,ic, i! !i+ilarl) ,ea-)" A+erican i+port! o* ReneJuelan oil ,a-e declined to Eu!t under a +illion arrel! a da), *ro+ 1"7 +illion arrel! a da) in 1997, accordin( to t,e Ener() Kepart+ent" And w,ile ReneJuelan export! o* oil are in decline, it! dependenc) on
A+erican re*inerie! *or re*ined petroleu+ product! ,a! (rown to nearl) &'',''' arrel! a da) ecau!e o* !e-eral recent ReneJuelan re*iner) accident!" Expert! expect ReneJuela to !end arrel! no lon(er needed in t,e United State! to 3,ina, a! pa)+ent! in kind under oil?*or?loan! contract!" ReneJuelaN! roken re*iner) !ector ,a! le*t !,orta(e! o* (a!oline and die!el in part! o* Latin A+erica, openin( t,e door *or -alua le +arket! to A+erican re*iner!" I-er ,i! 1% )ear! in power, Mr" 3,T-eJ relied ,ea-il) on oil re-enue! to *inance ,i! !ocial pro(ra+!" Ener() expert! !a) ,i! (a!oline !u !idie! dou led do+e!tic con!u+ption, cuttin( deepl) into export!, ut t,at ,i! ,o!tilit) to *orei(n in-e!t+ent and +i!+ana(e+ent o* t,e !tate oil co+pan) >etroleo! de ReneJuela were t,e pri+ar) rea!on! *or t,e !teep decline in production" A !trike and t,e *irin( o* +ana(e+ent talent and &',''' worker! at t,e oil co+pan) in &''& led to a !teep decline in t,e co+pan), w,ic, ,a! een under!cored ) t,e re*iner) accident!" ReneJuela i! a *raction o* w,at it u!ed to e,# !aid Sadad I ra,i+ al?8u!!eini, a *or+er ,ead o* Saudi Ara+coN! exploration and production di-i!ion, and t,atN! reall) ecau!e ReneJuelaN! tec,nocrat! ,a-e !cattered o-er t,e world and are no lon(er acti-e in ReneJuela"# Mr" 3,T-eJ *urt,er o-er,auled oil exploration and production wit, a nationaliJation pro(ra+ in &''< t,at ordered a rene(otiation o* contract! wit, *orei(n co+panie!, +andatin( t,at ReneJuelaN! oil co+pan) (et a +ini+u+ <' percent !,are in all production proEect!" Sixteen *orei(n co+panie!, includin( Do)al Kutc, S,ell and 3,e-ron, went alon( wit, t,e new rule!, w,ile Exxon Mo il, 3onoco >,ilip! and ot,er co+panie! re!i!ted, and t,eir ,oldin(! were nationaliJed" ReneJuela ,a! ,u(e re!er-e!, includin( it!

Irinoco ,ea-) oil elt, w,ic, t,e United State! Oeolo(ical Sur-e) e!ti+ate! to ,a-e $13 illion arrel! o* reco-era le oil L enou(, potentiall) to +ake ReneJuela one o* t,e top t,ree world producer!" Cut *orei(n oil co+panie! ,a-e een war) o* in-e!tin(" 0o!e Ralera, a 8ou!ton ener() law)er, !aid t,at i* =icolT! Maduro, Mr" 3,T-eJN! -ice pre!ident until ,e wa! !worn
in a! pre!ident on Hrida), or anot,er +e+ er o* t,e Mr" 3,T-eJN! +o-e+ent wa! elected pre!ident in a !pecial election it i! rea!ona le to expect continuit) o* a !u !tantial portion o* t,e policie!"# Cut a! *or ReneJuelaN! econo+), ,e ar(ued, t,e !ituation ri(,t now i! not !u!taina le and itN! onl) a +atter o* ti+e e*ore !o+e !i(ni*icant c,an(e! will ,a-e to e in!tituted"#

Lo& production causes insta4ilit% t!at ma8es price #olatilit% ine#ita4le ;AO' 9. (U"S" OAI, E=EDOA SE3UDI5A I!!ue! Delated to >otential Deduction! in ReneJuelan Iil >roduction#, United State! Oo-ern+ent Accounta ilit) I**ice, ,ttp://www"(ao"(o-/new"ite+!/d'<<<:"pd*, ,ttp://www"(ao"(o-/new"ite+!/d'<<<:"pd*2 ReneJuelan oil production ,a! *allen !ince &''1, ut export! o* crude oil and petroleu+ product! to t,e United State! ,a-e een relati-el) !ta leLexcept durin( a &?+ont, !trike in t,e winter o* &''&S&''3, durin( w,ic, t,e oil
!ector wa! -irtuall) !,ut down and export! to t,e United State! *ell ) a out 1"& +illion arrel!" Ener() In*or+ation Ad+ini!tration data !,ow t,at total ReneJuelan oil production in &''1 a-era(ed a out 3"1 +illion arrel! per da), ut ) &''$ ,ad *allen to a out &"< +illion arrel! per da)" Hollowin( t,e !trike, ReneJuelaN! >re!ident ordered t,e *irin( o* up to %' percent o* ReneJuelaN! national oil co+pan) e+plo)ee!" U"S" and international oil indu!tr) expert! told u! t,at t,e re!ultin( lo!! o*

experti!e contri uted to t,e decline in oil production" In &''$,t,e ReneJuelan (o-ern+ent announced plan! to
expand it! oil production !i(ni*icantl) ) &'1&, ut oil indu!tr) expert! dou t t,e plan can e i+ple+ented ecau!e ReneJuela ,a! not ne(otiated needed deal! wit, *orei(n oil co+panie! a! called *or in t,e plan" A +odel de-eloped *or t,e Kepart+ent o* Ener() e!ti+ate! t,at a <?+ont, di!ruption o* crude oil wit, a te+porar) lo!! o* up to &"& +illion arrel! per da)La out t,e !iJe o* t,e lo!! durin( t,e ReneJuelan !trikeLwould, all el!e re+ainin( eFual, re!ult in a !i(ni*icant increa!e in crude oil price! and lead to a reduction o* up to 6&3 illion in U"S" (ro!! do+e!tic product" A ReneJuelan oil e+ ar(o a(ain!t t,e United State! would increa!e con!u+er price! *or petroleu+ product! in t,e !,ort?ter+ ecau!e U"S" oil re*iner! would experience ,i(,er co!t! (ettin( replace+ent !upplie!" A !,utdown o* ReneJuelaN! w,oll)?owned U"S" re*inerie! would increa!e

petroleu+ product price! until clo!ed re*inerie! were reopened or new !ource! were rou(,t on line" 5,e!e di!ruption! would al!o !eriou!l) ,urt t,e ,ea-il) oil?dependent ReneJuelan econo+)" U"S" (o-ern+ent pro(ra+! and acti-itie! to en!ure a relia le !uppl) o* oil *ro+ ReneJuela ,a-e een di!continued, ut
t,e U"S" (o-ern+ent ,a! option! to +iti(ate !,ort?ter+ oil di!ruption!" Hor exa+ple, acti-itie! under a U"S"SReneJuela oil tec,nolo() and in*or+ation exc,an(e a(ree+ent were !topped in &''3, in part, a! a re!ult o* diplo+atic deci!ion!" In recent )ear!, U"S" oil co+panie! ,a-e not !ou(,t a!!i!tance *ro+ t,e U"S" (o-ern+ent wit, i!!ue! in ReneJuela ecau!e t,e co+panie! do not

elie-e t,at *ederal a(enc) inter-ention would e ,elp*ul at t,i! ti+e" 5o +iti(ate !,ort?ter+ oil !uppl) di!ruption!, t,e U"S" (o-ern+ent could atte+pt to (et oil?producin( nation! to increa!e t,eir production to t,e extent po!!i le, or could relea!e oil *ro+ t,e U"S" Strate(ic >etroleu+ De!er-e" W,ile t,e!e option! can +iti(ate !,ort?ter+ oil !uppl) di!ruption!,

lon(?ter+ reduction! in ReneJuelaN! oil production and export! are a concern *or U"S" ener() !ecurit), e!peciall) in li(,t o* current ti(,t !uppl) and de+and condition! in t,e world oil +arket" I* ReneJuela *ail! to +aintain or expand it! current le-el o* production, t,e world oil +arket +a) eco+e e-en ti(,ter t,an it i! now, puttin( *urt,er pre!!ure on ot, t,e le-el and -olatilit) o* ener() price!"

uq #ene5uelan prices falling

2!e transition !as created insta4ilit% t!at &ill destro% prices Scicc!itano' /)./13 (>aul, citin( 8ou!e Intelli(ence 3o++ittee, 8oek!tra: >o!t?3,a-eJ ReneJuela 3ould Huel E-entual Iil >rice Krop#, 3/</&'13, =ew!+ax, ,ttp://www"new!+ax"co+/=ew!*ront/c,a-eJ?deat,?oil?drop/&'13/'3/'</id/%93333, 01a,n2 5,e *or+er c,air+an o* t,e power*ul 8ou!e Intelli(ence 3o++ittee tell! =ew!+ax t,e deat, o* ReneJuelan dictator 8u(o 3,a-eJ i! unlikel) to ,a-e an) e**ect on (lo al oil price! in t,e !,ort ter+, ut could rin( (reater !ta ilit) L and po!!i l) a i( price drop L in t,e lon( ter+ " I* we (et a (o-ern+ent t,atN! +ore *riendl) to t,e We!t L it rin(! a out *unda+ental re*or+! in ReneJuela L I t,ink )ou could per,ap! in t,e lon( ter+ !a) itN! po!iti-e *or t,e United State!,# predicted 8oek!tra !peakin( in an exclu!i-e inter-iew on 5ue!da)" ItN! po!iti-e *or A+erican con!u+er! ecau!e a !ta le oil +arket will +ean t,at price! will (o down " 3,a-eJ wa! alwa)! one )ouNre ne-er Fuite !ure w,at wa! (oin( to ,appen,# ,e !aid" In!ta ilit) reed! pre+iu+ pricin(" Sta ilit) will lower price!, lower ri!k L and ,ope*ull) t,atN! w,at weNll !ee"# 8oek!tra, w,o i! on t,e ad-i!or) oard o* LIO=E5, a (lo al
intelli(ence and *oreca!tin( !er-ice a!ed in Wa!,in(ton, K"3", !aid t,at t,e United State! !,ould re!pond to 3,a-eJN deat, in a pro*e!!ional# and re!pect*ul +anner" We need to extend our !)+pat,) to t,e people o* ReneJuela" 5,e)N-e lo!t t,eir pre!ident,# explained 8oek!tra, w,o recentl) +ade a id *or a U"S" Senate !eat in Mic,i(an" Cut 8oek!tra elie-e! t,at t,e United State! !,ould al!o approac, 3,a-eJN pa!!in( a! an opportunit)" We need to reco(niJe t,at 8u(o 3,a-eJ ,a! not een a *riend to t,e United State! and ,a! een an anta(oni!t to u!,# ,e !aid" And we now need to u!e t,i! a! an opportunit) to reac, out to t,e people o* ReneJuela, and ,ope*ull) !tart a new c,apter wit, t,at countr) and de-elop a +uc, etter relation!,ip"# 8e elie-e! t,e United State! will pur!ue ack c,annel! to pro+ote a new relation!,ip wit, t,e oil?ric, !tate" I t,ink at lea!t o-er t,e next couple o* week!, o-er t,e next couple o* +ont,!, t,ereN! Eu!t (oin( to e a lot o* ackroo+ di!cu!!ion!,# !aid 8oek!tra" I ,ope t,at t,ereN! reac,in( out to !ee i* t,ere i! a wa) to *ind co++on (round and to !et t,e relation!,ip! etween t,e two countrie! on a new track"# An) ti+e t,ere i! a leader!,ip c,an(e in a countr), t,ere al!o i! a c,ance *or t,e United State! to ac,ie-e etter relation!, ,e explained" An) ti+e t,ere i! a !i(ni*icant c,an(e, w,ic, )ouNll ,a-e w,en a leader o* a countr) pa!!e! awa), itN! !i(ni*icant c,an(e" It pro-ide! u! wit, t,at opportunit),# ,e !aid" I ^+ a!!u+in( t,at t,e !ecretar) o* !tate, t,e pre!ident, t,e *ull ad+ini!tration, i! (oin( to do e-er)t,in( t,at t,e) can to u!e t,i! a! creatin( a turnin( point in our relation!,ip!"# 8e predicted t,at t,e United State! will e in a +uc, etter po!ition to deter+ine w,et,er it i! etter o** wit, ReneJuelaN! new leader!,ip !ix +ont,! *ro+ now" I t,ink 3,a-eJ, and t,e a(enda t,at 3,a-eJ ,a! put in place wa! not,in( ut pro le+atic *or t,e United State!,# !aid 8oek!tra" 8i! relation!,ip! in Sout, A+erica, t,e (o-ern+ent! t,at ,e propped up, t,e relation!,ip t,at ,e de-eloped wit, 3u a, t,e relation!,ip t,at ,e de-eloped wit, Iran L wa! reall) not,in( +ore t,an an anti?A+erican tirade and t,i! now a(ain pro-ide! u! t,e opportunit) to +o-e into a new direction,# ,e added" 8oek!tra al!o !aid t,at ,e would a-oid an) re!pon!e to ReneJuelan Rice >re!ident =icola! MaduroN! a!!ertion t,at 3,a-eJ wa! !o+e,ow in*ected wit, cancer ) Bi+periali!tB ene+ie!" Aou let ,i+ +ake t,e re+ark! t,at ,e need! to +ake and )ou Eu!t lea-e t,e+ (o,# !aid 8oek!tra" W,en t,ereN! not,in( t,ere in !u !tance, Eu!t lea-e it (o" >eople in A+erica, people in ReneJuela L t,e)Nll +ake t,eir own Eud(+ent! on t,o!e kind! o* !tate+ent! and I donNt t,ink t,e)Nll (i-e t,e+ a lot o* credi ilit)"#

uq #ene5uela trade ine#ita4le

U"S"$7ene5uelan oil trade is ine#ita4le countries are mutuall% dependent Al#are5' and :anson' 9? (Step,aniec, a!!ociate director and coordinatin( editor at t,e 3ouncil on Horei(n Delation!, Kirector o* >olic) and Iutreac, at t,e Wil!on 3enter, 3e!ar 0"cc, re!earc, a!!i!tant *or t,e 3ouncil on Horei(n Delation!, ReneJuela4! Iil?Ca!ed Econo+)#, &/9/&''9, ,ttp://www"c*r"or(/econo+ic!/-eneJuela!?oil? a!ed?econo+)/p1&':9Wp7, 01a,n2
ReneJuela4! pro-en oil re!er-e! are a+on( t,e top ten in t,e world" Iil (enerate! a out :' percent o* t,e countr)N! total export re-enue, contri ute! a out ,al* o* t,e central (o-ern+entN! inco+e, and i! re!pon!i le *or a out one?t,ird o* t,e countr)N! (ro!! do+e!tic product (OK>2" Increa!e! in world oil price! in recent )ear! ,a-e allowed ReneJuelan >re!ident 8u(o 3,a-eJ to expand !ocial pro(ra+ !pendin(, ol!ter co++ercial tie! wit, ot,er countrie!, and oo!t ,i! own international pro*ile" 5,ou(, 3,a-eJ ,a! t,reatened to !top exportin( ReneJuelan oil and re*ined petroleu+ product! to t,e United State!, it! i((e!t oil?tradin( partner, expert! !a) a !i(ni*icant !,ort?ter+ !,i*t in oil relation! etween ReneJuela and t,e United State! i! unlikel)" 5,e +ediu+?ter+ outlook *or !tate oil co+pan) >KRSA i! Fue!tiona le, ,owe-er, and anal)!t! draw link! etween >KRSA4! pro*ita ilit) and t,e political !ta ilit) o* t,e countr)" Anal)!t! !a) t,e recent (lo al *inancial cri!i! and !udden drop in oil price! are addin( to t,e oil co+pan)4! *inancial tur+oil" ReneJuela4! Econo+) under 3,a-eJ 8u(o 3,a-eJ took o**ice in 1999" Since t,en, ReneJuelaN! econo+) ,a! re+ained !Fuarel) centered on oil production" In &''<, 3,a-eJ announced a nationaliJation o* oil *ield! +ana(ed ) *orei(n co+panie!, w,ic, re!ulted in an increa!e o* t,e (o-ern+entN! !,are! in t,e!e proEect! *ro+ %' percent to <' percent" Oo-ern+ent o**icial! ar(ue, ,owe-er, t,at econo+ic (rowt, e**ort! are not !olel) *ocu!ed on oil" ReneJuelaN! a+ a!!ador to t,e United State!, Cernardo Al-areJ 8errera, wrote in a &''< Horei(n A**air! e!!a) t,at t,e non?oil !ector, w,ic, include! +inin(, +anu*acturin(, and a(riculture, (rew 1'"< percent in &''$, indicatin( an i+portant di-er!i*ication o* t,e countr)4! econo+)"# Aet e-en i* t,e countr) i! workin( to di-er!i*),oil !till predo+inate!,# !a)! Mi(uel 5inker?Sala!, a pro*e!!or o* Latin A+erican ,i!tor) at >o+ona 3olle(e" In &''&, t,e ReneJuelan econo+) experienced a !i(ni*icant downturn *ollowin( a *ailed +ilitar) coup to o-ert,row 3,a-eJ and a two? +ont, !trike ) t,e !tate?run oil co+pan) >KRSA" 5,e re!pon!e to t,e !trikeLt,e di!+i!!al o* +ore t,an !e-enteen t,ou!and >KRSA e+plo)ee!Lre!ulted in a rapid drop in OK> etween &''& and &''3" In !u !eFuent )ear!, ri!in( international oil price! ,elped t,e econo+) to reco-er" In &''7, t,e International Monetar) Hund (IMH2 e!ti+ate!, econo+ic (rowt, wa! :"% percent" Ipinion i! di-ided o-er t,e e**ect o* 3,a-eJ4! policie! on ReneJuela4! econo+)" So+e econo+i!t! !a) t,e tre+endou! ri!e in !ocial !pendin( under 3,a-eJ ,a! (reatl) reduced po-ert) and pu!,ed une+plo)+ent elow 1' percent, it! lowe!t le-el in +ore t,an a decade" Accordin( to a He ruar) &'': report *ro+ t,e Wa!,in(ton? a!ed 3enter *or Econo+ic and >olic) De!earc,, not onl) ,a! une+plo)+ent dropped, *or+al e+plo)+ent ,a! increa!ed !i(ni*icantl) (>KH2 !ince 3,a-eJ took o**ice" Cut ot,er econo+i!t! expre!! concern! a out t,e countr)4! ,i(, in*lation le-el!" 5,e IMH ,a! *oreca!t in*lation o* &$"7 percent in &'': and 31"' percent in &''9La+on( t,e ,i(,e!t rate! *or an) countr) in t,e worldLand accordin( to new! report!, t,e countr) i! alread) experiencin( *ood !,orta(e! o* (ood! !uc, a! !u(ar and +ilk" Hranci!co Dodri(ueJ, *or+er c,ie* econo+i!t o* t,e ReneJuelan =ational A!!e+ l), write! in a &'': Horei(n A**air! article t,at inco+e ineFualit) ,a! increa!ed durin( 3,a-eJ4! tenure, and *urt,er, 3,a-eJ4! !ocial pro(ra+! ,a-e not ,ad a !i(ni*icant i+pact on in*ant +ortalit) rate or literac) rate! a+on( ReneJuelan!" >KRSA >KRSA (>etrUleo! de ReneJuela, S"A"2, ReneJuelaN! !tate?owned petroleu+ co+pan), o-er!ee! t,e exploration, production, re*ine+ent, and export o* oil a! well a! t,e exploration and production o* natural (a!" It i! t,e world4! t,ird?lar(e!t oil co+pan), e,ind Saudi Ara+co and ExxonMo il" Accordin( to 5inker?Sala!, a*ter t,e nationaliJation o* ReneJualaN! oil in 197<, >KRSA wa! -er) +uc, like a !tate wit,in a !tate"# It in!ulated it!el* *ro+ t,e (o-ern+ent# and *unctioned lar(el) a! it! own entit) wit, control o* t,e nationN! wealt," In 19:', >KRSA acFuired 3I5OI, a U"S"? a!ed re*iner), and it i! now one o* t,e world4! lar(e!t re*iner!" Under 3,a-eJ, ,owe-er, t,e co+pan)4! +andate ,a! dra!ticall) expanded" In &''&, 3,a-eJ rede*ined >KRSAN! role to include t,e (o-ern+entN! !ocial prioritie!" >KRSA +u!t now !pend at lea!t 1' percent o* it! annual in-e!t+ent ud(et on !ocial pro(ra+!" 5,i! +one) i! *unneled t,rou(, t,e =ational Ke-elop+ent Hund, or Honden, an in-e!t+ent *und !et up in &''$ t,at i! not included in t,e (o-ern+ent4! ud(et" >eter 8aki+, pre!ident o* t,e Inter?A+erican Kialo(ue, a Wa!,in(ton? a!ed center *or polic) anal)!i!, !a)! t,at 3,a-eJN! (radual takeo-er o* >KRSA ,a! (i-en ,i+ an enor+ou! ankroll to pur!ue ,i! political and econo+ic a+ ition!" Aet 3,a-eJ ,a! al!o +o-ed to expand >KRSAN! role in ReneJuelaN! oil -enture!" In t,e 199'!, ReneJuela opened it! oil indu!tr) to li+ited pri-ate in-e!t+ent and allowed *orei(n co+panie! to +ana(e !peci*ic oil *ield!" Suc, !trate(ic a!!ociation!# +ade up rou(,l) &3 percent o* total oil production a! o* &''<" In April &''<, 3,a-eJ announced t,e (o-ern+ent would take a +aEorit) !take in !uc, proEect!, increa!in( it! !,are *ro+ %' percent to <' percent" 5,ou(, t,i! partial nationaliJation i! expected to urden >KRSA wit, in-e!t+ent co!t! in t,e illion!, in &''7 t,e pre!ident created !e-en new !u !idiarie! o* >KRSA, includin( !er-ice!, a(riculture, !,ip uildin(, con!truction and indu!tr)" 5,e ,ead o* >KRSA, Da*ael Da+ireJ, told t,e =ew Aorker in 0une &'': t,at 3,a-eJ plan! to u!e t,e oil co+pan) to tran!*or+ ReneJuela *ro+ an Boil !ultanate to a producti-e !ociet) wit,in a !ociali!t *ra+ework"B 5,e *inancial cri!i! and oil price drop ,a! ,ad !o+e i+pact on t,e oil co+pan)" In particular, >KRSA lo!t a 6$ illion line o* credit in Icto er &'':" In earl) &''9, 3,a-eJ !i(naled t,e (o-ern+ent would e open to +ore *orei(n in-e!t+ent in it! oil re!ource!, ut anal)!t! !a) t,ere i! little tru!t (Cloo+ er(2 contract! would e ,onored o-er t,e lon( ter+" B3,T-eJ i! cele ratin( t,e de+i!e o* capitali!+ a! t,i! international cri!i! un*old!,B >edro Mario Curelli, a *or+er oard +e+ er o* >KRSA, told t,e International 8erald 5ri une" BCut t,e iron) i! t,at capitali!+ actuall) *ed ,i! !)!te+ in ti+e! o* plent)"B Spendin( t,e Iil Mone) It i! di**icult to deter+ine ,ow ReneJuela ,a! een !pendin( it! oil wind*all, (i-en t,e lack o* (o-ern+ent tran!parenc) (t,e countr) rank! 1<& out o* 179 countrie! ranked on 5ran!parenc) International4! corruption index2" 8owe-er, *ro+ t,e *ew o**icial *i(ure! t,e (o-ern+ent ,a! relea!ed and it! !tated pled(e! o* aid to *orei(n countrie!, it i! po!!i le to (lean a picture o* illion! o* dollar! di!per!ed on acti-itie! not directl) related to >KRSA4! core u!ine!!" Anal)!t! expre!! *ru!tration t,at t,e!e report! lack detail, and e**ort! ) new! or(aniJation to o tain *urt,er in*or+ation *ro+ (o-ern+ent a(encie! ,a-e een re u**ed (=A52" >KRSA ,a! tran!*erred illion! o* dollar! to Honden, t,e o**? ud(et in-e!t+ent *und +an) expert! !a) i! *inancin( 3,a-eJ4! !ocial proEect!" Accordin( to International Iil Kail), an ener() trade pu lication, >KRSA !pent 61%"% illion on !ocial pro(ra+! in &''7 (a! co+pared to 6<"9 illion in &''$2" 5,e!e pro(ra+! include proEect! !uc, a! +edical clinic! pro-idin( *ree ,ealt, care, di!counted *ood and ,ou!e,old (ood! center! in poor nei(, or,ood!, indi(enou! land?titlin(, Eo creation pro(ra+! out!ide o* t,e oil u!ine!!, and uni-er!it) and education pro(ra+!" Increa!ed oil

re-enue! ,a-e al!o (i-en 3,a-eJ t,e a ilit) to extend a!!i!tance pro(ra+! out!ide ReneJuelaN! order!" Hor exa+ple, ,e pro-ide! oil at a pre*erential price to +an) countrie! in t,e 3ari ean t,rou(, t,e >etrocari e initiati-e" In &''9, a ReneJuela? acked ,o+e ,eatin( pro(ra+ to low?inco+e ,ou!e,old! in t,e United State! wa! rie*l) ,alted, a !i(n t,at low oil price! +a) e *orcin( 3,a-eJ to recon!ider (5IME2 !o+e o* ,i! !ocial pro(ra+!" In Au(u!t &''7, t,e A!!ociated >re!! calculated t,at 3,a-eJ ,ad pro+i!ed 6:": illion in aid, *inancin(, and ener() *undin( to Latin A+erica and t,e 3ari ean etween 0anuar) and Au(u!t &''7, a *i(ure *ar ,i(,er t,an t,e 61"< illion o* U"S" a!!i!tance *or t,e entire )ear" 5,ou(, it i! i+po!!i le to deter+ine ,ow +uc, o* t,at *undin( wa! actuall) di!per!ed, t,e di**erence in aid i! !trikin(" 3,a-eJ i! al!o !u!pected o* *unnelin( +one) to t,eHAD3, a 3olo+ ian (uerrilla (roup, a! well a! pro-idin( *und! to Ar(entine >re!ident 3ri!tina 1irc,nerN! election ca+pai(n in &''7Lt,ou(, ,e denie! ot, c,ar(e!" Militar) expenditure! are al!o *unded ) t,e (o-ern+ent4! *lu!, co**er!" Cetween &''% and &''<, ReneJuela !pent rou(,l) 6%"3 illion on weapon!, accordin( to a 0anuar) &''7 Ke*en!e Intelli(ence A(enc) report" A! part o* deal! !i(ned wit, Du!!ia in &''<, ReneJuela purc,a!ed 1'',''' 1ala!,niko- ri*le!, twent)?*our Suk,oi?3' *i(,ter plane!, and *i*t)?t,ree Du!!ian ,elicopter!" In Marc, &'':, it ,ired Celaru! to uild an air de*en!e !)!te+" 3ritic! o* 3,a-eJ t,ink ,e !,ould e pourin( +one) into in*ra!tructure to en!ure a !u!taina le oil indu!tr) rat,er t,an allocatin( !o +uc, *or !ocial and *orei(n polic) initiati-e!" Accordin( to t,e Wall Street 0ournal, >KRSA !pent Eu!t 6<' +illion on exploration in &''%, co+pared wit, 617% +illion in &''1"# Cut Ricente Hrepe!?3i il!, t,e lead econo+i!t *or ReneJuela at t,e World Cank, !a)! in-e!t+ent i! increa!in(# and ReneJuela ,a! an accu+ulation o* re!er-e! includin( out!ide *und! ran(in( *ro+ 61' illion to 61$ illion t,at it i! plannin( to u!e *or oil in*ra!tructure" >KRSA4! >roduction Le-el! and Hi!cal 8ealt, >KRSA ,a! not *iled *inancial !tate+ent! wit, t,e U"S" Securitie! and Exc,an(e 3o++i!!ion !ince &''%" A! a re!ult, it! production le-el! and o-erall *i!cal ,ealt, are !u Eect to de ate a+on( econo+i!t! and indu!tr) anal)!t!" A report (>KH2 ) t,e International Ener() A(enc) exa+inin( ReneJuela4! extra?,ea-) crude oil production put >KRSAN! &''$ production rate at 3"& +illion arrel! per da) ut !,owed a decrea!ed rate o* &"$$ +illion in Septe+ er &''<" 3urrentl), I>E3, t,e U"S" (o-ern+ent, and t,e International Ener() A(enc) a(ree t,at ReneJuelan oil production a+ount! to rou(,l) &"% +illion arrel! per da)" 5,e ReneJuelan (o-ern+ent, ,owe-er, !a)! >KRSA4! production i! a out 3"3 +illion arrel! per da)" Eit,er wa), t,ere are new !i(n! t,at all i!nNt ro!) at >KRSA" In &'':, ReneJuela4! ener() +ini!tr) relea!ed unaudited re!ult! docu+entin( a 3$ percent *all in pro*it! ) >KRSA t,e pre-iou! )ear" A *ew +ont,! later, audited *i(ure! were relea!ed t,at indicated pro*it! increa!ed 1$ percent in &''7" 5,e International Ener() A(enc), ,owe-er, !,ow! a 67"9 illion lo!! in &''7" Iil price!, w,ic, were extraordinaril) ,i(, t,rou(, +uc, o* &'':, ,elped +a!k !o+e o* t,e co+pan)4! *inancial woe!" Since t,e) e(an to drop dra+aticall) >KRSA ,a! !tru((led to keep up wit, it! *inancial o li(ation!, e!peciall) once it lo!t a 6$ illion line o* credit (3=C32 wit, t,e Do)al Cank o* Scotland in Icto er &'':" 5,e co+pan) ,ad a out 67"9 illion in un!ettled account! (Latin Cu!ine!! 3,ronicle2 etween 0anuar) and Septe+ er &'':, up *ro+ 6$"7 illion durin( all o* &''7, ut anal)!t! !a) !o *ar t,e co+pan) i! unlikel) to de*ault on it! creditor!" 8owe-er, t,e co+pan) +a) need to +ake !eriou! cut ack! or po!!i l) e-en !ell a!!et!, anal)!t! !a)" ReneJuela ,a! an e!ti+ated 7: illion arrel! o* pro-en con-entional crude oil re!er-e! and an additional e!ti+ated &3$ illion arrel! o* uncon-entional extra?,ea-) crude oil in t,e Irinoco Celt re(ion located !out,ea!t o* 3araca!" I* de-elop+ent in t,e re(ion can turn t,i! extra?,ea-) tar?like oil into a +ore +arketa le co++odit), ReneJuelaN! total re!er-e! couldri-al t,o!e o* Saudi Ara ia, report! t,e =ew Aork 5i+e!" Ix*ord Anal)tica note!, ,owe-er, t,at >KRSA will !tru((le to de-elop it! ,ea-)?oil re!er-e! in a ti+el) *a!,ion (i-en it! lack o* in*ra!tructure in-e!t+ent and t,e on(oin( oil nationaliJation!" Iil indu!tr) expert! !u((e!t t,at >KRSA need! to in-e!t at lea!t 63 illion annuall) into it! exi!tin( *ield! Eu!t to +aintain current production le-el!" De(ional Renture! ReneJuela i! Sout, A+ericaN! t,ird?lar(e!t +arket and i! acti-el) pur!uin( *urt,er econo+ic inte(ration wit, ot,er countrie! in t,e re(ion" In 0ul) &''< it eca+e a +e+ er o* t,e Sout, A+erican trade (roup Merco!ur (Mercado 3o+Zn del Sur2, Eoinin( CraJil, Ar(entina, Uru(ua), and >ara(ua)" 3,a-eJ ,a! al!o !purred t,e creation o* a re(ional de-elop+ent ank, known a! Canco del Sur" 8i(,li(,t! o* ReneJuela4! recent re(ional a(ree+ent! include: Ar(entina" ReneJuela and Ar(entina ,a-e +ade a(ree+ent! to create an in-e!t+ent ank *or in*ra!tructure de-elop+ent, a! well a! Eoint ,)drocar on exploration and de-elop+ent in ot, countrie!" ReneJuela ,a! al!o purc,a!ed 63"$ illion in ond! to ,elp pa) o** Ar(entinaN! de t" CraJil" In Ma) &'':, >etro ra! and >KRSA !i(ned an a(ree+ent to uild an oil re*iner) in nort,ea!tern CraJil, w,ic, i! anticipated to reFuire 6%"'$ illion in in-e!t+ent" >etro ra! will ,old <' percent o* t,e re*iner)4! !,are!" 3rude oil will e !upplied ) ot, countrie! to re*ine a proEected &'',''' arrel! per da)" 3olo+ ia" In &''7, ReneJuela and 3olo+ ia opened a natural (a! pipeline t,at link! nort,ern 3olo+ iaN! La OuaEira (a! *ield! to t,e >ara(uana re*inin( co+plex in we!tern ReneJuela" 5en!ion! etween t,e two countrie! ,a-e ,ei(,tened, ,owe-er, !ince a Marc, &'': !tando** in w,ic, 3,a-eJ !ent troop! to t,e 3olo+ ian order and te+poraril) !e-ered diplo+atic tie!" Coli-ia" ReneJuela and Coli-ia !i(ned a(ree+ent! in 0anuar) and Ma) &''< *or ReneJuela to !uppl) pre*erentiall) priced die!el and in-e!t 61"$ illion in t,e Coli-ian oil and (a! !ector in exc,an(e *or Coli-ian (ood! and !er-ice!, accordin( to Ix*ord Anal)tica" Ecuador" In He ruar) &'':, ReneJuela and Ecuador a(reed to colla orate on an oil re*iner) in Ecuador e!ti+ated to co!t 6$"$ illion" Under a(ree+ent! !i(ned in Ma) &''<, ReneJuela i! expected to re*ine up to 1'',''' arrel! o* Ecuadorean crude oil per da) at di!count price!" 3u a" 3o++erce etween ReneJuela and 3u a !oared to 67 illion in &''7, accordin( to t,e 3u an (o-ern+ent (in &''<, trade wa! 61"7 illion2" ReneJuela i! !ellin( up to 1'',''' arrel! o* oil per da) to 3u a, di!counted ) a! +uc, a! %' percent" In exc,an(e, t,ou!and! o* ReneJuelan! ,a-e tra-eled to 3u a *or +edical treat+ent, and 3u an doctor! ,elp ad+ini!ter ,ealt, care pro(ra+! *or low?inco+e ReneJuelan!" 5,ou(, ReneJuela ,a! repeatedl) t,reatened to cut

o** it! oil export! to t,e United State!, anal)!t! !a) t,e two countrie! are +utuall) dependent" ReneJuela !upplie! a out 1"$ +illion arrel! o* crude oil and re*ined petroleu+ product! to t,e U"S" +arket e-er) da), accordin( to t,e EIA" ReneJuelan oil co+pri!e! a out 11 percent o* U"S" crude oil i+port!, w,ic,
a+ount! to <' percent o* ReneJuelaN! total export!" >KRSA al!o w,oll) own! *i-e re*inerie! in t,e United State! and partl) own! *our re*inerie!, eit,er t,rou(, partner!,ip! wit, U"S" co+panie! or t,rou(, >KRSAN! U"S" !u !idiar), 3I5OI" A U"S" Oo-ern+ent Accounta ilit) I**ice (OAI2 report (>KH2 !a)! ReneJuelaN! export! o* crude oil and re*ined petroleu+

product! to t,e United State! ,a-e een relati-el) !ta le wit, t,e exception o* t,e !trike period " 5,e World Cank4! Hrepe!?3i il! !a)! ReneJuela will continue to e a ke) pla)er in t,e U"S" +arket"# 8e
ar(ue! t,at in t,e !,ort ter+ it will e -er) di**icult *or ReneJuela to +ake a !i(ni*icant !,i*t in !uppl) *ro+ t,e United State!" =e-ert,ele!!, 3,a-eJ ,a! increa!in(l) +ade e**ort! to di-er!i*) ,i! oil client! in order to le!!en t,e countr)N! dependence on t,e United State!" 5,e OAI report !a)! t,e !udden lo!! o* ReneJuelan oil in t,e world +arket would

rai!e world oil price! and !low t,e econo+ic (rowt, o* t,e United State!"

uq c!a#e5 transition > no in#estment

Numerous structural factors point to a decline in imports and production Ladisla& and 7errastro' /)./13 (Sara, I"c and Hrank A"cc, cco?director and !enior *ellow wit, t,e Ener() and =ational Securit) >ro(ra+ at t,e 3enter *or Strate(ic and International Studie!, !enior -ice pre!ident and 0a+e! D" Sc,le!in(er 3,air *or Ener() P Oeopolitic! at 3SIS, >o!t?3,a-eJ Iutlook *or ReneJuelan Iil >roduction#, 3/</13, ,ttp://c!i!"or(/pu lication/po!t? c,a-eJ?outlook?-eneJuelan?oil?production, 01a,n2 5,e wind! o* c,an(e are once a(ain lowin( in ReneJuela " 5,e recent announce+ent o* 8u(o 3,a-eJN! pa!!in( ,a! opened up a ,o!t o* Fue!tion! a out t,e *uture leader!,ip o* ReneJuela and t,e potential i+pact t,i! leader!,ip tran!ition could ,a-e on ReneJuelan oil production and (lo al oil +arket!" ReneJuela i! one o* t,e lar(e!t oil
and natural (a! re!ource ,older! in t,e world" It i! a+on( t,e worldN! lar(e!t oil producer! (13t,2 and exporter! (1't,2 and ,a! ,i!toricall) een one o* t,e United State!N lar(e!t !ource! o* oil i+port! (%t, e,ind 3anada, Saudi Ara ia and Mexico2" E-er !ince t,e *ailed coup and t,e !u !eFuent !trike t,at rou(,t a out a !,ort collap!e in oil production in &''&, *ollowed ) nationaliJation o* t,e oil !ector, onlooker! ,a-e een waitin( *or indication! t,at t,e re(i+eN! approac, to ener() production would eit,er *ail once and *or all or t,at !o+e political c,an(e would rin( a out re*or+ and reEu-enation o* t,e ener() !ector" A political tran!ition in ReneJuela i! now upon u! ut ,ow it e-ol-e! could +ean a lot *or t,e ener() !ector and (lo al ener() +arket!" Ke!pite it! enor+ou! oil re!ource!, ReneJuela4! oil production (re(ardle!! o* w,o!e *i(ure! )ou u!e2 ,a! lon( een in

!tead) decline" In &'11 liFuid! production wa! &"%7 +illion

arrel! per da) (++ d2 , down a +illion arrel! per da) !ince 1999" So+e o* t,i! i! re*lect! t,e c,an(in( co!t and econo+ic! o* ReneJuelan oil production ut *ield decline i! !i(ni*icant and experti!e and rein-e!t+ent are Fue!tiona le and lookin( ,arder to co+e )" 5,e internal tec,nical and +ana(erial

capa ilitie! o* !tate run oil and (a! co+pan) >KRSA ,a-e deteriorated !ince t,e &''& !trike and
a*ter+at," Increa!in(l), >KRSA relie! on contractor!, a! well a! ot,er pri-ate co+pan) partner!, to keep t,e *ield! in production ut report! !tate t,at contractor! ,a-e not een paid in +ont,! and t,at t,e political uncertaint) in t,e countr) ,a! e-en

dri-en routine deci!ion +akin( to a ,alt" 5,e !u!tained political uncertaint) ,a! al!o !lowed in-e!t+entG Du!!ian and
Indian co+panie! were plannin( to in-e!t in ReneJuela4! oil *ield! ut !o *ar ,a-e wit,,eld incre+ental new +one)" 3,ina ,a! not announced a new line o* credit or exten!ion! on it! de-elop+ent?linked *inancin( !ince la!t April" At t,e !a+e ti+e t,at production i! droppin(, ,i(,l) !u !idiJed do+e!tic con!u+ption o* oil i! increa!in( w,ile re-enue *ro+ export! i! al!o declinin(" 5,e United State! re+ain! t,e lar(e!t recipient o* ReneJuelan oil export! at9$',''' arrel! per da) in &'11, rou(,l) %' percent, plu! anot,er 1:$,''' arrel! per da) *ro+ t,e 3ari ean t,at wa! ReneJuelan !ourced ut t,o!e -olu+e! area down a! U"S" de+and ,a! declined and ot,er crude! ,a-e eco+e a-aila le" ReneJuela4! next lar(e!t export de!tination! are t,e 3ari ean (31 percent2 and t,en 3,ina (around 1' percent2" ReneJuela !ell! to +an) o* it! 3ari ean nei(, or! at elow +arket rate! due to extre+el) pre*erential *inancin( relation!,ip!, includin( additional ,ea-) !u !idie! *or 3u an export!" All o* t,i! cul+inate! in an outlook *or continued decline in oil production and a wor!enin( econo+ic outlook *or ReneJuela durin( a politicall) di**icult ti+e" 8owe-er, con-entional wi!do+ ar(ue! t,at +aintainin( oil production i! in t,e intere!t o* an) re(i+e" De-enue *ro+ oil production i! !uc, a lar(e part o* ReneJuelaN! (o-ern+ent alance !,eet t,at no leader!,ip could !ur-i-e *or lon( wit,out a !u!tained ca!, *low t,at oil export! rin(" 5,e con-er!e o* t,i! ar(u+ent i! t,at re-enue! (enerated ) t,e ener() !ector are !uc, an i+portant !ource o* power and in*luence in ReneJuela t,at t,ere i! potential *or in*i(,tin( o-er control o* t,e !ector" Moreo-er, t,e potential *or !trike! or

in!ta ilit) a+on( (roup! in-ol-ed in t,e !ector (!o+e o* w,o+ ,a-e not een paid2 could ,a-e additional ne(ati-e i+pact! on production " W,ile oil +arket! ,a-e !o *ar taken t,e new! o* 3,a-eJN! de+i!e in !tride (+an) clai+
ecau!e t,e new! wa! lar(el) expected, ot,er! ecau!e t,e political outco+e i! !till !o uncertain2 an actual di!ruption in ReneJuelan production could add pre!!ure to an alread) di**icult +arket outlook" 5,e la!t )ear ,a! produced a nu+ er o*

!uppl) di!ruption! around t,e world *ro+ I>E3, t,e Middle Ea!t =ort, A*rica re(ion, a! well a! non?I>E3
!ource!" I* t,e econo+ic outlook continue! to i+pro-e and )ield an increa!e (lo al ener() de+and, i* Iran !anction! re+ain in place, and i* ReneJuelan production e co+pro+i!ed, t,en oil price! would experience +uc, +ore !i(ni*icant up!ide pre!!ure *ro+ an) new di!ruption!" E-en under t,e e!t o* circu+!tance!, re*or+ in t,e ener() !ector will take a lon( ti+e to e+er(e" 5,e da+a(e t,at ,a! een done to not onl) >KRSA ut to t,e in!titution! o* t,e !tate and ci-il !ociet) could take )ear! to re,a ilitate" A *ew ke) rea!on! *or t,i! include: re-enue *ro+ t,e oil and (a! !ector t,at i! di-erted *or political purpo!e! and not rein-e!ted in a wa) t,at will dri-e new production will e ,ard to direct ack to u!e*ul in-e!t+ent in t,e !ector, +uc, o* t,e pri-ate !ector ,a! een dri-en awa) *ro+ in-e!t+ent in ReneJuela and +a) e reluctant to return, or *or t,e co+panie! in countr) to re?in-e!t in t,e !,ort?ter+ (i-en t,eir experience in t,e &'''!, oil *ield +i!+ana(e+ent and da+a(e +a) ,a-e likel) occurred o-er t,e la!t decade and it will take ti+e and in-e!t+ent to re-italiJe, +an) o* ReneJuelaN! core a!!et! are in tec,nolo(icall) co+plex and capital?inten!i-e ,ea-) oil proEect! t,at take ti+e and re!ource! to de-elop and +u!t now e -iewed in li(,t o* t,e (lo al arra) o* up!trea+ option! t,at are now on t,e ta le *or international oil in-e!tor! a! co+pared to a decade a(o, !o+e o* ReneJuelaN! current co++ercial relation!,ip! on t,e up!trea+ or export !ide +a) ,a-e to e re-i!ited in li(,t o* a +ore co++erciall)? a!ed ,)drocar on polic), ReneJuelaN! ener() !ector i! do+inated ) t,e !tateN! deci!ion! and +ana(e+ent and it will take ti+e to replace t,e +ana(erial co+petenc) t,at once exi!ted, ,i(,l) !u !idiJed oil i! a ke) *eature o* ReneJuelan !ociet) and t,e political will to re*or+ t,e entire ener() !ector into one t,at i! +ore +arket? a!ed and open to pri-ate in-e!t+ent will nece!!aril) ,a-e to *eed into t,e do+e!tic de+and?!ide o* t,at eFuation" W,at a out ReneJuelaN! relation!,ip wit, t,e United State!. I-er t,e la!t ten )ear! t,e !u!tained tradin( relation!,ip etween t,e United State! and ReneJuela ,a! een one o* t,e !ta iliJin( *orce! in an ot,erwi!e contentiou! and !o+eti+e! -olatile

relation!,ip" U"S" re*inerie! in t,e Oul* 3oa!t are !peci*icall) de!i(ned to proce!! ReneJuelaN! !our and +ediu+ to ,ea-) crude and !er-e! a! it! natural +arket" Ke!pite oil production ein( down, t,e United State! !till i+port! Eu!t under a +illion arrel! o* crude per da) *ro+ ReneJuela (down *ro+ a peak o* 1"% ++ d in 19972 and, a! !tated earlier, t,e (o-ern+ent o* ReneJuela i! ,i(,l) dependent on t,o!e re-enue! *or t,eir on(oin( !ta ilit), e!peciall) a! re-enue *ro+ ot,er export! and do+e!tic con!u+ption decline" A! we look a,ead to anot,er period o* tran!ition in ReneJuela it i! i+portant to e +ind*ul o* t,e potential *or di!ruption and to look *or wa)! to +iti(ate t,e i+pact! o* !uc, di!ruption, ut it i! eFuall) i+portant to re+e+ er t,e trade tie! t,at ind t,e two countrie! *or t,e ti+e ein( and to *ind opportunitie! to dri-e c,an(e in a po!iti-e direction" 5i+e +a) e li+ited in t,i! re(ard ecau!e t,e U"S" do+e!tic production outlook i! c,an(in( t,ank! to ti(,t oil de-elop+ent in t,e United State! and t,e in*lux o* 3anadian oil !and!, ot, o* w,ic, are (i-in( U"S" re*iner! +ore option! in ter+! o* t,e crude! t,e) u!e and +ore deci!ion! to +ake a out ,ow t,e) want to con*i(ure t,eir re*inerie! (oin( *orward" A *uture in w,ic, ReneJuela i! no lon(er a! co+petiti-e in it! natural +arket in t,e United State! would c,an(e t,e outlook *or ReneJuelan crude +arketin( deci!ion!" 5,e lon(?ter+ outlook *or ReneJuelaN! continued oil +arket production i! c,an(in( ot, in co++ercial and political ter+!" 5,e !ituation ,a! looked un!u!taina le *or a lon( period o* ti+e ut ,a! +ana(ed to per!i!t lon(er t,an +o!t people t,ou(, it would" Inl) ti+e will tell i* t,e upco+in( leader!,ip c,an(e! will rin( a new c,apter *or ReneJuela"

uq no #ene5uela sanctions no&

2!e% !a#e uniqueness 4ac8&ards t!e U"S" isn0t considering sanctions Rin!ua +)3+/13 (Qin,ua =ew!, citin( t,e I a+a ad+ini!tration, U"S" !a)! not con!iderin( !anction! on ReneJuela#, %/&%/&'13, ,ttp://new!"xin,uanet"co+/en(li!,/world/&'13? '%/&%/cM1&%<&&'13",t+, 01a,n2 WAS8I=O5I=, April &3 (Qin,ua2 ?? 5,e I a+a ad+ini!tration !aid ,ere on 5ue!da) t,at it wa! not con!iderin( an) !anction! on ReneJuela , a! t,e Sout, A+erican nation ,a! -owed retaliation a(ain!t an) !uc, +o-e!" U"S" State Kepart+ent !poke!+an >atrick Rentrell !aid t,at ReneJuela wa! readin( too +uc, into w,at A!!i!tant Secretar) o* State *or Latin A+erica Do erta 0aco !on ,ad !aid o-er t,e weekend " In an inter-iew wit, 3==4! Spani!, c,annel, 0aco !on !aid t,at !,e could not rule out !anction! i* ReneJuela doe! not ,a-e a recount o* la!t week4! di!puted pre!idential election , a! de+anded ) t,e United State! and t,e
Ir(aniJation o* A+erican State!" ReneJuelan Horei(n Mini!ter Elia! 0aua re!ponded on Monda) ) -owin( to take Bco++ercial, ener(), econo+ic and political +ea!ure!B a(ain!t t,e United State! in retaliation" BI4+ not !ure exactl) w,at ,e4! re*errin( to, ut I4+ not aware o* an) particular e**ort a*oot in ter+! o* !anction! o* ReneJuela at t,i! point ,B Rentrell !aid at a re(ular new! rie*in(" A! *or 0aco !on4! re+ark!, Rentrell !aid: BI t,ink ,er

po!ition wa! not indicatin( one wa) or anot,er in t,at inter-iew"B BI t,ink t,e ReneJuelan !ide +a) ,a-e looked at t,at and read into we4re con!iderin(
!o+et,in(,B t,e !poke!+an added" BI4+ !a)in( t,at t,at4! not !o+et,in( t,at we4re currentl) conte+platin( at t,i! +o+ent"B Wa!,in(ton ,a! not reco(niJed =icola! Maduro a! ReneJuela4! new pre!ident, a*ter ,e wa! !worn in la!t Hrida) de!pite t,e ReneJuelan oppo!ition4! de+and *or a recount o* t,e -ote!" Maduro won t,e election ) a narrow +ar(in" U"S"?ReneJuela relation! ,a-e een !trained in recent )ear!, and t,e two countrie! ,a-e not ,ad eac, ot,er4! a+ a!!ador! !ince 0ul) &'1'" Cut t,e United State! re+ain! t,e lar(e!t u)er o* ReneJuela4! oil"

uq lo& prices ine#ita4le

Lo& prices are ine#ita4le increased suppl% and decreased demand @arrons' .)*/)*/ (BHallin( Iil >rice!: W,at, Me Worr).B, Carron4!, online" arron!"co+/article/SC$'''1%&%'$&7%:7'%:7:9'%$7:$%37&1313773$7<",t+l. +od/r!!M arron!M+o!tM-iewedMda)Warticle5a !Marticle;3K1 //kd,2 Inl) a *ew )ear! a(o, it !ee+ed we were runnin( out o* oil" =ow it !ee+! we4re at,in( in it" 8owe-er, plenti*ul !uppl) *ro+ new drillin( tec,niFue! and weaker de+and in t,e U"S", Europe and 3,ina !u((e!t t,at oil price! will +oderate" 5,e U"S" enc,+ark could drop *ro+ 69<"<< per arrel to 6:$ o-er t,e next )ear" Crent crude, t,e international enc,+ark tradin( at a out 61'% per arrel, could *all elow 69$ in
t,e )ear a,ead, i* t,e Ir(aniJation o* >etroleu+ Exportin( 3ountrie! doe!n4t rein in +e+ er!, !a)! Ed Mor!e, ,ead o* (lo al co++oditie! re!earc, at 3iti(roup" W,ile a (eopolitical lowup could certainl) !end oil price! !oarin(, !a er? rattlin( in t,e Middle Ea!t, na+el) t,e

con!tant t,reat t,at Iran po!e! to I!rael and t,e re(ion, !ee+! lar(el) *actored in" B>rice! are likel) to ed(e downward,B Mor!e !a)!" B3o++ercial in-entorie! o* crude and re*ined product are at :'?)ear ,i(,! in t,e U"S" >roducer !tock! are ,i(, in place! like Saudi Ara ia" 5,e +arket elie-e! de+and will pick up in t,e !econd ,al*, ut no one elie-e! de+and i! particularl) !tron(, partl) ecau!e Europe i! weak, and partl) ecau!e 3,ina4! econo+) ,a! *altered"B 5,e U"S" oil oo+, t,e re!ult o* ,)draulic *racturin( in !,ale *or+ation! , i! oo!tin( =ort, A+erican oil in-entorie! and could e e+ raced
internationall)" Moreo-er, tepid econo+ic (rowt, and increa!ed auto *uel e**icienc) are pre!!urin( de+and" And natural (a! i! e+er(in( a! a *uel !u !titute" Internationall), ener() !upplie! are Bco+in( *ro+ an increa!in( di-er!it) o* !ource!,B accordin( to a C> Stati!tical De-iew o* World Ener() relea!ed t,i! week" All t,e!e !uppl) and de+and *unda+ental! point to

lower oil price!" 8owe-er, !o+e ener() !tock! !,ould pro!per e-en i* price! !,ould *all +oderatel)" Ine i! 3a+eron
International (ticker: 3AM2, a (lo al oil*ield eFuip+ent +aker w,o!e tec,nolo(), +ar(in i+pro-e+ent! and (rowin( +arket !,are po!ition it well *or t,e lon( ter+" Anot,er i! explorer 3anadian =atural De!ource! (3=V2, w,ic, !,ould ene*it *ro+ re(ional i+pro-e+ent! in oil deli-er) and pricin("

uq mexican exports !ig!

exican oil exports are !ig! no& and &ill continue to gro&,<!ina ;lo4al 2imes' +)?)*/ (BIncrea!e in Mexican oil export! indicate! t,awin( tie!B, www"(lo alti+e!"cn/content/773$1$"!,t+lW"Ud3eu-+)C!k //kd,2 I !er-er! !a) Mexican !tate oil co+pan) >e+ex4! deci!ion to !i(ni*icantl) oo!t oil export! to 3,ina will ,elp opti+iJe t,e i+ alanced ilateral trade !tructure and indicate! t,awin( tie! *ollowin( t,eir leader!,ip tran!ition!" In t,e !ideline! o* t,e Coao Horu+ *or A!ia on Saturda), >e+ex 3,ie* Executi-e E+ilio LoJo)a !aid t,e co+pan) would e(in increa!in( export! to 3,ina ) 3',''' arrel! a da) !tartin( t,i! +ont,, accordin( to a two?)ear a(ree+ent etween >e+ex and 3,ina4! Sinopec, Deuter! reported" 5,e le-el o* export! to 3,ina could increa!e o-er ti+e a! part o* t,e a(ree+ent , ,e added"

uq glo4al prices lo&

=rices are set to cras! structural c!anges in oil trade :ill 3)//13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, MaEor c,an(e! *ro+ oil re-olution#, Wa!,in(ton 5i+e!, &/3/&'13, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/*e /%/!ea?c,an(e!?*ro+?oil?re-olution/, 01a,n2 Somet!ing #er% dramatic !appened in &orld oil in 399+" Ae left 4e!ind a &orld of K39 oil and entered t!e &orld of K*99 oil'M &!ic! corresponds &it! gasoline prices of K/ to K+ a gallon on a#erage' r" 1ergin said in an inter#ie& &it! cEinse% Y <o" last %ear" IA!at !appened &as t!e recognition of t!e impact of emerging mar8et countries and &!at t!eir demand &ould 4e' and t!at gro&t! in &orld oil demand &ould s!ift from t!e traditional industrial countries to t!ese emerging mar8ets" 2!at !as carried us to a ne& !ig!er price planeM and launc!ed t!e dri#e to exploit !uge uncon#entional oil reser#es t!at is no& 4earing fruit in Nort! America" 5,e ,i(,er price! o* t,e pa!t decade kick?!tarted t,e trend toward ener() con!er-ation t,at ,a! !,a-ed illion! o*
dollar! o** U"S" oil trade de*icit!" 5,e trend pro+i!e! to accelerate a! t,e I a+a ad+ini!tration ratc,et! up *uel e**icienc) !tandard! *or car! and truck!" 5ec,nolo(ie! and +aterial! al!o are +akin( po!!i le a-era(e +ile! per (allon o* $' or ,i(,er in car! and !port utilit) -e,icle!" 5,e co+ ination o* *uel !a-in(! and increa!ed production *ro+ uncon-entional !ource! ,a! allowed A+erican! to entertain ,ope! *or ener() independence" Alt,ou(, it will take ,eroic# e**ort! to ac,ie-e, Mr" Aer(in !aid, oil independence i! no lon(er Eu!t a c,i+era# ,eld out ) politician! a! it once wa!" I>E3N! 3,ina pi-ot 5,at pro!pect al!o u!,er! in a +aEor !,i*t in I>E3 export! toward 3,ina and t,e re!t o* e+er(in( A!ia L e!peciall) a! IraF a!cend! once a(ain a! a (a+e?c,an(in( exporter L in a de-elop+ent t,at al!o ,a! i+portant i+plication! *or t,e U"S", Mr" Aer(in !aid" W,ile tri((erin( a potentiall) *unda+ental reorderin( o* U"S" prioritie! in t,e Middle Ea!t, it al!o ,ei(,ten! t,e i+portance o* t,e U"S" +ana(in( it! relation!,ip wit, 3,ina !o t,at t,e co+petition etween t,e two econo+ic (iant! o-er !ecurin( ener() !upplie! doe!nNt turn into outri(,t con*lict o-er !uc, i!!ue! a! CeiEin(N! ener() clai+! in t,e Sout, 3,ina Sea, ,e !aid" 3,ina alread) con!u+e! +ore ener() *ro+ all !ource! L coal, oil, (a! and renewa le *uel! L t,an t,e United State!, and it ,a! an increa!in(l) ur(ent need to !ecure it! !upplie! +uc, a! t,e U"S" did w,en it !,i*ted to ,ea-) dependence on i+port! in t,e 197'!" Ke+and *or oil continued to !tren(t,en in 3,ina e-en durin( t,e rece!!ion, w,ile oil con!u+ption in t,e U"S" and ot,er de-eloped nation! peaked )ear! a(o, wit, U"S" de+and down 1' percent !ince &''$" 5,e +ore con*ident t,e 3,ine!e are a out t,eir !ource! o* ener(), t,e +ore co+*orta le e-er)one will e,# Mr" Aer(in !aid" Dadical c,an(e! *oreca!t It,er! !ee e-en +ore radical i+plication! a! t,e U"S" reak! it! dependenc) on Middle Ea!tern oil, wit, t,e potential to !,atter !o+e lon(ti+e a!!u+ption! in t,e (lo al land!cape" It ,a! (eopolitical i+plication! t,at can e de ated al+o!t endle!!l),# !aid 0o,n 1in(!ton, (lo al director at >lattN! In!i(,t" I* t,e U"S" (et! to t,e point w,ere it i! no lon(er i+portin( an) crude out o* t,e >er!ian Oul*, w,) i! t,e U"S" =a-) patrollin( t,e Strait o* 8or+uJ.# 5,e U"S" *or decade! ,a! ,ad a +aEor +ilitar) pre!ence in t,e Middle Ea!t to !ecure it! !upplie! and t,o!e o* it! allie! in Europe and 0apan" Cut t,e co!t o* t,e +ilitar) operation! i! lar(e in an era w,en t,e U"S" i! ,a-in( to +ake +aEor !pendin( cut! to a-oid t,e kind o* !o-erei(n de t cri!i! pla(uin( Europe"

Lo& prices no&,drilling <onerl%' ()*)*/ (Cill 3onerl), >,"K" in econo+ic! *ro+ Kuke Uni-er!it), *or+er Senior Rice >re!ident at Hir!t Inter!tate Cank, contri uter to Hor e!, Hor e!,BIil >rice Horeca!t *or &'13? &'1%: Hallin( >rice!B, www"*or e!"co+/!ite!/ illconerl)/&'13/'$/'1/oil?price?*oreca!t?*or? &'13?&'1%?*allin(?price!/ //kd,2 Iil price! are ,eaded down, and I +ean down at lea!t 6&' a arrel" 5,e ke) rea!on i! t,at price! ,a-e een ,i(," ItN! not a paradox, ut a re!ult o* t,e lon( ti+e la(! in oil production" Iil price! were *airl) !ta le *ro+ 19:< t,rou(, &''1,
a-era(in( Eu!t 6&' per arrel" 5,en price! !tarted ri!in(, !pikin( to 613% Eu!t a! t,e rece!!ion e(an" 5,e price o* oil ,a! een a o-e 6:' *or t,e pa!t two and a ,al* )ear!" Wit, ri!in( price! ,a! co+e a dra+atic increa!e in exploration acti-it)" Kurin( t,e era o* low price!, t,e nu+ er o* drillin( ri(! in operation around t,e world wa! 1,9'' on a-era(eG now we are at nearl) dou le t,at pace, and we ,a-e een *or nearl) t,ree )ear!" Krillin( acti-it) re!ult! in oil production , la!tin( *or +an) )ear! a*ter t,e drillin( i! o-er" 5ake a look at t,e acco+pan)in( c,art o* drillin( ri(! and total production" Krillin( Eu+ped up a*ter t,e oil price ,ike! o* 1973 and 1979" C) 19:<, increa!ed oil production rou(,t price! cra!,in( down" Iil exploration Fuickl) *ollowed !uit" >roduction, ,owe-er, continued to (row lon( a*ter new drillin( declined" W,en drillin( wa! ,i(,, +uc, o* t,e acti-it) wa! explorator)Ltr)in( to *ind t,e oil" W,en price! *ell, t,e ri!kie!t drillin( +ade no !en!e" W,at wa! le*t wa! in?*ill" 5,e oil *ield ,ad een identi*ied, and *urt,er well! were needed to e!t utiliJe t,e re!ource" 5,e!e well! are *airl) low ri!k, wit, ,i(, reward! co+pared to t,e co!t o* t,e drillin( ri(" A! a re!ult, e-en low le-el! o* drillin( acti-it) led to !u !tantial increa!e! in (lo al production" 5oda) weN-e ,ad

+oderatel) !tron( drillin( acti-it) *or !e-eral )ear!" =ew *ield! ,a-e een identi*ied and delineated" =ow weNll !ee *airl) +ild drillin( acti-it) ut continuall) increa!in( production" In t,e
pa!t )ear production ,a! een !o*t, arel) (rowin(, ut t,atN! a re*lection o* weak de+and" In t,e !,ort run, production can e dialed ack to !a-e +ore oil *or t,e *uture" In t,e lon( run, t,ou(,, production capacit) rule! t,e roo!t" W,at o* de+and. Ke+and !,ould (row a little !lower t,an t,e (lo al econo+)" Unle!! t,e world !tart! to oo+Lan unlikel) !cenario, (i-en pro le+! in Europe and t,e United State!Lproduction capacit) will (row *a!ter t,an de+and, pullin( price! down" W,at o* peak oil worrie!. 5,e concept i!

o*ten !ound w,en lookin( at one wellL ut e-en a !in(le well will !o+eti+e! e re?worked to increa!e it! output" Hor t,e world a! a w,ole, t,e peak oil t,eor) *ail! to con!ider t,at ,i(,er price! lead to (reater exploration *or new oil *ield!, (reater in?*ill drillin( o* e!ta li!,ed *ield!, etter care o* older well!, and de-elop+ent o* new tec,nolo() *or all o* t,e!e *unction!" 5,e worldN! oil

production will peak w,en t,e co!t o* *indin( new oil ri!e! and t,e de-elop+ent o* alternati-e ener() +ake! t,e -alue o* oil decline" I-er t,e co+in( *ew )ear!, look *or oil price! to decline at lea!t elow 6:' a arrel and Fuite po!!i l) +ore"

***NO 6LOOD

no flood 3ac
6inancial constraints pre#ent production increases Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 W,ile Saudi Ara ia ,a! ene*ited *ro+ ,i(,er oil price! in &'11 and *ro+ additional re-enue! earned ) co+pen!atin( *or Li )aN! production !,ort*all, o-er t,e lon( ter+ Saudi Ara ia *ace! (rowin( *inancial con!traint!" Saudi ud(et! ,a-e !teadil) increa!ed o-er t,e pa!t decade, and are expected to continue to do !o in li(,t o* t,e -ariou! ener() and EID initiati-e! de!cri ed a o-e, a! well a! t,e pro!pect o* *uture !ocial !pendin( to Fuell do+e!tic unre!t" 5,i! will reFuire a con!i!tentl) ,i(, price o* oil " 0u!t a
decade a(o t,e 1in(do+N! reak?e-en price wa! 6&$/ arrel" In &''9 it increa!ed to 6<:/ arrel, and !tand! at 6::/ arrel in &'11" In 0anuar) Saudi oil +ini!ter A dulla, al =ai+i announced t,at t,e 1in(do+ would tar(et 61''/ arrel in &'1&" A recent !tud) conducted ) Di)ad,? a!ed 0adwa In-e!t+ent! *oreca!t! a reFuire+ent *or a 63&'/ arrel oil price ) &'3'" 5,e 1in(do+N!

a ilit) to reduce it! ud(et i! increa!in(l) con!trained ) t,e a+ount o* !pendin( it +u!t undertake to Fuell political di!content or pro-ide *or rapid population (rowt, in a wel*are !tate "
E-en t,ou(, t,e 1in(do+ retired a lar(e a+ount o* it! de t in &'1', an Er(o !ource w,o i! a *or+er ad-i!or to t,e Saudi Mini!tr) o* 3o++erce warn! t,at a *ew ad )ear! could cruci*) t,e Saudi!"#

Saudi Ara4ia can0t retain price control A=' *3 (W,) ReneJuela wonNt pa!! Saudi Ara ia a! t,e worldN! i((e!t oil power an)ti+e !oon#, Wa!,in(ton >o!t, </1$/&'1&, ,ttp://www"wa!,in(tonpo!t"co+/ lo(!/wonk lo(/po!t/w,)?-eneJuela?wont?pa!!?!audi? ara ia?a!?t,e?world!? i((e!t?oil?power?an)ti+e?!oon/&'1&/'</1$/(0VAx0&E*RM lo(",t+l, 01a,n2 ReneJuela ,a! 1: percent o* t,e worldN! pro-en oil re!er-e!, accordin( to C>N! &'1& Stati!tical De-iew o* World Ener(), out t,i! week" 5,atN! +ore t,an Saudi Ara ia (1< percent2 and 3anada (11 percent2" So doe! t,i! +ean ReneJuela i! now t,e worldN! i((e!t oil power. No , far from it" A! Ste-e LeRine point! out in Horei(n >olic), t,ereN! a ,u(e di**erence etween ,a-in( (ar(antuan oil re!er-e! under(round and actuall) pu+pin( out t,at oil" Saudi Ara ia !till export! +ore oil to t,e re!t o* t,e world t,an an)one el!e, !endin( out 1'"1 +illion arrel! per da) in April" ReneJuela pu+ped out onl) &"1 +illion arrel! o* oil per da)" E-en i* t,e countr) dou le! production in t,e next decade, a! >re!ident 8u(o 3,a-eJ ,a! planned, ReneJuela will !till la( well e,ind t,e Saudi!" W,) t,e di!parit). A clo!er look re-eal! ke) di**erence! etween t,e two countrie!" Saudi Ara iaN! oil i! t,e worldN! c,eape!t to extract" Mo!t o* ReneJuelaN! re!er-e!, ) contra!t, include ,ea-) and extra?,ea-) oil in t,e Irinoco Celt, w,ic, i! ,arder and +ore expen!i-e to produce" (5,i! i! one rea!on w,) ReneJuela tend!
to *a-or ,i(,er (lo al price! at I>E3 +eetin(!"2 ReneJuelaN! *ield! are al!o ,o led ) weak in-e!t+ent: 5,e !tate?owned *ir+, >KRSA, !pend! re+arka l) little on exploration and production, w,ile !o+e lar(e +ultinational!, like ExxonMo il, are war) o* workin( in a countr) wit, a ,i!tor) o* nationaliJin( *orei(n a!!et!" W,atN! +ore, LeRine note!, Saudi Ara ia re+ain! t,e worldN! do+inant oil power ecau!e o* it! !pare capacit) L it i! t,e !ole countr) a le to add +eanin(*ul dail) -olu+e! to (lo al production in a pinc,"# Man) anal)!t! t,ink t,at Saudi Ara iaN! a ilit) to in*luence t,e (lo al +arket! ,a! weakened

in recent )ear!" Still, t,i! !prin(, w,en price! were !oarin( and t,e United State! and European Union were coordinatin( a o)cott o* IranN! oil, Saudi Ara ia +ana(ed to ra+p up production to it! ,i(,e!t point in t,ree decade! in order to ea!e ti(,t !upplie!" ReneJuela canNt do an)t,in( like t,at" In recent )ear!, t,ere ,a-e een a !pate o* article! written a out ,ow t,e We!tern 8e+i!p,ere L led ) ReneJuela and =ort, A+erica L i! poi!ed to eco+e t,e

new center o* (ra-it)# *or t,e worldN! oil, t,ank! to a unc, o* -a!t new di!co-erie!" Cut a! ener() anal)!t Mic,ael Le-i ,a! o !er-ed , t,e Middle Ea!t i! likel) to re+ain t,e worldN! +o!t i+portant oil center *or t,e
*ore!eea le *uture: 5,e Middle Ea!t pla)! a !pecial role in t,e world o* ener() in t,ree a!ic wa)!" A! t,e ,o+e to +o!t o* t,e c,eap oil in t,e world, it pla)! t,e role o* price !etter, wit, road econo+ic con!eFuence!" A! t,e ,o+e to +o!t o* t,e ea!) to de-elop oil in t,e world, it can pla) t,e role o* price !ta iliJer, t,ou(, it appear! to e doin( t,at le!! t,e!e da)! t,an in t,e pa!t" And a! ,o+e to perpetual (eopolitical c,ao!, it ,a! t,e potential to erupt !uddenl) in con*lict, !endin( oil price! t,rou(, t,e roo*" And t,at +ean!, Le-i note!, t,at t,e Middle Ea!t i!nNt likel) to lo!e it! pi-otal role in t,e (lo al econo+) an)ti+e !oon"

no flood no saudi control

No price control gro&ing domestic demands Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 Increa!in( do+e!tic con!u+ption i! t,e +o!t critical concern *or Saudi, Ara iaN! oil do+inance" Saudi Ara iaN! Fuickl) (rowin( population o* &: +illion i! increa!in(l) con!u+in( electricit), ,ou!in(, car!Land ulti+atel) t,e oil t,at +ake! t,e+ all po!!i le" Increa!in( do+e!tic de+and *or petroleu+ product! ,a! e(un to a**ect Saudi Ara iaN! a ilit) to produce *or external +arket!, and Er(oN! t,reat anal)!i! !u((e!t! t,at it will continue to do !o in t,e *uture" i Upri!in(! t,rou(,out t,e Ara world in
&'11 ,a-e re!onated in Saudi Ara ia, w,ere a ,i(, )out, percenta(e, undere+plo)+ent, a S,iNa +inorit) t,at co+plain! o* repre!!ion, and a re!tricti-e political and !ocial en-iron+ent ,a-e created a -olatile +ix" 5,e 1in( ,a! een a le to Fuell di!content wit, expen!i-e !ocial aid packa(e!, and +a) continue to do !o !ucce!!*ull)" Cut !uc, packa(e! reFuire i((er ud(et!,

w,ic, will +ake t,e 1in(do+ +ore dependent on a ,i(, price o* oil" 5,i! dependence reduce! Saudi Ara iaN! a ilit) to control oil price! (oin( *orward" No price control constrained resource 4ase Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 Saudi Ara iaN! oil *ield! are +aturin(, and t,e ea!) oil ,a! een extracted" Maintainin( re!er-e! and productionL+uc, le!! increa!in( t,e+Lwill reFuire +ore ad-anced and expen!i-e tec,nolo(ie!" Alt,ou(, Saudi Ara+co ,a! pro-en it!el* adept at exploitin( t,e 1in(do+N! oil re!ource!, t,e need *or ,i(,er capital expenditure! to +aintain oil production will reFuire ,i(,er oil re-enue!, ,ence reducin( Saudi le-era(e to !ta iliJe or rin( down price! ) *loodin( t,e +arket" No price control s!ifting glo4al po&ers erode Saudi influence Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at

t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 =ei(, orin( IraF ,a! onl) Eu!t e(un to +et,odicall) de-elop it! oil !ector wit, t,e ene*it o* +odern tec,nolo(), and ,a! t,e potential to !urpa!! Saudi Ara ia a! a producer and exporter " E-en i* it onl) ac,ie-e! ,al* o* it! !tated production tar(et o* 1& +illion arrel! per da) ) &'17, an IraF wit, !i(ni*icant !pare capacit) would c,allen(e Saudi Ara iaN! do+inance a! an exporter" i Saudi Ara ia4! lon(!tandin( partner!,ip wit, t,e US i! coolin( " 5,e 1in(do+N! role in !uppre!!in( prote!t! in Ca,rain ,a! co+plicated t,e A+erican atte+pt to portra) it!el* a! !upporti-e o* de+ocratic re*or+ in t,e re(ion" Saudi pur!uit o* nuclear power wit,out Wa!,in(tonN! le!!in( ,a! al!o a((ra-ated relation! " Moreo-er, A+erican *orei(n polic)N! decrea!in( *ocu! on counterterrori!+ i! le!!enin( t,e US perception o* Saudi Ara iaN! -alue a! a partner" An ero!ion o* US !upport could tran!late into an ero!ion o* !tren(t, *or Saudi Ara iaN! oil +arket leader!,ip" No price control Iranian desta4ili5ation Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2
Er(o a!ked !elect t,ou(,t leader! to anal)Je !e-eral potential t,reat! to Saudi Ara iaN! *uture oil do+inance -ia a uniFue t,reat anal)!i! exerci!e" j 5,e t,reat +o!t likel) to occurLand t,e one t,at would ,a-e t,e !econd +o!t

ne(ati-e i+pact on Saudi Ara iaN! *uture po!ition a! an oil powerLi! per!i!tentl) ,i(, (rowt, in do+e!tic con!u+ption, w,ic, will reFuire e-er increa!in( *inancial and petroleu+ re!ource!" j Er(o !ource! al!o point to t,e po!!i ilit) t,at Iran will !eek to de!ta iliJe Saudi Ara ia ) incitin( internal oppo!ition, likel) -ia t,e Saudi S,iNa +inorit), to weaken a lon(ti+e ri-al and it! We!tern allie!" In He ruar) &'11 Er(o !ource! indicated t,at Iran would act co-ertl) in t,e Ea!tern >ro-ince in =o-e+ er, and indeed, t,ere are indication! t,at t,i! occurred"
In Icto er $t,, &'11, Saudi Ara ia co+plained o* a *orei(n countr)# incitin( unre!t in Awa+i)a o* t,e Ea!tern >ro-ince, w,ere (un*ire inEured ele-en !ecurit) per!onnel and t,ree ci-ilian!" Al!o, t,e US ,a! accu!ed Iran o* +a!ter+indin( t,e

recent atte+pt to a!!a!!inate t,e Saudi a+ a!!ador to t,e United State! , re-ealed on Icto er 11t,, &'11" 3ontinued Iranian co-ert action a(ain!t Saudi Ara ia, particularl) a! t,e Iranian re(i+e *ace! increa!in( i!olation due to EU i+port an!, re+ain! a di!tinct t,reat" Alt,ou(, Saudi Ara ia will re+ain t,e do+inant (lo al oil power in t,e !,ort to +ediu+ ter+, t,e t,reat! and c,allen(e! to it! do+inance ,i(,li(,ted in t,i! report will ine-ita l) erode Saudi Ara iaN! ,e(e+on) in t,e lon( ter+" 5o co+ at t,e!e c,allen(e!, t,e Saudi aut,oritie! will need to: adeFuatel) addre!! do+e!tic
political de+and! wit, +ore t,an +ere lar(e!!eG +eet increa!in( do+e!tic con!u+ption need! (*or exa+ple, ) de-elopin( t,e (a! !ector *or do+e!tic electricit) production2G and *ir+ up it! (lo al (eopolitical relation!,ip! to !tren(t,en it! ,and in it! con*lict wit, Iran" It i! not clear t,at t,e 1in(do+ will e a le to e**ecti-el) addre!! t,e!e i!!ue! o-er t,e lon(

ter+" No price control domestic insta4ilit% reduces influence Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur)

and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 In addition to electricit) and oil, Saudi! are increa!in( con!u+er! o* political re*or+ " 5,e countr)N!
de+o(rap,ic! are roadl) !i+ilar to t,o!e in ot,er countrie! experiencin( upri!in(! la!t )ear: a lar(e )out, contin(ent wit, *ew Eo pro!pect! or a-enue! *or political expre!!ion, +a!!i-e (o-ern+ent !u !idie!, a rulin( cla!! !een to u!urp t,e nationN! ric,e!" It al!o ,a! a di!contented S,iNa +inorit) w,ic, o*ten co+plain! o* ill treat+ent at t,e ,and! o* t,e predo+inantl) Sunni !tate apparatu!" Er(o !ource! !u((e!t t,at Iran -iew! t,i! S,iNa +inorit) a! a plat*or+ to e +anipulated in order to !ow

in!ta ilit) in t,e 1in(do+" 5,e!e pro le+! are co+pounded ) an acute ,ou!in( cri!i!, w,ic, ,a! reduced +arria(e pro!pect! *or +an) )oun( Saudi ac,elor! , w,o are expected to ,a-e e!ta li!,ed a ,o+e e*ore takin( a ride" 5,e 1in( re!ponded to t,e !tirrin(! o* prote!t t,i! !prin( wit, an expan!i-e 613$ illion aid packa(e" 5,e *act t,at t,e Saudi (o-ern+ent pro+i!ed to (i-e awa) o-er 61'' illion in !ocial pro(ra+! to !ta-e o** pu lic prote!t! i! an indication o* ,ow !cared t,e) are o* an upri!in(,# elie-e! an Er(o !ource wit, uniFue in!i(,t
into t,e ,i!tor) o* t,e Al?Saud *a+il)" 8i!toricall), Saudi Ara ia ,a! palliated di!content wit, !i+ilar act! o* lar(e!!e" W,ile it i! unlikel) t,at t,e Saudi (o-ern+ent *ace! a !eriou! exi!tential t,reat *ro+ prote!t!, it i! likel) t,at !i+ilar !ocial !pendin(

initiati-e! nece!!ar) to Fuell di!!ent will eco+e +ore *reFuent and +ore expen!i-e" 5,e con!eFuent increa!e! to t,e Saudi ud(et will +ake t,e 1in(do+ +ore reliant on a ,i(, price o* oil, w,ic, reduce! it! a ilit) to +anipulate oil +arket!" No price control t!rone crises &ill preclude effecti#e oil polic% Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 5,e recent pa!!in( o* 3rown >rince Sultan in A dul AJiJ under!core! t,e !ucce!!ion cri!i! *acin( t,e 1in(do+" 1in( A dulla, i! a(in( and in ill ,ealt,, and t,ere are +ultiple contender! to !ucceed ,i+" 5,e 1in(
e!ta li!,ed an alle(iance council in &''<, co+pri!ed o* -ariou! !on! and (rand!on! o* A dul AJiJ Al Saud, *ounder o* t,e +odern Saudi !tate, to con*ront t,e !ucce!!ion i!!ue, ut t,e in!titutionN! *unction and aut,orit) are not clearl) e!ta li!,ed" >rior to 3rown >rince SultanN! deat,, potential !ucce!!or! to 1in( A dulla, included >rince =a)e*, t,e Interior Mini!ter w,o e+ odie! a +ore ,ard?line, con!er-ati-e !tance, ut al!o >rince Saud, t,e re*or+?+inded *orei(n +ini!ter" =a)e* ,a! een no+inated 3rown >rince, ut at 7: )ear! old ,i! pro!pecti-e rei(n would *ace t,e !a+e !ucce!!ion i!!ue !ooner or later" A! t,e older (eneration o*

Saudi ruler! (i-e! wa) to it! !on! and (rand!on!, a !tru((le o-er !ucce!!ionLt,ou(, unlikel)L could increa!e political in!ta ilit) o-er t,e !,ort? to +ediu+?ter+" Source! point to t,e increa!in(l) di!parate c,aracter o* t,e Saudi ro)al *a+il) a! an o*ten o-erlooked a!pect o* t,e Saudi ro)al d)na+ic t,at could pro*oundl) i+pact t,e countr)N! *uture political !ta ilit)" >rett) !oon all o* t,e
direct *a+il) +e+ er! o* t,o!e w,o *or+ed Saudi Ara ia will e (one" In!tead o* rot,er! and !i!ter! +akin( deci!ion! and in*luencin( oil, it will e cou!in! and !econd cou!in!L*a+il) +e+ er! wit, *ewer tie!" 5,e (reate!t ri!k i! t,at t,e elite order o* *a+il) alliance! wit,in Saudi Ara ia will *racture,# note! a !ource wit, experti!e on t,e al?Saud *a+il) d)na+ic!" An

increa!in(l) *ractured Saudi leader!,ip will re!ult in a weakened central aut,orit) wit, di+ini!,ed a ilit) to *ace down do+e!tic or international political c,allen(e! or to adopt e**ecti-e oil !ector polic)"

No price control increased nuclear am4itions and U"S"$Saudi relations strains gut oil dominance Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2
Si(n! o* !tre!! are e+er(in( in t,e US?Saudi partner!,ip, in part due to t,e 1in(do+N! (rowin( relation!,ip wit, 3,ina, accordin( to an Er(o !ource w,o i! a director at a leadin( Oul* a**air! t,ink tank" In &''9, 3,ine!e oil i+port! *ro+ Saudi Ara ia exceeded 1 + pd, w,ile t,e US i+port! *ro+ Saudi Ara ia *ell elow 1 + pd, *or t,e *ir!t ti+e in &' )ear!" Additionall), Saudi Ara ia ,a! *or+ed a nu+ er o* new Eoint -enture! wit, 3,ina, includin( a partner!,ip etween 3,ina >etroc,e+ical 3orporation (Sinopec2 and Saudi Ara+co to uild a re*iner) in t,e Ded Sea port o* Aan u, and a Eoint -enture etween SACI3 and Sinopec *or a petroc,e+ical co+plex in 5ianEin" 3on*idential !ource! in!ide Saudi leader!,ip point to lon(?ter+ o**take a(ree+ent! ein( ne(otiated wit, 3,ina, and Er(o !ource! on de*en!e and !ecurit) anticipate t,at Saudi Ara ia will continue to !eek clo!er cooperation wit, 3,ina on +ilitar) and !ecurit) concern!" Saudi Ara iaN! nuclear a+ ition! ,a-e al!o placed !tre!! on US?Saudi relation!" It doe! not appear t,at t,e 1in(do+ will a(ree to a Section 1&3 A(ree+ent on nuclear partner!,ip wit, t,e US !i+ilar to t,at concluded wit, t,e UAE in &''9, wit,out w,ic, US co+panie! will not e a le to participate in Saudi nuclear de-elop+ent" Meanw,ile, t,e

1in(do+ i! !eekin( eFuip+ent pro-ider! in ot,er countrie! and +a) proceed wit,out US participation" Moreo-er, Saudi o**icial! ,a-e !tron(l) i+plied t,at i* Iran de-elop! nuclear weapon! t,e) will need to *ollow !uit, w,ic, i! not welco+e new! to a US t,at !eek! *ewer nuclear weapon! in t,e re(ion" 3ounterterrori!+ ,a! een t,e dri-in( *orce e,ind A+erican *orei(n polic) *or t,e pa!t decade, ut t,i! i! e(innin( to c,an(e in t,e a !ence o* a clear terrori!+ cri!i! in t,e US" Saudi Ara ia ,a! een a critical co+ponent o* A+erican counterterrori!+ e**ort!, ut will eco+e le!! rele-ant a! t,e *ocu! on counterterrori!+ !u !ide!" Moreo-er, Saudi per*or+ance on counterterrori!+ it!el* ,a! een +ixedG a recent pro(ra+ to re,a ilitate terrori!t! drew critici!+ w,en !e-eral indi-idual! were *ound to e acti-e in +ilitant (roup! like t,e S,a a a*ter t,eir relea!e" 5,e !train on t,e relation!,ip wit, t,e US wa! *urt,er exacer ated durin( t,e prote!t! acro!! t,e Ara world in t,e !prin( and !u++er o* &'11" Saudi Ara ia !ent troop! to Ca,rain to ,elp Fua!, prote!t!, a +o-e w,ic, ran contrar) to t,e United State!N +e!!a(e o* ad-ocac) *or de+ocrac), ,u+an ri(,t!, and political !el*?deter+ination " A! popular pre!!ure +ount! in Saudi Ara ia *or political and !ocial
re*or+, 3,inaN! !ilence on Saudi do+e!tic a**air! +ake! it !ee+ a +ore a(reea le partner to t,e Saudi rulin( elite t,an a United State! t,at i! increa!in(l) in!i!tent on de+ocratic re*or+! in t,e re(ion" Cut a coolin( o* t,e US?Saudi relation!,ip

and a war+in( to 3,ina could t,reaten Saudi Ara iaN! do+inance a! an oil power i* t,e US e(in! to *ocu! +ore on relation!,ip! wit, ot,er oil producer!, !uc, a! IraF"

no flood no saudi capacit%

A maturing resource 4ase means extraction &ill 4ecome too expensi#e destro%s Saudi a4ilit% to maintain a resource 4ase Ergo' *3 ((lo al intelli(ence and ad-i!or) *ir+, note: aut,or na+e! are not explicitl) pro-ided in t,e report, ut Fuali*ication! o* aut,or! are a! *ollow!: c*or+er Mana(er o* >roduction En(ineerin( and Huture Iil*ield Ke-elop+ent *or Saudi Ara+co, ad-i!or to t,e Saudi Iil Mini!ter and a! a Saudi Ara ian dele(ate to I>E3, cc*or+er Exxon Mo il executi-e, 5rea!ur) and Oo-ern+ent Delation! po!ition! in t,e Middle Ea!t, ccc,eaded a Mini!terial?le-el co++ittee in Saudi Ara ia c,ar(ed wit, ne(otiatin( t,e exploration and de-elop+ent o* non? a!!ociated (a! wit, II3!, 3on!ultant to Ara+co and Saudi Oo-ern+ent, cccc*or+er director at t,e DA=K 3orporation, >,"K" in ,i!tor), ccccc!c,olar o* t,e Al Saud *a+il), pro*e!!or o* Middle Ea!tern !tudie! at a pre!ti(iou! uni-er!it) in t,e United State!, Ener() Ad-i!or to t,e Saudi Mini!tr) o* 3o++erce, 5,e Wanin( Era o* Saudi Iil Ko+inance#, He ruar), &'1&, Er(o, ,ttp://www"er(o"net/Er(oSpecialDeportMSaudiMIilMHe &'1&"pd*, 01a,n2 Er(o !ource! caution t,at Saudi oil *ield! are a(in(, and li(,t crude ,a! eco+e !carcer and +ore co!tl) to extract" W,at i! worri!o+e i! t,at +an) o* Saudi Ara iaN! *ield! are o* poor Fualit) wit, tec,nical di**icultie!" It i! not onl) a Fue!tion o* ,a-in( a -a!t a+ountG Saudi Ara ia +u!t e a le to extract it e**ecti-el) and econo+icall),# explain! a *or+er ExxonMo il executi-e" In t,e pa!t, Saudi Ara ia
,a! een a le to inEect additional production into t,e +arket ecau!e o* it! accu+ulated !pare capacit), ut Er(o !ource! Fue!tion t,i! a ilit) in t,e *uture: Spare capacit) i! a d)na+ic ter+" Sure, t,e Saudi! can (et a !u(ar ru!,, ut *or ,ow lon(. 5,e) ,a-e t,e a ilit) to produce an extra &?3 + pd, ut not *or a! lon( a! t,e) once could,# !a)! a *or+er ener() ad-i!or to t,e Saudi Mini!tr) o* 3o++erce" Source! al!o elie-e t,at Saudi Ara iaN! *uture oil production (ain! will depend on en,anced oil reco-er) (EID2 tec,nolo() ad-ance! to re-i!it exi!tin( *ield!" Saudi Ara ia i! now explorin( option! includin( (a! inEection, !tea+?*loodin(, 3I&, !eawater inEection, and a new !olar power? (enerated !tea+ tec,nolo()" Cut w,ile EID can !u !tantiall) increa!e reco-era ilit) (up to %'; in !o+e ca!e!2, it al!o co+e! wit, an additional co!t, ran(in( *ro+ 6&' to a w,oppin( 6<' a arrel" 5,e ea!) oil in Saudi Ara ia ,a! alread) een extracted" It! oil *ield! are +aturin(, and w,ile ad-anced tec,niFue! +i(,t

i+pro-e production incre+entall), it will co+e onl) at a ,i(,er co!t, and !pare capacit) will not e a! ea!) to +aintain"

no flood no flood concept fla&ed

Speculation controls prices not Saudi Ara4ia :all' ** (1e-in O", *or+er Sout, A+erica ureau c,ie* *or Mc3latc,), winner o* t,e Societ) o* >ro*e!!ional 0ournali!t! Award and Si(+a Kelta 3,i Award, +e+ er o* t,e =ational Econo+i!t! 3lu , >ulitJer >riJe *inali!t, Speculator! oo!ted oil price! ) 6%' a arrel, Saudi Ara ia !a)!G 3a le! relea!ed ) WikiLeak! !,ow crude producer ,a! a!ked t,e U"S" *or )ear! to rein in !peculation#, $/&</&'11, 5,e Rancou-er Sun, >roFue!t, 01a,n2 W,en oil price! ,it a record 61%7 a arrel in 0ul) &'':, t,e U"S" leaned on Saudi Ara ia to pu+p +ore crude in ,ope! t,at a *lood o* new crude would dri-e t,e price down" 5,e Saudi! co+plied, ut not e*ore warnin( t,at oil alread) wa! plenti*ul and t,at Wall Street !peculation, not a !,orta(e o* oil, wa! dri-in( up price!" Saudi Iil Mini!ter Ali al?=ai+i e-en told U"S" A+ a!!ador Hord Hraker t,at t,e kin(do+ would ,a-e di**icult) *indin( cu!to+er! *or t,e additional crude, accordin( to an account laid out in a con*idential State Kepart+ent ca le dated Sept" &:, &'':" BSaudi Ara ia can4t Eu!t put crude out on t,e +arket,B t,e ca le Fuote! al?=ai+i a! !a)in(" In!tead, al?=ai+i !u((e!ted, B!peculator! ore !i(ni*icant re!pon!i ilit) *or t,e !,arp increa!e in oil price! in t,e la!t *ew )ear!,B accordin( to t,e ca le" W,at role Wall Street in-e!tor! pla) in t,e ,i(,
co!t o* oil i! a ,otl) de ated topic in Wa!,in(ton" Ke!pite weak de+and, t,e price o* a arrel o* crude oil !ur(ed +ore t,an &$ per cent in t,e pa!t )ear, reac,in( a peak o* 6113 Ma) & e*ore *allin( ack to a ran(e o* 69$ to 61'' a arrel" 5,e I a+a

ad+ini!tration, t,e Cu!, ad+ini!tration e*ore it and 3on(re!! ,a-e een !low to take !tep! to rein in !peculator!" Speculation pre#ents Saudi Ara4ia from disrupting prices :all' ** (1e-in O", *or+er Sout, A+erica ureau c,ie* *or Mc3latc,), winner o* t,e Societ) o* >ro*e!!ional 0ournali!t! Award and Si(+a Kelta 3,i Award, +e+ er o* t,e =ational Econo+i!t! 3lu , >ulitJer >riJe *inali!t, Speculator! oo!ted oil price! ) 6%' a arrel, Saudi Ara ia !a)!G 3a le! relea!ed ) WikiLeak! !,ow crude producer ,a! a!ked t,e U"S" *or )ear! to rein in !peculation#, $/&</&'11, 5,e Rancou-er Sun, >roFue!t, 01a,n2
In 5ue!da), t,e 3o++odit) Huture! 5radin( 3o++i!!ion, a U"S" re(ulator) a(enc), c,ar(ed a (roup o* *inancial *ir+! wit, +anipulatin( t,e price o* oil in &'':" Cut t,e co++i!!ion ,a!n4t enacted a propo!al to li+it t,e percenta(e o* oil contract! a *inancial co+pan) can ,old, w,ile 3on(re!! re+ain! *ocu!ed pri+aril) on i( oilco+panie!, t,reatenin( in ,earin(! la!t week to eli+inate t,eir tax reak! ecau!e o* t,e 63: illion in *ir!t?Fuarter pro*it! t,e top !ix U"S" co+panie! earned" 5,e Saudi!, ,owe-er, ,a-e !truck a !tead) t,e+e *or )ear! t,at !o+et,in( !,ould e done to cur t,e in*luence o* ank! and ,ed(e *und! t,at are !peculatin( on t,e price o* oil, accordin( to diplo+atic ca le! +ade a-aila le to Mc3latc,) =ew!paper! ) t,e WikiLeak! we !ite"

5,e ca le! !,ow t,at t,e !u Eect o* !peculation ,a! een rai!ed in workin( (roup +eetin(! etween U"S" and Saudi o**icial!, in one?on?one +eetin(! wit, A+erican diplo+at! and at lea!t once wit, *or+er pre!ident Oeor(e W" Cu!, ,i+!el*" In t,e ca le!, Saudi o**icial! explain t,at t,e) ,a-e two pri+ar) concern! a out arti*iciall) ,i(, crude price!: 5,at t,e)4ll da+pen t,e lon(?ter+ de+and *or oil and t,at t,e wide price !win(! t)pical o* co++odit) !peculation +ake it di**icult *or t,e+ to plan *uture oil*ield de-elop+ent" Ine ca le recount! ,ow Kr" MaEid al?Monee*, Saudi Ara ia4! I>E3 (o-ernor, explained w,at ,e

t,ou(,t wa! t,e *ull i+pact o* !peculation to U"S" Dep" Alan Ora)!on, a Hlorida Ke+ocrat, w,o in 0ul) &''9 wa! in Saudi Ara ia *or t,e *ir!t ti+e" Accordin( to t,e ca le, al?Monee* !aid Saudi Ara ia !u!pected t,at B!peculation repre!ented approxi+atel) 6%' o* t,e o-erall oil price w,en it wa! at it! ,ei(,t"B A!ked ,ow to cur !uc, !peculation, al?Monee* !u((e!ted Bi+pro-in( tran!parenc)B ?a re*erence to t,e *act t,at +o!toil tradin( i! conducted out!ide re(ulated +arket! ?and etter co++unication a+on( t,e world4! co++odit) +arket! !o t,at oil !peculator! can4t ,ide t,e *ull extent o* t,eir tradin( po!ition!" Al?Monee* al!o !u((e!ted t,at t,e U"S" con!ider Bpo!ition li+it!B ?re!triction! on ,ow +uc, o* t,e oil +arket a co+pan) can control ?!o+et,in( t,e 3H53 i! con!iderin(" Cut t,e propo!al to pre-ent an) !in(le trader *ro+ accu+ulatin( +ore t,an 1' per cent o* t,e oil contract! ein( traded ,a!n4t recei-ed *inal appro-al, and t,e 3H53 al!o ,a! )et to de*ine w,at it con!ider! exce!!i-e !peculation" Saudi concern! al!o ca+e up durin( a Ma) &'': +eetin( in Di)ad,, t,e Saudi capital, etween U"S" o**icial! and >rince A dulaJJiJ in Sal+an in A dulaJiJ al? Saud, t,e a!!i!tant petroleu+ +ini!ter" A dulaJJiJ wa! Bextre+el) worriedB t,at ,i(, price! would de!tro) t,e de+and *or oil, accordin( to t,e Ma) 7, &'':, account o* ,i! +eetin( wit, e+ a!!) o**icial!" BAra+co i! tr)in( to !ell +ore, ut *rankl) t,ere are no u)er!,B t,e ca le Fuoted ,i+ a! !a)in(" Anot,er con*idential docu+ent *ro+ t,e e+ a!!) in Di)ad,, dated He " 1%, &''7, indicate! t,at Saudi o**icial! ,ad concluded )ear! a(o t,at !peculation pla)ed at lea!t a! i( a role in !ettin( oil price! a! traditional i!!ue! o* !uppl) and de+and did" Decountin( t,e pre!entation ) Aa!!er Mu*ti, a planner *or Ara+co, at a con*erence o* United State! and Saudi o**icial!, t,e ca le !aid: B5,e Saudi anal)!i! indicated a link etween ,i(,er oil price! and t,e in*lux o* in-e!tor *und! into t,e oil +arket!"B Indeed, t,e ca le noted, BA! t,e oil *uture! +arket! pla) an increa!in(l) lar(e role in !ettin( world oil price!, (Mu*ti2 re+arked ,i! tea+ wa! now o tainin( etter in!i(,t! into pro!pecti-e oil price! *ro+ ank! t,an *ro+ t,o!e workin( in t,e real oil !ector, !uc, a! re*iner!"B Anot,er docu+ent, *ro+ Sept" &, &''9, o**er! an eeril) accurate prediction o* toda)4! ,i(, price!, +ade )

Sadad al?8u!!eini, Ara+co4! *or+er executi-e -ice?pre!ident" 5,e ca le !aid t,at Bal?8u!!eini predicted t,at anot,er oil price !,ock would likel) ,it !o+eti+e in t,e next )ear or two"B A Mc3latc,) in-e!ti(ation earlier t,i! +ont, !,owed t,e extent to w,ic, *inancial in!titution! now in*luence t,e price o* oil" Until recentl), u!er! o* oil ?!uc, a! airline!, re*inerie! and ot,er con!u+er! o* *uel ?accounted *or a out 7' per cent o* oil tradin( a! t,e) tried to ,ed(e a(ain!t price *luctuation!" 5oda), ,owe-er, !peculator! w,o will ne-er take po!!e!!ion o* a arrel o* oil account *or t,at 7' per cent o* oil*uture! tradin(, and t,e -olu+e o* !peculati-e tradin( ,a! (rown *i-e*old" 5,at4! w,) t,e Air 5ran!port A!!ociation, in a *ilin( Marc, &: to t,e 3H53, called *or a((re!!i-e cur ! on !peculator!" 5,e a!!ociation co+plained o* rapidl) cli+ in( Eet *uel price!, w,ic, ,a-e outpaced t,e rapid cli+ in crude price!" Ine docu+ent !aid t,at Saudi Ara ia ,a! oo!ted it! exce!! capacit) ?t,e di**erence etween t,e a+ount

o* oil it could produce and t,e a+ount it pu+p! *or it! client! ?*ro+ two +illion arrel! per da) to *our +illion, a +ar(in t,at o**er! a!!urance t,at t,ere will e little di!ruption to oil !upplie! *ro+ political unre!t in place! !uc, a! Li )a, w,ereoil production ,a! (round to a ,alt" Aet, !peculator! o*ten dri-e up oil
price! w,en unre!t, !uc, a! in Li )a, reak! out"

Aall Street speculation can cus!ion t!e mar8et and pre#ent prices from dropping <NN' *3 (Saudi Ara ia can4t !a-e u! *ro+ ,i(, oil price!#, 3/&1/&'1&, 3==, Hortune, ,ttp://*inance"*ortune"cnn"co+/&'1&/'3/&1/!audi?ara ia?oil/, 01a,n2 HID5U=E ?? Saudi Ara ia can4t !a-e t,e We!t *ro+ ri!in( oil and (a!oline price! ?? onl) Wall Street can" 5,e 1in(do+ announced earlier t,i! week t,at it wa! increa!in( crude production in a id to !,ake o** !uppl) concern! in-ol-in( a potential !,ut o** o* Iranian oil !upplie!" W,ile Saudi Ara ia doe! ,a-e a +a!!i-e re!er-e a!e, it can4t *i(,t t,i! late!t run?up in price! on it! own" It i! alread) runnin( clo!e to it! production li+it and it4! unclear it can rin( enou(, !uppl) online to *ill an Iranian -oid " Hurt,er+ore, e-en i* Saudi Ara ia could !o+e,ow *ill a ,)pot,etical !uppl) (ap, it i! unlikel) it would reall) +ake +uc, o* a di**erence in a +arket w,ere !peculator! on Wall Street continue to ,old lar(e ulli!, po!ition! in crude and (a!oline *uture!" 5,e a-era(e price *or a (allon o* re(ular (a!oline in t,e U"S" i! a-era(in( around 63":< a (allon, w,ic, i! a record ,i(, *or t,i! ti+e o* )ear and 9; a o-e w,ere it wa! durin( t,e !a+e ti+e la!t )ear" Muc, o* t,e increa!e can e traced ack to crude price!, w,ic, ,a-e +o-ed up con!idera l) a+id !uppl) concern!
!te++in( *ro+ ten!ion! o-er Iran4! nuclear pro(ra+" 5i(,ter !anction! ) t,e U"S" and Europe ,a-e ,it a ner-e in 5e,ran, pro-okin( a war o* word! t,at ,a-e +ade in-e!tor! ner-ou!" Ke!pite t,e -er al a!!ault!, t,ere ,a! een little i+pact on (lo al oil !uppl) a! a re!ult o* t,e tou(,er !anction! on Iran" I>E3 e!ti+ate! Iran produced 3"%&% +illion arrel! o* oil a da) in He ruar), w,ic, i! o** around $"%; *ro+ t,e &'11 a-era(e" Increa!ed crude production *ro+ t,e re!t o* I>E3, na+el) Li )a and Saudi Ara ia, +ore t,an +ade up *or t,i! !+all decline in output" Meanw,ile, t,e U"S" +arket continue! to e well !upplied" 5,ere i! currentl) enou(, oil in co++ercial oil !tora(e tank! to co-er $7"$ da)! o* de+and, w,ic, i! % da)! +ore t,an a )ear a(o and <"< da)! +ore t,an t,e *i-e?)ear a-era(e" Cut it i! t,e potential *or a +a!!i-e !uppl) di!ruption t,at i! addin( a !pecial pre+iu+ to oil price!, e-en t,ou(, !uc, a po!!i ilit) i! re+ote" Saudi Ara ia4! oil +ini!ter told reporter! la!t week t,at t,e 1in(do+ !tand! read) to B+ake (ood an) !,ort*all! S percei-ed or real S in crude oil !uppl)"B 5,i! week, t,e 1in(do+4! ca inet relea!ed an o**icial !tate+ent !a)in( t,at it BaloneB would !uppl) enou(, oil to t,e +arket! to return price! ack to w,at it dee+! to e a B*airB le-el *or con!u+er!" U"S" enc,+ark crude *uture! !,ed a out 6& a*ter t,e new!, to end 5ue!da) at 61'<"'7" Cut w,ile t,e new! i! co+*ortin(, it reall) ,a! little !u !tance" Saudi Ara ia i! alread) reakin( it! own I>E3?i+po!ed production Fuota li+it (a! are +o!t ot,er I>E3 +e+ er!2 and producin( an a!toundin( 9"9 +illion arrel! a da), puttin( it clo!e to a 31?)ear production ,i(," 5,e 1in(do+4! production en(ine i! *irin( on all c)linder! wit, t,e nu+ er o* drillin( ri(! in operation, up !i(ni*icantl) *ro+ t,e !a+e ti+e la!t )ear" It i! e-en (oin( to !tart drillin( in retired oil patc,e! to !FueeJe out an) extra oil t,at +i(,t !till e under(round" I**iciall), Saudi Ara ia4! *ull production capacit) i! around 1&"$ +illion arrel! a da), w,ic, i! &"$ +illion arrel! a da) a o-e it! current production le-el" It al!o Eu!t ,appen! to e Iran4! production li+it, w,ic, could lead one to elie-e t,at t,e Saudi! could po!!i l) +ake up *or an) lo!t Iranian production" Cut (i-en t,e *renJied production rate! o* late and all t,e new drillin( ri(! in operation, +an) anal)!t! elie-e t,at it would take !e-eral +ont,! to pu!, production up to it! ceilin(" And e-en i* it could !o+e,ow ,it t,at le-el it +a) not e !u!taina le a! it would +ean rai!in( production to le-el! t,at could actuall) da+a(e t,e *ield!" Hurt,er+ore, an) +aEor con*lict t,at would !ee Iranian production reduced to Jero would ,a-e +aEor !pill?o-er e**ect!" In t,e unlikel) e-ent t,at Iran did clo!e t,e Strait! o* 8or+uJ, one o* t,e +arket4! Bpercei-ed t,reat!,B t,at would not onl) cut o** t,e ulk o* Iran4! own oil export!, ut it would al!o cut o** t,e ulk o* Saudi Ara ia4! export!" Around &'; o* t,e world4! traded oil, !o+e 17 +illion arrel!, pa!!e! t,rou(, t,e Strait! e-er) da)" Mo!t o* t,at oil co+e! *ro+ Saudi Ara ia" 5,e onl) alternati-e i! to !,ip t,e oil acro!! t,e countr) -ia t,e 7%$ +ile Ea!t? We!t pipeline t,at du+p! out into t,e Ded Sea" 5,e pipeline ,a! a na+eplate capacit) o* Eu!t $ +illion arrel! a da), ,al* o* t,e 1in(do+4! current production" In addition, oil export! *ro+ IraF, 1uwait, and t,e UAE would e !e-erel) di!rupted in !uc, a !cenario" 5,e c,ance Iran would clo!e t,e Strait! i! -er) !+all a! it would e t,e eFui-alent o* co++ittin( econo+ic !uicide" Cut Wall Street !ee+! to t,ink t,at t,i! !cenario or !o+et,in( eFui-alent i! plau!i le enou(, to (o lon( t,e crude +arket!" 5,i! ,a! created an upward !piral in price!" =ow, la+in( !peculator! *or ,i(, price! i! not,in( new " W,at i! new i! t,at one o* t,e lar(e!t !peculator! in t,e oil +arket!, none ot,er t,an Oold+an Sac,! (OS2, ad+ittin( t,at ,ea-)

!peculation

doe! ,a-e an i+pact on oil price!" 8ow +uc,. Well, Oold+an4! oil anal)!t wrote in a note la!t +ont, t,at e-er) +illion
arrel eFui-alent o* oil *uture! t,at wa! net lon( t,e +arket add! 1' cent! to t,e price o* oil" 5,e +arket i! currentl) net lon( US enc,+ark crude, or W5I, ) &$:,%'< contract! w,ic, i! eFui-alent to &$: +illion arrel! o* oil" At 1' cent! per e-er) +illion arrel!, t,at would +ean !peculation i! currentl) addin( 6&$":' to e-er) arrel o* oil ?? wit,out t,e exce!! !peculation, oil would trade at around 6:1"$&" 5,i! pre+iu+ in t,e oil price i! part +arket?!peci*ic and part *ear pre+iu+" >a!!i-e in-e!t+ent *und! t,at ,a-e a lon( ia!, E5H! and co++odit) ull! keep t,e crude contract in t,e net lon( cate(or) u!uall) all t,e ti+e" 5,e *ear pre+iu+ added ) t,e Iranian !ituation ,a! Eu!t exacer ated t,i! di!tortion in t,e price" 5,i! *ear pre+iu+ will

continue *or a! lon( a! Wall Street i! worried" So

e-en i* Saudi Ara ia could *lood t,e +arket wit, oil and plu( an) percei-ed !uppl) !,orta(e, it wouldn4t +ake a di**erence unle!! t,i! o-er,an( in !peculation i! addre!!ed" 5,e next ti+e t,e >re!ident ,ead! to t,e Middle Ea!t to di!cu!! ,i(, oil and (a!oline price!, ,e would e wi!e to +ake a pit !top on Wall Street" 2!e Saudis &ill &ait out production s!ifts S%ndigate' *3 (Independent Saudi Ara ian oil anal)!i! *ir+, citin( Saudi oil +ini!ter, W,o will link *ir!t in crude +arket *aceo** wit, Saudi Ara ia.#, 7/&9/&'1&, Saudi in Hocu!, Lexi!, 01a,n2 NEA 1O-EU <rude oil !as s!o&n great resilience in t!e face of unsupporti#e data o#er t!e last mont!' 4olstered 4% tradersV optimism t!at central 4an8s &ill prime t!e economic pump %et again 4% printing more mone% " E-en trader! w,o acknowled(e t,at
!enti+ent +a) ,a-e li*ted crude te+poraril) out o* ali(n+ent wit, *unda+ental! !a) t,e) ,a-e to keep u)in(" Mo+entu+ can e *riendl), a*ter all" 5,e trick, o* cour!e, i! knowin( w,en to !top c,a!in( t,e crowd, ecau!e w,en !enti+ent !,i*t!, t,e reckonin( can e rutal" 5,at !,i*t +a) well co+e i* crude price! keep ri!in(, w,ic, will rin( t,e !,owdown etween t,e +arket and Saudi Ara ia to a ,ead" Alread%' t!e mar8et and t!e O=E< !ea#%&eig!t are on a collision course " 5,e pat, oil take! o-er t,e next *ew +ont,! i! likel) to depend on w,ic, !ide link! *ir!t" Inl) a *ew +ont,! a(o, Saudi Ara ia pu licl) !tated it! intent to pu!, down oil price!" At *ir!t t,i! wa! lit,el) i(nored ) t,e +arket" At t!e time it certainl%

seemed li8e anot!er tired repetition of official Saudi oil polic%U 2!e mar8et &ill al&a%s 4e &ell supplied" 1et &!at it mar8ed &as a clear s!ift in Saudi polic% to&ard acti#el% pus!ing oil into t!e mar8et in an effort to inflate in#entor% le#els in consumer nations" Since t!en' Saudi Oil inister Ali al$Naimi !as gone on t!e record sa%ing K*99 a 4arrel &as a TgreatT price for oil" 8i! co++ent! a*ter t,e 0une +eetin( o*
I>E3 +ini!ter! were e-en +ore tellin(" Explicitl) de!cri in( lower oil price! a! B!ti+ulu!B *or t,e world econo+), =ai+i under!cored Di)ad,4! new, +ore acti-i!t, approac, to t,e +arket" 5,e i+pact o* t,o!e word! on t,e oil +arket ,a! *aded" In +an) wa)! t,e !,owdown etween t,e oil +arket and Saudi Ara ia i! one etween !enti+ent and +arket *unda+ental!" Market !enti+ent i! undenia l) ulli!,, !upported ) expectation! o* central ank action" Hunda+ental! are *ar le!! !upporti-e, ut *or now are ein( di!+i!!ed" In t,e *unda+ental !ide, attention is focused on tig!ter Aestern sanctions on Iran

and t!e degree to &!ic! t!ese cut into 2e!ranVs oil exports" 1et Saudi Ara4ia !as maintained crude oil production a4o#e *9 million 4arrels per da%' def%ing expectations t,at t,e kin(do+ +i(,t !cale ack output (raduall) to rin( (lo al oil !upplie! down to +atc, de+and" And, at
lea!t *or now, t,e e**ect o* t,e current !anction! re(i+e +i(,t e at it! peak" Iranian oil export! in 0ul) are expected to e *lat wit, 0une, arre!tin( a !lide, ,elped ) record 3,ine!e u)in(" Sout, 1orea ,a! al!o !i(naled it +a) !oon re!u+e purc,a!e! *ro+ Iran a! 5e,ran work! to pro-ide !,ippin( in!urance t,at )pa!!e! We!tern *inancial +arket!" Hor now, Saudi Ara ia i! unlikel) to e too worried" 3rude price! ,a-e ri!en !+artl) *ro+ t,eir 0une low!, ut are !till clo!e to t,e 61'' +ark t,e kin(do+ want!" 5,e ca!e can al!o e +ade t,at plent) o* !,ort?ter+ noi!e ? =ort, Sea production trou le! di!tortin( Crent price!, *or in!tance ? +ake! it pre+ature to act" Indeed, t,ere i! (ood rea!on to !u!pect t,at Saudi Ara ia i! ,opin( t,e +arket will capitulate e*ore it i! *orced into action to put a lid on price!" A*ter all, it i! ,ardl) in Di)ad,4! intere!t to *lood t,e world wit, enou(, crude to tri((er a price cra!," Ki((in( out o* t,at ,ole would e co!tl) and potentiall) ri!k) wit, unre!t u lin( awa) in t,e Middle Ea!t" E-en in t,e a !ence o* a cra!, it i! not a co!t?*ree polic) to uild !tock! w,en no one el!e want! to" At t,e -er) lea!t, !tora(e co!t! +one), ot, in ter+! o* operation! and t,e opportunit) co!t o* lo!t !ale!" W,en oil price! are ,i(,er in t,e *uture t,an t,e) are toda), !torin( oil *or deli-er) later in t,e )ear can e a +one) +aker" Cut toda) t,e oppo!ite !ituation pre-ail!" 5,o!e !torin( oil ri!k lo!in( +one)" Aet t,at i! preci!el) w,at Saudi Ara ia ,a! done, *illin( up !tora(e in Europe and A!ia" >ricin( crude c,eapl) enou(, to (et t,ird partie! to !tore oil al!o co+e! at t,e co!t o* +one) le*t on t,e ta le" So t!e Saudi strateg% ma% &ell 4e &aiting

and !oping ot!er factors o#er&!elm t!e momentum of t!e mar8et" Cut i* t,e!e *actor! *ail
to +aterialiJe, or i* crude !i+pl) continue! to arrel pa!t ne(ati-e new!, Saudi Ara ia will encounter t,e c,allen(e *aced ) an) central anker w,o want! to turn a +arket tide" Inter-ention +u!t e !u**icientl) +a!!i-e to ,a-e a deci!i-e e**ect on price!G ot,erwi!e, t,e +arket trend will e un roken and t,e e**ect o* an) *uture inter-ention t,reat will e di+ini!,ed"

2!e glo4al mar8et is flexi4le,Saudi Ara4ia &ill Cust stri8e a 4alance Sili#e' .)3)*/ (B5,e co+in( A+erican ener() oo+ i! ad new! *or *orei(n oilB, www"!ili-e"co+/opinion/colu+n!/index"!!*/&'13/'</t,eMco+in(Ma+ericanMener()M oo",t+l //kd,2
It al!o +ean!, contrar) to popular elie*, t,at t,e current ri!e in U"S" do+e!tic production will ,a-e +ini+al i+pact on (lo al crude price!, and ,ence on t,e price we pa) *or (a!oline at t,e pu+p" Iil i! a *un(i le co++odit) and it! price! are deter+ined in t,e

(lo al +arket" I* t,e United State! drill! +ore, Saudi Ara ia will !i+pl) drill le!!, keepin( t,e !uppl)/de+and relation!,ip ti(,t and price! ,i(,"

no flood no opec control

O=E< no longer !as price control t!e U"S" is independent :ill 3)//13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, MaEor c,an(e! *ro+ oil re-olution#, Wa!,in(ton 5i+e!, &/3/&'13, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/*e /%/!ea?c,an(e!?*ro+?oil?re-olution/, 01a,n2 Hor A+erican! w,o ca+e o* a(e in an era +arked ) worrie! a out !carce world oil !upplie!, do+inant international oil cartel! and unre!t in t,e Middle Ea!t, t,e ti+e! are c,an(in( L Fuickl)" 5ec,nolo(ie! red in A+erica are unlockin( re!er-e! o* oil t,at *or decade! were con!idered out o* reac," Wit, oil production *ro+ !,ale rock, oil !and! and deep?!ea drillin( oo+in( in t,e U"S", 3anada, CraJil and el!ew,ere, worrie! a out Middle Ea!t? a!ed oil cartel! and -ulnera le >er!ian Oul* !uppl) line! are clo!e to eco+in( t,in(! o* t,e pa!t " Until recentl), t,e
U"S" wa! i+portin( a !i(ni*icant c,unk o* it! oil *ro+ t,e Middle Ea!t,# in particular, Saudi Ara ia and IraF, !aid Hati, Cirol, c,ie* econo+i!t at t,e International Ener() A(enc)" Cut we expect t,e U"S" will not need Middle Ea!t oil !o+eti+e !oon" 5,i! ,a! i+plication! *or international oil +arket! and e)ond t,at"# Aet e-en a! A+ericaN! ener() re!ur(ence ena le! t,e

nation to da le wit, t,e pro!pect o* ener() independence *or t,e *ir!t ti+e in a ,al*?centur) and ca!t o** a lon(?!tandin( preoccupation wit, t,e oil cartel I>E3, 3,ina and ot,er e+er(in( titan! are
!teppin( to t,e *ore wit, *a!t?ri!in( ener() de+and! t,at increa!in(l) put t,e+ at t,e e,e!t o* I>E3N! producer!" 5,e co+ ination i! !,akin( up lon(?,eld a!!u+ption! a out ,ow U"S" political leader! !,ould deal wit, t,e worldN! +o!t indi!pen!a le co++odit)" Ener() !peciali!t Kaniel Aer(in recentl) c,ecked o** t,e *a!t?paced c,an(e! t,at ,a-e altered t,e outlook and a!toni!,ed lon(ti+e o !er-er! includin( ,i+!el*: U"S" oil i+port! ,a-e *allen *ro+ <& percent to %' percent o* con!u+ption !ince &''$ a! a re!ult o* a dra+atic turn toward con!er-ation and *uel e**icienc), coupled wit, do+e!tic oil production t,at i! t,e *a!te!t?(rowin( in t,e world" 3anada L t,e Saudi Ara ia to t,e =ort,# L ,a! eco+e t,e +o!t i+portant out!ide !upplier to t,e U"S" and recentl) !urpa!!ed Li )a a! a +aEor oil exporter, w,ile CraJil i! le-era(in( it! ,u(e o**!,ore re!er-e! to eco+e a (lo al ener() power,ou!e" 5,e re!ult! o* t,i! ,e+i!p,eric up!ur(e will ,a-e *ar?reac,in( con!eFuence! L not,in( le!! t,an a re alancin( o* world oil,# Mr" Aer(in !aid, notin( t,at 3,ina now i+port! +ore oil *ro+ t,e >er!ian Oul* t,an doe! t,e United State!" Muc, le!! oil will co+e *ro+ t,e Ea!tern 8e+i!p,ere to t,e We!tern 8e+i!p,ere, and +uc, +ore Middle Ea!tern oil will *low to A!ia,# ,e !aid" 5,e 61''?a? arrel !,ock Mr" Aer(in, -ice c,air+an o* t,e (lo al u!ine!! t,ink tank I8S Inc", trace! t,e !ea c,an(e to t,e !ur(e in ener() price! nearl) a decade a(o w,en t,e world wa! con!u+ed ) worrie! a out t,e !carcit) o* oil !upplie! ecau!e o* t,e ri!e o* 3,ina and ot,er e+er(in( +arket!, creatin( +illion! o* +iddle?cla!! con!u+er! w,o were ea(er to +ake t,eir *ir!t car purc,a!e! and e+ulate t,e We!tern li*e!t)le" >re+iu+ crude price! !oared to +ore t,an 61'' a arrel *or t,e *ir!t ti+e, peakin( at 61%$ in 0ul) &'':" Suc, price! pro-ided incenti-e! *or oil co+panie! to *ind wa)! to tap ,arder?to?(et re!ource! !uc, a! =ort, KakotaN! Cakken !,ale and Al ertaN! oil !and! t,at ,ad een unecono+ical to o tain in )ear! pa!t" Extraction !uddenl) eca+e pro*ita le at t,e ,i(,er price le-el!, u!in( co!tl) and co+plex tec,nolo(ie! de-eloped in w,at Mr" Aer(in de!cri e! a! a (reat u lin(# o* ener() inno-ation"

S!ale production &ill eliminate Saudi control of t!e mar8et :ill' ()*+/13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, U"S" pu+p! up oil production a! de+and ri!e! in de-elopin( world#, Wa!,in(ton 5i+e!, $/1%/&'13, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/+a)/1%/u!?oil? !ur(e?tran!*or+!?+arket!?undercut!?opec/, 01a,n2 2!e rapid gro&t! of U"S" oil production is transforming glo4al mar8ets and easing supplies Eu!t a! 3,ina and t,e re!t o* t,e de-elopin( world +o-e to o-ertake t,e de-eloped world *or t,e *ir!t ti+e in con!u+ption, t,e International Ener() A(enc) reported 5ue!da)" 2!e s!ale oil re#olution in t!e U"S" !eartland &ill cause a surge in oil production of /"? million 4arrels a da% in t!e next fi#e %ears' far exceeding t!e gro&t! of O=E< and ot!er oil suppliers' eliminating t!e need for iddle Eastern imports in t!e U"S" and causing ot!er cascading effects" =ort, A+erica ,a! !et o** a !uppl) !,ock t,at i! !endin( ripple! t,rou(,out t,e world,# !aid IEA
Executi-e Kirector Maria -an der 8oe-en" 5,e (ood new! i! t,at t,i! i! ,elpin( to ea!e a +arket t,at wa! relati-el) ti(,t *or !e-eral )ear!"# Ce!ide! displacing iddle Eastern oil imports so t!e% can 4e redirected to&ard

Asia' w,ic, i! t,e *a!te!t?(rowin( center o* de+and, t,e ,)draulic *racturin( tec,nolo(ie! u!ed to relea!e t,e oil *ro+ !,ale rock in t!e U"S" !a#e t!e potential to transform t!e &a% oil is produced around t!e &orld and could lead to a maCor reassessment of t!e &orld0s oil resources , !,e !aid" M!" -an der
8oe-en called t,e A+erican oil renai!!ance re+arka le,# (i-en ,ow t,e U"S" *aced !ee+in(l) irre-er!i le production decline! *or decade! a*ter !er-in( *or +ore t,an a centur) a! t,e cradle o* t,e oil indu!tr)"# 2!e U"S" Energ% Information

Administration also is proCecting a surge in U"S" oil production in t!e next fi#e %ears as #arious prolific s!ale pla%s come to mar8et , ut it i! !o+ew,at le!! opti+i!tic a out ,ow

lon( t,e production oo+ will la!t, (i-en t,e uncertaintie! on ,ow lon( oil can e produced *ro+ !,ale *or+ation e*ore runnin( into tec,nical o !tacle!" 5,e (rowt, o* oil !uppl) *ro+ t,e U"S" and 3anada, w,ic, i! ratc,etin( up de-elop+ent o* it! -a!t Al erta oil !and!, couldnNt co+e at a etter ti+e a! t,e de-elopin( world i! !et to !urpa!! t,e de-eloped world in t,e con!u+ption o* oil *or t,e *ir!t ti+e t,i! Fuarter, t,e international a(enc) !aid" 5otal world oil de+and will (row *ro+ a out 9' +illion arrel! a da) toda) to nearl) 97 +illion in &'1:, wit, +ore t,an ,al* o* t,at co+in( *ro+ de-elopin( countrie!" 3,ina ,a! een t,e i((e!t and +o!t dra+atic !ource o* de+and *or oil in t,e pa!t 1$ )ear!, ut t,e u!e o* oil al!o i! (rowin( ri!kl) in t,e re!t o* A!ia, t,e Middle Ea!t and A*rica, area! t,at are enEo)in( ro u!t econo+ic (rowt,"

E#en if O=E< retains control' U"S" production pre#ents suppl% disruptions :ill' ()*+/13 (>atrice, 3,ie* Econo+ic 3orre!pondent at Wa!,in(ton 5i+e!, de(ree *ro+ I erlin 3olle(e, U"S" pu+p! up oil production a! de+and ri!e! in de-elopin( world#, Wa!,in(ton 5i+e!, $/1%/&'13, ,ttp://www"wa!,in(tonti+e!"co+/new!/&'13/+a)/1%/u!?oil? !ur(e?tran!*or+!?+arket!?undercut!?opec/, 01a,n2
At one ti+e onl) a decade or !o a(o, t,e U"S", Europe and 0apan were t,e do+inant !ource! o* world oil de+and" 5,ere i! a (rowin( perception t,at t,e peak in [Ir(aniJation *or Econo+ic 3ooperation and Ke-elop+ent\ oil de+and, includin( in t,e U"S", i! e,ind u!,# !aid M!" -an der 8oe-en, w,erea! non?IE3K de+and (rowt, i! !preadin( *ro+ 3,ina, w,ic, appear! to e !lowin( down !o+ew,at, to ot,er A!ian econo+ie! and e-en A*rica, w,ic, i! e+er(in( a! a new de+and *rontier"# E-en a! !upplie! !ur(e in =ort, A+erica, production ) I>E3 ,a! (rown onl) weakl), ,o led ) unre!t in t,e Middle Ea!t and =ort, A*rica !te++in( *ro+ t,e Ara Sprin( upri!in(!, t,e a(enc) !aid" IraF i! leadin( t,e (rowt, in I>E3 production, ut it continue! to encounter o !tacle! t,at !low t,e de-elop+ent o* it! -a!t oil re!er-e!" O=E< oil &ill still #er% muc! 4e needed ,# de!pite t,e cartelN! recent trou le!, 4ecause der 8oe-en" It

of t!e surging demand in Asia and t!e de#eloping &orld , !aid M!" -an &ill remain an essential part of oil mix for as long as &e can tell"M A!ile t!e U"S" and <anada aren0t producing enoug! oil to dramaticall% lo&er glo4al oil prices' it pro4a4l% &as enoug! last %ear to a#ert a serious suppl% crunc! &!en O=E< supplies &ere disrupted 4% #arious crises in t!e iddle East' s!e said"

no flood iraq controls

Iraq controls t!e glo4al mar8et t!e% !a#e no incenti#e to flood Le7ine' *3 (Ste-e, Cernard L" Sc,wartJ Hellow at t,e =ew A+erica Houndation, and i! Wa!,in(ton corre!pondent *or VuartJ, adEunct pro*e!!or at Oeor(etown Uni-er!it)4! Sc,ool o* Horei(n Ser-ice, *or+er *orei(n corre!pondent *or 5,e Wall Street 0ournal, 5,e =ew Aork 5i+e!, 5,e Wa!,in(ton >o!t, t,e Hinancial 5i+e! and =ew!week, 8ow IraF could *lood t,e (lo al oil +arket and eco+e a new Saudi Ara ia#, VuartJ >re!!, 1'/9/&'1&, ,ttp://FJ"co+/133%$/iraF?will?*lood?t,e?(lo al?oil?+arket/, 01a,n2 Muc, i! +ade o* t,e !tunnin( (rowt, o* =ort, A+erican petroleu+ !upplie!, ut a new report !a)! t,at *or t,e next two decade!, IraF will account *or %$; o* (lo al !uppl) (rowt,, and literall) eco+e a new Saudi Ara ia" 5,e down!ide i! t,at IraF will not produce 1$ +illion arrel! o* oil a da) ) &'&', t,e -olu+e i+plied ) current contract! in place, !a)! a new report ) t,e International Ener() A(enc)" Cut IraFi export! are likel) to al+o!t triple to +ore t,an < +illion arrel! a da) ) &'3$ *ro+ &"< +illion arrel! a da) toda), !urpa!!in( Du!!ia and +akin( t,e countr) t,e !econd?lar(e!t oil !upplier to t,e re!t o* t,e world " IraF al!o could eco+e t,e
!ixt,?lar(e!t exporter o* natural (a!, !urpa!!in( Vatar, t,e current world leader, t,e IEA !a)!" Hro+ t,e!e export!, IraF could e earnin( al+o!t 63'' illion a )ear ) &'3$, and ,a-e t,e per capita OK> o* Saudi Ara ia toda)" =u+erou! recent report!

,a-e placed =ort, A+erica includin( t,e United State! at t,e center o* a (lo al !ur(e in oil production" Cut t,e IEA report !a)! t,at e-entuall), it i! IraFN! -olu+e! t,at would ,elp to !ta iliJe (lo al +arket! ) pro-idin( a new cu!,ion o* !pare production !uppl) in addition to t,e !ole current ,older o* !,ut?in capacit), Saudi Ara ia" 5,ere i! a !tron( ali(n+ent etween t,e need! o* t,e (lo al +arket *or
(rowt, in IraFN! production and t,e need! o* IraF *or re-enue to uild t,e *oundation! o* a +odern and pro!perou! econo+),# t,e IEA !aid in t,e report" Cuildin( !uc, an econo+) and turnin( t,e countr) into a (lo al ener() power,ou!e will not e an ea!) ta!k, ut t,i! i! a priJe wit,in t,e reac, o* t,e people o* IraF"# Muc, would ,a-e to (o ri(,t in w,at i! now a+on( t,e +o!t c,aotic and -iolent countrie! on t,e planet, one w,o!e citiJen! (et electricit) Eu!t ei(,t ,our! a da) on a-era(e" Hor exa+ple, ei(,t +illion arrel! a da) o* water would need to e tran!ported inland *ro+ t,e >er!ian Oul* to !out,ern IraFi oil*ield!, t,e a(enc) !a)!" Iil*ield in-e!t+ent would ,a-e to triple to +ore t,an 6&$ illion a )ear t,rou(, &'3$ *ro+ a out 69 illion la!t )ear" I* all t,at i! done, t,e IEA !a)! t,at, includin( -olu+e! kept *or do+e!tic u!e and not exported, IraFN! oil production i! likel) to reac, <"1 +illion arrel! a da) ) &'&' and :"3 +illion arrel! a da) ) &'3$" I* t,i! !cenario doe! not pla) out, and de-elop+ent i! !lower, (lo al ener() +arket! will e !e-erel) !trained, pu!,in( proEected oil price! up to 61%' a arrel, or 61$ +ore t,an currentl) *ore!een, t,e IEA !a)!" 5,e IEA de*ine! t,i! ca!e a! IraF producin( Eu!t *our +illion arrel! a da) ) &'&', or one?t,ird +ore t,an toda), and $"3 +illion arrel! a da) ) &'3$" Dat,er t,an 6$ trillion in cu+ulati-e re-enue, IraF could earn a! little a! 6& trillion" Ke-elop+ent! in

IraFN! ener() !ector are critical *or t,e countr)N! pro!pect! and al!o *or t,e ,ealt, o* t,e (lo al econo+),# !aid IEA 3,ie* Econo+i!t Hati, Cirol, t,e reportN! c,ie* aut,or" Cut !ucce!! i! not a!!ured, and *ailure to ac,ie-e t,e
anticipated increa!e in IraFN! oil !uppl) would put (lo al oil +arket! on cour!e *or trou led water!"#

no flood flood ine#ita4le

U"S" s!ale findings &ill cause a Saudi flood IA' *3 (International Wire, inter-iew wit, 1aren 8er ert, pre!ident and 3EI o* t,e U"S" 3,a+ er4! In!titute *or &1!t 3entur) Ener(), U"S" 3ould Surpa!! Saudi Ara ia in Iil >roduction C) &'&'G Endin( Incenti-e! 3ould Crin( in Extra 6%' Cillion I-er 1' Aear!G Iran Ce,ind Mo!t#, 1'/&%/&'1&, International Wire, Lexi!, 01a,n2
HDA=3IS: =ow, I Eu!t want to put it in per!pecti-e *or -iewer!" Cecau!e I4-e een to Saudi Ara ia and t,e oil t,ere i! a!icall) !ittin( in t,e !and" And t,at oil t,at we are talkin( a out (ettin( ,ere i! a lot ,arder and +ore expen!i-e to (et to" I +ean, it i! (reat t,at we ,a-e tec,nolo() to do it ut it i! a lot +ore expen!i-e, ri(,t. 8EDCED5: Well, it i! +ore expen!i-e ut )ou (et a lot +ore out o* it ecau!e it i! t,e +o!t ad-anced tec,nolo()" Aou know, it i! no !urpri!e t,at w,ere a lot o* it i! ,appenin( in a place like =ort, Kakota" =ort, Kakota ,a! t,e lowe!t une+plo)+ent rate in t,e w,ole United State!" And t,at i!

ecau!e t,e) are a le to put t,eir econo+) to work a!ed on oil" So, )e!, it i! a little it +ore expen!i-e" Cut ecau!e o* tec,nolo(), )ou (et a lot +ore +olecule! out *or t,e +one) )ou put in " HDA=3IS: Cut, i* it i! +ore expen!i-e, I +ean, Saudi Ara ia can *lood t,e oil +arket wit, c,eaper oil in order to co+plete and take awa) t,at u!ine!!" 8EDCED5: Well, we ,a-e to care*ul" It i! not ri( ? it not
apple! to apple!" W,ile t,e tec,nolo() +i(,t e +ore expen!i-e, we are (ettin( out +ore *or e-er) dollar t,at we4re puttin( in" So, it i! actuall) a +uc, etter in-e!t+ent" HDA=3IS: I don4t under!tand" 8ow i! t,at t,e ca!e. 8EDCED5: Cecau!e t,e wa) )ou u!e t,i! tec,nolo(), w,en )ou put it in t,e (round )ou are a le to (et a lot +ore product out rat,er t,an con-entional drillin( w,ic, i! w,at t,e) are doin( in Saudi Ara ia" HDA=3IS: I4+ not !ure a out t,at" We +i(,t ,a-e to exa+ine t,at at anot,er ti+e" 8EDCED5: Sure"

Saudi Ara4ia &ill flood t!e mar8et 4ecause of U"S" s!ale despite Saudi statements U"S" Ne&s' *)*./13 (citin( C>, >roEection: U"S" Will Ce Ener() Sel*?Su**icient C) &'3'#, 1/1</&'13, U"S" =ew! and World Deport, Lexi!, 01a,n2 Surging domestic production of s!ale gas and oil means t!e United States could 4e #irtuall% energ% self$sufficient 4% 39/9 according to a report released Aednesda% 4% @ritis! =etroleum" 2!at could in turn !a#e TmaCor impacts on trade 4alances'T t!e report said' as glo4al energ% demand in de#eloping countries ramps up contri4uting to a /. percent gro&t! in o#erall demand " B5,e outlook !,ow! t,e de(ree to w,ic, once?accepted wi!do+ ,a! een turned on it! ,ead,B Co Kudle), C> Oroup 3,ie* Executi-e, !aid in a pre!! relea!e" B 2!e U"S" &ill not 4e increasingl% dependent on energ% imports' &it! energ% set to rein#igorate its econom%" And 3,ina and India are expected to need a lot +ore i+port! to keep (rowin("B
[WA538:U"S" =ew! 5our! >a" Hrackin( Hield!\ Si(ni*icant pro(re!! in ener() e**icienc) and *uel econo+) ,a! re!ulted in declinin( oil and (a!oline de+and in recent )ear! and will eco+e Ba (reat catal)!t ,ere,B !a)! 3,ri! Haulkner, 3EI o* Kalla!? a!ed Creitlin( Iil and Oa!" BI* A+erica continue! down t,e road o* ener() e**icienc), I t,ink we won4t e t,e i((e!t con!u+er o* oil ,ere in t,e next two )ear!,B Haulkner !a)!" B5,at co+ ined wit, t,e *act t,at our do+e!tic production i! !ur(in(, I t,ink ) &'3$, we4ll e a net exporter o* crude"B 5,at4! ecau!e w,ile !,ale *or+ation! exi!t el!ew,ere in t,e world, lar(e?!cale de-elop+ent o* t,o!e re!ource! ,a! onl) taken place t,u! *ar in =ort, A+erica" Ait! pre#iousl% unimagina4le amounts of crude oil

and natural gas loc8ed a&a% in s!ale roc8 across t!e United States' t!e nation is poised to 4ecome a glo4al energ% production leader' experts sa%$$a maCor re#ersal from predictions made Cust a fe& %ears ago" S,ale (a! and ti(,t oil production: [38AD5\ (Source: C>2
BWit, 3,ina and India, we could !ee de+and [A+erica\ didn4t e-en ,a-e at it! peak,B Haulkner add!" B5,o!e countrie!4 de+and i! (oin( to outpace u! tre+endou!l)"B [KECA5E: I! Hrackin( a Oood Idea.\ W,ile ot,er countrie! +a) adopt tec,niFue! currentl) ein( u!ed in =ort, A+erica in t,e *uture, t,e report !till proEect! t,e continent to do+inate production o* !,ale re!ource! ) &'3', wit, ti(,t oil??crude oil trapped in !,ale rock *or+ation!??accountin( *or a out 9 percent o* (lo al !upplie! ) t,at ti+e" 5,e U"S" will !urpa!! Saudi Ara ia t,i! )ear to eco+e t,e lar(e!t producer o* liFuid *uel!, t,e C> report noted, and accordin( to a =o-e+ er International Ener() A(enc) report, t!e U"S" &ill 4ecome t!e 4iggest oil producer 4% 3939 , outpacin( Saudi Ara ia *or a out *i-e )ear!" 5,at4! i+portant w,en it co+e! to pro!pect! *or U"S" export!, ecau!e accordin( to t,e C> report, *o!!il *uel! will continue to e t,e do+inant ele+ent in t,e world4! *uel +ix" Orowt, in power de+and ) re(ion: [38AD5\ (Source: C>2 Still t,e *ate o* +an) o* t,e!e opti+i!tic prediction! ,in(e! on *actor! like t,e *uture re(ulator) en-iron+ent t,at (o-ern! oil and (a! de-elop+ent in t,e U"S" and t,e potential *or oil price! to plu++et" B -egulation could 4e a

4ig !indrance !ere' as &ell as a drop in oil prices if' for example' Saudi Ara4ia unloc8s t!e c!o8e and floods t!e mar8et ,B Haulkner !a)!" B5,e co!t o* tr)in( to de-elop uncon-entional
re!ource!, w,ic, i! (oin( to e t,e !ource o* (rowt, (oin( *orward, i! +uc,, +uc, ,i(,er"B [DEAK: 8ow Hrackin( 3ould A**ect U"S" >olic) in t,e Middle Ea!t\ 3o!t! a!!ociated wit, extractin( !,ale (a! and ti(,t oil could al!o increa!e to a pro,i iti-el) ,i(, le-el i* !tate and *ederal (o-ern+ent! co+e down ,ard on ,)draulic *racturin(, a contro-er!ial practice t,at in-ol-e! pu+pin( +illion! o* (allon! o* pre!!uriJed water, !and, and !+all a+ount! o* c,e+ical! into well ,ead! to relea!e oil and (a!" Accordin( to Haulkner, 9'

percent o* t,e well! drilled toda) are ulti+atel) *racked, and i* co!t! !k)rocket due to re(ulation and low oil price!, t,e indu!tr) could (rind to a ,alt" BAll o* t,i! (rowt, i! (oin( to co+e *ro+ ti(,t oil or oil !and! or !o+e io*uel!, and *rackin( i! t,e e!!ential tool to unlock it,B Haulkner !a)!" BWe ,a-e to *ind a wa) a! an indu!tr) to extract t,i! oil out o* t,e (round in a +anner t,at *olk! *eel co+*orta le doin("B BI* *olk! t,ink we can do it wit,out *rackin(??t,e)4re *ool!,B Haulkner add!"

6looding0s ine#ita4le Iran nuclear &eapons 6or4es' ** (3,ri!top,er 8el+an, MS *ro+ 3olu+ ia Uni-er!it), MA *ro+ Uni-er!it) o* 3ali*ornia, Cerkele), Saudi! Set 5o Cankrupt Iran Wit, Hlood I* Iil#, </&&/&'11, Hor e!, ,ttp://www"*or e!"co+/!ite!/c,ri!top,er,el+an/&'11/'</&&/!audi!?!et?to? ankrupt?iran? wit,?*lood?o*?oil/, 01a,n2
5oda) t,e Wall Street 0ournal ,a! a *a!cinatin( piece de!cri in( a !peec, (i-en t,i! +ont, ) Saudi >rince 5urki Al?Hai!al" 5,e prince, !peakin( to a (roup o* U"S" and Criti!, !er-ice+en at an air a!e near London, explained t,at Saudi Ara4ia &as

so concerned a4out Iran0s continued marc! to&ard attaining nuclear &eapons t!at it &as considering opening its oil spigots and s&amping t!e &orld &it! oil in t!e interest of gutting 2e!ran0s go#ernment re#enue" 2!e prince insisted t!at t!e Saudis still !a#e sufficient spare production capacit% t!at' if need 4e' I&e could almost instantl% replace all of Iran0s oil productionM of roug!l% + million 4pd" A!!u+e
*or t,e !ake o* ar(u+ent t,at ,eN! ri(,t and t,at t,e Saudi! could +ana(e upward! o* 1% +illion pd" It +ean! t,at in a wor!t ca!e !cenario IranN! nuclear a+ ition! could e potentiall) reined in ) a na-al lockade o* it! oil tanker! wit,out in-okin( +a!!i-e oil !,orta(e! (and econo+) cru!,in( oil price!2 worldwide" Cankruptin( t,e +ulla,! wouldnNt e a !ure*ire !olutionSIran would o* cour!e -iew an) !uc, lockade a! an act o* war" Cetter t,en *or t,e Saudi! to cut 5e,ranN! re-enue (raduall), ) keepin( t,e +arket! *lu!, wit, crude" Hor +ore on t,e likeli,ood o* t,e Saudi! !,owin( it! power o-er I>E3 ) enactin( a VE3k in t,e *or+ o* oil, !ee +) di!patc, *ro+ la!t week"

2!e impact0s ine#ita4le Saudi flood is !appening no&' e#en if t!e% don0t flood mar8et' Iran &ill -eed' *3 (Matt,ew M" Deed, Matt,ew M" Deed, Middle Ea!t Speciali!t *or a con!ultin( *ir+ in Wa!,in(ton, K"3", MA in Middle Ea!t Studie! *ro+ Oeor(e Wa!,in(ton Uni-er!it)4! Elliott Sc,ool o* International A**air!, CA in 8i!tor) *ro+ Da+apo 3olle(e o* =ew 0er!e), B3an Saudi Ara ia Hlood t,e Market.B, 5,e Horei(ner, alaEna ee"wordpre!!"co+/&'1&/'</'%/can?!audi? ara ia?*lood?t,e?+arket/, 01a,n2 5,e Saudi! ,a-enNt +o-ed a(ain!t t,e oil +arket!. La!t )ear t,e) pu+ped a out :"$ +illion arrel! a da) ( /d2" Cecau!e o* di!ruption! and anxiet) !urroundin( a po!!i le !trike on Iran, t,e) are now pu+pin( 1' +illion /d, all in an e**ort to pu!, down price!" 3ooper !a)! t,e Saudi! +i(,t *lood t,e +arket in order to turn t,e !crew! on Iran" Cut t,e Saudi! are alread% flooding t!e mar8et: accordin( to t,e International Ener() A(enc), !uppl) i! now outpacin( de+and ) 1"$ +illion arrel! on a dail) a!i!Srou(,l) t,e nu+ er ) w,ic, Di)ad, increa!ed output t,i! )ear" 5,e)N-e al!o pro+i!ed to keep producin( at t,i! rate *or t,e near *uture"
And Iranian aut,oritie! arenNt ,app) a out it" In Ma) &9, IranN! I>E3 Oo-ernor Mo,a++ad Ali 1,ati i la+ed Saudi Ara ia *or producin( too +uc," Increa!in( production ) !o+e I>E3 +e+ er!, e!peciall) Saudi Ara ia, will create in!ta ilit) in t,e +arket and will likel) lead to a !eriou! decline in oil price! w,ic, under+ine! I>E3N! (oal!,# ,e !aid" We canNt (i-e t,e Saudi! all t,e credit" Iil price! are declinin( ecau!e t,e (lo al econo+) i! !putterin(" Cut w,ere would price! e wit,out Saudi Ara iaN! additional 1"$ +illion arrel! a da). CrentSt,e European enc,+ark t,at Saudi oil price! are tied toSnow !it! at 69:" 5,e Saudi tar(et price +i(,t e 61'', accordin( to Iil Mini!ter Ali =ai+i, ut t!ere0s no indication -i%ad! &ill cut

4ac8 production soon" Iran, and not Saudi Ara

ia, wa! I>E3N! pree+inent power roker [in t,e +id?197'!\" Alt,ou(, t,e S,a, wa! a U"S" all), ,e ,ad anta(oniJed Wa!,in(ton ) en(ineerin( t,e 1973 oil !,ock t,at led to t,e !wa+pin( o* We!tern econo+ie! wit, de t, une+plo)+ent, and in*lation, and !parked *ear! o* ankin( collap!e! and t,e ankruptc) o* =A5I allie! in !out,ern Europe" Iran wa! not t,e pree+inent power roker# o* I>E3 in 1973 e-en i* it wa! a +aEor producer" Saudi production wa! !till ,i(,er t,at )ear" And t,e S,a, did not en(ineer# t,e 1973 oil !,ock" 1in( Hai!al o* Saudi Ara ia, w,o wa! known *or ein( preoccupied wit, t,e >ale!tinian condition and a !taunc, opponent o* @ioni!+, led t,e e+ ar(o e**ort a*ter t,e U"S" !ided wit, I!rael in t,e Ao+ 1ippur War (!ee Kaniel Aer(inN! account in 3,apter &9 o* 5,e >riJe2" 5,e S,a, Eoined I>E3 +e+ er! in ,ikin( t,e po!ted price o* oil in Icto er 1973" Cut ,e kept production ,i(,, !old to t,e U"S" and I!rael, and did not Eoin t,e e+ ar(o" Wa!,in(ton wa! certainl) di!appointed wit, t,e S,a, ecau!e ,e re*u!ed to pu!, down price!" Cut it wa! t,e e+ ar(oLco+ ined wit, t,e de-aluation o* t,e dollar in 1973Lt,at !,ook t,e +arket, ,urt We!tern econo+ie!, and dro-e in*lation" 5,e S,a, ca!,ed in" 8e did not create t,e cri!i!" In t,e wake o* t,e Ara Sprin( unre!t acro!! t,e Middle Ea!t, t,e Saudi (o-ern+ent announced t,at it planned to increa!e !tate !pendin( ) at lea!t one t,ird and pu+p +ore t,an 613' illion ack into t,e do+e!tic econo+)" 5,i! rai!e! t,e ri!k! o* +onetar) o-er,eatin( and in*lation" An e!ti+ated 6< illion will e !pent on *orei(n !tud) !c,olar!,ip! alone" Anxiou! to !ta iliJe t,e e+er(in( re(ional order, t,e Saudi! ,a-e poured at lea!t 6$ illion in loan! and (rant! into E()pt to prop up t,at countr)N! *orei(n currenc) and +ilitar) (o-ern+ent" Cillion! +ore are ein( !pent to co+ at IranN! -aultin( a+ ition! in Le anon and IraF" 5,en t,ere i! t,e 6<' illion ar+! deal concluded wit, t,e U"S" in &'1' L t,e i((e!t o* it! kind" W,o will pa) *or t,e illion! in wel*are !u !idie! and ,i(,?tec, weapon!. 5,e Saudi! arenNt *acin( a +a!!i-e ud(et crunc," 5,e 613' illion packa(e

announced ) 1in( A dulla, la!t )ear, *or in!tance, include! ,ou!in( and ot,er proEect! t,at will take t,e etter part o* a decade to co+plete" Monetar) aid (i-en to *orei(n countrie! i! al!o a !low?(oin( proce!! (i* it i! e-er deli-ered2" 0u!t a!k t,e E()ptian!, w,o onl) recentl) !ecured a Saudi aid packa(e o* 61"$ illion, e-en t,ou(, it wa! pro+i!ed la!t !u++er" 5,e ar+! deal i! anot,er exa+ple o* (radual !pendin( +i!taken *or !plur(in(" 5,e deal +a) e wort, 6<' illion ut t,at co-er! t,e li*e?c)cle o* t,e eFuip+ent !old" 5,at !u+ will e !pread out o-er t,e next decade" In t,e +eanti+e, Saudi co**er! will onl) (row" La!t )ear t,e) po!ted a ud(et !urplu! o* 6:1 illion e-en t,ou(, t,e 1in(N! expanded wel*are pro(ra+! ,ad alread) increa!ed wa(e! and ene*it! *or +an) Saudi!" I canNt (ue!! w,at Saudi Ara iaN! ud(et !urplu! will e t,i! )ear" Cut *or t,e *ir!t !ix +ont,! o* &'1&, t,e) pu+ped 1' +illion /d w,en t,e +arketN! a!kin( price ,o-ered well o-er 61''" I et t,e &'1& !urplu! will e !i(ni*icantl) ,i(,er t,an &'11" Iran !,ould e +ore worried a out declinin( price! t,an Saudi Ara ia" 5,e IMH now e!ti+ate! t,at 5e,ran need! 6117 a arrel in order to alance it! ud(et" Deuter!, citin( national aut,oritie! and t,e IMH, !a)! Saudi Ara iaN! reak?e-en price per arrel i! onl) 671" A! I noted in +) colu+n earlier t,i! +ont,, t,e Saudi! are not onl) producin( oil at *ull capacit), t,e) are al!o !tockpilin( +uc, o* t,eir !urplu! production" Until t,e) decide w,et,er to ,old on to it or *lood t,e +arket wit, it, t,e Saudi oil !word re+ain! !,eat,ed *or now and t,e (lo al (a+e o* ri!k continue!" 5,e Saudi! are not producin( at *ull capacit) ) an)oneN! +ea!ure" 5,e) in!i!t t,eir +ax capacit) i! 1&"$ +illion /d" Man) t,ink t,i! i! too (enerou!" 3ritic! !a) 11"9 +illion /d i! pro a l) +ore accurate" A! o* toda), t,e)Nre onl) producin( 1' +illion /d, w,ic, +ean! t,e Saudi! could !till ra+p up production ) nearl) two +illion /d i* we !tick wit, t,e pe!!i+i!tic a!!e!!+ent" 5,e Saudi! are !tockpilin( oil in order to cal+ t,e

+arket and prepare *or t,e !ea!onal ri!e in de+and t,at co+e! wit, t,e !u++er air conditionin( !ea!on" Cut
t,e) can onl) *lood t,e +arket i* t,e) ,a-e u)er!" Since t,e +arket i! alread) well?!upplied, u)er! ,a-e little rea!on to u) +ore, and !o t,e onl) wa) to +anipulate !uppl)?de+and d)na+ic! and pu!, down price! would e to o**er di!count! w,ic, +ake unwanted oil +ore appealin(" 5,ereN! little rea!on to elie-e t,e Saudi! are preparin( *or a *ire !ale, ,owe-er" Ki!countin( i! trick) u!ine!! ecau!e ot,er cu!to+er! +a) de+and t,e !a+e treat+ent" Iran i! in a -er) di**erent po!ition" 5,e) now appear to e !tockpilin( ecau!e t,e) lack ot,er option!" 5,e

I!la+ic Depu lic i! reportedl) !torin( +illion! o* arrel! o* oil o**!,ore on crude tanker! ecau!e t,e) cannot *ind cu!to+er!" Ko+e!tic !tora(e +u!t e nearin( capacit) i* it i! not alread) +axed out" Iran +a) ulti+atel) !ell t,o!e di!tre!!ed car(oe! at a di!count in order to +ake roo+ *or *uture production w,ic, t,e) are a*raid to !,ut in" Iran &ill pro4a4l% flood t!e mar8et &it! c!eap cargoes 4efore t!e Saudis do" O=E< flood is ine#ita4le ;lo4e and ail' .)D)*/ (BI>E34! !lippin( (ra!p on t,e world4! oil +arketB, www"t,e(lo eand+ail"co+/report?on? u!ine!!/indu!tr)?new!/ener()?and?re!ource!/opec!? !lippin(?(ra!p?on?t,e?world!?oil?+arket/article1&%317%</.pa(e/all //kd,2 It add! up to a ni(,t+are !cenario *or t,e (roup" 3,ina, Du!!ia and ot,er countrie! are takin( earl) !tep! to e+ulate t,e =ort, A+erican uncon-entional oil oo+ o* recent )ear!, w,ic, ,a! t,e U"S" on track to o-ertake Saudi Ara ia a! t,e worldN! lar(e!t oil producer" So+e ke) I>E3 +e+ er!, +eanw,ile, are ea(er to pu+p a! +uc, a! po!!i le to rin( in adl) needed re-enue, rat,er t,an re!train output a! part o* an) concerted e**ort to add upward pre!!ure to price!" 5,e ri!k i! t,at !uc, a !cenario lead! to cutt,roat co+petition and a *lood o* oil in (lo al +arket!, tri((erin( a plun(e in price! t,at could t,reaten t,e econo+ic and political !ta ilit) o* it! +e+ er nation!"

no flood can0t control prices

Iraq controls prices not Saudi Ara4ia c<art!e% and Jones' .)D/13 ((lo al ener() reporter *or t,e Olo e and Mail, u!ine!! reporter *or t,e Olo e and Mail, citin( Saudi Ara iaN! oil +ini!ter and I>E3, I>E3N! !lippin( (ra!p on t,e worldN! oil +arket#, 5,e Olo e and Mail, </:/&'13, ,ttp://www"t,e(lo eand+ail"co+/report?on? u!ine!!/indu!tr)?new!/ener()?and? re!ource!/opec!?!lippin(?(ra!p?on?t,e?world!?oil?+arket/article1&%317%</.pa(e/1, 01a,n2 5,e IraF *actor A t,ornier pro le+ *or I>E3 i! de-elopin( *ro+ wit,in t,e *a+il) S IraF" Cle!!ed
wit, &' per cent o* t,e worldN! con-entional re!er-e!, it ai+! to oo!t it! oil export! to !e-en +illion arrel! a da) *ro+ t,e current capacit) o* a out t,ree +illion" E-en i* it acco+pli!,ed onl) ,al* t,at, it would e a +aEor !ource o* additional production to a (lo al +arket t,at I>E3 !a)! i! alread) well !upplied" Unle!! econo+ic (rowt, re ound! !+artl), I>E3 +e+ er! will ,a-e to cut production ) a! +uc, a! one +illion arrel! a da) o-er t,e next )ear, e-en a! IraF S acked ) 3,ina, w,ic, alread) u)! ,al* it! crude S look! to add $'',''' arrel! a da) eac, )ear" Hailure ) t,e cartel to re!pond would lea-e t,e world awa!, in crude, and t,reaten to !end (lo al price! !,arpl) lower" Cut IraF re+ain! deepl) di-ided alon( !ectarian line!" Sunni!,

S,iite and 1urd! are -)in( *or power S o*ten -iolentl) S in a countr) t,at ,a! )et to !ta iliJe a*ter t,e U"S" in-a!ion and occupation, and in a re(ion w,ere ten!ion! ,a-e e!calated wit, !anction! a(ain!t Iran and t,e S)rian ci-il war in w,ic, I>E3 ,ea-)wei(,t! are ackin( co+petin( !ide!" >olitical up,ea-al could t,wart t,e e!t intention! o* re uildin( IraFN! oil !ector" In addition, Saudi Ara ia, w,ic, reFuire! (rowin( oil re-enue! to *inance a+ itiou! econo+ic and !ocial pro(ra+!, will ,a-e li+ited patience *or unre!trained production *ro+ IraF, Mr" Aer(in !aid " In an) attle *or
+arket !,are, Saudi Ara ia ,a! t,e ,e*t t,at no one el!e ,a!,# ,e !aid" I* IraF doe! continue to !u !tantiall) (row, t,ere are de*initel) li+it! to w,ic, t,e ot,er Oul* countrie! S not Eu!t Saudi Ara ia S are willin( to +ake roo+ to acco++odate IraFi !uppl)" Since it! *oundin( in 19<', I>E3 ,a! *aced nu+erou! cri!e!, includin( t,e Iranian re-olution and Iran?IraF war in 1979?:', a precipitou! drop in world de+and t,at pulled price! down to 69 a arrel in 19:<, t,en t,e runup in &'': to 61%: a arrel, a price t,at t,reatened t,e world econo+)" Expert! caution t,at toda)N! pre!!ure! do not nece!!aril) +ean t,e cartel i! in trou le" It depend! w,at )our de*inition o* trou le i!,# !aid Manouc,er 5akin, an anal)!t at t,e London? a!ed 3entre *or Olo al Ener() Studie!, a (roup *ounded ) *or+er Saudi oil +ini!ter S,eik A,+ed @aki Aa+ani" E-er !ince I>E3 wa! e!ta li!,ed, on +an) occa!ion!, I>E3 ,a! een !aid to e in trou le" Cut it i! !till ,ere"# Mr" 5akin !aid I>E3 +ini!ter! are reluctant to act in t,e +arket a!ed on *oreca!t! o* t,in(! !uc, a! !,ale oil production, ut wait until actual condition! warrant a new !trate()" At t,i! point, wit, Crent crude price! in t,eir tar(et ran(e, t,e)Nre prett) !ati!*ied, de!pite I>E3N! own *oreca!t o* +arket weakne!! in t,e !econd ,al* o* &'13" In t,e ot,er !ide o* t,e eFuation, t,ere re+ain +aEor Fue!tion! a out (lo al de+and *or crude" 5,e IEA *oreca!t! t,at world oil con!u+ption will (row to 9'"< +illion arrel! a da) t,i! )ear *ro+ :9": +illion in &'1&" I* t,at ,old!, t,e de+and *or I>E3 oil !,ould re+ain ,ealt,)" 5,e IEA ,a! cautioned, ,owe-er, t,at de+and (rowt, in t,e ,u(el) i+portant 3,ine!e +arket i! expected to !,i*t to lower (ear# a! (rowt, !low! and t,e countr) !eek! alternati-e! to co+ at ur an pollution" 5,e) are not at a pi-ot point )et, ut t,ere are clear c,allen(e! a,ead,# !aid Kaniel Aer(in, -ice?c,air+an o* I8S Inc" and a leadin( con!ultant on t,e (lo al oil indu!tr)" 5,ere are (eopolitical c,allen(e! S re(ional c,allen(e! t,at co+e wit, t,e !tand?o**

o-er IranN! nuclear pro(ra+ and t,e concern! Ara Oul* !tate! ,a-e o-er it, and t,e S)rian con*lict, w,ic, ,a! ele+ent! o* ein( a prox) war a+on( countrie! t,at are ke) +e+ er! o* I>E3" And t,ere i! t,e uildup o* !uppl) co+in( *ro+ =ort, A+erica S in particular t,i! dra+atic increa!e, t,i! !ur(e, in U"S"
oil production S and al!o t,e potential reco-er) o* IraF, [w,ic, i!\ -er) keen to +ake up *or lo!t ti+e"# A! recentl) a! la!t )ear, I>E3 +e+ er! di!+i!!ed oo+in( U"S" !,ale oil production a! a *la!, in t,e pan" 5,e *or+ation o* a !tud) (roup to pore o-er t,e i+pact! !,ow! t,e t,at t,inkin( ,a! c,an(ed" It i! no wonder" In it! Ma) Mediu+?5er+ Iil Market Deport, t,e

International Ener() A(enc) re*erred to (rowt, in U"S" li(,t oil, alon( wit, t,e 3anadian oil !and!, a! a !uppl) !,ock# t,at will e a! tran!*or+ati-e to t,e +arket o-er t,e next *i-e )ear! a! wa! t,e ri!e o* 3,ine!e de+and o-er t,e la!t 1$"# Kri-en ) t,e oo+ in oil production *ro+ re(ion! !uc, a!
t,e =ort, Kakota Cakken and Ea(le Hord in 5exa!, t,e United State! i! now on track to e t,e worldN! lar(e!t oil producer in t,e next decade, accordin( to !o+e *oreca!t!" 5,e IEA, t,e We!tN! ener() watc,do(, ,a! predicted t,e United State! will pu+p 11"1 +illion arrel! a da) ) &'&', up *ro+ nearl) !e-en +illion in &'1& and !urpa!!in( Saudi Ara ia in t,e proce!!" =ort, Kakota production ,a! +ore t,an dou led in two )ear! to nearl) :'',''' arrel! a da)" Alread), a*ter decade! o* pro+i!e!, t,e !,ale re-olution i! ,elpin( t,e U"S" *inall) !,ake it! un,ealt,) addiction# to i+ported oil, a! *or+er pre!ident Oeor(e W" Cu!, called it" 5,at alone will not !trip I>E3 o* it! o-erall +arket power" Cut cartel +e+ er! !uc, a! =i(eria and Al(eria t,at are known *or producin( li(,t !weet crude S t,e ea!il) *lowin( !upplie! t,at are low in !ulp,ur content and !i+ple to re*ine S are *eelin( t,e pinc," U"S" i+port! *ro+ =i(eria were +ore t,an ,al-ed to %'3,''' arrel! a da) in Marc,, &'13, *ro+ 913,''' in Marc,, &'11, accordin( to t,e U"S" Ener() In*or+ation Ad+ini!tration" =i(eria, Al(eria and ot,er! ,a-e redirected export! to A!ia and ot,er +arket! a+id expectation! t,at t,e U"S" will e-entuall) reFuire no !uc, !upplie!, !aid Mic,ael Wittner, +ana(in( director and ,ead o* co++oditie! re!earc, *or Soci_t_ O_n_rale SAN! A+erica! operation!" I! I>E3 rele-ant. A! lon( a! t,e !,ale oil i! a =ort, A+erican t,in(, )e!" 5,atN! !o+et,in( I would !a) will ,old *or +a) e a *i-e?)ear ti+e ,oriJon",# Mr" Wittner !aid" Iut e)ond t,at, t,e Fue!tion eco+e! +uc, +ore co+plicated"# 8e point! out t,at ot,er countrie!, includin( Du!!ia, 3,ina, Au!tralia and

Ar(entina, +a) ,a-e lar(e !,ale oil re!er-e! t,at could one da) +ean !ti** new co+petition *or t,e I>E3 producer!" A! we +o-e into uncon-entional!, I>E3 i! no lon(er (oin( to ,old all t,e card!,# !aid
5,o+a! >)le, pre!ident o* t,e In!titute *or Ener() De!earc, in Wa!,in(ton" Man) in t,e U"S" !ee 3anada and t,e propo!al to uild t,e 1e)!tone QL pipeline to (et increa!in( -olu+e! o* Al erta itu+en to t,e U"S" Oul* 3oa!t a! an i+portant +o-e in t,e (eopolitical (a+e" I* t,e U"S" (o-ern+ent (ot it! act to(et,er and appro-ed t,e 1e)!tone pipeline, it would *or(e u! a la!tin( relation!,ip wit, 3anada t,at would !,i*t (lo al ener() power Fuite !i(ni*icantl),# Mr" >)le !aid" An i++ediate concern *or I>E3 due to *allin( li(,t oil export! to t,e U"S" i! increa!ed co+petition wit, ot,er crude! !uc, a! t,o!e *ro+ t,e =ort, Sea and Du!!ia, !aid 0udit, Kwarkin, director o* re!earc, at I5O In-e!t+ent De!earc," A! t,e U"S" draw! le!! on (lo all) traded crude!, t,o!e crude! will t,en e lookin( *or a ,o+e and t,atN! w,ere t,e pre!!ure co+e! S co+petition a+on( non?=ort, A+erican internationall) traded crude! o* w,ic, I>E3 i! a i( part, ut t,ere are ot,er!,# M!" Kwarkin !aid So itN! a !o+ew,at +ore co+petiti-e en-iron+ent in t,at !en!e"#

no flood dutc! disease turn

-ussia is extremel% #ulnera4le to Dutc! disease,8ills t!e econom% @uc8le%' *3 (=eil, !ta** writer *or t,e Hinancial 5i+e!, Econo+): Iil Kependence De+ain! a Hunda+ental Ki**erence,# Hinancial 5i+e!, </&'/&'1&, ,ttp://www"*t"co+/intl/c+!/!/'/%3:71& &? %97?11e1? &e? ''1%%*ea dc'",t+lWaxJJ1)pkHC'p8, 01a,n2
Mo!cowN! dollar?deno+inated !tock +arket index i! down +ore t,an &' per cent !ince t,i! )earN! +id?Marc, peak, w,ile t,e rou le ,a! *allen 13 per cent a(ain!t t,e dollar" I! Du!!iaN! econo+) a(ain ,eaded *or a *all. In-e!tor! +i(,t e *or(i-en *or *earin( it i! &'': all o-er a(ain" 5,at )ear, t,e !tock +arket e(an a !e-en?+ont,, :' per cent decline *ro+ peak to trou(,, a! oil and co++odit) price! !lu+ped, *ollowed ) t,e collap!e o* Le,+an Crot,er! in Septe+ er" Du!!iaN! econo+) went on to !,rink ) 7": per cent in &''9, t,e deepe!t rece!!ion o* an) O&' countr)" 5,e recent +arket !lide! re*lect a &' per cent decline in Crent crude price! !ince Marc,, w,ic, reac,ed 61'' a arrel ) earl) 0une, and inten!i*)in( concern! t,at Oreece could cra!, out o* t,e euroJone, dealin( a Le,+an?!t)le !,ock to t,e (lo al econo+)" Cut +an) anal)!t! !a) t,e recent *all! are an o-erreaction t)pical o* Du!!ian +arket!" 5,e countr) i! in +an) wa)! le!! -ulnera le to external !,ock! t,an it wa! *our )ear! a(o, e-en t,ou(, it ,a! eco+e e-er +ore dependent on oil price!" 3,arle! Do ert!on, (lo al c,ie* econo+i!t at Denai!!ance 3apital, t,e Mo!cow? a!ed in-e!t+ent ank, !a)!: In &'':, +arket! priced Du!!ia a! i* it wa! (oin( to o**er a repeat o* 199:,# re*errin( to t,e 199'! de*ault on do+e!tic de t" =ow, t,e +arket! are pricin( Du!!ia like itN! (oin( to e &'': a(ain"# 5,e *orei(n de t o* ank! and co+panie! i! +uc, lower t,an it wa! *our )ear! a(o, +akin( t,e econo+) le!! !u!cepti le to a !udden ,alt to *inancin( and t,e +acroecono+ic po!ition al!o look! ro u!t" Du!!ia ,a! *orei(n exc,an(e re!er-e! o* 6$'' n, a current account !urplu! la!t )ear o* +ore t,an $ per cent o* (ro!! do+e!tic product, and pu lic de t elow 1' per cent o* OK>" Orowt, wa! a re!pecta le %"3 per cent in ot, &'1' and &'11, and t,e International Monetar) Hund i! *oreca!tin( % per cent (rowt, t,i! )ear and next" Du!!ia can, o* cour!e, ne-er e i++une" S er ank, t,e countr)N! i((e!t ank, warned la!t +ont, t,at, i* Oreece wit,drew *ro+ t,e euro in t,e *inal Fuarter o* &'1& in an unre(ulated# wa), Du!!iaN! OK> would contract &"1 per cent next )ear" Denai!!ance 3apital !a)! an orderl)# Oreek exit would pro+pt a +ode!t !lowdown in Du!!iaN! (rowt, to & per cent t,i! )ear and &"9 per cent nextG a di!orderl) exit would cau!e a +ild &'13 rece!!ion o* '"& per cent" I* Spain al!o le*t t,e euro, Denai!!ance *oreca!t t,at Du!!ian output would decline &"7 per cent t,i! )ear and $ per cent in &'13" W,at i! nota le a out all t,o!e *oreca!t! i! t,at t,e) are le!! !e-ere t,an Du!!iaN! &''9 rece!!ion" Cut !o+e anal)!t! are +ore cautiou!" Du!!iaN! 8i(,er Sc,ool o* Econo+ic! warn! t,at i* a (lo al !lowdown reduced oil price! e-en to 6:' a arrel, t,e (o-ern+ent would Fuickl) urn t,rou(, it! 6<' n rain)?da) re!er-e *und to +eet it! ud(et o li(ation!" Iil

dependenc) i! !een a! Du!!iaN! i((e!t weakne!!" 5,i! )earN! ud(et need! an oil price o* +ore t,an 61&' a arrel to alance, li*tin( t,e non?oil de*icit , t,e !,ort*all excludin( oil and (a! re-enue!, to 1&"$ per cent o* OK>" It wa! elow $ per cent e*ore &'':" Deturnin( pre!ident Rladi+ir >utin, +ade !o+e co!tl) election pro+i!e! w,ic, totalled a out D !1'tn (63'9 n2 ) &'1:, e-en excludin( a+ itiou! +ilitar) !pendin(
increa!e!, note! Ser(ei Alek!a!,enko, a *or+er deput) central ank (o-ernor, now director o* +acroecono+ic !tudie! at t,e 8i(,er Sc,ool" Iil price! would need to (row ) 61' to 61$ a )ear, ,e add!, ot,erwi!e t,e ud(et will not e

a**orda le#, *orcin( Du!!ia to increa!e orrowin( or reduce !pendin(" Econo+i!t! ,a-e al!o warned t,at, wit, ud(etar) !pendin( eco+in( a i((er contri utor to (rowt,, and t,at, in it! turn, increa!in(l) *unded ) oil and (a! re-enue!, Du!!ia i! drawin( too ,ea-il) on it! ener() wealt," 5,at dri-e! up price! and co!t!, crowd! out pri-ate !ector in-e!t+ent and +ake! +anu*acturin( unco+petiti-e, all cla!!ic !)+pto+! o* t,e !o?called Kutc, di!ea!e" 5,i! ,inder! w,at !,ould e it! +ain polic) ai+: di-er!i*)in( t,e econo+) awa) *ro+ reliance on extracti-e indu!trie!" Mo!t o !er-er! a(ree t,e onl) wa) to do t,at i! t,rou(,
!tructural re*or+! ai+ed at increa!in( co+petiti-ene!! and !ti+ulatin( t,e pri-ate !ector, !+all u!ine!!e!, and tec,nolo()" Mr >utin ,a! repeatedl) !aid ,e under!tand! t,i!" Cut t,e +arket elie-e! t,at, !ince ,i! return a! pre!ident, t,e !i(nal! ,e ,a! (i-en o-er ,i! co++it+ent to re*or+! ,a-e een di!tinctl) +ixed" 8owe-er, Ander! Aa!lund, a Swedi!, econo+i!t w,o ad-i!ed on Du!!iaN! 199'! re*or+! and ,a! o*ten een a >utin critic, elie-e! t,e recent !i(nal! ,a-e een +ore po!iti-e t,an in-e!tor! (i-e credit *or" 8e expect! Mr >utin to e ,awki!, in do+e!tic politic! and *orei(n polic), ut to +ake real e**ort! on econo+ic re*or+!" 5,i! i! w,ere >utin t,ink! t,at ,e can deli-er !o+et,in(, w,ere ,e can (i-e (round to t,e li eral (roup!,# !a)! Mr Aa!lund" 8e ,i(,li(,t! an April !peec, ) Mr >utin w,ic, !et concrete tar(et! S includin( i+pro-in( Du!!iaN! 1&'t, po!ition in t,e World CankN! Ea!e o* Koin( Cu!ine!! index ) 1'' place! ) &'1:" Mr Aa!lund add! t,at t,e newl)?appointed (o-ern+ent, ,eaded ) pri+e +ini!ter K+itr) Med-ede-, contain! +ore li eral re*or+er!, wit, (reater roo+ *or +anoeu-re, t,an i! co++onl) !uppo!ed" Cut t,e 8i(,er Sc,oolN! Mr Alek!a!,enko re+ain! !ceptical, warnin( t,at Mr >utin tend! to i(nore t,e +o!t *unda+ental pro le+!" In ,i! article! and !peec,e!, t,ere wa! not one word a out independent court!, a out rule o* law, a out pre-ention o* corruption,# ,e !a)!" Wit,out t,e!e pillar!, I donNt elie-e !tructural re*or+ i! po!!i le"#

no flood lo& prices good

Lo& oil prices are good,t!e% force -ussia to enforce economic reforms -22 Ne&s' *3 (3/7/1&, BLow Iil >rice! 1e) to Du!!ia4! Orowt,: 3apital Econo+ic!B, D55 =ew!, www"rttnew!"co+/1:3$939/low?oil?price!?ke)?to?ru!!ia?!?(rowt,?capital? econo+ic!"a!px //kd,2 Lower oil price! can oo!t Du!!ia4! (rowt, in a +eanin(*ul wa) in t,e co+in( )ear!, a! t,e re-enue *ro+ oil export! ,a! een allowin( t,e (o-ern+ent to a !tain *ro+ en(a(in( in polic) re*or+!, 3apital Econo+ic! E+er(in( Market! Econo+i!t LiJa Er+olenko !aid 5ue!da)" 5,e *ir+ e!ti+ate! t,at i* oil price! drop to around 6:$ per arrel ) t,e )ear?end a! expected, it would i+pro-e Du!!ia4! +ediu+ ter+ (rowt, outlook" 5,e con!eFuent *all in export re-enue! +a) re!ult in t,e ud(et de*icit widenin( to %"$ percent o* OK> and t,e current account alance !lippin( to a de*icit o* 1 percent o* OK> t,i! )ear *ro+ la!t )ear4! $ percent !urplu!" Under !uc, circu+!tance!, t,e (o-ern+ent would e *orced to take up re*or+! ai+ed at wider econo+ic (rowt,, Er+olenko wrote" Du!!ia4! (rowt, ,a! een ,a+pered durin( t,e pa!t decade a! ene*it! o* ,i(,er oil price! +ade (o-ern+ent! ,e!itant to en(a(e in political and econo+ic re*or+!" Suc, ene*it! al!o created an illu!ion o* (ood (o-ern+ent policie!, and concealed !,ort*all! in Du!!ia4! (rowt, +odel and it! ailin( pu lic *inance!" In t,e 197'!, w,en ene*it! o* a !,arp
increa!e in oil price! pre-ented t,e (o-ern+ent *ro+ takin( up re*or+! per*or+ance o* all !ector! ot,er t,an t,e oil indu!tr), +o!t i+portantl) a(riculture, !teadil) deteriorated t,rou(,out t,e decade" Er+olenko o !er-ed t,at all +aEor econo+ic

re*or+! in t,e pa!t took place w,en oil price wa! ,o-erin( around 63' per arrel, ut t,e (o-ern+ent4! appetite *or re*or+ u!uall) receded w,en t,e price ro!e a(ain" 8i(, oil price! ,a-e ,eld
ack an) +eanin(*ul c,an(e in polic) and da!,ed t,e ,ope! *or a !,i*t to a new in-e!t+ent?led (rowt, +odel, t,e econo+i!t added"

***A2U I

=A<2S

at russia collapse
No -ussian economic collapse Adomanis' *)F)*/ (Mark Ado+ani!, under(raduate de(ree in (o-ern+ent at 8ar-ard, +a!ter4! de(ree in Du!!ian and Ea!t European Studie! at t,e Uni-er!it) o* Ix*ord, Hor e!, BW,) Du!!ia4! Econo+) I!n4t Ooin( 5o 3ollap!eB, www"*or e!"co+/!ite!/+arkado+ani!/&'13/'1/'7/w,)?ru!!ia!?econo+)?i!nt?(oin(?to? collap!e/ //kd,2
8atin( Du!!ia^! econo+) i! a *ull?ti+e Eo *or +an) people" Iwen Matt,ew! in =ew!week i! per,ap! t,e +o!t color*ul o* t,e unc,, ut t,e di**erence etween Matt,ew! and ot,er We!tern Eournali!t! i! pri+aril) one o* de(ree not o* kind" IN-e een *ollowin( Du!!ia -er) clo!el) *or a out a decade now, and IN-e !i+pl) lo!t count o* t,e nu+ er o* anal)!e! IN-e read ar(uin( t,at t,e end i! ni(, and t,at t,e econo+)N! *inal i+plo!ion i! +ere +ont,! awa)" 5,e!e article! -ar) (reatl) in Fualit), ut t,e a!ic

indict+ent o* Du!!iaN! econo+) con!i!t! o* a nu+ er o* actuall) Fuite rea!ona le o !er-ation! on t,e countr)N! corruption, red tape, and o-er?reliance on natural re!ource!" 8owe-er, a*ter (ettin( deci+ated durin( t,e wor!e da)! o* t,e *inancial cri!i!, Du!!iaN! econo+) ,a! een plu((in( alon( wit, !tead) and unre+arka le (rowt, in t,e 3?%; ran(e, ,ardl) world eatin( ut actuall) *a!ter t,an al+o!t e-er) countr) in t,e EU" A! +ore ti+e ,a! pa!!ed and Du!!iaN! econo+) ,a! de*ied prediction! ) continuin( to not collap!e, IN-e eco+e increa!in(l) con-inced t,at it! econo+ic !ta ilit) ,a! een !o+ew,at underrated and t,at, de!pite it! +an) *ault!, it! a!ic econo+ic +odel i! Fuite likel) to endure t,rou(, t,e !,ort and +ediu+ ter+!" I certainl) donNt t,ink t,at Du!!ia i! (oin( to eco+e !o+e !ort o* econo+ic ,e(e+on, ut it !ee+! *ar +ore likel) t,an not t,at it will e-ol-e (raduall) , and not t,rou(, !o+e titanic rupture or re-olutionar)
up,ea-al" Cut +) ,unc,e! and inclination! arenNt -er) (ood e-idence, !o I t,ou(,t I would put a *ew c,art! to(et,er w,ic, !,ow w,) I t,ink t,at Du!!iaN! econo+) i! a!icall) (oin( to !ta) !ta le o-er t,e next !e-eral )ear! and t,at itN! a ,u(e +i!take to predict a catacl)!+ w,ic, will !weep awa) t,e dread >utin" 1" 5,e price o* Crent crude ,a! !ta)ed re+arka l) ro u!t de!pite c,ronic econo+ic weakne!! in t,e de-eloped world" I !uppo!e itN! po!!i le t,at t,e EU will ne-er e+er(e *ro+ it! current doldru+!, ut I t,ink t,at t,e de-eloped world will e-entuall) (et out o* it! *unk and !tart to (row a(ain" W,en it doe! t,at (rowt, will likel) dri-e t,e price o* oil e-en ,i(,er, or at lea!t pre-ent it *ro+ (oin( +uc, lower" & " Du!!ia !till ,a! -er) lar(e

*orei(n re!er-e!, !o+e o* t,e lar(e!t in t,e entire world Alt,ou(, )ou o*ten ,ear, a! in Matt,ew!N piece, t,at t,e Du!!ian!
u!ed to e re!pon!i le wit, t,eir oil +one), now t,e)Nre eco+e totall) reckle!! and irre!pon!i le,# Du!!ia !till ,a! -er) lar(e *orei(n re!er-e! t,at a+ount to al+o!t &$; o* it! OK>" =ote t,e !i+ilarit) etween t,e oil price (rap, and Du!!iaN! *orei(n re!er-e!, t,eir !,ape! are al+o!t identical W,ile t,e utilit) o* *orei(n re!er-e! can o*ten e o-er!tated, t,e) can e -er) ,and) in

a-ertin( econo+ic cata!trop,e!, and, a! )ou +i(,t expect, t,e Du!!ian! drew ,ea-il) on t,eir *orei(n re!er-e! durin( t,e
wor!t da)! o* t,e &'':?'9 cri!i!" I t,ink t,at t,e re!er-e! pro-ide a cu!,ion t,at will ,elp to !,ield Du!!ia *ro+ a *uture !,ock, !uc, a! a rapid and +a!!i-e decline in t,e price o* oil" I* cour!e t,ereN! !till t,e c,ance t,at Du!!ia will !u**er a !low

and (radual decline in co+petiti-ene!!, ut w,at IN+ pu!,in( ack a(ain!t i! not t,at ar(u+ent ut t,e ar(u+ent t,at t,e w,ole ,ou!e o* card! i! (oin( to collap!e in t,e next couple o* )ear!" 3" 5,e Du!!ian (o-ern+ent !till run! a ud(et !urplu!, and it! !pendin( a! a percenta(e o* OK> i! not -er) ,i(, Hro+ 0anuar)?Icto er &'1& Du!!ia ran a ud(et !urplu! o* a out 1"%;, !+aller t,an t,e &'11 *i(ure (3"&;2 ut a
!urplu! nonet,ele!!" Du!!iaN! total le-el o* (o-ern+ent !pendin( (a out 3&; o* OK>2 ,ardl) !ee+! outra(eou! or un!u!taina le" Additionall), de!pite a lot o* loo!e and *ooli!, talk *ro+ t,e Du!!ian de*en!e +ini!tr) a out it loo+in( re?ar+a+ent ca+pai(n, Du!!iaN! ud(et !pendin( i! +ore wei(,ted toward! t,e !ocial !p,ere t,an t,e +ilitar) indu!trial co+plex" 3ourte!) o* t,e Oaidar in!titute, ,ereN! a (rap, !,owin( w,ere Du!!iaN! con!olidated (o-ern+ent !pendin( wa! directed in t,e *ir!t ten +ont,! o* &'1&: 5,e Oaidar in!titute i! ,ardl) a 1re+lin out*it, indeed t,e o-erall tone o* t,e report to w,ic, I linked i! actuall) Fuite (loo+)c and critical o* t,e aut,oritie!, and con!iderin( it! track record I donNt t,ink t,at it would ,a-e !pun t,e nu+ er! in a +ore pro?>utin direction" W,en anal)Jin( an) countr)N! ud(et po!ture )ou need to *ocu! on w,ere t,e +one) i! actuall) ein( !pent" W,ile t,ereN! een an aw*ul lot o* talk a out co+pre,en!i-el) re?ar+in( t,e Du!!ian +ilitar), t,e actual le-el o* !pendin( re+ain! relati-el) !+all and well wit,in t,e countr)N! a ilit) to pa)" 5,e pur!e?!trin(! are clearl) !o+ew,at loo!er t,an t,e) u!ed to e, ut a Fuick (lance at Du!!iaN! ud(et certainl) doe!nNt (i-e t,e i+pre!!ion o* a totall) reckle!! and de auc,ed approac," %" Du!!ian

une+plo)+ent i! at or near a po!t?So-iet record low Du!!iaN! la or +arket i!nNt exactl) a +odel *or an)one el!e, ut it! ar(ua l) +ore ro u!t now t,an it! e-er een e*ore " I t,ink t,at t,i! will act a! a
!ort o* !ta iliJin( in*luence in it! own ri(,t, ut, +ore i+portantl), it +i(,t allow t,e (o-ern+ent to *eel co+*orta le enou(, to do !o+e tinkerin( and i+ple+ent a *ew +oderate re*or+!" Ca!icall), t,e (o-ern+ent i! +ore likel) to undertake !o+e +ode!t li eraliJation i* t,e la or +arket i! ,ealt,) and itN! con*ident t,at people will e a le to *ind Eo ! t,an i* t,e une+plo)+ent rate i! alread) trendin( upward! (une+plo)+ent i! o -iou!l) ,i(,l) politicall) !en!iti-e in per*or+ance le(iti+ac)# re(i+e! like Du!!iaN!2"

2!e -ussian econom% can &it!stand a slump

-IA' ** (DIA =o-i!ti, Du!!ian econo+) can !ur-i-e low oil price! S 1udrin#, 9/&</&'11, DIA =o-i!ti, ,ttp://en"rian"ru/ u!ine!!/&'11'9&</1<7139$<&",t+l2 2!e -ussian econom% &ill 4e a4le to function normall% for a %ear' if glo4al oil prices fall to K.9 per 4arrel, Hinance Mini!ter Alexei 1udrin !aid on Monda) in an inter-iew wit, Du!!ia 5oda) international new! 5R c,annel" BAe expect t!is fall &ill certainl% cause a decrease in our economic gro&t! do&n to nearl% 5ero or 4elo& 5ero , ut in ter+! o* t,e ud(et polic) we4ll e a le to
cope wit, t,i! *or up to a )ear,B 1udrin !aid" Du!!ia4! *inance +ini!ter !aid on Saturda) ,e expected world oil price! to *all to 6<' per arrel in t,e next one and a ,al* to two )ear! and !ta) at t,i! le-el *or a out !ix +ont,!" A*ter t,i!, B &eVll !a#e to adCust

polic% and reduce expenditure" A! a w,ole, ,owe-er, &e are read% to pro#ide sta4ilit% for a %ear or t&o and fulfil all our commitments ,B 1udrin !aid" Du!!ia4! *ederal ud(et *or t,e next t,ree )ear! i!
a!ed on a *oreca!t o* Ural! a-era(e )earl) oil price at 61'' per arrel in &'1&, 697 per arrel in &'13 and 61'1 per arrel in &'1%" Du!!ian Keput) Hinance Mini!ter 5atiana =e!terenko !aid la!t week t,at a *all in (lo al oil price! to 6<' per arrel could *orce t,e Du!!ian (o-ern+ent to cut t,e &'1& ud(et !pendin( ut added t,at t,i! !cenario wa! unlikel)" 5,e a-era(e price o* Ural! lend, Du!!ia4! ke) export co++odit), !tood at 61'9"& per arrel in 0anuar)?Au(u!t &'11"

No impact to -ussian economic decline <OUN2-1 6O-E<AS2 SELE<2 /$D$39*9 (Econo+i!t Intelli(ence Unit, Lexi!2 8owe-er, alt,ou(, Du!!ian! are di!!ati!*ied wit, t,e econo+ic !ituation, t,i! doe! not )et appear to ,a-e a**ected !i(ni*icantl) t,e popular !tandin( o* eit,er Mr Med-ede- or Mr >utin" Alt,ou(, t,e i+pact o* econo+ic cri!e! on !ocial !ta ilit) u!uall) occur! wit, a la(, it i! ne-ert,ele!! dou t*ul t,at a ri!e in !ocial di!content could t,reaten t,e leader!,ip??Cori! Aelt!in +ana(ed to !ur-i-e politicall) t,rou(, t,e cri!i! in 199:, de!pite ein( in a +uc, weaker po!ition" Alt,ou(, !o+e independent la our (roup! ,a-e e+er(ed, +o!t trade union or(ani!ation! are clo!e to t,e (o-ern+ent" 5,e aut,oritie! *ace little t,reat *ro+ a weak oppo!ition" 5,e li eral! in Du!!ia are in di!arra) and are not repre!ented in parlia+ent" 5,e 3o++uni!t >art) o* t,e Du!!ian Hederation (3>DH2?? t,e onl) true oppo!ition part) in parlia+ent??i! a declinin( *orce" -ussian economic collapse is ine#ita4le,oil profits aren0t sustaina4le E:-US:<:E7A 399D (=ina L" 1,ru!,c,e-a i! an a!!ociate pro*e!!or o* international a**air! at t,e =ew Sc,ool, 3,ronicle o*
8i(,er Education, 9?$2 5,at !cenario, ,owe-er, i! unlikel)" 5,e

un!ta le condition! t,at are !tokin( Du!!ia4! current econo+ic oo+ +a) !oon rin( a out a cri!i! !i+ilar to t,e *inancial +eltdown o* 199:, w,en, a! a re!ult o* t,e decline in world co++odit) price!, Du!!ia, w,ic, i! ,ea-il) dependent on t,e export o* raw +aterial!, lo!t +o!t o* it! inco+e" Wide!pread corruption at e-er) le-el o* pri-ate and !tate ureaucrac), coupled wit, t,e *act t,at t,e (o-ern+ent in-e!t! little o* it! oil +one) in *o!terin( area! like tec,nolo(ical inno-ation, corporate re!pon!i ilit), and !ocial and political re*or+, could !pin t,e econo+ic alance out o* control" Da+pant in*lation +i(,t rin( t,e >utin?Med-ede1re+lin down"

at saudi relations
Oil isn0t 8e% means cooperation is sustaina4le @ronson' . (Dac,el, 3HD director o* Middle Ea!t Studie!, $ M)t,! A out U"S"?Saudi Delation!# $/&1/&''<, Wa!,in(ton >o!t, ,ttp://www"wa!,in(tonpo!t"co+/wp? d)n/content/article/&''</'$/19/AD&''<'$19'17$:",t+l, 01a,n2
5,e United State! and Saudi Ara ia *or+ one o* t,e world4! +o!t +i!under!tood partner!,ip!" 5,e Saudi! are a lon(ti+e oil !upplier *or t,e U"S" econo+) ?? ut on 9/11, t,eir kin(do+ accounted *or 1$ o* t,e 19 ,iEacker!" 5,e Cu!, *a+il) and t,e 8ou!e o* Saud are clo!e ?? )et Secretar) o* State 3ondoleeJJa Dice call! *or (reater de+ocrac) in t,e re(ion" 5o under!tand t,e relation!,ip, a *ew +i!conception! +u!t e de unked: 1 5,e U"S"?Saudi relation!,ip i! a ar(ain o* oil *or !ecurit)" 2!ereVs more to it

t!an t!at" Oil is' of course' critical to U"S"$Saudi ties $$ it can !ardl% 4e ot!er&ise for t!e &orldVs largest consumer and largest producer" @ut Aas!ingtonVs relations!ip &it! -i%ad! more closel% resem4les its friendl% ties to oil$poor iddle Eastern states suc! as Jordan' Eg%pt and Israel t!an its traditionall% !ostile relations &it! oil$ric! states suc! as Li4%a and Iran" Deep oil reser#es !a#e ne#er translated into eas% relations &it! t!e United States " A +aEor rea!on *or t,e clo!e tie! etween t,e two nation! wa! t,eir co++on <old Aar fig!t against communism " Cot, countrie! worried a out
t,e So-iet Union, and t,at !olidi*ied t,eir oil and de*en!e intere!t!, and +ini+iJed di**erence!" In ,ind!i(,t, ) !upportin( reli(iou! Jealot! in t,e attle a(ain!t co++uni!+, t,e two countrie! contri uted to t,e ri!e o* radical I!la+ic +o-e+ent!" & 5,e 9/11 ,iEacker! under+ined ot,erwi!e !tron( U"S"? Saudi tie!" Actuall), t,in(! were ne-er t,at !+oot," 8i!torian! re*er to t,e B!pecial relation!,ipB e!ta li!,ed w,en Saudi Ara ia4! 1in( A del AJiJ and >re!ident Hranklin K" Doo!e-elt +et in 19%$" Cut !ince t,en t,e relation!,ip ,a! endured oil e+ ar(oe!, U"S" re!triction! on ar+! !ale! to Saudi Ara ia, and ten!ion! around I!rael and >ale!tine" Ki!!en!ion per+eate! t,e entire ,i!tor) o* U"S"?Saudi relation!" Since t,e end o* t,e 3old War, relation! ,a-e eco+e particularl) *rau(,t, wit, t,e 9/11 attack! ein( t,e +o!t recent i!!ue" Iil, de*en!e and !o+e re(ional intere!t! keep t,e countrie! to(et,er, ut ot, !ide! ,a-e +ade clear t,at t,e relation!,ip i! le!! !pecial toda)" In &''$, Dice !tated t,at B*or <' )ear! " " " t,e United State! pur!ued !ta ilit) at t,e expen!e o* de+ocrac) in t,i! re(ion ,ere in t,e Middle Ea!t ?? and we ac,ie-ed neit,er"B

Saudi Ara4ia is stuc8 &it! us,no one else could fill in :A ADOU<:E AND SOU@I- 399F (Loui!a Kri!?Ait?8a+adouc,e and Aa,ia 8" @ou

ir , A!!i!tant >ro*e!!or at t,e In!titute o* >olitical Science at t,e Uni-er!it) o* Al(ier!G >ro*e!!or o* Inte+ational Delation! at EUDIMEK MADSEILLE, Sprin( &''7 58E US?SAUKI DELA5II=S8I> A=K 58E IDAV WAD: 58E KIALE35I3S IH A KE>E=KE=5 ALLIA=3E, Journal of Third World Studies, Rol" QQIR, =o" 1, e !co,o!t2 Until now, Di)ad, continue! to reFuire exten!i-e !ecurit) a!!i!tance in i+pro-in( and pro*e!!ionaliJin( t,e kin(do+4! ar+ed *orce!" 5,e nece!!it) *or t,i! a!!i!tance i! -ital, *or t,e kin(do+ ,a! no real alternati-e! to t,e United State! *or it!

!ecurit) need!" >otentiall), We!te+ Europe could e a candidate to *lil*ill t,i! ta!k, ut !e-eral rea!on! +ake t,i! ,)pot,e!i! i+pro a le" Hir!t, Europe doe! not enEo) an) continuou! +ilitar) pre!ence in t,e Oul* re(ion and it! *orce proEection capa ilitie! are in*erior to t,o!e o* t,e United State!" Second, Europe i! not en(a(ed in a ,o+o(enou! polic) toward t,i! re(ion " In t,e contrar), Europe !u**er! *ro+ radical di**erence!, t,e !o?called BoldB -er!u! B)oun(B Europe, in !ecurit) +atter! and !trate()" 5,ird, Europe pro-ide! !i(ni*icant Fuantitie! o* ar+! and +ateriel to Saudi Ara ia and t,e O33, and o**er! +ultiple in-e!t+ent opportunitie! in !uc, wa) t,at trade etween t,e O33 and Europe alread) out!trip! t,at o* t,e US wit, t,e O33" =e-ert,ele!!, t,e political in*iuence re+ain! exclu!i-el) A+erican" =eit,er Du!!ia nor 3,ina can, or want to, pla) a role o* !u !titution" A! *or *orei(n +ilitar) cooperation, Europe i! in-ol-ed in t,e re(ion t,rou(, action! w,ic, ,a-e
not up!et US intere!t!" Hor a lon( ti+e, Saudi Ara ia relied on >aki!tan *or !o+e !ecurit) +atter!, !uc, a! t,e !tationin( o* >aki!tani troop! in t,e kin(do+ and t,e !uppl) o* >aki!tani pilot! to !er-e in t,e Saudi air *orce" Cut, !ecurit) pro le+! co+pelled >aki!tan to ru!, ack to inte+al i!!ue!"

at canada dollar 3ac

US manufacturing ine#ita4le $$$ structural factors 6oroo!ar */ (Dana, A!!i!tant Mana(in( Editor S 5i+e, Hor+er Keput) Editor *or International Cu!ine!! and Econo+ic! S =ew!week, Winner S >eter D" WeitJ >riJe *or 5ran!atlantic Deportin(, C"A" S 3olu+ ia Uni-er!it), I! t,e U"S" Manu*acturin( Denai!!ance Deal.#, 5i+e Ma(aJine, 3?&:, ,ttp:// u!ine!!"ti+e"co+/&'13/'3/&:/i!?t,e?u?!?+anu*acturin(? renai!!ance?real/, Keec,2 U"S" +anu*acturin( i! 4ac8" 5,atN! een t,e con-entional econo+ic wi!do+ now *or !e-eral +ont,!, and t,ereN! plent) o* proo* to ack it up S ri!in( *actor) output, !tron( +anu*acturin( production (ain!, and lower la or co!t! t,at +ake A+erican worker! more attracti#e" 3ouple t,at wit, t,e natural gas 4oom underwa) in t,e U"S", w,ic, +an) expert! elie-e will lower ener() co!t! *or U"S" +anu*acturer!, and )ouN-e (ot a resurgence o* a !ector t,at ,a! een !,rinkin( a! a percenta(e o* t,e econo+) *or !e-eral decade!" We are pro a l) t,e most competiti#e, on a (lo al a!i!, t,an weN-e een in t,e pa!t 3' )ear!,# !a)! OE 3EI 0e** I++elt" Will U"S" +anu*acturin( (o *ro+ 9; to 3'; o* all Eo !. 5,atN! unlikel)" Cut could )ou !ee a !tead) increa!e in Eo !, o-er t,e next Fuarter! and )ear!" I t,ink t,at will ,appen"# <anadian dollar &ea8 no& @a4ad */ (Mic,ael, Welco+e to a 9$?cent (and *allin(2 3anadian dollar#, 5,e Olo e and Mail, 7?&, ,ttp://www"t,e(lo eand+ail"co+/report?on? u!ine!!/top? u!ine!!?!torie!/welco+e?to?a? 9$?cent?and?*allin(?canadian?dollar/article1&91:<'7/, Keec,2 5,e loonie i! now in t,e 9$?cent ran(e, and expected to &ea8en furt!er a+id t,e e-er? c,an(in( *ortune! o* t,e U"S" dollar and ot,er co++odit)?linked currencie!" 5,e loonie, a! t,e dollar coin i! known in 3anada, e+er(ed *ro+ t,e !econd Fuarter o* t,e )ear wit, a lo!! o* 3"3 per cent, rin(in( t,e erosion !o *ar t,i! )ear to < per cent" Mo!t recentl), it ,a! een u**eted ) de-elop+ent! in t,e United State!, w,ere t,e Hederal De!er-e ,a! rai!ed t,e likeli,ood o* e(innin( to pull ack on !ti+ulu! +ea!ure! in t,e *all, and 3,ina, w,ere trou le! cloud t,e de+and outlook *or co++oditie!" US manufacturing falling no& Ne& 1or8 2imes */ (U"S" Manu*acturin( Oau(e Hall! to 0une &''9 Le-el#, <?3, ,ttp://www"n)ti+e!"co+/&'13/'</'%/ u!ine!!/u!?+anu*acturin(?(au(e?*all!?to?Eune?&''9? le-el",t+l, Keec,2 WAS8I=O5I= L A +ea!ure o* United State! +anu*acturin( *ell in Ma) to it! lo&est le#el !ince 0une &''9 a! !lu+pin( o-er!ea! econo+ie! and a pull ack in u!ine!! !pendin( reduced new order! and production" 5,e In!titute *or Suppl) Mana(e+ent !aid on Monda) t,at it! index o* +anu*acturin( acti-it) *ell to %9 la!t +ont,, *ro+ $'"7 in April" 5,at i! t,e lowe!t le-el in nearl) *our )ear! and t,e *ir!t ti+e t,e index ,a! dipped elow $' !ince =o-e+ er" A readin( under $' indicate! contraction" A (au(e o* new order! *ell to %:":, it! lowe!t le-el in nearl) a )ear" >roduction and e+plo)+ent al!o declined" Manu*acturin( ,a! !tru((led t,i! )ear a! weak econo+ie! a road ,a-e !lowed export! *ro+ t,e United State!" Cu!ine!!e! ,a-e al!o reduced t,eir pace o* in-e!t+ent in area! like eFuip+ent and co+puter !o*tware"

at canada stoc8 mar8et

<anadian stoc8 mar8et drop ine#ita4le $$$ QE -egina Leader$=ost */ (Rolatilit) a,ead *or 3anadian +arket! a! U"S" end! !ti+ulu!#, <?&%, ,ttp://www"cal(ar),erald"co+/ u!ine!!/Rolatilit)da,eadd3anadiand+arket!dend!d!ti+ulu!/ :$<9:91/!tor)",t+l, Keec,2 Cot, t,e 5oronto !tock +arket and t,e 3anadian dollar are likel) in *or +ore pressure a! +arket! anticipate t,at t,e U"S" Hederal De!er-e i! !et to !tart windin( down a ke) ele+ent o* it! econo+ic !ti+ulu!" BWe4re enterin( a +ore #olatile period,B !aid 3a+illa Sutton, c,ie* currenc) !trate(i!t at Scotia 3apital" Cot, t,e 5SQ and t,e loonie were slammed la!t week a*ter t,e Hed !aid it could wind down it! ond? u)in( pro(ra+ ) t,e +iddle o* next )ear i* t,e econo+) continue! to i+pro-e" 5,e Hed ,a! een pu+pin( 6:$ illion U"S" a +ont, into *inancial +arket! ) u)in( (o-ern+ent trea!ur)! and +ort(a(e? acked !ecuritie!" 5,at pro(ra+ ,a! kept lon(?ter+ intere!t rate! low and ,elped keep a rall) (oin( on +an) !tock! +arket! al+o!t non?!top !ince t,e end o* la!t )ear" Cut anticipation t,at t,e Hed would !low, and e-entuall) end, it! ond purc,a!e! ,ad t,e e**ect o* depressing !tock +arket!, pu!,in( t,e U"S" dollar ,i(,er and rai!in( ond )ield!" Ne& de#elopments sol#e rare eart! s!ortage DOE */ (Kepart+ent o* Ener(), Ener() Inno-ation 8u 5ackle! S,orta(e! o* Dare Eart, Metal!#, 1?1<, ,ttp://app!1"eere"ener()"(o-/new!/new!Mdetail"c*+/new!Mid/1:9&7, Keec,2 5,e Ener() Kepart+ent on 0anuar) 9 !elected A+e! La orator) *or an award o* 61&' +illion o-er *i-e )ear! to e!ta li!, an Ener() Inno-ation 8u , w,ic, will !eek !olution! to !,orta(e! o* rare eart, +etal! and ot,er +aterial! i+pactin( U"S" ener() !ecurit)" 5,e new 3ritical Material! In!titute (3MI2 in A+e!, Iowa, will a!!e+ le re!earc,er! *ro+ t,e Kepart+ent4! Ida,o =ational La orator), Lawrence Li-er+ore =ational La orator), and Iak Did(e =ational La orator), a! well a! acade+ia and t,e pri-ate !ector" 5,e new 8u will *ocu! on tec,nolo(ie! t,at will ena le t,e United State! to +ake etter u!e o* acce!!i le +aterial! and to eliminate t!e need *or +aterial! t,at are !u Eect to !uppl) di!ruption!" Man) +aterial! dee+ed critical ) t,e Kepart+ent are u!ed in wind tur ine!, !olar panel!, electric -e,icle!, and ener()?e**icient li(,tin(" 5,e Kepart+ent4! &'11 3ritical Material! Strate() reported t,at !uppl) c,allen(e! *or *i-e rare eart, +etal! (d)!pro!iu+, ter iu+, europiu+, neod)+iu+, and )ttriu+2 +a) a**ect clean ener() tec,nolo() deplo)+ent in t,e co+in( )ear!" In recent )ear!, t,e Ener() Kepart+ent and ot,er! ,a-e !caled up work to addre!! t,e!e c,allen(e!" A+on( t,e recent in-e!t+ent!, t,e Kepart+ent4! Ad-anced De!earc, >roEect! A(enc)?Ener() and I**ice o* Ener() E**icienc) and Denewa le Ener() ,a-e !upported +ore t,an 6%' +illion in +a(net, +otor, and (enerator re!earc," Ne& allo%s replicate rare eart!s $$$ alle#iates t!e s!ortage itc!ell *3 (Stewart, 3orre!pondent S >3 >ro, 3itin( D)an Itt, >,)!ici!t S A+e! =ational La orator), US reakt,rou(, could !ol-e rare eart, +etal !,orta(e#, >3 >ro, 1'?&$, ,ttp://www"pcpro"co"uk/new!/3777<%/u!? reakt,rou(,?could?!ol-e?rare?eart,?+etal? !,orta(e, Keec,2 Scienti!t! at t,e US Kepart+ent o* Ener()N! A+e! La orator) clai+ to ,a-e +ade a 4rea8t!roug! t,at could alle#iate t,e tec,nolo() world4! reliance on 3,ina *or !o+e rare eart, +etal!" Dare eart, +aterial! are u!ed in a wide -ariet) o* tec,nolo() co+ponent!, ut 3,ina produce! t,e +aEorit) o* t,e world4! !uppl), leadin( to concern! o-er po!!i le !,orta(e! and price! ,ike!" 5,e A+e! re!earc,er! !a) t,e) ,a-e *ound a relia le wa) to rec)cle

neod)+iu+, a +aterial u!ed in ad-anced +a(net!, includin( in ,ard dri-e!" =ow t,e (oal i! to +ake new +a(net allo)! *ro+ rec)cled rare eart,!" And we want t,o!e new allo)! to e !i+ilar to allo)! +ade *ro+ unproce!!ed rare eart, +aterial!,# !aid D)an Itt, t,e A+e! La orator) !cienti!t leadin( t,e re!earc," It appear! t,at t,e proce!!in( tec,niFue work! well" It e**ecti-el) re+o-e! rare eart,! *ro+ co++ercial +a(net!"# In a proce!! t,at !ound! !urpri!in(l) !i+ple, t,e re!earc,er! ,ar-e!t t,ree rare eart, +aterial! u!ed in +a(net! ? neod)+iu+, pra!eod)+iu+ and d)!pro!iu+ S ) +ixin( t,e+ wit, +a(ne!iu+ and la!tin( t,e+ wit, ,eat *ro+ a radio *reFuenc) *urnace" B5,e!e are indi!tin(ui!,a le *ro+ rare eart,! t,at ,a-e een +ined and !o can e u!ed in an) application,B Itt !aid" B5,i! e**ecti-el) adds to reser#es o* rare eart,!"B

at canada econom%
<anadaVs econom% is suc! a Co8e t!at a rainstorm ris8s a recession Le&is */ (0e**, 3orre!pondent S Hinancial >o!t, Al ertaN! wor!t *lood in ,i!tor) ri!k! knockin( 3anadian econo+) o** cour!e#, Hinancial >o!t, <?13, ,ttp:// u!ine!!"*inancialpo!t"co+/&'13/'</&</al erta!?wor!t?*lood?in?,i!tor)?ri!k!?knockin(? canadian?econo+)?o**?cour!e/, Keec,2 W,ile t,e *ull extent o* da+a(e! and co!t! !te++in( *ro+ la!t weekN! delu(e re+ain (ue!!work, e!ti+ate! !,ow t,e i+pact will likel) e !i(ni*icant" CMI =e! itt Curn! ,a! pe((ed *lood? related da+a(e! a! ,i(, a! 6$? illion" Lo!!e! a*ter in!urance +a) reac, 63"7$? illion, it !aid" 3IC3 World Market! e!ti+ate! t,e *lood! could !,a-e a *ull *B *ro+ 3anadaN! annualiJed OK> (rowt, in t,e t,ird?Fuarter" Al erta, ,o+e to t,e oil !and!, +a) !u!tain a $; annualiJed ,it to it! t,ird?Fuarter OK>, econo+i!t! Warren Lo-el) and E+anuella EnenaEor wrote" W,ile 3al(ar) (accountin( *or Eu!t o-er $; o* 3anadaN! econo+)2 took a !u !tantial ,it *ro+ t,e *lood!, *ar+land! in Sout,ern Al erta were al!o a**ected, and ,ea-) rain! +a) ,a-e contri uted to pipeline rupture! and te+porar) !,utdown!,# t,e pair !aid in a note Wedne!da), !tre!!in( t,e a!!e!!+ent wa! preli+inar)" Ki!ruption! continue" Meat?packer 3ar(ill Ltd" ,a! !caled ack operation! at it! ee* plant, 3anadaN! lar(e!t, out!ide *lood?,it 8i(, Di-er, ecau!e o* a lack o* clean water needed to run t,e *acilit)" It !topped !lau(,terin( cattle la!t 5,ur!da) and doe! not know w,en it will re!u+e, !poke!wo+an Cri(itte Cur(o)ne !aid ) p,one" Suc, lo!!e! could erase up to 61"$? illion in econo+ic acti-it) in 0une, or '"1; o* 3anadaN! annualiJed OK>, 5K Econo+ic! e!ti+ate!" A num4er of sectors will e ,it,# 5K econo+i!t 0onat,an Cendiner !aid in an inter-iew" A lot o* t,e !er-ice?!ector indu!trie!, tran!portation and ware,ou!in(, t,in(! t,at are rel)in( on in*ra!tructure to +o-e (ood!, t,e)Nre (oin( to e a**ected"# <ollapse coming no& $$$ !ousing 4u44le and euro5one Stastna */ (1aJi, 3orre!pondent S 3C3 =ew!, 5oronto condo +arket could de!ta iliJe econo+), Cank o* 3anada warn!#, 3C3 =ew!, <?13, ,ttp://www"c c"ca/new!/ u!ine!!/!tor)/&'13/'</13/ u!ine!!?condo? ank",t+l, Keec,2 5,e Cank o* 3anada i! warnin( t,at certain o#er!eated !e(+ent! o* t,e ,ou!in( +arket could put 3anada4! econo+) at ris8 and ,a! a(ain !in(led out 5oronto4! condo+iniu+ +arket a! an area o* particular concern" In it! late!t a!!e!!+ent o* 3anada4! *inancial !)!te+, t,e central ank !aid t,at i+ alance! in t,e ,ou!in( +arket and ,i(, le-el! o* ,ou!e,old de t !till po!e an Tele#atedT ris8 to t,e !ta ilit) o* t,e 3anadian econo+) and are t,e two 4iggest ris8 factors on t,e do+e!tic *ront L wit, t,e euroJone cri!i! pre!entin( t,e 4iggest t!reat internationall)" It !aid t,at w,ile ,ou!e price! ,a-e !topped ri!in( in +o!t +aEor ur an area! and ,ou!in( !tart!, re!ale! and o-erall ,ou!in( de+and ,a-e !lowed, t,ere are !till !i(n! o* o-er uildin( and o-er-aluation in !o+e part! o* 3anada4! ,ou!in( +arket" B8ou!e price! are ,i(, relati-e to inco+e a and t,e total nu+ er o* ,ou!in( unit! under con!truction re+ain! !i(ni*icantl) a o-e it! ,i!torical a-era(e relati-e to t,e population,B t,e ank4! report !a)!" Al+o!t all o* t,at con!truction acti-it) i! in t,e area o* +ultiple?unit dwellin(! o* t,e condo+iniu+ -ariet)" 5,e ank4! a!!e!!+ent o* t,e ,ou!in( +arket ec,oe! t,at o* t,e Ir(aniJation *or Econo+ic 3o? operation and Ke-elop+ent (IE3K2, w,ic, la!t week i!!ued a report t,at identi*ied 3anada4! ,ou!in( +arket a! one o* t,e t,ree +o!t o-er-alued a+on( ad-anced econo+ie!" 3ondo +arket dip could ,a-e ripple e**ect 5,e ank !aid 3anada4! ,ou!in( pro le+ i! particularl) acute in 5oronto, wit, a lar(e nu+ er o* un!old ,i(,ri!e unit! t,at are under con!truction or in t,e pre? con!truction p,a!e" I* t,e!e unit! are not !old o-er t,e next 1& to 3' +ont,! a! t,e) are

co+pleted, it could cau!e price! to *all and rin( re!idential con!truction to a ,alt, t,e ank warned" I* in-e!tor de+and ,a! oo!ted condo+iniu+ con!truction e)ond de+o(rap,ic need!, t,i! could +ake t,e +arket +ore !u!cepti le to !,i*t! in u)er !enti+ent, t,e ank !aid" 5,at, in turn, could 4lo& 4ac8 on ot,er part! o* t,e econo+)" Que4ec secession is impossi4le <ro&le% */ (Crian Lee, Mana(in( Kirector S Macdonald?Laurier In!titute, Vue ec !ece!!ion will ne-er ,appen#, Rancou-er Sun, <?&%, ,ttp://www"-ancou-er!un"co+/opinion/op? ed/Vue ecd!ece!!iondwilldne-erd,appen/:$7&$&%/!tor)",t+l, Keec,2 W,) will no political leader !tand up and tell t,e trut, a out Vue ec !eparati!+. 5,at trut, i! t,at !eparati!+ i! dead L not, o* cour!e a! !o+et,in( to drea+ a out and -ote *orG t,at, like deat, and taxe! will alwa)! e wit, u!" =o, t,e trut, i! t,at t,e ,urdle i! !et so !ig! *or it to e done !ucce!!*ull) and le(all) t,at !eparation i!, *or all intent! and purpo!e!, impossi4le" E-en Step,ane Kion, arc,itect o* t,e 3larit) Act and one o* t,e +o!t coura(eou! and ri(,tl) ad+ired o* Vue ec *ederali!t!, !till +aintain! t,e *iction t,at t,e ke) Fue!tion i! w,et,er Vue ec (i-e! a clear an!wer to a clear Fue!tion on !ece!!ion" Vue ec will not e kept in 3anada a(ain!t it! will"# 8e !aid !o a(ain t,e ot,er ni(,t at one o* t,e Oreat 3anadian Ke ate! Serie! or(aniJed ) t,e Macdonald?Laurier In!titute in Ittawa" I* Vue ecker! reall) want to (o, ,e !a)!, t,e) can" 5rue, *orcin( Vue ecker! to !ta) a(ain!t t,eir clearl) expre!!ed will i! a recipe *or +i!er)" In t,e ot,er ,and, downpla)in( t,e certain co!t! Vue ecker! would con*ront to (et out o* 3on*ederation encoura(e! !eparation *anta!ie!, di!tortin( t,at -er) deci!ion a out w,et,er to -ote to lea-e" 5,e !ece!!ioni!t!, like *or+er CloFui!te Kaniel 5urp, w,o de ated Kion, !tri-e to +ake Vue ecker! elie-e t,at independence would e e!!entiall) co!tle!!, w,ile creatin( all kind! o* ene*it!" (We will *inall) e +a`tre! c,eJ nou!, or a! t,e (reat Vue ec c,an!onnier H_lix Leclerc put it, it would +ean t,e end o* t,e *at (rea!) *in(er! o* !tran(er! pawin( t,rou(, t,e *a+il) paper!"2 It !ee+! clear, t,ou(,, t,at i* Vue ecker! under!tood t,e real cost t,e) would ,a-e to pa) to (et out o* 3anada, t,e likeli,ood o* !uc, a -ote e-er occurrin( would plummet" So ) *ailin( to con*ront Vue ecker! wit, t,e trut, o* t,eir le(al and con!titutional po!ition, t,e de*ender! o* *ederali!+ actuall) ,elp to *o!ter t,e cli+ate o* con*u!ion and uncertaint) t,at ,a! co!t t,e w,ole countr) !o dearl), and no one +ore t,an Vue ecker! t,e+!el-e! o-er t,e la!t ,al* centur)" 5,e Supre+e 3ourt ,ad t,e coEone! to +ake clear Eu!t ,ow !ig! t,e ar to !ece!!ion !it! in it! 199: deci!ion on t,ree Fue!tion! re*erred to it ) t,e 3,r_tien (o-ern+ent" 5,o!e Fue!tion! dealt wit, w,en and under w,at condition! Ittawa +i(,t e reFuired to reco(niJe a pro?independence -ote in a Vue ec re*erendu+ and ne(otiate t,e pro-inceN! !ece!!ion"

at iran sanctions
Oil not 8e% $$$ agriculture and mining industries 4uffer sanctions -oroo!ar */ (1a+ iJ, 3orre!pondent S Cloo+ er(, Iran Mo-e! Awa) Hro+ Iil to Wit,!tand Sanction!, Mini!ter Sa)!#, Cloo+ er(, %?&3, ,ttp://www" loo+ er("co+/new!/&'13?'%? &3/iran?+o-e!?awa)?*ro+?oil?to?wit,!tand?!anction!?+ini!ter?!a)!",t+l, Keec,2 IranN! *inance +ini!ter !a)! ,i! countr)N! econo+) i! adapting to We!tern !anction! ) *indin( new +arket! *or a(riculture and +inin( product! a*ter oil export! plun(ed ) al+o!t ,al*" We ,ad to +ake adCustments,# S,a+!eddin 8o!!eini, IranN! +ini!ter o* econo+ic a**air! and *inance, !aid in an inter-iew )e!terda) at IranN! Mi!!ion to t,e United =ation! in =ew Aork" We will work ,arder and *ind new wa)! and e-en c,an(e our tradin( partner!"# 5,e U"S" and allie! are re!trictin( IranN! oil export!, t,e countr)N! lar(e!t !ource o* re-enue, to pre!!ure t,e (o-ern+ent in 5e,ran to !top enric,in( uraniu+" 5,e !anction! ,a-e dri-en t,e -alue o* t,e Iranian rial down :' percent in t,e pa!t two )ear!" W,ile t,e countr)N! oil export! ,a-e *allen $' percent in t,e pa!t )ear, t,e plun(e in t,e rialN! -alue ,a! ,elped exporter! w,o can !ell ot,er (ood! more c!eapl%, 8o!!eini !aid" 5,e I!la+ic Depu lic ,a! increased exports o* ot, a(ricultural and +inin( product!, ,e !aid" We ,a-e !een an increa!e o* 39 percent in non?oil export!,# 8o!!eini !aid" We are +akin( structural c!anges to our econo+) to reduce t,e i+pact o* !anction!"# Ci( =e(ati-e 5,atN! onl) part o* t,e !tor), !aid KEa-ad Sale,i?I!*a,ani, a pro*e!!or o* econo+ic! at Rir(inia >ol)tec,nic and State Uni-er!it) in Clack! ur(" 5,e currenc) de-aluation ,a! ,elped Iranian exporter! and do+e!tic producer! to e co+petiti-e,# Sale,i?I!*a,ani !aid in a telep,one inter-iew" 8owe-er, !anction! are a i( ne(ati-e ecau!e t,e) pre-ent Iranian co+panie! *ro+ tran!*errin( +one) or (et acce!! to tec,nolo()"# Japan circum#ents t!e sanctions $$$ guarantees income to Iran InaCima */ (5!u)o!,i, 3orre!pondent S Cloo+ er(, Iil I+port! Hro+ Iran Kou le in 0apan Ke!pite We!tern Sanction!#, Cloo+ er(, <?&7, ,ttp://www" loo+ er("co+/new!/&'13?'<? &7/oil?i+port!?*ro+?iran?dou le?in?Eapan?de!pite?we!tern?!anction!",t+l, Keec,2 0apanN! crude i+port! *ro+ Iran +ore t,an dou4led in Ma) *ro+ a )ear earlier despite sanctions a(ain!t t,e >er!ian Oul* countr)" 3rude i+port! ro!e to 1"'9 +illion kiloliter!, or a out &&&,''' arrel! a da), up *ro+ a out $&3,''' kiloliter! in Ma) &'1&, accordin( to data toda) *ro+ t,e Mini!tr) o* Hinance" >urc,a!e! *ro+ Iran in April o* t,i! )ear were a out $3',''' kiloliter!" 5,e U"S" extended 0apanN! exemption in Marc, *ro+ !anction! on ank! doin( u!ine!! wit, Iran *or a t,ird !ix?+ont, ter+ a!ed on additional reduction! in t,e -olu+e o* oil purc,a!e! *ro+ t,e countr)" 0apan i+ported %"77 +illion kiloliter! o* Iranian crude in t,e *i-e +ont,! ended Ma), down a out 17 percent *ro+ a )ear earlier, t,e *inance +ini!tr)N! data !,ow!" No impact to Israeli stri8es $$$ &ouldnVt escalate ;lo#er *3 (>eter 3", International A!!ociate Editor S Ener() 5ri une, It won4t e t,e end o* t,e world i* I!rael !trike! Iran#, 5,e 3o++entator, 9?&7, ,ttp://www"t,eco++entator"co+/article/17'9/itMwonMtM eMt,eMendMo*Mt,eMworldMi*Mi!rae lM!trike!Miran, Keec,2 I* or w,en +ilitar) action +i(,t take place i! not our c,ie* concern ,ere" 8owe-er, t,e ru!, o* We!tern politician! and co++entator! !preadin( alar+ o* apocal)ptic con!eFuence! !,ould I!rael elie-e it ,a! no c,oice ut to adopt t,e +ilitar) option i!" An) a!!ertion t,at t,e onl) *all? out *ro+ +ilitar) action to end IranN! nuclear a+ ition! would e wider con*la(ration acro!!

t,e Middle Ea!t#, e-en World War III, i! de+on!tra l) 4un8um" 5,e !u++er ,a! an o+inou! *eel, like Au(u!t 191%#, !a)! Mic,ael Curlei(,, aut,or o* Clood and Da(e: A 3ultural 8i!tor) o* 5errori!+, in t,e Kail) Mail" Writer and Eournali!t Max 8a!tin(! !tate! t,at an attack would lead to open?ended con*lict# etween Iran and t,e We!t" 8a!tin(! warn! t,at i* t,e Iranian! +ined t,e Strait! o* 8or+uJ, t,e We!t would enter a lon( dark tunnel#" La!t o* all, *ailed *or+er U1 5or) >art) leader Mic,ael 8oward a!!ert!: 5,e onl) t,in( wor!e t,an t,e pro!pect o* an Iran wit, nuclear weapon! would e t,e con!eFuence! o* u!in( *orce to !top t,e+#" W,at all ,a-e in co++on i! an illu!or) !en!e o* ,ow an en*ee led Iranian econo+) could wa(e a +eanin(*ul ca+pai(n a(ain!t t,e We!t#, and ,ow takin( t,e +ilitar) option lea-e! I!rael wit, no ri(,t to !el*?de*ence" Ika), !o letN! look at t,e political realities" 5,e *act i! t,at S,ia Iran i! an isolated and ailin( econo+) wit, no friends ot,er t,an S)ria in t,e predo+inantl) Sunni Middle Ea!t re(ion" We need to ear in +ind t,at, ,i!toricall), t,ere i! no lo-e lo!t etween S,ia and Sunni I!la+" We need onl) look at t,e +urderou! con*lict etween t,e two in IraF" In re!pon!e to an attack a(ain!t IranN! enric,+ent *acilitie!, )oun( ,ot,ead! would certainl) take to t,e !treet! to urn I!raeli and US *la(! and e**i(ie! to call *or Ei,ad" 5,eir leader!, *ro+ Di)ad, to 3airo to A++an would, ,owe-er, Fuietl) e reat,in( a !i(, o* relie* t,at !o+eone ,ad *inall) ended Iranian nuclear re(ional a+ ition! t,at could well !ee a nuclear? ar+ed Iran tar(etin( t,e+, not Eu!t I!rael" A! t,e >enta(onN! Wiki?leak! e+ail! re-ealed onl) too clearl), IranN! nei(, our!, deepl) !u!piciou! o* 5e,ranN! ideolo(ical re(ional a+ ition! (and not Eu!t a! re(ard! I!rael2, ,a-e pri-atel) een ur(in( a U"S" +ilitar) re!olution o* t,e Iranian nuclear pro(ra+ *or )ear!" Moreo-er, Du!!ia +a) ,a-e ,elped uild IranN! nuclear *acilit) at Cu!,e,r ut, a! we reported in 8a! Du!!ia Sold Iut Iran *or a Stake in I!raeli Oa!., *or all it! pu lic lu!ter, Mo!cow appear! alread) to ,a-e !old it! partner! down t,e Mo!k-a" In !,ort, in t,e e-ent o* a !trike on it! nuclear *acilitie!, Iran would stand alone"

at iran econom%
Alt causes $$$ mismanagement 7alineCad *3 (A*!,in, US Sanction! 3ru!, Iran Econo+) ? Iranian! Cla+e A,+adineEad#, 5,e 5rut, >ur!uit, 1'?17, ,ttp://t,etrut,pur!uit"co+/top?!tor)/u!?!anction!?cru!,?iran?econo+)? iranian!? la+e?a,+adineEad/113$9, Keec,2 5,e US?led !anction! are Eu!t one tar(et o* la+e *or t,e ,ard!,ip" More and +ore, law+aker! and ordinar) Iranian! la+e t,e ,i(, in*lation and une+plo)+ent a! +uc, on t,e (o-ern+ent4! mis!andling o* t,e oil re-enue wind*all o* recent )ear! a! on !anction!" E-en !upre+e leader A)atolla, Ali 1,a+enei ad+itted t,i! Ict" 1', acknowled(in( t,at w,ile t,e !anction! +a) cau!e pro le+!, B+i!+ana(e+ent +a) e-en increase t,e!e pro le+!"B A! an oil exporter durin( a period o* ,i(, oil price!, Iran !,ould e *lu!, wit, ca!, *ro+ pre?e+ ar(o !ale! t,at it could u!e to !,ield Iranian! *ro+ t,e wor!t o* t,e ad-er!e e**ect! o* t,e !anction!" In!tead, t,e (o-ern+ent4! !pendt,ri*t wa)! on co!tl) proEect! and ca!, ,andout! ,a-e le*t little protecti-e u**er" So+e 1'& parlia+entarian! ,a-e !i(ned a letter de+andin( a c,ance to Fue!tion >re!ident Ma,+oud A,+adineEad on ,i! econo+ic policie!, and +ore t,an ,al* o* t,e elected od) -oted to reexa+ine ,i! land+ark !u !id) re*or+!" >arlia+ent Speaker Ali LariEani S lon( a political ri-al o* t,e pre!ident S ,a! !aid +i!+ana(e+ent accounted *or D9 percent o* Iran4! *inancial woe!"

at qatar soft po&er

Lol5 <ar4err% */ (Sean, 3orre!pondent S =>D, Wit, A =ew E+ir, Will Vatar 1eep It! Iut!iJed Dole.#, =>D, 7?1, ,ttp://www"npr"or(/ lo(!/parallel!/&'13/'7/'1/197<&<97$/wit,?a?new? e+ir?will?Fatar?keep?it!?out!iJed?role, Keec,2 Under 8a+ad and ,i! *orei(n +ini!ter, S,eik 8a+id in 0a!e+, Vatar ,a! a!!u+ed t,e role o* c,ie* +ediator in t,e Ara world, 8a+id note!" It rokered a deal, known a! t,e Ko,a A(ree+ent, in 399D t,at ,elped a-ert anot,er ci-il war in Le anon" And it4! een tr)in( to roker peace talk! etween t,e 5ali an and t,e A*(,an (o-ern+ent" Le4anese insta4ilit% ine#ita4le $$$ political infig!ting and S%ria Arslan */ (Son(ll, Oue!t 3ontri utor S Kiplo+atic 3ourier, Internal I !tacle! to Le anonN! >olitical Sta ilit)#, Kiplo+atic 3ourier, <?&%, ,ttp://www"diplo+aticourier"co+/new!/re(ion!/+iddle?ea!t/1%97?internal?o !tacle!?to? le anon!?political?!ta ilit), Keec,2 Le anon, a !+all, co!+opolitan countr) on t,e Mediterranean t,at !,are! order! wit, S)ria and I!rael, i! once a(ain !u**erin( *ro+ political deadloc8" Apart *ro+ external sources o* in!ta ilit)Lt,e con*lict! ra(in( around ot, t,e S)rian and I!raeli order!LLe anon al!o ,a! internal political pro le+! wort, con!iderin(, e!peciall) a*ter t,e upri!in(! o* t,e Ara Sprin(, w,ic, led pre-iou! autocratic ut !o+ew,at !ta le !)!te+! to collap!e" 5,e cau!e! o* Le anonN! internal political in!ta ilit), w,ic, !aw t,e re!i(nation o* >ri+e Mini!ter =aEi MiFatiN! 3'? +e+ er ca inet in Marc,, predate! t,e Le ane!e ci-il war (197$ to 199'2 and t,e ri!e o* t,e >ale!tinian Li eration Ir(aniJation (>LI2" 5o under!tand t,e Le ane!e political !)!te+, one ,a! to look ack in ,i!tor) to e*ore t,e ori(in! o* t,e Le ane!e Depu lic" Rariou! ci-iliJation! ,a-e le*t t,eir +ark on t,e re(ion t,rou(, t,e centurie!: t,e >,oenician!, E()ptian!, A!!)rian!, Ca )lonian!, Oreek!, Do+an!, Do+an 3at,olic nation! *ro+ w,ic, t,e 3ru!ader! ca+e, Itto+an!, and Hrenc," 5,e!e ,a-e (i-en t,e re(ion a ric, cultural and reli(iou! di-er!it)" 5oda), Le anonN! reli(iou! (roup! include Maronite 3,ri!tian!, Oreek Irt,odox, Oreek 3at,olic!, Ar+enian Irt,odox, Sunni Mu!li+!, KruJe, and S,ii Mu!li+!, a+on( ot,er!" A*ter t,e di!inte(ration o* t,e Itto+an E+pire, Le anon e+er(ed a! a !tate and wa! rou(,t under t,e Hrenc, Mandate o* S)ria and Le anon" Hrance e!ta li!,ed t,e Depu lic o* Le anon in 19&< a! a de+ocratic repu lic" In 19%3, durin( t,e Second World War, it (ranted Le anon it! independence" 5,e Maronite 3,ri!tian!, t,e lar(e!t de+o(rap,ic (roup, clo!el) allied wit, t,e Hrenc, and t,e onl) Ea!tern 3,ri!tian! ne-er to rake co++union wit, t,e Do+an 3at,olic 3,urc,, a!!u+ed t,e lar(e!t repre!entation in (o-ern+ent" In t,e tripartite political !)!te+ t,at ,a! exi!ted !ince t,en, t,e >re!ident4! o**ice re+ain! +andated to e *illed ) a Maronite 3,ri!tian, w,ile t,e >ri+e Mini!ter i! a Sunni Mu!li+ and t,e Speaker o* t,e 8ou!e a S,ii Mu!li+" 5,i! would e an awkward and unco+*orta le arran(e+ent e-en under t,e e!t o* circu+!tance!, ut in Le anonN! ca!e it ,a! eca+e t,e !ource o* (rowin( anta(oni!+ a! t,e re(ionN! de+o(rap,ic! ,a-e c,an(ed dra+aticall)" Sunni Mu!li+! now outnu+ er Maronite 3,ri!tian!, and )et t,e) re+ain underrepre!ented in (o-ern+ent and arred *ro+ t,e pre!idenc)" Moreo-er, S)riaN! in*luence on Le anonN! politic! ,a! per!i!ted, e-en a*ter t,e wit,drawal o* it! troop! in &''$" Le anonN! de+ocrac) could e de!cri ed a! a con!ociational de+ocrac)#La ter+ coined ) t,e Kutc, political !cienti!t Arend LiEp,art to denote a (o-ern+ent w,o!e political elite ne(otiate! t,e politic! o* acco++odation etween di**erent (roup! or pillar!# o* a *ra(+ented !ociet) in order to ac,ie-e a !ta le de+ocrac)" A

con!ociational de+ocrac) !eek! *air repre!entation *or +inorit) (roup!, ut LiEp,art ,a! alwa)! ,eld t,at a con!ociational de+ocrac) i! in,erentl) less sta4le t,an a li eral de+ocrac)"

at 4a!rain econom%
@a!rain econom% resilient $$$ it0s decoupled ;DN *9 (Oul* Kail) =ew!, 1e) Hitc, ratin(! oo!t *or Ca,rain4! econo+)#, 1&?&3, ,ttp://www"(ul*?dail)?new!"co+/=ew!Ketail!"a!px.!tor)id/&9%%<', Keec,2 MA=AMA: Hitc, Datin(! ,a! a**ir+ed Ca,rain4! lon(?ter+ *orei(n and local currenc) I!!uer Ke*ault Datin(! (IKD!2 at 4A4 and 4Ad4 re!pecti-el), !,ort?ter+ *orei(n currenc) IKD at 4H14 and 3ountr) 3eilin( at 4Ad4" 5,e outlook on t,e long$term IKD! i! sta4le" 5,e outlook re*lect! t,e continued resilience o* Ca,rain4! econo+) and t,e ankin( !ector to t,e !tre!!e! *ro+ t,e (lo al downturn and re(ional propert) +arket! o-er t,e la!t two )ear!" It al!o re*lect! t,e !tron( !tartin( point *or pu lic *inance! in t,e context o* t,e (o-ern+ent4! planned *i!cal expan!ion durin( &'11?1&" No ris8 of =a8istan coup 2!e :indu ** (In!ta ilit) in >aki!tan ? 5,e 8indu#, 1&?&<, ,ttp://www"t,e,indu"co+/opinion/editorial/in!ta ilit)?in?paki!tan/article&7%7$%<"ece, Keec,2 5,e alar+ call !ounded ) >ri+e Mini!ter Au!u* DaJa Oilani o* a con!pirac) to ou!t ,i! (o-ern+ent ,a! rou(,t out in t,e open t,e ri*t etween >aki!tan4! elected ci-ilian (o-ern+ent and t,e +ilitar)" A! lon( a! t,i! wa! con*ined to w,i!per! in t,e corridor, t,ere wa! a po!!i ilit) t,at t,e di**erence! could e papered o-er" 3,ance! o* t,i! are now !li+" A pu lic denial ) t,e Ar+) c,ie*, Oeneral A!,*aF >ar-eJ 1a)ani, o* a coup in t,e +akin( and ,i! pled(e o* !upport to t,e de+ocratic proce!! ,a-e *ailed to clear t,e air" A +ilitar) takeo-er doe! !ee+ unli8el% L t,e >aki!tan Ar+) ,a! learnt t,at coup! &or8 4adl% *or it in t,e lon( run" Moreo-er, Oeneral 1a)ani and t,e ISI c,ie*, Lt" Oeneral S,uEa >a!,a, ot, on extended tenure!, are ,ardl) popular in t,e pre-ailin( anti?A+erican en-iron+ent +arked ) t,eir *ailure to pre-ent U"S" +ilitar) incur!ion!, nota l) to kill I!a+a in Laden" Cut t,e +ilitar)4! loat,in( *or >re!ident A!i* Ali @ardari could !till !ee it +anoeu-rin( a(ain!t ,i+ t,rou(, ot,er +ean!" 5,e openin( could co+e *ro+ t,e Supre+e 3ourt, w,ic, i! con!iderin( a petition ) t,e >aki!tan Mu!li+ Lea(ue (=2 leader, =awaJ S,ari*, a!kin( it to in-e!ti(ate ^+e+o(ate4" 5,i! i! t,e contro-er!) !tirred up ) a >aki!tani?A+erican u!ine!!+an4! alle(ation t,at, on e,al* o* t,e >aki!tan (o-ern+ent, ,e carried a ^+e+o4 to a top A+erican (eneral a!kin( *or ,elp to !ta-e o** a po!!i le +ilitar) coup in t,e a*ter+at, o* t,e I!a+a raid" Mr" @ardari4! opponent!, includin( *or+er cricketer I+ran 1,an, la+e ,i+ *or t,i! ^con!pirac)4 a(ain!t t,e >aki!tan +ilitar)" 5,e Ar+) ,a! added it! -oice to t,e de+and t,at t,e Supre+e 3ourt ,ear t,e ca!e" Cut >ri+e Mini!ter Oilani4! extraordinar) !peec, +ake! it clear t,ere can e no !electi-e re+o-al L i* t,e >re!ident (oe!, t,e (o-ern+ent will (o too" 5,at would precipitate a political cri!i! +uc, wor!e t,an t,e pre!ent !tando**"

at gcc stoc8 mar8et

Oil not 8e% to ;ulf economies $$$ empirics and go#ernment spending Ara4 Ne&s *3 (O33 pro!pect! durin( &'13 and can t,e) e !u!tained.#, 1&?3', ,ttp://www"ara new!"co+/(cc?pro!pect!?durin(?&'13?and?can?t,e)? e?!u!tained, Keec,2 5ake *ir!t t,e ti+e o* t,e &'':?&''9 cri!i!" 5,e O33 +ana(ed to +aintain relati-el) !ealt!% econo+ic (rowt, w,en t,e world went t,rou(, t,at !teep rece!!ion, w,ic, led to a s!arp decline o* O33 oil re-enue!" Hurt,er+ore, t,e world econo+), accordin( to IMH own e!ti+ate!, i! not expected to (o t,rou(, an actual decline, onl) a (rowt, rece!!ion,# wit, (rowt, reac,in( 3"< percent" =ot (reat, ut not a decline eit,er" 5,ere*ore, t,e e**ect! on O33 econo+ie! would e +ilder t,an durin( t,e &'':?&''9 de-a!tatin( rece!!ion" In addition, t,e expansionar% 4udgets t,at t,e O33 (o-ern+ent! adopt ,a-e an i+portant stimulating effect, e-en i* oil re-enue *latten! or decline!" Ae!terda) (Kec" &92, Saudi Ara ia announced it! &'13 ud(et, t,e lar(e!t in it! ,i!tor), allocatin( 6 &19 illion *or expenditure, a w,oppin( 19 percent increa!e o-er &'1& ud(et" Lar(er (o-ern+ent !pendin( and !u !eFuentl) ,i(,er do+e!tic de+and *or (ood! and !er-ice! durin( &'13 would ,a-e a noticea le !ti+ulatin( e**ect e-en i* t,e (lo al de+and *or oil *latten! or decline!" ;ulf economic collapse ine#ita4le $$$ structural factors Ara4 Ne&s *3 (O33 pro!pect! durin( &'13 and can t,e) e !u!tained.#, 1&?3', ,ttp://www"ara new!"co+/(cc?pro!pect!?durin(?&'13?and?can?t,e)? e?!u!tained, Keec,2 5,ere are serious structural c!allenges t,at could t!reaten t,e !u!taina ilit) o* ,i(, (rowt, e)ond &'13" Look at t,e!e *i-e c,allen(e! *or a !a+ple: Hir!t: 3on!er-ation" O33 countrie! rel) or non?renewa le natural re!ource! *or t,eir current pro!perit) and *uture !ur-i-al" 5,e) ,a-e !o+e o* t,e ,i(,e!t per capita le-el! o* u!e! o* water and ener() in t,e world" Unle!! rou(,t under control, *uture econo+ic (rowt, could e EeopardiJed" Second: Ki-er!i*ication, or t,e need to alance t,e oil and non?oil !ector! o* t,e econo+)" So+e O33 econo+ie! ,a-e +ana(ed to reac, rea!ona le le-el! o* di-er!i*ication, ut +o!t are !till reliant on oil *or (rowt," Ki-er!i*ication would reduce -ulnera ilit) to c,an(e! in (lo al de+and *or oil" 5,ird: Increa!ed econo+ic and la or participation rate!" We currentl) ,a-e !o+e o* t,e lowe!t participation rate! in t,e world, indicatin( !eriou! under?utiliJation o* ,u+an re!ource!" In addition, une+plo)+ent rate! ,a-e een in t,e dou le di(it! *or !e-eral )ear! in Saudi Ara ia, *or exa+ple" La!t week, I wrote in Ara =ew! on t,e *act t,at O33 national!N participation in t,e pri-ate !ector i! al+o!t non?exi!tent in !o+e O33 countrie!, dippin( a! low a! '"$ percent" Hourt,: Education re*or+" 3urrentl) O33 national! are outnu+ ered and out?!killed in t,e la or *orce" 5,ere i! ur(ent need to re*or+ uni-er!it) and tec,nical education wit, a -iew to increa!e O33 national!N co+petiti-ene!! in t,e la or +arket" Hi*t,: I+pro-e +acroecono+ic a !orpti-e capacit)" 3urrentl) O33 econo+ie! are una le to a !or all oil !urplu!e!, a! well a! pri-ate wealt," 5,ere i! con!idera le O33 wealt,, ot, pu lic and pri-ate, t,at currentl) (et! in-e!ted out!ide t,e re(ion ecau!e o* li+ited capacit)" I* we +ana(e to addre!! t,e!e c,allen(e! in a !i(ni*icant wa), ,i(, econo+ic (rowt, rate! could e !u!tained durin( &'13 and e)ond, e-en i* oil price! *all" Hailin( to addre!! t,e+ could limit gro&t! in t,e *uture e-en i* oil price! continue to ri!e"

at c!inese liquidit%
Liquidit% sufficient no& -euters */ (3,ina ank re(ulator !a)! liFuidit) a+ple, de t ri!k! +ana(ea le#, <?&:, ,ttp://www"reuter!"co+/article/&'13/'</&9/u!?c,ina? ank!?idUSCDE9$S'1U&'13'<&9, Keec,2 (Deuter!2 ? 3,ina4! c,ie* ankin( re(ulator !aid on Saturda) t,at liFuidit) in 3,ina4! ankin( !)!te+ i! sufficient and pled(ed to control ri!k! *ro+ local (o-ern+ent de t, real e!tate and !,adow ankin("Ke!pite a ca!, !FueeJe t,at !ent +one)?+arket intere!t rate! !oarin( o-er t,e la!t two week!, ank! ,a-e more t!an enoug! re!er-e! to +eet !ettle+ent need!, S,an( Hulin, c,air+an o* t,e 3,ine!e Cankin( De(ulator) 3o++i!!ion (3CD32, !aid at a *inancial *oru+ on Saturda)" BI-er t,e la!t *ew da)!, due to +ultiple *actor!, t,e pro le+ o* ti(,t liFuidit) ,a! appeared in t,e +arket" Cut o-erall, liFuidit) in our ankin( !)!te+ reall) isnVt scarce,B S,an( !aid at a !peec, to t,e LuEiaJui Horu+ in S,an(,ai" S,an( !aid total exce!! re!er-e! in 3,ina4! ankin( !)!te+ totaled 1"$ trillion, w,ic, ,e !aid wa! +ore t,an dou le t,e a+ount nece!!ar) *or nor+al pa)+ent and !ettle+ent need!" <!inese collapse ine#ita4le $$$ construction 4u44le <!ancellor *3 (Edward, Olo al Strate(i!t S OMI, Riewpoint!: I! 3,ina4! econo+) ,eadin( *or a cra!,.#, CC3, 7?1&, ,ttp://www" c"co"uk/new!/ u!ine!!?1::':7$:, Keec,2 3on!truction ,a! co+e to dominate 3,ina4! econo+), accountin( *or rou(,l) &$; o* all acti-it) and a out 1$; o* all Eo !" It !,ould t,ere*ore co+e a! no !urpri!e t,at a! 3,ina4! propert) +arket ,a! !lowed o-er t,e la!t )ear and land !ale! ,a-e collap!ed, t,e en(ine o* 3,ina4! econo+ic (rowt, ,a! al!o sputtered" 5,e >eople4! Depu lic ,a! al!o accu+ulated a +ountain o* dou t*ul de t! in recent )ear!" Mo!t anal)!t! take co+*ort *ro+ t,e *act t,at t,ere are no !u ?pri+e +ort(a(e! or co+plex *inancial deri-ati-e! in 3,ina" Aet it i! a +i!take to i(nore t,e i+plication! o* t,e rapid credit expan!ion on t,e +ainland *ollowin( t,e &'': (lo al *inancial cri!i!" Kue to it! !ti+ulu! !pendin(, 3,ina4! total out!tandin( de t ,a! increa!ed ) around $' percenta(e point! o* (ro!! do+e!tic product o-er t,e pa!t *ew )ear!" And a! credit (rowt, ,a! weakened o-er t,e pa!t couple o* )ear!, t,e fragilit% o* 3,ina4! econo+) ,a! eco+e apparent"

at xinCiang terrorism
2!is is a Co8e $$$ all t!eir e#idence is <!inese go#ernment propaganda $$$ insta4ilit% is ine#ita4le Liao */ (S,annon, 3orre!pondent S Epoc, 5i+e!, QinEian( Riolence Kue More to Et,nic Orie-ance! 5,an ^5errori!+N#, Epoc, 5i+e!, 7?&, ,ttp://www"t,eepoc,ti+e!"co+/n3/1%7:77? xinEian(?-iolence?due?+ore?to?et,nic?(rie-ance!?t,an?terrori!+/, Keec,2 W,en t,e +o!t recent out o* et,nic -iolence erupted in t,e nort,we!tern 3,ine!e pro-ince o* QinEian( recentl), t,e 3,ine!e 3o++uni!t >art)N! re!pon!e wa! t)pical" It acknowled(ed neit,er t,e et!nic tensions in t,e re(ion nor t,e restricti#e religious policies laid down ) t,e 3,ine!e aut,oritie!" In!tead, =ur Cekri, t,e co++uni!t (o-ernor o* QinEian(, !aid: Iur cla!, wit, -iolent terrori!t! i! neit,er a i!!ue o* et,nicit), nor a i!!ue o* reli(ion" Dat,er, it i! a li*e and deat, political !tru((le to de*end our national inte(rit) and !a*e(uard cooperation a+on( di**erent et,nic (roup!" 5,ere will e no roo+ le*t *or co+pro+i!e o* an) kind"# Hor decade! U)(,ur! in QinEian(, a 5urkic?!peakin( people t,at are +o!tl) Mu!li+, ,a-e *elt t,at >art) aut,oritie! are atte+ptin( to dilute t,eir culture and reli(ion ) !,ippin( in +illion! o* 8an 3,ine!e and +akin( o**icial re!triction! a(ain!t expre!!ion! o* I!la+ic *ait," C) i(norin( t,e root! o* oilin( (rie-ance! t,at !o+eti+e! explode into -iolence, and in!tead la elin( all in!tance! o* -iolence a! a kind o* or(aniJed terrori!+, t,e >art) i! atte+ptin( to +ute international critici!+ and Eu!ti*) t,e crackdown on t,e re(ion *ollowin( tra(ic e-ent!,# !aid Ali+ Se)to**, >re!ident o* U)(,ur A+erican A!!ociation, in a telep,one inter-iew wit, Epoc, 5i+e!" 5,e) are tr)in( to ,ide t,e total *ailure o* et,nic policie! in Ea!t 5urki!tan,# ,e !aid, u!in( t,e word t,eir (roup pre*er! to re*er to w,at i! now called QinEian( ) 3,ine!e aut,oritie!" Cut no od)N! u)in( <!inese propaganda"#

at 4ritis! de4t
US Na#% sol#es D2 *9 (Ke*en!e 5ec,, 5,e End o* U"S" Mariti+e Ko+inance. =ot So Ha!t Ar(ue! =a-al Strate(i!t#, 9?&, ,ttp://de*en!etec,"or(/&'1'/'9/'&/t,e?end?o*?u?!?+ariti+e?do+inance?not? !o?*a!t/, Keec,2 W,at a out t,e na-al alance. W,ile t,e =a-)N! planned expan!ion to 313 !,ip! +a) ne-er ,appen, it! current le-el o* &:' !,ip! !ee+! o#er&!elming, !a)! 5ill" =u+ er! o* !,ip! donNt tell t,e w,ole !tor)" Corrowin( *ro+ Co WorkN! anal)!i!, 5ill cite! tonna(e a! a etter indicator o* *leet !tren(t, a! t,e o**en!i-e and de*en!i-e power o* an indi-idual unit i! u!uall) a *unction o* !iJe"# 5onna(e wi!e, t,e U"S" attle *leet ,a! a 3"./U* ad#antage o-er a co+ ined 3,ine!e? Du!!ian *leet" Hactorin( in t,e ad-anta(e t,e U"S" =a-) po!!e!!e! in it! -ertical launc, +a(aJine! (actual !trike power2 an enor+ou! &'?power !uperiorit) exi!t!" 5,atN! not all: It! $< SS=/SSO= nuclear power !u +arine *leet +i(,t on t,e *ace o* it !ee+ o-erpowered ) t,e worldN! ot,er &&' SS=! and SS1! ut t,e Fualitati-e ad-anta(e! o* t,e U"S" !u +arine *orce are ,u(e" It i! +uc, t,e !a+e !tor) wit, re(ard to t,e U"S" =a-)N! a+p,i iou! and critical !upport *leet!, in it! capacit) to !upport !pecial *orce! operation!, in it! road area +ariti+e !ur-eillance capa ilitie!, in it! U"S" 3oa!t Ouard (t,e eFui-alent o* +an) o* t,e worldN! na-ie!2 and in t,e enor+ou! ad-anta(e con*erred ) t,e experience o* +an) decade! o* &%/7 oceanic operation!"# 5,e real !tren(t, o* a na-) !,ould e +ea!ured not ) t,e nu+ er o* unit!, 5ill ar(ue!, ut ,ow t,o!e co+pare to t,e reFuire+ent! t,e plat*or+ i! intended to per*or+" 5ill al!o Fue!tion! 3,ine!e !,ip uildin( prowe!!, notin( de*iciencie! in Fualit) a!!urance, inno-ation and experience expected in an indu!tr) in t,e *ir!t *lu!, o* )out,"# W,ile 3,inaN! +anu*acturin( !ucce!! i! i+pre!!i-e, it re+ain! +o!tl) la or?inten!i-e, low priced con!u+er ite+!" It re+ain! *ar e,ind Oer+an) and 0apan in tec,nolo(ical inno-ation and t,e export o* +ac,iner)" @ritis! defense cuts donVt impact &arfig!ting capa4ilities -euters */ (Critain4! I! orne reac,e! deal on !pendin( cut!#, <?&3, ,ttp://www"reuter!"co+/article/&'13/'</&3/u!? ritain?econo+)?idUSCDE9$M'01&'13'<&3, Keec,2 A deal wa! reac,ed wit, t,e de*en!e depart+ent on Saturda), I! orne !aid, endin( w,at anal)!t! !aw a! one o* t,e +o!t di**icult !et! o* ne(otiation!" Oeneral >eter Wall, t,e ,ead o* t,e ar+), !aid la!t week t,at +ore cut! would !eriou!l) da+a(e t,e countr)4! c,ance! o* !ucce!! in *uture war!" I! orne !aid t,e de*en!e deal would !ee cut! to ci#ilian staff num4ers, w,ile protecting Critain4! +ilitar) capa ilit)" A(ree+ent wa! onl) reac,ed on Sunda) wit, t,e u!ine!! depart+ent, run ) Rince 3a le, a !enior +e+ er o* t,e Li eral Ke+ocrat!, t,e (o-ern+ent4! Eunior coalition partner" La our, w,ic, lead! t,e 3on!er-ati-e! ) around 1' point! in t,e poll! wit, t,e next election due to e ,eld in &'1$, accu!e! t,e coalition o* c,okin( t,e reco-er) wit, it! au!terit) dri-e" La our *inance !poke!+an Ed Call! !aid ,e would adopt I! orne4! da)?to?da) !pendin( li+it! *or &'1$?1< i* ,i! part) win! t,e election" 8owe-er, ,e wanted t,e coalition to !pend 1' illion pound! +ore on capital proEect!" Call! !aid ,e would e prepared to orrow +ore to *inance extra capital expenditure, an ad+i!!ion Eunior 3on!er-ati-e *inance +ini!ter SaEid 0a-id ,eld up a! e-idence t,at La our couldn4t e tru!ted to alance t,e ook!" BI* Oeor(e I! orne ,ad done t,at la!t )ear or t,e )ear e*ore, we wouldn4t ,a-e ,ad !uc, a *latlinin( econo+),B Call! !aid"

at nor&a% econom%
Nor&a% alread% offered assistance to t!e Euro5one -2E Ne&s ** (=orwa) o**er! IMH m7 illion to ,elp euro Jone#, 1&?&1, ,ttp://www"rte"ie/new!/ u!ine!!/&'11/1&&1/31'1<<?euro/, Keec,2 =orwa) ,a! o**ered t,e International Monetar) Hund a out m7 illion to ,elp 4olster t,e European econo+), >ri+e Mini!ter 0en! Stolten er( !aid" B=orwa) toda) o**ered t,e International Monetar) Hund a loan o* $$ illion kroner to ,elp sta4ilise t,e European econo+),B Stolten er( !aid" Earlier t,i! week, t,e 17 countrie! t,at !,are t,e euro pled(ed m1$' illion in ilateral loan! *or t,e International Monetar) Hund to a!!i!t t,e de t?laden euro Jone" European Union leader! ,ad called at a Kece+ er 9 !u++it *or m&'' illion, includin( contri ution! *ro+ non?euro Jone countrie!" Euro5one reco#er% no& A6= */ (A(ence Hrance?>re!!e, EU4! De,n up eat on EuroJone reco-er) in &'13#, <?1&, ,ttp://www"c,annelnew!a!ia"co+/new!/ u!ine!!/eu?!?re,n?up eat?on/7'<9:'",t+l, Keec,2 58E 8AOUE: 5,e EuroJoneN! attered econo+ie! are !lowl) emerging *ro+ a cripplin( rece!!ion wit, (rowt, expected to return ) t,e !econd ,al* o* &'13, EU Econo+ic A**air! 3o++i!!ioner Illi De,n !aid on 5ue!da)" De,n wa! in 5,e 8a(ue, w,ere ,e +et Li eral >ri+e Mini!ter Mark Dutte a! well a! Hinance Mini!ter and Euro(roup *inance c,ie* 0eroen KiE!!el loe+, to di!cu!! t,e 3o++i!!ion4! ud(et re*or+ reco++endation! *or t,e =et,erland!" B5,e euro area4! econo+ie! are !lowl) e+er(in( *ro+ t,e rece!!ion,B an up eat De,n told Eournali!t! at a pre!! con*erence" BEcono+ic acti-itie! are !et to sta4ilise ) t,e *ir!t ,al* o* t,e )ear and in t,e !econd ,al*, gro&t! s!ould return,B ,e !aid"

at u8 elections
La4our &ill &in t!e next election Eaton */ (Oeor(e, Editor S =ew State!+an, W,) t,e odd! are !till on a La our -ictor) in &'1$#, =ew State!+an, 7?&, ,ttp://www"new!tate!+an"co+/politic!/&'13/'7/w,)?odd!?are? !till?la our?-ictor)?&'1$, Keec,2 A+on( M>!, a ,un( parlia+ent, rat,er t,an a La our +aEorit), i! now -iewed a! t,e +o!t likel) outco+e o* t,e election, wit, !o+e e-en !peculatin( t,at t,e 5orie! could (o all t,e wa) and ac,ie-e t,e +aEorit) t,at eluded t,e+ in &'1'" Cut *or (ood rea!on!, t,e odd! (literall)2 are !till on a La4our #ictor% in &'1$ (in t,i! ca!e, de*ined a! eco+in( t,e lar(e!t part)2" It4! true t,at oppo!ition! rarel) return to (o-ern+ent at t,e *ir!t atte+pt o* tr)in( ? t,e la!t ti+e wa! in He ruar) 197% ? ut Critain4! new electoral land!cape +ean! La our i! &ell positioned to do !o" 8ere are *i-e o* t,e rea!on! w,)" 1" La our can &in 4ig on a !+all lead 5,e ke) point in La our4! *a-our i! t,at it reFuire! a *ar !+aller lead t,an t,e 5orie! to win a +aEorit)" Ca!ed on a Li Ke+ !,are o* 1$ per cent, La our need! a lead o* Eu!t 1 per cent to win an o-erall +aEorit), w,ile t,e 5orie! reFuire one o* 7 per cent" In &''$, La our won a +aEorit) o* << !et! wit, a lead o* t,ree point! ut in &'1' t,e 5orie! *ell &' !,ort wit, a lead o* !e-en" 5,i! apparent ia! ,a! le!! to do wit, t,e unre*or+ed con!tituenc) oundarie! t,an it doe! wit, t,e *act t,at La our4! -ote i! *ar etter di!tri uted t,an t,e 5orie!4 and t,at it ene*it! di!proportionatel) *ro+ tactical -otin("