DISPATCHES FROM MOON OF ALABAMA, BY "B"
This article is part of an ongoing series of dispatches from Moon of Alabama
When the Saudi King Salman promoted his son Mohammad bin Salman (MbS) to Defense Minister and then Crown Prince the expectations were high. But three of the major projects Muhammad launched since then soon ran into trouble. Now initiatives are under way to limit the damage he caused. The end of the five year old Saudi war on Yemen is coming into sight. The public offering of the Saudi state owned ARAMCO oil company is finally happening but with a much lower valuation than originally planned. The thirty month spat with Qatar is under repair.
On August 17 2019 a Yemeni drone attack on Saudi Arabia's oil installations proved that the Saudis had lost the war. Moon of Alabama's headline empasized the effect that it would have:
Today's attack is a check mate move against the Saudis. Shaybah is some 1,200 kilometers (750 miles) from Houthi-controlled territory. There are many more important economic targets within that range. [...]
The attack conclusively demonstrates that the most important assets of the Saudis are now under threat. This economic threat comes on top of a seven percent budget deficit the IMF predicts for Saudi Arabia. Further Saudi bombing against the Houthi will now have very significant additional cost that might even endanger the viability of the Saudi state. The Houthi have clown prince Mohammad bin Salman by the balls and can squeeze those at will.
A month later another large scale attack disabled half of the Saudi oil output.
The Saudis have since procured additional U.S. military units to provide more air defenses around their oil installations. But U.S. air defenses are not effective against the kind of attacks the Yemenis launched. The Saudis had no choice but to sue for peace.
For several months there have been talks in Oman between Saudi official and Houthi delegations. An preliminary agreement was found but no official announcements were made. That changed today when Saudi Arabia’s Minister of State for Foreign Affairs Adel al-Jubeir made a comment that for the first time recognized the Houthi as a legitimate Yemeni entity:
Speaking on the situation in Yemen, al-Jubeir said that there is a possibility of reaching a truce in the country, which could be followed by a settlement.
“Yemen is of particular importance to us, and Iran’s intervention there is devastating. The only solution in Yemen is political, and the Houthis are the ones who started the war, not us.”
“All Yemenis, including the Houthis, have a role in the future of Yemen,” he added.
Today the Saudis also released some 200 prisoners who belonged to the Houthi. They were flown to Yemen's capital Sanaa. The preliminary agreement foresees the forming of a common government by the Houthi and the Saudi controlled former president Hadi.
This is not yet the end of the war. It will take quite some time before a new Yemeni government will evolve as the Saudis still have some unrealistic demands:
Saudi Arabia seems more open to some kind of coexistence with the Houthis in north Yemen through taking control over them from Iran. After signing the Riyadh power-sharing agreement between the separatist Southern Transitional Council and the UN-recognised government in Aden, Saudi Arabia and the UAE seem to be ready to move on to the next phase of their gouty war in Yemen.
Instead of the endless fighting, Saudi Arabia is trying to convince the Houthis to sever ties with its regional rival, Iran. After all, all the Houthis want is legitimacy of their new strategic posture in Yemen. This, in their view, must be cited in a similar power-sharing agreement that guarantees their share in a federation-like new system that includes president Abedrabbo Mansour Hadi’s government and separatists in the south.
Iran has never had "control" over the Houthi. Even the U.S. State Department has recently changed course and finally admitted that:
In a shift that analysts said reflects progress in Saudi talks with Yemen’s Houthi rebels to end the Yemen war, State Department Iran envoy Brian Hook said today that Iran does not speak for the Houthis, whom he described as playing a more constructive role in issuing a cease-fire proposal.
“We should recall that the Houthis proposed a cessation of missile and air attacks with Saudi Arabia just days after the Iranians struck Saudi oil installations on Sept. 14,” Hook told journalists at the State Department.
“The Houthis’ de-escalation proposal, which the Saudis are responding to, shows that Iran clearly does not speak for the Houthis, nor has the best interests of the Yemeni people at heart,” Hook said. “Iran is trying to prolong Yemen’s civil war to project power. Iran should follow the calls of its own people and end its involvement in Yemen.”
Hook’s comments praising the Houthi de-escalation proposal stand in contrast to how he described the Houthis, in a September Wall Street Journal op-ed, as an Iranian proxy group. He further characterized the Iranian-Houthi relationship as a “strategic alliance.”
The Houthi are not under Iranian control and neither is Hizbullah in Lebanon. These groups are independent political entities which make their own decisions in their own interests. Iran helps those groups during times of need as they will help Iran when necessary. Hook's claim that Iran is trying to prolong Yemen’s war is without any basis.
Iran has enabled the Houthi to resist throughout the 5 years of war the Saudis waged on them. Drones and missiles parts provided by Iran to the Houthi allowed them to compel the Saudis to sue for peace. It is therefore highly unlikely that the Houthi will dissociate themselves from Iran. They will agree to end their attacks on Saudi Arabia if the Saudis end their attacks on Yemen and pay for the damage their war has caused. If the Saudis do not agree to that more of their helicopters will come down in flames and more of their oil installations will be set on fire.
The war on Yemen was started by clown prince Muhammad bin Salman who was then Defense Minister of Saudi Arabia. He had hoped for a fast victory but the well equipped Saudi military proved to be incapable of defeating barefoot Houthi in the mountains of north Yemen. The war costs the Saudis several billions per month and threatens to ruin the state.
Muhammad Bin Salman's other projects did not go any better. He had planned to sell shares of Saudi Aramco at international stock exchanges and at a total valuation of 2 trillion dollar. The move was supposed to bring in $100 billion to finance a further industrialization of the Saudi economy. After many delays Saudi Aramco is now finally making its initial public offering. The shares will start trading on December 11. But the stock will only be listed at the Saudi Tadawul exchange.
The initial share price offer puts the value of the company at $1.7 trillion which is higher than the $1.5 trillion estimate international banks had published. Today the Saudis announced a large cut in their oil output to increase the global oil prices and the company's valuation. That might attract more urgently needed buyers to the IPO. But the stocks will still be sold to mainly domestic entities, if needed with some pressure. Instead of attracting $100 billion of fresh money from abroad some $25.6 billion will be taken out of the left Saudi trouser pocket to be put into the right one. The economic benefit for the country is dubious.
Two and a half years ago the clown prince tried to attack and occupy Qatar. The given ideological reason was the Qatari support for the Muslim Brotherhood. But the real reason was the Saudi need for more money which MbS tried to gain through a real estate and resource grab. The project failed when Turkish troops came to Qatar's aid. The Saudis and its UAE allies then tried to isolate Qatar with an embargo. That failed too but caused the Saudi rulers additional headaches which is why they are now pushing to end the conflict:
[N]ow more than two years on, signs of economic and political fracture are beginning to show not in Qatar, but in its embargoing neighbors. It is these indications that may help explain the countries’ recent conciliatory gestures, including the resolution to join the Arabian Gulf Cup in Doha and contemporaneous remarks by Saudi and Emirati officials suggesting a newfound openness to ending the dispute.
Since the oil crash of 2014, which saw prices plummet from more than $100 per barrel to below $30, all GCC countries have sought to offset enormous budget deficits by embarking on painful, fundamental changes to their oil-based economies.
As it happens, the GCC members that have gone the farthest in imposing unpopular reform measures are the blockading states, whereas Kuwait, Oman and Qatar have deferred implementation of the VAT and other structural reforms.
The Saudi rulers fears that their own population will point to Qatar and demand an increase in welfare or lower taxes. If all GCC countries, including Qatar, agree to take the same steps that the Saudis had to take, the chance of a revolt would decrease.
Qatar's foreign minister has recently made a 'secret' visit to Riyadh and the Saudi King has invited the Emir of Qatar to the next GCC meeting. But Qatar has a budget surplus while the Saudis have a 10% deficit. Qatar has no need to follow the economic policies of the other GCC countries. It will only do so if the Saudis are willing to offer something for it.
Three of the clown prince's major projects have failed. On top of that comes the reputational damage that the murder, on MbS' order, of Jamal Khashoggi caused. That the Saudi king has now taken steps to limit the overall damage may have come through the influence of Muhammad bin Salman's younger brother, Khalid bin Salman. KbS had been the Saudi ambassador to the U.S. Since February 2019 he has been the Deputy Defense Minister of Saudi Arabia. He was involved in the talks with the Houthi. It is possible that the king will finally recognize that MbS is not good enough for the job and that Khalid may a better successor to the throne than his brother Mohammad.
Posted by b on December 6, 2019 at 18:59 UTC | Permalink
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