Posts Tagged ‘Saudi Arabia’

The petrodollar system is being undermined by exponential growth in technology and shifting geopolitics. What comes next is a paradigm shift…

 

In the summer of 1974, Treasury Secretary William Simon traveled to Saudi Arabia and secretly struck a momentous deal with the kingdom. The U.S. agreed to purchase oil from Saudi Arabia, provide weapons, and in essence guarantee the preservation of Saudi oil wells, the monarchy, and the sovereignty of the kingdom. In return, the kingdom agreed to invest the dollar proceeds of its oil sales in U.S. Treasuries, basically financing America’s future federal expenditures.

Soon, other members of the Organization of Petroleum Exporting Countries followed suit, and the U.S. dollar became the standard by which oil was to be traded internationally. For Saudi Arabia, the deal made perfect sense, not only by protecting the regime but also by providing a safe, liquid market in which to invest its enormous oil-sale proceeds, known as petrodollars. The U.S. benefited, as well, by neutralizing oil as an economic weapon. The agreement enabled the U.S. to print dollars with little adverse effect on interest rates, thereby facilitating consistent U.S. economic growth over the subsequent decades.

An important consequence was that oil-importing nations would be required to hold large amounts of U.S. dollars in reserve in order to purchase oil, underpinning dollar demand. This essentially guaranteed a strong dollar and low U.S. interest rates for a generation.

[ZH: Still, the underlying concept of how Petrodollar recycling, or as some call it, petrocurrency mercantilism works, leaves some confusion. So in order to alleviate that, here courtesy of Cult State, is a quick and simple primer that should hopefully answer all questions. From CultState:

So what is petrocurrency mercantilism?

It’s when a national bank and an energy producer collude to generate artificial demand for a currency at the expense of the purchasing power of other currencies.

The flowchart below shows how it all works.

Given this backdrop, one can better understand many subsequent U.S. foreign-policy moves involving the Middle East and other oil-producing regions.

Recent developments in technology and geopolitics, however, have already ignited a process to bring an end to the financial system predicated on petrodollars, which will have a profound impact on global financial markets. The 40-year equilibrium of this system is being dismantled by the exponential growth of technology, which will have a bearish impact on both supply and demand of petroleum. Moreover, the system no longer is in the best interest of key participants in the global oil trade. These developments have begun to exert influence on financial markets and will only grow over time. The upheaval of the petrodollar recycling system will trigger a resurgence of volatility and new price trends, which will lead to a renaissance in macro investing.

Let’s examine these developments in more detail.

First, TECHNOLOGY is affecting the energy markets dramatically, and this impact is growing exponentially. The pattern-seeking human mind is built for an observable linear universe, but has cognitive difficulty recognizing and understanding the impact of exponential growth.

Paralleling Moore’s Law, the current growth rate of new technologies roughly doubles every two years. In the transportation sector, the global penetration rate of electric vehicles, or EVs, was 1% at the end of 2016 and is now probably about 1.5%. However, a doubling every two years of this level of usage should lead to an automobile market that primarily consists of EVs in approximately 12 years, reducing gasoline demand and international oil revenue to a degree that today would seem unfathomable to the linear-thinking mind. Yes, the world is changing—rapidly.

Alternative energy sources (solar power, wind, and such) also are well into their exponential growth curves, and are even ahead of EVs in this regard. Based on growth curves of other recent technologies, and due to similar growth rates in battery technology and pricing, it is likely that solar power will supplant petroleum in a vast portion of nontransportation sectors in about a decade. Albert Einstein is rumored to have described compound interest (another form of exponential growth) as the most powerful force in the universe. This is real change.

The growth of U.S. oil production due to new technologies such as hydraulic fracturing and horizontal drilling has both reduced the U.S. need for foreign sources of oil and led to lower global oil prices. With the U.S. economy more self-reliant for its oil consumption, reduced purchases of foreign oil have led to a drop in the revenues of oil-producing nations and by extension, lower international demand for Treasuries and U.S. dollars.

China has agreed with Russia to purchase Russian oil and natural gas in yuan.
◦As an example of China’s newfound power to influence oil exporters, China has persuaded Angola (the world’s second-largest oil exporter to China) to accept the yuan as legal tender, evidence of efforts made by Beijing to speed up internationalization of the yuan. The incredible growth rates of the Chinese economy and its thirst for oil have endowed it with tremendous negotiating strength that has led, and will lead, other countries to cater to China’s needs at the expense of their historical client, the U.S.
◦China is set to launch an oil exchange by the end of the year that is to be settled in yuan. Note that in conjunction with the existing Shanghai Gold Exchange, also denominated in yuan, any country will now be able to trade and hedge oil, circumventing U.S. dollar transactions, with the flexibility to take payment in yuan or gold, or exchange gold into any global currency.
◦As China further forges relationships through its One Belt, One Road initiative, it will surely pull other exporters into its orbit to secure a reliable flow of supplies from multiple sources, while pressuring the terms of the trade to exclude the U.S. dollar.

The world’s second-largest oil exporter, Russia, is currently under sanctions imposed by the U.S. and European Union, and has made clear moves toward circumventing the dollar in oil and international trade. In addition to agreeing to sell oil and natural gas to China in exchange for yuan, Russia recently announced that all financial transactions conducted in Russian seaports will now be made in rubles, replacing dollars, according to Russian state news outlet RT. Clearly, there is a concerted effort from the East to reset the economic world order.

ALL OF THESE DEVELOPMENTS leave global financial markets vulnerable to a paradigm shift that has recently begun. In meetings with fund managers, asset allocators, and analysts, I have found a virtually universal view that macro investing—investing based on global macroeconomic and political, not security-specific trends—is dead, fueled by investor money exiting the space due to poor returns and historically high fees in relation to performance. This is what traders refer to as capitulation. It occurs when most market participants can’t take advantage of a promising opportunity due to losses, lack of dry powder, or a psychological inability to proceed because of recency bias.

A current generational low in volatility across a wide spectrum of asset classes is another indicator that the market doesn’t see a paradigm shift coming. This suggests that current volatility is expressing a full discounting of stale fundamental inputs and not adequately pricing in the potential of likely disruptive events.

THE FEDERAL RESERVE is now in the beginning stages of a shift toward “normalization,” which will lead to diminished support for the U.S. Treasury market. The Fed’s total assets stand at approximately $4.5 trillion, or five times what they were prior to the financial crisis of 2008-09. The goal of the Fed is to “unwind” this enormous balance sheet with minimal market disruption. This is a high-wire act a thousand feet in the air without a safety net or prior practice. Additionally, at some not-so-distant future date, the U.S. will need to finance enormous and growing entitlement programs, and our historical international sources for that financing will no longer be willing to support us in that endeavor.

The market participants with whom I met theoretically could have the ability to accept cognitively the points made in this article. But the accumulation of many small losses in a low-volatility and generally trendless market has robbed them of confidence and the psychological balance to embrace any new paradigm proactively. They are frozen with fear that the lower- return profile of recent years is permanent—ironic in an industry that is paid to capture price changes in a cyclical world.

One market legend with whom I spoke suggested he wouldn’t have had the success he enjoyed in his career had he begun in the past decade. Whether or not this might be true, it doesn’t mean that recent lower returns are to be extrapolated into the future, especially when these subpar returns occurred during the quantitative-easing era, a period that is an anomaly.

I have been fortunate to ride substantial bets on big trends, earning high risk-adjusted returns using time-tested techniques for exploiting these trends. Additionally, I have had the luxury of not participating actively full-time in macro investing during this difficult period. Both factors might give me perspective. I regard this as an extraordinarily opportune moment for those able to shed timeworn, archaic assumptions of market behavior and boldly return to the roots of macro investing.

The opportunity is reminiscent of the story told by Stanley Druckenmiller, who was promoted early in his investment career to head equity research at a time when his co-workers had vastly more experience than he did. His director of investments informed him that his promotion owed to the same reason they send 18-year-olds to war; they are too dumb to know not to charge. The “winners” under the paradigm now unfolding will be market participants able to disregard stale, anomalous concepts, and charge.

RELATEDLY, THERE IS a running debate as to whether trend-following is a dying strategy. There is plenty of anecdotal evidence that short-term and mean-reversion trading is more in vogue in today’s markets (think quant funds and “prop” shops). Additionally, the popularity of passive investing signals an unwillingness to invest in “idea generation,” or alpha. These developments represent a full capitulation of trend following and macro trading.

Ironically, many market players who wrongly anticipated a turn in recent years to a more positive environment for macro and trend-following are throwing in the towel. The key difference is that now there is a clear catalyst to trigger the start of the pendulum swinging back to a fertile macro/trend-following trading environment.

As my mentor, Bruce Kovner [the founder of Caxton Associates] used to say, “Nobody rings a bell at key turning points.” The ability to properly anticipate change is predicated upon detached analysis of fundamental information, applying that information to imagine a plausible world different from today’s, understanding how new data points fit (or don’t fit) into that world, and adjusting accordingly. Ideally, this process leads to an “aha!” moment, and the idea crystallizes into a clear vision. The thesis proposed here is one such vision.

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A brief perspective on the geopolitical strategic posturing and amalgamation occurring in real time. Political commentary by Chris Anthony.

 

 

Confirming, and sending the clearest sign of his previously discussed pivot toward Russia and away from NATO and the West, on Tuesday President Recep Tayyip Erdogan announced that Turkey had signed a deal to purchase a Russian surface-to-air missile system, and paid the first installment. The deal cements Turkey’s recent rapprochement with Russia, despite differences over the war in Syria, the downing of a Russian fighter jet over Turkey in late 2015 and the assassination of a Russian ambassador earlier this year, and comes as Turkey’s ties with the United States and European Union have become strained to the point of breaking.

Although the missile purchase from Russia was made public several months ago, Erdogan’s announcement was the first confirmation that Turkey had transferred money to pay for the S-400 missile system.

“Signatures have been made for the purchase of S-400s from Russia,” Erdogan said in comments published in several newspapers on Tuesday. “A deposit has also been paid as far as I know.”

As the NYT writes, “the purchase of the missile system flies in the face of cooperation within the NATO alliance, which Turkey has belonged to since the early 1950s. NATO does not ban purchases of military hardware from manufacturers outside the American-led alliance, but it does discourage members from buying equipment not compatible with that used by other members.”

According to reports in the Russian media, Turkey is to get four batteries of S-400 launchers complete with targeting radar and control posts. Some aspects of the deal are reportedly to be finalized, but Russian officials said the contract furthers Russia’s geostrategic interests.

* * *

Predictably, the Pentagon promptly reiterated its concerns over the deal, which it said undermines inter-operability of weapons systems among NATO allies. “We have relayed our concerns to Turkish officials regarding the potential purchase of the S-400. A NATO inter-operable missile defense system remains the best option to defend Turkey from the full range of threats in its region,” spokesman Johnny Michael said in a statement.

A NATO official in Brussels where the alliance is headquartered, said that no NATO member currently operates the Russian missile system and that the alliance had not been informed about the details of the purchase by Turkey. “What matters for NATO is that the equipment allies acquire is able to operate together,” the official said, speaking on the condition of anonymity as required by alliance procedures. “Interoperability of allied armed forces is essential to NATO for the conduct of our operations.”

However, on Wednesday Turkish President Recep Tayyip Erdogan slammed the critics of Turkey’s deal with Russia, saying Ankara had no intention of waiting for the protection of its NATO allies.

“They have gone crazy because we made a deal for S-400s,” Erdogan said Wednesday in a speech to the ruling AKP mayors in Ankara, as cited by Hurriyet.

“What do you expect? Should we wait for you? We take care of ourselves in every security point. We are taking precautions and we will continue to do so,” the Turkish leader said.

Erdogan criticized the reluctance of US and Israel to authorize supply of combat drones to Turkey as another example of how Turkish security was sidelined by its allies.

“When they did give [drones], their repair and maintenance put us in a difficult position. Now [Turkey] has come to a point where it can produce its own unmanned, armed air vehicles. And now they are uncomfortable with that,” Erdogan added.

Erdogan also dismissed issues of interoperability, brand loyalties or the geopolitical optics of such a sale. “Nobody has the right to discuss the Turkish republic’s independence principles

or independent decisions about its defense industry,” the daily newspaper Hurriyet reported him as saying.

“We make the decisions about our own independence ourselves,” he said. “We are obliged to take safety and security measures in order to defend our country.”

As the NYT adds, Erdogan’s announcement — made to Turkish journalists aboard his presidential jet as he returned from Kazakhstan — appeared timed as a response to two judicial cases announced last week in the United States. One is against his presidential bodyguards, who are charged with assaulting protesters when Mr. Erdogan visited Washington this year. The other is against a group of Turks, including a former minister, accused of breaking United States sanctions against Iran. Erdogan has angrily criticized both cases.

* * *

The S-400 SAM is designed to detect, track and then destroy aircraft, drones or missiles. It’s Russia’s most advanced integrated air defense system, and can hit targets as far as 250 miles away. Russia has also agreed to sell them to China and India, both nations who are masters at reverse engineering. Most concerning for NATO, however is that the systems delivered to Turkey would not have a friend-or-foe identification system, which means they could be deployed against any threat without restriction.

Turkey has been weighing options for acquiring long-range SAMs for years. In 2013, Ankara surprised other NATO members by announcing that it was going to purchase the FD-2000 system from China, sparking criticism from Washington. Defense observers speculated that Turkey played the China card to put pressure on its allies and get better terms for buying a NATO-compatible SAM system, such as the US-made Patriot PAC-3. The Chinese deal stalled and was eventually scrapped, with Turkey reportedly unhappy over Beijing’s reluctance to hand over the technology behind the advanced system. Last year Ankara announced that it was in talks with Russia over a potential purchase of the S-400.

Turkey has other reasons for the missile purchase. It needs to cultivate good relations with Russia, and it also needs to build its own military defense, said Asli Aydintasbas, a fellow at the European Council on Foreign Relations. “Turkey wants the deal,” she said, “and Russia is only too happy to drive a wedge into the NATO alliance.”

While NATO’s collective defense should have been sufficient for Turkey – NATO deployed Patriot missiles there during a rise of tensions with Syria in the past – Erdogan lost trust in the West since last year’s failed “coup attempt”, which he slammed repeatedly as a Western plot to oust him, and appears determined to secure his own defense.

Furthermore, the transfer of technology from Russia is attractive to Turkey: Erdogan has spoken also of his frustration at having requests to the United States for drones turned down, and of his satisfaction that Turkey developed its own.

Notably, Erdogan’s announcement of the deal with Russia came after Germany said that it was suspending all major arms exports to Turkey because of the deteriorating human rights situation in the country and the increasingly strained ties. “We have put on hold all big requests that Turkey sent to us, and these are really not a few,” the German foreign minister, Sigmar Gabriel, said during a panel discussion in Berlin on Monday, according to Reuters.

While the purchase of Russian missiles will take cooperation between the two nations to a new level, but is not the first time that Turkey has bought military equipment from Russia. It turned to Moscow in the early 1990s to buy military helicopters and armored personnel carriers. Last year, Russia and Turkey reached an agreement to revive a suspended natural-gas pipeline project.

Meanwhile, as the US military-industrial complex has flourished in recent months following a spike in deals with Saudi Arabia, South Korea and other nations courtesy of rising geopolitical tensions, Russia has remained largely squeezed out of the arms market in Western and Eastern Europe, even in countries that once bought nearly all their weapons from the Soviet Union, has looked for years to NATO’S eastern flank as a promising market and the alliance’s weakest link. It has also sold weapons to Greece, another NATO member and to Cyprus, which is not a member of NATO but houses British military bases and effectively serves as an outpost of the alliance.

Meanwhile, as Turkey’s suspicions toward the West have grown, relations with Russia warmed, driven by the personal relationship between Erdogan and Vladimir Putin. Erdogan has expressed personal admiration for Putin, to the consternation of many European and American leaders, if not President Trump. Erdogan has also shown a preference for the Russian model, with its sense of restoring a lost empire, returning Turkey to a more independent place in the world and rejecting Western democracy.

At the same time, the fact that Turkey belongs to NATO has only increased Mr. Putin’s desire to forge strong relations with Mr. Erdogan despite their differences over the conflict in Syria.

Mr. Putin and myself are determined on this issue,” Erdogan told journalists about the missile deal.

Unless we come to terms with 9/11 and the obvious fact that the official government story is a ridiculous fairytale, it’ll be hard for our nation to move forward in an intelligent, courageous and ethical manner.

Many of the most destructive trends which have defined our post September 11, 2001 environment, such as a loss of civil liberties and endless barbaric wars of aggression abroad, have been directly related to our false understanding of that awful terrorist attack.

As I’ve always maintained, I have no idea what really went down on that day, I just know that the U.S. government and its intelligence agencies are not being honest.

Although it’s been a long time coming, we’re finally uncovering some kernels of truth about the attack and the role Saudi Arabia played in carrying them out. Much of this progress has been driven by family members of those who died, some of whom are suing the Saudis for their role in that despicable slaughter of civilians.

I’ve written about these lawsuits on several occasions, but here’s an updated summary from Common Dreams, published two days ago:

As our summer draws to a close and ushers in a cool and rainy September, there is a solemn chill in the air marking the approaching anniversary of the infamous attacks on the World Trade Center that took place September 11th, 2001 – nearly sixteen years ago. The memories are still fresh for the survivors and the family members of victims who are to this day living with their losses while continuing to fight for accountability through both the military court in Guantanamo, where individuals involved in the attacks have been tried or are still facing painstakingly slow trials. This upcoming sixteenth anniversary of 9/11 will be the first time since the attacks that the families now have another legal recourse for seeking accountability not only from individuals but from a nation involved in the attack: Saudi Arabia.

Introduced in the Senate on September 16th, 2015, the Justice Against Sponsors of Terrorism Act (JASTA) removed a major roadblock to justice by opening the way for private US citizens to file suit against the Saudi government, which was previously protected by the blanket immunity given to foreign governments. There is much that we do not yet know about what went on behind closed doors with regard to the orchestration of the 9/11 attacks, but the declassification of the portion of the 2002 Congressional Joint Inquiry known as the 28 pages on July 15th, 2016, after 14 years of secrecy, offered the preliminary hope of some much-needed answers. Of the 19 total hijackers who carried out the attacks, 15 were from Saudi Arabia, and evidence contained within the 28 pages pointed to financial connections between these individuals and members of the Saudi government.

Curiously, however, Saudi Arabia’s suspected culpability in the attacks has not been reflected in US response. From the War on Terror in Iraq and Afghanistan to President Trump’s attempted travel ban affecting a list of seven Muslim-majority countries—from which Saudi Arabia is notably absent, it would appear that our government’s enthusiasm for retaliation against “Islamic terror” has a blind spot in the shape of the US alliance with Saudi Arabia.

Getting at the truth of the extent to which the Saudi government sponsored and aided in the attacks is a vital step towards justice and closure for families that, until JASTA, had the power of foreign sovereign immunity standing in its way. Despite fierce oppositionfrom Saudi lobbyists and a presidential veto that argued that it would invite similar lawsuits against the United States government from victims of US war crimes, JASTA was successfully passed into law on September 28th, 2016. Only two days later, the first lawsuit under this new act went forward. DeSimone v. The Kingdom of Saudi Arabia, filed by the widow of US Navy Commander Patrick Dunn, set the precedent for many other lawsuits of its kind to follow.

While some JASTA lawsuits came from single individuals or families as in the case of DeSimone v. The Kingdom of Saudi Arabia, others were filed in the form of consolidated complaints with hundreds of plaintiffs issuing shared demands. Ashton et al v. The Kingdom of Saudi Arabia is one of the largest class action lawsuits of this kind, sporting the names of over 800 family members and 1500 survivors. Filed March 20th, 2017, the lawsuit as of the time of this publication is contending with a motion filed by Saudi Arabia to dismiss it from the court. Lawyers for the plaintiffs have until October 2nd to submit documents opposing the motion.

Evidence of at least some Saudi complicity in the attacks is pretty much undeniable at this point, and if you missed it the first time, I suggest you read my summary of what we learned in the infamous “28 Pages.”

But now we have even more information. A lot more. For instance, take a look at some of what the New York Post reported over the weekend:

Fresh evidence submitted in a major 9/11 lawsuit moving forward against the Saudi Arabian government reveals its embassy in Washington may have funded a “dry run” for the hijackings carried out by two Saudi employees, further reinforcing the claim that employees and agents of the kingdom directed and aided the 9/11 hijackers and plotters.

Two years before the airliner attacks, the Saudi Embassy paid for two Saudi nationals, living undercover in the US as students, to fly from Phoenix to Washington “in a dry run for the 9/11 attacks,” alleges the amended complaint filed on behalf of the families of some 1,400 victims who died in the terrorist attacks 16 years ago.

The court filing provides new details that paint “a pattern of both financial and operational support” for the 9/11 conspiracy from official Saudi sources, lawyers for the plaintiffs say. In fact, the Saudi government may have been involved in underwriting the attacks from the earliest stages — including testing cockpit security.

“We’ve long asserted that there were longstanding and close relationships between al Qaeda and the religious components of the Saudi government,” said Sean Carter, the lead attorney for the 9/11 plaintiffs. “This is further evidence of that.”

Citing FBI documents, the complaint alleges that the Saudi students — Mohammed al-Qudhaeein and Hamdan al-Shalawi — were in fact members of “the Kingdom’s network of agents in the US,” and participated in the terrorist conspiracy.

They had trained at al Qaeda camps in Afghanistan at the same time some of the hijackers were there. And while living in Arizona, they had regular contacts with a Saudi hijacker pilot and a senior al Qaeda leader from Saudi now incarcerated at Gitmo. At least one tried to re-enter the US a month before the attacks as a possible muscle hijacker but was denied admission because he appeared on a terrorist watch list.

Qudhaeein and Shalawi both worked for and received money from the Saudi government, with Qudhaeein employed at the Ministry of Islamic Affairs. Shalawi was also “a longtime employee of the Saudi government.” The pair were in “frequent contact” with Saudi officials while in the US, according to the filings.

During a November 1999 America West flight to Washington, Qudhaeein and Shalawi are reported to have tried multiple times to gain access to the cockpit of the plane in an attempt to test flight-deck security in advance of the hijackings.

“After they boarded the plane in Phoenix, they began asking the flight attendants technical questions about the flight that the flight attendants found suspicious,” according to a summary of the FBI case files.

“When the plane was in flight, al-Qudhaeein asked where the bathroom was; one of the flight attendants pointed him to the back of the plane,” it added. “Nevertheless, al-Qudhaeein went to the front of the plane and attempted on two occasions to enter the cockpit.”

 

The pilots were so spooked by the Saudi passengers and their aggressive behavior that they made an emergency landing in Ohio. On the ground there, police handcuffed them and took them into custody. Though the FBI later questioned them, it decided not to pursue prosecution.

But after the FBI discovered that a suspect in a counterterrorism investigation in Phoenix was driving Shalawi’s car, the bureau opened a counterterrorism case on Shalawi. Then, in November 2000, the FBI received reporting that Shalawi trained at terrorist camps in Afghanistan and had received explosives training to perform attacks on American targets. The bureau also suspected Qudhaeein was a Saudi intelligence agent, based on his frequent contact with Saudi officials.

More, investigators learned that the two Saudis traveled to Washington to attend a symposium hosted by the Saudi Embassy in collaboration with the Institute for Islamic and Arabic Sciences in America, which was chaired by the Saudi ambassador. Before being shut down for terrorist ties, IIASA employed the late al Qaeda cleric Anwar al-Awlaki as a lecturer. Awlaki ministered to some of the hijackers and helped them obtain housing and IDs.

The FBI also confirmed that Qudhaeein’s and Shalawi’s airline tickets for the pre-9/11 dry run were paid for by the Saudi Embassy.

“The dry run reveals more of the fingerprints of the Saudi government,” said Kristen Breitweiser, one of the New York plaintiffs, whose husband perished at the World Trade Center.

Carter said in an interview that the allegations that the Saudi Embassy sponsored a pre-9/11 dry run — along with charges of other Saudi involvement in the 9/11 plot, from California to Florida — are based on “nearly 5,000 pages of evidence submitted of record and incorporated by reference into the complaint.”

They include “every FBI report that we have been able to obtain,” though hundreds of thousands of pages of government documents related to Saudi terror funding remain secret.

 

Finally, let me end this post by sharing a video put together by James Corbett, which has attained nearly 3 million views.

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The most important event of the past 70 years is the change in the international order, from a US unipolar domination to a new multipolar reality. The fundamental question lies in understanding how this transition is taking place, its consequences and root causes

The transition in the international order, from a pre-WWI multipolar world to a post-WWII bipolar world, cost humanity a world war involving millions of deaths. The next stage, distinct from the conflicts between the USSR and the US, ended with the fall of the Berlin Wall in 1989, but without the tragedy of direct confrontation. This fundamental historical difference has its own intrinsic logic governing the relationship of forces between powers. The USSR was a country in decline, unable to continue its role on the international stage as the premier anti-hegemonic power.

The transition from a bipolar to a unipolar reality could have had nuclear consequences, but an agreement between the powers avoided this danger. The upshot was an unconditional surrender of the USSR, with catastrophic consequences in economic and cultural terms for the superpower to come to terms with, but at least without the explosion of a large-scale conflict.

With the end of the bipolar model, however, began what some historians declared to be the «end of history»: the transition from a multipolar world, to a bipolar world, to end in a unipolar world. From the point of view of Washington, the story ended with only one global power remaining, thereby granting the United States the power to decide matters for the whole world.

The scenario in which we live today, in terms of international law and the balance of forces, is almost unprecedented in history if looked at in the present context. It is true that the current transition from a unipolar to a multipolar reality is something similar to what has been seen in previous decades, with the transition from British hegemony in the late-nineteenth century to a multipolar situation in the period preceding the two world wars. Nevertheless, resorting to this historical analogy is difficult, given the relative absence of international rules compared to a century ago. Therefore it is difficult to use the earlier transition period to make assumptions about future trends.

The causes of change

The attitude of the US over the last 25 years has been focused completely on the achievement of global hegemony. The dream of having control over every event, in every corner of the world, has ironically led to accelerating the end of America’s unipolar moment. Of course the deep meaning of the word “control” can be expanded upon, examining the merits of the cultural, economic and military impositions that result from a constant quest for global domination.

The US has chosen an impassable road that is full of contradictions to justify their rise as a global power. In two decades we have witnessed the dismantling of all the key principles of the balance of power between Russia and the United States, necessitating the change in international relations from unipolar to multipolar. Similarly, the ratio of economic and military power between China and the United States has significantly worsened, culminating in the dangerous dispute over the South China Sea. The abandonment of the Kissinger doctrine governing relations with Beijing, and the failure of the Clinton reset with Moscow, have pushed two global powers, Russia and China, to forge an alliance that allows for a world where there are more powers on the international stage and not just Washington as the central focus of global relations.

The failure of the foreign doctrine of the United States was a direct consequence of the arrogance and the utopia of being able to dominate the planet, seeking to extend indefinitely the unipolar moment and forging a worldwide system culturally and economically based on the will of Washington, reinforced by a power and military posture without precedent.

Consequences

Had Washington thought more carefully about the consequences of their actions, and thereby employed a more considered strategic vision, it would certainly have opted for different choices. As a demonstration of this, we note Washington’s attitude in the Middle East, the deciding ground for prospects of continued US global hegemony.

Much of Washington’s remaining capacity to influence global decisions is attributable to the dollar and the trading of goods such as oil in that currency. With the appearance of a world with more regional or global powers, it is easy to guess that the rise of the Iranian Republic has consequences for the whole of the Middle East region. The odds are evident that Tehran, culturally, economically and militarily, will be the first regional power. Washington has realized this and has decided to reach an agreement with the Islamic Republic in order to remain relevant in the region and not to be cut off from future agreements. Washington also seeks, in doing so, to counterbalance the situation with her most influential regional allies, Saudi Arabia and Qatar.

It is a strategy that in the Middle East has had a negative impact in the immediate present for Riyadh, Doha, and in some ways even Ankara, who have all opted for an autonomous and interventionist approach in the region without much consultation with Washington. Nevertheless, the choice to include Iran as a dialogue partner for the Middle East balance has allowed Washington to conserve the illusion that in the future it will maintain an important role in regional decisions. This is a decision that has created many problems with historic allies, but Washington hopes, with a view to the future, to have made an appropriate choice. This also explains why so many of the neoconservatives and liberals (the promoters of a prolonged unipolar doctrine, the cause of so many failures ) are clearly opposed to this agreement.

Washington and its establishment have opted for a cultural and economic confrontation with Moscow, possibly militarily with Beijing in the South China Sea, in the process impelling the emergence of a multipolar world in which more powers have the ability, by joining together, to resist the will of the greater global power. In fact, it is easier to frame the international balance in a multipolar model that is slowly becoming bipolar.

We consider that Russia and China (and to a lesser extent Iran) do not possess the military capability to successfully oppose American power in a conventional conflict on a grand scale. For this reason, it is easy to understand that shaping a multipolar international order perhaps remains quite optimistic at this time. It is similarly optimistic to maintain a unipolar world order that remains anchored in the illusions of the American elite.

Reality rather shows us a bipolar world, where the alternative pole to the US is represented by the union and alliances (cultural, economic and military) of Beijing, Moscow and Tehran. And their partnership has resulted in a change in the pattern of international relations. The cause of this union is to be found in the will of the US elites to prolong their unipolar moment. Instead of opting for an agreement with another global power (probably China) and seal the international stage in a realistic model with two poles, facing no real opposition, Washington has exacerbated the differences by pushing countries like Russia, China, Iran and India closer and closer together, forging what currently might be termed a temporary bipolar model of world order.

The certainty is that the future will turn fully into a multipolar model, and this obliges Washington to struggle in every way possible to remain relevant. To date, apart from nuclear agreements, every choice has been counterproductive and wrong. Will Washington’s elites ever learn, or will they eventually become irrelevant?

As the US slams Russian bombing in Aleppo, accusing Putin of “crimes against humanity” and in the process sending US-Russian relations to levels not seen since the Cold War, it quietly sells billions in weapons and equipment to Saudi Arabia, a nation which as Hillary Clinton revealed in a “private setting” to the 2014 Jewish United Fund Advance & Major Gifts Dinner, has “exported more extreme ideology than any other place on earth over the course of the last 30 years.” It also happens to be one of the biggest state donors to the Clinton Foundation. Which may explain why as Reuters reported in an exclusive story today, the Obama administration went ahead with a $1.3 billion arms sale to Saudi Arabia last year despite misgivings and warnings from some officials that the United States could be implicated in war crimes for supporting a Saudi-led air campaign in Yemen that has killed thousands of civilians.

Citing government documents and the accounts of current and former officials, Reuters reveals that while the Obama administration and the Pentagon rail against Russian bombing in Syria, State Department officials have been skeptical – in private of course – of the Saudi military’s ability to target Houthi militants without killing civilians and destroying “critical infrastructure” needed for Yemen to recover.

However, and this may be where Saudi funding for Hillary’s campaign – according to a recent report, Saudi Arabia funded 20% of Hillary’s presidential campaign – and her election came into play, government lawyers ultimately did not reach a conclusion on whether U.S. support for the campaign would make the United States a “co-belligerent” in the war under international law, Reuters said citing four current and former officials. Such a finding would have obligated Washington to investigate allegations of war crimes in Yemen and would have raised a legal risk that U.S. military personnel could be subject to prosecution, at least in theory.

The findings emerge days after an air strike on a wake in Yemen on Saturday that killed more than 140 people renewed focus on the heavy civilian toll of the conflict. The Saudi-led coalition denied responsibility, but the attack drew the strongest rebuke yet from Washington, which said it would review its support for the campaign to “better align with U.S. principles, values and interests.”

What Reuters’ report reveals is that instead of Russia being the war criminal, as the US has now alleged, the real aggressor would be Saudi Arabia, and the US – whose actions have enabled Saudi war crimes – would be a “co-belligerent” participant.

Reuters notes that a 2013 ruling from the war crimes trial of former Liberian president Charles Taylor significantly widened the international legal definition of aiding and abetting such crimes. The ruling found that “practical assistance, encouragement or moral support” is sufficient to determine liability for war crimes. Prosecutors do not have to prove a defendant participated in a specific crime, the U.N.-backed court found.

Ironically, and exposing the unabashed hypocrisy behind the US political system, the U.S. government already had submitted the Taylor ruling to a military commission at Guantanamo Bay, Cuba, to bolster its case that Khalid Sheikh Mohammed and other al Qaeda detainees were complicit in the Sept 11, 2001 attacks.

The previously undisclosed material sheds light on the closed-door debate that shaped U.S. President Barack Obama’s response to what officials described as an agonizing foreign policy dilemma: how to allay Saudi concerns over a nuclear deal with Iran – Riyadh’s arch-rival – without exacerbating a conflict in Yemen that has killed thousands.

Exposing the selective morality of the US government, the documents, obtained by Reuters under the Freedom of Information Act, date from mid-May 2015 to February 2016, a period during which State Department officials reviewed and approved the sale of precision munitions to Saudi Arabia to replenish bombs dropped in Yemen. The documents were heavily redacted to withhold classified information and some details of meetings and discussion.

It gets better. While the US would take even the slightest opportunity to slam Russia for allegations of civilian deaths, State Department lawyers “had their hair on fire” as reports of civilian casualties in Yemen multiplied in 2015, and prominent human rights groups charged that Washington could be complicit in war crimes, one U.S. official said. That official and the others requested anonymity. During an October 2015 meeting with private human rights groups, a State Department specialist on protecting civilians in conflict acknowledged Saudi strikes were going awry.

The strikes are not intentionally indiscriminate but rather result from a lack of Saudi experience with dropping munitions and firing missiles,” the specialist said, according to a Department account of the meeting.

Ah, the old, they are not bloodthirsty murderers (whom we are supplying), they are just incompetent, defense. At least the US did not blame Putin’s crack team of hackers for this fiasco as well.

Meanwhile, truly pleading stupidity, the Saudi government called allegations of civilian casualties fabricated or exaggerated and has resisted calls for an independent investigation – considering the civilian death toll is estimated to be over 10,000 one can see why. The humor continued when the Saudi-led coalition has said it takes its responsibilities under international humanitarian law seriously, and is committed to the protection of civilians in Yemen. The Saudi embassy in Washington declined further comment.

In a statement issued to Reuters before Saturday’s attack, National Security Council spokesman Ned Price said, “U.S. security cooperation with Saudi Arabia is not a blank check. … We have repeatedly expressed our deep concern about airstrikes that allegedly killed and injured civilians and also the heavy humanitarian toll paid by the Yemeni people.”

The Saudi “cooperation” with the US most certainly is not a blank check: since March 2015, Washington has authorized more than $22.2 billion in weapons sales to Riyadh, much of it yet to be delivered. That includes a $1.29 billion sale of quote-unquote precision munitions announced in November 2015 and specifically meant to replenish stocks used in Yemen.

The billions in recycled petrodollars may explain why the Pentagon and the State Department’s Near East Affairs bureau leaned toward preserving good relations with Riyadh “at a time when friction was increasing because of the nuclear deal with Iran.” That’s the pretext: the real reason why it was critical to preserve good relations with Riyadh despite risks of being branded a war criminal, is to keep the money rolling in.

Still, not everyone was corrupt: the State Department’s Office of the Legal Advisor, backed by government human rights specialists, expressed concern over U.S. complicity in possible Saudi violations of the laws of war. As Reuters adds, U.S. refueling and logistical support of Riyadh’s air force – even more than the arms sales – risked making the United States a party to the Yemen conflict under international law, three officials said.

The estimate of Yemeni casualties range from 3,800 to over 10,000, with Saudi-led airstrikes on markets, hospitals and schools accounting for 60 percent of the death toll, the United Nations human rights office said in August. However, unlike the Syria campaign, there is hardly a mention of US support of Saudi Arabia anywhere in the prime time media.

Still, in a surprising move, the UN just stopped short of accusing  accusing either side of war crimes, saying that was for a national or international court to decide. No international court has decided yet.

Reuters also reports that in August 2015, the White House convened a meeting on how best to engage the Saudis over rising civilian casualties in a sign of mounting concern over the issue. That same month, State Department officials gathered to discuss how to track those casualties. What Obama decided on was not to halt arms sales but to provide Saud Arabia with… no strike lists.

While preserving military ties with Riyadh, the Obama administration has tried to reduce civilian casualties by providing the Saudis with “no-strike lists” of targets to avoid, dispatching to Saudi Arabia a U.S. expert on mitigating civilian casualties and pressing for peace talks, the officials said.

“If we’re going to be supporting the coalition, then we have to accept a degree of responsibility for what’s happening in Yemen and exercise it appropriately,” a senior administration official said.

Did Saudi Arabia follow the no strike lists? Nope

 After ceasefire talks collapsed in August and airstrikes resumed, coalition bombs destroyed the main bridge from the port of Hodeidah to the capital of Sanaa, a main supply route for humanitarian food aid, Oxfam International said.

Another U.S. official said the bridge was on a U.S. no-strike list

Meanwhile, the sales go on. As we reported previously, despite demands to halt it, the Obama administration went ahead with a $1.3 billion arms sale to Saudi Arabia last year. More than 60 U.S. House of Representatives members urged Obama not to do the deal, but the push to block that sale failed in the U.S. Senate on Sept. 21.

Some critics say the administration’s approach has failed.

In the law of war, you can be guilty for aiding and abetting war crimes and at some point the … evidence is going to continue to mount and I think the administration is now in an untenable situation,” said Congressman Ted Lieu, a California Democrat and former military prosecutor.

Of course, if and when the evidence becomes too big to ignore, whoever is the prosecutor will simply be replaced, bought out or silenced by other more unconventional means, because if there is anything the past few months of Clinton scandals have shown us, it is that US foreign policy goes to the highest bidder, a list topped by – you guessed it – Saudi Arabia.

As Riyadh conducts military drills in the Persian Gulf, Iran’s Revolutionary Guards have called the exercises an unnecessary provocation that risks escalating tensions in the region.
On Tuesday, the Kingdom began live-fire drills known as Gulf Shield 1 Exercise. The exercise involves warships, aircraft, speed boats, and elite naval units, and will take place in the Sea of Oman and the Strait of Hormuz.
“The exercises include shooting of live ammunition as part of the efforts to improve combat readiness and protect the Kingdom’s waters and marine interests against any possible aggression,” said Navy Brig. Gen. Majed Al-Qahtani, according to the Saudi Gazette.
The Iranian government, however, isn’t thrilled with the drills taking place so close to its own waters, and has warned against any provocations.
“The naval forces of the Islamic Revolutionary Guard Corps (IRGC) believe this military exercise is a clear instance of creating tensions and undermining the stable security of the Persian Gulf,” the IRGC said in a statement published in an Iranian newspaper.
“None of the naval vessels participating in this drill are permitted to trespass into Iranian waters and under no circumstances should they approach Iranian territorial waters,” the statement added.
“Any such trespassing will not be considered a harmless aberration.”
 Sitting on opposite sides of the Gulf, Sunni Saudi Arabia and Shiite-dominated Iran cut off bilateral communication earlier this year.
“[The IRGC] will take proportionate and immediate action against any kind of movement, attempt or action to disrupt the peace and security of the Persian Gulf, the Strait of Hormuz and the Sea of Oman,” the statement said.
Iran has also had a number of encounters with US Navy vessels in the Persian Gulf in recent months. While the Pentagon has described Tehran’s actions as “unsafe,” Command of the IRGC Maj. Gen. Mohammad Ali Jafari has urged the US to end provocative operations in the waterway.
“We tell the Americans that they had better stop wasting the American people’s assets and wealth by malicious and harmful presence in the Persian Gulf,” Jafari said last month, according to Tasnim news agency.