NO MEANS TO DEAL WITH GLOBAL RECESSION? HOW ABOUT A TURMOIL IN MIDDLE-EAST?

From a price of $147.27 per barrel on July 11, 2008, the price of crude oil tumbled to alarmingly low levels - levels which couldn't be explained based on any rational economic principle. Yes, there is a situation of recession in US, Euro zone, Japan but that situation can not justify a demand contraction happening overnight which should trigger a drop in crude price more than 70% below the July 11 level.

Anyway, in the aftermath of this precipitous fall from the cliff the oil companies worldwide started behaving like pansies - new E&P projects started getting put on hold, especially, projects related to non-conventional crude sources, like oilsands in Canada.

[One wonders what kind of economic model these companies follow that low crude prices prevailing even for a month sends their economic viability haywire. It is well known that economic analyses of such projects are done over the life cycle of the source of oil - the life cycle ranging from 25-40 years. So, it is hard to imagine that the oil companies chicken out just on the basis of one, two or six month period of relative low crude prices.]

More than the oil companies, most of whom have reasonably good balance sheet position, the oil producing countries are hurting more. So much so that even a country like Saudi Arabia was forced to delay the issuance of Request for Bids for their two refinery projects which were slated to go out in Q4 2008.

Iran, Venezuela and Russia are already in bad shape. Venezuela is considering to nationalise some profitable foreign owned mining leases to supplement their national revenue. Russian Rouble has plunged to unprecedented lows. Iran has had to ration their fuel supplies. Well, if these three countries find themselves in trouble it is music to West's ears.

With recession casting a pall of gloom globally, and US, Japan and Europe not knowing what to do to get out of this morass, is a crisis in the Middle-east a welcome event at the moment? Who would gain if there is a turmoil in that region? Will a military conflict, which can potentially become a full blown crisis in the region threatening to cut off oil supplies, be helpful to global economy at this time?

The world's top three GDP regions are struggling to find ways to bring about higher liquidity in the markets so as to increase aggregate demand for goods, housing and so on. So, in such a scenario will these economies not suffer a whammy by having to cope with higher crude oil prices which invariably happens whenever there is a conflict in Middle-east?

But this is exactly what is happening at the moment. Israel is going full blast at Hamas in Gaza, and there are fears that this operation might escalate. Crude prices are nudging their way upwards.

Granted that Israel will have their parliamentary elections in two months and Prime Minister Olmert is allegedly gambling on this military operation to come back in power. But the billion dollar question is: Will Israel ever carry out this kind of an operation and, more importantly, at this point in time without the knowledge and/or acquiescence of their godfather - USA? Hard to digest that they have gone ahead without keeping Washington informed.

Further, US and its lackey (UK) would have immediately figured out the consequential economic ramifications of a potential Middle-east crisis. Yet they would have apparently agreed. Why? Is there some smart Alec who theorised that should there be a disruption of sea lanes (and the trade dependent on it) leading to 'perception' of disruption of goods globally, there can be a rebound in consumer demand triggered by panic buying?

Bear in mind, consumer spending is key to the big economies getting back on track. So, if the consumer spending can be triggered for some reason it is most welcome. And, apart from increased consumer spending there is a potential of arms supply by major powers, like, US, UK and to some extent, Russia. Dollars and Pounds flowing in exchange of arms supply can grease the economic wheels of these countries. Never mind, if Russia also gets some crumbs.

Moreover, rise in crude prices will again restore the projected inflow of money for OPEC countries who will then have funds for their new oil & gas projects which will in turn be good news for vendors, contractors and EPC companies - most of which come from G-7 countries.

So, it may seem that after all a crisis in Middle-east is what the doctor ordered for at this very moment. Is it likely that this is an event which has been engendered in a scripted manner? Will it escalate? Will it suck in Hamas supporters, like, Iran and Syria? And, will this provide an opportune time to Israel (and US) to hit at Iranian nuclear facilities, since Iran is down in dumps economically?

The concern is: Will it be possible for Israel (and its allies) to play this crisis as a scripted event? If the crisis goes out of hand and/or plays outside the script what will happen? Or, are the phantom scriptwriters damn sure that they can control it right till the denouement? By the way, on the flip side, who knows, this event can end up in a whimper too without bringing in the spin-offs for the G-7 visualised so glibly in the foregoing. Let's wait and watch!

LAST GASP REPUBLICAN DIVERSIONARY TACTIC WITH INCURSION IN SYRIA!

BBC website reported on Oct 26 "US helicopter-borne troops have carried out a raid inside Syria along the Iraqi border, killing eight people including four children, Syrian officials say.
The official Syrian news agency Sana said the raid took place in the Abu Kamal border area, in eastern Syria. It said that American soldiers on four helicopters had stormed a building under construction on Sunday night.
The US says it is investigating. It has previously accused Syria of allowing foreign militants into Iraq.
Syria has summoned the US and Iraqi envoys in Damascus to protest at the raid.
If confirmed, the raid would be the first known attack by US forces inside Syrian territory, says the BBC's Natalia Antelava."

In a separate article on same day BBC's Diplomatic correspondent, Jonathan Marcus writes "But its (US action's) timing is curious, coming right at the end of the Bush administration's period of office and at a moment when many of America's European allies - like Britain and France - are trying to broaden their ties with Damascus."

He further writes "Whatever the local military factors involved in this US operation, it would be unthinkable to imagine that an incursion into Syria would not require a policy decision at a high-level."

So, why did some one very high in Washington - either the President himself or the Defence Secretary - authorised this incursion? The answer is simple: it is a tactic to give McCain, who claims he knows more than Obama on security issues, to divert the election campaign focus from the perilous current economic crisis to security matters.

It is just a ploy to give McCain and the Republicans, who are badly trailing in opinion polls, some straw to clutch on to. Some political analysts had felt about 9-10 months back that US may resort to adventurism in Iran to ensure Republican victory in Nov this year. But somehow this option didn't seem to be feasible because of high cost attached to it and potential of dangerous politico-military fall out. An Israel led adventure also did not seem feasible because of continued political instability in Israel for the last few months and even now.

So, Iran being not an option to do some gun-boat diplomacy, the outgoing Republican administration looked at other 'cheap' options. And, they found Syria to be not only a 'cheap' option to strike but that any action vis-a-vis Syria could be relatively easily justified to the American people and the international community.

Republicans are staring down the barrel for a double whammy - loss in Presidential election, and Democrats getting the magic figure of 60 in Senate. With opinion polls showing precarious condition of Republicans on both the fronts, it is hard to assume that Bush administration will watch the situation idly and twiddle its thumb.

So, the outgoing administration seems to have decided to play the military card against Syria which is notorious in US as being anti-America. They probably reasoned to themselves that whacking Syria, even in a limited manner, would be a safe bet politically and may help the Republican cause in some way.

Some one may say that the above is a cynical view. But in all fairness it should be said that it is not a cynical commentary on this incident. It is not a biased view because one may ask: why did US wait all this long to carry out this incursion? After all, movement of insurgents and foreign fighters from Syria into Iraq has long been a bone of contention between Damascus and Washington.

There is, therefore, hardly any doubt about the political motive of the timing of this military raid. As the BBC Diplomatic correspondent noted further in his article 'this action of US is in marked contrast to European efforts to engage the Syrians.

With French President Nicolas Sarkozy in the lead, a number of European countries have sought to bring Syria in from the cold.'

Incursion in Syria is an attempt by the outgoing President and his cronies to administer 'CPR' to the sinking Republican poll campaign. It remains to be seen whether the US voters can discern this diversionary tactic and prefer to remain focused to more bread and butter issues.

Finally, it will not be surprising at all to see US military carrying out something sensational before Nov 4 to provide the vital dose of oxygen needed by McCain, and the Republican senate candidates for their political survival.