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href="https://www.telesurenglish.net/analysis/The-Spoils-of-Economic-War-How-the-US-Saudis-Profit-From-Sanctions-on-Venezuela-and-Iran-20190606-0016.html">https://www.telesurenglish.net/analysis/The-Spoils-of-Economic-War-How-the-US-Saudis-Profit-From-Sanctions-on-Venezuela-and-Iran-20190606-0016.html</a></font>
<h1 class="reader-title">The Spoils of Economic War: How the US,
Saudis Profit From Sanctions on Venezuela and Iran</h1>
6 June 2019</div>
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<p> The Spoils of Economic War: How the US, Saudis Profit
From Sanctions on Venezuela and Iran </p>
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<p>The United States has been playing the role of the
world's economic bully. So far, the U.S. has imposed
sanctions against Afghanistan, Burundi, Burma, Cuba,
North Korea, China, Cyprus, Haiti, Libya, Lebanon,
Belarus, Crimea, Eritrea, Iran, Iraq, Central African
Republic, Democratic Republic of the Congo, Russia,
Syria, Somalia, Sudan, South Sudan, Russia, Ukraine,
Venezuela, Yemen and Zimbabwe.</p>
<p>But if unilateral harassment has proven itself
historically ineffective at achieving conventional
geopolitical objectives, why does the U.S. insist
on bullying Venezuela and Iran?</p>
<p>A glance at the political economy of international oil
markets, an industry used as a battlefield to
further the aims of war, provides insight into the
seemingly irrational realm toward which President Donald
Trump has been leading U.S. foreign policy.</p>
<h4>U.S. energy independence requires manipulating markets</h4>
<p>Since international markets are highly speculative,
many believe that price trends cannot be manipulated;
however, that is not true. When energy commodities and
strategic raw materials are involved, the U.S. does not
sit back as a patient price taker but prefers to throw
the dice as a price maker.</p>
<p>Between 2006 and 2014, when China's economic boom was
increasing the demand for international commodities,
structural changes occurred that paradoxically favored
the U.S. a few years later. First, high oil prices
allowed the fracking industry to become a financially
viable option.</p>
<blockquote>
<p><em><strong>RELATED:</strong></em></p>
<p><a
href="https://www.telesurenglish.net/news/US-Renames-Natural-Gas-to-Freedom-Gas-Made-of-Freedom-Molecules-20190529-0021.html"
target="_blank"><em><strong>US Renames Natural Gas
to 'Freedom Gas' Made of 'Freedom Molecules'</strong></em></a></p>
</blockquote>
<p>This, in turn, helped the U.S. gradually overcome the
dependence it had experienced for 30 years, and which
made it the world’s largest oil importer in 2016, with a
voracious appetite of around 12 million barrels per day
(bpd).</p>
<p>In December 2018, for the first time in the last 75
years, the U.S. became a net oil exporter thanks to
"thousands of wells producing from the Permian region of
Texas and New Mexico to Bakken in North Dakota and
Marcellus in Pennsylvania," the Los Angeles Times
reported. </p>
<p>"We (the U.S.) are becoming the dominant power in the
world," as Michael Lynch, president of Strategic Energy
and Economic Research, Inc. said.</p>
<p>Trump is reaping the fruit of energy independence, a
condition he did not contribute to at all. This
abundance of energy is fragile, however, because
maintaining it depends on keeping oil prices as high as
possible.</p>
<p>Therefore, to force this to happen, anything that
threatens to diminish global oil supplies is
actually good for the U.S., including the blockade of
Venezuelan and Iranian exports.</p>
<p>And that's not all...</p>
<h4>If you can't make more pie, make sure you control the
slices</h4>
<p>While the U.S. now has enough oil to be able to export
some of its reserves, Trump’s homeland can't satisfy the
world's energy demands completely. This opens up
business opportunities for Saudi Arabia and other allies
who can also benefit from economic sanctions against
Venezuela and Iran.</p>
<p>Before April 2018, when the U.S. began applying a new
round of sanctions against the Persian nation, Iran was
OPEC's second largest producer and exported almost 3
million bpd. Since then, however, its oil production has
been reduced by more than 1 million bpd.</p>
<p>In Venezuela, U.S. foreign policy has achieved a
similar result: between February 2018 and January 2019,
the Bolivarian Republic's average oil output decreased
from 1.5 million bpd to 1.1 million bpd, which is almost
50 percent below its production levels in 2006.</p>
<div>
<div>
<blockquote data-lang="en">
<p dir="ltr" lang="en">Oil production in Venezuela
and Iran fell further in May. In both countries,
production is down more than 30% since US
sanctions were imposed. Looks like sanctions will
continue to be one of the forces shaping the oil
market. <a
href="https://twitter.com/hashtag/OOTT?src=hash&ref_src=twsrc%5Etfw">#OOTT</a>
<a href="https://t.co/i0mKrsUn5T">pic.twitter.com/i0mKrsUn5T</a></p>
— Sergi Lanau (@SergiLanauIIF) <a
href="https://twitter.com/SergiLanauIIF/status/1136660015232798720?ref_src=twsrc%5Etfw">June
6, 2019</a> </blockquote>
</div>
</div>
<p>These combined results have triggered a trend towards
the contraction of global oil supplies, which could be
worsened if the Libyan civil war adds another cut of 1.2
million bpd in the near future.</p>
<p>Nevertheless, the oil market’s invisible hand is not
enough to ensure that those high prices the U.S.
desperately needs, since global supply basically meets
global demand, moving around 99.5 million bpd, according
to data from the International Energy Agency (IEA).</p>
<p>This won't change one its own — global economic growth
will not easily lead to a new boom in oil demand. On the
contrary, factors such as the U.S. trade war against
China and Brexit could reduce growth prospects all over
the world.</p>
<p>In this context, where oil demand remains more or less
fixed, putting Venezuela and Iran out of
business changes the portion of pie each country gets.
And, of course, only the lucky ones get to continue
enjoying their slice of the oil markets. Among these is
Saudi Arabia, a country that will be able to capture
more clients and expand its oil output without violating
its OPEC commitments.</p>
<p>Oil prices have already responded to the U.S.'s
politically-motivated supply shortages. The average
crude oil spot price rose from US$56 per barrel in
January to US$67 per barrel in May, a 16 percent
increase. This would not have been possible without
the sanctions that prevented Venezuela from selling over
50 percent of its production in February.</p>
<p>Certainly, the international average oil price will
most likely remain below US$100 per barrel, but current
unstable equilibrium prices are enough to keep U.S.
companies in the fossil-fuel business at home and
abroad. One of the short-term costs of this maneuver
could be price volatility. However, it seems that Trump
administration has assimilated such an eventuality —
global stability hasn't ever been one of the U.S's.
foreign policy priorities.</p>
<p>Looking at it pragmatically, the negative consequences
of harassing Venezuela and Iran are outweighed by a very
lucrative reward: 2 million oil barrels per day.</p>
<p>"The U.S. currently removes about two million barrels
of oil per day from the world's supply through sanctions
on the Iran and Venezuela industries. But Washington
hopes that soaring U.S. oil production - now at an
all-time high of more than 12 million barrels per day -
will keep global markets well-supplied and hold prices
down," Reuters commented on May 5.</p>
<p>The political manipulation of supply and demand is a
risky rent-seeking game. And this is where Trump's
personality could play a key role — he is not a
risk-averse player. So far, he seems unconcerned with
the collateral damage arising from his economic warfare.</p>
<p>One of them is that U.S. sanctions "will help oil
producers because the prices will go up, and Russia will
be one of the most significant oil producers," said
Robert Malley, former Middle East aide to President
Barack Obama, as reported by RIA Novosti.</p>
<p>We are no longer living in that “good old world” in
which U.S. geopolitics had to do with ensuring the flow
of cheap natural resources from the closest friendly
provider.</p>
<p>"Hence, paradoxically, a regional production crisis
near U.S. territory could be good for the U.S. in the
medium term," Giancarlo Elia Valori wrote in
Geostrategic and added that "the U.S. is entirely in
favor of an increase in the oil barrel price - and hence
indirectly in favor of tension in Venezuela."</p>
<h4>The "almighty" dollar would fall from grace with back
up from oil</h4>
<p>Trump opens war fronts everywhere, which wouldn't seem
to make sense unless they were a distraction. But
they're not.</p>
<p>The rise of China as a global power has been silently
transforming the international monetary system, another
element triggering the U.S. into endless economic
bullying.</p>
<p>Since the abandonment of the gold standard in 1971, the
U.S. dollar is not linked to any assets, becoming a fiat
currency. In these kinds of cases, only a country's
output could back the currency in the long term. But
what happens when monetary expansion occurs faster than
increases in productivity?</p>
<p>Bringing new meaning to the "In God We Trust" motto
coined so long ago, the dollar’s value depends on its
capacity to remain an international reserve
currency; that is, a currency other countries hold as
part of their foreign exchange reserves and use in their
international transactions.</p>
<p>In a world where economic agents don't ask the Federal
Reserve to convert their notes into gold or any other
physical asset, trust is the only thing keeping the U.S.
upright. As a result, the dollar has remained a mighty
currency because most international transactions are
traded in U.S. dollars.</p>
<blockquote>
<p><em><strong>RELATED:</strong></em></p>
<p><a
href="https://www.telesurenglish.net/news/Even-Saudi-Arabia-Threatens-to-Ditch-Dollar-for-Oil-Trade-Over-US-Bullying-Policies-20190406-0011.html"
target="_blank"><em><strong>Even Saudi Arabia
Threatens to Ditch Dollar for Oil Trade Over US
Bullying Policies</strong></em></a></p>
</blockquote>
<p>On Jan. 30, <a
href="https://www.telesurenglish.net/news/John-Bolton-Admits-US-backed-Coup-in-Venezuela-Is-About-Oil-Not-Democracy-20190130-0020.html"
target="_blank">U.S. National Security Advisor John
Bolton</a>, in fact, revealed very little when he
blatantly admitted that the coup attempt in Venezuela
was really about grasping for oil resources. In reality,
aggression by the U.S. hides something much more than
that.</p>
<p>If the dollar stops being the world's most traded
currency, the U.S. will not be able to issue the notes
it needs to finance an almost 50-year-old federal
deficit which rose from US$666 billion in 2017 to US$779
billion in 2018.</p>
<p>"The U.S. budget deficit by year is how much more the
federal government spends than it receives in revenue
annually. The Fiscal Year 2020 U.S. budget deficit is
expected to be US$1.1 trillion.</p>
<p>"That's the biggest deficit since 2012," wrote Kimberly
Amadeo in The Balance, noting how President Trump has
ramped up the U.S. deficit to pay for record-high levels
of military spending.</p>
<p>The dollar losing status as the world's preferred
currency would give the U.S. problems paying for imports
in an economy where its lack of international
competitiveness has given it a trade deficit since
1976, which widened to US$50 billion in March.</p>
<p>Last but not least, if the dollar stops being almighty,
the U.S. will have a very difficult time maintaining
itself as a first-world-class economy, since it's
federal debt exceeded US$22 trillion in February. This
amount represents over 76 percent of what the U.S. is
able to produce in one year. Nevertheless, this is most
likely to get worse: the debt-to-GDP ratio in the United
States will rise to 150 percent by 2049, according to
the Congressional Budget Office.</p>
<p>Besides preventing Venezuela and Iran from exporting
their natural resources, the U.S. is actively seeking to
avoid the dollar's collapse, an inevitability in the
next few years, as the history of previous empires has
already shown.</p>
<p>This is why the Trump administration is prone to
fighting the use of barter, virtual currencies or other
alternative international payment methods.</p>
<p>U.S. sanctions are not whimsical expressions of this
president. They are tools used to retain hegemonic
power in a multipolar world no longer willing to
tolerate such an aspiration. At the core of U.S.
bullying is not ideological disagreement but economic
decline.</p>
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