Saturday, February 20, 2016

Plunging oil price brings Saudi Arabia and Iran together in alliance of enemies

first commercial oil well in Saudi Arabia

China’s economic slowdown and United States oil fracking are putting the screws to the OPEC nations. 
The more the U.S. taps its own domestic oil reserves the worse it is for Arab oil producing countries. 

The Guardian reports the Iranian endorsement of a plan by its arch regional rival, Saudi Arabia, to stabilise global oil prices could be seen as a diplomatic coup for Riyadh.

However, Tehran’s support for a production freeze has not been driven by a new desire for political rapprochement as much as acceptance of a greater enemy: collapsed commodity prices. 

The markets are flooded in crude at a time when demand is faltering due to the slowdown in expected growth from key importers such as China. Desperate times require desperate measures.

Iran and Saudi Arabia are rival oil producers but also bitter adversaries in regional politics. Short of a shooting war, tensions could hardly get any worse at this particular moment.
The Saudis severed diplomatic relations with Iran in January following a mob attack on their embassy in Tehran – a protest at the execution of a leading Shia cleric, Nimr al-Nimr, in Saudi Arabia’s eastern province.

The two countries stand on opposite sides in the wars in Syria and Yemen – their strategic competition is interlaced with vicious sectarian hostility – adding a proxy element to an already toxic mix.

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