Sunday, October 04, 2015

Current speclations on Russia in Syria and related matters

The surrogate war occurring in the Middle East has taken new turns with the introduction of direct military involvement by the Russians in Syria, even it if primarily is an arms transaction.

Thoughts on how the situation may evolve.

  • First, one might expect the Saudis to try to now stir up trouble for Russia in the Crimea and Chechnya.  This pledge of allegiance may be the start of that process.

  • Second, Russians need oil prices to be in the range of $85-$114/bbl and they are currently about half that.  Iran likewise wants to bring its production to world markets and either it must compete with a crowded field of suppliers or production has to be disrupted elsewhere to create a market opportunity if prices are to rise.
  • Third, if oil & gas supplies from Saudi Arabia or the Emirate states were disrupted, then it is likely the price of energy would go up.  Last week a diplomatic incident unfolded because Iran was caught with a bomb factory in Bahrain.  Diplomatic relations between Iran and Yemen and Bahrain have been affected. Could this be the beginning of Iran's effort to destabilize the Sunni oil kingdoms that have made its life miserable for years?
  • Fourth, Coalition air support in the last few weeks has focused on helping the Kurds secure oil fields near Kirkuk.  That appears to be successful. One may wonder where oil and gas fields are in Syria and whether or not fighting might focus on control of them before winter sets in.  Last winter Syrians burned wood for heat and cash flow for whatever government emerges will depend on some limited source of energy to pay bills and rebuild.
  • Fifth, if the Russians are expanding their influences back into the Mediterranean one might expect them to want more bases.  The Soviet era might provide some guidance as to where they will go.  Keep an eye on Mersa Matruh in Egypt.