-Caveat Lector-
Subj: The Coming Saudi Oil War
Date: 99-07-03 18:34:28 EDT
From: [EMAIL PROTECTED] (Tony Toews)
To: [EMAIL PROTECTED]
[Folks, okay, this guy is coming from a viewpoint of a disruption in Saudi
Arabia cause by its enemies and internal rebellion. But still relevant
enough. On the other hand every stock market prophet/economist/government
official has a theory of the week. Tony]
http://www.chaostan.com/oilwar.html
==================================
We recommend OilWorld's Award Winning Site
For U.S. investors, Saudi Arabia is one of the most important countries
in the world. It's the largest oil exporter, containing somewhere between
25% and 30% of the known world oil supply. When Saudi Arabia sneezes, U.S.
investment markets catch pneumonia.
While we cannot be certain, it looks like a big sneeze is just around
the corner. The exact timing is not predictable, but when it happens,
investors who are in the right oil investments [see Crude Oil Strips] will
profit enormously. Those who aren't will be seriously hurt.
Here's the Story:
Look at a world map from the last century and you'll find the Arabian
peninsula labeled Arabia, not Saudi Arabia. This seems a small point, but
it's the key to understanding what's happening.
Saudi Arabia is a giant desert: a third the size of the U.S., but with
only 17 million people. (The U.S. has 258 million.) When I flew over the
"Empty Quarter," I felt as if I were flying over the surface of the moon.
Most of the Arabian peninsula is so dry and worthless that until this
century, few tribes bothered to draw the boundaries between their
territories.
Until the early Middle Ages, the peninsula was inhabited only by a few
nomadic bands. Then it was divided into numerous states often at war with
each other. One of these was the Saud family dynasty, founded in the 1400s.
In the 1500s, the Turks gained control of the area along the Red Sea
called the Hejaz, and in the 1800s, the British took parts of Hasa and Oman
along the east coast and Aden in the southwest tip of the Arabian peninsula.
The wars among the tribes continued until the 1930s when ibn-Saud,
backed by the British, finally conquered the other tribes. He established
the state of Saudi Arabia, roughly within its present boundaries. Yemen and
the other small states of the Arabian peninsula are the lands ruled by tribes
the Saudis did not subdue.
When Saudi Arabia finally does slide into chaos, I will not be surprised to
see the price of oil double in 48 hours. Call this "Scenario # 1."
If the crisis includes an invasion by Iraq or Iran, I will expect oil to
triple in 48 hours. Call this "Scenario # 2."
If it includes an invasion by both, I expect oil to quadruple in 48 hours.
Call this "Scenario # 3."
If at the time it happens you have five of the Crude Oil Strips, purchased at
$2,000 each for a total investment of $10,000,* your possible net profits
could be:
Scenario # 1 -- $250,000 based on oil @ $38 per barrel
Scenario # 2 -- $630,000 based on oil @ $57 per barrel
Scenario # 3 -- $1,010,000 based on oil @ $75 per barrel
* Prices are subject to market moves and are constantly changing.
No guarantees, but I think there is a 70% chance of something enormous
happening in the Persian Gulf by the end of the decade, and 90% within five
years. In EARLY WARNING REPORT I will continue keeping you informed.--
Richard Maybury
The risk of loss in futures and options can be substantial, therefore only
genuine risk funds should be used. The risk of loss in buying options on
futures can result in the total loss of the premium paid plus transaction
costs. Past profits are not necessarily indicative of future profits. This
estimate was calculated by Investors Publishing Services, Inc. (IPS). The
opinions contained herein do not necessarily reflect the views of any
individual or other organization. Material was gathered from sources
believed to be reliable; however, no guarantee to its accuracy is made.
Why is the Name Saudi Arabia So Important?
It causes the misleading assumption that members of the Saudi family
are the rightful owners of the place and the rightful representatives of the
people. It's as if a Canadian family named Ferguson had conquered Canada and
had the gall to rename it Ferguson Canada, and everyone in the world
including the USG (U.S. Government) now referred to all Canadians as
Fergusons. It is one of the most successful hoaxes in history.
The Saudis are dictators who rule the other tribes with a heavy hand.
If they didn't have all that oil, other cultures would regard them as just
one more group of thugs in the same league as Qadaffi, Assad and Saddam
Hussein.
The key point for our investments is that the Saudi royal family is
roundly hated by their subjects. The king and his tribe live in great
opulence that provokes much jealously. Everyone knows the Saudi tribe has no
more rightful claim to the oil money than any other tribe.
The Saudis have two armies so that if one revolts they can pit the
other one against it.
Their primary means of preventing revolts has been to spread some of
the wealth around in the theory that if the population can be kept in a kind
of welfare stupor like domesticated cattle, few will have the initiative to
revolt. So far it's worked.
They allow no freedom of speech or press. Every non-Saudi knows that
if he gets caught saying something unflattering about a member of the royal
family, he could vanish.
It's a big family. Ibn-Saud had 150 wives, so today a legion of 6,000
Saudi princes occupy the most important and high-paying jobs and keep the
economy in a chokehold of nepotism.
Political parties are not permitted. Activists are arrested and
tortured, including electric shock and flogging. Judges are influenced by
the royal family and they can be overruled by the king.
No one in the Islamic world ever forgets that the hated Saudi
conquerors sit atop 260 billion barrels of oil and they got there with the
help of one of Islam's oldest enemies, Britain. Worse, the Saudis are trying
to stay there with the help of Britain's ally, the U.S. This is a time bomb
that will go off. Count on it. The only question is
when.
Now that you know about some of the turmoil brewing in the Persian Gulf, I
suggest that when you invest in oil companies you make sure they are well run
firms with little debt, lots of oil or gas in the ground, and little or no
holdings in Chaostan.
I suggest Berry Petroleum (BRY, NYSE), Murphy Oil (MUR, NYSE) and American
Gas Index Fund (1-800-622-1386).
You will find a list of more than three dozen investments expected to profit
from the turmoil in Chaostan in the July 1997 EARLY WARNING REPORT.
Subscribe now.
Tensions Are Rising
Despite the carloads of money earned by all that oil, the Saudis are
now managing to spend it faster than they can make it. Infrastructure is
going without repairs as contractors wait more than six months to be paid.
Some neighborhoods experience frequent water cutoffs. Hospital beds are in
short supply. New homes sit empty for lack of electrical service.
As the Saudi welfare state crumbles, the influence of Islamic rebels is
increasing. Underground faxes written against the royal family are widely
read and discussed. Popular music has become openly antiroyal. A line in
one song says, "Kings when they enter a country despoil it and make the
noblest of its people the lowest."
Middle class Arabs keep mental lists of the rumored prices of each
royal palace.
Jokes depict the king as a witless tyrant. This is very important.
The one weapon no government can stand against is ridicule. Once
bureaucrats, police and troops are embarrassed to be a part of the
institution, their morale drops, they quit doing their jobs, and that's the
end of it. (If you really want to fight back against the Washington power
structure, compile a list of jokes about it and pass it around.)
How Hopeless is the Situation?
Try to imagine: the Saudis have a fourth of all the oil in the world
and a population of only 17 million -- the same as Texas -- yet they are
spending the money so fast they're broke.
The royal family's connections with Britain and the U.S. discredit them
even further since the U.S.-UN arms embargo of the earlier 1990s in the
Balkans led to the slaughter of thousands of Moslems. Said Saudi Arabia's
Al-Yawm newspaper: "The United Nations bears responsibility for what is
happening now in Bosnia."
The royal family's complete dependence on the protection of the West
was demonstrated in the Iraq-Kuwait war. When the ground war began on
January 16, 1991, the Saudi troops immediately abandoned their equipment and
fled to take cover behind U.S. lines. A disgusted British officer said,
"They bugged out."
"If the world has seemed a messy place since the end of the cold war, it has
lately been getting sharply messier."-- THE ECONOMIST, 1/14/95
A Nitroglycerine Combination
As if all those historical and financial problems were not enough,
Saudi Arabia also contains Mecca and Medina. These are Islam's two holiest
cities. This means the shrines that are Islam's most sacred are under
control of a regime that is widely perceived as Islam's most corrupt. A
nitro and glycerine combination if there ever was one. Imagine how Catholics
would feel if the Vatican were conquered and controlled by Al Capone.
A popular song is titled "Islam vs. Christianity," and Moslems
everywhere wonder which side the Saudi royal family is really on.
In 1981, President Reagan pledged U.S. protection for the Saudi regime
against all enemies, internal as well as external. This means, apparently,
that when the Saudi rulers finally do come under attack by their own people,
their dictatorship will be protected by U.S. troops. I wonder how many U.S.
troops realize what they've signed on for. Do they remember it was the
Saudis who led the 1973 oil embargo against the U.S.?
The End of the Saudi Royal Family
We can never be sure about these things, but the great rebellion in
Saudi Arabia may be near, due to breakthroughs in electronics.
As with all dictatorships, the primary means the Saudis use to control
their people is to control the information the people receive. For several
years, Saudi police have been searching out and destroying satellite TV
dishes which receive uncensored news broadcasts from space. But the dishes
are being downsized; some now are as small as 18" in diameter and can be
hidden anywhere. Also, phone line access to the Internet is fast becoming
universal.
So, I believe the new electronics combined with the financial crisis
means the end of the Saudi royal family. My guess is that Iran's secret
agents will continue working to foment revolution, and they'll do it in a way
designed to prevent U.S. intervention. The rebels will claim to be fighting
for a more democratic Arabia. Once they've succeeded and are in power, they
will request assistance from Iran to "stabilize" Arabia. This voluntary
invitation to Iran by the new "democratic" government will be an end run that
will deprive the USG of justification to intervene.
A Puppet of Iran
The new Arabian government will be, in effect, a puppet of Iran, and
Iran will get de facto ownership of all that oil. If Iran can also take the
small Persian Gulf oil states in the process, they will end up controlling
half of all the oil in the world.
The USG has little understanding of Saudi Arabia. As in Iran in the
1970s, U.S. officials deal with the English-speaking elite and get only their
view of things. When the big rebellion happens, today's politicians will
probably be as surprised as their predecessors when the Shah of Iran was
overthrown.
Saudi Arabia is the most thoroughly crazy place I've ever visited. A
whole list of descriptions comes to mind. Weird, balmy, psychotic, Alice in
Wonderland. The only thing certain is that it cannot last. Saudi Arabia
will go back to being Arabia, and the bloody transition will cause oil
prices to soar. When? We cannot know, human behavior is difficult to
predict. We can say only that with the financial problems, the decline of
the welfare handouts and the new advances in electronics,
the stage is now set.
In all the Islamic world, the only tribe that's despised more than the
Saudis is the Kuwaitis, who also got where they are with the help of the much
hated British and U.S. I still believe the forecast that makes the most
sense is this: Iraq and Iran will continue working secretly to get the U.S.
armed forces hopelessly tangled up in the Balkans and elsewhere. Then they
will foment revolutions in Kuwait and Saudi Arabia. Iraq will take Kuwait
and Iran will take the rest of the Persian Gulf plus Mecca and Medina.
Eventually -- maybe immediately, maybe later -- Iraqis and Iranians
will fight among themselves for ownership of the whole prize, and all the
Persian Gulf oil fields will go up in flames as Kuwait's did in 1991.
What to Look For
Generally, when a government gets into the kind of trouble the Saudis
have gotten themselves into, it will try to buy time by printing money. A
leading indicator to watch is the value of the Saudi currency, the riyal.
It's reported daily in the WALL STREET JOURNAL and other major newspapers.
If we see the value of the riyal begin to decline dramatically, I will take
this as a sign the big revolt is near and I
should get more deeply into oil investments [see Crude Oil Strips].
The exact timing is impossible to predict, so I keep a certain number of
these investments in my portfolio at all times.
Warn everyone you care about, it looks like the Great Chaos is about to
mushroom.
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