Outside the Box

The Complexity of Persian Gulf Unrest

John Mauldin

March 3, 2011

While the world's attention was (and still is) on the fighting in Libya, George Friedman – founder of a global intelligence company called STRATFOR – told his employees to watch the tiny island of Bahrain. Libya's protests are more violent, but the unrest in Bahrain, he said, will have much stronger strategic implications.

It's easy to look at the news event that makes the most noise (and makes for good television). It's much more critical to pay attention to the event that, depending on its outcome, could disrupt the world economy. If unrest in Bahrain gets out of hand, Saudi Arabia's Shiite minority could follow suit with protests of their own, and the Iranian-Saudi balance in the Persian Gulf could teeter heavily toward Iran. Imagine if Iran fully controlled the area through which 40% of the world's seaborne oil must pass daily. Does Bahrain have your attention now?

You can <<click here to watch a video>> on this very subject from STRATFOR. If you have an older browser, you may not be able to see the video – but in that case you can simply read the transcript below it. I strongly recommend you also follow the link to sign up for their free intelligence reports. Their paid subscription is well worth the investment, but the free product is a good way to get your feet wet.

John Mauldin, Editor
Outside the Box

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The Complexity of Persian Gulf Unrest

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John Seater

March 3, 2011, 9:55 p.m.

This analysis seems routinely shallow, as is the prevailing view that the US somehow has a military interest in the Middle East because of oil.  Suppose that Islamists take over all the Middle Eastern oil states.  What would be the implication for the petroleum market?  Nothing.  The oil-producing countries still will sell their oil on the world market.  They presumably would supply oil in the same quantity and sell it at the same prices as now because those maximize the cartel’s profits.  Wild-eyed Imam: “Allahu akhbar and pass the profits.”  Once the oil is on the world market, the producers have no further control of it.  In particular they cannot control who ends up with it.  At the same quantities and prices, the US would continue to buy the same amount that it does now.  If any of those countries attempted to restrict US imports by reducing output, the world price would rise and the US, being the richest country on earth, would outbid everybody else and keep importing oil.  The Chinese might end up buying a whole lot less oil, but the effect on the US would be much smaller.  Where’s the cause for concern?

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