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Saudi Arabia and Russia close to freezing oil production

Joint Russian – Saudi statement on oil production and prices suggests despite vague language movement towards a temporary oil production freeze, though impact on oil prices likely to be small.

Alexander Mercouris

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Talks between the Russians and the Saudis at the G20 summit in Hangzhou once again raised hopes throughout the oil industry of a Russian – Saudi agreement for an oil production freeze.

Russia, Saudi Arabia and the US are the three big oil producers, producing roughly similar quantities of oil in any given year.  Of these three countries Saudi Arabia, since it is not a significant oil consumer, has the single biggest role in the oil market, a position further consolidated by its de facto leadership of OPEC – the international oil producers’ cartel – and the oil producing Gulf States.

In 2014 as oil prices began to slide, to the surprise and disappointment of many in the oil industry, Saudi Arabia refused to cut its output to create an artificial shortage in the oil market to support prices.  On the contrary the trend throughout 2015 was for Saudi oil production to rise.  The Saudis instead insisted that the market would eventually rebalance itself as more expensive output was shelved because of low prices.

Contrary to the expectations – and hopes – of many in the oil industry, the Saudis have stuck to this position ever since.

One particular phantom that has flickered with tedious regularity throughout this affair is the hope that if the Saudis will not cut production themselves, they will at least come to some sort of arrangement with the other big oil exporter – Russia (the US despite the size of its production being a net importer of oil) – to rebalance the market. 

The original grounds for this hope were comments by the Saudis at the time of the OPEC summit in November 2014 that they would not cut production because they could not rely on the other big producers – first and foremost Russia – also doing so.

The Russians for their part have consistently said they will not cut production to rebalance the market, and that that is something for Saudi Arabia to do.  They have also said that it would be technically impossible for them to cut production during the winter months since the cold weather in Russia would cause their Siberian wells to freeze.  This explanation is widely ridiculed, though it is in fact perfectly plausible given the harsh conditions of the Siberian winter.

Whilst the Russians have consistently ruled out an oil production cut, they have been open to the idea of an oil production freeze, and in the first few weeks of this year talks between them and the Saudis to achieve this seemed for a time to be going well. 

The background to those talks was a temporary crash in oil prices, which briefly fell to low of $25 a barrel.  What however seems to have prompted these talks was a tour of oil producers in the first few weeks of 2016 by the Oil Minister of Venezuela who was furiously lobbying for an output cut on behalf of his severely cash-strapped government. 

Whilst neither the Saudis nor the Russians were in the mood to talk about a production cut, the Venezuelan Oil Minister’s lobbying does seem to have prompted them to talk to each other about the possibility of a freeze.

In the event talks between the Russians and the Saudis and other oil producers appeared in April 2016 to have come to the brink of reaching agreement on an oil production freeze, with the text of an agreement prepared and ready for signature at an oil producers’ summit in Doha. 

Then to everyone surprise, at the very last moment, the Saudi Deputy Crown Prince, Prince Mohammad bin Salman Al Saud, suddenly reversed Saudi Arabia’s position, and abruptly ordered the Saudi delegation – which was about to sign the agreement – home

The Deputy Crown Prince’s reason was that Iran, whose oil industry had just been freed from the effect of UN sanctions which had previously limited its production and ability to sell oil, was in the process of bringing more oil onto the market, allowing Iran to benefit from a Russian – Saudi production freeze by capturing part of Saudi Arabia’s market share. 

Underlying this of course is the ongoing geopolitical duel between Iran and the Saudis in the Middle East, which makes any agreement between Saudi Arabia and Iran on any subject, including oil prices and production, extremely difficult.

The meeting between Russian President Putin and the Saudi Deputy Crown Prince during the G20 summit in Hangzhou seems to have raised hopes amongst oil industry insiders that this time – with the Deputy Crown Prince directly involved in the talks – an agreement between Russia and Saudi Arabia for an oil production freeze to rebalance the oil market would finally be reached. 

In the days that followed the meeting in Hangzhou comments by certain Russian and Saudi oil industry officials did appear to hold out the promise of an agreement for an oil production freeze.  Thus Russian Energy Minister Aleksandr Novak after meeting Saudi officials in Hangzhou was reported to have said

“We have agreed with the Saudi Arabia energy minister on joint action aimed at stabilizing the situation in the oil market. We consider a production freeze the most efficient tool, concrete parameters are being discussed at the moment.”

Novak is also reported to have said that Saudi Arabia was considering freezing production for one to three months at the levels of July, August or September.

Saudi Oil Minister Khalid Al-Falih for his part is reported to have said

“I have to say all other producers are expressing interest in coordinating… with Saudi Arabia and other like-minded countries to reach a consensus.  We are optimistic the Algiers meeting will provide a forum, and pre-Algiers consultations taking place bilaterally and in groups will bring us to Algiers with some sort of coordinated decisions. But the two countries agree that even if there is no consensus, we will be willing to take joint action when necessary.”

The reference to the meeting in Algiers is to a meeting of the International Energy Forum, which is due to take place later in September in that city.

In the event the joint Russian – Saudi statement on oil production and prices which appeared after the talks proved to be something of a damp squib.  It contained no reference to an oil production freeze.  The closest it came to discussing that possibility was in the following paragraph

“The Ministers recognizer the current challenges in the supply side of the global oil market, including major contraction of capital investments in oil extraction on a global scale, particularly in exploration, as well as mass deferrals of investment projects, which made the market, as a whole, more volatile and therefore unsustainable to both producers and consumers in the long term. There is an imperative to mitigate excessive volatility harmful to global economic stability and growth. In this regard, the Ministers noted that constructive dialogue and close cooperation among major oil producing countries is crucial to oil market stability to ensure sustainable levels of investment for the long term. Therefore, the Ministers agreed to act jointly or with other producers. In addition, the Ministers agreed to continue consultations on market conditions by establishing a joint monitoring task force to continuously review the oil market fundamentals and recommend measures and joint actions aimed at securing oil market stability and predictability.”

This is not an agreement for an oil production freeze.  It is simply a statement of platitudes amounting to nothing more than a wish-list.  Not a single concrete proposal appears anywhere in it, with some oil industry analysts not surprisingly calling it “all talk and no action”.

The likelihood nonetheless remains that some sort of oil production freeze – lasting however no more than a few weeks – will be agreed in Algiers, especially as comments from the Iranian Oil Minister suggest that Iran might now also be willing to join in.

No one should however expect a brief production freeze lasting no more than 3 months at most to have any significant impact on oil prices. 

As I have said many times, the two factors that determine the level of oil prices are (1) monetary policy in the US, which has a direct impact on the oil price because oil is traded in US dollars; and (2) supply and demand. 

An oil production freeze of a few weeks might have some marginal impact on supply.  It cannot influence the effect on oil price movements caused by US monetary policy.  This is key since it was the tightening of US monetary policy in the summer of 2014 with the ending of QE, leading eventually to the rise in interest rates in December 2015, which was the single biggest factor causing oil prices to fall.

Why then, if the effect of an oil production freeze on oil prices can only be minimal, are the Russians and the Saudis even talking about one? 

The answer has been provided by Omar Al-Ubaydli, who is a programme director at the Bahrain Center for Strategic, International and Energy Studies as well as an affiliated senior research fellow at the Mercatus Center at George Mason University

“In the case of Saudi Arabia and Russia, both countries are seeking closer relations, and they want to project a good relationship to the rest of the world.  They both know that there’s no chance of effective cooperation in oil markets due to market forces, but there’s no harm in having an extra meeting, and issuing mutually supportive statements.”

In other words, at a time when Russia and Saudi Arabia are intent on improving their relations with each other, it is in their joint interests to appear to be cooperating on oil production and prices, even if in reality that cooperation does not amount to very much.

By at least going through the motions of talking to and agreeing with each other, they send out a strong signal – first and foremost to the US and Iran – that despite their differences over the conflict in Syria they remain friends.

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Denmark As A Model For American Socialists?

In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high.

The Duran

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Authored by Lars Hedegard via The Gatestone Institute:


Here are some facts to consider before American “democratic socialists” look to Denmark for guidance, as Senator Bernie Sanders did during the 2016 presidential campaign.

First of all, Danes actually pay for their brand of socialism through heavy taxation. In Denmark, everyone pays at least the 25% value-added tax (VAT) on all purchases. Income tax rates are high. If you receive public support and are of working age and healthy enough to work, the state will require that you look for a job or it will force a job on you.

The willingness of all the Danes to pay high taxes is predicated on the country’s high degree of homogeneity and level of citizens’ trust in each other, what sociologists call “social capital.” By and large, Danes do not mind paying into the welfare state because they know that the money will go to other Danes like themselves, who share their values and because they can easily imagine themselves to be in need of help — as most of them, from time to time, will be.

Whenever politicians propose tax cuts, they are met with vehement opposition: So, you want to cut taxes? What part of the welfare state are you willing to amputate? And that ends the debate.

Danes, in contrast to American socialists gaining ground in the Democratic Party, are increasingly aware that the welfare state cannot be sustained in conditions of open immigration. A political party agitating for “no borders” could never win a Danish election. Danes do not suffer from historical guilt: they have not attacked any other country for more than two centuries and have never committed a genocide.

Moreover, there is an even deeper truth to ponder: Denmark is not really socialist but constitutes a sui generis fusion of free-market capitalism and some socialist elements. Denmark has no minimum wage mandated by law. Wages, benefits and working conditions are determined through negotiations between employers and trade unions. 67% of Danish wage-earners are members of a union, compared to 19% in Germany and 8% in France. Strikes and lockouts are common, and the government will usually stay out of labor conflicts unless the parties are unable to agree.

It is uncomplicated for enterprises to fire workers, which gives them great flexibility to adapt to shifting market conditions. To alleviate the pain, the state has in place a number of arrangements such as generous unemployment benefits and programs to retrain and upgrade redundant workers.

Danish companies must make ends meet or perish. They generally will not get handouts from the government.

Denmark is more free-market oriented than the US. According to the Heritage Foundation’s 2018 Index of Economic Freedom, Denmark is number 12, ahead of the United States (number 18). Venezuela is at the bottom, one place ahead of number 180, North Korea.

Mads Lundby Hansen, chief economist of Denmark’s respected pro-free-market think tank CEPOS, comments:

“Very high taxes and the vast public sector clearly detract in the capitalism index and reduce economic freedom. But Denmark compensates by protecting property rights, by low corruption, relatively little regulation of private enterprise, open foreign trade, healthy public finances and more. This high degree of economic freedom is among the reasons for Denmark’s relatively high affluence.”
Trish Regan recently claimed on Fox Business that Danes pay a “federal tax rate” of 56% on their income. This is misleading. The 55.8% is the levied on the marginaltax for the top income bracket, only on the part of their income above DKK 498,900 ($76,500). Any income under DKK 498,900 is taxed at lower rates. And the 55.8% marginal rate does not represent a “federal” or “national” rate. It represents the total of all taxes on income: national tax, regional tax, municipal tax and labor market tax. It does not, however, include Denmark’s 25% value-added tax (VAT), paid on all purchases.

Regan also claimed that Danes pay a 180% tax on cars. While it is true that there was once a maximum tax of 180% on care in Denmark, the vehicle tax rates have been lowered in recent years. Today, the first DKK 185,100 ($28,400) of the price of a gas- or diesel-powered car is taxed at 85%, and if the car’s price is above DKK 185,100, the remaining amount is taxed at 150% — which is of course bad enough.

Denmark’s total tax burden amounts to 45.9% of GDP, the highest of all countries in the Organisation for Economic Co-operation and Development (OECD).

As pointed out in the Fox Business segment, all education for Danes is tuition-free, all the way through to a Ph.D. Not only that; the state will, within certain time constraints, pay students to study. For students at university level no longer living with their parents, the monthly cash grant comes to almost $1,000 per month. No fewer than 325,000 students out of a total population of 5.6 million benefit from this generous arrangement setting the state back to the tune of DKK 20.9 billion or 1% of GDP (latest 2018 figures just in and supplied by Mads Lundby Hansen). Denmark even pays student support to 20,000 foreign students.

Attempts by fiscal conservatives to cut down on payments to students have been successfully resisted by the vociferous and influential student organizations; at present it would appear impossible to muster anything like a parliamentary majority to limit the student handouts.

Fox Business is right that a great many Danes are on public transfer payments. Government figures from 2017 indicate that 712,300 Danes of working age (16-64) — not including recipients of student benefits — get public financial support. But Regan’s claim that most Danes do not work is ludicrous. According to Statistics Denmark, 69.9% of Danes aged 16-64 are active in the labor market.

How can Denmark pay for its comprehensive welfare state, which includes free medical care regardless of the severity of your condition? Regan claims that Denmark is “heavily in debt.” Not so. As it turns out, Denmark is among the least indebted countries in the world, even when compared to other Western countries. The Danish government’s gross debt stands at 35.9% of GDP. Compare that to, e.g., The United Kingdom (86.3 %), The United States (108%), Belgium (101%), Canada (86.6%), France (96.3%), Germany (59.8%), The Netherlands (53.5%), Italy (129.7%), Spain (96.7%) and even Switzerland (41.9%).

Comparing Denmark to the US, Madsen notes that the latter has a problem with fiscal sustainability that may necessitate tax increases. Denmark enjoys what he labels fiscal “oversustainability” (“overholdbarhed”).

At a time when socialism appears to be popular among certain sections of the American population, its proponents would do well not to cite Denmark as a model. The Danish fusion of free-market capitalism and a comprehensive welfare state has worked because Denmark is a small country with a very homogeneous population. This economic and social model rests on more than 150 years of political, social and economic compromises between peasants and landowners, business-owners and workers, and right- and left-leaning political parties. This has led to a measure of social and political stability that would be hard to emulate in much larger and more diverse counties such as the United States.


Lars Hedegaard, President of the Danish Free Speech Society, is based in Denmark.

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Ron Paul: Protectionism Abroad and Socialism at Home

One of the most insidious ways politicians expand government is by creating new programs to “solve” problems created by politicians.

Ron Paul

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Authored by Ron Paul via The Ron Paul Institute for Peace & Prosperity:


One of the most insidious ways politicians expand government is by creating new programs to “solve” problems created by politicians. For example, government interference in health care increased health care costs, making it difficult or even impossible for many to obtain affordable, quality care. The effects of these prior interventions were used to justify Obamacare.

Now, the failures of Obamacare are being used to justify further government intervention in health care. This does not just include the renewed push for socialized medicine. It also includes supporting new laws mandating price transparency. The lack of transparency in health care pricing is a direct result of government policies encouraging overreliance on third-party payers.

This phenomenon is also observed in foreign policy. American military interventions result in blowback that is used to justify more military intervention. The result is an ever-expanding warfare state and curtailments on our liberty in the name of security.

Another example of this is related to the reaction to President Trump’s tariffs. Many of America’s leading trading partners have imposed “retaliatory” tariffs on US goods. Many of these tariffs target agriculture exports. These tariffs could be devastating for American farmers, since exports compose as much as 20 percent of the average farmer’s income.

President Trump has responded to the hardships imposed on farmers by these retaliatory tariffs with a 12 billion dollars farm bailout program. The program has three elements: direct payments to farmers, use of federal funds to buy surplus crops and distribute them to food banks and nutrition programs, and a new federal effort to promote American agriculture overseas.

This program will not fix the problems caused by Tramp’s tariffs. For one thing, the payments are unlikely to equal the money farmers will lose from this trade war. Also, government marketing programs benefit large agribusiness but do nothing to help small farmers. In fact, by giving another advantage to large agribusiness, the program may make it more difficult for small farmers to compete in the global marketplace.

Distributing surplus food to programs serving the needy may seem like a worthwhile use of government funds. However, the federal government has neither constitutional nor moral authority to use money taken by force from taxpayers for charitable purposes. Government-funded welfare programs also crowd out much more effective and compassionate private efforts. Of course, if government regulations such as the minimum wage and occupational licensing did not destroy job opportunities, government farm programs did not increase food prices, and the Federal Reserve’s inflationary policies did not continuously erode purchasing power, the demand for food aid would be much less. By increasing spending and debt, the agriculture bailout will do much more to create poverty than to help the needy.

Agriculture is hardly the only industry suffering from the new trade war. Industries — such as automobile manufacturing — that depend on imports for affordable materials are suffering along with American exporters. AFL-CIO President Richard Trumka (who supports tariffs) has called for bailouts of industries negatively impacted by tariffs. He is likely to be joined in his advocacy by crony capitalists seeking another government handout.

More bailouts will only add to the trade war’s economic damage by increasing government spending and hastening the welfare–warfare state’s collapse and the rejection of the dollar’s world reserve currency status. Instead of trying to fix tariffs-caused damage through more corporate welfare, President Trump and Congress should pursue a policy of free markets and free trade for all and bailouts for none.

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In Monsters We Trust: US Mainstream Media No Friend of the American People

Over 300 US newspapers ran editorials on the same day denouncing Trump, an event in itself that points to some high degree of collusion and groupthink.

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Authored by Robert Bridge via The Strategic Culture Foundation:


Over the course of his turbulent presidency, Donald Trump has accused various media companies, with special attention reserved for CNN, as being purveyors of ‘fake news.’ In one early-morning Tweet last year, he slammed the “FAKE NEWS media” as the “enemy of the people.”

This week, over 300 US newspapers ran editorials on the same day – an event in itself that points to some high degree of collusion and groupthink – denouncing Trump’s insensitive portrayal of them, as if the notion that journalists were not in the same sleaze league as lawyers, politicians and professional con artists never crossed anyone’s mind before. Even the peace-loving Mahatma Gandhi recommended “equality for everyone except reporters and photographers.”

But is the MSM really an “enemy of the people?”

First, it cannot be denied that the US media, taken in all its wholesomeness, has been overwhelmingly consistent in its ‘style’ of reporting on Donald Trump, the 45th POTUS. And by consistent I mean unprecedentedly critical, misleading and outright aggressive in its guerilla coverage of him. If one is not convinced by the gloom-and-doom Trump stories featured daily in the Yahoo News feed, then a study by the Media Research Center (MRC) should do the job. From January 1 through April 30, evening news coverage of the US leader – courtesy of ABC, CBS and NBC – were 90 percent negative, which is pretty much the same incredible average revealed by MRC one year earlier.

The study looked at every one of the 1,065 network evening news stories about Trump and his administration during the first four months of 2018. Total negative news time devoted to Trump: 1,774 minutes, or about one-third of all evening news airtime. That’s pretty much the definition of a circle jerk.

“Nearly two-fifths (39%) of the TV coverage we examined focused on Trump scandals and controversies, while 45 percent was devoted to various policy issues,” MRC wrote in its report.

Meanwhile, the farcical Russia ‘collusion’ story was consistently the main grabber — clocking in at 321 minutes, or nearly one-fifth of all Trump coverage. Of the 598 statements MRC calculated about Trump’s personal scandals, virtually all of them (579, or 97%) came out of the media wash cycle tarred and feathered.

If this represents an orchestrated attack on the Commander-in-Chief, and in light of those numbers it would be difficult to argue it isn’t, the strategy appears to be falling flat. Despite, or precisely because of, the avalanche of negative media coverage, Trump’s popularity rating smashed the 50 percent ceiling in early August and continues to remain high.

In Monsters We Trust

Although it can be safely stated that the MSM is an entrenched and relentless enemy of Donald Trump, that doesn’t necessarily mean it’s an “enemy of the American people,” as Trump argues it is. Let’s be a bit more diplomatic and say it isn’t our friend.

One yard stick for proving the claim is to consider the steadily mounting concentration of media holdings. In 1983, 90 percent of US media were controlled by 50 companies; today, 90 percent is controlled by the Big Six (AT&TComcastThe Walt Disney Company21st Century FoxCBS and Viacom control the spoken and printed word from sea to shining sea).Although many people are aware of the monopolistic tendencies of the US mainstream media, it’s important to understand the level of concentration. It means the vast majority of everything you see and hear on any electronic device or printed publication is ‘democratically’ controlled by six average white guys and their shareholders.

However, keeping track of who owns what these days is practically impossible since the dozens of subsidiary companies that fall under each main company are themselves fiefdoms, each with their own separate holdings. In fact, the already short ‘Big Six’ list is already dated, since National Amusements, Inc. has gobbled up both Viacom and CBS, while 21st Century Fox merged with Disney this year. As for the 350 US newspapers that penned tortured editorials decrying Trump’s critical opinion of them, many of those ‘local’ publications get their marching orders from either the Hearst Communications or the Gannett Company on the East Coast.

Now, with this sort of massive power and influence lying around like dynamite, it stands to reason, or unreason, that the corporate and political worlds will succumb to the law of attraction and gravitation, forging powerful and impregnable relationships. It’s no secret that the politicians, our so-called ‘public servants,’ are mostly in the game to make a fast buck, while the corporations, desperate for ‘democratic representation’ to control regulation and market share, have an inexhaustible source of funds to secure it. Naturally, this oligarchical system precludes any sort of democratic participation from the average person on the street, who thinks just because he remembers to yank a lever once every several years he is somehow invested in the multibillion-dollar franchise.

As far as media corporations being ‘private enterprises’ and therefore free to demolish the freedom of speech (even censoring major media players, like Infowars, simply because they whistle to a different political tune), that is quickly becoming revealed as nothing more than corporate cover for state-sponsored machinations.

“In a corporatist system of government, wherein there is no meaningful separation between corporate power and state power, corporate censorship is state censorship,” writes Caitlin Johnstone. “Because legalized bribery in the form of corporate lobbying and campaign donations has given wealthy Americans the ability to control the US government’s policy and behavior while ordinary Americans have no effective influence whatsoever, the US unquestionably has a corporatist system of government.”

Meanwhile, it cannot be denied, from the perspective of an impartial observer, that the mainstream media is nearly always positioned to promote the government narrative on any number of significant issues. From the media’s unanimous and uncritical clamoring that Osama bin Laden was responsible for 9/11 (even the FBI has admitted it has no “hard evidence” that bin Laden carried out the attacks on the World Trade Center and the Pentagon), to its gung-ho enthusiasm for the 2003 Iraq War, to the sycophantic cheerleading for a war in Syria, the examples of media toeing the government line are legion. And if US intel is in bed with Hollywood you can be damn sure they’re spending time in the MSM whorehouse as well.

Is it any surprise, then, that public trust in the US media is reaching all-time lows, while news consumers are increasingly looking to alternative news sites – themselves under relentless attack – to get some semblance of the elusive truth, which is the God-given right of any man? Truth is our due, and we should demand nothing less.

As Thomas Paine reminded the world in the face of a different foe: “Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph. What we obtain too cheap, we esteem too lightly: it is dearness only that gives everything its value.”

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