Can Trump Drive A Wedge Between Saudi-Russian Alliance?

Authored by Zainab Calcuttawala via OilPrice.com,

Together, Russia and Saudi Arabia produce a fourth of the world’s oil. The laws of competitive international commodity trading have pit the two petrostates on opposite poles of the U.S.-Russia geopolitical rivalry. But a new era of American oil exports and ailing national budgets is pulling Moscow and Riyadh together in trying financial times.

President Barack Obama’s administration maintained a cold distance from Saudi Arabia in its final years. As the United States and its European allies began a war against the Islamic State in 2014, Saudi Arabia focused its military might on Yemen—a country on the Arabian Peninsula facing the brutal consequences of an extended Arab Spring. Iranian arms and funding reached the pockets of the Shiite Houthi rebels, who hoped to build a new regime in Yemen, to the chagrin of Wahabbi Saudi Arabia. 

President Donald Trump’s White House has extended an olive branch towards Riyadh as the new State Department lays out its foreign policy agenda.

But this new diplomatic program runs contrary to the KSA’s economic goals. American oil exports, reinstated back in December 2015, counter the effects of OPEC’s landmark agreement to lower bloc-wide output by 1.2 million barrels per day in an effort to alleviate an international supply glut.

As a major oil exporter, Russia was invited to participate in the agreement when it was being discussed back in 2016. American exports were still limited to specific destinations back then, and U.S.-based companies had only just begun to secure supply contracts in Asian and European markets. Any threat to the success of the deal from the other side of the Atlantic seemed far-fetched just a year ago. 

But the tables have turned.

Washington doesn’t rely on oil profits to run its nation. Moscow and Riyadh do—and heavily so. A boost in active rigs in the Permian basin, as well as other areas in the north of the country, has put shale oil and gas in the center of Russo-American geopolitics. As Moscow approves an extension of its 300,000-bpd output drop commitment with OPEC, the U.S. department of energy eyes new markets for American fossil fuels. Energy Secretary Rick Perry made his rounds to Japan in May to open the world’s largest liquified natural gas (LNG) consumer’s doors to U.S.-drilled supplies. The carbon-light fuel is considered a gateway energy source for developed countries as grid systems shift to renewable and alternative power options.

In Europe, American infringement of Russian dominance in gas markets is even clearer. The European Union has faced off against Moscow regarding the Crimea annexation and the Syrian revolution in recent years, but Russian control over Europe’s energy supplies undermined the continent’s geopolitical leverage. 

This new landscape puts Saudi Arabian interests in line with those of Russia. Both mega producers need to contain the growth of the outbound American fossil fuel industry, but the Iran issue remains a key point of contention between Riyadh and Moscow. The KSA is neck-deep in a showdown against Qatar for its involvement with Tehran on the South Pars gas field. New Crown Prince Mohammad bin Salman’s assertive stance locks the country in an irreconcilable rivalry with Iran. In contrast, Moscow stood by Iran through the latter’s experience as an international global pariah.

So far, President Trump has announced Iran’s official decertification from the nuclear deal, which doesn’t dismantle the deal completely, but provides the Republican Congress a route to sanctions it didn’t have before. The White House also approved new sanctions against the country’s Revolutionary Guard last week. These new developments are bound to bring back the Tehran and Moscow alliance in full force, potentially alienating the KSA in its anti-Iran stride.

The exact dynamics of the Moscow-Riyadh axis are still being forged in OPEC meetings around the world. Time will tell whether Saudi wants this new ally badly enough to reduce its belligerence against Iran, if that’s what the future of the relationship comes to.

U.S. Preparing Charges To Arrest Julian Assange

In a stunning new report, CNN has just revealed, according to anonymous sources at least, that US authorities have prepared charges and will seek the arrest of WikiLeaks founder Julian Assange for intelligence leaks dating all the way back to 2010.

US authorities have prepared charges to seek the arrest of WikiLeaks founder Julian Assange, US officials familiar with the matter tell CNN.

The Justice Department investigation of Assange and WikiLeaks dates to at least 2010, when the site first gained wide attention for posting thousands of files stolen by the former US Army intelligence analyst now known as Chelsea Manning.

US prepares charges to seek arrest of WikiLeaks" founder Julian Assange, sources say https://t.co/U06aLxlQ4Q https://t.co/NBl2Hn1nBD

— CNN (@CNN) April 20, 2017

This latest revelation comes after CIA Director Mike Pompeo ramped up the Trump administration"s rhetoric against WikiLeaks describing it as a "non-state hostile intelligence service" earlier this week.  Ironically, as we noted this morning, Pompeo"s comments can just days before the FBI and CIA admitted that they are searching for an "insider" at the CIA (not a Russian) who exposed thousands of top-secret documents that described CIA tools used to penetrate smartphones, smart televisions and computer systems.

Last week in a speech at the Center for Strategic and International Studies in Washington, CIA Director Mike Pompeo went further than any US government official in describing a role by WikiLeaks that went beyond First Amendment activity.

He said WikiLeaks "directed Chelsea Manning to intercept specific secret information, and it overwhelmingly focuses on the United States."

"It"s time to call out WikiLeaks for what it really is: A non-state hostile intelligence service often abetted by state actors like Russia," Pompeo said.

Pompeo"s comments were, of course, met with an immediate snarky reply from Assange over twitter.

Called a "non-state intelligence service" today by the "state non-intelligence agency" which produced al-Qaeda, ISIS, Iraq, Iran & Pinochet.

— Julian Assange (@JulianAssange) April 14, 2017

For the past several years, U.S. prosecutors have struggled with whether the First Amendment precluded the prosecution of Assange.  In fact, in what now appears to be a very prescient opinion piece, Julian Assange recently penned an article in the Washington Post defending his publications by saying that his motives are "identical to those claimed by the New York Times and The Post."

Quite simply, our motive is identical to that claimed by the New York Times and The Post — to publish newsworthy content. Consistent with the U.S. Constitution, we publish material that we can confirm to be true irrespective of whether sources came by that truth legally or have the right to release it to the media. And we strive to mitigate legitimate concerns, for example by using redaction to protect the identities of at-risk intelligence agents.

During President Barack Obama"s administration, Attorney General Eric Holder and officials at the Justice Department determined it would be difficult to bring charges against Assange because WikiLeaks wasn"t alone in publishing documents stolen by Manning. Several newspapers, including The New York Times, did as well. The investigation continued, but any possible charges were put on hold, according to US officials involved in the process then.

All that said, CNN"s sources seem to believe those same prosecutors have now found a way to move forward...though we"re sure the New York Times won"t receive similar arrest warrants.

Of course, it"s unclear what immediate purpose the charges will serve given that Assange is holed up in the Ecuadorian Embassy in London for the sole purpose of avoiding political persecution.  That said, somehow we suspect that some form of "leverage" is about to be applied against Ecuador to help them "remember" that they have other immediate and critically important uses for Assange"s London bedroom.

And this pretty much sums it up:

Wednesday "WikiLeaks will show illegal actions by the CIA"
Friday "US prepares charges to arrest Assange"https://t.co/7zRy5A2ZAH

— WikiLeaks (@wikileaks) April 21, 2017

Trump Administration Rolls Back Obama Protections On Student Loans...Sorry, Snowflakes

Just days after reports emerged that student loan defaults are soaring, which is undoubtedly due to some combination of, among other things, poor job prospects for the millions of snowflakes who graduate each year with their $200,000 educations in anthropology and the moral hazard created by liberal politicians constantly calling for student debts to be "forgiven" (a.k.a. forcefully jammed down the throats of taxpayers), the Trump administration has revoked rules put in place by Obama that barred student debt collectors from charging penalty fees on past-due loans.

Originating from the Department of Justice, the "Dear Colleague" letter (full letter included at end of post) says that Obama"s unilateral rules implemented in 2015 could have "benefited from public input"...but what good is being King if you can"t unilaterally force new laws on the masses? Per the Washington Post:

The Education Department is ordering guarantee agencies that collect on defaulted debt to disregard a memo former President Barack Obama’s administration issued on the old bank-based federal lending program, known as the Federal Family Education Loan (FFEL) Program. That memo forbid the agencies from charging fees for up to 16 percent of the principal and accrued interest owed on the loans, if the borrower entered the government’s loan rehabilitation program within 60 days of default.

The Obama administration issued the memo after a circuit court of appeals asked for guidance in a case against United Student Aid Funds (USA Funds) challenging the assessment of collection costs. Bryana Bible took the company to court after being charged $4,547 in collection costs on a loan she defaulted on in 2012. Though she had signed a “rehabilitation agreement” with USA Funds to set a reduced payment schedule to resolve her debt, the company assessed the fees.

Education officials sided with Bible, prompting USA Funds to sue the department in 2015. Earlier this year, the company agreed to pay $23 million to settle a class-action lawsuit born out of the Bible case, though it did not admit any wrongdoing.

Of course, it didn"t take long for Elizabeth Warren to draft a letter to the Education Department urging them to not take away "freebies" from America"s entitled snowflakes.

On Monday, Sen. Elizabeth Warren (D-Mass.) and Rep. Suzanne Bonamici (D-Ore.) sent a letter urging the Education Department to uphold the Obama administration’s guidance on the collection fees, which they said “results in an unnecessary financial burden on vulnerable borrowers.”

“Congress gave borrowers in default on their federal student loans the one-time opportunity to rehabilitate their loans out of default and re-enter repayment,” the letter said. “It is inconsistent with the goal of rehabilitation to return borrowers to repayment with such large fees added.”

Of course, these new rules came just days after new data published by the U.S. Department of Education revealed that $137 billion of federal student loans were in default as of December 2016, a 14% year-over-year increase.  Key findings from the Consumer Federation of America:

Average amount owed is $30,650 per federal student loan borrower. Average amount owed per borrower continues to tick up, rising 17% since the end of 2013, when borrowers owed on average of $26,300.

$137 billion in default. For federal loans originated by financial institutions (FFEL) and the US Department of Education (Direct), a total of $137.4 billion in balances were in default, a 14% increase from 2015. This cumulative level of defaulted balances includes loans which defaulted in previous years. Defaulting on a federal student loan comes with severe consequences. Borrowers can face seizure of their tax refund, garnishment of their wages, and an inability to pass employment verification checks.

1 million Direct Loan defaults in 2016. In 2016, 1.1 million Federal Direct Loan borrowers defaulted. Federal law typically defines a federal student loan default as being 270 days past due. Borrowers defaulting for the first time slightly decreased compared to 2015, though borrowers re-defaulting slightly increased compared to 2015.

 Seems the cost of financing those spring break trips to Cancun just got a little costlier...sorry, snowflakes.

"El Chapo" Extradited To The US

The third time behind bars for Joaquin "El Chapo" Guzman may be the unlucky one: on Thursday, Mexico"s most notorious cartel kingpin who twice brazenly escape from prison and spent years on the run as the country"s most wanted man, was extradited to the U.S. on Thursday to face drug trafficking and other charges.

In a major victory for the US DEA, Mexico"s Foreign Relations Department announced Guzman was handed over to U.S. authorities for transportation to the U.S. on Thursday, the last full day of President Barack Obama"s administration and a day before Donald Trump is to be inaugurated.

The U.S. Justice Department issued a statement confirming that Guzman was en route to the United States and expressed gratitude to Mexico for its cooperation.

As reported by the AP, a senior U.S. official said the U.S. Drug Enforcement Administration took custody of Guzman in Ciudad Juarez, which is across the border from El Paso, Texas, and a plane carrying him departed for New York at 5:31 p.m. EST.  The convicted Sinaloa cartel boss has been held most recently in a prison near Ciudad Juarez.

El Chapo was recaptured a year ago after escaping from a second maximum-security prison through a tunnel dug to his cell. He had fought extradition since then.

Upon return to the US, Guzman faces the possibility of life in a U.S. prison under multiple indictments in six jurisdictions around the United States, including New York, San Diego, Chicago and Miami.

A federal indictment in the Eastern District of New York, where Guzman is expected to be prosecuted, accuses him of overseeing a trafficking cartel with thousands of members and billions of dollars in profits laundered back to Mexico. It says Guzman and other members of the Sinaloa cartel employed hit men who carried out murders, kidnappings and acts of torture.

He was first indicted by a U.S. federal grand jury in July 2009. A superseding indictment was issued in May charging him and Ismael "El Mayo" Zambada with a variety of drug, gun and money laundering charges as part of an ongoing criminal enterprise.

A Mexican Foreign Relations Department statement said a court had ruled against Guzman"s appeal and found that his extradition would be constitutional. Obama"s White House, which was down to a skeleton staff hours before Trump takes office, said it had no immediate comment.

'Protectionist' Obama Escalates Trade War, Slams China With Subsidized Aluminum Complaint

With all the partisan narrative defining Trump as a tariff-setting, anti-trade, economy-buster, we thought it ironic that free-trade-wunderkid Obama just escalated trade wars by bringing his administration"s 16th trade-enforcement complaint against China with WTO, urging tariffs on subsidised Chinese aluminum, after accusing them of funneling artificially cheap loans from state-run banks to producers.

Despite declining global aluminum prices, China has increased production 154% over the past eight years while upping capacity by 243%, according to the U.S. government.

As Bloomberg reports, the complaint says China has harmed U.S. interests by artificially expanding Chinese capacity, production and market share, resulting in a significant lowering of the global price for primary aluminum. It is the 16th trade enforcement challenge President Barack Obama’s administration has launched at the WTO against China.

“This latest challenge once again demonstrates the Obama administration’s unwavering commitment to ensuring a fair and level playing field for American workers and businesses,” U.S. Trade Representative Michael Froman said in a written statement. “Artificially cheap loans from banks and low-priced inputs for Chinese aluminum are contributing to excess capacity and undercutting American workers and businesses.”

In a statement very reminiscent of Trump"s rhetoric on "fair" not "free" trade, President Obama noted he U.S. under his tenure has filed more enforcement complaints in the WTO than any other country and has won every one that’s been decided...

“America succeeds when our workers and businesses have a fair shot to compete in the global economy. That’s why when other countries cut corners and break the rules on trade, my Administration stands up for strong trade enforcement,” Obama said.

“China gives its aluminum industry an unfair advantage through underpriced loans and other illegal government subsidies. These kinds of policies have disadvantaged American manufacturers and contributed to the global glut in aluminum, steel, and other sectors.”

As The Wall Street Journal reports, the complaint would represent an escalation of trade disputes between countries with the world’s two largest economies almost a week before Donald Trump assumes the U.S. presidency. Mr. Trump suggested again Wednesday in a news conference that trade relations with Beijing would be a top priority, saying the U.S. trade imbalance with China was too large.

The complaint accuses China of funneling artificially cheap loans from state-run banks to Chinese aluminum producers, helping the companies upgrade their facilities and expand production, the people said. China also subsidizes aluminum production by providing producers with cut-rate coal and electricity, the complaint says, according to people familiar with it.

Donald Trump, who will be sworn in as the president’s successor next Friday, has vowed to pull out of or renegotiate free trade deals he argues allow Chinese market manipulations. During a press conference Wednesday in New York, Trump said China had “taken total advantage of us economically” and vowed the leadership in Beijing “will respect us far more” under his presidency.

So the timing of this escalation of trade disputes appears to be just another example of the Obama administration"s "smooth transition" efforts to leave behind chaos for the Trump administration (even if this effort seems to fit with Trump"s "fair" trade rhetoric).