Another Gulf Crisis: Dinar Devaluation Looms As Bahrain Begs Neighbors For Bailout

Despite the recent rise in oil prices, all is not well among the allies in the Gulf. The "pegged-to-the-dollar" Bharaini Dinar has tumbled in the last few days as Bloomberg reports the nation has asked Gulf Arab allies for financial assistance as it seeks to replenish its foreign-exchange reserves and avert a currency devaluation - which could spread contagiously through MidEast markets.

Bloomber notes that the slump in oil prices has battered the six-member Gulf Cooperation Council, at times raising questions over whether a dollar peg seen as a bedrock for economic stability for more than three decades was sustainable. And while bets against the region’s currencies have subsided this year, a devaluation of a GCC member would risk shifting the attention to others. Gulf central banks, including Bahrain’s, have repeatedly brushed aside talk of abandoning their exchange-rate regimes.

But Bahrain has seen its central bank"s foreign reserves collapse over 75% from 2014 highs as they have defended the currency peg.

And so, as Bloomberg reports, according to people with knowledge of the talks, Bahrain has asked for a bailout.

The request was made to Saudi Arabia and the United Arab Emirates, two of the people said.

 

A third person said Kuwait was also asked.

 

The countries responded by requesting the island kingdom do more to bring its finances under control in return for the money, the people said on condition of anonymity because the discussions were private.

 

The talks are at an early stage, one person said.

It appears the FX markets are not convinced as the Dinar tumbled...

The IMF estimates that Bahrain needs oil prices at $99 a barrel to balance its budget this year, compared with $73.1 a barrel for Saudi Arabia, which is overhauling its economy.

While Brent crude is trading at the highest level in more than two years, it’s still almost $40 below Bahrain’s breakeven price.

But, Bloomberg points out that economists say that a Saudi-led bailout of Bahrain will be less costly than cleaning up the mess of a devaluation.

“Most people are fully expecting the other Gulf countries to come to Bahrain’s aid,” said Jason Tuvey, a London-based economist at Capital Economics.

 

“If Bahrain was forced to devalue its currency it would probably start to raise questions about other currency pegs.”

Will this be the next ripple to spook markets? Or just another dip to buy?

One Of The World's Biggest Sovereign Wealth Funds Is About To Become A Seller

As regular readers may recall, one of the alleged reasons for the market swoon at the end of 2015 and early 2016 was what Deutsche Bank first dubbed "quantitative tightening" but not by central banks (that would come later), but by sovereign wealth funds in general - with an emphasis on petrodollar nations who were struggling to balance their budgets at a time of plunging oil prices and were forced to sell assets - and China in particular, which faced with a tumbling Yuan was forced to sell billions in US-denominated securities to halt the sharp devaluation of the Yuan.

Now, after a period of relative stability for sovereign wealth funds, in which the indiscriminate SWF/China selling of 2015 faded into a distant memory, one of the world’s biggest buyers of trophy assets is about to become a seller again. According to Bloomberg, following the ongoing isolation by its powerful Arab neighbors, Qatar’s sovereign wealth fund is reversing a decade-long run in high-profile foreign investments to buttress its own economy.

The Qatar Investment Authority, or QIA, which has already reduced its holdings in Credit Suisse, Rosneft and Tiffany in recent months, is considering unleashing what could be a liquidation tsunami in this illiquid market, selling more of its $320 billion of assets, which includes stakes in Glencore and Barclays, and using the proceeds to bolster the domestic economy, according to Bloomberg sources.

The selling, which we previewed back in June amid an overview of Qatar"s deteriorating financial system, will probably not come as a surprise: "Sovereign wealth funds, such as the Qatar Investment Authority, are always national buffers against adverse risk events, ” said Sven Behrendt, managing director of GeoEconomica in Geneva. “Since the boycott is such a risk event for Qatar, the assets stored within QIA will need to serve as such a buffer.”

Created over a decade ago, in 2005, to handle Qatar’s vast windfall from sales of LNG of which it is the world’s biggest exporter, the QIA and other Qatari investors have amassed holdings in Hollywood, New York office space, London residential property, luxury Italian fashion and even a soccer team. The QIA ranks as the ninth largest globally, according to the Sovereign Wealth Fund Institute.

Meanwhile, Qatar"s banks have already sensed the change in the wind direction, and having pitched acquisition targets to the QIA for years "are now proposing asset sales, and have been told not to expect any major investments by the fund in the near term." The fund hasn’t formally hired financial advisers to dispose of any assets but is considering which stakes are best positioned to be offloaded, they said. The QIA declined to comment.

Quoted by Bloomberg, Rachel Pether, a senior adviser at the Sovereign Wealth Fund Institute said that "the QIA is being fiscally prudent by not actively pursuing new investments." She added that “the QIA has approximately 57 percent of its portfolio in publicly listed securities, which means there is reasonable liquidity in its portfolio if further support is required."

The QIA last year saw its biggest overhaul since 2014, grouping $100 billion of investments in local companies into a new unit and abandoning the Qatar Holding name synonymous with its highest-profile deals, people with knowledge of the matter said at the time.

After a dip in transactions in 2015 and 2016 as oil prices slumped, the fund regained its appetite for deals late last year, investing in Turkey’s biggest poultry producer, Rosneft, and U.K. gas company National Grid Plc, all within a couple of months.

All that, however ended after a Saudi-led standoff that started in June has put the small but rich (with the world"s highest GDP/capita ratio in the world) in a vice.

Confirming the start of the upcoming liquidation phase, CEO Sheikh Abdullah Bin Mohammed Bin Saud Al Thani said last month that the QIA plans to spend most of what remains of its $45 billion investment target on U.S. assets as it seeks diversification. As Bloomberg adds, the fund is also considering selling some of its extensive property portfolio, especially in the U.K. where it owns stakes in London’s Savoy Hotel, the Shard skyscraper and the Olympic Village. The QIA also wants to sell an office building in London’s Canary Wharf financial district that is leased to Credit Suisse, people familiar with the matter said last month.

In other words, already reeling from the withdrawal of Ultra high net worth buyers, the London real estate market is about to get hit by a double whammy of selling from the very top.

The QIA has injected billions of dollars into local banks to shore up liquidity after Saudi Arabia, the United Arab Emirates and Bahrain cut diplomatic ties on June 5 amid accusations of funding terrorism, prompting their lenders to withdraw funds from Qatar, people familiar with the matter said at the time. Qatar has repeatedly denied the charges.

Qatar should also look at other assets that could be used as alternative buffers to reduce some of the heat on QIA, said GeoEconomica’s Behrendt.

“The diplomatic boycott and economic blockade of Qatar sees basically two strategies employed by the parties: the Saudi-led coalition employs a ‘wearing down’ approach, Qatar a ‘holding out’ strategy,” he said. “In the end it will be about who will have the longer staying power.”

And while the QIA liquidation was telegraphed months in advance, a bigger question is if now that SWFs are once again selling assets to shore up the domestic economy, will others follow, and specifically, will Saudi Arabia be next. As Bloomberg"s Javier Blas showed this morning, Saudi FX reserves tumbled $6.9 billion in August, and are down a whopping $48bn YTD, effectively in line with the drop over the same period in 2016, when Saudi Arabia saw $54bn in reserves flow out, on lower oil output and prices.

#SaudiArabia FX reserves fell $6.9 billion in August (Jan-Aug 2017: -$48bn, same period 2016: -$54bn) on lower #oil output #OOTT #OPEC pic.twitter.com/z50TYnQdK0

— Javier Blas (@JavierBlas2) October 3, 2017

If and when Saudi Arabia joins the QIA as a motivated seller (at any price), and as central banks withdraw as buyers of first, last or any resort, the sudden risk asset air pocket of 2015/2016 may seem like a walk in the park in retrospect.

Trump Prevented War Between Saudi Arabia And Qatar In Last Minute: Report

In what may be the most bizarre news of the day, Bloomberg reports that Saudi Arabia and the United Arab Emirates were "close to taking military action in the early stages of their ongoing dispute with Qatar", until Donald Trump called the leaders of both countries and warned them to back off; in other words, Trump"s intervention prevented yet another gulf war, which if true will make the U.S. Millitary-Industrial complex very unhappy as Trump"s peace effort likely cost US offense defense companies tens of billions in lost profits.

As Bloomberg writes, confirming reports from early June that Saudi Arabia and Qatar were inches away from war leading to the mobilization of Qatar"s army, Saudi Arabia and the U.A.E., which both have a penchant for using their brand new weapons purchases from the US in the most practical of ways, were looking at ways to remove the Qatari regime, which they accused of sponsoring terrorism and cozying up to Iran. However, Trump told Saudi and U.A.E. leaders that any military action would trigger a crisis across the Middle East that would only benefit the Iranians.

It wasn’t clear when the conversations took place. The Saudis, backed by the U.A.E. and two other regional allies, broke off diplomatic ties with Qatar in early June, imposed an economic embargo and cut transport links. They’ve since issued multiple demands, including the closure of Qatar-based broadcaster Al Jazeera, that haven’t been met. Qatar denies all the accusations and accuses the Saudis of seeking to dominate smaller neighbors.

Of course, Saudi Arabia denied that military action was ever considered". The allegations are entirely incorrect, have already been denied, and amount to nothing more than typically misleading Qatari propaganda", said a Saudi official source familiar with the matter. At least they didn"t blame Russia.

Separately, Emirati officials have said in the past that the dispute can only be resolved by political, not military, means.

Still, despite avoiding war, the standoff has yet to be resolved, despite efforts by Kuwait to mediate. Trump made a push to settle it this month, after talks in Washington with Kuwaiti Emir Sheikh Sabah Al-Ahmed Al-Sabah. He failed.

The U.S. president made a flurry of calls with Gulf leaders, saying the dispute was distracting U.S. allies from forging a united front against Iran.

Qatar’s emir, Sheikh Tamim bin Hamad Al Thani, told the United Nations General Assembly in New York on Tuesday that the blockade amounted to a “betrayal” by the Saudis and their allies. He said his country is open to dialogue, but won’t be dictated to.

Outlining his mediation efforts at a press conference with Trump, Sheikh Sabah said: “Thank God, what’s important is that we stopped any military thing.” The Saudi-led coalition responded with a statement saying that a “military solution was never and will never be on the table.”

Meanwhile, speaking to reporters during his meeting with the Qatari Emir this afternoon near the UN, Trump denied everything and according to Bloomberg said he "didn"t warn the Saudis on military action against Qatar." In other words, everyone denied the story which is all we needed to hear. The question is if tensions between the gulf neighbors pick up again to the point of military intervention, will Trump succeed again.

Despite Sanctions, Qatar Is Still Outpacing Saudi Arabia In Economic Growth

Authored by Zainab Calcuttawala via OilPrice.com,

Despite the torrent of reports attesting to the non-impact of the Saudi Arabia-led diplomatic boycott of Doha, new estimates by Bloomberg’s economic survey predict that 2017 will be Qatar’s slowest year of GDP growth since 1995.

A previous study in June forecasted 3.1 percent and 3.2 percent growth for this year and next, respectively. New figures reduce those numbers to 2.5 percent for 2017 and 3.2 percent for 2018. The deficit figures jump to 5.1 percent for the current period, compared to previous estimates at 4.6 percent.

The current feud between Gulf monarchies began on June 5^th, when Saudi Arabia expressed its indignation at an insubordinate Qatar.

Energy interests, most notably Doha’s shared custody of the South Pars gas field – the largest of its kind – prevent Qatar from cutting relations with Shiite Iran, the Sunni Saudi government’s main rival in the Middle East.

“Even before the diplomatic crisis with regional powers, it looked like Qatar’s non-energy economy would slow,” William Jackson, of Capital Economics told World Oil.

“The early signs are that the sanctions dealt a damaging blow to Qatar’s economy in June. The impact appears to be temporary, but it will still result in weaker growth."

To be clear, Qatari exports of natural gas have not been affected by the diplomatic row.

The biggest casualty has been GCC-funded projects, namely food-processing and port facilities, that now face an uncertain future.

“The illegal actions of our neighbors have been the catalyst for us to accelerate our economic plans and renew our commitment to diversification and sustained growth,” said Sheikh Tamim bih Hamid at Thani.

“We fully expect to see a strong return of the Qatari economy this year and growth over the years to come.”

Qatar Petroleum also guarantees an increase in oil equivalent output topping one million barrels per day between the next five to seven years.

Doha’s unbeatable diplomatic flexibility plays a large role in carving out its niche in the region. The variety in its alliances will prove its immunity from the disciplinary tendencies of Saudi Arabia over the next 12 months.

"We expect the disruptive impact of the boycott to have evaporated by next year," said Farouk Soussa of Citigroup Middle East.

"Trade routes will have been fully reconfigured, confidence will have been restored, building will recommence -- all possibly against a backdrop of a continued boycott, but one that the economy has adapted to."

Though the extent of Qatar’s economic expansion sees new limits, it still outpaces its former GCC allies. It is ahead of Saudi Arabia by 0.5 percent and the United Arab Emirates by two percent, the latest surveys say. And that is a problem for the GCC, especially for Saudi Arabia.

As Hajj season approaches, Doha continues to deny any efforts to block any Muslims’ timely arrival in Mecca or Medina. Qatar’s Civil Aviation Authority issued a statement on Monday that denied its intent to block Saudi Arabian planes from landing or departing from its airports.

To be fair, the KSA has done the same. Recently, Riyadh reopened its lander border to allow Qataris to enter the Islamic holy lands, and offered other citizens a flight into the country.

Even plans for World Cup 2022 in Qatar’s desert heat seem to remain undisturbed.

According to Hassan Al-Thawadi, Secretary General of the Supreme Committee for Delivery and Legacy, the blockade has caused “an inconvenience” in delivering on its soccer field promises. Still, “progress is being made” and the predetermined schedule has yet to see adjustments.

Projections for economic growth are consistently in flux. Whether or not Qatar meets its 3.1 percent growth rate this year is a factor of will power, bureaucratic know-how and international diplomacy, especially when a country has lost its major regional allies. So far, Doha’s resilience sees no foreseeable cracks.

Dubai's "Torch Tower", World's Fifth Tallest Residential Building, Is Engulfed In Flames

A massive fire has engulfed the fifth tallest residential building in the United Arab Emirates, the 86-story Dubai Torch Tower - the same building which was also damaged in a major blaze in 2015 -  where social media footage showed flames spreading up much of building and burning debris falling down. According to BBC, civil defence officials have "successfully evacuated" the building and are now working to bring the fire under control.

Firefighting brigades from four stations have been sent to battle the flames at the Torch Tower, the fifth tallest residential building in the world.

It was not immediately clear what caused the blaze in one of the world"s tallest buildings.

BREAKING: #Dubai"s torch tower is AGAIN on fire. pic.twitter.com/dqBA0TgLeN

— The Intel Crab (@IntelCrab) August 3, 2017

The fire is believed to have started on the ninth floor before ascending towards the top stories: “It"s big fire started on 9th floor. Civil defence and police in the scene now to control the fire,” a Dubai police spokesperson told Gulf News.

The #Torch tower in #Dubai, the fifth-largest residential building in the world, is engulfed in flames pic.twitter.com/PrztJZYZMH

— Benjamin Alvarez (@BenjAlvarez1) August 3, 2017

Dubai’s Civil Defence Director General and Police Commander are at the scene coordinating the rescue efforts. “No injuries have been reported so far in the Torch Tower fire incident,” Dubai"s media office said in a latest tweet.

#torchtower #dubai
it"s still burning ???? pic.twitter.com/sNyfa8EoNK

— Hilda (@dhuyanik) August 3, 2017

The 79-story skyscraper opened in 2011, and it was the world"s tallest residential building at its opening, but has since been surpassed by several others.

The Torch Tower is said to be the 32nd tallest building in the world, according to the Skyscraper Centre. It has 676 apartments.

Revisiting Saudi Arabia

By Chris at www.CapitalistExploits.at

In May of last year I was attempting to figure out if there was an asymmetric play to be had in the land of sand and black gloop. There were a lot of moving pieces to deal with. I think it"s worth revisiting but first it"s worth reviewing what I thought just over a year ago. Much has subsequently happened so we can piece a little bit more together now.

A few years ago, when living in Phuket, Thailand, a group of Saudis stayed for a week’s holiday in a neighboring villa.

Outside of the religious and social confines of the land of black gold and endless sand, this group made a bunch of spoiled 5-year olds left to run amok in a candy shop without adult supervision look positively angelic.

They were very visible, with an entourage of young Thai “ladies” and a fleet of Land Cruisers to haul them about. On one occasion, after my son witnessed one of the guys buying a beer and throwing a US$100 bill at the waiter, telling him to keep the change, he asked me how come they had so much money to waste.

I explained that Saudi Arabia has two things in abundance: sand and oil. And though the world doesn’t need sand as much as it does oil, they have grown very wealthy selling the oil to the rest of the world.

Depending on whose numbers you take, somewhere between 75% and 85% of Saudi Arabia’s revenues come from oil exports, and fully 90% of revenues come from oil and gas. Clearly the Kingdom is dependent on oil revenues in the same way that an infant is dependent on its mother’s milk. And unless you’ve been living under a rock for the last few years, you’ll have noticed that the price of oil has collapsed.

Now, in a “normal” market the reduced revenues would manifest in a weaker local currency as demand for Riyals declines.

But governments and central bankers don’t believe in “normal” markets and so the Saudi riyal has been pegged at 3.75 to the US dollar since 1986.

It’s not hard to see a situation where Saudi Arabia may very well be forced to de-peg the currency to curb the fall in the country’s FX reserves should low oil prices persist.

Let’s look at some of the potential catalysts for this.

Could Yellen Kill The Peg?

While the Sheiks contemplate how to deal with their predicament from diamond encrusted cars and golden toilets, across the pond we find that monetary policy in the US has been tightening albeit modestly. What’s important to understand is that in order for Saudi Arabia to maintain its currency peg it needs to follow FED monetary policy.

By following Yellen the Saudis land up sacrificing growth, and by diverging they sacrifice FX reserves in order to maintain the peg. Clearly neither are attractive propositions. According to the Saudi Arabian Monetary Agency (SAMA), for every 100 basis point increase in the Saudi Interbank Offered Rate (SIBOR) this leads to a 90 basis point decline in GDP in the subsequent quarter, and a further 95 basis points in the following quarter.

Falling GDP in a country where over 60% of the population are under 30 brings about its own set of problems. Political instability in the Kingdom has been rising and the royal family is increasingly fighting for survival. After all, they had the experience of watching the Arab Spring unfold on their flat screens.

If, on the other hand, they opt not to follow the stumpy lady, the gap between interest rates in the US and Saudi Arabia will be quickly exploited by people like me as arbitrage opportunities open up.

So this is what we’re all looking at right now: SAMA will have to buy riyals in the open market by selling from its hoard of dollar reserves. Any rise in interest rates in the US will mean SAMA will have to further deplete reserves.

As I have mentioned before, all pegs eventually break. The question is one of timing.

How long do the Sheiks have under current oil prices?

The falling oil price since mid-2014, has significantly reduced Saudi Arabian revenues. So much so that the scorecard for 2015 showed a deficit of $98bn, and SAMA is estimating a further $87bn deficit this year.

The Saudi government have been funding this deficit by drawing down on forex reserves, spending $132bn in the year to January of this year. With current prices and current reserves they can easily last another 4 years.

Some things I’m thinking about:

• Iran will bring additional supply to a market in surplus. Saudi Arabia will be forced to keep the pedal to the metal on production, not wanting to lose any market share. And so I’m not convinced we’ll see oil rising in the next 12 to 24 months.


• Internal domestic political pressures can be "addressed" with creating an external pressure or conflict. It wouldn"t be the first time.


• We’re in a US dollar bull market as I’ve stated here,here, and here and many other times. Dollar strength will put pressure on the price of oil and thus revenues to the Kingdom.

This could certainly get interesting and traders have begun speculating on a de-pegging from the dollar.

Should low oil prices persist for the next 3 to 4 years, Saudi Arabia will be forced to decide whether it prefers to either cut the production or loosen the currency peg.

I could be wrong but I feel like it’s too early to play this trade and the costs of entry are not astoundingly cheap. Saudi Arabia has almost no debt and can easily access the credit markets. With debt to GDP of just 2% they have a lot of room to move. Coupled with the upcoming partial listing of Aramco their ability to tap international markets for capital is certainly a factor I’m not sure all currency speculators are considering.

What is worth watching are neighbour states. While Kuwait, Qatar, and the UAE all have dollar pegs, they too have vast central bank reserves and sovereign wealth funds. But what looks pretty precarious to me are Oman and Bahrain who could run out of reserves in less than three years. Both these countries have resorted to issuing debt to extend the longevity of their reserves but issuing dollar denominated debt which is essentially asset underwritten by the price of oil in an environment of persistently low oil prices certainly looks like a precarious bet to be making.

Investors looking for asymmetry in markets will do well paying attention to the currency markets, and existing dollar pegged currencies in particular. As I mentioned before… all pegs break, and the returns that can be made in such situations are of the life changing variety.

– Chris

“If Saudi Arabia was without the cloak of American protection, I don’t think it would be around.” – Donald Trump

Ok, so that was over 12 months ago. Fast forward to today and we have some of the answers... and we"re a little further down the road.

Oil

Still looks like isht. The supply and demand setup hasn"t gotten any better, and this is not what the house of Saud wants. Nothing shocking to what we expected anyway.

Rates

The tubby lady at the FED has gone ahead with a divergent policy (raising rates). As you can see, I discussed in that article what effect the raising of rates could (or would have) on the finances in Saudi Arabia. Again, nothing we never expected.

Conflict

I penned an article on Qatar here. I do think the spat with Qatar has less to do with them than it has to do with Iran and with the Saudi"s domestic problems - both financial and political. In the article above, I mentioned some stupid conflict but wouldn"t have put it up there as a probability over 50%. And yet now it"s happening in real time. Does it subside, does it blow up, or something else?

The question I think we need to ask ourselves today is this: now that the conditions have been met that do nothing to assist the Saudis with their finances (and at the same time they"ve chosen a path of "external" enemy) where does that leave us with original idea of looking for an asymmetric payoff on the riyal having to de-peg their currency?

I"m watching the dollar index very, very closely. If we break higher, then the Saudis will have a very, very serious problem on their hands as their balance sheet blows out. This could get interesting... and profitable.

- Chris

"Rockefeller once explained the secret of success. Get up early, work late - and strike oil." — Joey Adams

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Qatar Blockade To Continue After Arab States Slam "Negative" Response To Ultimatum

Foreign ministers from Egypt, Saudi Arabia, the United Arab Emirates and Bahrain released statements following a meeting in Cairo on Wednesday, after the latest deadline they had set to Qatar expired on Tuesday night.

The four Arab nations, locked in a diplomatic crisis with Qatar, dismissed Doha’s response to their demands as “not serious” and pledged to continue to keep the Gulf state under political and economic sanctions until it changes its policies. They also “expressed regret with regards to the negative response from Qatar, which showed complacency and non-seriousness to deal with the root of the problem and reconsider their policies and practices.”

Arab Foreign Ministers meet to discuss the diplomatic situation with Qatar, in Cairo, Egypt.

Speaking to reporters, Egyptian Foreign Minister Sameh Shukri said that Qatar’s response to the four Arab states’ list of demands, which was passed on via intermediary Kuwait on Monday, was “generally negative” and failed to “lay the foundation for Qatar"s reversal of the policies it pursues.”

He added that Qatar’s reply "lacked content", and that it was no "longer possible to tolerate Qatari acts." Shukri also accused Qatar of failing “to realize the gravity of the situation,” according to AP.

Separately, the Saudi Foreign Minister Adel bin Ahmed Al Jubeir says the alliance will weigh more measures against Qatar, and reserves the right to take action when appropriate. He also made it clear that “this is not a response to the Kuwait letter” so something more formal may follow as “consultations are ongoing."  He also said that the Boycott will continue until Qatar changes policy, adding that it was no surprise that Iran is trying to get closer to Qatar, while expressing hopes that Turkey will remain neutral.

In other words, it appears that while nothing firm was decided, “the boycott will continue until Qatar changes policy” according to the Saudi.

The Saudi-led alliances will meet again in Manama, Bahrain to discuss next steps.

Earlier in the day, Qatar"s Foreign Minister accused four Arab neighbors of "clear aggression" against his country. Sheikh Mohammed bin Abdulrahman al-Thani said charges cited by Saudi Arabia, Bahrain, the United Arab Emirates and Egypt in cutting diplomatic and transport links a month ago "were clearly designed to create anti-Qatar sentiment in the west".

"Qatar continues to call for dialogue despite the violation of international laws and regulations, despite the separation of 12,000 families, despite the siege that is a clear aggression and an insult to all international treaties, bodies and jurisdictions," he told a meeting at London"s Chatham House think-tank.

Qatar “wasn’t built on oppression, fear, censorship, has an independent view on global and regional events,” the official added. Also, the country successfully “mediated in 10 international portfolios in the course of the last 8 years,” without “interfering in the internal affairs of others.”

Qatar remains “open for dialogue, not an ultimatum,” as the country’s authorities believe that “citizens everywhere should have the right to a government that is responsive to their needs,” and their country, despite not being a democracy, caters to these needs. “That’s why Qatar wasn’t alarmed and threatened by the Arab Spring movement [back in 2011],” the Qatari Foreign Minister said.

Saudi Hypocrisy: The Great Gas War Is Looming

Authored by Golem XIV,

Astonishing hypocrisy! Saudi and its affiliates demand end to support of terrorism while they themselves are some of its largest funders.

Their list of demands, as reported in the Guardian, should be translated as:

1) Curb ties with Iran = No talking to Shia Muslims.

2) Sever all ties to terror organisations = Declare Muslim Brotherhood terrorists who we find threatening internally and only Saudi should decide which terror organisations get funded. Not you

3) Shut down al-Jazeera = We don’t allow press freedom you can’t have it either. Especially one that criticises us. Shut down what is, for all its significant faults, one of the best media outlets in the world.

4) Shut down all other media Qatar funds = Only Saudi propaganda allowed. al-Jazeera was far too willing to report government repression during the Arab Spring. So close down all non Saudi controlled media.

5) Close down Turkish military bases in Qatar = Qatar isn’t allowed its own diplomatic sovereignty.

6) Stop funding anyone Saudi calls a terrorist = Stop funding anyone who opposes Saudi or other undemocratic regimes in the ME. No democratic dissent allowed.

7) Handover terrorist figure = Hand over to us all dissidents we want to imprison or behead.

8) Stop interfering in other countries affairs = Hand over people we don’t like that have taken refuge in Qatar. We do the interfering (see this list of demands) not you.

9 -12) Make yourself a vassal state of Saudi, pay us money, let us control your treasury and foreign policy and agree to all this NOW. Or else, Saudi, its minions, the US and Israel will try to paint you as part of a new axis of evil.

Oh and by the way oil rules! Not the gas you and Iran want to sell!

The Great Gas War is gathering towards a major escalation.

The Northern Front in Ukraine has gone quiet. Or at least unreported. But its Southern Front from Syria to Yemen, Turkey to Iran is hotting up.

Multipolar World Order: The Big Picture In The Qatar-Saudi Fracture

Authored by Federico Pieraccini via The Strategic Culture Foundation,

In a climate of outright confrontation, even the Gulf monarchies have been overtaken by a series of unprecedented events. The differences between Qatar on one side, and Saudi Arabia, the United Arab Emirates and Bahrain on the other, have escalated into a full-blown diplomatic crisis with outcomes difficult to foresee.

Officially, everything started with statements made by Qatari emir Tamim bin Hamad Al Thani that appeared on the Qatar News Agency (QNA) on May 23, 2017. A few hours before the conference between the 50 Arab countries and the US President, Al Thani was reported to have said the same words that appeared on QNA. The speech was very indulgent towards Iran and described the idea of an «Arab NATO» as unnecessary. The exact words are not known because the event in which Al Thani had made such incendiary remarks concerned military matters and was thus not accessible to the general public. Especially to be noted is that QNA denies having published words in question and attributed them to a cyber-attack.

The public dissemination of the Emir"s words on QNA promptly provoked an unprecedented diplomatic crisis in the Gulf. Immediately, Saudi Arabia, the United Arab Emirates (UAE), Bahrain, Egypt and the Maldives took advantage of the confusion created by Al Thani’s alleged words by enacting a series of extreme measures while accusing Doha of supporting international terrorism (through Hamas, al Qaeda, Iran and Daesh). Qatar’s ambassadors in the countries mentioned were requested to return home within 48 hours, and Qatari citizens were given 14 days to leave Bahrain, Saudi Arabia and the UAE. At the same time, Riyadh proceeded to close its airspace as well as land and sea borders to Qatar, effectively isolating the peninsula from the rest of the world.

Realistically, what interest would Qatar have had in promulgating the words of Al Thani in order to antagonize Riyadh and Abu Dhabi? Even if the Emir had made such remarks, Doha would certainly not have given them to QNA to publish on its website. If it was not a cyber-attack, it was certainly a miscalculation on Doha"s part or, worse, possibly internal sabotage to damage the Al Thani family.

To explain the dynamics that have officially created this unprecedented situation, it is necessary to sift through the facts in order to discern reality from fiction.

There is no difference between Saudi Arabia and Qatar

The Saudi charge that Qatar supports terrorism is well supported by the facts, Doha having long supported terrorist groups in North Africa and the Middle East, from Libya to Syria through to Egypt and Iraq. The problem is that the one throwing the charge, Saudi Arabia, is as guilty of it as is the accused. Both countries have provided the financial backing for much of the extremism that has been infesting the globe for decades. The Saudi royal family is the ultimate expression of the Wahhabi heresy that historically corresponds to the ideology of al Qaeda. Riyadh"s support for terrorist organizations was complemented by the US neoconservative strategy designed to destabilize Afghanistan in the context of anti-USSR geopolitics, as admitted by the recently deceased Zbigniew Brzezinski.

The rivalry between Saudi Arabia and Qatar has deep roots and affects not only the ideological difference between Wahhabis and the Muslim Brotherhood, but also the increased religious tolerance of Doha as opposed to the ideological intransigence of Riyadh.

Qatar, through the Muslim Brotherhood, has supported the Arab Spring that deposed Mubarak and placed Morsi in charge of Egypt, creating in the process strong tensions with the Saudis. Riyadh supported al Sisi to remedy the situation in Egypt, financing the coup that sent Morsi to jail. In 2014 this prompted a crisis between Gulf Cooperation Council (GCC) countries, with Qatar’s ambassadors being expelled from the UAE and Saudi Arabia. Differences were soon patched up by the convergence of interests in destabilizing Syria and Iraq with extremist terrorism funded by both nations together with Turkey"s important contribution.

The Neocon Zionist and Wahhabi plans

What is interesting to note in connection with the Gulf crisis is the change in strategy in recent months by the US, Israel and Saudi Arabia. Washington"s plan, shared by Tel Aviv and supported by Riyadh, is to pin the blame for sponsoring international terrorism on Tehran and Doha, fingering Qatar as the key financer of Hamas, al Qaeda and Daesh. The reason and purpose behind this are manifold.

The problem of Islamic terrorism has become a subject of focussed attention for European and American citizens because of frequent attacks. Security agencies are incapable of preventing terrorist attacks from the same elements they have for years funded and supported as part of their anti-Iranian and anti-Syrian strategy. The difficulties faced by secret services in halting such attacks (as opposed to rogue secret services who aid terrorist networks a la Operation Gladio) have made people question.

Citizens, increasingly frightened and angry with their governments for the lack of security, are beginning to realize that the extremists receive their financial support from the Gulf countries, who are known to be in business with many European capitals. The last thing that the governments of France, Italy, Germany, the UK and the US want is the revelation that they are in league with Islamic terrorism for geopolitical purposes. The consequences would be disastrous for the already fragile credibility of the West.

Further confirmation of this strategy to gang up on Qatar can be seen in the economic field. S&P downgraded the credit rating of Qatar a short time ago to AA-, setting the stage for a further downgrade that could have important implications for the future economic stability of the emirate.

Trump and other leaders of the G7 seem to have made up their minds, agreeing with Saudi wishes, heaping on Qatar all the blame for Islamic terrorism. The US administration, more eagerly than its European vassals, also insists on including Tehran in the charge of state sponsors of terrorism. For Washington, the aim is to curtail covert Western support for terrorism, all the more urgent given the worsening state of affairs in Europe. Politicians from the Old Continent understand that it is fundamental for a culprit to be found before being accused of being unable to stop Islamist terrorism. It is a desperate exit strategy that aims to attribute primary blame to Qatar and secondary blame to Iran.

Europeans are more reluctant to endorse this vision, given the possible trade opportunities for the European private sector in Iran following the removal of sanctions. It is even possible that some European leaders are opposed to Trump"s idea, probably discussed during the G7 in Italy, given Qatar"s billions of investment poured into the dying European economy.

Israel has officially maintained a neutral position concerning the Arab Spring, benefiting from the chaos in the region and the weakening of geopolitical opponents like Syria and Egypt. Qatar"s support for Hamas, Israel"s historic enemy, is a factor that has contributed to Tel Aviv"s support for Riyadh"s manoeuvres against Doha.

The Saudis, on the other hand, have multiple reasons for attacking Qatar. Firstly, it brings Doha"s foreign policy back into line after showing leanings towards Tehran. Secondly, it aims to incorporate Qatar in order to absorb its enormous financial resources, as an extreme measure to help solve Saudi Arabia’s disastrous economic situation.

Chaos as a means of preserving global hegemony

Behind a convergence of convenience involving the triumvirate of Israel, Saudi Arabia and Qatar lies a well-outlined project of preventing Tehran from becoming a regional hegemon. The Saudis regard Iran as a heretical nation with regard to Islam and have always promoted policies against Tehran. Israel considers Iran the only real danger in the region as it is also a military powerhouse like Israel. As for the United States, the main objective is to mediate a diplomatic rapprochement between Israel and Saudi Arabia, which is needed for the two nations to officially develop a military alliance against Tehran. The final goal is the creation of an Arab NATO to contain Iran, mirroring NATO"s stance towards the Russian Federation.

The fault lies in Qatar.

Washington sees only one possible way to at once allay the concerns of her European allies suffering an onslaught of Islamist attacks while simultaneously giving the impression to a domestic audience of fighting extremists. It plans to do this by entering into a major agreement with the two nations closest to Islamist terrorism - Israel and Saudi Arabia - while blaming a third terrorist-supporting nation for all the terrorism -Qatar. Of course the weakest and strategically least relevant of these three countries is Qatar.

The real challenge: Unipolarity vs. Multipolarity.

The most salient point in this story is the contrast between the new multipolar order and the American unipolar world order. Qatar, thanks to its enormous financial resources, has maintained high-level contacts with a wide variety of countries that are not necessarily allied to Riyadh.

From the point of view of energy, Qatar is the region"s second power after Riyadh, getting 90% of its revenue from exports of liquefied natural gas from the world"s largest deposit that is shared with Iran. In the case of relations with Moscow, the problem is not significant given the relations between Saudi Arabia and the Russian Federation. For example, Qatar has recently injected capital into Rosneft by acquiring a large share of stocks. Qatar foreign minister meet with Lavrov in Moscow a couple of days ago discussing how to deescalate tensions but also reaffirming the importance of relations between Doha and Moscow. Qatar, on the back of its economic wealth, has expanded its political horizons by moving away from Riyadh, infuriating Washington and Tel Aviv.

The strengthening of the Iranian position in the region was achieved thanks to two main factors, namely the victories in the Syrian war and the agreement with the Obama administration over Iranian nuclear power. This rehabilitation of Iran on the international scene following the signing of the agreement slowly led Doha to advance back-channel dialogue with Tehran to reach a compromise, especially in relation to the exploitation of the South Pars / North Dome gas field. About three months ago, Qatar removed the moratorium on exploiting the field and carried out dialogue with Iran over its development. It seems that an agreement has been reached between Qatar and Iran for the future construction of a gas pipeline from Iran to the Mediterranean or Turkey that will also carry Qatari gas to Europe. In exchange, Doha’s ending of support for terrorism has been demanded, openly contravening Saudi and American directives to destroy Syria.

The Saudis have bet all their chips on the continuation of American hegemony. They prefer to please the United States by avoiding the sale of oil to China in yuan, and are consequently paying the price, with China buying more and more oil from Angola and Russia instead. Moscow Central Bank has even opened a bank branch in Shanghai to convert yuan into gold, creating something that resembles the US dollar gold standard of yesteryear.

In Yemen, Riyadh has compromised its future by squandering huge amounts of wealth, with the only thing to show for it being a pending military defeat at the hands of the poorest Arab country on the planet. The collapse of the price of oil has only exacerbated these difficulties. Qatar has avoided these problems by virtue of having huge gas reserves as well as a somewhat more diversified foreign policy than Riyadh. For the Saudis, placing under their control the world"s largest gas reserve, as well as an obscene amount of cash, would offer the opportunity of at least recovering in part the huge losses experienced recently.

In this bloody game, Qatar is in the wrong place at the wrong time, and the mainstream media"s coverage of the events leaves us with little doubts as to what the future for Doha will be. CNN"s interview with the Qatari ambassador to the United States represented a rare example of journalistic integrity when the ambassador was embarrassed by the CNN host’s airing accusations of Qatar’s support for terrorists.

Neocon Deep State Vs Neoliberal Deep State

The fratricidal war within the US deep state also affects the Middle East, especially in the clash between Qatar and Saudi Arabia. It has long been known that Huma Abedin has deep ties to the Muslim Brotherhood, as did the previous American administration as well as Hillary Clinton. This proximity has had repercussions on the relationship between Obama and the Sunni countries, especially Saudi Arabia.

Until a few months ago, Washington was full of rumours about alleged lobbying efforts by former Trump adviser Michael Flynn on behalf of Erdogan. Considering that the former general was fired, this could be an important indicator of Trump’s position on Qatar, as the Turkish President is very close to the Muslim Brotherhood, a Doha-backed ideological movement. Flynn could have been fired by Trump for his close indirect relationship with the Muslim Brotherhood.

The mainstream media close to the Clinton/Obama clan may have used the alleged links between Flynn and Russia to obscure the hidden links between Washington and the Muslim Brotherhood. On the other hand, the evidence of collusion between the Muslim Brotherhood and Washington dates even before 2010, with Obama"s speech in Cairo in 2009 and the resulting Arab springs, all funded by Qatar via the Muslim Brotherhood, with Washington’s blessing. The consequences of those actions are well known, having increased the chaos in the region, forced a greater US presence in the Middle East, and contributed to increasing synergies between the Shiite axis in response to terrorist aggression.

In this context, Turkey backed the same terrorist groups as Qatar and Saudi Arabia, and the abortive July 2016 coup only served to strengthen the takeover of power by Erdogan and the Muslim Brotherhood faction supporting him. Even today the consequences of the coup reverberate in the region, with the alliance between Ankara and Doha recently strengthened with the presence of Turkish troops in Qatar. Another element not to underestimate was Iran"s attitude towards Ankara following the failed coup d"état, with Tehran declaring its solidarity with Ankara.

The strategic choices of previous administrations in the Middle East were disastrous in every respect. They strengthened enemies and weakened historic allies. No wonder Trump has decided to hit the rewind button, placing strong confidence in the two main allies in the Middle East, Israel and Saudi Arabia.

Trump and the deep-state faction loyal to him aims to create an Arab NATO able to confront Iran in its own right, freeing Washington from a constant presence in the Middle East. The United States is focussed on two key factors in this strategy, namely the sale of Saudi oil in US dollars, and the sale of weapons to US allies to keep its military-industrial complex happy. These goals coincide with what happened recently in the emirates with Trump"s visit. The United States and Saudi Arabia have signed agreements worth over 350 billion dollars. Saudi Arabia strongly supports the creation of an Arab NATO. The organization would make official Tehran"s role as the greatest danger for the entire region. Moreover, the project of an Arab NATO would suit Israel fine, as it hates Tehran.

For the US deep state, or at least part of it, the most urgent strategy concerns the transfer of American forces in terms of presence and focus, from the Middle East and Europe to Asia in order to face the main challenge of the future, namely China’s intention to dominate the Asian region. What is happening in the Philippines with Daesh, which the author wrote about last week, is simply the continuation of a wider strategy that also affects the Saudi-Qatar conflict.

With Obama and the ruling Democrats, much attention had been paid to the issue of human rights. In particular, the component of the deep state close to the Clinton/Obama clan embraced the Muslim Brotherhood"s attempt to subvert power in the Middle Eastern region through the Arab Spring. The approach of neoconservatives and neoliberals towards hegemony is very different and shows conflicting strategies, highlighting the diversity between the two souls of the US deep state that has long been battling each other.

On one hand, the neoliberal/human-rights clan is very close to Obama and Clinton as well as supportive of the Muslim Brotherhood and Qatar indirectly. Neoconservatives, however, are historically more aligned with Saudi Arabia and Israel, both of whom seem to support Trump in order to make the US role in the Middle East less central, thanks to an Arabian NATO that would free the US up to shift its attention to Asia by delegating regional control to Riyadh and Tel Aviv.

In this regard, the nuclear agreement between the Obama administration and Tehran is explained. The neoliberals hoped to see Iranian revolts in the wake of the Arab Spring, leading to the overthrowing of the regime and the ushering in of democracy. Neoliberal human-rights interventionists abuse the word democracy, wielding it as a baton. The results of these efforts can be seen in the disasters in Libya and Syria. Paradoxically, Obama and Clinton"s strategy has backfired on Washington, since Iran, thanks to the nuclear agreement, has increased its weight in the region, forcing the Neocon-Saudi-Zionist faction to try to sabotage it in any way.

Conclusion

Qatar is at a crossroads. Acquiescing to Saudi pressure means falling into line and abandoning its dalliance with the multipolar world order. The fate of Doha is probably already determined, with Iran and Russia hardly desirous of becoming too much involved in the sanguinary game. A likely outcome is that the Al Thani family will in the end acquiesce to Saudi demands after resisting thanks to foreign partners help. What is interesting to note is that the situation in Washington has deteriorated to such an extent that even Washington"s historic allies are fighting each other.

Iran, Russia and China, assisting Iraq, Syria, Yemen and Libya, have created the necessary conditions to end Middle-Eastern destabilization, even prompting an internal crisis in the Gulf Cooperation Council. The bet that Riyadh, Tel Aviv and Washington embarked on with the aggression against Doha could prove to be an unforgivable strategic error, even leading to the end of the Gulf Cooperation Council and the weakening of the anti-Iran coalition in the region.

If Qatar should decide to resist Saudi pressure, which is only possible with the covert support of Russia, China and Iran, it is likely that the Syrian war has its days numbered. This is not to mention the fact that such an outcome would provide Turkey with an even easier path to transition into the Eurasian alliance.

Should Doha decide to oppose the demands of Riyadh (their economic capacity is certainly not lacking), it will be up to Russia, Iran and China to decide whether to risk supporting Qatar against Saudi Arabia in order to stabilize the region. The hostility of the United States, Saudi Arabia and Israel hold towards Qatar are warning signs for the Eurasian bloc, already facing many obstacles in the world as it is.

Despite this, Tehran and Moscow are providing and offering Qatar"s first needed goods in terms of food and medicine. Iran is also opening its own airspace to Doha-based companies. Iran, in addition to being a nation usually ready to help when demanded, sees the opportunity to continue the destruction of the axis opposed to it. An overall assessment (In Astana at the SCO meeting?) will be needed to determine which strategy is best to follow. Above all it will be necessary to understand how Qatar will want to proceed in this unprecedented crisis in the Gulf region.

Even in Syria, the terrorist groups funded by the monarchies and Turkey are fighting each other, reflecting the divisions and tensions within the Gulf. It is only a matter of time before the conflicts between various organizations extends to other places in Syria, leading to the collapse of the opposition groups. In light of these developments, it appears that Iran and Syria have proposed to Qatar that they switch from supporting terrorism and instead cooperate in the reconstruction of Syria with Chinese and Iranian partners. Receiving credible responses to such a proposition is impossible, but following dialogue between Doha and Tehran on the development of the North Pars Gas Field, one cannot rule out that an agreement could be reached in Syria in the medium term, which would also bring enormous benefits to Doha as well as to Damascus and Tehran.

The American century is rapidly coming to an end. Terrorists are biting their masters’ hands and the vassals are rebelling. The unipolar world order that defers to the United States is rapidly disappearing, and the consequences are being felt in many areas of the world.

To Bypass Food Embargo, Qatar Will Pay $8 Million To Airlift 4,000 Cows

Yesterday we reported that as the Qatar crisis continues with no resolution in sight, in an act of generosity toward its distressed Gulf neighbor, Iran dispatched four cargo planes of food to Qatar and plans to provide 100 tonnes of fruit and vegetable every day. Qatar has also been holding talks with Iran and Turkey to secure food and water supplies after Saudi Arabia, the United Arab Emirates, Egypt and Bahrain cut links, accusing Doha of supporting terrorism.

However, any stopgap measures implemented so far are not nearly enough to compensate for all the food imports lost as a result of the gulf blockade. So, for the nation with the highest GDP/capita in the world, where money is largely not an object, an ingenious solution has emerged.

Call it the biggest bovine airlift in history, as Bloomberg puts it. Because while the "showdown between Qatar and its neighbors has disrupted trade, split families and threatened to alter long-standing geopolitical alliances", it has prompted one enterprising Qatari businessman to fly 4,000 cows to the Gulf desert in an act of resistance and opportunity to fill the void left by a collapse in the supply of fresh milk.

The reason for the dramatic "solution" to the millk embargo is that most of Qatar"s fresh milk and dairy products, meant for Doha’s more than 1 million residents, came from Saudi Arabia up until a week ago. That supply was cut off after the kingdom and its allies cut transport links with "a country that spends $500 million a week to prepare stadiums and a metro before the soccer World Cup in 2022."

According to Bloomberg"s calculations, it will take as many as 60 flights for Qatar Airways to deliver the 590-kilogram beasts that Moutaz Al Khayyat, chairman of Power International Holding, bought in Australia and the U.S. “This is the time to work for Qatar,” he said. In addition to the abovementioned airlifted Turkish dairy goods and Iranian fruit and vegetables, there’s also a campaign to buy home-grown produce. Signs with colors of the Qatari flag have been placed next to dairy products in stores. One sign dangling from the ceiling said: “Together for the support of local products.”

“Our government has made sure we have no shortages and we are grateful for that. We have no fear. No one will die of hunger.”

“It’s a message of defiance, that we don’t need others,” said Umm Issa, 40, a government employee perusing the shelves of a supermarket before taking a carton of Turkish milk to try.

Only you do, and those who provide the much needed milk will get even richer than they already are.

For Al Khayaat, whose main business is a construction firm that built Qatar’s biggest mall, the cow-a-drop may be a slam dunk business decision. He has been expanding the company"s agricultural business at a farm 50 kilometers north of Doha. Food security is part of Qatar’s government strategy to steer the economy away from petrodollars, known, like in Saudi Arabia, as “Vision 2030.” And what better way to aggressively grow that business than at a time when it is your countrymen"s patriotic duty to buy your goods.

On a site covering the equivalent of almost 70 soccer fields, new grey sheds line two strips of verdant grass in the desert with a road running through the middle up to a small mosque. It produces sheep milk and meat and there were already plans to import the cows by sea. Then Qatar was ostracized, so the project was expedited.

Fresh milk production will start by the end of the month rather than September and will eventually cover a third of Qatar’s demand by mid-July, Al Khayyat told Bloomberg at his office in Doha. Facilities for the Holstein cows are ready, though the company will take a hit on the shipping cost for the animals, which increased more than five times to $8 million.

Which amounts to $2,000 per cow. At that price, it was not immediately clear if the cows would fly business or first class.

German Foreign Minister Warns "Dramatic" Qatar Crisis "Could Lead To War"

Germany"s foreign minister Sigmar Gabriel warned that the ongoing isolation of Qatar by Saudi Arabia and its allies could lead to a war in the Gulf region, according to an interview he gave to Germany"s Frankfurter Allgemeine Sonntagszeitung, although he added that he still saw a chance to defuse the tension.

"There is a danger that this dispute could lead to war," Gabriel said citing what he called a "dramatic" harshness in relations between allied and neighbouring countries in the Gulf.

The foreign minister said personal talks this week with his counterparts from Saudi Arabia, Qatar and Turkey, and phone calls with the foreign ministers of Iran and Kuwait underscored his concerns.

"After my talks this week, I know how serious the situation is, but I believe there are also good chances to make progress."

Gabriel also said that he had a phone conversation with Secretary of State Rex Tillerson on the Gulf situation on Friday and said that Tillerson showed a "very wise and prudent attitude" that has contributed to calming the conflict.

Yet while Tillerson was "calming" the conflict, during a press conference on Friday Trump appeared to be adding fire to it, when the president accused Qatar of being a "high level" funder of terrorism even as the Pentagon and Tillerson cautioned against the military, commercial and humanitarian effects of a blockade imposed by Arab states and others.

As expected, on Saturday Saudi Arabia and Bahrain welcomed Trump"s demand for Qatar to stop supporting terrorism, but did not respond to a U.S. Department of State call for them to ease pressure on the Gulf state. After severing ties with Qatar on Monday, Saudi Arabia said it was committed to "decisive and swift action to cut off all funding sources for terrorism" in a statement carried by state news agency SPA, attributed to "an official source".

In a separate statement issued on Friday, the United Arab Emirates praised Trump"s "leadership in challenging Qatar"s troubling support for extremism".

A separate SPA report on Saturday acknowledged Tillerson"s call for Qatar to curtail support for terrorism, but did not mention his remarks that the crisis was hurting ordinary Qataris, impairing business dealings and harming the U.S. fight against the Islamic State militant group. Saudi Arabia said its action followed the conclusions of last month"s Arab Islamic American Summit in Riyadh, where Trump delivered a speech about Islamic extremism.

Trump said he helped plan the move against Qatar, although a senior administration official told Reuters earlier this week that the U.S. had no indication from the Saudis or Emiratis during the visit that they would sever ties with Qatar.

Meanwhile, adding further fire to the situation, on Saturday Turkish President Recep Erdogan vowed to continue supporting Qatar. “Now, there are ones who are bothered because of us being together with our Qatari brothers or sending and exporting food supplies, drugs etc – no matter if they are in hunger or thirst – should excuse us. We will continue to give all our support to Qatar,” Erdogan said at an iftar (fast-breaking meal) with members of his AK Party in Istanbul, quoted by RT.

Echoing Tillerson, the Turkish urged Saudi Arabia, as “the largest and most powerful state in the Gulf,” to reduce tensions and lift sanctions. “It is wrong to add more troubles on top of everything in the term that the Muslim world is already struggling with a lot of problems,” he said. “I am calling you: There won"t be any winners in the brother"s fight.”

“You have to work for bringing brothers together. This is what we expect from Saudi, the Custodian of the Holy Mosques [in Mecca and Medina],” Erdogan added.

Separately, Turkey"s foreign minister Mevlut Cavusoglu said Erdogan, who met with Bahrain’s Foreign Minister Sheikh Khalid Bin Ahmed Bin Al Khalifa in Istanbul on Saturday, said a solution to the dispute needs to be found by the end of the month of Ramadan.

* * *

Also on Saturday, Moscow - where Qatar"s foreign minister met with his Russian colleague - called for dialogue between Qatar and its neighbors in the Gulf, promising help in mediating the crisis, as Russia’s foreign minister met his Qatari counterpart.

“We have observed with concern the news of this escalation,” Russian Foreign Minister Sergei Lavrov said in opening remarks of his meeting with Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman Al-Thani in Moscow.

“We cannot be happy in a situation when the relations between our partners are worsening. We are in favor of resolving any disagreements through… dialogue.”

Lavrov said that Russia is “ready to try to do everything in its power” to help resolve the crisis and said unity is needed to fight terrorism. “For us, unity is clearly necessary for maximum effect on this front (against terrorism),” he said.

Qatar has denounced the allegations against it, and Al-Thani during his meeting with Lavrov called the measures against the country “illegal.”

Finally, speaking of last week"s CNN report which alleged that Russian hackers helped spark the crisis but Moscow has dismissed this as a “stale claim” with “zero evidence.”

Mapping Where Where U.S. Troops Are Based In The Middle East

On Monday, Saudi Arabia, the UAE, Yemen, Libya"s eastern-based government and the Maldives cut diplomatic ties with Qatar, creating a new crisis in the Arab world. U.S. President Donald Trump quickly waded into the row, lambasting Qatar in a series of tweets. Joining the Gulf states in labeling Qatar a funder of extremism, Trump tweeted that his visit to Saudi Arabia "was already paying off" and that Monday"s developments could mark the "beginning of the end to the horror of terrorism."

However, as Statista"s Nial McCarthy notes, despite Trump"s tweets and his accusations against Qatar, the country actually plays host to the largest U.S. base in the Middle East. Located southwest of Doha, Al Udeid Air Base hosts an estimated 10,000 U.S. troops and the facility has been proven crucial in the fight against ISIS. Qatar invested $1 billion in constructing the base and it"s also home to the the U.S. Combined Air Operations Center, responsible for coordinating U.S. and allied air power across the Middle East, particularly in airspace over Iraq, Syria and Afghanistan.

Indeed, the base is likely to become even more important in the coming weeks as a U.S. backed alliance of Kurdish and Arab fighters gain traction in their offensive towards the ISIS stronghold of Raqqa. In the wake of Monday"s events and Trump"s comments, the Defense Department praised Qatar for hosting the base and its "enduring commitment to regional security". State Department spokeswoman Heather Nauert said "we recognize that Qatar has made great efforts to stop the financing of terrorism but they still have a lot of work to do."

The following infographic highlights just how important Qatar is to the U.S. presence in the Middle East.

You will find more statistics at Statista

The country hosts an estimated 10,000 U.S. troops, second only to Kuwait"s 15,000. Neighboring Bahrain is also vital to American interests in the region, home to the Naval Support Activity Bahrain, the U.S. Fifth Fleet and a substantial military presence at Isa Air Base.

While My Qatar Gently Weeps

By Chris at www.CapitalistExploits.at

Menopause, I"m told, is horrible.

Men don"t know too much about it, and thankfully I"ve not been exposed to it... yet. One minute you"re hand in hand on the beach with your sweet adoring wife and the next she"s a sobbing wreck who wants to stab you in the thigh with a pair of knitting needles.

This is probably just how Qatar feels right now.

Sure, they"ve never been "mates" with their neighbours but they"ve always tolerated each other. Only months ago, they had joined with Saudi Arabia and the UAE. Hand in hand, they had come together with the shared vision of bombing Yemen back into the sand. Happy days! Today, knitting needles.

Two questions:

1. What is actually going on?


2. Should we care?

The two are related. We can only know if we should care if we actually know what"s going on.

To answer the first question, let"s begin with the second.

Consider that the most expensive, complicated, and unpopular wars are those that Western powers (which really means the US these days) wage directly. Outright wars... Washington has found... are unpopular.

And I"m not referring only to women with hairy armpits and unshaven men running around, waving silly placards chanting and throwing chairs through McDonald"s windows every time they feel triggered. After Iraq and Afghanistan, Trump faces a populace sick of "their boys" coming home without their legs.

Here"s what happens: the US military, after offloading a few billion dollars worth of hardware, flattening designated cities... I mean, "strategic targets" (remember shock and awe?) must ultimately commit ground troops to "secure the peace". Puppets need installing and that"s impossible to do without security, and security means ground troops.

And this is where the fun starts.

The average terrorist looks exactly like everybody else in the country. US ground troops, however, stand out like a sore thumb. Brave young Billy Joe Swanson, armed with pimples, testosterone, and enough hardware to take out New Zealand, doesn"t actually know why he"s there, but he"s there because he was recruited from a low socio economic area where his prospects were late shift at Taco Bell or the excitement of "fighting for freedom".

Young, uneducated, and not being the sharpest tool in the shed, Billy chose the latter and now, in a country and culture he knows absolutely nothing about, is faced with unknown and mostly unidentifiable attackers who will cut him down in an instant. Billy, together with his friends, feels increasingly isolated, frustrated, frightened, and angry. We"re here to help, he thinks. WTF is wrong with these people?

When Billy has to push what"s left of his best friends organs back into the gaping hole an IED left in his side, he quickly comes to hate the locals. They"re all terrorists or terrorist sympathisers. You can tell by the language used by Billy and his fellow soldiers where they are in the world - narcos, gooks, chinks, flops, commies, ragheads.

The countries change but the results do not. Billy and his friends hate them, and this means that more innocents are killed. This turns the country increasingly against the invaders.

The locals, now presiding over rubble, grow increasingly intolerant of arrogant, heavy handed Billy and the "liberating forces". Whatever synergy and initial euphoria may have existed rapidly disappears. The gap -- a result of cultural, religious, and value systems -- widens with each viewing the other as more alien than ever.

Remember Abu Ghraib?

The lines between acceptable and outrageous blur in war. All wars, all militaries. None are immune. It"s how it is.

Western media continue to speak of "precision strikes" and, when things inevitably go wrong, "isolated incidents".  Locals speak of genocide and murder.

For Washington it becomes an embarrassment. The world"s most sophisticated military with B1s, drones, guided missiles, satellites, helicopter gunships, and bunker busting bombs still, many years later, are struggling to win against sandal-wearing goat herders with AKs and RPGs.

Just like Musk figured with Tesla, it"s far easier to simply outsource all the parts to someone else and get someone to fund the whole thing. Enter proxy wars and the US puppet dictatorship of Saudi Arabia.

Trump likely figured this out. Ground troops in yet another Middle Eastern backwater will be as popular as herpes. So why going there?

Trump to his military advisors on Saudi Arabia: "Isn"t it time these guys started working for us?"

The real issue here isn"t Qatar.

They are merely a pawn in this. The target here is Iran, and now that Chairman Trump just gave the Saudis a "we"ve got your back" pledge, it"s time to move things forward.

This is likely to be as messy as ever. Why? Because it"s all been tried before. Direct wars, as discussed, have their problems. Proxy wars, on the other hand, aren"t all peaches and cream either.

The folks in the 5-sided building in Virginia may have higher IQs than Billy but they"re still as dumb as "isht".

Here"s what happens with proxy wars.

US forces "train" local forces to stand up and fight for whatever the US thinks they should be fighting for. All too often it involves killing the citizens of their own country.

Pray tell, why US-trained forces in Iraq, Libya, and Afghanistan never seem to work?

Let me put it this way. It"d be like the Russians invading the United Kingdom and having Ivan force Peter in Yorkshire to fight Luke in Devon. Only government could fail to see this for what it is: a terrible idea. This won"t stop it from happening. You can"t fix stupid.

What Now?

Iran, a country that hasn"t invaded another in 200 years, is a terrible danger to the US, and Qatar supports them. We know this because the MSM tells us it"s so.

As that thug Henry Kissinger stated:

"It is not a matter what is true that counts but a matter of what is perceived to be true."

Sadly, he is correct. That this narrative is being championed now by none other than biggest sponsor of terrorism makes it all the more laughable.

Washington have decided Iran is the enemy and that"s really what matters, which begs the question. Was Trump"s Middle Eastern visit used to drum up support for an offensive on Iran? An easy sell to the Saudis who like Iran in the same way Jews like bacon.

Given the speed with which the Saudis and 6 other Middle Eastern countries cut ties with Qatar, I think it"s safe to say there is a far broader plan in the works.

As ZeroHedge pointed out yesterday it"s about energy and the money and power that comes with it. Surprise:

"The real reason behind the diplomatic fallout may be far simpler, and once again has to do with a long-running and controversial topic, namely Qatar"s regional natural gas dominance.

Recall that many have speculated (with evidence going back as far back as 2012) that one of the reasons for the long-running Syria proxy war was nothing more complex than competing gas pipelines, with Qatar eager to pass its own pipeline, connecting Europe to its vast natural gas deposits, however as that would put Gazprom"s monopoly of European LNG supply in jeopardy, Russia had been firmly, and violently, against this strategy from the beginning and explains Putin"s firm support of the Assad regime and the Kremlin"s desire to prevent the replacement of the Syrian government with a puppet regime."

With nearly 30% of global LNG supply, Qatar has more natural gas than Michael Moore after a bowl of cauliflower. And what"s more, it has the lowest extraction rates in the world. It"s how they got to be the richest country in the world on a per capita basis.

What to Expect?

Remember Libya?

Well, it"s no coincidence that the amount of terrorist attacks in Europe have increased ever since the US-led "coalition" shoved a flag pole up Gaddafi"s bum.

Any conflict in the Middle East is likely to increase the surge of refugees into Europe, and you can read my article on this very topic "7 steps to the easiest short in recent history" for a rundown. That particular theme will only increase the already fragile political and social fabric of Europe.

While it"s currently a low probability, should the powder keg that is the Middle East really blow, expect a US-led "coalition" to first provide "support" and finally to put boots on the ground. Then we go from passive to active and Billy gets to "integrate" once more with the natives. We"ve seen it all before.

Who wins? Who loses?

• It"s hard to see how any disruption to the supplier of 1/3rd of the natural gas market wouldn"t move prices.


• Any escalation leading to war won"t help already ballooning deficits, and yet the treasury will almost certainly need to sell more of those. Wars don"t come cheap.

Something else to consider is that this move by Middle Eastern countries led by the Saudis -- designed no doubt to contain Qatar ahead of a more aggressive stance towards Iran -- could backfire spectacularly, pushing Qatar closer to both Turkey and Iran. Qatar has money... lots of it.. and Turkey and Iran have decent military capabilities and regional ambitions.

Cast your vote here and also see what others think will happen

- Chris

"There are two ways to be fooled. One is to believe what isn’t true; the other is to refuse to believe what is true." — Søren Kierkegaard

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