Answers to Political Questions: Oil Prices, Erdogan's Visit to Britain, Malaysian Elections, and Armenia

Answers to Political Questions

(Oil Prices, Erdogan’s Visit to Britain, Malaysia Elections, Armenia)

First: Question:

Oil prices rose on May 24, 2018, to striking figures, with Brent crude reaching $79 per barrel and West Texas Intermediate (WTI) reaching $71 per barrel, following the declines we witnessed in 2014. Does this mean the world has entered a new era of high oil prices? Are we approaching a surge similar to the previous high of nearly $150 per barrel? What are the reasons for this?

Answer:

Oil, like any other commodity, is affected by supply and demand. However, unlike other commodities, oil price stability is almost negligible; meaning every change in supply or demand has a direct impact on the price. This is due to the nature of the oil market, in addition to the impact of speculation, especially when political disturbances cause market instability. To clarify this, we highlight the following:

1. Regarding Supply:

a. The Organization of the Petroleum Exporting Countries (OPEC) and non-member countries agreed to limit the supply of oil in the market. In an agreement between Russia and OPEC countries at the end of 2016, a decision was made to cut crude oil production by 1.8 million barrels per day (bpd) to remove the surplus supply and increase the price. A study by Standard & Poor's Global Platts for OPEC revealed that OPEC crude production in April fell for the third consecutive month to its lowest level in a year, producing 32 million bpd last month—140,000 bpd less than in March. Today, production stands at 32.73 million bpd, which is about 730,000 bpd below the limit set by OPEC. The agreement set by OPEC will continue for a year. If current conditions persist, oil prices are likely to increase further. This was echoed by Matthew Parry, Head of Long-Term Research at Aspects energy consultancy, who said: "What we see happening, and will repeat more in the future, is that supply problems or threats are beginning to affect prices more significantly and clearly." (https://www.marketwatch.com)

b. The political and economic situation in Venezuela has had a significant impact on the country's ability to achieve its production goals. It produced 1.41 million bpd in April 2018, which is 80,000 bpd less than in March 2018, and 540,000 bpd less than in 2017. One of the main reasons for the decline is the policy of the Venezuelan state, as the state oil company Petróleos de Venezuela, S.A. (PDVSA) was poorly managed. Last month, ConocoPhillips won a $2 billion case against PDVSA due to the seizure of two oil projects in Venezuela. PDVSA has already defaulted on its debt, which amounts to $2.5 billion. All of this contributed to the decline in the Venezuelan state company's oil production, which in turn contributed to the decrease in supply, causing prices to rise.

c. President Trump's announcement of the withdrawal from the nuclear agreement with Iran raised the prospect of imposing new sanctions on the Iranian oil industry. A similar sanctions system was first established in 2012 under the Obama administration. Theoretically, Iran's production could drop by 20%, or by 400,000 to 500,000 bpd. This would be equivalent to about one billion dollars a month at current prices (http://foreignpolicy.com). While the United States has not revealed the measures it might take against Iran, speculation suggests a type of sanctions regime targeting the Iranian oil industry.

All three of these measures contributed to the decrease in supply, resulting in the observed rise in prices.

2. Regarding Demand:

a. There has been an increase in demand for oil. The International Energy Agency (IEA) expects global oil demand to rise from 97.8 million bpd in 2017 to 99.3 million bpd this year. The Paris-based IEA previously raised its forecast for oil demand growth in 2018 from 1.3 to 1.4 million bpd, after the International Monetary Fund (IMF) raised its estimates for global economic growth for this and next year. The IEA said in its monthly market report that oil demand grew at a rate of 1.6 million bpd in 2017 (https://www.reuters.com).

b. Another area for oil demand growth is China. In April 2018, China was expected to consume more than 9 million bpd of crude oil, more than ever before. This is nearly 10% of global consumption and more than a third of total demand in Asia. If crude oil reaches $75 per barrel, it means monthly import costs for China of more than $20 billion. This record demand comes despite the maintenance season, during which imports usually drop at this time of year, showing that China's oil requirements are greater than expected. The American bank Goldman Sachs said in a note to clients: "Chinese demand indicates strong growth, and may be higher than current estimates" (https://www.reuters.com/).

Based on the above, there is growth in demand, which has resulted in the observed rise in prices.

3. Speculation: Speculation becomes active during rapid changes in oil supply and demand, in addition to market sentiment which is difficult to define. Thus, speculation becomes more evident when there is a significant increase or decrease in the price of oil. Large hedge funds play a role in the oil market either by buying huge oil contracts or offering them. Consequently, speculation is a double-edged sword; it may influence an increase in demand and thus increase prices, or it may influence a decrease in demand and decrease prices. In any case, the impact of speculation was not significant in the current price rise; the most prominent role was played by the issue of supply and demand as we explained above.

4. As for oil prices reaching the previous high figures, such as $150 or so, this is unlikely because global economic conditions cannot tolerate it. Therefore, it is expected that the price of oil will continue to rise slowly until it stops without reaching a hundred dollars. Specifically, the imminent trade war between the United States and China will lead to a reduction in demand, and thus oil prices will drop easily. Additionally, American pressure on OPEC through Saudi Arabia in particular to increase production will have a similar effect if prices rise to a level undesirable to America.

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Second: Question:

Erdogan arrived in London on Sunday, May 13, 2018, for a three-day visit. During the visit, Erdogan met with Queen Elizabeth and Prime Minister Theresa May. Erdogan's visit comes a few weeks before the early presidential and legislative elections in Turkey on June 24. It is known that Erdogan's relationship with Britain has been tense since the previous failed coup, so how did this visit come about and what was its purpose? Did he succeed in his purpose?

Answer:

To clarify the purpose of the visit, we review the following matters:

1. It is well known that Erdogan seeks to consolidate his power through a presidential system where powers are concentrated in the hands of the president, while the country lives under a state of emergency. The state of emergency imposed in Turkey has led to the arrest of 160,000 people and the dismissal of nearly the same number of government employees, often arbitrarily. Since the failed coup against the Turkish government in 2016, thousands of opponents have been purged, including employees, lawyers, police officers, and academics, many of whom are loyal to Britain. However, before Erdogan left Istanbul for London on Sunday, (Erdogan described the United Kingdom as a "strategic partner and ally," and confirmed that he would discuss bilateral, regional, and international issues with May on Tuesday, including, as he said, the latest developments in Cyprus as Turkey and Britain are guarantors, as well as discussing the "joint action plan" in the Middle East. Erdogan also stressed that his visit would also focus on increasing trade between Turkey and Britain, saying "We want to continue our economic relations without interruption after Britain's exit from the European Union"... 2018/05/13 http://www.elfagr.com).

2. It is understood from his statements that he discussed regional and international issues, the latest developments in Cyprus, the action plan in the Middle East, and increasing trade between Turkey and Britain with May. As for the action plan in the Middle East, Erdogan is not the person with whom May would address such international issues. Regarding the focus of the talks on economic issues and increasing trade exchange between the two countries, as Erdogan stated in a press conference at Atatürk Airport in Istanbul before his departure, this is not true. Economic and trade matters to raise the trade level between any two countries require an atmosphere of political stability, which is absent, especially after the failed coup. This is confirmed by the fact that no significant economic project was announced during the visit. The subject of Cyprus remains, which could be discussed as both parties are guarantors of peace and security on the island, but only when there is tension, which is not present now. This means that all the purposes Erdogan announced for his visit do not hold up and are intended to divert attention from the real reason.

3. The real reason can be identified by studying the reality of events since the failed coup and linking them to the fact that the visit came before the elections. Thus, the real purpose of Erdogan's visit to Britain becomes clear:

• As for the reality of events, it is well known that British agents in Turkey were actively behind the failed coup. Erdogan took very harsh measures against British agents, especially in the military, as mentioned in the question and more. This resulted in great anger in Britain toward Erdogan.

• As for the visit being before the elections and the link between them, Britain pushed the Turkish opposition parties loyal to it, led by the Republican People's Party (CHP), to form an unusual alliance against Erdogan to obtain a majority in parliament. They followed standard tactics in such cases, which is contesting the parliamentary elections with joint lists to try and push the presidential elections to a second round at least, to show Erdogan losing the majority of public opinion as claimed, thus shaking his image even if he succeeded later. This naturally constitutes a concern for Erdogan.

• Hence, this tour was more like a gesture of satisfaction/appeasement to Britain before the Turkish elections scheduled for June 24. Therefore, Erdogan tried to persuade the British in exchange for some concessions, such as releasing British agents from prison, and showering praise on Britain as a strategic ally as stated in his announcement, enticing Britain to stop his wide-scale purge campaign against its agents in exchange for easing the confrontation of British agents against him in the election campaigns. This is the most likely real purpose behind Erdogan's visit to Britain.

4. Did he succeed in achieving his purpose? It seems he failed, and indicators of this include:

• May said while standing next to Erdogan in her office at Downing Street after the meeting: "It is right that those who tried to overthrow a democratically elected government are prosecuted." She added: "But it is also important that Turkey does not overlook the values it seeks to defend while protecting democracy... (2018/05/16 alarab.co.uk). That is, May criticized Erdogan in front of journalists while he was her guest!

• Groups defending freedom of expression were moved to protest against Erdogan, where: (members of freedom of expression groups such as PEN, Index on Censorship, and Reporters Without Borders participated in the protest that took place in front of the government headquarters in Downing Street... Nafahat al-Qalam page 2018/05/15), (and pro-Kurdish activists carried banners with pictures of Erdogan and the word "terrorist." Al-Ain News 2018/05/15).

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Third: Question:

The Malaysian elections were held on May 9, 2018, and the result was the fall of Prime Minister Najib and the return of Mahathir to the premiership, noting that he has passed ninety years of age. It seems as if there was a certain plan behind these elections; were there external motives or is the matter, as they say, a local democratic game?

Answer:

1. Malaysia includes the Malay Peninsula in the southern part and the island of Borneo in the northern parts, separated by a wide stretch of the South China Sea. Islam began to spread in the region through Muslim traders in the thirteenth century AD, where rulers and elites first adopted Islam before it spread among the general public. The Malacca Sultanate, located on the Malay Peninsula, gained prominence due to increased maritime trade when land trade routes were disrupted by Mongol invasions. The Sultanate achieved independence from Chinese influence in the fifteenth century AD and soon adopted Islam, which spread rapidly throughout the region due to the strength and status of this Sultanate. However, this region was colonized by Portuguese colonialism through the Sultanate itself in 1511 AD, after they bribed someone from the inside to open the gate of the capital's fortress. Then the Dutch came in 1641 AD, and British colonization of the peninsula began in 1786 AD through trade and treaties to lease ports, and then through Britain's strategy of exploiting the different ethnicities of the "population" to become the actual rulers, while maintaining the remaining Sultans as largely symbolic rulers. The Federation of Malaya on the peninsula achieved formal independence from the British in 1957, and the state of Malaysia was established in 1963 after the unification of the Federation of Malaya with the island of Borneo as well as Singapore (although Singapore separated via a vote in the Malaysian Parliament in 1965).

2. It is clear that even after independence, Britain continued to maintain political control over Malaysia, for example:

a. Malaysia remained a member of the British Commonwealth and a member of the Non-Aligned Movement (which it joined in 2003). it is also a founding member of the Association of Southeast Asian Nations (ASEAN) and the Organization of Islamic Cooperation (OIC), and Prime Minister Tunku Abdul Rahman was its first Secretary-General.

b. In 1971, the Five Power Defence Arrangements were signed between the United Kingdom, Australia, New Zealand, Malaysia, and Singapore, following the British "East of Suez" withdrawal. It is worth noting that in 1971, Australia was ruled by the Liberal Party, which remained loyal to the British during the twentieth century.

c. Prime Minister Mahathir Mohamad opposed the establishment of the pro-American APEC organization, which was launched by Australia under the leadership of the pro-American Labor Party leader (Bob Hawke) in 1989. Hawke's successor, Labor Party leader and Prime Minister (Paul Keating), described Mahathir as "recalcitrant" for not attending the 1993 APEC summit in Seattle, USA.

d. As an alternative to APEC, Mahathir Mohamad proposed in 1997 the formation of the East Asia Economic Group, which excludes America and Australia. However, this idea failed and was later converted into the East Asia Summit meetings, which included Australia but under the chairmanship of the pro-British Liberal Prime Minister (John Howard), yet America was excluded. (America and Russia were not able to join the group until 2011).

3. Britain noticed that America was courting the former Prime Minister Najib Razak and feared his shift toward America, despite the fact that he was a minister in previous pro-British Malaysian governments and that he came from the same party (United Malays National Organisation) that has ruled Malaysia since independence. Some indicators of this fear include:

a. Barack Obama visited Malaysia in April 2014, the first US president to visit Malaysia in about 50 years, where he decided to "elevate the Malaysian-American relationship to a comprehensive partnership," which was considered part of Obama's "pivot to Asia" policy.

b. Najib and Obama were like friends playing "golf" together in Hawaii in December 2014. Obama visited Malaysia again in November 2015.

c. Najib strongly supported the Trans-Pacific Partnership (TPP), an American initiative, and insisted on American participation, and then worked with Japan to continue the trade points program after America's withdrawal under Trump. (Vietnam and Malaysia played vital roles in saving the 11 countries in the Trans-Pacific Partnership trade agreement, which came close to collapse after the withdrawal of the United States) "https://asia.nikkei.com/Economy/Vietnam-and-Malaysia-play-vital-roles-in-making-TPP-11-"

4. As the 2018 election date approached, it seems that Britain turned once again to its old and loyal servant (Mahathir Mohamad), who used the opposition platform to return to power, and so it was. It is expected that Malaysia will now move away from American policies and resume working to limit American interference in the region in accordance with British policies.

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Fourth: Question:

The Armenian Parliament approved on May 8, 2018, the election of the opposition leader Nikol Pashinyan as Prime Minister, thereby closing a chapter of more than three weeks of anti-government protests against the pro-Russian government in Armenia. The question is: what is the magnitude of this political shift in Armenia? Does it mean that Russia's influence will disappear from Armenia? Does the West ("Europe and America") have a role in this matter?

Answer:

To clarify these matters, we review the following:

1. Armenia is a small country (4 million people) that gained independence during the wave of the disintegration of the Soviet Union in 1991. The Republican Party, whose leader was ousted by the protests, has ruled Armenia since 1999. Its leader, President Serzh Sargsyan, has completed two presidential terms since 2008. His rule is widely described as dictatorial and pro-Russian, despite the presence of opposition parties with representation in Parliament. Because the country's constitution did not allow more than two terms for the presidency, in order to continue in power, he sponsored constitutional changes that made the post of president ceremonial and transferred actual powers to the Prime Minister. As soon as his second presidential term ended, President Sargsyan moved and became Prime Minister. (The Armenian Parliament elected former Armenian President Serzh Sargsyan as Prime Minister, in a step that will consolidate his grip on power, despite thousands demonstrating in Yerevan protesting his remaining at the head of government. The Parliament approved Sargsyan (63 years old) taking the new position, with 77 votes in favor and 17 against, after his second and final presidential term ended last week... Al-Nahar 2018/04/17). Popular protests broke out against this appointment, especially since Sargsyan's era was characterized by the economic hardship experienced by Armenians and the lack of available opportunities. This was primarily due to government corruption added to the country's lack of natural resources such as oil, gas, and ores. The opposition "Yelk" party focused on all these matters and then ignited the spark of protests in Armenia—protests that quickly brought forward a new "popular" leadership represented by the opposition figure Nikol Pashinyan.

2. The main motivation for the protests in Armenia was the deterioration of the economy during President Sargsyan's rule. Like other countries of the Soviet system, administrative and financial corruption dominates the government in Armenia, and bribery is widespread in the government apparatus to such an extent that people feel distressed and suffocated. The people were dissatisfied with the rule for livelihood reasons and were counting the days for Sargsyan's second term to end, only to find him circumventing it with the role of Prime Minister! So the people revolted against his rule, and matters ended with his resignation and the inauguration of the opposition leader Pashinyan as Prime Minister. Since the economic issue is urgent, along with local issues related to democracy, the new Prime Minister Pashinyan confirmed shortly after forming the government the necessity of holding parliamentary elections and that his government must embark on ("wide-scale reforms in various fields." Pashinyan had previously pledged to "democratize Armenia," strengthen the rule of law, separate private economic interests from the government, and radically improve the investment climate.) Armenian News 2018/04/14.

Thus, it is clear that the political change taking place in Armenia was primarily driven by local motivations.

3. Reactions:

a. America, during the protests, was announcing that it was closely monitoring the situation in Armenia. It appears it was studying possible opportunities to extend its influence there. After Pashinyan's inauguration as Prime Minister, (Heather Nauert, spokesperson for the US State Department, said in a statement issued late Tuesday: "The United States congratulates Nikol Pashinyan as the new Prime Minister of Armenia." She said: "We look forward to working closely with the new government and with the people of Armenia on many areas of mutual interest between our two countries, including increasing trade, working to support democracy and the rule of law, and protecting regional and global security.") Armenian news site 2018/05/09.

b. As for Europe, (the EU High Representative for Foreign Affairs and Security Policy Federica Mogherini held a phone call with Armenian Prime Minister Nikol Pashinyan. In a press release issued by the European Union, Mogherini invited Pashinyan to visit Brussels at the earliest possible opportunity. The statement said: "The High Representative of the European Union and Vice-President of the European Commission Federica Mogherini spoke yesterday afternoon by phone with Nikol Pashinyan to congratulate him on his election as the new Prime Minister of Armenia. The importance of the partnership between the European Union and Armenia was agreed upon, and she looked forward to meeting in person, inviting the Prime Minister to Brussels at the earliest possible opportunity.") ARMENPRESS 2018/05/09.

c. As for Russia, shortly after Pashinyan's election in Parliament as Prime Minister on 2018/05/08, (Russian President Vladimir Putin sent a congratulatory telegram to Pashinyan, expressing his hope that the latter's work would help consolidate the partnership relations between Russia and Armenia and bilateral cooperation between the two countries within the framework of the Commonwealth of Independent States, the Eurasian Economic Union, and the Collective Security Treaty Organization... Pashinyan had previously expressed his conviction that the strategic partnership and military cooperation between his country and Russia is a basis for the security of the Armenian state. Pashinyan added in a special session in Parliament that strategic partnership relations with Russia would remain a priority for Armenia. Pashinyan said that his country would not withdraw from the Collective Security Treaty Organization, nor from the Eurasian Economic Union, which includes Russia, Kazakhstan, Belarus, Armenia, and Kyrgyzstan.) Russia Today 2018/05/08.

To limit Russian fears in Armenia, (Pashinyan said: "The political process that began in Armenia does not carry in its essence and form any geopolitical contexts," and explained that "in our movement we are not guided by the interests of the United States or the European Union, but the interests of Armenia and its people." He continued: "Our protest is not directed against Russia, and it does not carry any of the characteristics of the Ukrainian event.") DARAJ site 2018/05/01.

4. Thus, it is clear that Russia's opportunity to maintain its influence in Armenia still exists. Therefore, the Russian President invited Pashinyan to a meeting in Sochi, Russia. In their first meeting, (the new Armenian Prime Minister Nikol Pashinyan told Russian President Vladimir Putin on Monday that he wants to further develop relations with Russia in the military field and that no one questions the importance of strategic relations between the two countries.) Reuters 2018/05/14

Pashinyan said: ("I think that no one in Armenia has questioned and will never question the strategic importance of Armenian-Russian relations. We intend to give a new impetus to these relations, whether politically, economically, or commercially"... The Armenian leader specifically touched upon the fact that the people of his country highly appreciate the balanced position taken by Russia during the recent political crisis in Armenia.) Russia Today 2018/05/14.

What reinforces Russia's chances in maintaining its influence in Armenia is what we can call the "Armenian Knot." The deep "Armenian Knot" prevents the opposition from turning its back on Russia. This is because Armenia lives in a surroundings of Muslims and is possessed by a constant feeling of fear of its Islamic surroundings. It is bordered by Azerbaijan, where the conflict over the Nagorno-Karabakh region exists, and Turkey, where Armenians accuse it of the great massacres at the beginning of the twentieth century, as well as its proximity to Iran. Although Armenia is not in direct geographical contact with Russia, as Georgia separates it from southern Russia—which is full of Islamic separatist tendencies as was the case in Chechnya—nevertheless, Russia, as the closest international power, provided Armenians with a sense of security in the face of the Islamic surroundings. Russia has also been providing the government in Armenia since its independence with the means of survival through military support, especially against Azerbaijan in the Nagorno-Karabakh issue, and with loans, grants, and providing energy resources of fuel and gas. Armenia is a country with a weak economy, relying on aid and remittances from Armenians abroad, and Armenia trusts Russia's strength to protect it from Islamic risks. In this way, Russian military bases in Armenia and the strategic partnership with it can be considered the cornerstone of Armenia's foreign policy. Even the statements that came out during the protests from some protesters about withdrawing the Russian military base in Armenia, as mentioned by Russia Today on 2018/04/26, are nothing but a venting of the feelings of some protesters who are unaware of the reality of the opposition leader Pashinyan, as evidenced by his practical, friendly statements supporting the survival of Russian military influence.

5. The conclusion is that the character of the protests is local, aimed at the opposition taking power. Even though the previous government was closely attached to Russia because Sargsyan was part of the "inner circle" for Russia, and Pashinyan was in the opposition and Sargsyan was closer to Russia than him... the strength of the protests made Russia accept the one who is further from it rather than the one who is closer! So it rode the wave and accepted the opposition, feeling reassured by the difficulty of the West encroaching on Russia's influence in Armenia for the reasons we mentioned above. Nevertheless, it is not expected that the West, especially America, will leave the Armenian arena solely to Russia, as is common in the international colonial struggle with its various malicious methods...

10th of Ramadan 1439 AH
2018/05/26 CE