Editorial: The Theory Of General Political Relativity

Tim Haïdar

As supermajor BP announces a $485 million loss for the first quarter of 2016, in the Arabian Peninsula, big moves are afoot at the headquarters of the world’s largest company by daily oil production.

Saudi Aramco, the Saudi-national petroleum company based out of the Eastern Province city of Dhahran, will offer less than five per cent of the company for sale under an initial public offering (IPO). Under this radical plan, the Aramco will be valued at an estimated $2 trillion - that is roughly analogous to the annual gross domestic product (GDP) of India, the world’s seventh largest economy.

The offering of one twentieth of Aramco to the public is part of a scheme dubbed “Saudi Vision 2030”, a comprehensive raft of fiscal and policy overhauls to be implemented over the next 15 years for a "prosperous and sustainable economic future" with less reliance on crude oil exports. The Gulf state will diversify its economic foundation through investment into business sectors such as healthcare, finance and tourism, at the same time as creating the world’s largest sovereign wealth fund.  

The unprecedented announcement has come to pass after a sustained slide in crude prices and the prosecution of a war with neighbouring Yemen has left the Kingdom in an unfamiliarly bleak financial position. The concerted motioning of the kingpin member of the Organisation of Petroleum Exporting Countries (OPEC) away from its Black Gold addiction may act as a spur to other oil-dependent nations to follow suit. It could also be a veiled warning of further oil price devaluation as the Saudi Arabia engages in a price war with its sectarian nemesis, Iran.

Meanwhile, several hours South and East of Dhahran, in the fractured, war-torn deserts of North Africa, the self-appointed government of the Eastern portion of the country has trumpeted a victory of sorts.  On Tuesday, it announced that the first shipment of oil from its newly-founded National Oil Company, had left the port of Masra al-Hariga, bound for Malta. Despite the price of Brent crude hovering around $40 per barrel, this is of little consequence for a regime that is trying to strike out on its own in a push for political autonomy by fiscal means.

As we said here, Libya is on the verge of fracturing into its historical constituents: Cyrenaica, Fezzan and Tripolitania. Independent oil-wealth would represent the first step on the road to semi-self-sufficient statehood in a country that accounts for as much as 20 per cent of the jihadists currently active in the Fertile Crescent and Levant. It is in this instance that we should appreciate that an “adverse” oil price is nearly always a matter of geopolitical relativity.....