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In "Seismic Shift" To Mid-East Regional Power, Saudis Halt Egypt Oil Supplies As Cairo Turns To Iran
by Tyler Durden

While the proxy war in the middle-east rages, a curious, and largely under the radar pivot has been taking place in one of the countries directly impacted by Hillary Clinton's foreign policy: Egypt.

In mid-October, we reported that, for the first time ever, Russia and Egypt would conduct joint military drills. This followed news that Russia will sell attack helicopters to the North African nation and invest billions in Egyptian infrastructure. These items, along with the fact that Egypt is eager to be re-granted Russian tourism rights for its citizens after recent bad blood between the countries, lead one to the logical conclusion that Egypt has every incentive to cooperate with Russia going forward.

This means when the Russian fleet reaches the Mediterranean - whether the intent is to park in those waters and bombard Aleppo, as some believe, or merely to project Russian might to the world, as others suggest - it will be flanked by friendlies on three sides. Turkey to the north, Syria to the east, and Egypt to the south.

It appears, however, that the quiet Egyptian pivot has not gone unnoticed by the US and its mid-east allies, and on Monday, Saudi Arabia informed Egypt that critical shipments of oil products expected under a $23 billion aid deal have been halted indefinitely, which according to Reuters suggests a deepening rift between the Arab world's richest country and its most populous.

The official narrative is that while Saudi Arabia has been a major donor to Egypt since President Abdel Fattah al-Sisi seized power in a violent countercoup in mid-2013, Riyadh has become frustrated with Sisi's lack of economic reforms and his reluctance to be drawn into the conflict in Yemen. During a visit by Saudi King Salman in April, Saudi Arabia agreed to provide Egypt with 700,000 tonnes of refined oil products per month for five years but the cargoes stopped arriving in early October as festering political tensions burst into the open.

What is curious is that the deal fell apart just weeks after Cairo suddenly became friendly with Moscow.

While Egyptian officials said since that the contract with Saudi Arabia's state oil firm Aramco remains valid and had appeared to expect that oil would start flowing again soon, on Monday, however, Egyptian Oil Minister Tarek El Molla confirmed it had stopped shipments indefinitely. Aramco has not commented on the halt and did not respond to calls on Monday.

"They did not give us a reason," an oil ministry official told Reuters. "They only informed the authority about halting shipments of petroleum products until further notice."

So with Saudi Arabia turning a cold shoulder to Egypt, what options are left? Well, one: "the enemy of my enemy is my friend", and sure enough oil minister El Molla's delegation said late on Sunday evening that he would visit Iran, Saudi Arabia's main political rival, to try to strike new oil deals, hinting that Egypt may be the latest to join a fledgling mid-east axis which includes Iran, Syria, Russia and just perhaps, Turkey.

Egypt and Iran's diplomatic relations have been strained since the 1970s, and is why according to Reuters, "an Egyptian official visiting Iran would cement a break in its alliance with Saudi Arabia and mark a seismic shift in the regional political order."

Of course, such a dramatic shift in the regional balance of power can not came overnight, and is perhaps why speaking to reporters in Abu Dhabi, Molla said he was not going to Iran. An Iranian oil official later said that a report by the semi-official Mehr news agency suggesting Molla would meet his Iranian counterpart in Tehran on Monday was "incorrect". Egyptian Prime Minister Sherif Ismail also said Molla was not visiting Iran and Egypt was not negotiating with Tehran over importing oil products, state newspaper al-Ahram reported.

However, that was just a front, and according to Reuters, two security sources and the source in Molla's delegation said the minister had been scheduled to go, and the low-key visit was now delayed after the news became public.

* * *

Gulf Arab countries, led by Saudi Arabia, have pumped billions of dollars into Egypt's flagging economy since former general Sisi took over after a year of divisive rule by the Muslim Brotherhood. But with the Brotherhood threat diminished, Gulf rulers have grown disillusioned at what they consider Sisi's inability to reform an economy that has become a black hole for aid, and his reluctance to back them on the regional stage.

Meanwhile, as the facade of diplomatic normalcy slowly is pulled away, tensions between the former allies are set to escalate as Egypt has been reluctant to provide military backing for Riyadh's war against the Iranian-backed Houthi group in Yemen.

In Syria, where Saudi Arabia is a leading backer of rebels fighting against Iranian-backed Bashar al-Assad, Sisi has supported Russia's decision to bomb in support of the president.

A deal to hand over two Red Sea islands to Saudi Arabia, made at the same time as the oil aid agreement, has faced legal challenges and is now bogged down in an Egyptian court.

With the Russian fleet set to arrive in Syria in a few days, keep a close eye on what Egypt's next move will be.

Saudi Arabia & Gulf allies ready to slash oil output 4% - report

Riyadh and other Persian Gulf producers are ready to cut oil output by at least four percent and are seeking Russian support, Reuters reports, quoting sources familiar with the matter.

Saudi Arabia proposed the plan to Russian Minister Aleksandr Novak last week, according to the source. However, Novak reportedly said Moscow would prefer to freeze at current levels.

According to Reuters, the proposal to cut production by four percent will likely be raised on the eve of the November 30 OPEC meeting, where the cartel and other producers, including Russia, will discuss joint action to stabilize prices.

Iraq, OPEC's second-biggest producer, said this week that it would not cut production, as it needs more oil revenue to fight Islamic State.

"We are not going back in any way, not by OPEC not by anybody else," said Falah al-Amri, the head of Iraq's state oil marketing company.

"If there is a cut, then everyone must cut. No exemptions," one OPEC source told Reuters, in response to Iraq's refusal.

Three OPEC sources said only Libya, Nigeria and Iran could be excluded because they were recently affected by wars or sanctions.

Oil producing countries want to reduce the global estimated glut of 1.0 million to 1.5 million barrels per day. On September 28, OPEC agreed to curb daily production by 700,000 barrels.

The details of how the production cuts will be shared are still to be worked out and are expected to be signed at the OPEC meeting in Vienna on November 30.

Novak said production freeze talks are less likely to collapse, as OPEC means business this time around.

“I see the attitude of OPEC. They want to ensure that the decisions announced in Algeria were formally finalized... It is important to be consistent when making decisions, it is important for the market, too,” the Russian energy minister said.

Global markets were less positive about the upcoming meeting as oil prices continued their weekly decline. Brent crude was trading at $50.38 per barrel, while US WTI cost $49.56.

"Doubts linger about OPEC's ability or willingness to implement any production cuts. The market has been wary of reading too much into the rhetoric ahead of the next meeting scheduled for the end of November," said analysts at Cenkos Natural Resources.

Iran Launches War Drills Amid Accusations U.S. Breaking Nuke Deal
by Adam Kredo

Uses American-made jets, planes in air force drills

Iran on Monday launched a series of war drills that included the use of American-made planes amid accusations by top officials that the United States is violating last summer’s comprehensive nuclear agreement, according to regional experts and Persian-language media reports.

Iran’s Artesh Air Force kicked off a three-day series of drills aimed at displaying the Islamic Republic’s air might, according to Iranian military officials who told the country’s state-run press that the drills are in preparations for upcoming war.

“The goal of holding this drill is the creation of readiness so as to be able to combat any threat, and should a war occur, the Air Force will be the first force to enter the battlefield,” Iranian Air Force Gen. Masoud Rouzkhosh was quoted as saying, according to independent translations of the original Farsi provided to the Washington Free Beacon. “The newest armaments of the Air Force like precision-guided bombs and laser-guided missiles will be used in this year’s drill.”

Iran is using many American-made jets in the drills, including F-4 and F-5 warplanes, as well as large Boeing airliners, which are aiding in mid-air refueling tactics, experts told the Free Beacon. Iran also is using Russian-made warplanes.

The three-day air drills, now entering their second day, come as senior Iranian officials repeatedly accuse the United States of violating its side of the nuclear agreement.

Iranian officials maintain that they will continue to fund global terrorist organizations such as Hezbollah and Hamas, which are committed to Israel’s destruction, despite objections from the United States.

“When they ask the foreign minister of America why do you violate your commitments under the JCPOA, they say we have acted on our commitments and even gone further than they require. However, Iranians must do certain things, such as ceasing their support for terrorists and halting their missile activities,” Ayatollah Sadeq Larijani, the head of Iran’s Judiciary, was quoted as saying in Farsi-language reports on Monday.

“However, what they mean by terrorists are resistance groups like Hezbollah of Lebanon and Hamas in Palestine, which have stood against the violations and crimes of the Zionist regime,” Larijani said.

Iranian officials have reportedly pressed their counterparts in the United States to explain why America is not, as they claim, upholding its end of the nuclear deal.

Iran’s outrage over the issue comes just months after the Obama administration made a secret cash payment to Iran of $1.7 billion as part of what lawmakers described as a ransom payment to free American hostages.

The Obama administration also has moved forward with new sanctions relief that is expected to provide Iran with even more financial resources, a large portion of which are suspected by Congress of being allocated to the country’s military and terrorist organizations.

Top Iranian military commanders say the armed forces remain committed to removing the American presence from the region.

“The bloody wars of Iraq, Afghanistan, Syria, Yemen, the continued occupation of Zionists in Palestine, the war of the Ba’ath regime of Saddam against the Islamic Republic of Iran, the conflicts in Lebanon, Bahrain, and other events and incidents where each one [has featured] thousands of dead and maimed and brought about endless destruction, are only part of the behavior of the satanic governing body of America in the region,” Brig. Gen. Massoud Jazayeri, deputy commander of Iran’s Armed Forces General Staff, was quoted as saying on Monday, when the war drills commenced.

“The presence of America in the region is a cancerous malign tumor that can only be treated by removing the filthy tumor and the ejection of America from the region,” Jazayeri added. “In Iran, nobody will permit America to tie its failure to live up to its commitments to defense issues and the interests of the resistance”

Regional experts told the Free Beacon that Iran’s rhetoric is part of an effort to squeeze more concessions from the Obama administration as it seeks to preserve the deal in the final months of its term.

“These comments are part of a calculated gamble to gain additional sanctions relief without any meaningful changes in Iranian behavior,” Behnam Ben Taleblu, senior Iran analyst at the Foundation for Defense of Democracies, told the Free Beacon. “By constantly referring to perceived failures in American compliance with the accord, Iran is able to threaten the durability of the deal, thereby demonstrating it has exit options.”

“For months now, Iranian officials have provided a steady stream of criticism against the West for allegedly failing to live up to its own promises pursuant to the accord that would grant Tehran meaningful sanctions relief,” Taleblu said.

Iran’s efforts have appeared to pay off, as the administration has moved forward with several new plans to boost Iran’s access to the global financial system.

“Just recently, Secretary Kerry attested to the U.S. going above and beyond the terms of the accord,” Taleblu explained. “This was noted by officials in Tehran like Ayatollah Larijani as not being enough. This is a tried and true tactic by Tehran. During the negotiations with the P5+1 that led to the JCPOA, Iran was able to force concessions by upping the ante. This was most notably seen with the centrifuge cap. Now, in the deal implementation era, Iran is upping the ante in an attempt to garner additional relief.”
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