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Loretta Napoleoni says little will change after death of King Abdullah, but the Saudis cannot sustain low oil prices for much longer; they have lost control of ISIS; and their big fear is revolution

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay. King Abdullah of Saudi Arabia died on Wednesday. And now joining us to talk about the significance or consequences of his death and the whole Saudi relationship to the ISIS project, joining us from New York, is Loretta Napoleoni. She’s an economist who specializes in international terror financing. A former Fulbright scholar, she holds degrees from Johns Hopkins University and the London School of Economics. She’s the author of seven books, most recently The Islamic Phoenix: The Islamic State and the Redrawing of the Middle East. Thanks very much for joining us. LORETTA NAPLEONI, AUTHOR, THE ISLAMIST PHOENIX: Thank you for inviting me. JAY: So, first of all, with the death of King Abdullah, should we expect any changes in the course of Saudi–at least its foreign policy? NAPOLEONI: I don’t think anything is going to change, at least in the short term. I think they’re trying to maintain as much continuity as possible. And this is in fact what the new king said. He said we’re trying to maintain control over the country, and in particular we are very concerned about stability. So that’s a clear message of continuity, I think. JAY: Before we get into the ISIS issue–that’s sort of a not directly connected issue, at any rate–the question of plunging oil prices, there is a lot of theorizing going on that market forces help create a dropping of oil prices. But the Saudis made a very deliberate decision, and some suggest–Larry Wilkerson, for example–that the Americans are actually in on this decision to use falling oil prices and let them go lower than they might have otherwise if the Saudis had cooperated with OPEC and cut back production. They didn’t have to go this low. Maybe they couldn’t prevent it from dropping, but it didn’t have to sink like a stone. And the targets being–obviously, for Saudi Arabia, they get to mess up the Iranian economy, the Americans get to mess up the Russian economy, and certainly the Saudis don’t mind doing that, given the Russian support for Assad. So, I mean, I don’t know if you agree with some of this. And if you do, do you think this death of King Abdullah might change any of that? NAPOLEONI: Well, I think it is possible that originally the idea was to weaken, on one side, Iran and, on the other side, Russia. But to me it looks like that this policy is now turning into a boomerang, both for Saudi Arabia and, of course, for the U.S. For all concerned, the U.S., the problem is shale oil, of course, you know, at these levels, below $50 it’s impossible to maintain production. So a lot of wellls everywhere across the West–in particular we’re talking about Texas, and of course the Bakken region, which goes from, basically, Wyoming all the way to North Dakota. These wells have been shut. Now, that’s not good for the U.S. economy, because we’re talking about a lot of people that will be out of job, also talking a lot about a lot of profits who are disappearing. Now, for all concerned, Saudi Arabia, the situation is even more interesting, ’cause Saudi Arabia is a country which has a very high percentage of young people. Most of these people work in the public sector, and the public sector is maintained by, of course, oil revenues. Saudi Arabia is a rentier state. The only thing that they produce and export is oil. Now, with oil prices decreasing, it’s becoming increasingly difficult to maintain salaries, but even employment. JAY: So why don’t they go along with Venezuela and the others and cut back production and try to get the oil prices back up again? NAPOLEONI: Well, of course, because at this point it’s almost a matter of principle to maintain this hardline policy. They never expected oil prices to drop to these levels. I think that they are trying to gain time to see if by getting close to $40–you know, the next biggest barrier, according to the technical analysis, the support, let’s say, is going to be $40. Now, if the oil prices break that barrier, for sure I think something’s going to happen. They are going to start cutting production. But there is a lot of analysis out there, a lot of economists saying that this is not going to happen, that the oil prices will stabilize around $42, $43. And then, from there they will start climbing up very slowly. And I think they’re banking on that. But it’s a big gamble. I think it is a gamble that can produce that instability inside Saudi Arabia that the Saudis are trying to prevent. JAY: As far as United States being hurt by this, I mean, the American economy, it’s like an enormous stimulus overall to the economy. And, frankly, if I understand it correctly, a lot of the owners of shale oil in the United States are medium- and small-size operators. It’s a wonderful opportunity for big oil to come and buy them all up while they’re in trouble with low oil prices. I mean, the big companies certainly can sustain such things for quite a while. And then, with the oil comes back, it’s all even more–concentration of ownership is even higher. So both in terms of the broad American economy and big oil companies, I don’t think the Americans mind this very much. I think this is kind of a win-win. NAPOLEONI: Well, I don’t think so, because we have to see if oil prices will go back to the levels they were before. I mean, it is possible that oil prices will break the $40 barrier and then they will start climbing up again. And eventually they will stabilize around $48, $50. I mean, most of shale oil is not profitable. I mean it needs at least $67. Now, it is possible they are not going to get to that level, $67, for the next several years. JAY: Well, if you’re right about that, that’s the destruction of the Russian economy, the Iranian economy, the Nigerian economy, and it’s a pretty heavy hit to the Canadian economy. I mean, this is of global, catastrophic consequences, really. NAPOLEONI: Well, that’s what’s happen when you play with strategic resources prices such as oil. I mean, why do you think in the last 30 years OPEC has always controlled supply? Because they were afraid of something like this. Now, we’ve been here before the 1980s, and so we can go back. I mean, history repeats itself. People do not tend to learn their lesson. JAY: Right. Okay. Let’s switch over to this issue of death of King Abdullah and does it change anything. Let’s talk about the Saudi relationship with ISIS. How significant was Saudi funding in the beginnings of ISIS, particularly in the Syria theater. And what is the current Saudi-ISIS relationship? NAPOLEONI: Well, the financing from Saudi Arabia was very important, but I wouldn’t say that it was crucial. I mean, they could shop around in 2011, when they actually moved over to Syria. So we’re talking about Quwait. Also we’re talking about Qatar. Actually, initially Qatar was more important than Saudi Arabia. A lot of the funding coming from Saudi Arabia actually came from private investors /skoʊlˈðɛm/ like that, so not directly from the royal family, but from people close or from peripheral members of the royal family. The situation now is completely reversed, meaning that clearly the government, the leadership, the elite, even, of Saudi Arabia is actually very scared, because we have a caliphate on the border [incompr.] of Saudi Arabia which is projecting an image to be the government that comes all the way from Muhammad. So it’s taking over the role of Saudi Arabia as the holy land, as the holy government, as the representative of Muhammad in contemporary history. That’s a big threat. Now, of course that doesn’t mean that the Islamic State wants to invade Saudi Arabia, but the simple fact that the Islamic State exists, that the caliphate exists, is a very strong force to mobilize people. There is a lot of hostility inside Saudi Arabia vis-à-vis the Royal family, vis-à-vis the way the Royal family is actually running the country. And that is something that, of course, could explode any minute. And the Islamic State is banking on that. So it’s hoping that the simple existence of the caliphate will be sufficient to trigger a sort of upheaval and, eventually, a revolution. And this is the nightmare scenario of the royal family of Saudi Arabia. That’s what they are scared the most about. JAY: Now, if I understand correctly, most of the oil in Saudi Arabia is in areas occupied by Shia, and the Shia must be particularly concerned, if not terrified, of the IS off their border. NAPOLEONI: Yes. I think the Shia are very afraid, and it is true that the area where most of the oil is is predominantly a Shia area. But, of course, the Shia are discriminated against. Let’s not forget that Saudi Arabia is a Sunni-Wahhabist country. So I don’t think that the real threat at the moment is sort of Sunni-Shia confrontations inside Saudi Arabia. I think the real threat is sort of revolution, similar to the one that happened in Iran, and it’s going to be a Sunni, Salafist kind of revolution, which will want to unite the country to the Islamic State. I think that’s what they fear. And this is what could happen, easily. JAY: Go back a little bit to the Qataris. It’s not directly connected with the Abdullah story. The Qataris like to position themselves as modernizers. When you go there, it looks practically like some kind of weird Disneyland, all these new, modern, interesting-shaped buildings, they have all–they’re inviting Western universities to set up, they have Al Jazeera as their broadcaster, and so on. With this whole–and most importantly, they have CENTCOM. I mean, the biggest American base in the area is sitting in Qatar. Why was it in their interest to get involved with IS and that kind of most radical Islam? NAPOLEONI: Well, they weren’t. Actually, the Qataris were the first one who started to fund the insurgency, if you want to call it like that, against the Assad regime. So, back at the beginning of 2011, they were [early (?)] involved. I remember I was in Jordan, and the Jordanians were actually trying to alert the Americans about what was happening, and the Americans were not paying any attention about that. And the reason is, of course, again, is the fact that they want to remove the government of Assad because of its very, very strong, close ties with Iran. Now, what we have to understand is as Kuwait, Qatar, Saudi Arabia, most of the Gulf state, they are deeply, deeply hostile to Iran. In 1978, the Iranian Revolution really shook that area, because everybody all of sudden was very afraid that the same kind of people would come in their own countries. Now, we’re talking about absolute monarchies, we’re talking about countries that are not democratic it all. And here we have a theocracy, okay, in Iran, but still it is a democracy also, because people vote regularly and they have normal elections. Now, that is, in that area, a model that we cannot find anywhere else. Now, of course, Iraq today is a democracy, but it doesn’t function, frankly, as well as the democracy in Iran. So that, I think, is something that still today is upsetting those regimes. JAY: So you think the antagonism of Saudi Arabia, Qatar, the Emirates, and so on to Iran is not so much that it’s a competitive regional power; it’s the fact that it represents the overthrow of a monarchy. NAPOLEONI: Absolutely. I don’t think there is a competition about that, because we know that Iran is not doing very well. It’s been under sanction for a long time. And we’re not–we can’t talk about Iran as a power of the region in economic terms as it was 30 years ago, 40 years ago. Absolutely not. But the simple fact that there is a democratic regime which was created through a revolution–again, an absolute monarch who was put there by the United States. So, you see, it’s the same story, basically, that we could apply to regime like Kuwait, for example, or even Qatar. I mean, at the end of the day what the Islamic insurgency has been saying through all of those years is that these regimes are ruled by corrupted oligarchic elites which have been put there by the West. So the same narrative that we’re seeing in Iran could easily be taken and applied in the Gulf. JAY: To what extent is the Sauds, the Qatars, the Kuwaitis, any of the Gulf states still financing or cooperating, collaborating with ISIS? To what extent is Turkey collaborating with ISIS? We know there’s quite a long history–you can include Pakistan in this scenario–of cooperating with the West, sort of, in this fight against terrorism, and then financing and having allies within the very same quote-unquote terrorists? How much of that’s still going on? NAPOLEONI: Well, from my information, there are still some sympathizer. I don’t know how much money they’re actually throwing towards ISIS, but there are still sympathizer in Kuwait for ISIS. Saudi Arabia, no, I would say not at all. And the same thing is Qatar. Now, of course, ISIS doesn’t need this money through this war of conquest, as conducted since 2012, has managed to control strategic region, important resources. So it’s not dependent on the money. The simple fact–for example, I think the simple fact that they ask for the ransom for the Japanese hostages [of] $200 million, given only 72 hours, which is impossible to get it together, to get–actually, even if the Japanese government wanted to pay, shows that money is not the issue. Here the issue is a political issue. So it is a new power in the region and it’s established itself as a new power. And now it wants to push this image to the region. So Turkey, for example, is a country that has to be very careful, because in reality the Islamic State is on his border. It’s also a country that’s being flooded, absolutely flooded, by refugees coming from Syria due to the destabilization of the north and of the country. So I think Turkey is trying to maintain–. And then, finally, finally, of course, the role of Kurdistan. The Kurds were involved in fighting the Islamic State, of course are bankrolled now by the West–in particular we’re talking about the Europeans and also the Americans. So I think Turkey is trying to maintain a sort of neutrality position–which is very, very difficult–because it doesn’t really want the Islamic State to become a problem internally. JAY: When ISIS released those 45 Turkish diplomats, was there a ransom paid? NAPOLEONI: Of course. Of course. Everybody pays the ransom. Everybody that is released pays the ransom. But we’re not talking about $200 million. I mean, it doesn’t matter. To be honest, you pay $10 million or you pay $50 million, doesn’t matter. Important thing is that you pay, and by paying you establish a certain kind of diplomatic relationship with the Islamic State, and you recognize, you recognize that power, of course, in your political entity. Now, this is the real problem. The problem is that if everybody would follow what they have agreed in 2013, together with the Americans and the British, do not negotiate with any terrorist organization, the situation would be very different. But everybody does, apart from the U.S. and U.K. JAY: Okay. Loretta, first of all, let me apologize to all the viewers, ’cause the sound quality is kind of not as great as we would like it to be. Loretta, we’re going to pick this up again, and we’ll do it again when we have better sound. But thank you very much, and I hope we get to talk again sometime in the next couple of weeks. NAPOLEONI: Okay. JAY: And thank you very much for joining us on The Real News Network.


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Loretta Napoleoni is the author of several books, including the bestsellers Rogue Economics: Capitalism's New Reality and Terror, Incorporated: Trading the Money Behind Global Terrorism, and most recently, Merchants of Men: The Business of Kidnapping Inside the Refugee Crisis. One of the world's leading experts on money laundering and terror financing, she has worked as London correspondent and columnist for La Stampa, Corriere della Sera, La Repubblica, El País, and Le Monde. A former Fulbright scholar, she holds an MA in international relations and economics from John Hopkins University and an MPhil in terrorism from the London School of Economics. For her work as a consultant to commodities markets, she traveled regularly to Pakistan, Turkey, Iran, Iraq, Syria, and other Middle Eastern countries, where she has met top financial and political leaders. She lives in London and Montana.