Hi Malcolm, I think we may safely ignore the longer terms issues as well as big issues, such as balance of payment, defense spending, global outsourcing, protectionism and such ... for the moment.
The time to worry about those issues may have passed.
Now, we may want to concentrate on the immediate and now, and I fear no amount of portfolio shuffling will make any of us safe.
Chugs, Jay
P.S. Do you remember my description of those dancing and singing weapons in Unreal Tournament Death Match (nowhere to run nowhere to hide).
Global Market Brief: June 7, 2004
Jun 07, 2004
stratfor.biz
Summary
The security situation in Saudi Arabia should be at the center of discussions at this week's G8 meeting, particularly as a new al Qaeda leader in the Gulf region turns his sights toward impacting oil prices.
Analysis
The Group of Eight meeting in Georgia will bring together the leaders of the world's top economies from June 8 through 10, but the summit, ironically, will not involve what is arguably the world's most important economy at the moment -- or more precisely, the country that could have the greatest impact on the global economy for at least the rest of the year: Saudi Arabia.
The kingdom's security situation has deteriorated rapidly -- a trajectory that has shaken the confidence of the global crude markets and pumped oil prices to near-record levels, when not accounting for inflation. Saudi insecurity has generated a new risk premium on crude that will not soon dissipate, and that will directly impact the economic outlook in Asia, Europe and North America. While Riyadh may not be officially represented at the summit in Georgia, the situation in Saudi Arabia will certainly be on the minds and tongues of those attending the G8.
One name that is likely to warrant specific mention at the meeting is that of Abdel Aziz al-Muqrin -- who emerged earlier this year as al Qaeda's top leader in the Gulf region, following the death of his predecessor in a shoot-out with Saudi security forces. Al-Muqrin is one of the main figures behind the sharply escalating militant offensive in the kingdom. Under his direction, the jihadist campaign has taken on new dimensions -- appearing increasingly flexible and adaptive to changing circumstances.
Those characteristics pertain to al-Muqrin himself, who through various statements and writings has demonstrated a certain political and operational savvy, as well as the ability to quickly recognize the impact that the local campaign is having on al Qaeda's wider jihad. Those characteristics, coupled with his latest statements about the oil markets, make al-Muqrin -- and therefore the situation in Saudi Arabia -- much more dangerous for the global markets than they were merely two months ago.
Recent tactics used by Saudi militants display a new adaptability.
Al-Muqrin is thought to be the mastermind behind the November 2003 attack on the al-Muhaya housing compound in Riyadh, which killed 18 people. However, that was not a particularly successful operation for the jihadists, considering the low ratio of Western versus Arab and Muslim casualties. The strike gained the jihadists little and may have cost them support among more moderate Islamists.
Al Muqrin apparently learned a lesson. Since then, Saudi militants have been much more careful to avoid killing Muslims and Arabs (with the exception of those linked to the "apostate" regime), and much more serious about targeting Westerners specifically -- and particularly those within the oil industry. Unlike the large-scale compound bombings of 2003 and earlier, which killed large numbers of people indiscriminately, assailants in the recent incidents in Yanbu and Khobar systematically passed over Muslim expatriates as they hunted down and killed Western and other non-Muslim business professionals.
These were not wild killing sprees, but rather well-planned, disciplined operations that reflected the militants' core objectives: intimidate Westerners and demonstrate the inability of Saudi security forces to protect them, while avoiding Muslim casualties so as to win more domestic support.
This is an important shift that speaks to the sophistication of the militants' leadership as well as to their understanding of the bigger picture. The jihadists' move away from the use of large cells, which are needed to support and carry out large-scale operations like truck bombings, can be viewed in the same light. In April, Saudi security forces were able to round up several large truck bombs before they were detonated, with one slipping through that was used in an attack against the Saudi intelligence services headquarters. Following those interdictions, there appeared to be another adaptation -- to the use of much smaller cells that could carry out stealth operations, arguably with greater effect than the more spectacular strikes that were planned.
Viewed from the outside, it is impossible to link these changes definitively to al-Muqrin. However, some key tactical shifts have occurred on his watch, and there are some striking similarities between his writings and statements and subsequent tactics employed by Saudi militants.
Al Muqrin recently has written a string of articles for al Qaeda's online training manual, Camp al-Battar Magazine, that offer tactical tips for jihadists -- including specific targeting guidance. Among the recommendations that later were used in operations:
- Emphasizing human targeting over mass casualty targeting (7th edition, March 2004, prior to the Yanbu and Khobar attacks). - Increased emphasis on symbolic individuals, such as CEOs and other top executives (7th edition) - Focus on economic targets, especially international companies, "investments coming from enemy countries," and "targeting stolen natural resources from Muslim lands." (7th edition) - Improving surveillance techniques to avoid detection (9th edition, May 2004) - Directions for successful kidnapping operations (10th edition, May 24)
The edition focusing on kidnappings was issued little more than a week before the Khobar attacks, where hostages were held. In al-Battar, one of the justifications for kidnappings describes exactly what resulted in Khobar: "Put the government in a difficult situation that will create a political embarrassment between the government and the countries of the detainees." Also, days before the Khobar operation, al-Muqrin issued a statement in which he called for four-man cells to carry out operations in the kingdom; four-man cells carried out the strikes in both Yanbu and Khobar.
This ability to direct and implement tactical improvements makes al-Muqrin a dangerous new jihadist leader in Saudi Arabia. But it is at the strategic level that he becomes truly dangerous for oil markets and the global economy.
Building on the success of the April 29 strike in Yanbu -- which marked the first direct attack against the kingdom's oil industry -- and the follow-on operation in Khobar, al-Muqrin likely will look to consolidate and expand the jihadists' gains beyond Saudi Arabia. The strategy of attacking expatriate oil workers also could be expanded to include hits against actual Saudi infrastructure. Though the militants may not be able (or even willing) to truly cripple the Saudi production or export infrastructure, such attacks would send new shockwaves through the markets -- driving up the Saudi risk premium (and, by extension, global oil prices) and delivering the pain of strikes occurring within the kingdom far beyond the country's borders.
Al-Muqrin's latest statement, published June 3 on a jihadist Website, shows the evolution of his thinking: He has now explicitly linked oil prices to al Qaeda's war against both the Saudi monarchy and the United States. In a statement praising the most recent series of militant attacks, al-Muqrin noted the impact on global crude prices, saying, "The operation in Khobar was a new victory which God bestowed upon the mujahideen and which put the Saudi government in a deep crisis. It took the oil price to its highest levels of over $42, while Saudi Arabia is committed to America's prosperity by providing oil at the cheapest prices."
This is a telling observation for an operations leader to make. In effect, al-Muqrin has openly recognized that more attacks on the Saudi oil sector not only would further weaken the royal family and drive out more foreign oil workers, but also would ripple outward to hurt al Qaeda's greatest enemy, the United States, and the rest of the capitalist world. In hockey terms, that would be a "hat trick" for al Qaeda -- an opportunity too good to pass up.
This also makes the ongoing battle in Saudi Arabia the most important story in the global economy, now and for months to come.
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