There's a big tide arisin'

This is the BBC chart for closing prices of Commodities on World Markets last night.. click chart to enlarge

Brazil, Argentina to drop the US$ for internal trade

This has been a good week for the Argentinian Economics Minister Felisa Miceli 54 , trained economist and the country's first female Economics Minister - in a country where macho has a special meaning. Argentina is undergoing a massive influx of US dollars spurred by strong international prices for the country’s export commodities, tourism and the issuing of severeign bonds.

Argentina’s international reserves reached a record US$40 Bn. this week according to the latest release from the Central Bank . The Brazilian real has risen 9.1 % this year against the US dollar , making it the best performer among the 16 most-actively traded currencies that Bloomberg tracks.

The government also reported on Tuesday that Argentina`s unemployment remained below double-digits in the first quarter, falling to 9.8% from 11.4% in the same period a year ago.

Felisa Miceli has taken this opportunity to announce that Argentina and Brazil, the 2 major economies in Mercosur , will drop the U.S. dollar in favor of a regional currency in their bilateral trade starting in October 2007 - which is when President Kirchner, 57, or his wife Cristina Fernandez de Kirchner, 54, both leaders of the ruling Peronist party, will face former Economy Minister Roberto Lavagna (who Kirchner fired) in October's presidential election.

Paradoxically Argentina's economy (2nd largest in South America) has grown more than 8.5% annually in the past 4 years after a $95 billion debt default in late 2001 and subsequent currency devaluation. Lavagna, a former Ambassador to the European Union, headed the restructuring effort. Miseli worked in Lavagna's consultantcy Ecolatina, in the beginning of the 1990s. In May 2002, she became part of Lavagna's team as a representative of the Ministry of Economy before the Central Bank during the presidency of Eduardo Duhalde and at the height of the Argentine economic crisis.

Miseli is generally seen as a follower of Lavagna, and his policies which have broadly been followed by her.

Since its foundation in 1991,South American continent's major trade alliance Mercosur has had the stated primary objective to remove obstacles to internal trade.

The transition to a (as yet unnamed) new currency, is part of a pilot project of Mercosur - whose Finance Ministers met in Paraguy this week - she said the new currency should eventually spread throughout the bloc, which also includes Paraguay, Uruguay, and Venezuela.

Bolivia, Chile, Colombia, Ecuador and Peru have associate member status of Mercosur.

Meanwhile Chavez has said Venezuela is withdrawing from the IMF as he rides the petrodollar wave - don't bet the mortgage on that as the bond market will collapse if he does exits the Washington-based organization as by "gaining economic sovereignty.'' he would trigger a so- called technical default. A clause inserted in most bonds in emerging markets stipulates that there is a default if Venezuela ``ceases to be a member of the IMF or ceases to be eligible to use the general resources of the IMF.''

Mind you he has enough in the piggy bank to pay them off if needed.

Tales of the Arabian Knights

Average Saudi daily oil production (left scale), by month, from EIA, JODI, and IEA, together with Baker Hughes oil rig count (right scale). Jan 2000-present. Click to enlarge. Sources: IEA Oil Market Reports, EIA International Petroleum Monthly Table 1.1a, JODI, and Baker Hughes.

This fascinating composite graph comes from the invaluable Oil Drum and was prepared and Posted by Stuart Staniford on Friday December 01, 2006.

He quotes Nawaf Obaid in The Washington Post 28th November 2006.

" ......therefore the Saudi leadership is preparing to substantially revise its Iraq policy. Options now include providing Sunni military leaders (primarily ex-Baathist members of the former Iraqi officer corps, who make up the backbone of the insurgency) (Khazraji and pals Ed.) with the same types of assistance -- funding, arms and logistical support -- that Iran has been giving to Shiite armed groups for years."

An alternative Abdullahmite stratergery might be ...

" ......Finally, King Abdullah may decide to strangle Iranian funding of the militias through oil policy. If Saudi Arabia boosted production and cut the price of oil in half, the kingdom could still finance its current spending. But it would be devastating to Iran ...."

Is this threat credible Stuart Staniford asks... Go see his more detailed Saudi production graphs, read about Saudi oil depletion and frenetic oil drilling in the Kingdom (plus 273 well informed comments) .... judge for yourself. A first reading of the "Baker" report from Grey Panthers of the Rock Steady Crew on Capitol Hill whose latest single "Sayonara Baghdad" was released today suggests we are about to live in interesting times.

Get a wood burning stove and buy a forest says Lady Patel from the kitchen.

By the end of this year Saudi foreign assets should be up to approximately a quarter of a trillion dollars in foreign assets by the end of 2006.

PS. If you don't know who the hell Nawaf Obaid is, he is an adjunct fellow with the Arleigh A. Burke Chair in Strategy at CSIS, as well as managing director of the Saudi National Security Assessment Project, a consultancy based in Riyadh. He is the private security and energy adviser to HRH Prince Turki Al Faisal, the Saudi ambassador to the United States (previously Ambassador to the Court of St. James, London (see pic)

He is the author of The Oil Kingdom at 100: Petroleum Policymaking in Saudi Arabia (Washington Institute for Near East Policy, 2000) and coauthor, with Anthony Cordesman, of National Security in Saudi Arabia: Threats, Responses, and Challenges (Praeger/CSIS, 2005).

Anthony Cordesmann wrote the highly important "Planning for a Self-Inflicted Wound: US Policy to Reshape a Post-Saddam Iraq" December 31st 2002 about post war Iraq and foretold with terrible accuracy the dilemma that the US now finds themselves in - months before the invasion.

It is left to the reader to judge whether the remarks of Nawaf Obaid in the Washington Post might have possibly passsed across the handily placed desk of the Saudi Ambassador , HRH Prince Turki Al Faisal

Lord Patel thinks it is likely.

Thos interested so far might like to reflect on a telephone interview with Mr Nawaf Obaid phone from Riyadh on August 19, 2006 with SUSIS, the Saudi US Information Service.
in the course of which he said ....

regarding King Abdullah's overseas visits ..

" He looked to the two countries that are going to most need oil from Saudi Arabia in the future, India and especially China......The signal here is pretty clear that the Chinese recognize Saudi Arabia as the main power in the Middle East. For China the most important aspect is that Saudi Arabia is the number one oil producer and exporter and will be into the future. China realizes its booming economy needs oil. So it is logical to establish what will eventually become a strong relationship between the number one provider of oil, Saudi Arabia, and what will become at some point in the near future the number one importer of oil, China. "

And of relations with America...

"This is the problem. There is deep distrust regarding each other and its growing especially after the Lebanon crisis. The fear is that it might sink to new lows, especially in the last two years of the Bush administration."

Read on ....

VERY UNTERESTING NEWS UPDATE ON THE CAREER OF NAWAF OBAID

Reuters reports (6th Dec 2005) that the Kingdom of Saudi Arabia (KSA)had fired Nawaf Obaid and said there was no truth in his Washington Post article of November 29 article, which suggested the kingdom would back Iraq's Muslim Sunnis in the event of a wider sectarian conflict. They quote the state Saudi Press Agency last week who quoted an "official source" .

Obaid stressed in the article that the views were his own and not those of the Saudi government.

"We felt that we could add more credibility to his claims as an independent contractor by terminating our consultancy agreement with him," Prince Turki al-Faisal, Saudi Arabia's ambassador to the United States, told the World Affairs Council of Philadelphia.

The article said the kingdom would intervene with funding and weaponry to prevent Shi'ite militias from attacking Iraq's Sunnis and suggested Saudi Arabia could bring down world oil prices to squeeze Shi'ite power.

Make of that what you will.

See also Reuters News Alert of Prince Turki al-Faisal's response to the Baker report...""The U.S. must underline its support for the Maliki government because there is no other game in town."