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Unformatted text preview: ar that it aims to draw the line against Iranian expansionism. 27 Iran is dependent on oil revenues for more than 65 percent of its government revenue. In contrast, the Kingdom is in a position to withstand a period of low oil prices. Thus, Saudi Arabia’s ability to wage a price war is a major tool it can use to diminish Iranian power in the region and weaken Iran’s position as a regional military and political rival to the Kingdom. The ability to wage an oil price war also helps the Kingdom to guard against other producers with large oil reserves, such as Iraq, from taking over its oil market share. In fact, Iraq has expressed the ambition to reach 10 to 12 million b/d of production by 2017. This level is commensurate with Saudi Arabia’s capacity. Rising Iraqi output could alter the balance of political power within OPEC and challenge Saudi Arabia’s current leadership. Iraqi oil reserves are considered very low-cost to develop and are competitive with those of Saudi Arabia. In summary, while the costs of maintaining enough spare capacity to wage a price war have risen for Saudi Arabia, there are still many geopolitical incentives for the Kingdom to maintain this capability. This includes contributing to its security by weakening Iran and by remaining important to the United States, which would then be more apt to provide security guarantees in exchange for the free flow of oil.28 193 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 ***Low Prices Good – General*** 194 Oil DDW 2012 1 Low Prices Good – Stability 195 Last printed 9/4/2009 7:00:00 PM Oil DDW 2012 1 High oil prices cause state aggression and weakness that undermines security Umbach, Centre for European Security Strategies (CESS), Munich-Berlin, Germany, 09 Frank Umbach, Centre for European Security Strategies (CESS), Munich-Berlin, Germany, 3-6-09, [“Global energy security and the implications for the EU,” Energy Policy Volume 38, Issue 3, March 2010, Pages 1229–1240,] E. Liu These energy prices offer a significant increase of hard currency in the state budgets for many producer states. The New York Times columnist Thomas L. Friedman and others have identified a direct correlation and negative impact of average crude oil prices on political freedom, democratisation and the direction of cooperative or confrontational foreign policies. According to his ‘‘First Law of Petropolitics’’, the higher the average oil and gas prices on the international market, the lower the internal political and economic reform willingness of governments and the more confrontational their foreign and security policies, leading to ‘‘petro-authoritarianism’’ (Friedman, 2006). It explains the present policies of those ‘‘petroist’’-states such as Russia, Iran, Venezuela, Nigeria, Sudan and others, which are highly dependent on oil and gas for their GDP and having either weak institutions or authoritarian systems. They have started asserting themselves domestically as well as in their foreign polic...
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