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| Familiar Excuses: Those wondering why our Prime Minister was so willing to countenance a reputationally damaging breaking of Air New Zealand's contract with the Saudi Arabian navy should wonder no longer. Pieces are in motion on the Middle East chessboard. The interests of the majority shareholder in Air New Zealand are, accordingly, in flux. Jacinda Ardern has sniffed the wind and smelled Joe Biden’s aftershave. |
CAPITALISM IS CHANGING. Twenty years ago, the sole obligation of a capitalist enterprise (other than abiding by the laws of the states in which it operated) was to generate a return on its shareholders’ investment. So entrenched was this notion that it was specifically referenced in the legislation giving effect to the free-market reforms of the 1980s and 90s. Not anymore. In today’s climate, the interests of shareholders are expected to give way to the moral convictions and/or objections of journalists and politicians. The pursuit of profit now comes second to the quest for ethical perfection.
The current furore engulfing Air New Zealand’s commercial relationship with the Saudi Arabian Navy illustrates the many problems associated with mixing money and morality.
A quick Google search established that, in the words of the Sanctions Scanner website, “there are no formal international sanctions implemented against Saudi Arabia”. Following the gruesome assassination of the journalist, Jamal Khashoggi, in 2018, the US Congress briefly considered imposing unilateral sanctions, but nothing came of it. (In matters relating to “The Kingdom” nothing usually does.) Put simply, there was and is no legal impediment to Air New Zealand entering into a commercial relationship with the Saudis. The company saw an opportunity to make money for its shareholders – and took it.
Yes, but, the Saudi navy is blockading the war-torn nation of Yemen, a country constantly teetering on the brink of humanitarian catastrophe. Refurbishing the gas turbine engines of its warships places the national carrier in the invidious position of at least appearing to be aiding and abetting the perpetrators of acts which some critics of the Saudi regime have alleged to be war crimes.
Some critics? Therein lies the problem. Yemen finds itself in the unfortunate position of being caught up in the struggle for regional supremacy between the Kingdom of Saudi Arabia and the Islamic Republic of Iran. By means of its naval blockade, and intermittent bombing sorties, the Saudi regime has been able to prevent Iran’s proxies – the rebel Houthi militias – from over-running completely what remains of the Saudi-friendly forces associated with the government of President Abdrabbuh Mansur Hadi. The Saudis’ extremely restricted military options in this ferociously complex civil war leave them acutely vulnerable to accusations of war crimes. To date, however, international opprobrium has been deemed preferable to an Iranian ally controlling the geopolitically critical entrance to the Red Sea.
Not that the most vocal critics of Air New Zealand’s association with the Saudis have much to say about geopolitics. For the Greens’ Golriz Ghahraman, the fact that people (many of them children) die in wars is sufficient reason for New Zealand to have nothing to do with them. For Valerie Morse, one of the most outspoken critics of New Zealand’s small but innovative arms industry, there can be no excuse for even the most peripheral involvement of Kiwi companies in the production or refurbishment of military equipment – especially a company whose majority shareholder is the New Zealand state.
All very noble and principled of this outspoken duo, whose political stance, in addition to being high-minded, is also (dare we say it?) guaranteed to attract massive support on Twitter, Instagram and Facebook.
Less ethically lustrous, perhaps, is the consideration owed to Air New Zealand’s highly skilled engineering workforce. With their usual flow of contracts stemmed by the Covid-19 pandemic, the Saudi refurbishment job was likely seen as a godsend. That nobody asked too many questions about what these refurbished engines might be powering is entirely understandable. Air New Zealand’s engineering capabilities are an important contributor to its international success. Management had every right to assume that, as the company’s majority shareholder, the New Zealand state has a vested interest in keeping one of its airline’s most efficient operations economically viable.
It would have been equally understandable if those involved in, and associated with, the contract saw the whole exercise as part of a much bigger picture. New Zealand is, when all is said and done, still a member of what John Key called the Five Eyes “club”. With the two biggest exporters of arms to the Saudi kingdom being fellow Five Eyes members the United States and the United Kingdom, and with the Aussies revving-up their own arms industry in sympathy, New Zealand pitching-in to the geopolitical working-bee may well have been seen as the shrewdest move – diplomatically-speaking.
The Iranians already possess the capability of closing the Strait of Hormuz at the entrance to the Persian Gulf. Allowing them to close-off the entrance to the Red Sea would be greeted with alarm and dismay by all those nations dependent on the oil and natural gas reserves of the Arabian peninsula. That’s not just us, by the way, but also our biggest trading partners China and Australia.
To Ms Ghahraman and her Green colleagues, the prospect of so dramatically exposing the world’s dependence on fossil fuels was, no doubt, an alluring one. Unfortunately, the global economy is nowhere near being able to do without coal, oil and natural gas. For many years to come, the strategic criticality of Middle East oil will drive the decision-making of nations much larger and more ruthless than New Zealand.
That the very existence of the Air New Zealand-Saudi relationship came to light at all may be related very closely to the recent political shifts in the biggest and most ruthless nation of them all – the United States of America. On 4 February 2021, America’s new president, Joe Biden, delivered a foreign-policy speech in which he signalled the USA’s unwillingness to let the bloody stalemate in Yemen continue.
“This war has to end,” said Biden. “And to underscore our commitment, we’re ending all American support for offensive operations in the war in Yemen, including relevant arm sales.”
Those words should not be interpreted as an indication of the USA’s willingness to let the Iranians claim victory – far from it. What Biden’s announcement portends is Washington’s impatience with the Saudi regime’s military inadequacies. Donald Trump may have taken its Crown Prince’s assurances that his armed forces were more than a match for Houthi militiamen, but Biden is much more willing than his predecessor to believe the evidence of his military and diplomatic experts on the ground. Uncle Sam is getting ready to butt some intransigent heads together. Mohammed bin Salman’s ambitions will be put on ice, while the Iranians will be offered an end to crippling US sanctions if they undertake to help broker a lasting peace in Yemen.
Those wondering why our Prime Minister was so willing to countenance a reputationally damaging breaking of the gas turbine contract should wonder no longer. Pieces are in motion on the Middle East chessboard. The interests of the majority shareholder in Air New Zealand are, accordingly, in flux. Jacinda Ardern has sniffed the wind and smelled Joe Biden’s aftershave.
Maybe capitalism hasn’t changed that much after all?
This essay was originally posted on the Interest.co.nz website on Monday, 15 February 2021.
9 comments:
An interesting take Chris; but...
"Uncle Sam is getting ready to butt some intransigent heads together. Mohammed bin Salman’s ambitions will be put on ice, while the Iranians will be offered an end to crippling US sanctions if they undertake to help broker a lasting peace in Yemen."
Presumably that would mean Iran transferring their support from the rebels to the Saudi approved leadership. That doesn't seem likely to me. Nor does it seem likely that Israel will allow the US to make a deal with Iran that resembles the original JCPOA. Not on behalf of Yemen anyway.
Biden's stance seems to be simply a continuation of Trump's as far as Iran is concerned , requiring more grovelling from Iran rather than less to prove his tactical superiority .
Will be interesting to watch.
D J S
Your beluefs on the conflict in Yemen are moulded by the deliberately ahistorical western media narrative that paints this solely as a proxy conflict with the Houthi as pretty much pawns of Iran.Gordon Campbell gets it. https://www.scoop.co.nz/stories/HL2102/S00059/on-the-latest-lockdown-and-on-air-nzs-saudi-military-sales.htm
A pretty astute comment. As you note, there is no way the US and Europe will want the Iranians to be able the blockade the Red Sea. However, it is also true that the Saudis have been utterly inept in their intervention, which has simply made the situation worse with all the adverse humanitarian consequences.
Biden's team will want to see the end of this war. It could be tied to lifting Iranian sanctions and the re-establishment of the nuclear deal. Maybe on the basis of a much bigger approach to the overall Iran/US relationship. After 42 years since the Iranian revolution, it is well over time for a meaningful breakthrough on how the two nations deal with each other. It is worth recalling that the Sino/US rapprochement of 1972 was only 33 years after the 1949 revolution. Are the US and the Iranians up to a fundamental reset of their relationship? Is the Biden Harris team bold enough?
None of us were wondering that but thanks for the trip around.
Much love for Yemenis, a defeat for progressives, like Egypt, from the Arabian Spring. And a proof for the realpolitik view. Like 1848.
I saw Frank Bunce on a travel show caught up in Egypt's 'Spring', enthused to the gills. I can't believe our great midfielder was wrong.
This article raised a nagging idea of our future relationship with oil.
Oil is finite and as it runs down over the next 20 or so years competition for access will increase for what is left. We are a small nation with little clout at the end of long supply lines.
How we respond may be instructive for the rest of the world. We need to get to grips with how we utilise our advantages in renewable electricity before it becomes critical. There is so much to do and so little time.
Since the Biden administration made this announcement the Houthis have stepped up their attacks with a drone attack on civilians last Saturday, with four more such attacks the next day. To this the Biden administration responded as follows:
The United States urges the Houthis to halt their advance on Marib and cease all military operations and turn to negotiations. The Houthis’ assault on Marib is the action of a group not committed to peace or to ending the war afflicting the people of Yemen. . . .
If the Houthis are serious about a negotiated political solution
...
There is no military solution
This is one of those moments where you have to laugh otherwise you'd cry.
Not the actions of a group committed to peace?
No it's not. You seem as surprised as Biden is by this stunning revelation.
If the Houthis are serious about a negotiated political solution...
I think they're committed to winning a long war.
Finally, WRT to there being no military solution here, I'm reminded that is exactly what Obama repeatedly told Bashar al-Assad in Syria. He and his friends in Iran and Russia did not agree, and they were right. They won.
Oil is finite
I've been hearing that all my life and while it must be technically true, given the difference in speed between formation (millions of years) and extraction (decades or perhaps a couple of centuries), the fact is that even by the measurement of recoverable reserves we have more oil now than ever before. And this is nothing new. The 1975 URR (Ultimately Recoverable Reserve) estimate by Aramco for the Ghawar field (when it was owned by four US companies) was 46 billion barrels, having produced 15.5 billion barrels to that date. To 2006 it has produced 55 billion barrels – 90% of the earlier URR+extracted figure and far past the point when Peak Oil theory demands that output should decline.
Moreover, even leaving aside the impact of fracking, which in the USA has completely debunked the Huppert Theory which was recently held up as an immutable law, there are over one trillion barrels of oil that can be lifted out of the ground for less than $US10 a barrel, and most of that oil lies with nations that have little else to trade with the world.
They will drill. They will pump. They will ship to eager buyers.
"Oil is finite and as it runs down over the next 20 or so years competition for access will increase for what is left. We are a small nation with little clout at the end of long supply lines."
The critical point Nick, and it could well be relevant to understanding US foreign policy all over the world.
In Syria , whatever their claimed reasons for being there are, they are taking the opportunity to blatantly steal Syria's oil. This seems incredibly blatant and terrible to me but no-one else seems to think anything of it. But to me it puts everything that the US does on the world stage into clear perspective. They will do whatever they please with anyone's property wherever they are. They are a tyrant regime under any puppet president.
All the countries that have significant oil deposits are either having them exploited by american companies or are under sanction. The sanctions are a way of preserving the deposits until the US can organise by coup or invasion a regime in that country that will allow american companies access to that oil.
Russia should be thankful if the Nord stream 2 is stopped . They will need that gas themselves one day.
D J S
Tom, you might wish to defer to the annual BP report on oil output. It paints a less than rosy picture.
US oil production is falling rapidly as the fracking companies fail due to the high capital cost and rapid depletion of shale wells. The business model doesnt stack up, especially as the US demand has fallen with Covid etc. Soon it will be back to below prefracking levels. That crash puts paid to the much quoted $10 dollar a barrel idea. Much of the feted trillions of barrels belong to costly unconventional reserves. In that light Hubbards model far from debunked applied to standard oil wells has proven very accurate. Easy oil is running down.
Proven reserves are to be taken with a grain of salt. To justify continuing capital investment stocks are routinely overstated. That said even if there are continuing discoveries they are now in smaller and more difficult fields. The easy oil is gone. The key issue here is not total volume of reserves. It is two things.
First is energy cost per unit of energy recovered. That is going down. That means as the figures draw closer there will be little point extracting from remaining reserves.
Second each time the cost of oil becomes too high economies crash, demand falls but capital is lost. Depressed economies are hard to restart and capital for oil becomes harder to justify on a risk basis.
Sorry to disabuse your optimism Tom, I never believed much of what I learned at Uni 40 years ago but geological facts remained stubbornly accurate.
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