A Putin-Arab Alliance?

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By Marin Katusa, Chief Energy Investment Strategist

After intense opposition, Egyptian President Mohamed Morsi rescinded the decrees he issued on November 22, wherein he expanded his powers and protected himself from all judicial oversight. Though this looks like a concession that will defuse the current political tension in Egypt, Morsi has already done what he needed to do: put forth a draft constitution that is heavily influenced by his Islamist allies. This constitution will go through a referendum on December 15.

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No matter the results of the referendum, Morsi has shown himself as a leader who is willing to twist the rules in order to benefit himself. Even if he does not succeed this time, he will definitely try again to monopolize the power in Egypt and reassert Egypt’s place in the Middle East.

Once Morsi becomes the new Mubarak of Egypt, he will undoubtedly begin pushing for more Islamist presence throughout the Middle East. The Islamists would seek to topple the governments in Saudi Arabia, Qatar, and the other countries in the Persian Gulf and replace them with Islamist regimes. These governments would be vehemently anti-Israel and also hostile towards Israel’s biggest ally – the United States.

And who stands to gain the most from the establishment of an Islamist, anti-US, pan-Arab state?

Interestingly enough, we believe it is Russian President Vladimir Putin.

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A few weeks ago, we mentioned how Vladimir Putin now owns the number-one publicly traded oil producer in the world – Rosneft. The company is looking to produce more than 4 million barrels per day – more than that of Exxon Mobil.

According to his master’s thesis, what Putin is looking for is to reestablish Russia as a major world power through the control of natural resources. So far he has already done a good job, maintaining a stranglehold on Europe’s energy. In our upcoming Casey Energy Report, we will complete a two-part series on Putin’s control of Europe – and how investors could profit.

It is true that a secular Russia and an Islamist Arab state would not be a match made in heaven, but a common opponent (the United States) and a common goal (more revenues for the country’s coffers through higher oil prices) could very well bring them together in a marriage of convenience.

If Putin decides to throw his lot in with the Arab oil-producing countries, it would give him control of over 40% of the world’s oil supply, a figure that would be increased to more than half of all the oil production in the world if the rest of OPEC tagged along.

A unified front of Arab countries combined with the wiles of Vladimir Putin would create an unprecedented level of volatility in the energy markets.

What does this mean?

For Casey Energy Report subscribers, it means the chance to make a great amount of money through the right stock picks.

What will it mean for you?

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Additional Links and Reads

Kurdish Oil Exports Halve (Reuters)

The Kurdistan-Iraq saga continues, as disputes over oil payments and technical problems plague the region and its ability to export oil. Baghdad also continues to reject the deals signed between the Kurdistan Regional Government (KRG) and oil companies. As Kurdistan is one of the last places in the world where large, onshore light-oil deposits can still be found, we could expect the drama to last quite some time.

India State Oil Firms Press Ahead with Canada Oil-Sands Bid (Reuters)

India is at it again: right after purchasing Conoco’s stake in the Kashagan project, a consortium of Indian firms is looking to buy Conoco’s stake in Canadian oil-sands project in a deal that could be worth as much as $5 billion. We believe that this is the beginning of more aggressive investments and acquisitions from Indian firms, as they have been losing out to Chinese firms for oil reserves around the world. The competition should greatly benefit companies that have the large reserves that attract Asian companies.

Egypt Importing Gas for First Time as Exports Disappear (Bloomberg)

The political turmoil that has embroiled Egypt has also begun to hit its gas exports. The lower amount of supply, combined with steadily increasing demand from electricity generation, has forced Egypt to look into importing, rather than exporting, liquefied natural gas. The loss of the revenue that comes from natural-gas imports will hurt the Morsi government and its ability to stabilize the economy during this challenging time.

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avatarDoug Casey - Casey's Daily Dispatch posted Tuesday, December 11th, 2012.

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