By: Julia Aurell

Sweden faced a great deal of security problems in 2015 ranging from soaring asylum applicants to a resurgent posturing Russian Federation. However, a brief incidence took place in March 2015, which led to a great deal of controversy and anticipation within Swedish foreign policy. On March 9, Swedish Foreign Minister Margot Wallström was prohibited from giving a speech to the Arab League after Sweden refused to renew a 10 year weapons deal with Saudi Arabia, citing human rights abuses and the degrading treatment of women as reasons for the non-renewal. Sweden, the 11th largest arms exporter in the world from 2011 to 2014, earned more than 5.1 billion SEK from sales to Saudi Arabia between 2011 and 2014, and therefore had little to gain financially from ending such an agreement. Moreover, 31 Swedish business giants, such as Volvo, H&M and Ericsson came out aggressively against the new policy arguing that not extending the deal would undermine Sweden’s credibility as a trading partner. As an anonymous Swedish diplomat told the Financial Times, “It is always money versus principles. And this time we decided the principles of human rights were more important than a military deal.” Saudi Arabia proceeded to condone Wallström’s actions and withdrew their ambassador from Stockholm saying that Wallström had “unacceptably interfered” in the country’s internal affairs by suggesting that arms deals should be attached with promises of improved human conditions. However, the events echo a wider Swedish, and global, challenge; to what extent is it acceptable to attempt to coerce countries to change their values and what consequences are states willing to accept to reinsure these values are adopted?

Sweden is one of Europe’s most egalitarian and secular societies and has little in common with the deeply religious Saudi Arabia. Committed to human rights and gender equality, the Swedish government has struggled to uphold their values with their continuous arms sales to autocratic regimes, such as Saudi Arabia, Pakistan, Brunei and Thailand to name a few. Although it has a revolting human rights record, Saudi Arabia remains a close ally to the Western world, much at a double standard; Saudi Arabia is a medieval theocracy protected by its fabulous oil wealth. The lashings of imprisoned bloggers, public beheadings and continued restrictions on women’s rights – including their ability to drive – have been subject to harsh criticism from human rights activists in the Western world. Foreign Minister Wallström who pursues a self-proclaimed “feminist foreign policy,” arguing that “striving toward gender equality is not only a goal in itself but also a precondition for achieving out wider foreign, development and security-policy objectives.”As Ali al-Ahmed, director of the Institute of Gulf Affairs, said the action did show “a break in the 50-year view in the West of ‘We can’t touch Saudi Arabia.’”

However, the withdrawal of Saudi Arabia’s ambassador from Stockholm clearly suggested that Riyadh would prefer that Sweden, and Western countries, do not interfere in its internal politics. While it seemed as though Sweden’s strategic interests were beginning to align with her values, the situation soon took another turn. The government reversed its policy by allowing King Carl XVI Gustav of Sweden to send a well-timed letter to the King Salam of Saudi Arabia emphasizing the previous relations between the two countries. King Carl XVI Gustav has little political input in Sweden, other than the ability to declare war. The apology and reassurance from a figure of authority, and presumably from a man and not a woman, was well received in Saudi Arabia as they reinstated their ambassador soon after. While the act to attempt to condone Saudi Arabia’s action was well-received in the West, it is unlikely that other countries will want to follow Sweden’s example by angering one of the most important players in the Middle East. There is no doubt a double standard in how leaders stress human right ideas. In the face of immediate economic and security though, concerns often fall silent in their complaints.

While the issue of Saudi Arabia has been overlooked as a one-time incident in many circles, the issue of human rights violations versus national interests has arisen in Sweden. In August 2015, Wallström met with co-leader of the pro-Kurdish People’s Democratic Party (HDP), Selahattin Demirtas, to show support in their fight against the systematic oppression within Turkey. Since their meeting, the violence has continued with more than 400 of HDP’s offices being attacked, killing more than 300 civilians in the process. While Wallström promised support in their fight to achieve equality and freedom, this has been overlooked with the escalation of the migration crisis.

In March 2016, the European Union promised to provide an additional 3 billion euros to Turkey to help stem migrant flow, in which Sweden has promised to contribute a significant amount. While empowerment was promised to the Kurds, migrants from the Middle East are being denied the opportunity to flee to Europe and begin their life. Rather, Sweden and the rest of Europe have chosen to “turn a blind eye” to the abuses occurring against Kurdish militants as well as refugees of conflict to receive Turkish help to control the migrant influx. Once again, human rights have taken second priority when faced with issues of one’s own national security. Mikael Damberg, Swedish minister of Enterprise, has hinted that the shift in policy is intertwined with the potential economic consequences, as the government believes that exports to Turkey will be vital for Sweden’s export-led economy in the next 10 years.

These two incidents clearly show where Sweden’s priorities lie. If Sweden wants to maintain its reputation as a humanitarian superpower, the battle for human rights cannot be limited to verbal commitments. While attempting to be a force for human rights and democracy both in Saudi Arabia and Turkey in the last year, these efforts have hit a dead end in the face of economic and security priorities. Rather, the formation of a precise and effective doctrine is needed to guide Swedish foreign policy on issues of human rights and democracy. The creation of such a doctrine will create an incentive for Sweden to act in the face of confrontation, rather than to blink in the final moments of confrontation. However, this echoes a larger challenge, the question of values and national security. While Sweden hardly constitutes a threat to anyone, one could hope that a continued attempt to break the double standard which exists in the Western world against authoritarian regimes in strategically important locations, will provide the spark needed to dramatically shift policy, in all Western nations.

Image by UN Geneva


By Kristopher Klein
Staff Writer

What happens to a cartel when there is substantial competition from outside? The answer depends on patience.

The Organization of Petroleum Exporting Countries (OPEC) has been the most influential component of setting oil prices since their founding in 1960. As an organization OPEC has helped raise the price of oil above $100 per barrel for the past near-decade. Large importers of oil, such as the United States, have put up with rising prices, unable to stop OPEC from colluding in their own interest. However with the recent rise in competition from North American shale oil producers, that era has come to a swift and decisive end.

Any college-level economics course will review the concept of collusion among cartel members and the decision each cartel member makes about whether to remain in the cartel or to go out on their own.

The difference between these strategies is a matter of weighing short-term profit versus long-term profit. If the cartel remains intact, producers will be able to collude to raise prices to artificially high levels and thereby make more profits. However, if a producer leaves the cartel they can lower their price and temporarily receive a larger share of the market (i.e. more customers) and thereby make a lot of profit in the immediate future.

But the betrayal of the second strategy has consequences. If the integrity of the cartel is undermined, greater competition between all members will force producers to charge a fairer price and lose the profits they could have made through continuing to collude to raise prices.

Thus, it is a matter of patience and how soon a cartel member needs to receive their profits that determines strategy. A member who is very eager to receive short-term profits is a greater risk of leaving than a member who can afford to wait for higher profits in the long-term.

Competition from outside this cartel lowers prices and raises the risk of a cartel member, in a pinch from lower profits, making a quick dash for more revenue (either per unit or overall) by either cutting production in order to raise the price or increasing production to gain market share.

The United States has been increasing its production of shale oil since a jump in production in late 2014. Greater supply of oil, combined with slower growth in the economies of Europe and East Asia, has created a global supply glut and falling prices.

In late December the United States decided to lift its ban on the export of oil. But the United States imports more oil than it exports, so what effect could that really have? As it turns out, the United States is one of the only countries capable of refining the crudest oil into a product for the global market, so a lot. John Auers, executive vice president at Dallas-based Turner Mason & Co was quoted as saying that, “U.S. refineries built out their capacity to run heavy barrels. Refineries in the rest of world aren’t built to run heavy barrels.” That means lifting the ban on exporting oil has allowed the United States to begin refining very crude oil from around the world before then exporting refined gasoline back around the world at a price that can compete with the OPEC cartel.

The result of competition from the United States has led to a collapse in the price of oil from above the $100 per barrel level that OPEC loves so much, to around $45 per barrel today. Some OPEC members are seriously hurting. If the pain does not end soon, political turmoil could arise from within OPEC.

OPEC member Venezuela calculated its 2015 budget on the idea that oil prices would remain at about $60 per barrel and that any excess revenue would be used to help run social programs. With the price of oil now just above $45 per barrel, Venezuela looks to run a deficit this year, which will force them to limit funding to social programs.

On January 10, Venezuelan President Nicolas Maduro and Iranian President Hassan Rouhani vowed to cooperate to stabilize falling oil prices. Five days later, Maduro and Russian President Vladimir Putin, whose country is not a member of OPEC, held a “detailed discussion” about the global oil market, without releasing any details.

Saudi Arabia has repeatedly rejected calls from OPEC members for the cartel to cut production in order to defend the price of oil. Saudi Arabia has saved much of the revenue it earned from higher oil prices and now has a reserve large enough to wait a while before cutting production, a move they hope will lead to a cut in production from North American shale oil producers.

However, not every member of OPEC has the reserves that Saudi Arabia and its neighbors on the Arabian Peninsula have built up over time. Without a rise in the price of oil very soon those countries, such as Venezuela and Algeria, will come under significant pressure to find a means of changing their fortunes.

Could this fall in the price of oil and Saudi Arabia’s refusal to cut production endanger the cohesiveness of OPEC as a price-influencing entity, or perhaps even mean a collapse of the cartel altogether? It very well may. In fact, OPEC seems already to be losing its control of prices that at one time were to the penny. According to Kuwaiti Oil Minister Ali Saleh al-Omair, “OPEC would have to accept any market price for oil, whether it were $100, $80 or $60 per barrel.”

North American competition has, at least for a time, defanged OPEC and clipped the wings of global oil prices. If the American market can sustain production and OPEC is forced to proceed as a price-taker rather than price-maker, OPEC members will begin to wonder why they participate in the cartel at all.

Image by Iguanasan