Today’s Global Sitrep will be a bumper pack, making up for Monday’s absence. We will largely focus on the stories highlighting the major themes shaping our world.

Wikileaks And Peak Oil

JOHN VIDAL for The Guardian, Feb 8, 2011: WikiLeaks cables: Saudi Arabia cannot pump enough oil to keep a lid on prices

The US fears that Saudi Arabia, the world’s largest crude oil exporter, may not have enough reserves to prevent oil prices escalating, confidential cables from its embassy in Riyadh show.

The cables, released by WikiLeaks, urge Washington to take seriously a warning from a senior Saudi government oil executive that the kingdom’s crude oil reserves may have been overstated by as much as 300bn barrels – nearly 40%.

The revelation comes as the oil price has soared in recent weeks to more than $100 a barrel on global demand and tensions in the Middle East.

AK – The problem of overstated OPEC reserves is a well-known one in industry circles, if a rarely publicly articulated one. Because the oil cartel’s extraction quotas are set by their relative reserves, repeated reserve inflation wars broke out as each country vied for a bigger share of the total production pie. So their numbers are unreliable. For the essential background to this topic, see Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy by Matt Simmons.

Trouble In The Kurils

Yahoo News, Feb 7, 2011: Russia and Japan wage war of words over islands (h/t Charles Ganske)

MOSCOW (AFP) – Russia and Japan were engaged in a heated war of words on Monday over a disputed island chain that the Kremlin vowed to keep forever despite the pressure from Tokyo.

The deeply divisive issue flared again when Japanese Prime Minister Naoto Kan used a national remembrance day to call President Dmitry Medvedev’s recent visit to the Kuril Islands — known as the Northern Territories in Japan — an “unforgivable outrage”.

Japan’s centre-left prime minister delivered his comments at a rally demanding the islands’ return — an event that received broad media play in Moscow because it featured the burning of a Russian tricolour flag.

AK – Japan would have been best off settling for the old Russian offer to give it 2 of the 4 islands back when it was an economic basketcase. Now Japan has little to offer Russia and they’re not getting any of the islands back.

Drought In China

KEITH BRADSHER for The New York Times, Feb 8, 2011: U.N. Food Agency Issues Warning on China Drought (h/t Mark Sleboda)

HONG KONG — The United Nations’ food agency issued an alert on Tuesday warning that a severe drought was threatening the wheat crop in China, the world’s largest wheat producer, and resulting in shortages of drinking water for people and livestock.

China has been essentially self-sufficient in grain for decades, for national security reasons. Any move by China to import large quantities of food in response to the drought could drive international prices even higher than the record levels recently reached.

“China’s grain situation is critical to the rest of the world — if they are forced to go out on the market to procure adequate supplies for their population, it could send huge shock waves through the world’s grain markets,” said Robert S. Zeigler, the director general of the International Rice Research Institute in Los Baños, in the Philippines.

The state-run news media in China warned Monday that the country’s major agricultural regions were facing their worst drought in 60 years. On Tuesday the state news agency Xinhua said that Shandong Province, a cornerstone of Chinese grain production, was bracing for its worst drought in 200 years unless substantial precipitation came by the end of this month.

AK – Perhaps most underreported major story in the global press. Let’s take stock: we have (1) continuing record high food prices, (2) the unprecedented droughts and floods in Australia, and (3) spiraling food prices already inflaming political instability in vulnerable nations (see Tunisia, Egypt). If the problem in China gets worse, it’s not impossible that the summer will see further revolts and some of the poorest nations sliding into outright starvation.

China Moves Into Africa

XAN RICE for The Guardian, Feb 6, 2011: China’s economic invasion of Africa

In December 1999, a 24-year-old Chinese man called Zhang Hao left behind the freezing winter of his native Shenyang city to fly to Uganda. Zhang was nervous. He spoke no English. The journey was not even his idea, but that of his father, who had worked in Uganda a few years before on a fishing project involving the Chinese government.

“If you want to start something – and be the boss – Africa is the place to do it,” Zhang’s father had told him when he asked for business advice.

Banks Capture State In The UK

GEORGE MONBIOT for Guardian, Feb 7, 2011: To us, it’s an obscure shift of tax law. To the City, it’s the heist of the century

‘I would love to see tax reductions,” David Cameron told the Sunday Telegraph at the weekend, “but when you’re borrowing 11% of your GDP, it’s not possible to make significant net tax cuts. It just isn’t.” Oh no? Then how come he’s planning the biggest and crudest corporate tax cut in living memory?

If you’ve heard nothing of it, you’re in good company. The obscure adjustments the government is planning to the tax acts of 1988 and 2009 have been missed by almost everyone – and are, anyway, almost impossible to understand without expert help. But as soon as you grasp the implications, you realise that a kind of corporate coup d’etat is taking place. …

At the moment tax law ensures that companies based here, with branches in other countries, don’t get taxed twice on the same money. They have to pay only the difference between our rate and that of the other country. If, for example, Dirty Oil plc pays 10% corporation tax on its profits in Oblivia, then shifts the money over here, it should pay a further 18% in the UK, to match our rate of 28%. But under the new proposals, companies will pay nothing at all in this country on money made by their foreign branches.

AK – In related news, 50% of Tory funds come from City.

How To Not Lose Money

AK – Most authors tell you how to make money. But not losing it is just as important.

KIMBERLY THORPE for Mother Jones, January 2011: Take this APR and Shove It

At last count, Steven Katz owed $80,000 on his six credit cards, and he has no intention of paying any of it off. In fact, he’d like to show you how to be like him—a “credit terrorist” in open revolt against the banking system.

Katz is the founder of Debtorboards.com (“Sue Your Creditor and Win!”), a five-year-old online forum where he’s collected countless tricks and tactics for evading and repelling persistent creditors. He’s written how-tos on shielding your assets from seizure, luring collection agencies into expensive lawsuits, and frustrating private investigators looking for debtors on the run. He’s even infiltrated the bill collectors’ forums, where he’s been tagged a “credit jihadist” and his site’s been called a “credit terrorist training camp,” a label he embraces. “Debtorboards is one of the biggest and most successful temper tantrums ever,” the 59-year-old Katz boasts. The site has more than 10,000 members—double what it had in 2009.

JEEVAN VASAGAR for Guardian, Feb 6, 2011: (UK) Universities ready to charge £9,000 fee, students warned

Top universities are poised to charge undergraduates the maximum fee of £9,000 a year from next September, according to the chairman of the Russell group of elite institutions.

Giving the clearest indication yet that high fees will be the norm at the most competitive institutions, Michael Arthur, who is vice-chancellor of Leeds University, told the Guardian that the most selective universities needed to raise their fees past the standstill figure of £7,000-8,000 a year to remain world class.

AK – If you’re a British secondary school graduate, you can now look forwards to what may now be the most expensive higher education system in the world. Unless you’re rich or have an Oxbridge offer, we would strongly recommend you to look into studying in the EU. You get to experience a different culture, many classes will be in English, and tuition fees are either non-existent or symbolic.