Middle East Christmas-week violence raises security, oil supply concerns


While much of the world has been praying for peace and goodwill, the Middle East has witnessed more mayhem and murder.

During Christmas week, the south of the region witnessed further sabotage attacks on Yemen’s Marib oil pipeline. Also in Yemen, there was a deadly army shelling of a funeral tent that killed 10.

In Iraq, al-Qaida-linked militants claimed responsibility for an attack on a television station headquarters that killed five journalists, bringing to 12 the number of journalists killed in the country in the past three months; a roadside bomb struck the convoy of the country’s acting defense minister, wounding two guards, only days after five senior army officers and 10 other soldiers had been killed during an operation against militants in western Iraq’s restive Anbar province; in the Dora area of Baghdad, other attacks targets Christians celebrating Christmas; in the country’s major southern oil producing province of Basrah, the disgruntled governor threatened to shut in Iraq’s roughly 2.2 million b/d of crude exports via the Persian Gulf over a revenue-sharing dispute with Baghdad.

We could go on: Lebanon, Egypt, South Sudan, Turkey. In the case of the latter, a series of police anti-corruption probes have resulted in the resignations of three senior cabinet ministers close to Prime Minister Recep Tayyip Erdogan and, despite cold weather, have sparked anti-government protests in Istanbul. At stake are major intergovernmental deals to import oil and gas from Iraqi Kurdistan and provide pipeline transit for 31 billion cubic meters/year of gas from the second development phase of Azerbaijan’s Shah Deniz field.

As for the cluster of OPEC oil exporters in the Persian Gulf region, only Iraq, and its plans to expand oil production and export capacity, and Bahrain, which is continuing its crackdown on anti-government protests by the island’s Shiite majority, are directly affected by the escalating violence in the greater Middle East. However, the Gulf region is now ringed by states that are either failing or in danger of becoming economically dysfunctional, especially if Iran’s southern and eastern neighbors, Afghanistan and Pakistan, are added to the regional tally.

Gulf Cooperation Council powerhouse Saudi Arabia remains key to whatever Middle East stability remains, and has channeled massive financial, military and diplomatic resources into containing unrest in Egypt, Bahrain and Yemen. The Gulf region’s other wealthy oil exporters, Kuwait, the UAE and Qatar, have largely followed Riyadh’s lead with similar initiatives.

Nonetheless, the threat to Saudi stability from the deteriorating security situations in countries to the kingdom’s immediate north and south — Egypt and Yemen — is real and growing.

It is in this context of increasing problems with Arab neighbors that Riyadh has reined in antagonism toward regional arch-rival Tehran, despite sere misgivings about the provisional deal forged by Iranian President Hassan Rouhani and the P5+1 group of international powers on Iran’s nuclear program and sanctions.

Riyadh’s official acceptance of and muted support for the accord supports views expressed to Platts by Adam Eneli, a consultant on international affairs and former US ambassador to Bahrain, on the state of US-Saudi relations.

“The ties between the US and Saudi Arabia are broad and deep,” he said. “There is a fabric of relationships that are much tighter and more interwoven than any temporary disagreement over a single policy.”

Eneli noted that Saudi investment in the US currently total roughly $700 billion and that the kingdom is the US’ 12th largest trade partner.

For its part, Tehran is under increasing threat of regional isolation as the Syrian conflicts inevitably spills over into neighboring Iraq and Lebanon. Iran’s remaining economic links to the Levant are further endangered by the gathering political storm in trade-partner Turkey.

While Eneli believes Iran stands to benefit from improved relations with major international powers if it upholds its end of the six-month deal signed in October, he is less sanguine about its western neighbor Iraq.

“That’s where you’ve got a serious problem,” he said, adding that Prime Minister Nouri al-Maliki had seriously overplayed his hand in seeking to consolidate power by marginalizing political opponents. In the process, he had antagonized former allies, leading to a resurgence of violence.

It is by no means easy to project how all this will play out. Scenarios range from a blanket regional descent into lawlessness with major downside implications for global oil supply, to a gradual waning of civil unrest if, as and when the problem states receive concerted international support aimed at relieving the immediate humanitarian crisis and establishing long-term economic viability. In between these extremes lies the likelihood of at least some degree of continued Middle Eastern unrest, stimulating worldwide and especially Asian concerns about Middle East oil supply – in other words, business as usual in the near-term.

As a corollary, continued strong oil prices would strengthen the Saudi establishment and the economies of Riyadh’s GCC allies, potentially leading to the emergence of a “fortress” GCC economic and security union dominated by Riyadh. The economic gap between oil-rich and oil-poor states and provinces in the Arab world would widen, intensifying social unrest. This is not a scenario that bodes well for the wider region’s long-term stability.

Source from : Platts