How will geo-political unrest in the Middle East affect Cayman's Energy Security?

Will the battle for Iraq become Saudi war on Iran?

Be careful what you wish for could have been, and perhaps should have been, Washington’s advice to Saudi Arabia and other Gulf states which have been supporting Sunni jihadists against Bashar al-Assad’s regime in Damascus.

The warning is even more appropriate today as the bloodthirsty fighters of the Islamic State of Iraq and al-Sham (ISIS) sweep through northwest Iraq, prompting hundreds of thousands of their Sunni coreligionists to flee and creating panic in Iraq’s Shiite heartland around Baghdad, whose population senses, correctly, that it will be shown no mercy if the ISIS motorcades are not stopped.

The outbreak of civil war in Iraq has oil traders nervous. Crude oil trading on the NYMEX Thursday gained more than $2 per barrel and has so far continued its climb Friday morning, going as high as $107.68 for WTI and Brent Crude to $113.02.

Such a setback for Iraqi Prime Minister Nouri al-Maliki has been the dream of Saudi Arabia’s King Abdullah for years. He has regarded Maliki as little more than an Iranian stooge, refusing to send an ambassador to Baghdad and instead encouraging his fellow rulers of the Gulf Cooperation Council (GCC) — Kuwait, Bahrain, Qatar, the United Arab Emirates, and Oman — to take a similar standoff-ish approach. Although vulnerable to al Qaeda-types at home, these countries (particularly Kuwait and Qatar) have often turned a blind eye to their citizens funding radical groups like Jabhat al-Nusra, one of the most active Islamist groups opposed to Bashar al-Assad in Syria.

Iran’s President Hassan Rouhani commented on June 12 on the latest crisis in Iraq, making it clear that Iran will intervene at the appropriate time to combat terror. According to a transcript of the speech released by the Islamic Republic News Agency, he said, "The Islamic Republic of Iran will not tolerate this violence and we will not tolerate this terror and as we stated at the UN, we will fight and combat violence, extremism and terrorism in the region and the world."

Currently on vacation in Morocco, King Abdullah has so far been silent on these developments. At 90-plus years old, he has shown no wish to join the Twitter generation, but the developments on the ground could well prompt him to cut short his stay and return home. He has no doubt realized that — with his policy of delivering a strategic setback to Iran by orchestrating the overthrow of Bashar al-Assad in Damascus showing little sign of any imminent success — events in Iraq offer a new opportunity.

This perspective may well confuse many observers. In recent weeks, there has been a flurry of reports of an emerging — albeit reluctant – diplomatic rapprochement between the Saudi-led GCC and Iran, bolstered by the apparently drunken visit to Tehran by the emir of Kuwait, and visits by trade delegations and commerce ministers in one direction or the other. This is despite evidence supporting the contrary view, including Saudi Arabia’s first public display of Chinese missiles capable of hitting Tehran and the UAE’s announcement of the introduction of military conscription for the country’s youth.

The merit, if such a word can be used, of the carnage in Iraq is that at least it offers clarity. There are tribal overlays and rival national identities at play, but the dominant tension is the religious difference between majority Sunni and minority Shiite Islam. This region-wide phenomenon is taken to extremes by the likes of ISIS, which also likely sees its action in Iraq as countering Maliki’s support for Assad.

ISIS is a ruthless killing machine, taking Sunni contempt for Shiites to its logical, and bloody, extreme. The Saudi monarch may be more careful to avoid direct religious insults than many other of his brethren, but contempt for Shiites no doubt underpinned his Wikileaked comment about "cutting off the head of the snake," meaning the clerical regime in Tehran. (Prejudice is an equal opportunity avocation in the Middle East: Iraqi government officials have been known to ask Iraqis whether they are Sunni or Shiite before deciding how to treat them.)

Despite the attempts of many, especially in Washington, to write him off, King Abdullah remains feisty, though helped occasionally by gasps of oxygen — as when President Barack Obama met him in March and photos emerged of breathing tubes inserted in his nostrils. When Sheikh Mohammed bin Zayed, the crown prince of Abu Dhabi — and, after his elder brother’s recent stroke, the effective ruler of the UAE — visited King Abdullah on June 4, the Saudi monarch was shown gesticulating with both hands. The subject under discussion was not revealed, but since Zayed was on his way to Cairo it was probably the election success of Egypt’s new president, Abdel Fattah el-Sisi, considered a stabilizing force by Riyadh and Abu Dhabi. Of course, Sisi gets extra points for being anti-Muslim Brotherhood, a group whose Islamist credentials are at odds with the inherited privileges of Arab monarchies. For the moment, Abdullah, Zayed, and Sisi are the three main leaders of the Arab world. Indeed, the future path of the Arab countries could well depend on these men (and whomever succeeds King Abdullah).

For those confused by the divisions in the Arab world and who find the metric of "the enemy of my enemy is my friend" to be of limited utility, it is important to note that the Sunni/Shiite divide coincides, at least approximately, with the division between the Arab and Persian worlds. In geopolitical terms, Iraq is at the nexus of these worlds — majority Shiite but ethnically Arab. There is an additional and often confusing dimension, although one that’s historically central to Saudi policy: A willingness to support radical Sunnis abroad while containing their activities at home. Hence Riyadh’s arms-length support for Osama bin Laden when he was leading jihadists in Soviet-controlled Afghanistan, and tolerance for jihadists in Chechnya, Bosnia, and Syria. More

One of the reasons that I have been lobbying and submitting reports on the need for an energy policy and the need for alternative energy to the Cayman Islands Government for the last seven years is because of the possibility of geo-political instability triggering conflict in the Middle East.

This may have come to pass. As you will have read above the insurgency has moved out of Syria and into Iraq. Civil war appears to have broken out, with Iraq's most senior Shia cleric has issued a call to arms after Sunni-led insurgents seized more towns. The call by a representative of Grand Ayatollah Ali al-Sistani came as the militants widened their grip in the north and east, having seized Mosul and Tikrit and threatened to march south, towards Baghdad.

The question is whether Saudi Arabia will offer help to the ISIS insurgents. Currently on vacation in Morocco, King Abdullah has so far been silent on these developments, but the developments on the ground could well prompt him to cut short his stay and return home. The Washington Institute for Near East Policy asserted that the Saudi military parade on April 29 marked a message to both Iran and the United States. Institute fellow Simon Henderson said this marked the first time Riyad displayed its Chinese-origin CSS-2 ballistic missile, designed to contain a nuclear warhead. King Abdullah has no doubt realized that — with his policy of delivering a strategic setback to Iran by orchestrating the overthrow of Bashar al-Assad in Damascus showing little sign of any imminent success — events in Iraq offer a new opportunity. Saudi Arabia's defense budget according to Deloitt, stands at $16 billion dollars.

Iran’s President Hassan Rouhani commented on June 12 on the latest crisis in Iraq, making it clear that Iran will intervene at the appropriate time to combat terror. According to a transcript of the speech released by the Islamic Republic News Agency, he said, "The Islamic Republic of Iran will not tolerate this violence and we will not tolerate this terror and as we stated at the UN, we will fight and combat violence, extremism and terrorism in the region and the world."

Given that Iraq is OPEC's second largest producer and that Brent Crude is already at a nine month high, the possibility is that oil prices could rapidly escalate to $150 per barrel is high.

What effect would this have on the Cayman Islands you may ask. If we have civil war in Iraq, which already appears to be the case, and if the ISIS takes Baghdad and continues south to the oil rich areas we could see $150 per barrel oil. However, if conflict spreads further afield in the region, which conceivably could see the Straights of Hormus closed, we could see oil at $300 per barrel. Editor.

 

 

© 2014

AREVA, EDF sign accords for Saudi nuclear program

RIYADH - EDF and AREVA signed two sets of agreements aimed at supporting the Saudi nuclear energy program on Monday, coinciding with the visit of French President François Hollande's to Riyadh. The two companies have signed Memorandums of Understanding (MoUs) with 5 Saudi industrial partners - Zamil Steel, Bahra Cables, Riyadh Cables, Saudi Pumps, Descon Olayan.

The agreements aim to develop the industrial and technical skills of local companies. They reflect AREVA and EDF's desire to build an extended network of Saudi suppliers for future nuclear projects in the country.

A second series of agreements signed with 4 Saudi universities - King Saud University in Riyadh, Dar Al Hekma College and Effat University in Jeddah and finally Prince Mohammed bin Fahd University in Al-Khobar - are intended to contribute to the development of nuclear expertise in the Kingdom.

These agreements follow on from the previous operations organized by EDF and AREVA, through their joint office in Riyadh. These include the "Suppliers' Days" in March and October 2013, the visit to France by Saudi industrial companies in November, the agreement signed with the local professional training institute (NIT) in July 2013, the visits to French nuclear facilities organized for Saudi university faculty members in June 2013 and internship offers made to Saudi students since the summer.

EDF CEO Henri Proglio said: "These new agreements underline EDF and AREVA's commitment alongside the Kingdom of Saudi Arabia to enable it to successfully implement its national energy strategy and in particular to develop its future nuclear program by contributing to the development of a local network of manufacturers and by training qualified engineers."

Luc Oursel, President and CEO of AREVA, added: "These agreements demonstrate the common will of EDF and AREVA to establish a true long-term partnership with the Kingdom of Saudi Arabia. They will enable the country to build a strong industrial base and a robust skills management program."

The EDF group, one of the leaders in the European energy market, is an integrated energy company active in all areas of the business: generation, transmission, distribution, energy supply and trading. The Group is the leading electricity producer in Europe. In France, it has mainly nuclear and hydropower generation facilities where 95.9 percent of the electricity output is CO2-free.

AREVA supplies advanced technology solutions for power generation with less carbon. Its expertise and unwavering insistence on safety, security, transparency and ethics are setting the standard, and its responsible development is anchored in a process of continuous improvement. Ranked first in the global nuclear power industry, AREVA's unique integrated offering to utilities covers every stage of the fuel cycle, nuclear reactor design and construction, and operating services. The group is actively developing its activities in renewable energies - wind, bioenergy, solar and energy storage - to become a European leader in this sector. More

 

 

Posted with Blogsy

BP selling oil fields in Gulf of Mexico ahead of Deepwater Horizon fines

BP has agreed to sell some of its Gulf of Mexico oil fields for $5.6bn as it builds up cash reserves ahead of potentially huge fines for 2010's Deepwater Horizon disaster.

The British oil giant is selling its interests in older smaller fields in the gulf to Plains Exploration & Production of Houston. BP will remain a major operator in the area.

"While these assets no longer fit our business strategy, the Gulf of Mexico remains a key part of BP's global exploration and production portfolio, and we intend to continue investing at least $4bn there annually over the next decade," chief executive Bob Dudley said in a statement.

"This sale, as with previous divestments, is consistent with our strategy of playing to our strengths as a company and positioning us for long-term growth. In the Gulf of Mexico, that means focusing future investments on our strong set of producing assets and promising exploration prospects."

On completion of the transaction, BP will continue to operate four large production platforms in the region – Thunder Horse, Atlantis, Mad Dog and Na Kika – and hold interests in three non-operated hubs – Mars, Ursa and Great White.

Analysts calculate that BP faces a fine of up to $20bn under the clean water act for the Deepwater Horizon disaster. The blowout killed 11 workers and pumped about 4.9m barrels of oil into the Gulf.

Transocean, the company that owned Deepwater Horizon, said Monday that it was in discussions with the justice department to pay $1.5bn to resolve civil and criminal claims related to the US's worst offshore oil spill.

Last week the US department of justice launched a withering attack on BP over its handling of the disaster. In court papers government lawyers said BP had made "plainly misleading representations" in its settlement proposals. More

 

Blood for Oil

There is a close relationship between petroleum and war. James A. Paul, Executive Director of the Global Policy Forum, has described this relationship very clearly in the following words:

“Modern warfare particularly depends on oil, because virtually all weapons systems rely on oil-based fuel - tanks, trucks, armored vehicles, self-propelled artillery pieces, airplanes, and naval ships. For this reason, the governments and general staffs of powerful nations seek to ensure a steady supply of oil during wartime, to fuel oil-hungry military forces in far-flung operational theaters.”

“Just as governments like the US and UK need oil companies to secure fuel for their global war-making capacity, so the oil companies need their governments to secure control over global oilfields and transportation routes. It is no accident, then, that the world’s largest oil companies are located in the world’s most powerful countries.”

“Almost all of the world’s oil-producing countries have suffered abusive, corrupt and undemocratic governments and an absence of durable development. Indonesia, Saudi Arabia, Libya, Iraq, Iran, Angola, Colombia, Venezuela, Kuwait, Mexico, Algeria - these and many other oil producers have a sad record, which includes dictatorships installed from abroad, bloody coups engineered by foreign intelligence services, militariization of government and intolerant right-wing nationalism.”

Iraq, in particular, has been the scene of a number of wars motivated by the West’s thirst for oil. During World War I, 1914-1918, the British captured the area (then known as Mesopotamia) from the Ottoman Empire after four years of bloody fighting. Although Lord Curzon denied that the British conquest of Mesopotamia was motivated by oil, there is ample evidence that British policy was indeed motivated by a desire for control of the region’s petroleum. For example, Curzon’s Cabnet colleague Sir Maurice Hankey stated in a private letter that oil was “a first-class war aim”. Furthermore, British forces continued to fight after the signing of the Murdos Armistice. In this way, they seized Mosul, the capital of a major oil-producing region, thus frustrating the plans of the French, who had been promised the area earlier in the secret Sykes-Picot Agreement.

Lord Curzon was well aware of the military importance of oil, and following the end of the First World War he remarked: “The Allied cause has floated to victory on a wave of oil”. More

 

Saudi Arabia - America’s Real Strategic Petroleum Reserve?

As oil prices ticked above $115 per barrel last week, a White House leak revealed that President Barack Obama may dip into the Strategic Petroleum Reserve (SPR), the United States' 695 million barrel stockpile of emergency fuel supplies.

The leak might have been a signal that Washington wants Gulf countries to take action to lower oil prices. It might also have been an attempt to wring the risk premium out of current prices by reassuring the market that America won't let a potential war with Iran shut off the spigot. The one thing we can say for sure is that the announcement highlights two interrelated problems with U.S. energy policy: that every president since Ronald Reagan has used Saudi Arabia as his de facto SPR and that there exist no clear standards for when to dip onto the actual SPR. Both problems have the potential to bite us -- badly.

Over the years, the United States has been surprisingly reluctant to release SPR during times of crisis, preferring instead to let Saudi Arabia handle the problem by simply increasing its production. For decades, in fact, U.S. presidents have been able to count on the Middle Eastern petro giant to pre-release oil in anticipation of times of war. For example, Riyadh flooded the market ahead of the first Gulf War and, though many do not remember, it also put extra oil on the market ahead of the U.S. invasion of Iraq in 2003. Saudi Arabia even increased its oil production after the 9/11 attacks, which badly strained U.S.-Saudi relations. Likewise, this spring, when the Obama administration was debating whether or not to release the SPR ahead of the tightening of sanctions against Iran, Saudi Arabia helpfully boosted its production above 10 million barrels per day, causing oil prices to fall more than $10 a barrel and eliminating the need for the White House to make a firm decision.

But relying on Saudi Arabia, while politically convenient, is not without risks. The most obvious is that the Saudis have come under increased pressure -- both internal and external -- as a result of their longstanding oil-for-security alliance with Washington. Iran has warned its fellow Gulf producer not to make up the slack resulting from American and European sanctions, threatening direct retaliation if it does. Saudi Arabia isn't taking any chances. In recent months, it has arrested prominent Shiite dissidents -- always suspected of possible ties to Iran --and doubled the number of Saudi National Guard forces in the Eastern Province, home to the vast majority its 2 million-plus Shiite citizens as well as the close to 90 percent of its oil production.

America's ability to fall back on the Saudis is further imperiled by the inherent instability of the kingdom's political and economic system, and is the elephant in the desert that no one talks about.

Oil markets might have taken solace in Saudi preparedness until rumors surfaced of an assassination attempt aimed at the kingdom's intelligence chief, a move purported to be a revenge killing by Iranfor similar assassinations of senior military leaders in Syria. The rumors proved to be false, but like much of the region's murky political intrigue, it moved markets and served as a reminder that a tit-for-tat game of high level assassinations is not out of the realm of possibility. The oil implications of this unpredictability are clear: It will be hard to keep global oil markets calm in the coming weeks and months. Deaths of rulers can change dynamics overnight virtually anywhere in the region, and Israel's defense policy remains an ever-present black swan. Saudi Arabia's own rumoredpursuit of new nuclear-style ballistic missiles from China adds an additional layer of uncertainty about a nuclear arms race in the region.

America's ability to fall back on the Saudis is further imperiled by the inherent instability of the kingdom's political and economic system. Saudi Arabia is going to need more and more oil revenue just to keep its population from growing restive. Riyadh-based Jadwa Investment predicts that Saudi Arabia will be forced to run budget deficits from 2014 onwards, even at a break-even price forecast of $90.70 per barrel in 2015. Other forecasts are even bleaker in the medium term, estimating the breakeven price at $110 a barrel in 2015. Either way, the kingdom's thirst for cash is likely to mean that U.S. and Saudi interests diverge. The oil-for-security deal between the two countries has destabilized the kingdom in the past by igniting support for al Qaeda in the Arabian Peninsula and it could be used again by agents of internal opposition groups. Moreover, the recent pro-democracy upheavals in Egypt, Syria, and above all Bahrain are bound to influence U.S.-Saudi relations over time in ways that are hard to predict. More

 

Strait History And Iran 's Options

George Santayana wisely said: “" Those who cannot remember the past are condemned to repeat it ." Oblivious to history and its lessons, America and its Western allies are repeating their actions of the 1950's -- that of imposing an oil embargo on Iran . The American-led alliance has forgotten the past.

Iran remembers

When under the leadership of the nationalist Dr. Mossadegh, Iran opted to nationalize its oil industry, the British Royal Navy blocked Iran 's oil exports to forcefully prevent if from nationalizing its oil. In retaliation to Iran 's nationalistic ambitions, and to punish Iran for pursuing its national interests, the British instigated a worldwide boycott of Iranian oil.

In the 1950's, Iran did not have the military might to retaliate to the oil embargo and the naval blockade was aimed at crushing the economy in order to bring about regime change. The subsequent events is described in The New York Times [i] article as a “lesson in the heavy cost that must be paid” when an oil-rich Third World nation “goes berserk with fanatical nationalism.” Iran learnt that sovereignty and nationalism necessitate tactical/military strength and determination.

Not heeding the aftermath of the 1950's, the American-led Western allies have once again imposed an oil embargo on Iran . In retaliation, Iran has drafted a bill to stop the flow of oil through its territorial waters – the Strait of Hormuz , to countries which have imposed sanctions against it. This bill is not without merit and contrary to the previous oil embargo, it would appear that Tehran has the upper hand and the heavy cost associated with the embargo will not be borne by Iran alone.

Iran's Legal Standing

The 1982 United Nations Convention on the Law of the Sea stipulates that vessels can exercise the right of innocent passage, and coastal states should not impede their passage. Although Iran has signed the Treaty, the Treaty was not ratified, as such, it has no legal standing. However, even if one overlooks the non-binding signature, under UNCLOS framework of international law, a coastal state can block ships from entering its territorial waters if the passage of the ships harms “peace, good order or security” of said state, as the passage of such ships would no longer be deemed “innocent” [ii] .

Even if Iran simply chooses to merely delay the passage of tankers by exercising its right to inspect every oil-tanker that passes through the Strait of Hormuz , these inspections and subsequent delays would maintain or contribute to higher oil prices. While higher oil prices would benefit Iran and other oil-producing countries, they would further destabilize the European economy which is already in crisis. More

 

Saudi Oil Minister Calls Global Warming "Humanity's Most Pressing Concern"

 In a speech at the Middle East and North Africa energy conference in London yesterday, Al-Naimi — who once called renewable energy a “nightmare” — hailed energy efficiency and solar as important investments, global warming “real” and “pressing,” and explained that drilling for oil “does not create many jobs.”

“We know that pumping oil out of the ground does not create many jobs. It does not foster an entrepreneurial spirit, nor does it sharpen critical faculties.”

In the U.S., which is definitely not the Saudi Arabia of oil (that would be Saudi Arabia), there is a major industry campaign underway to convince Americans that drilling for fossil fuels will create over a million jobs in the country. However, assuming we drill virtually everywhere possible in America, credible analysis puts the real figure at a small fraction of that claim.

Even the Saudis, who pump out 12% of the world’s oil, understand that simply drilling for more oil isn’t a long-term economic strategy. More

 

Iran 'Definitely' Closing Strait of Hormuz Over EU Oil Embargo

 January 23, 2011 '"RT" --Tensions in the Gulf could reach a breaking point as a senior Iranian official said Iran would “definitely” close the Strait of Hormuz if an EU oil embargo disrupted the export of crude oil.

Mohammad Kossari, deputy head of parliament's foreign affairs and national security committee, issued the warning in respone to a decision by the European Union on Monday to impose an oil embargo on Iran over the country’s alleged nuclear weapons program. 

“The pressure of sanctions is designed to try and make sure that Iran takes seriously our request to come to the table,” EU foreign policy chief Catherine Ashton said.

However, with Washington’s decision to deploy a second carrier strike group in the Gulf, the EU’s attempt to pressure Iran economically could greatly increase the likelihood of all-out war in the region.

The Strait of Hormuz is the vital link between the Persian Gulf and the Gulf of Oman.

It is also one of the most strategic chokepoints in the world when it comes to oil transit.

With world oil output estimated at some 88 million barrels per day in 2011, the US Energy Information Administration estimated that some 17 million of those barrels passed through the Strait.

If economic sanctions sufficiently pressure Iran to retaliate by closing down the Strait, nearly 20 per cent of worldwide oil trade would be impacted, resulting in a massive spike in global energy costs.

With over half a million regular forces and an additional 120,000 personnel in the country’s elite Revolutionary Guard, analysts believe the consequences of a US-led war against Iran would dwarf recent Western-backed military incursions the Middle East. 

Thus far, the US decision to maintain two carrier strike groups in the region has been described as “a routine activity” by Iran. 

But the vast US military buildup in the region, which was bolstered when the Pentagon dispatched an additional 15,000 troops to the neighboring nation of Kuwait, was only the latest step in an obvious attempt by Washington to strengthen its military capabilities in the region. More