Thursday,25 April, 2019
Current issue | Issue 1328, (19 - 25 January 2017)
Thursday,25 April, 2019
Issue 1328, (19 - 25 January 2017)

Ahram Weekly

Energy competition in the Middle East

An aspect of global competition between the great powers that deserves special attention from the people of the Middle East is the competition for energy resources, writes Ahmed Mahdi

The world is witnessing an intense global competition between the United States and Russia in several regions, including the Middle East, Central Asia, northwest Europe and other hotspots. With the advent of the civil war in Syria and Moscow’s drive to support its ally Syrian President Bashar Al-Assad, American-Russian competition in the Middle East has escalated to a new level. 

The main drive for the global competition between these great powers is that both Washington and Moscow seek to spread their influence across the world stage. This competition includes military and economic and to an extent also ideological aspects. But one aspect that perhaps deserves special attention is energy resources. Due to the economic and strategic importance of energy resources, the American-Russian competition over global influence includes a geopolitical competition between these powers to control critical regions around the world that contain energy resources or could serve as vital routes for energy transport.

One reason behind the war in Syria, for example, is the competition over exporting natural gas to the energy-hungry European market. This competition is taking place between Iran on the one hand and Saudi Arabia and Qatar on the other. Iran wants to build a pipeline to export Iranian natural gas from the Pars gas field in the south of Iran through Iraq and then through Aleppo in Syria to Europe. (This pipeline might carry Russian natural gas as well).

On the other hand, Saudi Arabia and Qatar, backed by the United States, want to construct a competing pipeline to carry Qatari and Saudi natural gas, also through Syria, to the European market. This means that Syria would be a main transit route for both pipelines. However, in 2009 the Al-Assad regime, backed by Moscow, signed an agreement with Tehran to construct the Iranian pipeline through Syria. This angered Saudi Arabia and Qatar which wanted to promote their pipeline, and it also angered the West which stands against any agreement signed between Iran and any leading Arab country.

Conspiracy theorists claim that the United States and the West triggered the uprising against the Al-Assad regime in 2011 in order to disrupt the construction of the Iranian pipeline and to promote the Saudi and Qatari pipeline instead. This is why Saudi Arabia and Qatar are so eager to remove the Al-Assad regime and support the armed movements against it. It is tempting to believe this theory, but there is no solid proof to support it, especially since the uprising against the Al-Assad regime was peaceful during its first six months and only then turned violent as a result of the brutality of the regime’s backlash.

Conspiracy theorists also claim that the West, Saudi Arabia and Qatar have helped the rise of the Islamic State (IS) group in Iraq and Syria and have helped it to establish its proto-state on the borders between Iraq and Syria in order to disrupt the construction of the Iranian pipeline. The Sunni IS group would naturally work against any economic movement led by Shia Iran. Again, this is tempting to think about, especially since Washington and Riyadh have a history of supporting Islamic armed groups. However, a major reason for the establishment of the IS proto-state was the unwillingness of the Iraqi army to fight against it in the summer of 2014 due to corruption, a lack of morale, and other reasons when the Iraqi city of Mosul fell into the hands of IS.  

Furthermore, it would be an oversimplification to say that the main reason behind the civil war in Syria is a western-Saudi-Qatari conspiracy to construct a pipeline through Syria. According to experts, pipeline politics might be a secondary reason for the war in Syria, but the main reason for the international intervention in Syria is great power competition between the United States and Russia for global influence, especially in the Middle East. The Al-Assad regime is a strong ally of Russia, which makes Washington eager to remove it, or at least weaken it, especially since Syria hosts the only Russian military base in an Arab country in the Syrian port of Tartous on the Mediterranean Sea.

Another main reason for Washington’s drive to remove Al-Assad, according to experts, is to weaken Iran, given that the Syrian president is a main ally of Tehran and that Iran could potentially threaten American interests in the region. Iran has been threatening Israel through its support of Hamas in Gaza and Hizbullah in Lebanon, and it is in Tel Aviv’s interests to weaken Iran.

The Saudi-Iranian competition for regional influence in the Gulf is a part of the war, and Iran has been involved in several proxy wars against Saudi Arabia, whether in Iraq, in Yemen, or in Syria. This means that it is also in Riyadh’s interest to weaken Tehran. Moreover, Iran has repeatedly threatened to close the Straits of Hormuz, a global bottleneck through which oil tankers from the Gulf pass to international markets in Asia and Europe.

Some 20 per cent of the world’s oil supplies pass through the Straits of Hormuz. Whether Iran could in fact follow through with the threat to close the straits is a different issue, especially since Iran would bear heavy economic losses from such a move given that its economy is heavily dependent on oil exports through the straits.

Global competition: The American-Russian competition over influence and energy security is not restricted to the Middle East. It has also been taking place in Central Asia since the fall of the former Soviet Union in the early 1990s.

Later in this decade, the United States wanted to build the Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline, which would carry natural gas from gas-rich Turkmenistan through Afghanistan to Pakistan, India, and the rest of the global market. Russia was against any American energy investment in the Central Asia region, but Moscow was not strong enough to stop it.

Afghanistan, a main transit pathway for this Pipeline, was under the control of the Taliban, an Islamic fundamentalist armed group which controlled 90 per cent of Afghan territory at the time. The Taliban were also hosting Osama bin Laden, the leader of Al-Qaeda, in Afghanistan, and Washington was pressing the Taliban to hand him over as he was wanted for several attacks against American establishments around the world.

At the same time, however, Washington was willing to work with the Taliban to construct the TAPI Pipeline through Afghanistan. In March 2001, the newly elected US president George W. Bush received a delegate from the Taliban, Sayed Rahmatullah Hashemi, in the White House in order to discuss the Pipeline. But the negotiations between Washington and the Taliban stopped with the September 11 2001 attacks. A few weeks later, the American military invaded Afghanistan, entered Kabul and overthrew the Taliban. Part of the reason the United States invaded Afghanistan in 2001 was to secure a military foothold in the region in order to protect western energy projects from Russian interference.

Indeed, the increased American power in Central Asia allowed the construction of the Baku-Tbilisi-Ceyhan (BTC) Pipeline in 2005. This is supported by Washington and the West and carries petroleum and natural gas from Central Asia through the Azeri capital Baku and the Georgian capital Tbilisi to the Turkish port of Ceyhan on the Mediterranean and from there to Europe. Naturally, Russia had concerns that this Pipeline would increase America’s influence in the Caspian region, but it was powerless to stop it. However, the fighting in Afghanistan, whether between the American military and the Taliban or between the various tribes and factions in Afghanistan, did not stop after the American invasion. 

Despite the continued instability in Afghanistan, a ceremony took place in Turkmenistan in December 2015 to officially start the construction of the TAPI Pipeline, which is expected to be completed by the end of 2019. The leaders of Turkmenistan, Afghanistan, Pakistan and India attended the ceremony. The Taliban, which has changed its name to the Islamic Emirate in Afghanistan, also promised in November 2016 to protect the TAPI Pipeline and other foreign projects in Afghanistan.

However, no American or western company has undertaken to participate in the project, and so far only companies from the four countries mentioned are involved in the TAPI investment. Only the Asian Development Bank (ADB), headquartered in the Philippines, has agreed to participate in the TAPI project.

Invasion of Iraq: The US-led invasion of Iraq in 2003 was another American attempt to control global energy resources.

A main reason behind the invasion was Washington’s desire to reshape Iraq’s political structure to match Washington’s plans for the region, in other words; to turn Baghdad into a pro-American hub in the Middle East. Another reason was for Washington to control the petroleum resources of Iraq, and thus to have more influence over the petroleum resources of the Middle East, not necessarily for American consumption, but to gain a tighter grip over the petroleum supplies which flow from the Middle East to America’s economic competitors in Asia and the European Union.

Russia opposed the American invasion of Iraq because Moscow had oil contracts with the regime of former Iraqi president Saddam Hussein and because it would oppose any movement which would increase Washington’s global influence. However, due to the Iraqi political and armed resistance against the American presence in Iraq, Washington then failed to control Iraq’s oil resources or to reshape Iraq into a pro-American hub in the Middle East. The American military withdrew from Iraq in 2010 without achieving any of the goals that it had aspired to achieve from the invasion, leaving Iraq in ruins and in a state of sectarian violence. 

This competition between Washington and Moscow over the Middle East’s and Central Asia’s energy resources continues today. But there are also other arenas in which this conflict is being played out, one of them being the European gas market.  

The European Union imports about 25 per cent of its gas and about one third of its oil from Russia, while countries such as Slovakia, Finland, Poland, Hungary, the Baltic States and Ukraine are almost totally dependent on Russian energy. The United States has warned the EU against over-reliance on Gazprom, the Russian state-owned gas company which is seen as Moscow’s most powerful economic weapon against the West. Washington has also called for the development of Caspian resources to replace Europe’s reliance on Russian gas.

Moscow has repeatedly cut off its natural gas exports to Europe in order to force certain countries to increase the price they pay for Russian gas. In 2006, Moscow forced Ukraine to pay 400 per cent more for its gas imports from Russia and Georgia to pay twice as much. In 2007, Moscow forced Belarus to increase the price it pays for gas imports from Russia. Moscow argued that it had the right to take such measures, given that it was selling gas to these countries at a discount. Nevertheless, threats of Russian supply cut-offs have caused concern in Europe, since 80 per cent of Europe’s gas imports from Russia pass through Ukraine and 20 per cent through Belarus.

Despite the Russian measures against Georgia and Ukraine, it is unlikely that Russia would actually attempt to cut off gas supplies to major European countries. This is because the Russian economy is heavily dependent on natural gas exports, and 70 per cent of Russia’s gas exports go to Europe, meaning that Moscow needs Europe more than Europe needs Moscow. Nevertheless, what Russia can do is increase the price of its gas exports, as it did in 2006, 2007 and 2008. The Europeans, with help from Washington, have been seeking to diversify their energy dependence away from Moscow’s grip by building pipelines to replace the Russian-controlled ones. 

Europe, with the support of the United States, aims to construct the Nabucco Pipeline (named after the opera written in 1841 by Giuseppe Verdi that tells the story of the Babylonian king Nebuchadnezzar) to carry natural gas from the Caspian region, mostly from Azerbaijan, to Bulgaria, Romania, Hungary, Austria and Turkey and decrease dependence on Russian gas. Russia, on the other hand, aims to construct a competing pipeline, the South Stream Pipeline, which would carry gas from Russia to Italy and Austria.

However, the Nabucco consortium announced in June 2013 that it was freezing the Nabucco project in favour of another which seemed more feasible. This project, the Tran-Adriatic Pipeline, is backed by the West and would carry natural gas from Azerbaijan through Turkey, Greece and Albania and across the Adriatic Sea to Italy and the European market.

Similarly, Russia announced in December 2014 that it would stop the South Stream Pipeline after the European Union imposed sanctions on Moscow because of the Russian annexation of the Crimea in the Ukraine crisis. Instead, Russia would invest in the Turkish Stream Pipeline, which would carry natural gas from Russia through the Black Sea to Turkey and then the European market.

Turkey wants to be a transit point, or hub, through which all these pipelines will pass. This would increase the political importance of the regime in Turkey and would grant more power to Turkish president Recep Tayyip Erdogan, in addition to transit fees for the Turkish treasury.

Price competition: The competition between Washington and Moscow over global energy resources is not limited to the control of strategic energy locations or competition over pipelines. It also extends to global energy prices.

Today, the global energy competition has turned into a trade war over prices and market share. There is a competition over oil prices and global oil market shares between the United States, Russia and Saudi Arabia. The latter, of course, is the most influential country in the Organisation of Oil-Exporting Countries (OPEC), and a victory for Saudi Arabia would be a victory for OPEC, even though one could argue that the members of OPEC are not exactly in agreement over oil-pricing policy, making one wonder if OPEC is really a cartel or not. But this is a different issue.

The price of oil fell from $115 per barrel in the summer of 2014 to about $30 per barrel in late 2014 (one barrel of oil is about 159 litres.) The price is around $50 or $55 per barrel at the time of writing.

Despite the rise of threats like IS and the on-going military clashes in the Middle East, the price of oil has declined because the surplus in global oil supply is actually greater than the effect of these threats. The United States has increased its supply of oil and natural gas because of hydraulic fracturing, or fracking as it is more commonly known. This is a technology that has recently become more widespread in the United States and other parts of the world. It can extract oil from underground rock formations that was almost impossible to extract ten or 15 years ago before this technology was widely available.

Similarly, members of OPEC (spearheaded by Saudi Arabia) have increased their supply of oil in order to maintain OPEC’s market share in the global oil market, lest it be taken over by the new American energy supplies. Russia has also increased its oil supply, lest its global market share be taken over by American or Saudi oil. This competition for market share between the three sides has led to a rise in the supply of oil and to a decline in its price.

The decline in price is a threat to the economies of Saudi Arabia and Russia, which are heavily dependent on oil and natural gas exports. A decline in oil prices is also a threat to the American fracking companies, which need high oil prices in order to achieve a profit. So far, however, these companies have been able to survive by coming up with new technologies to decrease the cost of production.

According to Reuters, Saudi Arabia needs an oil price of at least $85 per barrel in order to balance its budget, and Moscow needs an oil price of at least $105 per barrel to do the same. So far, Riyadh’s policy of increased production and decreased prices has managed to increase the Saudi market share of the global oil market by one per cent, thereby increasing its market share to 13 per cent of the global oil market. But this has come at an enormous cost.

Moscow and Riyadh have thus far been willing to take this risk in order to maintain their market shares. One question remains, however: how long can their economies withstand the losses caused by the decline in revenues from oil exports?

In conclusion, one can say that energy pipeline competition and oil price competition are part of the American-Russian competition for global dominance. The Middle East, with its strategic location and ample natural resources, will remain a target for the ambitions and interference of the great powers. The current American-Russian competition will not be the last of the great power struggles over the Middle East. One has to wait for the next phase, which will see the advent of the rising power of China.

According to US academic John Mearsheimer, a leading international relations theorist who teaches at the University of Chicago, the Middle East will see a competition between the United States and China similar to that between the United States and the Soviet Union during the Cold War, especially since China is increasingly importing a large portion of its oil and natural gas from Saudi Arabia, Iran and other Gulf states.

The peoples of the Middle East will remain at the mercy of the vagaries of the major powers and their ambitions for decades to come, unless they work hard to develop their economies away from dependence on oil revenues and increase their reliance on economic sectors like education and the sciences. 

The author is a member of the Egyptian Council for Foreign Affairs (ECFA) and the Royal Institute of International Affairs (Chatham House) in London. He is an assistant professor of political science at the Future University in Egypt.

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