Connect with us

Middle East

Libya and the essence of the agreement between OPEC and non-OPEC countries

Published

on

[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] L [/yt_dropcap]ibya is planning to double its crude oil production next year. Although it has been an OPEC member since 1962, as well as the African country with the largest (and best quality) oil reserves, for obvious geopolitical reasons it has not been involved in the recent agreement between OPEC and non-OPEC countries, which favours the Russian Federation, reconnects Russia to Saudi Arabia, thus avoiding too close a link between Russia and Iran, and make Russia play a primary broker’s role in the Middle East.

Also Iran has no intention to sabotage this agreement on oil prices, which will certainly favour also the Shiite republic.

Conversely Nigeria and Libya itself have increased their production, while the whole non-OPEC area, Russia, Brazil, Canada, Norway and Kazakhstan have increased stocks, especially because a decrease in oil and gas demand is expected, starting from China.

According to the statements made by the President of the National Oil Corporation (NOC), Mustafa Sanalla, currently Libya extracts 708,000 barrels/day, but production is expected to soon reach 900,000 and level off at around 1 million barrels per day in late 2017.

It is worth recalling that, pending the crazy and senseless Libyan civil war, production had fallen to 200,000 barrels per day.

Later it was NOC itself to deal with the various armed groups deployed to patrol the pipelines in exchange for considerable money payments and resorting to the effective support of General Khalifa Haftar’s forces.

In fact, Libya’s new presence on the global oil market was made possible by an agreement reached last September between NOC and General Khalifa Haftar, who holds power over most Libyan ports and, above all, on Ras Lanuf and Es Sider.

As already said, Libya was not involved in the agreement between OPEC and non-OPEC countries, along with Nigeria and Iran which, however – as stated by the Oil Minister, Zangrneh – supports the process of controlled reduction of the Vienna-based cartel’s oil production and of the even larger oil production of the non-OPEC area.

For the time being, the agreement is operating particularly between Russia, Saudi Arabia, Qatar and Venezuela.

Moreover, for the first time since 2012, few days ago Iran resumed its oil exports to Europe.

If the agreement between OPEC and non-OPEC countries works, Iran will have every interest in becoming an integral part of it.

If Saudi Arabia – albeit unwillingly – withdraws 4.5% of its daily oil production from the market, equivalent to 500,000 barrels a day, all the non-OPEC area will cooperate and contribute to this bullish operation for a total of 600,000 barrels a day, while the Russian Federation is ready to cut its daily production by 300,000 barrels.

Hence, with specific reference to Libya, a quick economic revival is expected – driven, as usual, by oil and gas – which will certainly not bring back the country to the glories of Muammar El Gaddafi’s leadership, with its 1.6 million barrels a day, but will certainly allow to somehow rebuild this poor and very unfortunate country.

Hence Libya as a sort of oil “replacement economy” for the rest of OPEC, which will allow to improve its economy but could even weaken – and virtually stultify – the OPEC and non-OPEC countries’ efforts to make the oil barrel price rise again.

Nevertheless we do not believe that NOC will shoot itself in the foot. Quite the reverse. We are certain that Libya will follow the rise on the markets with careful daily adjustments of its oil production.

Furthermore, in the second half of 2017, nothing prevents OPEC from adapting to another further decrease in oil production. If an oil barrel price of 60 US dollars were recorded – as is likely – also Iran would have an interest in participating in the process.

So far Iraq has lobbied to avoid having to enter into the agreement between OPEC and non-OPEC countries, considering that it must back a military and social effort against terrorism and the so-called Al Baghdadi’s “Caliphate”, but it eventually agreed to a daily ceiling of 4.35 million barrels a day.

Russia pressed for the agreement also with Iraq and, despite extraction restrictions, probably the increase above 60 dollars a barrel will allow high liquidity.

According to the independent analysts of this particular market, currently compliance with the agreement accounts for 90% approximately. This will enable Saudi Arabia, which has agreed to make the largest cuts, to stabilize the Middle East region. It will also enable Russia to become the great player and mediator in the Middle East and even the United States to make the oil shale extraction very profitable.

According to the most reliable economic intelligence analyses, however, the break-even point of the US shale oil is well under 30 US dollars per barrel – and this is the real Saudi Arabia’s problem.

Saudi Arabia did everything – even cutting the oil barrel price down, as until recently – to eliminate the North American competition since the very beginning, although the shale oil production cost in the United States varies greatly from one region to the other.

Saudi Arabia dreams of reducing the number of companies operating in the US shale oil sector to fewer than ten, so as to later try to achieve a vertical consolidation of that market with some large international players.

On the other hand, the Saudi oil production cost is very low and the country can afford a trade war with the US shale oil as long as it wants.

With specific reference to natural gas, which has a structurally different market compared to the oil one, a trade war is foreseen in the near future between some US operators and the EU traditional Russian gas suppliers, while Gazprom will take remedial measures by flooding European countries with low-cost natural gas.

Hence another trade war looming over the energy systems, not to mention the fact that if very low oil prices had continued to dominate the markets for another two years, Saudi Arabia would have gone into default in mid-2018 – and the 30 US dollars a barrel prolong Saudi Arabia’s life by approximately six months.

The other “poor” OPEC countries are in the same situation as the rich Saudi Arabia.

Saudi Arabia, however, has favoured the too low oil prices with a view to destroying the US and, above all, the Russian production.

Now, with the new agreement, the OPEC area becomes a point of reference for Russian geopolitics, and even Libya will increasingly operate in close connection with Russia, considering that it was exactly the Russian pressure that led to the “finalization” of the Algiers agreement and, later, to the Doha agreement.

Nevertheless Saudi Arabia, which has monetary reserves to the tune of 655 billion US dollars, cannot accept – for a long period of time – even a barrel price above 60 US dollars, unless it cuts its public spending and starts its external indebtedness.

Furthermore also Russia has the problem of the impoverishment of its oil fields in Western Siberia. Hence the production reduction, which for Moscow is not high, is a blessing for prices and for extending the lifecycle of oil wells – not to mention the fact that the sanctions, imposed as a result of the Ukrainian issue, blocked the arrival of modern extraction technologies in Russia, with the related increase in production costs.

Therefore if – thanks to this agreement with OPEC – Vladimir Putin succeeds in reaching the level of 100 US dollars per barrel within a time frame acceptable to international investors, the new “big game” in Central Asia and the Greater Middle East will begin.

Saudi Arabia began to extract large and unexpected oil quantities in the mid-1980s, on the basis of a political and financial agreement with the United States, which further destroyed the Soviet economy – but now the mechanism is working exactly in the opposite way.

Currently the Russian oil barrel production cost is equal to 5.4 US dollars. Saudi Arabia’s cost is only 3 US dollars, while obviously the next start of offshore extraction activities will only increase production costs.

In Libya, the production cost – net of the country’s political disaster – is similar to the Saudi one, but data shows that, without an increase – as expected – in production and prices, the Libyan State, or what remains of it, would have no more funds by the end of this year.

To some extents this is also the Russian problem.

Russia’s federal deficit amounts to 1.5 trillion rubles (23.2 billion US dollars) and, according to the relevant Ministers, the Russian Reserve Fund could dry up just at the end of 2017.

Hence, without the oil price recovery, the whole Russian strategic architecture would go to ruin, thus causing an even more severe geopolitical disaster than the one which led to the USSR collapse – as Putin put it.

However, as we have seen, if the agreement between OPEC and non-OPEC countries works – and is even strengthened during the year – the stabilization (and diversification) of the Russian economy and, consequently, the stabilization of the entire Middle East crisis arc, will be a reality.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Continue Reading
Comments

Middle East

Iraq: Three Years of Drastic Changes (2019-2022)

Published

on

When the wave of the protests broke out at the beginning of October 2019 in Iraq, the Iraqi politicians did not realize the size of the gap between the demands of the protesters which were accumulated more than seventeen years, and the isolation of the politicians from the needs of the people. The waves of the protests began in a small range of different areas in Iraq. Rapidly, it expanded as if it were a rolling snowball in many regions of Iraqi governorates. Moreover, the platforms of social media and the influencers had a great impact on unifying the people against the government and enhancing the protest movement.

Al Tarir Square was the region where most protesters and demonstrators were based there. At that time, they stayed all day in this region and set up their tents to protest and demonstrate against the public situation of their life.

The protesters demanded their looted rights and asked for making economic reforms, finding job opportunities, changing the authority, and toppling the government presided by Prime Minister Adil Abdul-Mahdi. The protest stayed between ebb and tide, pressuring the political authority in Iraq.

A new period began in the history of Iraq where clashes between the protesters and the riot forces broke out in Al Tahrir Square and many governorates in the south of Iraq. Tear gas and ductile bullets were used against the protesters to compel them to retreat and disperse them. But the protesters insisted on continuing their demands. Many protesters were killed and wounded due to the intensive violence against them. The strong pressure with falling many martyrs gave its fruit when the Iraqi representatives of the Parliament endeavored to achieve the protesters’ demands by changing the election law into a new one. On 24 December 2019, the Iraqi Parliament approved of changing the unfair Saint Leigo election law into the open districts. The new law divided Iraq into 83 electoral districts.

Moreover, this violent protest led to the collapse of the Iraqi government presided by Prime Minister Adil Abdul Mahdi. He was compelled to resign by the end of 2019. Many political names were nominated by the Iraqi politicians but the protesters refused them all because they were connected with different political parties.

Finally, Mustafa Al-Kadhimi, who worked in the Iraqi Intelligence Service and had no party, was nominated by the politicians to be the new Prime Minister. He was well-known for ambiguity and far from the lights of media.

Mustafa Al-Kadhimi has become the Prime Minister in March 2020. The protests were over at the beginning of April 2020. With the taking of responsibility of helping Iraq, Mustafa Al-Kadhimi promised the protesters, who were called “Octoberians”, to hold a premature election, and the election was fixed on 10 June 2020.

Many politicians tried to postpone or cancel the premature election. Under their pressure, the premature election was postponed and fixed on 10 October 2020. During Mustafa Al-Kadhimi’s period as a Prime Minister, he opened new channels with the Arab states to enhance the cooperation and held many summits to support Iraq in the next stage.

Attempts to postpone the premature election by the Iraqi politicians were on equal foot, but all these attempts failed and the election occurred on the due time.

Before the election, many Octoberians and influencers encouraged the people not to participate in the election. On the day of the election, it witnessed low participation, and people were convinced of not happening any change. These calls gave their fruits in the process of elections in Iraq where the election witnessed very low participation, and most Iraqis refused to participate and vote to the nominees even though there was a new election law. When the elections were over, the Independent High Electoral Commission (IHEC) in Iraq announced that the results would be within two days. After announcing the results of the election partially and defeating many political factions in the Iraqi arena, many convictions were directed to the commission, and it was convicted by fraud and manipulation with the results. This aspect affected the activity of the Commission and led to put great pressure on it. After two weeks of pressure and convictions, the final results of the elections were announced and many political elite Iraqi leaders were defeated gravely.

The results of the election gave a new start through new leaders who were supporting the October revolution that happened in 2019. And most names of these winning movements and alliances were inspired by the October Movement. Those, who represented October Revolution, were also convicted by other Octoberians that Octoberian winners in the election deviated from the aims of the October Revolution.

A new struggle has begun between the losers in the election and the new winners who will have the right to be in the next term of the Iraqi Council Parliament of Representatives. Moreover, many independent individuals won in the election, and the conflict would deepen the scope of dissidence between the losers and winners. Finally, all raised claims of election fraud have not changed the political situation.

The final results of the election had been announced, and the date of holding the first session of the Iraqi Parliament of Representatives was fixed to nominate and elect the spokesman of the Iraqi Parliament of Representatives.  The Shiite Sadrist movement, which represents 73 seats, has wiped out its competitors. This aspect has compelled the losing Shiite competitors to establish an alliance called “Coordination Framework” to face the Sadrist movement, represented by the cleric Sayyed Muqtada al-Sader. On the other hand, Al-Takadum Movement (Progress Party), represented by the spokesman of the Iraqi Parliament of Representatives, Mohamed Al-Halbousi, has taken the second rank with 37 seats.

The final results of the election had been announced, and the date of holding the first session of the Iraqi Parliament of Representatives was fixed to nominate and elect the spokesman of the Iraqi Parliament of Representatives.

Finally, the first session of the Iraqi Council Parliament of Council was held. Mohamed Al-Halbousi has been elected as the spokesman of the Iraqi Council Parliament of Council. During the next fifteen days, the president of the republic will be elected.

Continue Reading

Middle East

China-US and the Iran nuclear deal

Published

on

Chinese Foreign Minister Wang Yi told his Iranian counterpart Hossein Amirabdollahian that Beijing would firmly support a resumption of negotiations on a nuclear pact [China Media Group-CCTV via Reuters]

Iranian Foreign Minister Hossein Amir Abdollahian met with  Chinese Foreign Minister, Wang Yi on Friday, January 14, 2022 in the city of Wuxi, in China’s Jiangsu province.  Both of them discussed a gamut of issues pertaining to the Iran-China relationship, as well as the security situation in the Middle East.

A summary of the meeting published by the Chinese Foreign Ministry underscored the point, that Foreign Ministers of Iran and China agreed on the need for  strengthening bilateral cooperation in a number of areas under the umbrella of the 25 year Agreement known as ‘Comprehensive Cooperation between the Islamic Republic of Iran and the People’s Republic of China’. This agreement had been signed between both countries in March 2021 during the Presidency of Hassan Rouhani, but the Iranian Foreign Minister announced the launch of the agreement on January 14, 2022.

During the meeting between Wang Yi and Hossein Amir Abdollahian there was a realization of the fact, that cooperation between both countries needed to be enhanced not only in areas like energy and infrastructure (the focus of the 25 year comprehensive cooperation was on infrastructure and energy), but also in other spheres like education, people to people contacts, medicine and agriculture. Iran also praised the Belt and Road Initiative (BRI) and said that it firmly supported the One China policy.

The timing of this visit is interesting, Iran is in talks with other signatories (including China) to the JCPOA/Iran nuclear deal 2015 for the revival of the 2015 agreement. While Iran has asked for removal of economic sanctions which were imposed by the US after it withdrew from the JCPOA in 2018, the US has said that time is running out, and it is important for Iran to return to full compliance to the 2015 agreement.  US Secretary of State Antony Blinken in an interview said

‘Iran is getting closer and closer to the point where they could produce on very, very short order enough fissile material for a nuclear weapon’

The US Secretary of State also indicated, that if the negotiations were not successful, then US would explore other options along with other allies.

During the course of the meeting on January 14, 2022 Wang Yi is supposed to have told his Chinese counterpart, that while China supported negotiations for the revival of the Iran nuclear deal 2015, the onus for revival was on the US since it had withdrawn in 2018.

The visit of the Iranian Foreign Minister to China was also significant, because Foreign Ministers of four Gulf Cooperation Council (GCC) countries – Saudi Arabia, Kuwait, Oman and Bahrain — and Secretary General of GCC,  Nayef Falah Mubarak Al-Hajraf were in China from January 10-14, 2022 with the aim of expanding bilateral ties – especially with regard to energy cooperation and trade. According to many analysts, the visit of GCC officials to China was driven not just by economic factors, but also the growing proximity between Iran and Beijing.

In conclusion, China is important for Iran from an economic perspective. Iran has repeatedly stated, that if US does not remove the economic sanctions it had imposed in 2018, it will focus on strengthening economic links with China (significantly, China has been purchasing oil from Iran over the past three years in spite of the sanctions imposed by the US. The Ebrahim Raisi administration has repeatedly referred to an ‘Asia centric’ policy which prioritises ties with China.

Beijing is seeking to enhance its clout in the Middle East as US ties with certain members of the GCC, especially UAE and Saudi Arabia have witnessed a clear downward spiral in recent months (US has been uncomfortable with the use of China’s 5G technology by UAE and the growing security linkages between Beijing and Saudi Arabia). One of the major economic reasons for the GCC gravitating towards China is Washington’s thrust on reducing its dependence upon GCC for fulfilling its oil needs. Beijing can utilize its good ties with Iran and GCC and play a role in improving links between both.

The geopolitical landscape of the Middle East is likely to become more complex, and while there is not an iota of doubt, that the US influence in the Middle East is likely to remain intact, China is fast catching up.

Continue Reading

Middle East

Egypt vis-à-vis the UAE: Who is Driving Whom?

Published

on

Image source: atalayar.com

“Being a big fish in a small pond is better than being a little fish in a large pond” is a maxim that aptly summarizes Egyptian regional foreign policy over the past few decades. However, the blow dealt to the Egyptian State in the course of the 2011 uprising continues to distort its domestic and regional politics and it has also prompted the United Arab Emirates to become heavily engaged in Middle East politics, resulting in the waning of Egypt’s dominant role in the region!

The United Arab Emirates is truly an aspirational, entrepreneurial nation! In fact, the word “entrepreneurship” could have been invented to define the flourishing city of Dubai. The UAE has often declared that as a small nation, it needs to establish alliances to pursue its regional political agenda while Egypt is universally recognized for its regional leadership, has one of the best regional military forces, and has always charmed the Arab world with its soft power. Nonetheless, collaboration between the two nations would not necessarily give rise to an entrepreneurial supremacy force! 

Egypt and the UAE share a common enemy: political Islamists. Yet each nation has its own distinct dynamic and the size of the political Islamist element in each of the two countries is different. The UAE is a politically stable nation and an economic pioneer with a small population – a combination of factors that naturally immunize the nation against the spread of political Islamists across the region. In contrast, Egypt’s economic difficulties, overpopulation, intensifying political repression, along with its high illiteracy rate, constitute an accumulation of elements that serves to intensify the magnitude of the secreted, deep-rooted, Egyptian political Islamists.

The alliance formed between the two nations following the inauguration of Egypt’s President Al Sisi was based on UAE money and Egyptian power. It supported and helped expand the domestic political power of a number of unsubstantiated Arab politicians, such as Libya’s General Khalifa Haftar, Tunisia’s President Kais Saied and the Chairman of Sudan’s Transitional Sovereignty Council, Lieutenant-General Abdel-Fattah Al-Burhan. The common denominator among these politicians is that they are all fundamentally opposed to political Islamists.

Although distancing political Islamists from ruling their nations may constitute a temporary success, it certainly is not enough to strengthen the power of the alliance’s affiliates. The absence of true democracy, intensified repression by Arab rulers and the natural evolution of Arab citizens towards freedom will, for better or for worse, lead to the re-emergence of political Islamists. Meanwhile, Emirati wealth will always attract Arab hustlers ready to offer illusory political promises to cash in the money.   

The UAE has generously injected substantial amounts of money into the Egyptian economy and consequently the Egyptian State has exclusively privileged Emirati enterprises with numerous business opportunities, yet the UAE has not helped Egypt with the most critical regional threat it is confronting: the Grand Ethiopian Renaissance Dam. Meanwhile, Egyptian President Abdel Fatah El Sisi’s exaggerated fascination with UAE modernization has prompted him to duplicate many Emirati projects – building the tallest tower in Africa is one example.

The UAE’s regional foreign policy that hinges upon exploiting its wealth to confront the political Islamist threat is neither comprehensible nor viable. The Emirates, in essence, doesn’t have the capacity to be a regional political player, even given the overriding of Egypt’s waning power. Meanwhile, Al Sisi has been working to depoliticize Egypt completely, perceiving Egypt as an encumbrance rather than a resource-rich nation – a policy that has resulted in narrowing Egypt’s economic and political aspirations, limiting them to the constant seeking of financial aid from wealthy neighbors.

The regional mediating role that Egypt used to play prior to the Arab uprising has been taken over by European nations such France, Germany and Italy, in addition of course to the essential and ongoing role of the United States. Profound bureaucracy and rampant corruption will always keep Egypt from becoming a second UAE! Irrespective of which nation is in the driver’s seat, this partnership has proven to be unsuccessful. Egypt is definitely better off withdrawing from the alliance, even at the expense of forgoing Emirati financial support.

Continue Reading

Publications

Latest

Trending