Can sustainable peace be established in Middle East?

One wonders why Middle East and North Africa (MENA) continue to suffer from internal turmoil as well as proxy wars. Some analysts say the single largest reason behind ongoing turmoil can be ongoing attempts to keep crude oil prices high to facilitate other countries to boost their domestic oil production.

The latest evidence was attack on Aramco facilities in Saudi Arabia to attract high subscription to Initial Public Offering (IPO). The immediate success was, China opting to take US$10 billion stake in one of the largest energy production facility in the world.

Reportedly, Saudi Arabia is making efforts to negotiate an end to the Yemen war by initiating a dialogue with Iran. This move is not likely to be approved by US President Donald Trump, the biggest proponent of maximum pressure on the Islamic republic.

Saudi officials hope that talks mediated by Oman and Britain between the kingdom and Houthi rebels will lead to a revival of stalled talks between the Yemeni insurgents and the Saudi-backed, internationally recognized government of Abed Rabbo Mansour Hadi.

 Saudi crown prince Mohammed bin Salman has tasked his younger brother and Saudi deputy defense minister, Khalid bin Salman, with engineering an end to the Yemeni war as part of a broader revamp of Saudi foreign policy.

The revamp involves a return to a more cautious foreign and defense policy that embraces multilateralism after several years in which the kingdom adopted an assertive and robust go it alone approach that produced several fiascos, including the Saudi-led intervention in Yemen initiated four and a half years ago. The revamp was prompted by attacks in September on two of the kingdom’s key oil facilities as well as doubts about the reliability of the US defense commitment to the Gulf.

The kingdom’s return to a more cautious approach is also intended to project itself in 2020 as president of the Group of 20 (G20) and repair its image tarnished by the Yemen War, the killing of journalist Jamal Khashoggi in 2018, and a domestic crackdown on dissent.

 Trump’s response to the September drone and missile attacks for which the Houthis were blames claimed in some ways was the clearest indication that Gulf States may not be able to count on the United States in times of crisis.

Trumph said that the attack was on Saudi Arabia and the US would certainly help them, but his adoption of a transactional attitude towards Gulf security did upset Saudi Arabia.

 It is being propagated by the US that the attacks on Saudi Arabia suggests that escalation of US-Iranian tensions would make them targets in an environment in which the United States may not wholeheartedly come to their rescue.

The US officials are also suggesting that now the Saudi policy is to lessen their involvement in Yemen and to stop Yemen being some version of a proxy so they (the Saudis) can deal directly with Iran.

United Nations Yemen envoy Martin Griffiths told the UN Security Council this week that the number of air attacks by the Saudi-led coalition had dropped by nearly 80% lately.

Griffiths said, “We call this de-escalation, a reduction in the tempo of the war and perhaps a move towards an overall ceasefire in Yemen,". He also expressed hopes that a negotiated end to the war could be achieved early next year.

However, the efforts to end war as well as gestures towards Iran in recent months by the United Arab Emirates did not stop senior Saudi and UAE officials from adopting a hard line.

“Appeasement simply cannot work with Iran. We hold Iran responsible for the attack on Abqaiq. We do not want war, but Iran needs to be held accountable” said Saudi Minister of State for Foreign Affairs Adel al-Jubeir at a Bahrain gathering.

Al-Jubeir’s UAE counterpart, Anwar Gargash added, “The key to stability is deterrence and steadfast resolve of the international community was that Iran must change. If not, sanctions must be increased, not loosened.”

Can OPEC opt for production cut?

The Organization of the Petroleum Exporting Countries (OPEC) and its allies face a major challenge in 2020 as demand for crude is expected to fall sharply.

The IEA estimated non-OPEC supply growth would surge to 2.3 million barrels per day (bpd) next year as compared to 1.8 million bpd in 2019, based on production hike in the United States, Brazil, Norway and Guyana.

The hefty supply cushion that is likely to build up during the first half of next year will offer cold comfort to OPEC+ ministers gathering in Vienna at the start of next month.

While US supply rose by 145,000 bpd in October, the IEA said, a slowdown in activity that started earlier this year looks set to continue as companies prioritize capital discipline.

Demand for crude oil from OPEC in 2020 will be 28.9 million bpd, the IEA forecast; one million bpd below the exporter club’s current production.

The recovery by OPEC’s de facto leader Saudi Arabia from attacks on the country’s oil infrastructure contributed 1.4 million bpd to the global oil supply increase in October of 1.5 million bpd.

With plans underway for the Aramco IPO and the persistent need for revenues to fund the government budget, Riyadh has every incentive to keep oil prices supported.

Saudi state oil company Aramco, the world’s most profitable firm, scheduled to start its share sale on 17^th November in an IPO that may help in mobilizing between US$20 billion to US$40 billion.

The IEA said that if some or all tariffs were lifted in coming months, world economic growth and oil demand growth would both rise significantly, though the rebound may not be immediate.

Sluggish refinery activity in the first three quarters has caused crude oil demand to fall in 2019 for the first time since 2009, but refining is set to rebound sharply in the fourth quarter and in 2020.

Who has attacked Saudi oil facility?

Western media controlled by those having vested interest was prompt in spreading the disinformation about attacks on Saudi oil facilities. It has used following pointers: 1) Yemen’s Iran-aligned Houthi group has claimed responsibility of attacks, 2) Kingdom’s output will be knocked out more than half, 3) oil prices will surge and 4) tension will rise in the Middle East.

This is exactly what western media has been doing for ages, only the operators have been changing. One must not forget that these attacks have come in the aftermath of earlier cross-border attacks on Saudi oil installations and on oil tankers in Gulf waters, which have failed in skyrocketing oil prices.

Mike Pompeo, Secretary of State of United States was prompt in accusing Iran of the attacks. In the same breath he ruled out Yemeni involvement and denounced Tehran for engaging in false diplomacy. He claimed “Tehran is behind nearly 100 attacks on Saudi Arabia. He accused Iran’s President Hassan Rouhani and Foreign Minister Mohammed Javad Zarif for pretending to engage in diplomacy.”

Apparently the Zionists were happy when US President Donald Trump withdrew his country from a 2015 pact and imposed a series of sanctions that could cripple Iran’s economy. But in recent weeks they were annoyed when Trump said he would be open to meeting with Rouhani on the sidelines of the United National General Assembly in New York later this month. Pompeo had also said such talks could take place without any preconditions.

Let us review the immediate response of the US which alleges Iran for the attack. The sole purpose is to diminish any and every possibility of reconciliation with Iran and keep it out of oil trade. The ultimate beneficiary of high crude price is United States as 1) its Shale oil producers remain competitive and 2) it keeps on selling arms to Saudi Arabia.

One could also recall that President Trump has often said “Saudis can’t survive without their (US) help.” As the Kingdom was going for IPO of Aramco, its production has to be suspended to make the IPO a big failure. The attack is also aimed at proving that Saudis can’t protect their assets and must ask the US to provide security. Interestingly, it is beyond comprehension how a Houthi drone attack could curtail Saudi crude production to half?

The sole purpose of spreading disinformation is to jack up crude price. Certainly, if output is curtailed by 5.7 million barrels per day the price could raise up to US$10/ barrel on Monday. Since the US has the largest surplus production capacity, it will be the only beneficiary. The attack is also aimed at reducing the importance of newly appointed Saudi Oil Minister.

To create uncertainty and make crude price volatile, the news have started pouring in. “Abqaiq is the nerve center of the Saudi energy system. Even if exports resume in the next 24-48 hours, the image of invulnerability has been altered,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told Reuters.

A Saudi-led coalition battling Yemen’s Houthi group said it was investigating drone attacks against Saudi oil installations and would confront terrorist threats to global energy security. “Investigations are ongoing to determine the parties responsible for planning and executing these terrorist attacks,” said coalition spokesman Colonel Turki al-Malki. Analysts can’t rule out putting the entire blame on Iran.

Iranian foreign ministry spokesman Abbas Mousavi dismissed the US allegation as pointless. A senior Revolutionary Guards commander warned that the Islamic Republic was ready for full-fledged war. He went to the extent of saying, “All the US bases and its aircraft carriers in a distance of up to 2,000 kilometers around Iran are within the range of our missiles.”

While the probability of any attack on Iran remains low, the US will be able to achieve its prime objective, jacking up crude oil prices. Western media has already started saying, “Aramco has given no timeline for output resumption, but return to full oil capacity could take weeks, not days.” Traders and analysts say crude price may spike to as high as US$100/barrel if Riyadh fails to quickly bring back supply.