Israel snubs Lebanese request for changes in maritime deal

Lebanon said US-brokered talks to demarcate its maritime border with longtime foe Israel were at a make or break point on Thursday after Israel rejected revisions to a draft deal requested by Beirut, throwing years of diplomatic efforts into doubt.

The draft, which has not been made public, had a warm preliminary reception from the Israeli and Lebanese governments. But amid domestic opposition in both countries, Lebanon on Tuesday sought amendments from the US envoy.

On Thursday, Israeli Prime Minister Yair Lapid was updated on the details of the substantial changes Lebanon is seeking to make and instructed the negotiating team to reject them, an Israeli official said.

A spokesperson for the US embassy in Jerusalem said the parties were at a critical stage in the negotiations and the gaps have narrowed.

According to Israeli media, a main sticking point was over recognition of a line of demarcation buoys Israel has strung out to sea from its coast. Lebanon worries about any action that may connote formal acceptance of a shared land border.

Lebanon, which has never recognized the state of Israel, with any broader peace deal beyond the horizon - has also said Israel will earn no royalties from the Lebanese share of gas in the Qana prospect.

Top Lebanese negotiator Elias Bou Saab told Reuters on Thursday that he would only respond to official statements and not to media reports on Israel's stance.

He said the deal is 90% done but the remaining 10% could make it or break it, adding that he was in constant contact with US mediator Amos Hochstein.

Israel has been preparing to activate a gas rig, Karish, which is outside Qana. Lebanon's Iran-backed Hezbollah made veiled threats about Karish that lent urgency to the talks.

Israel previously presented the draft deal with Lebanon, if finalized, as securing Karish. But on Thursday, it changed tack.

Israel is now pressing ahead with Karish, regardless of progress or no progress in the talks, whereas before it cast a successful deal as a means of securing Karish.

"Israel will produce gas from the Karish rig as soon as it is possible to do so," the Israeli official said, adding that negotiations will "stop immediately" in the face of any threats.

Defence Minister Benny Gantz further hardened the tone, saying in a speech that "Lebanon will bear a heavy military price" if Hezbollah attacks, and he put forces on alert.

 

Nord Stream investigation finds evidence of detonations

A crime scene investigation of the Nord Stream 1 and 2 gas pipelines from Russia to Europe has strengthened suspicions of gross sabotage involving detonations, Sweden's Security Service said on Thursday.

Swedish and Danish authorities have been investigating four leaks from the pipelines in Swedish and Danish exclusive economic zones in the Baltic Sea since they were first spotted at the beginning of last week.

Europe, which is a facing an energy crisis is investigating what caused the damage as Moscow seeks to pin the blame on the West, suggesting the United States stood to gain.

Washington denies any involvement as a stand-off between Russia and European countries continues over supplies of gas that have stopped flowing or been put on hold as a result of the conflict in Ukraine.

The Nord Stream operators said this week they were unable to inspect the damaged sections because of restrictions imposed by Danish and Swedish authorities who had cordoned off the area.

"After completing the crime scene investigation, the Swedish Security Service can conclude that there have been detonations at Nord Stream 1 and 2 in the Swedish economic zone," the Swedish Security Service said in a statement.

The security service said there was extensive damage to the gas pipelines and they had retrieved some material from the site that would now be analyzed. The evidence has strengthened the suspicions of gross sabotage, they said.

Sweden's Prosecution Authority said in a separate statement that the area, where gas spewed into the sea for almost a week, was no longer cordoned off.

Russia said on Thursday it had been informed via diplomatic channels that it was not able to join the investigation.

"As of now, there are no plans to ask the Russian side to join investigations," Kremlin spokesman Dmitry Peskov told reporters, adding that Moscow replied it was not possible to conduct an objective investigation without its participation.

Swedish prosecutors had on Monday cordoned off the area of the leaks for a crime scene investigation conducted by the Swedish Coast Guard and Navy.

On Wednesday, Sweden's Justice Minister said in response to the Kremlin that it was not possible to let others take part in a Swedish criminal investigation.

Denmark's Foreign Minister Jeppe Kofod told Reuters on Thursday that his Ministry had not told Russia to stay out of the investigation, but that a police-led taskforce between Denmark, Sweden and Germany was in charge of the investigation.

Maria Zakharova, spokeswoman for the Russian Foreign Ministry, said separately on Thursday that Moscow would insist on a comprehensive and open investigation that includes Russian officials and Gazprom.

"Not to allow the owner (of the pipelines) to witness the investigation means there is something to hide," Zakharova said.

 

 

Can the US impose sanctions on Saudi Arabia?

The United States is all critical of the latest decision of the OPEC Plus to cut oil production. Interestingly the hike in oil and gas prices is due to the US imposing sanctions on Russia, earlier on Venezuela and Iran. It is feared that out of desperation the US may impose some sanctions on Saudi Arabia, often termed de-fecto leader of oil cartel. I invite all my readers to carefully read a Reuters news dated May 05, 2022.

According to the details, a US Senate committee passed a bill that could expose the Organization of the Petroleum Exporting Countries (OPEC) and partners to lawsuits for collusion on boosting crude oil prices.

The No Oil Producing or Exporting Cartels (NOPEC) bill sponsored by senators, including Republican Chuck Grassley and Democrat Amy Klobuchar, passed 17-4 in the Senate Judiciary Committee.

White House spokesperson Jen Psaki said the administration has concerns about the potential implications and unintended consequences of the legislation, particularly amid the Ukraine crisis. She said the White House is still studying the bill.

Versions of the legislation have failed in Congress for more than two decades. But lawmakers are increasingly worried about rising inflation driven in part by prices for US gasoline, which briefly hit a record above US$4.30 a gallon.

"I believe that free and competitive markets are better for consumers than markets controlled by a cartel of state-owned oil companies ... competition is the very basis of our economic system" Klobuchar said.

NOPEC would change US antitrust law to revoke the sovereign immunity that has long protected OPEC and its national oil companies from lawsuits.

The bill must pass the full Senate and House and be signed by President Joe Biden to become law.

If passed, the US Attorney General would gain the ability to sue OPEC or its members, such as Saudi Arabia, in federal court. Other producers like Russia, which works with OPEC in wider group known as OPEC Plus to withhold output, could also be sued.

Saudi Arabia and other OPEC producers have rebuffed requests by the United States and other consuming countries to boost oil production beyond gradual amounts, even as oil consumption recovers from the COVID-19 pandemic and Russian supply falls after its invasion of Ukraine.

OPEC Plus, which cut production when oil prices crashed to historic lows when the pandemic slashed oil demand, had agreed to stick to its existing plans to reverse the curbs with modest increases for another month.

NOPEC is intended to protect US consumers and businesses from engineered spikes in the cost of gasoline, but some analysts warn that implementing it could also have some dangerous unintended consequences.

In 2019, Saudi Arabia threatened to sell oil in currencies other than the dollar if Washington passed NOPEC, a move that could undermine the dollar's status as the world's main reserve currency, reduce Washington's clout in global trade and weaken its ability to enforce sanctions on nation states.

Senator John Cornyn, a Republican from the top US oil producing state Texas, opposed the bill, saying it could prompt OPEC to restrict shipments to the United States.

"If we really want to deal with price at the pump we ought to produce more oil and gas here in America," Cornyn said.

The bill is also opposed by the American Petroleum Institute, the top US oil and gas lobbying group. In a letter to the committee's leaders, API said, NOPEC creates significant potential detrimental exposure to US diplomatic, military and business interests while likely having limited impact on the market concerns driving the legislation.

Some analysts have cautioned that NOPEC could ultimately harm domestic energy companies if it pressures Saudi Arabia and other OPEC members to flood global markets with oil, because they produce oil much more cheaply than US companies do.

 

OPEC Plus agrees deep oil production cuts

OPEC Plus agreed steep oil production cuts on Wednesday, curbing supply in an already tight market, causing one of its biggest clashes with the West as the US administration called the surprise decision shortsighted.

The de-facto leader of the cartel, Saudi Arabia said the cut of 2 million barrels per day (bpd) of output - equal to 2% of global supply - was necessary to respond to rising interest rates in the West and a weaker global economy.

The kingdom rebuffed criticism it was colluding with Russia, which is included in the OPEC+ group, to drive prices higher and said the West was often driven by "wealth arrogance" when criticizing the group.

The White House said President Joe Biden would continue to assess whether to release further strategic oil stocks to lower prices.

"The President is disappointed by the shortsighted decision by OPEC+ to cut production quotas while the global economy is dealing with the continued negative impact of (Russian President Vladimir) Putin’s invasion of Ukraine," the White House said.

Biden faces low approval ratings ahead of mid-term elections due to soaring inflation and has called on Saudi Arabia, a long-term US ally, to help lower prices.

US officials have said part of the reason Washington wants a lower oil price is to deprive Moscow of oil revenue. Biden travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy. Relations have been further strained as Saudi Arabia has not condemned Moscow's actions in Ukraine.

Saudi Energy Minister Abdulaziz bin Salman said OPEC Plus had needed to be pro-active as central banks around the world moved to "belatedly" tackle soaring inflation with higher interest rates.

Wednesday's production cuts of 2 million bpd are based on existing baseline figures, which means the cuts would be less deep because the cartel fell about 3.6 million barrels per day short of its output target in August.

Under-production happened because of Western sanctions on countries such as Russia, Venezuela and Iran and output problems with producers such as Nigeria and Angola.

Analysts from Jefferies said they estimated the figure at 0.9 million bpd, while Goldman Sachs put it at 0.4-0.6 million bpd saying cuts would mainly come from Gulf OPEC producers such as Saudi Arabia, Iraq, the United Arab Emirates and Kuwait.

 

OPEC Plus thought of production cut annoys US

OPEC Plus looks set for deep oil output cuts in its meeting today (Wednesday), curbing supply in an already tight market despite pressure from the United States and other consuming countries to pump more.

The likely cut could spur a recovery in oil prices that have dropped to about US$90 from US$120 three months ago due to fears of a global economic recession, rising US interest rates and a stronger dollar.

The cartel that includes Saudi Arabia and Russia, is working on cuts in excess of one million barrels per day (bpd). Reuters reports the cuts could be as high as two million bpd if reductions could include additional voluntary cuts by members such as Saudi Arabia or if cuts could include existing under-production by the group.

OPEC has been under-producing over 3 million bpd and the inclusion of those barrels would dilute the impact of new cuts.

"Higher oil prices, if driven by sizeable production cuts, would likely irritate the Biden Administration ahead of US midterm elections," Citi analysts said in a note.

"There could be further political reactions from the US, including additional releases of strategic stocks along with some wildcards including further fostering of a NOPEC bill," Citi said referring to a US anti-trust bill against OPEC.

Saudi Arabia and other members of the Organization of the Petroleum Exporting Countries and allied producers (OPEC Plus) have said they seek to prevent volatility rather than to target a particular oil price.

The West has accused Russia of weaponizing energy as Europe suffers from a severe energy crisis and may face gas and power rationing this winter in a blow to its industry.

Moscow accuses the West of weaponising the dollar and financial systems such as SWIFT in retaliation for Russia sending troops into Ukraine in February. The West accuses Moscow of invading Ukraine while Russia calls it a special military operation.

A significant cut is likely to anger the United States, which has pressured Saudi Arabia to pump more to pressure oil prices and reduce revenue for Russia.

Saudi Arabia has not condemned Moscow's actions and relations are strained between the kingdom and the administration of US President Joe Biden, who travelled to Riyadh this year but failed to secure any firm cooperation commitments on energy.

Saudi Aramco CEO and President Amin Nasser said that the spare production capacity is not the responsibility of Saudi Arabia alone.

Nasser made the remarks on Tuesday during his speech at the Energy Intelligence Forum 2022 in London. He added that the spare capacity amounts to 1.5% of global demand.

The oil market does not focus on the fact that global spare capacity to increase oil production is very low, Nasser said.

He clarified that the market focuses on what will happen to demand if there is recession in different parts of the world. He also added that they do not focus on the supply fundamentals.

Nasser stressed that Aramco maintained its market in Asia despite European demand, while he pointed out that the problem of Europe lies in gas and liquefied gas due to the lack of spare capacity.

During his speech, Nasser expected that the demand for oil would increase until 2030 and beyond. He also added that Aramco is on track to raise its capacity to 13 million barrels per day by 2027, which would cost billions of dollars.

The Aramco's CEO remarks came about 24 hours before the meeting of the OPEC Plus meeting that will be held on Wednesday in Vienna, which is its first attendance meeting since March 2020.

The alliance is expected to reduce production by at least 500,000 barrels per day, while other expectations indicate the possibility of reducing by more than one million barrels per day.

 

 

Is US behind Nord Stream gas pipeline blasts?

Since the outbreak of the Ukraine war and many years before the conflict even erupted, the signs were clear. The United States was and continues to wage economic war against Russia and all other countries, such as China and Iran that pursue independent foreign and economic policies. 

On Russia, Congress loathed the idea of Moscow sending 40% of Europe's gas supplies mostly through the Nord Stream 1 pipeline. Over the years, the US imposed so much diplomatic pressure on Europe to abandon the implementation of another pipeline: Nord Stream 2. 

It was supposed to be a major energy project in Europe, perhaps the biggest but also of major concern in Washington, where officials tried their best at scaremongering their counterparts in Europe.

Nord Stream 2 is designed by Russian energy giant Gazprom and the aim of the new pipeline was to double the amount of gas flowing from Russia straight to Germany.

The concern in Washington was the US sitting on an excess amount of gas supply from the shale gas boom but unlike Russia, there were little buyers.

The US has been eager to export the surplus to Europe on tankers in the form of liquefied natural gas (LNG) and essentially replace Russian supplies. 

What stood in the way of the LNG companies was Nord Stream 2, which all but ended the European Union's interest in building the more expensive LNG gas terminals that are needed to import American gas. The logistics of the whole operation did not make sense when there was a much cheaper option from Russia. 

As the momentum for Nord Stream 2 was gaining speed, former US President Donald Trump, in his last year in office, signed into law sanctions from the US Congress against companies involved in the construction of the new gas pipeline between Russia and Germany. 

However, many said at that time the sanctions came too late and would do little to end the project’s completion. Too much money had already been spent on Nord Stream 2, something to the tune of US$11 billion.

The layout of the new pipeline followed the route of the existing Nord Stream 1 pipeline under the Baltic Sea. While the Russian gas would serve most of Europe's energy needs the main countries involved, Russia and Germany, accused the US of using energy security concerns as a smokescreen for its own economic interests. 

Former German Chancellor Angela Merkel even condemned the American sanctions, with then Foreign Minister Heiko Maas saying they amounted to "interference in autonomous decisions taken in Europe. European energy policy is being decided in Europe, not in the US” he said. An EU spokesperson said the 27-nation bloc “opposes the imposition of sanctions against EU companies conducting legitimate business”.

To the huge frustration of the American Congress, Moscow and Brussels brushed aside the sanctions and it was obvious that the pipeline was almost complete. Denmark gave the final approval needed for the project. The company constructing Nord Stream 2 said it was putting the final touches with over 2,000 kilometers already laid at the bottom of the Baltic Sea. The pipeline was expected to start pumping gas earlier this year.

NATO's eastward military buildup toward Russian borders was met with the following threat by US President Joe Biden: "If Russia invades (Ukraine), then there will be longer Nord Stream 2. We will bring an end to it.” Before adding "I promise you we will be able to do it."

Moscow says the NATO military buildup on Russian borders, the abandonment of the Minsk agreement and Washington’s refusal to answer Russian security guarantees forced it to conduct what the Kremlin describes as a “special military operation” in Ukraine.

Three unexplained gas leaks, preceded by two explosions, occurred on the Baltic Sea’s Nord Stream 1 and 2 pipelines last Monday. Did the US force Russia into military action to exchange Russian gas to the EU with US gas in the aftermath of the Covid-19 pandemic that battered the American economy?

In the aftermath of the Ukraine conflict, the US offered a quick commitment to deliver its own LNG to the EU telling Brussels this is a big step towards making Europe less dependent on Russian gas.

EU Commission Head Ursula von der Leyen said, "We aim to reduce this dependency on Russian fossil fuels and get rid of it. This can only be achieved through... additional gas supplies, including LNG deliveries."

"The US commitment to provide the European Union with additional at least 15 billion cubic meters of LNG this year is a big step in this direction because this will replace the LNG supply we currently receive from Russia."

The United States has committed to providing the EU with an additional 15 billion cubic meters (bcm) of LNG this year, with both sides aiming to ramp up deliveries to 50 bcm per year over time.

"Looking ahead, the United States and Europe will ensure stable demand and supply for additional at least 50 billion cubic meters of US-LNG until 2030," Von der Leyen said, adding this would replace one-third of Russian gas supplies to the EU today.

"We need to secure our supplies not just for next winter but also for the years ahead", she added. "Our partnership aims to sustain us through this war."

The timing of the leaks and explosions has raised many eyebrows. It occurs just as Europe is getting restless with skyrocketing energy bills that are making voters topple one government after the other. While Nord Stream 1 was filled with gas when the explosions occurred, it was not pumping to Europe as a result of Western sanctions that had led to technical issues.

However, such is the severity of the European energy crisis. The sanctions could have been lifted on the pipeline, the maintenance issues resolved and the energy flows resumed. Not just Nord Stream 1 but gas could have been delivered through Nord Stream 2 as well to get to Europe by the winter.

Russia has said that the ruptures appear to be the result of state-sponsored "terrorism".

Russian President Vladimir Putin has accused the West of organizing the blasts that led to numerous gas leaks.

“Sanctions are not enough for the West. They have switched to sabotage. Unbelievable, but it is a fact!” Putin said during a televised speech.

“By organizing explosions on the Nord Stream international gas pipelines that run along the bottom of the Baltic Sea, they actually started destroying European energy infrastructure,” Putin said. “It is clear to everyone who benefits from this,” he added.

The Kremlin says the incidents on two major undersea gas pipelines from Russia to Germany look like acts of state-sponsored "terrorism".

"This looks like an act of terrorism, possibly on a state level," Kremlin spokesman Dmitry Peskov told reporters.

"It is very difficult to imagine that such an act of a terrorism could have happened without the involvement of a state of some kind, this is a very dangerous situation which requires an urgent investigation," Peskov said.

There have been many protests against energy price hikes across Europe which has put pressure on governments to return Russian energy. The German chancellor visited Persian Arab Gulf countries to try to secure energy supplies.

The Russian Foreign Ministry says US President Joe Biden is “obliged” to answer if Washington is behind the gas leaks. “On February 7, 2022, Joe Biden said that Nord Stream would be finished if Russia invaded Ukraine,” foreign ministry spokeswoman Maria Zakharova said on social media, posting a video of Biden saying “we will bring an end” to Nord Stream 2 if Russian tanks cross Ukraine’s border.

“Biden is obliged to answer the question of whether the US carried out its threat,” Zakharova added.

“A statement of intent was backed by a promise. We must be responsible for our words... Europe must know the truth,” Zakharova added.

The ministry says the ruptures to the pipelines occurred in territory that is "fully under the control" of US intelligence agencies.

 

OPEC Plus mulling largest cut since 2020

The OPEC Plus group of oil producers is discussing output cuts of more than one million barrels per day (bpd). Voluntary cuts by individual members could come on top of that, making it their largest cut since 2020.

The group is set to meet on October 05, 2022 in Vienna in person for the first time since March 2020, against a backdrop of falling oil prices and months of severe market volatility which prompted top OPEC Plus producer, Saudi Arabia, to say the group could cut production.

The cartel, which combines OPEC countries and allies such as Russia, has been gradually raising its output target to unwind the record cuts it made in 2020.

Now faces a sharp fall in prices, which have dipped below US$90/barrel from as high as $120 in recent months due to fears about the global economy and a rally in the US dollar after the Federal Reserve raised interest rates.

"It may be as significant as the April 2020 meeting," the source said, referring to when the cartel agreed record supply cuts of around 10 million bpd, or 10% of global supply, as the COVID-19 pandemic slashed demand.

A significant cut is likely to anger the United States, which has been putting pressure on Saudi Arabia to continue pumping more to help oil prices soften further and reduce revenue for Russia as the West seeks to punish Moscow for sending troops into Ukraine.

Saudi Arabia has not condemned Moscow's actions amid difficult relations with the US administration under President Joe Biden.

Last week, a source familiar with Russian thinking said Moscow would like to see OPEC Plus cut its output target by one million bpd or 1% of global supply.

On Sunday, sources said the cut might exceed one million bpd.

On Monday, one OPEC source said voluntary cuts by individual members would come on top of that figure.

It was not yet clear what levels of voluntary cuts Saudi Arabia or any other top Gulf OPEC producers could contribute.

In the past few years, only Saudi Arabia has offered voluntary cuts to give additional boost to the markets.

"My instinct is that if they (OPEC Plus) have suggested a cut and prices are still going down, they will have to do it and a bigger one than they wanted," said Raad Alkadiri, Managing Director at Eurasia Group.

Stephen Brennock at PVM said fears of a demand-sapping recession have rattled OPEC Plus and hence they are set to take preemptive action.

"It must be noted that OPEC Plus is already pumping more than 3 million bpd below its target, hence any further cuts will only exacerbate the existing supply tightness," he said.