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Gastón Saidman | Public Relation and Goverment Relations, Israel-Chyprus Chamber of Commerce. | Main | Articles | 6/4/2019

THE NEW BLOCK THAT THREATENS THE MIDDLE EAST ENERGY MARKET

The investors and energy market followers noticed that the price of crude oil did not move according to the expectations of analysts betting on a significant rise. Only in the last three weeks, did it stop its stagnation and begin to materialize, although still far from the desired price.

The growing influence of new actors such as Israel and its gas discovery, along with the development of new deposits that were restored in the United States to make use of their reserves in response to the wave of production by the OPEC countries, managed to confuse the investors. They found themselves in a market that will be changing its main player, in this case natural gas. It is rumored that its demand will grow in comparison to oil.

Given this situation, a new dilemma could affect the market, especially Israel's status as a gas producer, who in recent months managed to reach agreements with countries such as Egypt and began a dialogue with Jordan to finalize a supply agreement of the mineral. So far, the agreement was expected to be in effect from the first quarter of 2019 and to expire by the end of 2032. This last deal seems to be having some setbacks, since in mid-February the Jordanian Parliament requested to cancel this agreement with Israel, because this year the project to create a pipeline to move oil and gas between Qatar and Iran could be finalized and that will include Turkey and Jordan.

The Arab world leadership is based on main producers of both oil and gas, which is why we must pay attention to how relations between them are, and how external players such as the U.S influence the market, because their goal is to establish branch offices in every possible oil field. The result can be good and bad, the good thing is that the countries that allow US presence on their soil, manage to create some sort of stability in the area. The bad thing is that at the same time, it affects the commercial status of those who do not go along with the requirements of the world leader.

What I just explained clarifies the very general point of view of the West world countries interests. In the internal Middle East conflict, the interests are influenced by the struggle of who will be the next leading country of the Arab world. The strongest contenders are Iran and Saudi Arabia that want to control the entire hydrocarbon economy from production to transportation due to the huge benefits that can be reaped from it.

Saudi Arabia has been the largest oil exporter in the world and among one of the most open to the West. As we all know, they are the ones that control the oil market in many aspects of it and it is known that their closeness to the modern countries allows them to reach new technologies as a solution for the future economic crisis they will have when the mineral classified as "black gold" will be replaced by natural gas. That is why the Saudi kingdom has agreements with Western countries that contribute to their ambitions.

In recent years, this approach helped many Western companies get a foothold in the Middle East. However, Saudi Arabia was not the only one that helped the western companies, the developing relations with Israel, and new commercial agreements with Israeli companies played a big part in creating trust between the Western Countries that brought more investments in different areas between both Saudi Arabia and other countries of the Arab Emirates.

The new alliance that could hold up against the world's most powerful countries

The current political map of the Middle East is seen as follows: Russia has a significant presence in Iraq and is the mediator of Israel in Syria. The People's Republic of China is also very influential in the area, but we know that even if they are allies of some of the countries that belong to the Iranian axis. When the time comes to take sides, these two countries will support only the regional powers to secure their own interests and that will make it easier for the U.S to put pressure on Iran. Bearing this in mind, we understand that it was only a matter of time until the remaining countries that do not belong to these alliances will take the initiative to make their own alliance. They are working on creating an array of pipes in case that the sanctions will affect the transportation of oil and gas. The main members of this new alliance are Turkey, Iran and Qatar; with Iraq, Syria, Lebanon, surprisingly - Jordan could be getting involved as well.

In the early summer of 2017, Qatar initiated bilateral and trilateral talks with Iran and Turkey after Saudi Arabia imposed sanctions on Qatar. These sanctions include the requirement to close the Al-Jazeera television network and a Turkish military base under construction on the Qatari coast until June of that year. The first reaction of the three countries at the end of November 2018 was to reach an agreement in Tehran to create a "joint working group to facilitate the transit of merchandise among them."

According to the "Oil Price" magazine reports, this block has geostrategic objectives that could be realized until the end of May, unless the block is already formed. We are talking about a block that could influence the general Middle East policy not only in the energy market, but will also affect important minorities such as the Kurds who together with the Sunni Arabs represent a threat that could limit the access of Iran and Turkey to the central areas and a put a stop to their desire to be the Middle East leading countries.

The first pipelines that are being built in the Mediterranean will go through Iranian, Iraqi and Syrian territory, thus creating the final connection with Turkey along with electricity lines and transport infrastructure fully integrated at the regional level, replacing the "Sunni oil pipelines" (controlled by Saudi Arabia) that until now provided the area with minerals.

Russia, between the two sides

At the end of 2018, Russian analysts warned about this union, qualifying it as threatening to the region due to the adjustments and changes it will bring. Although the new alliance members consider Russia their ally, The Russian Government did not react with great enthusiasm, even showing a certain distrust towards Qatar because of the support that it offers to terrorist organizations. In any case, Vladimir Putin sent his Defense Minister Sergei Shoigu to Damascus, to guarantee Russian interests in the context of the new regional reconfiguration.

United States and its limitations in the Middle East

The increase in China's influence in the area is affecting its influence in other areas where it could have impact on the hegemonic status of the US. Even more now that the US influence in the Middle East has diminished despite its military presence in Syria, Iraq and Jordan and its good relations with Saudi Arabia.

Possibly, Washington is thinking about putting great pressure against this new block. However, this can only stimulate both Turkey and Iran to continue with the block project and even create new actions against the United States, the Middle East and their partners, further strengthening the new alliance, which already has a name: "the Middle East pact."

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