By Zainab Calcuttawala, an American journalist based in Morocco. Originally published at OilPrice
A string of oil deals between Russian oil companies and Arab petrostates have shifted the center of political gravity in the Middle East and North Africa towards Moscow – counteracting the effect of decades of American military and political involvement as U.S. President Donald Trump’s plan for the region remains unclear.
The 2014 oil price drop hit the national economy hard, causing the price of the ruble to plummet and GDP growth to grind to a halt. This has pushed Moscow to look outward to project strength as a crippling recession proceeds on the domestic front.
The Arab World has been Putin’s favorite arena to grow the Russian sphere of influence. Moroccan King Mohammed VI’s visit to Moscow last year brought the two countries closer together on tourism and counterterrorism issues. But the North African country’s lack of oil or gas resources did not leave room for further discussions on Russia’s flagship foreign policy issue—energy.
The rest of the Middle East and North Africa, however, is brimming with proven fossil fuel reserves, and Putin has used his massive state-owned energy companies to carve out political opportunities in vulnerable and stable Arab nations.
Syria took the first dose. The continuation of President Bashar Al Assad’s regime is all but guaranteed thanks to Russian political maneuvering in the months leading up to Trump’s inauguration and the Russian military’s contribution in the fall of several rebel strongholds in major Syrian cities.
Russian oil and gas companies – all intimately related to Putin’s personal wealth – have reaped the greatest rewards from Moscow’s intrigues.
According to Sputnik, which quoted Dmitry Sablin, Assad told a visiting Russian delegation of lawmakers this week that neither Iran nor China has companies with a worldwide reputation in the oil and gas sector like Russia has. Therefore, Assad “sees only the work of Russian companies”, Sablin said.
State-owned oil and gas company Rosneft has shaken up the MENA region the most so far.
Late last year, American authorities rechecked the terms of a deal for the purchase of a minority stake in Rosneft by the Qatari sovereign wealth fund commodities trader Glencore. At the time, the White House said the arrangement could be in violation of international sanctions levied against Russia after the country forcibly annexed Ukrainian Crimea.
“The experts at the Department of Treasury that are responsible for constructing and enforcing the sanctions regime will carefully look at a transaction like this,” Josh Earnest, the press secretary for the Obama Administration, said.
Since the $11.3 billion deal profits the Russian government and not Rosneft itself, Moscow argued that it did not violate the terms of the sanctions, which specifically named no-go entities.
Two years ago, in Egypt, Rosneft signed two deals to supply liquefied natural gas and other petroleum products to Cairo. In the months following, Russia doubled down on its energy investments in the country, offering $25 billion to build a 1,200 MW nuclear power plant over 12 years.
Putin made his entrance to Egypt at an opportune moment. “The NPP construction project in El Dabaa near Alexandria is important in itself and it is a much more significant project in positive terms than return of Russian tourists to Egypt,” Egyptian Professor and energy strategist Tarek Peggy said in an interview with TASS this week. “The Mediterranean gas will be enough to cover national demand for the next 30-35 years; therefore it is highly important to start building the NPP now in order to provide ourselves with electric power after that.”
Most recently, Rosneft moved into Iraq and Libya, expanding its footprint in two Middle Eastern countries with weak domestic stability just recovering from years of civil strife.
“We need the assistance and investment of major international oil companies to reach our production goals and stabilize our economy,” NOC Chairman Mustafa Sanalla said this week in an official statement.
The Russian company agreed to by oil from Libya’s National Oil Corporation and promised to new markets “worldwide for Kurdish crude oil,” according to a statement by Chief Executive Officer Igor Sechin.
By taking over part of the Kurdistan Regional Government’s distribution burden, Russia is helping the semi-autonomous zone bypass potential hurdles with Baghdad, which controls the flow of oil through crucial pipelines. Disagreements between the Iraqi capital and Erbil regarding oil export contracts have caused pipeline closures in the past. With a new ally in Russia, the KRG can devise new ways to get their oil products out without having to negotiate with the Iraqi government, buttressed by the U.S.
This is just a snapshot of the impact a single company has had on a slew of MENA petrostates. Transneft, Gazprom and other Russian firms have other deals in related fields that entangle Moscow’s interests in weapons sales with the ambitions of Arab leaders seeking to grow their oil wealth and maintain the strength of their regime through force.
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Its not just in oil deals. Russia just did a big deal with the UAE for selling Sukhoi-35 fighters and to develop a new aircraft. This would have been unthinkable a few years ago (the UAE military usually use a politically correct mix of US and European weapons).
The Gulf States have long used weapons purchases as a means of exerting political control on the west – you can always see who the Sheikhs consider important to placate by who they buy expensive weapons off. If they are now buying Russian weapons it means they see the way the winds are blowing, and its not favourable for the US or Europe.
You’ve gotta hand it to the Washington neocon establishment. They spent the last 15 years strengthening Iran by wiping out its enemies at great expense, and now they are doing the same for Russia. Worth every cent of their wages they are.
Yes, and then they’ll use Russia’s renewed strength to justify building up the defense budget even further. Great method to the madness.
…. and its not favourable for the US or Europe.
I tend to think that not being involved with the middle east is an extremely favourable position.
Forget about climate change, just getting rid of the Oil Addiction is well worth doing for the security aspect alone – not to mention the insidious influence of rich Arabs via “businesses interests” on how “we run things here”.
I don’t understand the “western” bee-in-the-bonnet about Iran, because so far every islamist terror attack on the west and every mosque preaching Jihad right here, on the western country it is placed in, is paid with Saudi- and Pakistani- money. Not Iranian. While Iran is not a nice place, it is also not the worst place to be female.
A great book on the Iranian-American relationship during the era of the Shah is Andrew Scott Cooper’s “The Oil Kings.” The similar development of the Saudi-American relationship and the Saudi-British relationship was also about oil and arms deals. Wikileaks cables are instructive on this, for example from 1978:
However this whole relationship is based on continued high global demand for oil & gas, as is Russia’s petroleum-based export economy. This is not a stable economic policy, as Venezuela has learned, and if you listen to Putin he recognizes this, he regularly calls for technological growth in Russia. China is of course way ahead of the curve being the world leader in renewable energy manufacturing, along with others like Japan, Germany and California. This is clearly the direction that global demand for energy projects is taking: even Saudi Arabia sees the writing on the wall:
https://www.pv-magazine.com/2017/02/02/saudi-arabia-to-invite-solar-wind-bids-in-april-says-minister/
Yet here in the U.S., we had Obama boosting fracking and oil export infrastructure (like DAPL), and Trump boosting coal by lifting EPA clean air and water regulations, all while trying to keep low-cost Chinese solar panels from being imported to the United States using tariffs. This is no doubt what Wall Street, with its huge long-term fossil fuel investments, wants, but it is an idiot’s game that will only cause the U.S. to suffer major economic declines.
Geopolitical risks may also drive the US fracking and pipeline policies. There is some benefit to reduced US direct dependence on middle east producers, although that doesn’t do that much for other non-producer OECD economies (e.g., Japan) that are still heavily reliant on Saudi et al. To what extent do environmental degradation and human rights costs enter any US policy deliberations, if there really are any, in consideration of such policies? Some aspects are more likely to get headlines and others get buried in footnotes, if seen at all.
I have a different take on this (which actually confirms the overall argument of the article).
a) The Western Sahara is being explored for hydrocarbons, and Western firms have already found oil and gas on- and off-shore.
b) The Western Sahara is occupied by Morocco — and this has been a very contentious issue regionally and internationally for decades.
c) Morocco has just re-joined the African Union, which has rekindled the debate about the future of the Western Sahara.
d) An oil pipeline from Nigeria to Morocco is being planned. The joint venture between both countries was signed very recently.
All of which make the personal visit of the Moroccan king to Russia really, really important in that energy-geostrategic game.
What happened to the giant solar project that was envisioned for the Western Sahara? That is where the US could have positive influence and build back some respect. There is nowhere on earth that has better solar insolation. It is also a way to get off the oil addiction of North Africa and the EU, where the electric power can be profitably exported.
A very good article on that project, Desertec, from 2011, is here:
http://www.investmentu.com/article/detail/24733/the-european-energy-revolution
That’s one issue, the other is the effect that a 15% drop in demand for natural gas would have on the economics for Russia, Iran, Qatar, and the various U.S, British, Swiss commodity traders from Goldman Sachs to Glencore to Vitol, etc. They of course would all want to sabotage such a threat to their profits by any means available.
This article begs the question: What is America doing to secure its influence in the Middle East? Why bombing people, of course, preferably into submission so they eventually prostrate themselves before our will for their own greater good. America has an a priori agenda of political domination while the Russians must make do with an economic one. While they make deals, we plan regime change.
Trump sees Iran as the greatest prize of all. By taking them down, America would be unrivaled in the region. America has always been blessed with Big Thinkers never lacking in imagination.
An attack on Iran by the American Empire would have the same kind of long-term effect that the attack on Afghanistan by the Soviet Union did. The final nail in the coffin.
It seems that the last worthwhile president we had was JFK. He started out his presidency as a Cold Warrior but at the end saw the futility of being involved in Vietnam and of the cold war in general.
At the time there was a very strong anti-communist pro-war sentiment in the US which resonated well with the military industrial complex that Kennedy was up against when his views became more conciliatory with Russia. This anti-Russian sentiment is trying to be re-whipped up in the US but isn’t finding as receptive an audience.
Kennedy essentially lost control of his presidency. Trump seems to be facing similar pressures but I don’t think he’s so isolated in his battles. He has strong allies in both the military and industry and there is a different public sentiment.
I think that there’s still a lot of resistance in the US to consider seriously the idea that it could be responsible for assassinating it’s own popular president (JFK) and also to consider critically our current activities in places like Ukraine, Libya and Syria.
Russia seems to be treating its Arab neighbors with more respect and it would be good if Trump could get on that train. It would also be good to see Trump transition to a more climate friendly attitude such as partnering with China on solar energy.
Late last year, American authorities rechecked the terms of a deal for the purchase of a minority stake in Rosneft by the Qatari sovereign wealth fund commodities trader Glencore. At the time, the White House said the arrangement could be in violation of international sanctions levied against Russia after the country forcibly annexed Ukrainian Crimea.
This fellow sounds like he is part and parcel of the MIC, n’est-ce pas?
She’s just a new-fangled old-fashioned cold warrior. She did her degree at U. of Texas at Austin, then worked for the Daily Texan. She seems to be writing extensively, and mostly, about Morocco, with a US slant.
That will only strengthen Europe over the US and Russia. I don’t see any US benefit there.
And such energy pipelines are always a security risk. Look at all the middle eastern oil and gas pipelines. Not many of them are working.
That was very interesting. When John McCain said, “Russia isn’t even a country, it’s just a gas station,” he was talking about the expanse and development of Russian gas and oil. McCain’s solution to all this seems to be bombs. Which is even more insane than fossil fuels. Seems the second most insane solution is to impose sanctions on Russia to crush their economy so all they can do is develop their oil industry. Somehow other solutions must all have to do with not just Russia but also the vulnerable “West” tightening belts. Bec. nobody’s willing to break out of this mindset.
Huh. Russia “forceably annexed Crimea”? Really? Crimea held a referendum. Over 90% voter turnout and over 90% of them voted to reunite with Russia. Where’s the forceable annexation in that? Why no mention of the illegal coup in Western Ukraine pushed/funded by the US and NATO that necessitated that the Crimeans hold the vote in the first place?!
A story pushing the Russia scare nonsense.
Even Glenn Greenwald – who must know better – goes around saying this about the Crimea.
Probably a requirement for continued financial support from Pierre Omidyar’s First Look Media for the Intercept. The role of the Omidyar Network in conjuction with USAID in assisting with the Ukrainian coup overseen by Victoria “Cookies” Nuland could use a lot more examination.
Hm. Sounds like it’s very very important to Russia to get a gas->generator situation built before it’s practical to cover Egypt with solar and power it that way.