The great Middle East energy game: Winners and losers

The US has miscalculated by believing other countries are incapable of pursuing independent interests without its involvement.

By IRINA TSUKERMAN
FILE PHOTO: Workers fix a sign for oil giant Total at a petrol station in Cairo, Egypt, October 13, 2016. (photo credit: REUTERS)
FILE PHOTO: Workers fix a sign for oil giant Total at a petrol station in Cairo, Egypt, October 13, 2016.
(photo credit: REUTERS)
Leaving aside the faux, voyeuristic outrage over the political sideshow that is the potential process of moving the US Embassy from Tel Aviv to Jerusalem, the greatest catalyst of conflicts in the Middle East right now is Iran.
Iran’s hands are seen in Hezbollah’s control of Lebanon, Syria, Yemen, an attempted coup in Bahrain, Iraq – even in Cuba, Venezuela, and formerly in Argentina and other Latin American Countries. Iran is implicated in continued cooperation with North Korea on ballistic missiles; with the backing of the Taliban in Afghanistan; with illicit arms trades involving a number of African countries; and with the growth of Shi’a militias in Nigeria. Iran has likewise been fomenting discontent among the Shi’a population in Pakistan, which has no shortage of other destabilizing factors. Iran seems to be a “mother lode of bad ideas.”
Simultaneously, it has managed to develop fairly profitable, albeit at times tense relationships with other major or rising world powers. Those include Russia, China and Turkey. At the same time it is engaging a large number of European countries, South Korea, India, and others in assorted trade agreements. Iran has managed to place itself front and center – not only as a bad actor bent on colonization of the “Shi’a Crescent” and possibly beyond – it has also gained increasing political and economic legitimacy among its former adversaries.
Iran has even managed to get the United States under the Trump administration to wage limited war against ISIS, first in Iraq and Syria and to a lesser extent in Afghanistan, despite conflicts and occasional confrontations between US forces and the terrorist group’s own militias. While Iran’s various financial deals are to some extent being tracked, what remains noteworthy is the issue of energy control in the region, a factor that fuels the numerous conflicts, or at least finances them.
We already know that much of the assets unfrozen by the Obama administration and sent to Iran in bulk cash went for sponsorship of terrorism, various military operations and advanced weapons development. Those funds did not modernize Iran’s economy or provide for poor people suffering from the regime’s mass corruption. Deliberately divisive policies have added to the marginalization of minorities and those in peripheral regions of the countries, by exploiting natural resources and further degrading the environment.
To continue its accelerating expansionist policy, Iran must have continuous access to financing well beyond that produced by investments from European companies or increased trade with China.
None of these ventures will yield enough profit overnight. Infrastructure investment will likely suffer due to the effects of extreme government bureaucracy and corruption. Worse still, as a result of its own poor planning, Iran must export oil for refinement until its own refineries are fully functional. Where, then, will they find funding? The solution is obvious – Iraqi oil. According to recent estimates, Iran already earns more than a million dollars a day from Iraqi oil as a result of growing business with Iraq and Baghdad’s regained control of the Kirkuk oil fields. That brings the country to a new level in the grand geopolitical scheme.
Yet, Iran’s profiteering tells us only part of the story. There are other winners and losers in the great Middle Eastern energy game.
The first losers are the Kurds, who literally lost access to the oil fields formerly under their control. Their economy is in shambles and controlled by Baghdad, which stopped all commercial flights, thereby cutting off access to most humanitarian aid and tourism, not to mention possible business with Western oil companies and other investors.
The second, unequivocal losers are the Gulf states that for too long have pillaged their natural resources and failed to diversify their economies. With the US increasingly moving away from reliance on foreign oil, these states stand to lose one of their biggest customers. Coupled with the dropping price of oil, the Gulf States are racing to reinvest in longer-term markets and find other sources of energy for the future.
Iran is clearly outplaying these countries in that regard, as are Russia and Turkey. Russia has taken advantage of the situation to play all sides. Iraq is reopening an old oil pipeline to Turkey, bypassing the Kurdistan Regional Government. Russia is also building its own pipeline to Turkey. Turkey will also benefit from a purported gas pipeline deal with Israel.
By discovering gas, Israel is playing up its advantages. It is now working to build pipelines with several Mediterranean states, possibly Turkey, and making deals with Jordan and Egypt. It has also invested in green energy and water technology and is seen as a source of such investment, particularly in many countries in Africa. As Israel becomes less dependent on oil and less reliant on other countries, it stands to grow its economy quite a bit.
What of the US? The United States, despite not being nearly as dependent on OPEC as it was in recent decades, is actually losing a great deal. It seems to have formulated a peculiar plan of bringing together Iraq, Saudi Arabia, Qatar and Turkey to oppose Iran, and has been tolerating quite a bit from Iraq’s, Qatar’s, and Turkey’s mischief for the sake of this potential and chimeric alliance.
The reality is that separately or together, none of these countries need the US, except for limited trade agreements. Iraq is growing closer to Iran and making profit off Kurdish oil, having gained a great deal of arms and training from the US.
Saudi Arabia is diversifying its arms trade by playing nice with Russia and buying up a great deal of US real estate. The kingdom is not necessarily beholden to the US, except vis-a-vis Iran.
Qatar is trying to play all sides, but is still independently rich, trades well with Iran, and does business with a number of Asian countries.
Turkey is getting oil and gas from a number of places, growing closer to Iran and Russia. And despite recent economic setbacks due to corruption and other factors, it looks to profit immensely from its own independent arrangements.
The US has miscalculated by believing other countries are incapable of pursuing independent interests without its involvement, or by thinking such nations cannot use energy markets effectively to marginalize any state that is not already in an active leadership position. The US should take stock of the way the energy assets are being played by various states. It should either separate the authoritarian regimes which only grow stronger with the greater access and interconnections such valuable assets provide, or by outplaying those states at their own game.
But the first step is to acknowledge that there is such a problem, and that Middle East politics are as much as about who controls energy and funding as they are about having the best weapons, the best training, or the most important backers.
The author is a human rights and national security lawyer based in New York