AIJAC webinar: energy expert Simon Henderson surveys complex Middle East situation

July 26, 2020 by J-Wire Newsdesk
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The latest webinar from the Australia/Israel & Jewish Affairs Council featured Simon Henderson, the Baker Fellow and director of the Bernstein Program on Gulf and Energy Policy at the Washington Institute, whose topic was “Power Struggles: Energy Wars in the Middle East.”

Simon Henderson

By way of context, he noted the current price of oil is very low. There are two areas of potential conflict over energy, the Persian Gulf, which is the more important in terms of production volume, and the eastern Mediterranean, he said.

In Saudi Arabia, he noted, King Salman’s health is declining, and the transition to the throne of assumed heir and de facto ruler Mohammad bin Salman, better known as MbS, may not be smooth due to opposition within the royal family. There could, in fact, be a vicious succession battle, which would have the potential to disrupt oil exports.

In the eastern Mediterranean, Egypt looks as though it is moving towards a military confrontation with Turkey over Libya. The two countries are backing opposing sides in the civil war, with Turkey behind the Tripoli-based and UN-recognised Government of National Accord (GNA) and Egypt backing the Libyan National Army (LNA) of General Haftar, which controls the east of the country, including the area abutting Egypt.

Haftar’s forces were doing well until Turkey intervened militarily, swinging the balance back in the GNA’s favour. The Egyptian Parliament recently gave Egyptian President Abdel Fattah al-Sisi permission to involve the Egyptian military. Haftar currently controls the oil-producing area of Libya.

Israel, Egypt and Cyprus have found oil and gas in their zones in the Mediterranean, and Turkey has none, so it is disputing the territorial off-shore exploration zones, and claiming Cyprus’ zone for itself. So far, there has been no military confrontation, but Turkey’s attitude is making the situation dangerous. Gas prices are currently very low, he says, so what would previously have been commercially attractive to drill for has become less attractive.

The coronavirus is damaging the economies of the Gulf States already battered by the low oil prices, so they may be unable to sustain their current economic systems, which rely on foreign workers, he also noted.

On the series of mysterious explosions in Iran, he said that one in a missile manufacturing facility may have been sabotage, but the Iranians haven’t said this was the case. An explosion in Natanz seems to have destroyed a facility for manufacturing the advanced centrifuges Iran needs to produce nuclear weapons. This was sabotage, and while no-one has claimed the attack, Israel has dropped hints. Henderson estimated that the Iranian ability to produce these centrifuges has been delayed by a couple of years.

On the Iran-China economic and strategic partnership deal reportedly being negotiated, Henderson noted that Asian countries need oil, so they need to remain friendly with the Gulf states, and China already has relationships with the Gulf states, including a strategic relationship with Saudi Arabia, Iran’s chief rival. Therefore, he says, China is more likely to try to balance these relationships rather than jeopardise any of them.

The relationship between Israel and the Gulf states, Henderson says, has for the last five years already been way beyond the “take-off” stage, and is already at “cruising altitude”. The basic reason for this relationship is shared concern about the threat from Iran, while the Gulf leadership has also been growing less supportive of the Palestinians. There is also the view that Israel can provide valuable technology.

Perhaps due to popular sympathy for the Palestinians, the Gulf leadership has been publicly critical of Israel’s plans to extend sovereignty in the West Bank, but in Henderson’s opinion, whether it is likely to threaten the current level of relations is questionable. However, he added, whether there would be genuine normalisation, including diplomatic relations, even without the proposed extension of sovereignty is also questionable.

Henderson believes that the proposed East Mediterranean pipeline to take Israeli and Cyprian gas to Europe via Greece is unlikely to ever be built, due to a lack of commercial viability. He says the price of gas is no longer high enough to pay for the pipeline, and for it to be profitable depends on further discoveries of gas, yet the current price doesn’t warrant the expense of exploration.

Israel, he says, does have enough gas for itself and to export to Jordan and Egypt, but not enough to justify a pipeline, and Cyprus is unlikely to even start producing gas from its fields until 2025.

Asked about the Qatari media network Al-Jazeera, whose reports are sometimes used in Australia by the ABC and SBS, he stated, “Basically, I don’t trust any media in the Gulf, full stop.”

Asked about the policy implications of the US presidential election, Henderson said a second term for Donald Trump would likely produce a similar Middle East policy, with the same sympathy for Israel and the Gulf states, whereas a Biden Administration would likely revert to the Obama presidency’s more cautious approach to Israel and Saudi Arabia.

He described the conflict between Azerbaijan and Armenia as a “small war” adding that small wars are most of the time irrelevant to energy and economies. The difference here, however, is that Azerbaijan exports fuel through Turkey, and the conflict could imperil that route. This could be bad for Israel, which gets much of its oil from Azerbaijan, via this route, he added.

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