Tag: Saudi Arabia
Peace picks, October 17-21
- Elusive Peace in Colombia: A Conversation with Ambassador Juan Carlos Pinzon | Monday, October 17 | 2:00pm – 3:00pm | American Enterprise Institute | Click HERE to Register |
On October 2, Colombians rejected in a referendum a peace accord between the government and the Revolutionary Armed Forces of Colombia (FARC) through a national plebiscite. Proponents of the agreement said it was the only way to end the 50-year terror campaign plaguing Colombia and usher in a new era of peace and prosperity. Critics argued that it provided amnesty to human rights violators and that facilitating FARC’s political participation will invite narco influence and corruption into Colombia’s government and society.
Join AEI for a conversation with Colombian Ambassador Juan Carlos Pinzón about what the rejection of the peace agreement means for Colombia and the US, the hopes and concerns of the Colombian people, and the post-accord challenges the country will face. - National Security Law and the Legal Challenges of Terrorism | Monday, October 17 | 3:00pm – 4:00pm | Institute of World Politics | Click HERE to Register |
Andrew McCarthy will give an overview of terrorism law and an explanation for why neither the criminal justice system nor the military system is a good fit against international terrorism. Andrew C. McCarthy III is a former assistant US Attorney for the Southern District of New York. He led the 1995 terrorism prosecution against Sheikh Omar Abdel Rahman and eleven others. The defendants were convicted of the 1993 World Trade Center bombing and of planning a series of attacks against New York City landmarks. He also contributed to the prosecutions of terrorists who bombed U.S. embassies in Kenya and Tanzania. He resigned from the Justice Department in 2003. He is a contributing editor of National Review and a senior fellow at the National Review Institute.
- Saudi Vision 2030: Opportunities and Challenges | Tuesday, October 18 | 12:00pm – 1:30pm | Middle East Institute | Click HERE to Register |
Saudi Arabia’s ‘Vision 2030’ is the Kingdom’s most comprehensive economic reform package in its history. Put forward by Deputy Crown Prince Mohammad Bin Salman, Vision 2030 aims to privatize entire sectors, raise non-oil revenues, cut subsidies, and streamline government services, among other reforms.
But the challenges are significant, including moving Saudi nationals out of the government sector and into private employment, employing higher numbers of women, and raising taxes. In the process, the plan upends the Kingdom’s long-held social contract, which guaranteed its citizens most of their needs in return for their support.
The Middle East Institute (MEI) and the Conflict Management Program at the Johns Hopkins University School for Advanced International Studies (SAIS) are pleased to host a discussion examining the economic and political implications of Vision 2030 with Hala Aldosari (Arab Gulf States Institute, ASGIW), Anthony Cordesman (CSIS), Fahad Nazer (AGSIW), and Jean-Francois Seznec(MEI and SAIS). Paul Salem(MEI) will moderate the discussion. - Turkey and the Syrian War, an EES Distinguished Lecture with Dr. Sonar Cagaptay | Tuesday, October 18 | 6:00pm – 7:30pm | Johns Hopkins School of Advanced International Studies | Click HERE to Register |
The European and Eurasian Studies (EES) Program cordially invites you to join a presentation and discussion with Soner Cagaptay of The Washington Institute for Near East Studies on “Turkey and the Syrian War” on Tuesday, October 18, 2016, 6:00-7:30pm. The session will be moderated by European and Eurasian Studies Program Director and Professor Erik Jones.
- A New Strategy for Iran-US Relations | Wednesday, October 19 | 9:00am | The Atlantic Council | Click HERE to Register| Nearly four decades since the Islamic Revolution of 1979, the United States has found itself at cross-purposes with Iran throughout the Middle East. Though the Joint Comprehensive Plan of Action (JCPOA) to limit Iran’s nuclear program has reopened channels of communication between the United States and Iran, new opportunities for engagement must be measured against the ongoing threat Iran poses to US partners and allies in the region. Ellen Laipson, Atlantic Council distinguished fellow and president emeritus of the Stimson Center, presents her ten-year vision for tackling these complex challenges in A New Strategy for US-Iran Relations. On October 19, Michael Connell, director of the Iranian Studies Program at the Center for Naval Analyses, Atlantic Council board director Amir Handjani, and national security correspondent for the New York Times David Sanger will join Laipson for a discussion of this first regionally focused installment in the Atlantic Council Strategy Papers.
- Islamophobia: Overcoming Myths and Engaging in Better Conversation | Thursday, October 20 | 11:00am – 12:30pm | The Atlantic Council | Click HERE to Register |
Islamophobia is on the rise in non-Muslim-majority countries. It is worse today than it was in the immediate aftermath of the September 11 attacks, with no signs of improvement. Following the recent spate of global terrorist attacks, Muslims are increasingly portrayed negatively by the media. Furthermore, some US politicians and their European counterparts have proposed an array of policies – from policing Muslim communities to controlling the flow of refugees and migrants from the Middle East.
The role of national policy on civil rights protections is vital and now more important than ever before.
Join us on October 20 for a public discussion at the Atlantic Council, convened in anticipation of the Smithsonian’s opening of its international exhibition, ‘The Art of the Quran.’
Our distinguished group of panelists will address issues, including the media’s influence on shaping public perceptions of Islam and Muslims; the role policymakers can and should play in bridging the gap between Muslim and non-Muslim communities; and the role art and cultural institutions can play in shifting the narrative to a more inclusive and productive discussion. This panel will feature Karen Armstrong, author and Commentator on Comparative Religion, Vali Nasr, Dean, School of Advanced International Studies at Johns Hopkins University, Zainab Salbi, Founder, Women for Women International and Best-Selling Author, and TV Host. Moderated by Frederick Kempe President and CEO of the Atlantic Council.
Share this, I'll really appreciate it:
Yemen talks need rethinking
The most recent round of peace talks between the Houthis, supporters of former president Ali Abdullah Salih, Yemen’s government in exile lead by Abd Rabbuuh Mansur Hadi, and the regional powers involved in the GCC campaign in Yemen has gone nowhere. Hadi’s government in exile has departed from Kuwait. They signed a recently proposed UN deal and left it up to the Houthis to ratify the agreement and keep the talks moving.
The Houthis have not, and will not. This should come as no surprise. The Kuwait talks in their present form cannot lead to a political solution for three reasons:
1. The assumptions and structure that underpin the talks preclude an equitable settlement. On April 17, 2015 the Security Council adopted Resolution 2216, which has served as the basis for all Yemen peace talks since then. Then UNSC president Jordan (a party to the GCC coalition that has supplied planes and arms to pro-Hadi forces) proposed the resolution. It calls for the Houthis to withdraw from all territory they have seized since 2014 and to surrender their weapons.
That’s not likely to happen anytime soon. Particularly troublesome is that unconditional Houthi surrender has become a precondition for further political negotiations, not an end goal. Once the Houthis surrender their weapons and retreat from seized territory, they lose their bargaining chips in the negotiations. The Houthis initiated the current conflict because they felt they were not being heard in the political process. They aren’t going to trust Hadi to include them in Yemen’s future without the threat of force. The UNSC resolution also reiterates the legitimacy of the Hadi government and extols the GCC Initiative that removed Salih from power, led to the National Dialogue Conference, and created a draft constitution.
Widely credited with helping to avoid civil war in Yemen after the 2011 uprising, the National Dialogue Conference failed to represent the demands of the groups that had fought for Salih’s removal. Women, young people, the Houthis, and representatives of the movement for southern independence were all marginalized. Despite an initial unanimous agreement to a federal structure for Yemen, the process fell apart when it came to deciding the precise terms. A small, unrepresentative committee Hadi hand-picked redrew Yemen’s 21 governorates into a 6 regions. Criticism was widespread: the Houthis, southerners, the salafi Rashad Union, and others questioned the new map.
This led to the Houthi take over of Sana’a in September 2014. Going back to the GCC Initiative without addressing the grievances of young activists, Southerners, and especially the Houthis will accomplish nothing. A new starting point for a more representative political process is needed.
By far the most damning aspect of UNSC 2216 is its exoneration of the Saudi-led campaign. The Resolution makes no mention of a multilateral ceasefire, even while noting the deteriorating humanitarian situation. In fact, the GCC air campaign is not mentioned at all, even though the UN assistant secretary-general for human rights, Ivan Simonovic, reported the day prior that the majority of casualties were civilians. Demanding that only the Houthis put down their weapons without asking the same of “pro-Hadi forces” will never work.
2. The Kuwait talks do not represent the forces fighting on the ground. The war in Yemen is widely portrayed as a war with two sides:
- the Houthis and forces loyal to Ali Abdullah Salih;
- Allegedly “Pro-Hadi forces,” who include southern secessionists, tribes in central Yemen who are fighting more to remove the Houthis than to reinstate Hadi, and people in the Houthi stronghold of Sa‘ada who oppose the Houthis on religious and political grounds.
A large portion of the forces fighting the Houthis share many of their grievances and also felt side-lined by the elite-dominated GCC Initiative, but oppose the Houthis’ turn to violence and effort to dominate opposition to Hadi. Many do not want to see Hadi re-installed as president, but none of them have been represented at talks in Kuwait or Geneva. While “pro-Hadi forces” are united for now by a common enemy, if the Houthis retreat Hadi will lose what little influence he commands on the ground.
3. The war has stalemated on the battlefield, but both sides still believe they can use force to extract more concessions at the negotiating table. When the Yemeni government in exile walked away from the talks the first time, the Houthis escalated their shelling of the Saudi border. There is no genuine commitment on either side to reaching a political solution for the sake of the Yemeni people.
Throughout all negotiations, Hadi has not budged an inch. He demands a full return of his government and has offered no concessions to his opponents. He sees the negotiations as a zero-sum game. Any power-sharing deal with the Houthis and other groups in Yemen would come at a cost to his monopoly. With the GCC and much of the international community behind him, Hadi has no reason to accommodate Houthi interests.
The Houthis, on the other hand, lost international legitimacy when they violently chased the Yemeni government from Sana’a. Their most recent proposal, to form a joint body to oversee a political transition to a national unity government, went nowhere. Their subsequent move to form a governing council with supporters of Ali Abdullah Salih lost them any sympathy they might have enjoyed from the international community.
Peace talks in Yemen need rethinking. The international community needs to stop seeing the GCC as an impartial arbiter when it is in fact a party to Yemen’s war. The negotiations need to include all the stakeholders, including southerners and civil society actors. Then it might be possible to begin talking about trust-building measures that could lead to partial Houthi and Salih withdrawal and disarmament as well as aid delivery to besieged Ta’iz. Without these changes, Yemen’s war will continue and its abysmal humanitarian situation will continue to deteriorate.
Share this, I'll really appreciate it:
Peace picks July 25 – 29
- Ten days after Quelling the Coup: Where is Turkey Headed? | Tuesday, July 26th | 11:30 AM | The Atlantic Council | Click HERE to RSVP | Last week’s failed coup attempt in Turkey has raised serious questions about Turkey’s domestic political and security situation. The immediate aftermath of last weekend’s events will have significant implications for a range of Western interests, from the fight against ISIS to EU membership to Turkey’s role in the Middle East. To what extent did the attempted coup indicate an irreparable rift in the Turkish armed forces? How will the United States manage the fragile Turkish relationship in light of accusations of an American role in the plot and demands for extraditing Fethullah Gulen? How far will President Erdogan go to purge government institutions and how will this impact the country’s political and economic future? A conversation with: Elmira Bayrasli, Visiting Fellow at the New America Foundation, and Steven A. Cook, Eni Enrico Mattei Senior Fellow for Middle East and Africa Studies at the Council on Foreign Relations. The discussion will be moderated by Aaron Stein, Senior Resident Fellow, Rafik Hariri Center for the Middle East at the Atlantic Council, and an introduction by Ambassador Frederic C. Hof, Director of the Rafik Hariri Center for the Middle East at the Atlantic Council.
- Israel and Hezbollah: The Prospect of Renewed Hostilities Ten Years after War | Tuesday, July 26th | 11:45 AM – 1:30 PM |Hudson Institute | Click HERE to RSVP | On July 12, 2006, the Iranian-backed Lebanese terrorist group Hezbollah ambushed an Israel Defense Force patrol near the Lebanese border. Three IDF soldiers were killed on the spot and another two were taken hostage. Israel retaliated by bombing the Beirut airport and other key targets. Thus began what Israel refers to as the Second Lebanon War, a conflict that lasted 34 days and set the stage for much of what has happened in the Levant over the last ten years. Israel quietly secured the Israel-Lebanon border, and Hezbollah pivoted to fight in Syria. Ten years later, both sides face circumstances similar to those that led to war a decade ago. In recent years, Iran has dramatically increased Hezbollah’s weaponry capabilities by supplying Russian-made “Kornet” missiles, surface-to-air missile defense systems, and surface-to-ship cruise missiles. Israel’s concerns are compounded by Tehran’s increasingly assertive regional posture and ballistic missile tests conducted since signing the nuclear agreement. Hezbollah is still Iran’s most impressive export, but it is hemorrhaging fighters in Syria to a sectarian war in which it is outnumbered eight to one. Many throughout the Middle East and in the West believe that regional tensions and hot spots will necessarily drive Israel and Hezbollah to resume hostilities. On July 26, Hudson Institute will host a timely panel on the 2006 Israel-Hezbollah War and the prospect of resumed conflict. Panelists include Deputy Head of Mission at the Embassy of Israel Reuven Azar, Hudson Senior Fellow Michael Doran, and Foundation for Defense of Democracies Research Fellow Tony Badran. Hudson Senior Fellow Lee Smith will moderate the conversation.
- Will North America become the next Saudi Arabia? | Tuesday, July 26th | 12:00 PM – 1:15 PM | New America Foundation | Click HERE to RSVP | Not long ago Washington policymakers spent a great deal of time bemoaning our ever increasing dependence on foreign (especially, alas, Middle Eastern) oil. Rarely has such pessimistic groupthink proven so misguided. North America is blessed with a number of comparative advantages when it comes to producing energy at a low cost, and Canada’s increased oil production, innovation in alternative energy research, Mexico’s historic energy reforms, and the shale revolution across the region have only accentuated North America’s potential to become the world’s dominant energy superpower. On the heels of the North American Leaders Summit, Future Tense and the Wilson Center’s Canada Institute invite you to join them for a conversation on what it will take for North America to fulfill its energy potential. People tend to obsess over the monthly gyrations of oil prices and the latest regulatory battle over shale or pipeline-building, but we want to look forward to 2050. With the new North American Climate, Energy, and Environment Partnership what concerted steps should Canada, Mexico, and the United States be taking to ensure that North America will become the world’s leading energy power for generations? And how can this region lead the world not only in output and economic growth, but also in setting new standards of environmental responsibility and sustainability? Panelists include: Hector Moreira, Director of Energy Model for Mexico Initiative at Arizona State University and Commissioner, Mexican National Commission of Hydrocarbons, and Former Under Secretary of Energy of Mexico; Laura Dawson, Director of the Canada Institute at the Wilson Center and Former Senior Advisor on economic affairs at the United States Embassy in Ottawa; and Sharon Burke, Senior Advisor for International Security and Resource Security at New America and Former Assistant Secretary of Defense for Operational Energy.
- Islamic Exceptionalism: How the Struggle Over Islam is Reshaping the World | Wednesday, July 27th | 12:00 PM – 1:30 PM | Middle East Institute at the Carnegie Endowment’s Choate Room | Click HERE to RSVP | The Middle East Institute (MEI) is pleased to host Shadi Hamid (Brookings Inst.), Nathan Brown (George Washington Univ.) and Hassan Mneimneh (MEI) for a discussion about how Islam shapes public life, law, and the state. The conversation will explore and challenge the thesis behind Hamid’s new book,Islamic Exceptionalism: How the Struggle Over Islam is Reshaping the World. In Islamic Exceptionalism, Hamid argues that Islam is distinctive among the world’s cultural systems in how it conceives religion and politics as intertwined. In this exceptionalism he sees an intrinsic resistance to secularization, with profound implications for how the West can interact with the Middle East. The panelists will address Hamid’s provocative thesis and offer their own analyses of Islam’s relationship with politics. Sumaiya Hamdani (George Mason Univ.) will moderate the discussion. Copies of the book will be available for purchase and signing.
- French Leadership in a Post-Brexit Europe | Thursday, July 28th | 10:00 AM | Atlantic Council | Click HERE to RSVP | Europe faces historic challenges from the east and the south, at the same time as internal forces of fragmentation call into question the unity and direction of the European Union (EU). In the wake of the Brexit referendum, horrific terrorist attacks, an unprecedented migration crisis, and a continually sluggish economy, the future of Europe is in play. As a nation that combines strategic outlook, political will, military capabilities, and economic wherewithal, France is poised to shape Europe’s future. Since the end of World War II, Paris has played a leading role in advancing the European project. Franco-German political cooperation set the terms for integration. Franco-British military cooperation ensured Europe remained a serious security actor. Today, France is the bridge between the EU’s northern and southern members. France has the history, geography, and demography to help Europe navigate the confluence of challenges buffeting the continent. However, next year’s elections in France will likely determine whether France helps Europe hold together or succumbs to the challenges of economic stagnation, political fragmentation, and populism. Panelists include: H.E. Gérard Araud, Ambassador of France to the United States; Ambassador John Herbst, Director of the Dinu Patriciu Eurasia Center at the Atlantic Council; Ambassador Frederic Hof, Director of the Rafik Hariri Center for the Middle East at the Atlantic Council; Ms. Laure Mandeville, Nonresident Senior Fellow, Future Europe Initiative, Atlantic Council. With an introduction by Mr. Damon Wilson, Executive Vice President of Programs and Strategy at the Atlantic Council.
Share this, I'll really appreciate it:
No end in sight
How can Daesh (that’s the Islamic State, ISIS or ISIL to the uninitiated) be defeated and what will happen thereafter? If you want the more upbeat official story, read Brett McGurk’s testimony. Here are some thoughts that have crossed my screen lately.
Everyone should expect a generational fight. Though Daesh is losing territory rapidly in Iraq (47% of its maximum) and Syria (20%), it is good at what it does, resilient and adaptable. It has recruited at least 40,000 foreign fighters from 120 other countries. It has overt affiliates in more than half a dozen countries as well as a covert worldwide network devoted to smuggling, finance and terror, as illustrated all too clearly in this week’s Istanbul airport bombing. Even after it has lost all its territory, Daesh will go to ground and continue terrorist attacks of that sort.
The Coalition arrayed against Daesh is large (nominally 66 countries) and organized but still clumsy and far from fully integrated. It will hold a July 20 “summit” in Washington focused on its five “lines of effort”: political/military coordination, blocking foreign fighters, Daesh finance, stabilization of areas retaken from Daesh and counter-messaging. This is in addition to the nine US “lines of effort.”
There are contrasting narratives that avowed opponents of Daesh espouse, leading them to opposing conclusions.
The Russians view Daesh as the product of destabilization of Syrian government institutions, whose maintenance is vital to stem the extremist tide. In order to ensure the survival of state institutions, they support Assad and want reconciliation between him and at least some portion of the opposition. They also think their military intervention has gone pretty well, delivering some Western respect and easing Western pressure on Ukraine. But they are concerned, based on the Chechen precedent, about the enormous cost and difficulties of an Assad victory in Syria. They have flatly refused to pay for any reconstruction when approached by a government-linked expert.
The Saudis have an almost diametrically opposed narrative. They believe Daesh is the product of Iranian-sponsored sectarianism in both Iraq and Syria. Iraqi Prime Minister Nouri al Maliki helped the Islamic State to revive in Iraq after the American withdrawal by governing in a blatantly sectarian way dictated by Iran. ISIS’s ability to gain ground in Syria is attributable to the regime, which released extremist prisoners, has bought oil from Daesh, and focused its military attacks against moderates, all with backing by Iran. The Saudis take the threat of Daesh seriously and believe the fate of Iran’s effort to establish itself as the Middle East hegemon will be determined in Syria. The Kingdom recognizes that its own Wahhabi ideology has contributed to Daesh‘s appeal and is committed to reforms that will change that in the decades to come.
Iraqis are fighting and dying to take turf from Daesh, but the aftermath of victory is a big and unsolved problem. Inclusive governance is what the country needs but seldom gets, in particular in Baghdad. Shia militias were too active in Tikrit in the wake of victory there over Daesh, rendering the town unsafe for Sunni returnees initially. Only once local leaders and reconciliation mechanisms were put in place was the stabilization effort more successful. At Ramadi, the governor has been doing well but there is much more damage and a lot of demining to be done. At Fallujah, there is less destruction but a serious humanitarian crisis, with 85,000 civilians fleeing from the city and living in unacceptable conditions in the desert. UNDP resources are grossly inadequate to the stabilization effort it has been tasked with.
Little planning has been done for stabilization in Syria. What is needed there is a political settlement. Sunni alienation and grievance are the the problem, enormously aggravated by the presence of Hezbollah. Ignoring it gives the impression that the West will support “ABS”: anyone but Sunnis. Post-Daesh, governance needs to be far more inclusive.
The Kurds in both Iraq and Syria are getting a lot of Western support because they are willing to fight Daesh. The support should be more conditional. The US should insist that Iraqi Kurdistan reach a pact with Baghdad and that the Syrian Kurds help with peace talks between Turkey and the PKK, which is closely tied to the Syrian Kurds.
Looking ahead, there is a real risk that with Russian and Iranian support the Syrian regime will manage to capture Aleppo as well as Raqqa, form some sort of “national unity” government with elements of the loyal opposition and rewrite parts of the constitution. The US might then declare victory and abandon the field entirely, leaving reconstruction inadequately resourced. This would not really solve anything and would allow grievances to worsen, ungoverned spaces to grow and the conflict to spread, possibly to Lebanon and Jordan.
There is a glimmer of hope for Iraq, but even that is limited. Splits in both the Sunni and Shia communities are opening the possibility of cross-sectarian mobilization in Baghdad. The Popular Mobilization Forces (PMF) are often viewed as under Tehran’s control, but some of them are not and might join with Sunnis who have also fought against Daesh. The Kurdish issue would still be unresolved, however, which will create problems for the liberation of Mosul. Kurdistan Regional Government President Barzani is entirely dedicated to consolidating his own power, both vis-a-vis other Kurdish political forces and vis-a-vis Baghdad. Without clearer definition of the political end-state, defeat of Daesh could lead to a follow-on civil war pitting Kurds against Arabs.
Share this, I'll really appreciate it:
Continued dependence on Gulf oil
Doug Hengel, formerly at the State Department and now at the German Marshall Fund (and also teaching at SAIS), allowed me to republish his excellent notes for his talk at Woodrow Wilson last week, already posted here:
There is a great deal of uncertainty in oil markets at the moment. The big questions, beyond when the market will rebalance, include:
- Are we in the midst of another boom and bust cycle in the oil market or are there structural changes that define a new paradigm? Has U.S. tight oil changed market dynamics forever?
- Has the Saudi/Iranian rivalry evolved to the point where geopolitics now dominates Riyadh’s approach to oil? Are the Saudis using oil as a weapon?
- Is the Saudi 2030 Vision OPEC’s “obituary notice” as some have declared? Will the Saudis continue to invest in oil or are they pumping all out now due to concerns that oil demand is going away?
- Are we in a “lower for longer” scenario for oil prices? Or have the large cuts in investment by oil companies in the past couple years simply planted the seeds for the next price spike?
As we think about these questions, and more importantly what the future of oil geopolitics might look like, it is helpful to ground ourselves with a few facts. It is important to remember:
- The countries of the Persian Gulf account for almost 1/3 of global oil production and hold roughly 50% of proven oil reserves. They generally have the lowest cost oil to produce.
- About 17 million barrels a day (mbd) of crude oil and refined products move through the Strait of Hormuz, only a small fraction of which could get to market via alternative routes if the strait was blocked.
- Oil fields have a natural decline rate averaging 3-6 percent a year, much higher for U.S. tight oil. This means that every year investment in existing or new fields is needed to bring to market about 4 mbd of additional oil just to keep global production at current levels (not including any increase in demand). Those 4 mbd are equivalent to the total surge in U.S. tight oil production over the 2011-14 period. It also means we need to add the equivalent of a new Saudi Arabia to the market every 3 years.
By one estimate, global upstream project cancellations could create a 4 mbd ‘‘hole” in global oil supplies by 2020. Estimates of production in Brazil, Canada, Mexico and elsewhere in coming years have been revised downwards. There is growing concern that the large reduction in investment by the international and national oil companies will lock in the world’s reliance on OPEC, and in particular on the lower-cost supplies from the Persian Gulf, for decades. The International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have pointed to this risk in their most recent global energy outlooks.
Are there structural issues that might mitigate against greater reliance on OPEC and the Persian Gulf? Two are often cited – the U.S. tight oil boom and climate change.
U.S. TIGHT OIL: While U.S. tight oil production jumped by an average 1 mbd per year from 2011 through 2014, over the past year U.S. tight oil production is down about 1 mbd. In the meantime U.S. gasoline consumption has increased sharply and is expected to hit a record in 2016. So U.S. oil imports are growing again. Last year U.S. net crude oil imports dropped to only a quarter of U.S. consumption, the lowest level since 1970. This year it looks like we will need to import one-third of our oil. Some believe that with prices of $50 or more per barrel there could be a renewed surge of U.S. production this year adding perhaps as much as 1 mbd to U.S. output by the end of the year. But that is a very optimistic scenario. And after that? There is no doubt U.S. production could resume an upward climb with higher prices, but almost certainly not enough to offset reduced output elsewhere in the world.
CLIMATE: All scenarios that would reduce carbon emissions enough to keep global warming to 2 degrees or less require a huge shift away from petroleum for transportation. Both Statoil and the IEA have modeled what very aggressive introduction of electric vehicles (EVs) might do to oil demand, in the case of Statoil’s “renewal” scenario new car sales would be 90 percent EVs or hybrids by 2040. Even with such an enormous change in how light duty vehicles are powered global oil demand would still be in the range of 75-80 mbd by 2040 — as much as 20 mbd below today’s consumption but still requiring very large investments to compensate for the decline of existing fields. Supply could well decline much faster than demand.
So what does this all mean for the U.S. and the world?
- We are not in a new paradigm. Oil is not going away and the world’s dependence on the Persian Gulf for global supplies is very likely to increase going forward. Therefore the U.S. will need to play an active role in the region to ensure the oil keeps flowing, including protection of sea lanes.
- U.S. “energy independence” remains a chimera even if we were self-sufficient in oil, which is very unlikely to happen in any case.
- OPEC is not dead. Notwithstanding the Saudi/Iranian rivalry, they are likely to be able to and want to work together to influence the oil market once markets are more in balance. Recent statements by the new Saudi oil minister indicate they will continue to invest heavily in maintaining their production capacity.
- We need to keep our eye on the ball regarding constraining oil demand – continued progress on more efficient vehicles, facilitating the move to EVs, to natural gas for trucking, etc.
- Innovation is essential (e.g., autonomous vehicles), ideally in cooperation with international partners.
- We should continue to encourage and assist new and non-OPEC oil producers seeking to boost their output, in particular Mexico and emerging suppliers in Africa.
- We should not be treating our Strategic Petroleum Reserve as a piggy bank – selling off oil to meet other budgetary requirements. We may need the SPR to cushion a supply disruption, U.S. tight oil is not a substitute. At the same time we should continue to promote cooperation by China and India with the IEA on a coordinated response to an oil supply disruption given their increasing importance to the market (and since they are building their own strategic reserves).
Share this, I'll really appreciate it:
The Gulf’s still risky future
Wednesday the Middle East Program at the Wilson Center hosted The Gulf, Iran, and Future Oil Geopolitics, featuring David Goldwyn, President of Goldwyn Global Strategies; Douglas Hengel, Senior Resident Fellow at the German Marshall Fund; Elizabeth Rosenberg, Senior Fellow and Director of the Energy, Economics, and Security Program at the Center for New American Security; and Jean-Francois Seznec, Non-Resident Senior Fellow and Director at the Atlantic Council’s Global Energy Center. Jan Kalicki, Global Fellow at the Wilson Center and Senior Fellow at the Watson Institute for International and Public Affairs at Brown University, moderated the discussion.
Rosenberg discussed how lifting most sanctions on Iran has influenced Iranian politics. While the economy has opened up considerably since January, there are still many obstacles to doing international business in Iran. The prohibition on doing business with the Iranian Revolutionary Guard Corps (IRGC) leaves much of the economy untouchable by foreign investors. Many of the remaining sanctions are secondary, which requires Iranian companies to cut ties to groups like the IRGC that control 20-60% of the Iranian economy.
Iran is currently producing 3.5-3.8 million barrels per day and exporting 2 million. Iran could get up to 4 million per day. Beyond that, Iran would have to make substantial infrastructure investments. Several international oil companies have signed exploratory contracts, but there are still a lot of unknowns. With Iran upping the ante in Syria and around the region, the future of the broader Middle East is in question.
Goldwyn said that Iraqi oil production had recently reached 1.8 million barrels per day, its highest level ever. This is Iraq’s peak. It will not even be able to maintain this level. Iraq suffers chronic problems:
- the government is weak and unable to make plans or execute them;
- failure to resolve ethnic and sectarian conflicts opened the door to the Islamic State (ISIS) and maybe worse in the future;
- the government is spending a huge portion of its budget on the war effort: $33 billion between 2009 and 2014.
The Iraqi army’s progress in retaking Fallujah is promising, but Fallujah has been liberated many times—each time escalating ethnic tensions to still higher levels.
Iraq will barely be able to maintain production in the coming months. The Iraqi government is spending all of its diminished oil revenue on its military, and low oil prices have limited the government’s ability to function on a basic level—let alone invest in infrastructure to boost oil production. Iraq’s near future looks grim.
Seznec commented on how Saudi Arabia’s deputy Crown Prince Mohammed bin Salman is transforming his country in dramatic ways. His new “Vision 2030” intends to wean Saudi Arabia off oil dependence and diversify its economy. Saudi Arabia intends to maintain its current production of 10.2 million barrels per day, while growing its private sector. To accomplish this, King Salman bin Abdulaziz Al Saud appointed Khalid al-Falih as minister of the newly revamped Ministry of Energy, Industry, and Mineral Resources.
A major component of “Vision 2030” is selling 5 percent of the government’s shares in Aramco. Aramco is currently valued at 2 trillion dollars, so this will likely be the biggest IPO (initial public offering) in history. Part of Mohammed bin Salman’s plan is to revolutionize the workforce. By 2030, the government hopes that women will fill 45 percent of public and private sector positions. There are big changes on the way for the Kingdom, and we will have to wait and see what else the young deputy crown prince has in store for us.
Hengel addressed major factors that will affect all the countries discussed. His bottom line is that dependence on the Gulf will continue. The natural decline in current production means that continued investment in existing oil fields and new discoveries are essential. Hengel predicts that the United States and the world will continue to be dependent on OPEC. There is much uncertainty about the future of consumption. Many countries have started shifting towards electric vehicles and are moving away from their dependence on oil. But the United States continues to lead in consumption with the lion’s share, 10%, of global consumption. Gulf oil supplies are likely to remain important for the foreseeable future.
RSS - Posts
