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2023-11-02 Terror Networks
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Energy weapons of the sheikhs: is the West facing a new oil embargo?
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Direct Translation via Google Translate. Edited.
by Oleg Krivoshapov
[REGNUM] On November 1, Iran's spiritual leader Ayatollah Ali Khamenei called for a halt in food and oil supplies to Israel while shelling of the Gaza Strip continued.
Continued from Page 2
And the day before, on October 31, it became known that on November 11, an emergency meeting of the Council of the League of Arab States (LAS) at the highest level would be held in the capital of Saudi Arabia, Riyadh. Assistant Secretary General of the Arab League Hussam Zaki, in particular, reported that the leaders of Arab countries intend to “discuss the ongoing Israeli aggression against the Palestinian people in the Gaza Strip since October 7.”
Earlier, on October 18, Iranian Foreign Minister Hossein Amir Abdollahian spoke about the need for sanctions against Israel . During a meeting with his Qatari counterpart Sultan al-Marihi, he called on all Muslim countries to take anti-Israeli measures, including an embargo on oil exports.
THE THREAT OF A NEW “THIRST FOR OIL”
Public statements and calls from influential Muslim leaders against the backdrop of an emergency November meeting of the Arab League raise fears that Arab countries will resort to a large-scale ban on oil supplies, and not only to Israel, notes leading analyst of the National Energy Security Foundation (NEF), lecturer at the Financial University Igor Yushkov .
Israel itself now consumes relatively little oil, he clarifies: “Norway or the United States will calmly cover these needs.”
But the escalation of the armed conflict in the Middle East may well, in turn, intensify the reaction to it, Yushkov believes.
Observers do fear a repeat of the 1973 energy crisis if Arab countries impose a ban on oil supplies to those who support Israel.
Fifty years ago, Arab oil exporting countries imposed an embargo on oil supplies to Israel's allies - European countries, Japan, and the United States. And this went down in world history as the first global energy crisis.
“Prices have soared, a lot of things have appeared that we now perceive as the norm - small cars, all these stories with energy saving and the development of renewable energy. The West has realized how dependent it is on oil supplies from the Middle East,” says IA Regnum’s interlocutor.
However, the degree of consolidation of Arab countries is now much lower than in 1973. And the call of Shiite Iran to all Muslim countries not to supply oil to Israel, given that all Iranian oil goes exclusively to China, does not look like the most convincing argument.
IMPLICATIONS FOR THE MARKET
In turn, Deputy General Director of the Institute of National Energy Alexander Frolov believes that the very fact of a ban on the supply of Arab oil to Western countries, if agreed upon, does not mean a strong blow to Western economies.
“If we are only talking about a ban on exports to countries that support Israel, while maintaining the volume of supplies to the world market, then such a step will be purely decorative,” the expert believes. The previous balance of supply and demand with the redistribution of only logistics flows will not bring any effect during the year.
A ban based on the same model that limited Europe’s purchases of oil from Russia will simply lead to another redistribution of transport flows. This will cause some difficulties and local problems, but it will not have such a powerful impact as to overturn the economies of Western countries.
In addition, there are a number of differences in the current situation from the one in which the world found itself half a century ago, at the height of the dramatic events of 1973, which led to the “anti-Israeli” oil embargo, IA Regnum’s interlocutor is convinced.
Frolov draws attention to the fact that over the past years, in the energy sector, the business interests of companies from Europe and the United States have become significantly intertwined with the interests of state-owned companies from Arab countries.
“How will the refining facilities of Saudi Aramco in the United States, for example, feel after a ban on oil exports? What about those Arab projects in which European companies take part, and European projects in which Arab companies take part?” - the expert asks questions.
In addition, the positions of Iran and Saudi Arabia should not be confused, says Russian International Affairs Council (RIAC) expert Kirill Semyonov : “Iran itself is a separate phenomenon, Saudi Arabia has its own views. Now the Saudis have become somewhat closer to Iran, but Tehran’s initiatives should be viewed as purely Iranian.”
The expert also draws attention to the contradictions between the Saudis and the driving force of the Palestinian armed activists, which distinguishes the current picture in the Middle East from the situation in 1973: “Despite the casualties in Gaza, Hamas is not a completely friendly structure for Saudi Arabia . ” The Houthis, Hamas' Yemeni allies who have declared war on Israel, are responsible for the deaths of four Saudi soldiers, prompting Saudi Arabia to put its army and air defense forces on high alert.
But if, nevertheless, the Arab countries agree on an embargo on oil exports, reducing it by the volume supplied to the West as a whole, then the countries of the Middle East will have to come to terms with the fact that in the short term, cash receipts to their state budgets will sharply decrease. Although at the very beginning prices will rise sharply, Frolov clarifies.
On October 30, the World Bank released a forecast according to which a reduction in oil supplies to the world market by 6–8 million barrels due to a sharp escalation of the Middle East conflict will lead to an increase in prices to $157 per barrel.
This value itself puzzles the expert, but he has no doubt about the strong rise in prices: “Prices will begin to put pressure on demand, which will decline sharply. As a result, prices will return to approximately the current level, and demand will recover more slowly . ” In this scenario, oil supply countries have a high risk of losing much more than they earn from a temporary price jump, concludes the interlocutor of IA Regnum .
HOW TO REACT TO RUSSIA
Frolov also recalls the US military presence in the oil-bearing region: Pentagon bases are located in almost all Middle Eastern countries and Turkey. It is clear that the escalation of contradictions between the Islamic world and the United States in the oil market into an open trade war in such a situation is too risky.
However, the option cannot be ruled out, which Frolov himself refers to as “Jesuitical”: “Suppose the Arab countries introduce a ban against the countries of Europe, which has already lost Russian oil. This will be beneficial for the United States, because it will accelerate the destructive processes in the economy of the European Union and the “pumping out” of investments into the same States.”
At the same time, the United States is now extremely interested in keeping oil prices as low as possible until the end of 2024. For their domestic policy, retail prices for automobile fuel are now an incredibly important factor.
Frolov notes that the famous “Arab” oil embargo of half a century ago, which was actually aimed against the same countries against which it is proposed to be introduced now, lasted relatively short - from October 1973 to March 1974. And, despite the growing crisis in European countries and the United States, the collective West did not abandon its support for Israel.
At the same time, Russia should definitely take a distant position if sanctions against Israel are approved, Igor Yushkov believes: “We don’t particularly supply oil and petroleum products to Israel anyway. And we probably shouldn’t announce that we are joining such calls.”
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