The Gulf countries could supply more energy to the West

Headquarters of Abu Dhabi National Oil Company (ADNOC) in Abu Dhabi, the UAE (Photo by Shutterstock)

The Gulf oil and gas producing countries may be the biggest winners in the war between Russia and Ukraine, writes Ahmed Abdul-Rahman.

There is a consensus among observers and analysts of Gulf affairs that if the sanctions imposed by world leaders on Russia after its invasion of Ukraine include the energy sector, this may benefit the Gulf States.

Germany has taken the most notable step so far, halting the approval of the USD 11 billion Nord Stream 2 gas pipeline project from Russia. This project was to make the price of energy cheaper for European consumers who are facing record high prices.

European countries have been reluctant to cut back on their imports of Russian oil and gas as they do not want these cutbacks affecting their economies. Russia is the world's second largest oil producer and a country responsible for 40 per cent of Europe's natural gas imports. Withdrawal of Russian energy could have a devastating effect on the global economy.

It is likely that other oil and gas producing countries will be encouraged to pump more oil and gas to keep prices low. It is likely that the Gulf States will be able to use the Ukraine crisis to their advantage.

Washington has already sent the White House coordinator for the Middle East and North Africa (MENA), Brett McGurk, to Saudi Arabia and the United Arab Emirates (UAE), to discuss the Gulf's ability to pump more oil. Riyadh, the capital of Saudi Arabia, refused. Instead, it committed to a five-year OPEC+ production agreement that includes Russia. This prompted accusations in the US media that it is "colluding" with Moscow.

The Prime Minister of the UK, Boris Johnson, also went to Saudi Arabia and the UAE with the same request.

Saudi Arabia has acquiesced to US demands in the past: in 2018, it went along with Donald Trump's call to increase oil production to stabilise the market. It later reduced production when required.

For current US President Joe Biden, he understands pragmatism forces him to work with Saudi Arabia- even though it has issues dealing with the country, especially after 9/11 and the killing of journalist, Jamal Khashoggi. In return, the Saudis could order the arms they require to continue their fight in Yemen.

Iran is also in the final stages of its negotiations with the US, the UK, and the EU. to return to a nuclear agreement. But it wants to be able to sell its oil without hindrances and return to the level of 2.5 million barrels per day that it exported before the sanctions that the then president, Donald Trump, unilaterally imposed. Iranian crude exports dwindled to 700,000 barrels per day in January. Its exports now stand at 1,000,000 barrels per day, according to a Reuters report in February.

"The need for more oil on the market and a guaranteed supply line would give Tehran significant negotiating power as the final details of the JCPOA are being worked out" said Karen E. Young، director of the Economics and Energy Program at the Middle East Institute. "A lot of Iranian oil is already on the market through other means, but maybe they can get to 3.5 million barrels," Young added.

Young also referred to Qatar, the world's largest LNG producer. Natural gas is now in high demand. Qatari Energy Minister Saad al-Kaabi said recently "neither Qatar nor any other country has the ability to completely replace Russian gas supplies to Europe - in the event of the worst - given that it is responsible for about half of what the continent needs." It must be noted that Qatari storage units are currently restricted to long-term contracts with mostly Asian buyers. However, al-Kaabi also said that up to 15 per cent of its LNG could be transferred to Europe.

While it will be difficult to fill the gap left by not taking oil and gas from Russia, the fact that Europe needs alternative sources of energy will be a powerful card that Doha can use to secure Western support and influence in the region, as it emerges from a four-year Saudi-led blockade.

As a consequence of these issues, the Gulf oil and gas producing countries may win in the war between Russia and Ukraine.

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Friday, 29 September 2023