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Page added on July 7, 2014
Iraq fighting doesn’t raise oil prices, yet
Iraq is one of the world’s top oil exporters, so you would think that a recent attack by militants on its largest oil refinery amid a deteriorating security situation in the country would prompt global fears of oil shortages and spark a spike in prices.
Instead, prices are about where they were a year ago, although they have been creeping up in recent months. Why no panic? Iraq’s vast crude supplies are safe for the time being because the bulk of its oil production — about 2.5 million barrels a day — takes place in the south, far from the current insurgency, analysts say.
“Iraq oil production is spread throughout the country,” said Richard Mallinson, a geopolitical analyst in London. “So only about 10-15% takes place in the northern part of the country, which is where the current Sunni insurgency is being fought out.”
A Sunni militant group — the Islamic State of Iraq and Syria (ISIS), which now calls itself the Islamic State — is battling the Shiite-dominated central government. The rebels claimed late last month to have seized control of the Baiji oil refinery, but the government said it had retaken control of it.
Benchmark West Texas crude oil closed at a 10-month high of $107 on June 20. By Thursday, it had dipped to $104 a barrel, a sixth-straight daily drop. Still, global markets remain jittery about what the future could hold should Iraq’s sectarian and regional tensions worsen.
The insurgency is not expected to reach Iraq’s main oil producing fields in the south and in Kurdish-controlled areas in the north any time soon, but in the long term “infrastructure, as well as producing assets, will be a tempting target if the ISIS offensive moves into higher gear,” wrote Raad Alkadiri, managing director at IHS Energy, a London-based consulting firm, in an analysis emailed to USA TODAY.
Any new supply outages could push global oil prices higher — perhaps towards $120 a barrel, wrote Alkadiri.
The situation in Iraq has global leaders worried because the country — along with the USA — was expected to be one of the major growth areas for oil production, as global demand increases in an already tight market with little spare capacity, say analysts.
“If Iraq can’t deliver on that then the market looks a lot tighter,” said Mallinson. “If there are disruptions to Iraq in the short-term, it’s Saudi Arabia that will increase its production to balance the supply and make up for the difference.”
But instability, a weak government and redirected resources could block investment needed to develop Iraq’s oil production in the long term, meaning it may get harder to deal with future disruptions and meet growing demand, Mallinson added. International companies are already removing staff and preparing to move everyone out at quick notice.
“That points to higher oil prices in the medium-term,” said Mallinson.
Iraq’s capacity to rally its troops could also affect the central government’s plans to control exports from the semi-autonomous, oil-producing region of Kurdistan. The Kurdistan Regional Government has been pushing for more political autonomy and more control of oil produced in the northern region.
Despite objections from Baghdad, the Kurdish government plans to export oil directly to Turkey, the only way it believes it can get a fair share of the country’s oil wealth.
While Baghdad has said it will cooperate with Kurdistan’s skilled and disciplined security force — the Peshmerga — to combat ISIS, analysts say the Kurds have been using the security crisis to extend their political and economic control.
“What’s happened is the Kurds appear to be taking every opportunity they can amid the crisis to push for the autonomous sales and for greater control,” said Mallinson. “Their forces have occupied the city of Kirkuk, which includes major oil fields, and they are trying to take control of that. And they’ve made it very clear, they still intend to export their oil without Baghdad’s approval.”
13 Comments on "Iraq fighting doesn’t raise oil prices, yet"
Plantagenet on Mon, 7th Jul 2014 5:57 pm
The Caliphate is highly likely to attempt to seize more of Iraq’s oil production from the apostate Shia, and if they can’t seize the oil infrastructure then they may destroy it by terrorism as a way to weaken their Shia enemies. Either way, look for the Caliphate to act to raise oil prices.
Roman on Mon, 7th Jul 2014 6:14 pm
If ISIS is smart or working for the US they wont touch the oil.
steve on Mon, 7th Jul 2014 7:29 pm
I think Rock has got it…sitting here day to day wondering if the price of oil is going to go up is just a waste of time….it will go up….
Plantagenet on Mon, 7th Jul 2014 9:18 pm
@Roman—the whole idea that ISIS is working for Obama is crazy. Obama may be incompetent, but he isn’t a traitor.
AND don’t fool yourself into thinking ISIS won’t go for the oil. So far thats exactly what they’ve done—they seized Syria’s oil and the first thing they did in Iraq was seized its biggest oil refinery. OF course the Caliphate is going to go for the rest of Iraq’s oil. Its where the money and power in Iraq lies.
Roman on Mon, 7th Jul 2014 11:11 pm
They could have been easily taken out by the Air Force. Somebody wants a mess in the middle east. It’s profitable for the oil companies and some governments.
GregT on Mon, 7th Jul 2014 11:33 pm
“Somebody wants a mess in the middle east.”
They most certainly do, and it has been very well documented. It surprises me how many people still can’t figure out who that ‘somebody’ is.
Clue: It isn’t about oil, and it isn’t about profits. It is about global domination.
bobinget on Tue, 8th Jul 2014 9:43 am
By Nidal al-Mughrabi and Maayan Lubell
GAZA/JERUSALEM, July 8 (Reuters) – Israel bombarded dozens of targets in the Gaza Strip on Tuesday, stepping up what it said might become a long-term offensive against Islamist Hamas after a surge in Palestinian rocket attacks on Israeli towns.
Following the worst outbreak of violence along the Gaza frontier since an eight-day war in 2012, the Israeli military said a ground invasion of the enclave was possible, though not imminent, and urged citizens within a range of 40 km (24 miles) of the coastal territory to stay close to bomb shelters.
“We are preparing for a battle against Hamas which will not end within a few days,” Defense Minister Moshe Yaalon said in a statement.
update:
The Israeli newspaper Haaretz reports that Prime Minister Netanyahu has instructed the country’s army to prepare for a possible ground offensive in Gaza.
“The prime minister’s instruction by the end of the meeting was to prepare for a thorough, long, continuous and strong campaign in Gaza,” a senior Israeli official told the newspaper. “The prime minister instructed the army to be ready to go all in. A ground offensive is on the table.”
comment:
Impending region wide war didn’t start with three Israeli’s kidnapped and murdered. This was the provocation Israel had been anticipating. Did you think WW/1 started because of the death of one arch-duke?
Palestinian Authority, Jordan, Egypt, Lebanon border states, will become involved soon enough.
Because Muslim states are so deeply divided along SAECTarian lines, Israeli collective punishment could unite factions, at least temporally, opposing Israel.
I’m almost certain, Hezbollah, recently aligned with Hamas will join in.
Update:
Israel it has been reported has called up 40,000 reservists in addition to the 1,500 already announced.
President Obama is sending editorials;
As I said last year in Jerusalem, peace is necessary, just, and possible. I believed it then. I believe it now. Peace is necessary because it’s the only way to ensure a secure and democratic future for the Jewish state of Israel. While walls and missile defense systems can help protect against some threats, true safety will only come with a comprehensive negotiated settlement. Reaching a peace agreement with the Palestinians would also help turn the tide of international sentiment and sideline violent extremists, further bolstering Israel’s security.
Peace is also, undeniably, just. Just as the Israeli people have the right to live in the historic homeland of the Jewish people, the Palestinian people deserve the right to self-determination. Palestinian children have hopes and dreams for their future and deserve to live with the dignity that can only come with a state of their own. And, in President Abbas, Israel has a counterpart committed to a two-state solution and security cooperation with Israel. The United States has repeatedly made clear that any Palestinian government must uphold these long-standing principles: a commitment to non-violence, adherence to past agreements, and the recognition of Israel. With negotiations on hiatus, these principles are more important than ever. All parties must exercise restraint and work together to maintain stability on the ground.
bobinget on Tue, 8th Jul 2014 10:09 am
http://www.washingtonpost.com/world/israel-launches-major-operation-against-hamas-in-gaza-strip/2014/07/08/81874d52-067a-11e4-a0dd-f2b22a257353_story.html
WP has excellent on the ground coverage.\\
What’s next?
Facts are scarce. Invasion and ‘pinpoint’ targeting of Hamas positions must have been in planning stages for
years. Me, I’m waiting for the next ‘pin’ to drop.
bobinget on Tue, 8th Jul 2014 10:27 am
Kuwait stands on a precipice facing the ‘Islamic Caliphate’
Last week, Kuwait’s Ministry of Interior announced a full military alert because of the Islamic Caliphate’s push west and south towards Jordan and Saudi Arabia. The alert coincided with a similar move by Saudi Arabia and Riyadh sent a mixed force of Saudis, Pakistanis, and Egyptians to protect the kingdom’s northern border. Jordan repulsed an Islamic Caliphate attack for now and was able to maintain law and order among the salafists and Sunni tribes in the eastern part of the Hashemite Kingdom. Now there is concern about Kuwait’s internal dynamics and how well the al-Sabah rulers can control the undercurrents that are increasingly coming to the fore.
Kuwait is divided into two key groups: the Nomads (Hadhar) and the Bedu. The Hadhar are divided into a Sunni majority and a Shiite minority. According to an Arab official, the Sunnis are concentrated in four of the main governorates: Ahmadi, Mubarak al-Kabier, Jahra and Farwaniyah which comprises the bulk of the country outside of Kuwait City and on the borders of Iraq and Saudi Arabia. According to Kuwait officials, the Shiites make up 30 percent of the population and the remaining 70 percent is Sunni. Of this 30 percent of the population, 6-9 percent are Arab Shiites, 12-15 percent are Persian Shiites and 5-6 percent are Hassa Shiites from the “Eastern Province” of Saudi Arabia. These Kuwait officials are quick to point out that Arab Shiites and Persians Shiites include some Turkomens, Shirazis, and “Lore.”
The al-Sabah ruling family has its hands full with the country’s multi-level mix of nomads, bedu, tribes and a sectarian divide that challenges the security order in the country
Dr. Theodore Karasik
The Bedu are extensively tribal and these tribes cross over into the Hadhar where the tribes are Kuwaiti or Saudi affiliated. Importantly, Kuwaiti officials are thinking that messages from the Islamic Caliphate are giving additional momentum to a mix of tribal Sunnis who see greater “enlightenment” in the events in Iraq and Syria. This fact is sending shock waves throughout the states of the Arabian Peninsula where the tribal-sectarian mix is possibly beginning to fissure.
The key factor
The tribal element in Kuwaiti society is a key factor. After Saddam Hussein invaded Kuwait in the early 1990s, the bulk of the tribes went to Saudi Arabia to stay with Saudi-based relatives. Once they returned to Kuwait, and ever since that time, the tribes are affecting Kuwait’s internal and external policy by asking for greater rights for Salafism and growing inclusion in the parliamentary processes. This situation is seen, for example, in the Kuwaiti emir’s constantly dissolving the country’s parliament and the ongoing problem with the Sunni tribal leader Musallam al-Barrak. The situation is making tribal members susceptible to recruitment, according to a Kuwaiti official.
Kuwaiti leaders are recognizing the Islamic Caliphate’s threat. Emir Sheikh Sabah al-Ahmed al-Sabah gave a critical speech on the eve of the Holy Month of Ramadan. Kuwait’s ruler told viewers not to threaten stability by playing “games” with politics, pointing to the turmoil in Iraq and elsewhere as examples of the dangers of political division. The emir stated: “are you aware of what is going on not far from us?” Although the message by the emir targeted the ongoing disputes in the country regarding struggles over the parliament, corruption charges, and an attempted coup, the real message focused on events to the north. According to a Kuwaiti official, the emir needs to keep the political, tribal, and religious divisions peaceful because the Islamic Caliphate represents a clear and present danger not only to Kuwait, but to Saudi Arabia and Jordan. The Kuwaiti official feels that Jordan will not let the Islamic Caliphate into the country and will take pre-emptive measures to protect the al-Sabah rulers. In other words, the Hashemite Kingdom is seen as protecting Kuwait and Northern Saudi Arabia from his point of view. Indeed, Jordanian riot control police were active in Kuwait following the Arab Spring – these forces may easily need to return soon.
Recruiting from Kuwait
Finally, the Islamic Caliphate may see a robust base from which to recruit young people from Kuwait to their cause because of the past mistakes of Kuwaiti Sunni religious leaders who worked to donate funds and supplies. In Kuwait, 75 percent of the population are young people. An Arab official asserts that Kuwait is fertile ground for potential “want to be” extremist violent jihadists because of the detaining of Musallam al-Barrack as well as the activity of Kuwait’s Ikhwan who are purportedly energizing these young people “to act out.” Consequently, Kuwaiti officials are now required to boost their monitoring of the country’s youth in order “to keep them quiet” and to avoid their being absorbed into the Islamic Caliphate.
Kuwaiti Shiite youth are also seen as a threat because of the sectarian disaster in Iraq. The four main Shiite neighborhoods in Kuwait City and surrounding areas of Dasma, Rumaithia, Daia’a, and Jabria are increasingly restive. According to a Kuwaiti official there is a “manifestation” of “new Persian radicals” in Kuwait attempting to create a “Persian cultural society” for Kuwaiti Persians of both Sunni and Shiite extraction. Another factor to recall is from 2008 when Kuwaiti Shiite politicians attended a public ceremony mourning the assassination of Lebanese Hezbollah leader Imad Mughniyah. Such displays of sectarianism are thought to be returning to Kuwait if events in Iraq between the Islamic Caliphate and Shiite militias and the 90 percent majority Shiite Iraqi army deteriorate. Any event to the north or elsewhere in the Levant is likely to inflame the Kuwaiti domestic situation as long as the government is locked in constant internal battle.
Clearly, Kuwait seems to be on a precipice. The al-Sabah ruling family has its hands full with the country’s multi-level mix of nomads, bedu, tribes and a sectarian divide that challenges the security order in the country. As long as the Islamic Caliphate exists in its current state, Kuwait will require help to quell any internal dissent because any social disruption will open the door to Caliph Ibrihim’s supporters to exploit collective gaps in the country. The impact on northern Saudi Arabia, as well as the rest of the Arabian Peninsula, is momentous.
____________________________
Dr. Theodore Karasik is the Director of Research and Consultancy at the Institute for Near East and Gulf Military Analysis (INEGMA) in Dubai, UAE. He is also a Lecturer at University of Wollongong Dubai. Dr. Karasik received his Ph.D in History from the University of California Los Angles.
Last Update: Monday, 7 July 2014 KSA 10:10 – GMT 07:10
JuanP on Tue, 8th Jul 2014 10:53 am
Bob, Kuwait should have never existed. It was invented by the British as a wedge state between Iraq and KSA. There is no national identity there. There never was.
The british achieved the same in South America with the creation of Uruguay between Brazil and Argentina. Uruguay, Kuwait, and Hong Kong are classic examples of British Empire created wedge nation states, most of which are former British colonies, but not all.
steve on Tue, 8th Jul 2014 12:21 pm
Juan the whole middle east is a wedge state…the western nations want instability there and mostly small nations…not one big power…
JuanP on Tue, 8th Jul 2014 12:36 pm
Steve, I agree that the whole former Ottoman Empire territorial borders are artificial and imposed by the West. The same goes for other places of the world, too.
Creating chaos weakens all the parties involved. Divide and conquer has always been a good military, economic, and imperial policy, it simply works. The cost in human suffering is terrible, though.
steve on Tue, 8th Jul 2014 6:47 pm
yes I know the suffering is terrible…it is why people like you and me are not in power. We would not be good at deciding who lives and who dies…