8 January 2016

A Troubling Start to 2016 and the World’s Energy Security

https://resilient.com/a-troubling-start-to-2016-and-the-worlds-energy-security/
Posted on January 4, 2016 at 2:52 pm by Thomas P.M. Barnett /
CRUDE OIL PRICES ARE PRESENTLY TESTING HISTORIC LOWS, WITH "NEW" IRANIAN OIL SET TO HIT THE MARKET IN 2016. In general, that's good news for a global economy that's greatly benefited from lower energy prices thanks to the North American-led fracking revolution in tight oil and shale gas production. That production growth has allowed the US to continue to cut its crude oil imports, thus allowing major Persian Gulf exporters to further concentrate on meeting South and East Asia's ever growing demand.

It's no mere coincidence that America's willingness to play "global policeman" in the Persian Gulf has declined commensurately with its growing energy self-sufficiency. Yes, war-weariness was the proximate cause for Washington's strategic disengagement from the region under President Obama, who packaged that move as a necessary "strategic pivot" from Southwest Asia to East Asia so as to counter China's growing military "muscle flexing." But that was why Obama was elected - twice. As we've seen with the Paris terror strikes of weeks back, a Western great power (France) can easily find itself sucked back into the Middle East's many battlefields, so Americans should not delude themselves into thinking that such renewed pacifism is permanent. The right constellation of terror strikes in the US could easily push the next president (Clinton? Trump? Rubio?) into more vigorous action, no matter how much the Pentagon prefers to plan its high-tech future wars against more conventional opponents (Russia, China). I mean, sometimes America's foreign policy happens to the world, and sometimes the world happens to America's foreign policy.

Ultimately, however, it will more likely be America's rising energy self-sufficiency that dissuades Washington from reassuming a lead balancing/stabilizing military role in the Persian Gulf - that, and the rise of the Millennial Generation as a force in American politics (hint, they don't see China as an enemy and greatly prefer multilateralism over unilateralism).

But here's the trick: even as it is China, India, Japan and South Korea that import the vast majority of Persian Gulf oil (from Saudi Arabia, Iraq, Iran), none of them show much interest in replacing the US with its Carter Doctrine notion (now fading) of keeping the Gulf open and available to the global energy trade. Frankly, the only great power that seems to harbor such ambitions is Russia, with its surprise entry into Syria's civil war. Yes, China just signed a naval basing agreement with Djibouti on Africa's nearby "horn," but Beijing's interests seem decidedly limited to protecting its energy shipping versus playing a direct role in tamping down the region's many bitter rivalries - any one of which could directly impact global energy security.

So that's why today's headlines about Saudi Arabia once again breaking off diplomatic ties with regional rival Iran are seriously disturbing.


Saudi Arabia severed diplomatic relations with Iran on Sunday, escalating the regional crisis that erupted after the execution of a Shiite cleric triggered outrage among Shiites across the Middle East and beyond.


Saudi Foreign Minister Adel al-Jubeir told reporters in Riyadh that the Iranian ambassador to Saudi Arabia had been given 48 hours to leave the country, citing concerns that Tehran’s Shiite government was undermining the security of the mostly Sunni kingdom.

Saudi diplomats had already departed Iran after angry mobs trashed and burned the Saudi Embassy in Tehran overnight Saturday, in retaliation for the execution of Sheik Nimr Baqr al-Nimr earlier in the day.


The rift sets the region’s two biggest powerhouses on a collision course at a critical time for U.S. diplomacy aimed at bringing peace to the Middle East, and it raises the specter of worsening violence in countries where they back rival factions, such as Yemen and Syria.

Despite their countless international feuds, it was the first time since a two-year rupture in 1988-1990 that diplomatic relations between Iran and Saudi Arabia had formally been severed, according to Abdullah al-Shamri, a Saudi analyst and former diplomat.

To put it in perspective, an equivalent scary development in East Asia would require a similar severing of ties between China and Japan over South/East China Sea maritime disputes. That's because the biggest and most important commodity flow in the global economy today is Persian Gulf crude oil flowing from Southwest Asia to South and East Asia by sea. That flow can be disrupted at its source or at its destination, but either way, any such crisis would be highly destabilizing.

We in the West have long assumed that the big flow was from the PG to us, but that reality dissipated a long time ago. The Persian Gulf is the 5th most-important source of US crude oil after (1) domestic production, (2) North America (Canada, Mexico) imports, (3) South American imports (historically Venezuela but Brazil will emerge over time), and (4) African sources. Somebody blows up the Persian Gulf tomorrow and - in direct terms - it's a speed bump for the US economy. It would, however, bring Asia's economic pillars to their knees rather quickly, which, in turn, would harm the rest of the global economy in due course.

So yes, we in the West should be very concerned by Iran and Saudi Arabia's long-running and highly bitter rivalry breaking out in the open so decisively right now. We don't actually live in a "G-Zero world" (the notion that none of the G-20 powers is interested in managing the international system right now). Russia wants to manage it's "near abroad" alright, and America seeks to manage East Asia with its "pivot" there, to match China's clear ambitions to do the same. It's just that no one seems all that interested - save for meddling Putin - in doing the same for the tumultuous and tense Persian Gulf.

And that's a scary way to start 2016.

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