Foreign Policy Blogs

Energy Resources and Political Dynamics with Gulf States

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For years, oil has been powering our increasingly technologically dependent world. Oil alternatives are becoming increasingly popular, and coupled with the Persian Gulf’s limited supply, many governments have tried to stay ahead of the market, which forecasts a world that’s not dependent on the Arabian Peninsula’s oil. Although it will be some time until the effects of a waning oil market come into full force, changes in the political current are already evident.

The Middle East’s oil and natural resources have become increasingly tied to the United States’ national security as of the 1960s. When the Gulf first became a major player in the market, oil producers were convinced that the United States would embrace an economic partnership based on common goals void of political motives. However, observing the United States’ and Israel’s increasing fast-paced friendship, they became quick to cater the idea that the United States’ foreign policy and interest in oil is tied to the colonial past; strictly political. The essay “America, Oil, and War in the Middle East” from Oxford’s Journal of American History discusses the early U.S.-Gulf dynamic:

“In 1973 this irritation transformed into outrage during the October War, when Egypt launched a surprise attack on Israeli forces to recapture territory in the Sinai Peninsula. Gulf oil producers were infuriated when the United States helped re-equip the beleaguered Israeli military in the course of battle. Led by Saudi Arabia, Arab oil producers and oil companies orchestrated an embargo of the United States, thereby drying up supply and driving up prices.” On this front, Gulf oil producers took immediate action “seizing direct control over production and pricing mechanisms from the giant Western oil conglomerates, leading to a massive increase in oil revenues for those [Gulf] nations.”

The embargo allowed Gulf oil producers and Gulf leaders to have greater leverage in their relationship with the United States.

One political concern that is heightened the Gulf States’ skepticism of U.S. intentions, is President Obama’s recent foreign policy towards Iran. The Gulf countries have watched U.S.-Iran nuclear negotiations warily and have begun to grow increasingly skeptical. This fear has not only pushed Gulf officials to invest in energy megaprojects, but to banner for nuclear weapons, saying, “If Iran can have one, then we should have one too.”

Iran looms large on the Gulf’s list of security concerns. But a standoff could result in the targeting of one area of strategic import that could paralyze not only the Gulf, but the global market, and that’s the Straight of Hormuz. It’s a straight that separates Oman and the Arabian Peninsula from Iran, and is effectively the “jugular vein” of the United States’ and the Gulf’s financial and strategic security. In the past, this sea passage has been an area of dispute and threatened to be close by Iranians to Arab and West countries. If the U.S. disproportionately excludes Iran from its activity in the region, which is a growing rhetoric of some U.S. officials, Hormuz could become a target, damaging any positive efforts in hemming the United States and Gulf States relationship with Iran.

The Risk Pivot: Great Powers, International Security and the Energy Revolution, points out why Hormuz is an attractive and viable target. “At its most narrow, it is only 21 miles wide. Linking the Persian Gulf to the Gulf of Oman and the Arabian Sea, more than a third of all oil transported globally by sea passed through the straight as of 2012, with more than 85 percent of these exports bound for Asia”

Speaking to Senior fellow and Director of the Strategy and International Order Program at the Brookings Institution, Dr. Bruce Jones, on U.S. energy independence and its effect on Gulf States, he shared that, “Energy independence is a mirage. The U.S. economy is still heavily shaped by the price of oil, and oil is a globally traded commodity. It doesn’t matter whether we get our supply from the Gulf or North Dakota—we still pay the global price. And if the global price of oil goes up because of supply disruptions in the Persian Gulf, we’ll take an economic hit, and so too will all of our major allies and trading partners.”

The evidence is in the quantity the United States imports from Gulf States. According to the U.S. Energy  Information Administration only 20 pecent of our total imports come from the Persian Gulf, with 13 percent of that is coming from Saudi Arabia. Oil price stability is what we are after, which is why the Gulf’s access is in our interest, but not because we need direct access to oil.

In an address to Center for Strategic and International Studies, Saudi Minister of Petroleum Ali Al Naimi made a similar point:

“Talk of energy independence fails to recognize the interconnected nature of global energy markets. If you take crude and all liquid products together, the US is the third largest exporter in the world, after Saudi Arabia and Russia. We are all part of a global market. And no country is truly energy independent. So just as I didn’t buy into the peak oil theories, I do not go along with the opinion that increasing US liquids production means the United States could, and should, detach itself from international affairs.”

In other words, the United States’ interest in oil and the security of the Straight of Hormuz is stronger than some want to admit. It’s in the U.S.’ interests to sustain a trusting relationship with the Gulf and prevent the Gulf and Iran from a standoff that could harm the market and led to a war among the Gulf, Iran, Middle East allies, the United States. Our security is effectively tied to that of the Gulf’s.

The threat from Iran, talk of the need for U.S. energy independence, and political uncertainty of U.S. intentions beyond oil has led Gulf states to begin looking at new alternative energies. Middle Eastern governments are jumping to invest in order to sustain their countries in the future and loosen their dependency on limited oil and foreign security, which could alter the United States’ relationship with the Middle East in the long-term. Although there is no immediate reason in the Gulf to construct energy megaprojects, it needs to have the blueprints of them on call should there be an attack or a sudden turn in the Gulf’s relations with global superpowers.

A change in relations is likely in decades to come. Although the United States’ is blessed with expansive oceans and geography that allows it to be geographically isolated from most current global conflicts, it also means it’s hard for it to be involved in some energy megaprojects, which have connected the Gulf, the greater Middle East and Europe together. It’s too early to say if this would work in the United States’ advantage or not.

Emphasized in a recent ISS report, Arab futures: three scenarios for 2025, Desertec, a leading energy megaproject, is pushing for countries around the Mediterranean to utilize their desert climates and sun to fuel solar energy, bringing together the European Union and the Middle East. Shared energy has the capacity to bring unity, as we have seen in the GCC in their Gulf region. Renewable energy could very well bring the broader Middle East closer together.

On March 4, 2015, Saudi Oil Minister Ali Al Naimi noted in a speech in the German capital that Germany and Saudi Arabia’s relationship had grown significantly thanks to renewable resources. “Germany is a world leader in terms of solar — and Saudi Arabia has a lot of sun, and acreage,” he said. “We intend to harness more and more of our domestic energy needs from solar power so there really is scope for greater cooperation.”

Most Gulf countries are pumping investments into future renewable energy resources. In 2012 Saudi Arabia announced its plan to invest $109 billion into solar energy after assessing suitable technologies to use, with a goal of solar power to provide 1/3 of the Kingdom’s electricity by 2032. Qatar is seeking to construct a solar energy plant estimated to be $20 billion. Kuwait, meanwhile, plans to partner with a number of international companies so that 15 percent of its total energy needs will be supplied by solar energy by 2030.

Jones contends that while U.S. energy independence is a mirage, the Gulf’s transition from oil to solar and wind power resources is unlikely to be that disruptive, given the scale of recent projects and their timeframes. “The Gulf has to consume a growing portion of the energy it produces, so even as renewables grow, Gulf oil and gas exports are going to remain vital to the global economy for a long time to come,” he said.

It’s unlikely that the Gulf will start actual construction of megaprojects like Desertec in the near future, as there have been a number of technical delays. Current politics will also shape how the Gulf States and the broader Middle East will deal with the United States if and when they develop these energy projects with Europe.

“The challenge here is that many in the U.S. perceive that we are no longer dependent on Gulf supplies — even though that’s a fiction in terms of the global price and the economic impacts,” Jones said. “But because that perception is around, there’s an underlying doubt about the merits of expending U.S. resources on securing the Straits of Hormuz or guaranteeing the territorial security of Saudi and the Gulf states. If an isolationist takes the White House (albeit unlikely) we could see a fundamental change to the U.S. security posture in the region, with predictably destabilizing consequences.”

While the U.S. and Gulf are inter-dependent on each other now, future energy megaprojects like Desertec could work for both the Middle East’s and Europe’s advantage in a strengthened alliance, as well as reassure the United States they will not be pulled back into the Middle East on its pivot to Asia. Still, there is a chance that exclusion of the U.S. from these major energy projects will lead to an exclusion of U.S. relations and priorities, for energy and politics in the region go hand in hand.

 

Author

Sarah Elzeini
Sarah Elzeini

Sarah recently returned from Qatar where she worked in the Center for International and Regional Studies (CIRS), contributing to multiple projects, from the Changing Security Dynamics of the Persian Gulf, Arab Youth, to Cyberspace and Digital Communication in the Middle East.

Sarah holds a BSFS in International Politics from Georgetown University School of Foreign Service. She comes from a multi-cultural American family, which has led to her open understanding of Middle East Affairs and U.S. foreign policy. She is also a passionate supporter of international development and women and youth empowerment.

Additionally, she has worked as Coordinator of Cultural Affairs for a music organization based in NYC, branched in Doha, Qatar; bringing together East and West cultures and stressing the importance of the cultural narratives that art and music brings.

Follow her on Twitter @SarahElzeini

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