The real goal of US energy policy in Mideast

After the US-led invasion of Iraq in 2003, Iran and its regional allies emerged once more as the key threat perceived by America. But the question remains why the US should be so concerned about a third-rate power in a region seemingly less central to American interests today. The answer lies in oil – but not in the way this is conventionally understood. Washington isn’t “protecting” supplies of energy for its industries; instead, its interest lies in its ability to control oil prices and supply as an instrument of foreign policy.

Studies suggest that the US spends $81 billion annually to protect oil supplies, mostly in the Persian Gulf. Yet even in 2005, around the peak of American oil imports, the share of the Middle East was not large: 14% from Saudi Arabia, 5% from Iraq and less than 2% from Kuwait. Since then, net US oil imports have been virtually eliminated by the shale boom.

Of course, as long as US oil markets continue to be connected to the world, the country will still see the impact of any shortfall. A disruption in the Middle East would drive up international prices, helping oil-producing Republican states such as Texas, Oklahoma, North Dakota and Alaska, but hurting Midwestern motorists in swing stakes that were the key to President Donald Trump’s narrow win in 2016.

Today, in terms of oil as policy, disruptions at major international oil producers have turned the spotlight back to American allies in the Gulf region.

Venezuela’s output, 2.4 million barrels per day (mbpd) as recently as 2015, has plummeted to 830,000bpd. After severe mismanagement and underinvestment, various US sanctions have pushed its industry toward collapse. The US-backed “interim president,” Juan Guiadó, has failed to gain much traction, with Russia doubling down on its backing of sitting President Nicolás Maduro.

In April, Trump supported the move of Libyan Field Marshal Khalifa Haftar toward Tripoli. The chairman of Libya’s national oil company says 95% of oil output could be cut off by renewed fighting. Most severely, of course, the US embargo against Iran has cut its production by about 1.3 million barrels per day since August, with a White House goal of “zero exports” threatening a further loss of 800,000bpd or so. The US also imposed sanctions on Russia’s oil industry in 2014, over its annexation of Crimea, though these have not significantly affected production, and is threatening more measures against the Nord Stream 2 gas pipeline to Germany.

This extensive use of economic coercion reflects the United States’ new position as an exporter of oil and liquefied natural gas

This extensive use of economic coercion reflects the United States’ new position as an exporter of oil and liquefied natural gas. Under president Barack Obama, the US grew confident that its rising output gave it more freedom to risk taking adversaries’ oil off the market. Under Trump, the administration has become openly mercantilist – for instance, pushing its LNG into Europe by threatening Russian supplies, and acquiescing to Iraqi gas and electricity imports from Iran only if Baghdad awarded contracts to American companies.

Given the US administration’s quixotic pursuit of multiple conflicting foreign-policy priorities simultaneously, its Arab supporters have become even more important. The ability of Saudi Arabia, and to a lesser extent the United Arab Emirates and Kuwait, to use their spare capacity to add as much as 2.5mbpd to the market is crucial to dealing with unexpected contingencies as the campaign against Iran ramps up.

This betrays the Achilles’ heel of the United States’ newfound “energy dominance” – shale oil is not infinitely flexible nor as fast to respond as Saudi spare capacity. And the very light shale oil is not an ideal diet for refineries, currently short of medium and heavy grades – those produced in the Gulf region and by Venezuela and Russia.

After repeated Iranian threats to close the Strait of Hormuz, both the UAE and Saudi Arabia have constructed bypass pipelines that could carry about half of their exports. Kuwait, Qatar and Bahrain are completely dependent on the strait, though, and Iraq is mostly so. If indeed the recent attacks on shipping in waters off the UAE’s Fujairah emirate and on the Saudi East-West pipeline were at Iranian direction, Tehran was sending a message that these alternative routes were vulnerable too.

Even though the US has for long imported relatively little Gulf oil, its security posture there was a key part of the Western alliance system. Europe, Japan and South Korea were assured that neither the former Soviet Union nor a hostile regional monopolist could cut their supplies or jack up prices. Now that logic has evolved. Allies are seen more as vassals, obliged to adopt US economic dictates.

And the continuing US military presence in the Gulf region gives leverage against Washington’s only likely peer competitor, in Beijing, as well as its irritating rival in Moscow. Both countries have strong relations with Iran, which has few other friends.

China’s role in the Middle East still is largely limited to trade and investment. But its Belt and Road strategy involves building a maritime presence in the region, as well as strengthening overland Eurasian oil and gas import routes, less easily interdicted. In extremis, in the event of open conflict, the US still has its foot on China’s jugular.

Russia, meanwhile, has boosted its Middle Eastern role by returning to its old ally in Syria, and building political and economic influence in countries such as Egypt, Libya and Iraq. Its cooperation with the Organization of the Petroleum Exporting Countries (OPEC) has made it indispensable to Riyadh too. But Russia can never be a replacement for the US in the Middle East, just a useful counterweight.

Other interested parties – European countries and India – play only a marginal diplomatic and security role in the Gulf region, despite their economic importance and historic involvement. And so Washington complains of its unfair burden in the Gulf, while reaping the rewards of its stranglehold over any competitor.

This article was provided to Asia Times by Syndication Bureau, which holds copyright.