Russia and Iran Moving to Corner the Mideast Oil Supply
It looks like Vladimir Putin and the ayatollahs are preparing to corner the world’s oil supply – literally.
Last May I wrote on this site that Iran was in the process of surrounding the Saudi/Wahhabi oil reserves, along with those of the other Sunni Gulf petro-states. I added that, “Iran’s strategy to strangle Saudi/Wahhabi oil production also dovetails with Putin’s interests. As the ruler of the second largest exporter of oil, he would be delighted to see the Kingdom’s production eliminated or severely curtailed and global prices soar to unseen levels. No wonder he is so overtly supporting Iran.”
We’ve now seen Putin take a major, menacing step in support of the Iranians by introducing combat forces into Syria. Many analysts argue that he’s doing this both to protect his own naval base at Tartus and as some sort of favor to the Iranians. Are those really sufficient inducement for him to spend scarce resources and risk Russian lives, or does he have bigger ambitions in mind? Given the parlous state of Russia’s economy, thanks in very large part to the recent halving of oil prices, he must relish the opportunity now presented to him, in an axis with Iran, to drive those prices back to prior levels.
The Iranians, for their part, must welcome this opportunity as well, for two huge reasons: first, when sanctions are finally lifted, thanks to their friend in the White House, Iran’s oil production will only aggravate the current global excess oil supply, reducing their cash flow (although they will still repatriate the $150 billion released by the nuclear deal). They and the Russians must both be desperate to find a way to prevent further oil price declines. And second, Iran’s mortal sectarian enemies and rivals for leadership of all of Islam are the Saudi/Wahhabi clan, so the prospect of simultaneously hurting them while strengthening themselves must seem tremendously tantalizing.
To achieve this, the Russian-Iranian axis can pursue the encirclement strategy of the Arabian Peninsula that Iran has already been overtly conducting, as I described in May, and is evident by referring to the map below.
Iran and its allies already control the border across the Saudi/Wahhabi Kingdom’s northern frontier, although the Iranian grip on the Syrian portion is tenuous – hence the Russian intervention. Now Iran is also fighting a bitter proxy war with the Kingdom in Yemen, where Iran is backing coreligionist Shi’ites. From Yemen, Iran can also threaten the Bab-al-Mandeb that provides access to the Red Sea, multiplying the pressure it already exerts on the Kingdom by threatening the Strait of Hormuz at the entrance to the Persian Gulf from its own territory.
Moreover, Iran is widely believed to be supporting the Shi’a who live on top of the Saudi/Wahhabi oil reserves in the Eastern Province. The natural affinity between the Shi’a of Arabia and Iran has long worried the royal family and led them to discriminate against their Shi’ite subjects, fostering resentment among them. Attacks on the Shi’a community early this year have increased tensions. On top of all that, Iran is reportedly behind the recent Shi’a unrest in Bahrain, which Iran considers it lost “14th province” – much as Saddam viewed Kuwait in the late 1980s.
With this being the current state of the Mideast chessboard, consider how the game can unfold. With Russian assistance, Iran can save its Syrian puppet and reinforce its defensive enclave in the Allawite homeland in the northwest of its putative boundaries. Then the combined forces of the axis can turn on ISIS, all the while boasting of doing the world a favor, and reduce its territorial control if not extirpate it entirely. Of course, the Saudi/Wahhabis will probably do whatever they can to assist their vicious ideological offspring, but it would be hard to bet against the axis.
As the axis pacifies Syria, it can then begin pressure the Saudi/Wahhabis and other Sunni petro-states to curtail their oil production enough both to accommodate the increased Iranian flow and to lift prices back to acceptable levels. $100 a barrel must sound like a nice target.
The axis’s initial pressure will probably be diplomatic, applied by both principal powers. However, with Iran’s foothold-by-proxy in Yemen and their influence in the Eastern Province and Bahrain, it could easily foment more general violence against the Saudi/Wahhabis, even within the Kingdom itself. Iran could likewise twist Bahrain’s arm and thereby rattle the cages of the lesser Sunni petro-states. Then, by trading a reduction in oil for a reduction in violence, the axis could achieve its objective.
If not, the Iranians could escalate the violence further. Perhaps ideally from the Iranian perspective, the Saudi/Wahhabis would overreact and provide Iran with an excuse to strike directly at the geographically highly concentrated Arabian oil fields and support facilities. Iran might not be willing to risk royal retaliation by attacking on its own, but it could be emboldened with Russian backing by air and sea, and perhaps even a nuclear umbrella. In that scenario, the proud Arabs would be forced to bow to the will of their ancient Persian foes – particularly since it is obvious that the US under its current president could not be relied upon for support.
An attack on the Kingdom’s fields would cause a severe and lengthy disruption of Mideast oil supply, which would dreadful for the rest of the world – but certainly not the worst-case scenario. Such a disruption would precipitate another nasty global recession and could severely weaken the US, Europe, and China, all of whose economies are fragile and probably brittle. Thus the damage inflicted could far outlast the disruption itself. This could be yet another highly attractive incentive for Putin and his ayatollah allies.
So, Putin and the ayatollahs have powerful motives to corner the world’s oil market and therefore the US and the rest of the world are facing an enormous risk. The horrible pity of this is that the US could easily demonstrate the futility of the Russian-Iranian axis trying to take the world hostage with Mideast oil, simply by opening up our surface deposits of oil shales in the Rockies. As I showed in this analysis last March, these resources could make Mideast oil irrelevant.
The US’ surface oil shales are completely different from the deep shales that are accessed through directional drilling and fracking and that grab all the headlines; the deep shales are a mere side show in terms of reserves. The surface shales hold up to 3 trillion barrels of oil versus about 50 billion barrels of tight oil accessed by fracking. The total global proven reserves of oil are 1.6 trillion barrels, and the Canadian tar sands have 1.6 to 2.5 trillion barrels (although they're officially listed at 175 billion barrels, which are incorporated in the global total). So, the US and Canada together essentially can triple the global supply of oil, and at prices in the $60-75/barrel range. Meanwhile, Mideast reserves are about 800 billion barrels – half of Canada’s oil sands, perhaps less than a third of the US surface shales. The world no longer needs the Muslim oil.
Unfortunately, the vast majority of the Rockies surface shales sit on Federal land, and while George W. Bush opened up those lands for development, Obama rescinded that policy. These reserves now sit almost entirely idle.
As with any petroleum deposit, these surface shale reserves can’t be turned on with the wave of a wand. But they can be opened for development with just a pen, and not even a phone. For the protection of this country, and the good of the world, our current president should immediately open these reserves for development, with great fanfare. If he will not use our military to protect our interests, he should at least use our economic weapons.
There is no time to lose. Russia is on the march, in unison with the emboldened and enriched Iranians, thanks again to our president. Putin and the ayatollahs know they will enjoy only another 464 days with this president and that none of his likely replacements will be so complacent and flexible, to use his own term. We should therefore expect that they will want to make as much hay as they can while the sun reflects off of Obama’s insouciant grin.