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Fractures in Arab Gulf alliance a greater threat to oil security than Islamic State
Break up of the Gulf Co-operation Council could threaten world's largest oil fields as Saudi Arabia and Qatar lock horns over alleged support for Islamists

By Andrew Critchlow, Business News Editor
6:00AM BST 24 Aug 2014

In 1981 six Arab monarchies, which today control about a fifth of the world’s oil supply, formed the Gulf Co-operation Council (GCC).

As the war between Iraq and Iran intensified, the Sunni Arab sheikhdoms of the Gulf peninsula - Saudi Arabia, Oman, United Arab Emirates (UAE), Kuwait, Bahrain and Qatar - originally came together in theory to form a Middle Eastern version of the European Union. Although the group has no formal political charter like the EU, it still provides the only official forum where all six leaders of these oil-rich countries can sit down together to debate and agree on mutually beneficial policies in the region.

But the rise of Islamic extremism across the Middle East, America’s growing willingness to deal with Iran and lingering leadership succession issues amongst member states are now unpicking the ties that have bound the GCC together in a tectonic shift that could have profound implications for the security of the world’s largest oil fields.

Formed in the shadow of war, its initial purpose was to help guarantee security mainly from larger Pan-Arab nationalist despots such as Saddam Hussein and the threat posed by the Shiite Mullah’s in Tehran. But after the US invasion of Iraq in 2003 its focus became increasingly economic. Initiatives such as interconnecting electricity networks across the GCC, regional transportation projects including a railway and the possibility of a formal currency union took hold.

Often criticised as being just a powerless club of oil-rich benign dictators, the GCC has arguably done more than any other institution to guarantee political and economic stability over the last 35 years in the region once dominated by warring bedouin tribes. However, the populist forces unleashed by the Arab Spring uprisings of 2010 and the rise of extremists under the banner of either the Muslim Brotherhood in Egypt, or the Islamic State of Iraq and the Levant (Isil) now threaten to tear it apart.

Tensions between Saudi Arabia, the UAE and Qatar were understood to have again come to head this weekend with an emergency meeting of foreign ministers in the Red Sea city of Jeddah described by the Saudi newspaper Asharq Al-Awsat as being “critical”. Riyadh and Abu Dhabi have accused authorities in Doha of supporting terror related groups such as the Muslim Brotherhood and meddling in the internal affairs of other GCC states.

The meetings could eventually lead to Qatar - the world’s biggest shipper of liquified natural gas - being ejected from the GCC. They also come at an awkward moment in the group’s history when a number of its leading ruling dynasties are in transition.

“People in the region say the GCC is effectively over as an organisation,” said Christopher Davidson, a reader in Middle East politics at Durham University. “Cracks are now appearing in the half-century old client state system in the region.”

In Oman - where rumours over the health of the country’s childless leader Sultan Qaboos have brought decision making to a halt in recent months and caused growing speculation over the succession - the country has slowly moved closer to Iran. Bilateral talks between Muscat and Tehran over a number of energy deals have deviated from the GCC’s naturally hawkish line on Iran. Meanwhile in Iraq, Isil is reported to be earning $2m (£1.2m) per day from oil fields it has already captured.

However, a bigger danger than Isil to the security of the world’s largest oilfields in the Gulf is arguably a wider breakdown of political co-operation across the region. Despite these dangerous risks, oil prices are under downward pressure with Brent crude suffering its biggest falls in more than a year to trade close to $100 per barrel.

“We’ve got the barbarians at the gates of the world’s largest oil fields and the price of crude has hardly moved, which tells me this instability has been factored in,” said Davidson.

Kuwait agrees China crude deal as Gulf producers turn to Asia

Kuwait has become the latest Arab Gulf state to deepen its oil trading relationship with China as the US gears up its own exports of ultra-light crude.

Kuwait Petroleum Corporation said over the weekend that it will increase its shipments to China by 500,000 barrels per day (bpd) of oil over the next three years, accounting for about 15pc of the Gulf state’s exports. Eventually, exports to China could hit 800,000 bpd.

“With new and mutual co-operation between the two parties, there is a good sign of increasing the volume of our crude oil exports to China up to 500,000 bpd in the next three years,” Nasser Al-Mudhaf, KPC’s Managing Director of International Marketing told the Kuwait News Agency.

Oil-rich Gulf states are increasingly turning to China for new energy deals as the West led by the US seeks to reduce its dependence on Middle East oil and instead focuses on developing domestic energy sources such as shale.

Earlier this year, state-owned China National Petroleum Corporation agreed a landmark deal with the Abu Dhabi’s government to help exploit energy resources in the emirate.

Traditionally, Gulf states have held close relationships with Western oil companies but experts say these deals will challenge the historic status quo further.

Supply risks are high despite falling oil price

Bears have hold of the oil market with crude falling to its lowest level since June 2013 but according to Commerzbank the current weakness in prices will be short lived.

The price of Brent has fallen 15pc since hitting $115 per barrel in June largely due to the perception of new supply coming on stream such as ulta-light oil condensate exports from the US.

But Commerzbank believes investors are ignoring the fundamental risks that could shut off supplies from the Middle East and Russia in a heartbeat. “The market is underestimating supply risks in our view and the price of oil could rise significantly at any time. Long-term oil prices have already increased markedly,” said the broker.

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26 August 2014 Last updated at 00:38 GMT
Libya crisis: US 'caught off-guard' by air strikes

The US was "caught off guard" by air strikes against Islamist militia in Libya, a senior official has told the BBC.

The attacks on militia positions around Tripoli airport were reportedly carried out by the United Arab Emirates (UAE) from bases in Egypt.

Egypt has denied any involvement and the UAE has not commented.

A militia alliance recently captured the capital's international airport after a battle lasting nearly a month.

The official told the BBC that the US had not been consulted about the air strikes and that it was concerned that US weapons may have been used, violating agreements under which they were sold.

The unidentified war planes attacked twice in the past week during a battle for Tripoli's airport between Islamist and nationalist militias.

A report in The New York Times on Monday said the UAE had provided the military aircraft, aerial refuelling planes and crews while Egypt gave access to its air bases.

On Monday, the US, France, Germany, Italy and the UK issued a joint statement denouncing "outside interference" in Libya which it said "exacerbates current divisions and undermines Libya's democratic transition".

Weak police and army

The BBC's Barbara Plett Usher in Washington says the air strikes have exposed another battleground in a regional struggle for power between Arab autocrats and Islamist movements.

Qatar has provided weapons and money to Islamist forces in Libya and elsewhere, she says, while Egypt and the UAE along with Saudi Arabia are trying to roll back Islamist advances.

Violence in Libya has surged recently between the rival groups who overthrew Muammar Gaddafi in the 2011 uprising.

Libya's police and army remain weak in comparison with the militias.

Over the weekend, Islamist-affiliated forces from Misrata and other cities took over Tripoli airport from the Zintan militia, which has held it for three years.

The airport, Libya's largest, has been closed for more than a month because of the fighting.

Hundreds of people have died since clashes broke out in Tripoli in July.

Rival parliaments

In another development on Monday, Libya's previous Islamist-dominated parliament reconvened and voted to disband the country's interim government.

Correspondents say it leaves Libya with two rival parliaments, each backed by armed factions.

Elections in June saw the old General National Congress (GNC), where Islamists had a strong voice, replaced by the House of Representatives, dominated by liberals and federalists.

The GNC, which reconvened in Tripoli on Monday, has refused to acknowledge the legitimacy of its successor assembly, which is based in Tobruk.

The House of Representatives says the groups now in control of Tripoli airport are "terrorist organisations".

But the Misrata-led brigade, now in control of Tripoli airport, has called on the GNC to resume work.

Libya's government has repeatedly called for the militia groups to disband and join the national army. But so far, few have shown a willingness to disarm.

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delft said:

Plenty of bad things are still happening in Libya:

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It will take a long time before Libya is again a functioning country able to keep out the worst of foreign intervention.
Here we see GCC countries supporting rival warlords.

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According to French financial newspaper La Tribune Salman bin Abdulaziz Al Saud, Crown Prince of Saudi Arabia, could sign a letter of intent (LOI) with the French Government for 6 FREMMs during his visit in Paris in early September. French Navy's FREMM multi-mission frigates are designed and built by DCNS. Five hulls have already been launched, with three Frigates delivered to the French Navy and one to the Royal Moroccan Navy.

Contacted by Navy Recognition, no DCNS representatives were available to comment the information at the time of publishing.

The information would confirm however that Saudi Arabia is currently seeking to increase its naval power. The Saudi Navy is currently upgrading its fleet through contracts and programs signed with the French naval defence company:
» The LEX contract relates to the maintenance of 4 Madina-class frigates (frigates 2000) and two Boraida-class replenishment oilers built in the frame of the Sawari1 program.
» The ERAV contract covers the maintenance of 3 Al Riyadh-class frigates (frigates 3000) delivered in the frame of the Sawari 2 programme.
» The AMWAJ contract relates to support to the Royal Saudi Navy in terms of spare-parts supply and technical assistance.

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Saudi-Iranian thaw will take time
The interpretation that comes readily to mind regarding the visit to Riyadh by the Iranian Deputy Foreign Minister Amir Abdollahian and his talks on Tuesday with the Saudi Foreign Minister Prince Saud Al-Faisal would be that a thaw is in the offing in the ties between the two countries.
The time for a thaw may appear propitious. The surge of the Islamic State of Iraq and the Levant [ISIL] is a matter of concern to both Tehran and Riyadh and, arguably, they have a shared interest in countering the tidal wave of extremism and terrorism sweeping Iraq and Syria.
Certainly, Iran played a key role in the replacement of Iraqi Prime Minister Nouri al-Maliki, which also happened to be a long-standing Saudi demand — although Tehran had its own weighty reasons to promote the transition in Baghdad.
Most certainly, Iran is working hard for a national unity government in Baghdad, which is inclusive and would accommodate Sunni aspirations and preserve Iraq’s unity and territorial integrity, as the recent visit to Iraq by Foreign Minister Mohammad Javad Zarif to Iraq testifies. The Saudis have been clamoring for an inclusive approach in Iraqi politics.
Again, make no mistake, Iran aspires to be a factor of stability in Iraq. Zarif’s consultations in Iraq displayed the spectacular reach of Iranian influence in Iraq — be it in Erbil, Baghdad, Najaf or Karbala.
Thus, it may come as no surprise that the Iranian account of Abdollahian’s consultations with Faisal is on a manifestly positive note, highlighting their commonality of interests on the grave issues buffeting regional security in the Middle East today. IRNA says the two diplomats “stressed the importance of opening new page in the political relations between the two countries.” (here).
However, there is no word in the report about the languishing invitation from Faisal in May to Zarif to visit Saudi Arabia. Zarif has been extensively touring the Gulf Cooperation Council region but has studiously sidestepped Saudi Arabia so far. (Zarif is currently in Ankara on his second visit to Turkey in, perhaps, as many months.)
Indeed, the Saudi-Iranian tango is never quite visible to the naked eye. What is extremely significant is that even as Faisal was holding Abdollahian’s hand in Riyadh, Tehran let it be known in a characteristically roundabout way quoting ’sources’ that the Israeli spy drone that Iran shot down on Monday had only flown from a Saudi air base.
A senior Iranian commander from the Revolutionary Guards claimed, here, that Tehran spotted the spy drone even as it took off but deliberately let it cross the border with a view to monitor its flight path and identify the ‘targets’ that would excite the Israeli engagement. (The prime ‘target’ turned out to be Iran’s Natanz nuclear enrichment centre.)
Of course, Tehran has threatened Israel with retaliation — but then, it has ignored Israel’s Saudi partner as unworthy of such high consideration. The Iranian reaction has been very sharp — “Our response to this aggression will not be diplomatic, we will retaliate in the battlefield, but will not necessarily announce it. The enemy will see and understand it.” (here).
What could it be? Quite possibly, Iran may now upgrade the transfer of missile technology to Hamas and bring it on par with the Hezbollah so that a kind of ’strategic parity’ is reached in Palestine, too — like on the Lebanon-israel front.
There is no suggestion in the media reports that Abdollahian had any word with Faisal specifically regarding the Saudi complicity in the affair of the ill-fated Israeli spy drone. Simply put, it is not the Iranian style to be blunt — unlike the Gulf Arabs.
The intricate pantomime playing out in Tehran and Riyadh only goes to show that an enduring ‘thaw’ is hard to achieve in a short term between the two ancient adversaries. There is a fundamental contradiction in the Saudi-Iranian relationship insofar as Iran’s rise as regional power, its normalization with the Western world, its integration with the world community, its full-fledged entry into the world energy market that is imminent, its economic and technological regeneration that will follow once the sanctions are lifted, its support of the stirrings of the ‘Arab Spring’ — all these are antithetical to Saudi interests. Put differently, Iran’s rise ‘diminishes’ Saudi Arabia — its clout as America’s number one regional ally — and Iran’s emergence as an Islamic democracy rattles the Saudi nerves.
The collaboration with Israel on a dangerous intelligence operation directed against vital Iranian nuclear installations only goes to show the Saudi intentions to try a little bit harder to ‘contain’ Iran despite the collapse of the US’s 3-decade old containment strategy as such.
So, why did Abdollahian undertake the mission to Riyadh? Clearly, yesterday’s Saudi-Iranian consultations were scheduled in advance. The curious part is that Faisal, who is reputed to be an implacable hardliner on Shi’ite Iran, would most certainly have known about the invasive flight by the Israeli spy drone into the Iranian air space on the very same day Abdollahian emplaned from Tehran to meet him in Riyadh.

Posted in Diplomacy, Military, Politics.

Tagged with Arab spring, Hamas, Iraq, ISIL, Israel's Dome.

By M K Bhadrakumar – August 27, 2014

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World Maritime News said:

A U.S. Coast Guard vessel operating in international waters in the Arabian Gulf fired on an Iranian dhow in what U.S. military officials described as a defensive move after the crew of the Iranian vessel trained a machine gun on the Americans with hostile intent, the U.S. Department of Defence said.

A statement issued by the U.S Fifth Fleet in Bahrain said the incident occurred as the Coast Guard was conducting a routine maritime security operation.

The American vessel fired a single shot at the dhow, but military officials said they did not know whether it hit the Iranian boat, which left the scene and did not communicate with the American crew. No U.S. personnel were reported injured.
The inflatable Coast Guard boat had been dispatched from the USCG Patrol Boat Monomoy to query the Iranian dhow, a common approach in the Arabian Gulf intended to improve maritime security in the region.

U.S. military rules of engagement state that unit commanders always have the inherent right and obligation to exercise unit self-defense in response to a hostile act or demonstrated hostile intent.

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