The energy dimension of the Gulf Crisis: The Saudi perspective

The energy dimension of the Gulf Crisis: The Saudi perspective

On June 5, Saudi Arabia, the United Arab Emirates, Bahrain and Yemen, as well as Egypt and the Maldives, severed diplomatic relations with Qatar and placed the country under a blockade, closing it off by land, sea and air.

This triggered a serious diplomatic crisis in the Gulf. Saudi Arabia and its powers pointed to Qatar’s alleged terrorism and support for fanatical Islamist groups as grounds for their action. Qatari officials dismissed these accusations as baseless and responded with similar claims against their opponents. Qatar also revealed at the same time that it was not going to apply counter-measures and that it was ready for dialogue and negotiations.

There is also an energy-related dimension to this untimely and artificial crisis.

Saudi Arabia is one of the world’s largest producers of oil, ranking in the top three producers along with Russia and the United States. Oil makes up 95 percent of its exports, and it is also the only one which possesses spare capacity. It is able to increase its output to 1 million or 2 million barrels a day whenever it feels necessary. However, very nearly all its oil reserves are on the western coast of the Gulf, lying in towns like Dammam, Katif and al-Hobar in its eastern region. That region has another characteristic: it is the part of Saudi Arabia which is nearest to Iran and the vast majority of its population, as in Bahrain, is composed of Shiites. One might ask what this has to do with energy. The answer is that it has a great deal to do with it.

The Saudis question the Shiites’ loyalty and consequently keep them out of important positions in state institutions. Last year, they went further and executed Sheikh Nimr, one of the chief leaders of the Shiite community in the country, in order to silence protests. The argument was that Iran was stirring up the population of the region and was trying to influence them. For that reason, Saudi Arabia regards Iran as both an ideological rival and a threat to its oil fields and is attempting to encircle it, weaken it and restrict its influence to the eastern coast of the Gulf. Its actions against Qatar may in part be regarded as the product of this anxiety. It was not very easy for the Saudis to accept Iran’s return to the international community and global markets as an exporter of oil after it concluded an agreement over nuclear power with the Western world, and the Saudi royal family has never forgiven former U.S. President Barack Obama for it.

Iran’s activities in the Arab world in Iraq, Syria and Lebanon were interpreted as attempts to boost its influence in the region and encircle it. Saudi officials began to look for new allies to distance Iran from these countries and its environs and to put a halt to its activities there.

These calculations were upset by the serious recent fall in oil prices. When the anticipated rises in prices did not occur, the chemistry of the Gulf countries, if that is the appropriate expression, was ruined. The income from oil fell as a result of lower prices and so Saudi Arabia was obliged to drop around US$250 million of infrastructural developments and to use part of its foreign exchange reserves to balance its budget.

The Saudi side began to view Iran, the country which had entered the markets so rapidly and made major increases in the amount of oil it was producing, and Iraq as the scapegoats responsible for this “calamity.”

While this was occurring on the western shores of the Gulf, Iran had completed an agreement with Total of France and begun development operations on a gas field called South Pars. Talks are still continuing with other companies. Qatar and Iran share a vast natural gas field, and it might be seen as entirely natural for them to engage in dialogue with each other and explore opportunities for cooperation. But it could hardly be expected that Saudi officialdom would stand by and watch Iran, its main rival, cooperating with one of its partners in the Gulf Cooperation Council (GCC) and remain indifferent to the spectacle. So, during President Donald Trump’s visit to Riyadh, Saudi Arabia read between the lines of the speech he delivered there and made its own judgement, and then together with its allies, pressed the button over Qatar. 

Actions such as severing diplomatic relations, an embargo, closing air and sea space, shutting down border posts and stationing troops on the borders have all been used before in diplomacy as a means of bringing an opponent to heel. But it is sometimes impossible to obtain results by such means. In the present situation, one side is attempting to impose its conditions on the other by testing its sovereignty. However, if the crisis drags on, everyone involved will suffer harm. For example, it is likely that the two sides will transfer important sections of their revenues from oil and natural gas to actors from outside the region in return for their support to obtain weapons, equipment and services. The result of that would be that the various peoples of the region will end up footing the bill.

*Mithat Rende is the former Turkish ambassador to Qatar and former chair of the OECD Executive Committee.