Energy Flows and Military Escalation: How does the War in Ukraine Affect the Gulf?
Featured Speakers: Ambassador Patrick Theros (moderator), Dr. Mark N. Katz, Dr. Samuel Ramani, Dr. Diana Galeeva, and Rauf Mammadov.
Russia’s military operation in Ukraine, the largest in Europe since WWII, has thrown the entire world into disarray. Russian armed forces invaded Ukraine on February 24 from three directions and as of this writing were advancing across the country. This invasion will certainly have especially dire consequences for the security of Europe. The current crisis threatens to throw global oil and gas markets into turmoil, with indirect effects on the Gulf region. The already uncertain energy market, partly resulting from tensions over Ukraine, has now seen oil prices cross the $100 per barrel mark. Some observers predict much higher prices, especially in Europe. Even before the Russian invasion, President Joe Biden reportedly discussed with the Qatari Emir plans to supply Europe with Qatari LNG to decrease European dependence on Russian gas. While oil producers, particularly in the GCC, stand to benefit from the steep price increase, energy importing countries of the region, and beyond, are likely to suffer.
The invasion of Ukraine affects most of the world and the Gulf states will not avoid consequences. The GCC states depend on Washington for their security and defense, both directly and through arms sales. However, Russia has become an important trade partner for the GCC. Iraq as well, have deepened their trade and security ties with Moscow. The crisis threatens to undermine the GCC balancing act between Washington and Moscow. This dilemma explains most of the statements coming from GCC officials which have called for de-escalation. On the other hand, Iran has a different stake in the crisis. Tehran and the P5+1 are in the final stages of the JCPOA and many analysts predicted that the current crisis could give the Iranian negotiators leverage since the West would benefit from a de-escalation of tensions. The US and its European allies do not want potential confrontation with Iran to distract from the challenge in Europe. Moreover, should a JCPOA agreement end America’s sanctions against Iranian oil exports, Tehran has the potential to ease Europe’s energy crisis should Russian supplies stop. According to Bloomberg, Iran has 103 million barrels in floating storage that could move to Europe almost immediately and can add another 1.3 million barrels/day in production within a short time, making a major dent in world oil prices. Yet, Tehran has already sided with Moscow by adopting the Russian claims that the crisis was caused by “NATO’s provocative actions,” according to the Iranian foreign minister tweet on February 25, 2022. On the other hand, it appears that Russia continues to cooperate with the US on bringing JCPOA talks to a successful end.
What options do the GCC states have in this crisis? How can they distance themselves from the consequences of Europe’s worst conflict since WWII? Can the West exploit the relations with the GCC states to weaken Russia’s position? How does the crisis affect JCPOA negotiations and Iran’s perception of its interests vis-a-vis the US and Russia?