The Global Energy Crisis: A Game of Policies and Interests in The Middle East

The Global Energy Crisis: A Game of Policies and Interests in The Middle East

It was not expected that Russia would have the courage to take harsh measures against European countries that oppose its war against Ukraine, especially concerning energy supplies from crude oil and natural gas, as the Russian economy has recently become highly dependent on oil and gas sales. But it seems that the US and Western sanctions against Russia have prompted Russia to take these harsh decisions, which will negatively affect the economies of European countries and the US, as well as the Russian economy.

However, the Russian government seems to have anticipated the American and Western reactions to its war on Ukraine before it began, and has taken precautionary measures to avoid the negative effects that would be inflicted on the Russian economy as a result of new legislation to impose sanctions.

Russian decisions and measures did not stop at limiting natural gas supplies to European countries, but also included the nationalization of some European and American companies and properties located inside Russia and the inclusion of their assets and bank balances into Russian public ownership. This came in response to the freezing of the assets of many Russian businesspersons and Russian companies in the US and EU. Also, the decision of some American and European companies to leave the Russian market after the beginning of the Russian war on Ukraine came to give an opportunity for the corresponding Russian companies to these foreign companies to expand their business inside Russia and achieve a high growth rate while American and European companies incurred heavy losses as a result of their exit from the huge Russian market.

With regard to energy, Russia has tried to use natural gas for leverage against Europe. A shortage of this vital resource poses a threat to the European economy in general and may lead to the suspension of many industries within those Western countries as well as portend a major problem that the residents of these countries will face during the coming winter due to the lack of availability of natural gas used for heating. Another painful blow dealt by Russia to the countries prone to its war against Ukraine was the issuance of a decree to nationalize the largest company for the production and processing of natural gas in Siberia by seizing Japan’s share in the company, representing 25%, and Britain’s share in the company, representing 25% as well, and thus constituted a major crisis for Japan, which depends on gas in heavy metallurgical and automobile industries.

Although the US will not be directly harmed by the suspension of Russian gas supplies to European countries, it has become essential to provide an alternative to Russian gas for its Western allies, and has hinted at the possibility of exporting American gas to Europe, but it seems that this solution is not practical at the present time. In addition, US sanctions on Russian oil have deprived the global oil market of about 10 million barrels of daily production, which represents approximately 10% of global daily production. This led to a rise in crude oil prices globally to nearly $120 US per barrel of Brent crude, which constitutes an additional burden on the US economy itself since imported crude oil constitutes more than 50% of US consumption of crude oil. At the same time, the global economy is suffering from a severe wave of stagnation and inflation, which has led to a rise in fuel prices in most countries of the world.

Russia tried to sell its crude oil production to its strategic ally, China, or to some countries that consume huge quantities of oil, such as India, at a price lower than the global market. However, it seems that this approach did not achieve tangible success in pumping Russian oil out of the global oil market, which contributed to the rise in the price of a barrel of crude oil globally during the last period.

The US worked to calm the differences and clear the political atmosphere between Algeria and Morocco, allowing Algeria to pump natural gas to Spain, Greece and some European countries through the pipeline passing through Morocco to compensate for the shortage in Russian gas to Europe. At the same time, international oil and gas companies have started an extensive activity of search and exploration for natural gas in new areas in Algeria, which contain huge reserves of natural gas, for increasing Algeria’s production of natural gas. Indeed, new discoveries of natural gas have been recorded recently in Algeria.

The US is currently seeking to finalize a nuclear agreement with Iran and all the necessary legislation, which would allow Iran to pump its crude oil production, estimated at about 4 million barrels per day, into the global market. On the other hand, the US is moving towards urging its allies from the Arab Gulf states, led by Saudi Arabia, to increase their daily production of crude oil. At the same time, the US is working to support political and security stability in both Iraq and Libya in order to secure an additional 4 million barrels of crude oil per day from Iraq and about 2 million barrels of crude oil per day from Libya, which would increase global oil supplies and keep global prices under control.

From the above, we can conclude that the recent accelerating events, as well as the intertwined interests between the major industrial countries (oil consumers) and oil producers in the Middle East, necessitate that producers work to maximize their revenues given the current situation, while there needs for creating the needed plans and legislation in these countries for the development of parallel economies that do not exclusively depend on oil and gas revenues in the future.


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