February 2014
A New Old Trend: Divide Et Impera?

We are witnessing at new geopolitical phenomena, the breakup of some well established countries which have the misfortune to be located in unstable zones, unstable largely due to disputes around hydrocarbon resources and proven reserves or, alternatively, because they happen to be close to strategic oil and gas transit routes. These countries seem to be dismembered along religious, ethnical, cultural, historical and even tribal lines, often dismembered forcefully just as the ancient Romans practiced it. The concept behind this policy amounts to the assumption that smaller state entities are easier to control while their energy potential is easier to access. Such events within this geopolitical tendency occur in different regions, MENA, Africa and even Ukraine, which is still playing a crucial role in securing transit of Russian natural gas to Europe. In this three-part article we offer a preliminary analysis of this policy trend in the Arab world, in the territories populated by the Kurds, and in Sudan.

Reshaping And Reformatting The Middle East

The ongoing civil war in Syria has opened the Pandora box of old conflicts involving old players in regional games. Who is fighting whom? Who wants what? To bring the war to a victorious end? What kind of an end could that be? Total annihilation of all the opponents? Will the one who genuinely wants peace to be restored stand up please? Is there an option for a quick political settlement? Who will comply with the terms of the negotiated peace or interim peace settlement? And will there be some parties that will not respect the agreement?

The events are evolving rapidly.

Presently, in Syria we see four big actors. First, the loyal forces around Presidential Bashar Assad rooted in the Alawite branch of the Shiites and supported by some other religious minorities. They are clustered mostly in Damascus and along the Mediterranean coast; they rely on the government armed forces, once the mightiest in the region, except the Israeli Tsahal. Second, there are the Kurds located in the North who are de facto autonomous starting from 2012 and maintaining links with their ethnic kin in Iraq and Turkey. The ideology of the Kurds is based not so much on religion but on nationalism.

So far, Western politicians and Western media used to present the opposition to the regime as a sort of ‘united front’ willfully neglecting their stark differences. Today, it is no more possible to sustain such an illusion. In Syria, there is no homogeneous opposition but a conglomerate of a variety of antigovernment Sunni paramilitary formations, some with political wings. The only common denominator is their absolutized commitment to the Sunni branch of Islam. Their internal controversies are so blatant that recently they started open hostilities which immediately developed an inertia engulfing more and more militant fractions.

The Sunnite armed groups and groupings are more or less in control of the central part of the country, with each of them having its strongholds and foreign sponsors. Without the external financial and military support it would be next to impossible for them to keep on fighting for so long. There are the West-sponsored and Gulf- Kingdoms-sponsored armies. Yet, the most known, the Free Syrian Army, for the moment has lost the military momentum. The armed groupings generously supported by Saudi Arabia and Qatar retain military capability but are engaged in a tug-of-war among themselves, reflecting the intensified rivalry between their sponsors giving orders from in Riyadh and Doha.

The Saudis are betting on the Islamic Front which is formed of hardcore fundamentalists, and made up of brigades listing some 60.000 fighters with combat experience gained in Iraq, Afghanistan and Chechnya. At the moment, the Islamic Front has its strongholds in Raqqa and along the border with Turkey. They do not hesitate to use terror tactics against their Sunnite rivals. Media reports claim the Islamic Front made military gains in Idlib and Aleppo zones which had been previously controlled by jihadists from al-Qaeda affiliated Islamic Sate of Iraq and Levant, a group comprised of 10.000-15.000 guerillas, mostly foreign mercenaries.

The Islamic Front is emerging as the leading re bel ar my, and now they are s eekin g international acceptance. The United States is in process of establishing direct contacts with the Islamists from the Front and attempt to convince Saudi Arabia to bring them in line and make them parties to political games. These attempts may end in fiasco because some brigades, e.g. Ahar al-Cham, Soqour al-Cham, Liwa al- Tawhid and some others, are not keen to receive (or give) orders. They are relatively autonomous and often unruly: their commanders are not always able to force their fighters to obey commands.

It is necessary to take into consideration the third major Sunnite force, the Front al-Nosra, also ideological affiliates to al-Qaeda. However, they have Syrian roots and tend to pursue a local agenda, not pushing forward the concepts of radical Islam. One UN diplomat on condition of anonymity called al-Nosra “al-Qaeda which is trying to adapt to realities.”

It does not make sense to speculate on the outcome of the civil war and the chances of a political settlement. It is enough to highlight the main parties involved in the Syrian war to understand that the conflict is a perfect reflection of the complexities of the regional quagmire.

Finally, what is “Syria”? Similar to other states in the region, Syria is an artificial creation put together at the end of World War I through the maneuvers of British and French diplomacy. In 1916, in the process of “dismembering” the for mer Ottoman Empire the two European powers elaborated a secret deal called after the two diplomats who hammered it out, Mark Sykes and François Georges-Picot. The two have drawn the borders of the newly molded states often ignoring religious, tribal and other factors of distinction.

For almost a century that new political geography withstood all hazards being glued and backed up by local rulers. Presently, the Sykes- Picot model is subject to stor ms and shocks. The first blow came in the for m of the Iraqi invasion by the US troops. The second blow was the Arab Spring which is now culminating in the civil war in Syria. Old dividing lines and enmity reemerged exac erb ated by moder n exter mination technologies. The region witnesses not only classical standoffs between the Sunnis and the Shiites but confrontation between tribes, sects, nations. Some old alliances are revitalized, and old scores claimed unsettled.

Assessing the evolution of the Syrian civil war, it is evident there can be no guarantee that once war is substituted by some kind of peace the countr y will be preserved as a unified state entity and within its previous borders.

The case of Libya is an example of the threat of a breakup into two or even three territories, just like the case of Yemen where the North and the South are looking in opposite directions, not to mention the fractious Iraq.

An American scholar from the United States Institute of Peace and the Wilson Center, Robin Wright, published a study on the perspectives of “reshaping” the North Africa and Middle East region. His scenario supposes that after the finalization of the Arab Spring processes new states will emerge. Here are some of the scholar’s main conclusions:

  • Syria will be split into three parts, with the Alawites holding the Mediterranean belt,with the Sunnis in the center and the Kurds in the North;
  • Libya could be slashed into three territories as well, following the traditional tribal areas: Tripoli and the Wester n sea coast, Benghazi and the Eastern coast and, possible, the desert Fezzan region;
  • Yemen in pregnant with separatism of the South which enjoyed independence for decades. The North of that poorest Arab country could gravitate towards the ultra rich Saudi Arabia hoping for some kind of federation model;
  • Iraq is on the verge of Balkanization. Kurds, Arab Sunnis and Shiites are all considering the options of setting up their own statehood (the Kurds are the closest to achieving this goal), but they face the intricate challenge of apportioning the mineral resources.
  • Finally, Saudi Arabia is also in the risk zone despite its affluence and sustainable development. “The kingdom seems physically secured in glass high-rises and eight-lane highways”, writes Robin Wright, but it still has disparate cultures, distinct tribal identities and tensions between a Sunni majority and a Shiite minority, notably in the oil-rich east.”

The key players in the MENA game are confined only to local population, local ideology or local rulers. This is not an ordinary region. It’s an oil and gas rich domain. Markets are nervous and harbor concerns about stability which is a must for secure hydrocarbon flows. What if major political and business actors decide it would be advantageous to break some countries in the region into smaller territorial entities which are easier to control and thus guarantee uninterrupted oil and gas deliveries to consumers?

China Gets Dragged Into Proxy Energy Wars

After five weeks of heavy fighting a truce was struck in South Sudan, an independent state since 2011 with Juba as capital city. Forces of President Salva Kiir and Vice-President Riek Machar have signed a document in the Ethiopian capital, Addis-Ababa, leaving behind estimated 10 thousand dead and 500 thousand refugees (according to International Crisis Group data). This was a temporary settlement of a new conflict within the youngest state in Africa. But does it matter globally? Yes, it does.

For outsiders, it is quite difficult to understand the cause of the war which started with a failed coup led by the Vice-President against the President. One can assume that the explication lies in tribal or religious contradictions, water or land disputes. Indeed, this is true, yet only partially. The previous protracted war within Soudan (1983-2005) between its Northern Muslims-populated part and non-Muslims in the South had a religious and tribal background: it was a fight for pastures and water resources in the context of progressing desertification.

This internal conflict had peculiar consequences for the global energy environment. When the war started and the place became insecure, Western, mostly American oil companies stopped prospecting in that promising area. At the time there were many other attractive oil-rich regions. For years the Sudanese conflict was a local one, with no interest displayed by international actors.

Things changes when China and other developing economies started to search for resources outside its borders. They found a way to launch oil exploration, production and export despite tense internal circumstances and public unrest in Sudan. The Chinese who became net oil importers since 1993 were the most successful in this part of Africa, although they did not enjoy exclusivity.

Western powers realized what had happened too late, when oil derricks were already pumping, pipelines were transporting oil to the Red Sea coast, at Port Sudan, and tankers bound to Asia were being loaded with huge amounts of Sudanese fuel. Then the international mass media started to play up stories about Darfur and other conflict affected regions of Sudan, reporting about the sufferings of displaced people and committed atrocities which they previously completely disregarded. The Government in Khartoum, led by Islamist President, Omar Hassan al-Bashir, immediately became an international pariah, accused of sheltering Islamic radicals. Nevertheless, China never abandoned its support to the Sudanese regime, although preferred not to challenge openly the West and its policies in the region. Beijing has invested in Sudan $20 billion. It was then that the West-brokered deal split the country, once of the biggest in Africa, into two halves.

In the global energy context, the new environment became more complex. The Sudanese oil reserves (75-80%) were located in South Sudan, but the transportation facilities passed through Sudan proper. The two countries seemed inseparably linked by oil and money interest, and it could serve as an anchor for regional stability despite continuing local controversies. Losing a part of oil revenues in the autumn of 2013 generated turmoil in Khartoum (“Oil Rich Sudan Hit By Popular Unrest: Minor Episode or Trend”, EIRA, Volume 1, Issue 6, 2013) provoked by an end to petrol subsidies for the population.

In the past both countries attempted to impose their rule on local oil business. In 2012, the production was stopped over a dispute about royalties. It ended when Khartoum and Juba realized that they were both loosing from that confrontation and started to cooperate. China also tried to establish good links with President Salva Kiir and promised him another $8 billion of investments.

That configuration of balanced interests seemed to work out fine until the recent eruption of violence in South Sudan, focused on securing political power. The turbulences were triggered by an old rivalry between Salva Kiir (Dinka tribe), historically linked with the US, and Riek Machar (Nuer tribe), who were number one and number two in the new state hierarchy. The roots of rivalry go deep into the war of Southerners against Khartoum.

In the 1990s, Riek Machar disaffiliated from the independent fighter’s movement and allied himself with the central government of Sudan. Then, before the political settlement in mid 2000s Machar joined once again the so called Sudan People’s Liberation Movement, the actual ruling party in South Sudan. He explained it by accusing the President of trying to concentrate all the power in his hands while getting rid of competitors. In 2012, Salva Kiir played the anticorruption card pointing his finger at the local officials who have presumably stolen up to $4 billion of the government’s oil revenues. It amounts to one-third of the state’s oil revenues from 2005 to 2011.

The internal showdown was concentrated in oil rich provinces. Their capitals, Bentiu and especially Malakal changed hands several times. Heavy fighting was concentrated in the city of Bor. From that point rebels wanted to march against the capital, Juba, located 200 km to the South. The city with a population of one million people was basically destroyed.

The recent episode in the protracted war has also an oil dimension. The stakes are high since it relates to the future of the Sudanese potentially huge local hydrocarbon reserves.

China was importing from South Sudan 14 million barrels during the first 10 months of 2013, 14% up if compared with 2012. It amounted only to 1% of the oil consumption of China, but Beijing’s strategy is to lay its hands on all possible resources throughout the world and it makes the Chinese very sensitive to attempts to squeeze them out from any energy rich region. China had the same nasty experience in Iraq (2003) and recently in Libya right after having heavily invested in the oil sector in both countries. In South Sudan, China was awarded concessions for oil fields; it spares the trouble of negotiating the purchase of oil.

In 2013, South Sudan was producing 220-240 thousand barrels/day (470 thousand before 2011), 200 thousand in the Malakal region. Most of the volumes, two-thirds, were shipped to China. Its foreign minister, Wang Yi, flew to Africa to find a solution to the erupted conflict. This is a remarkable precedent: such a move is unusual for Chinese diplomacy which prefers not to get exposed in the “first line” and opts for a behind the scene maneuvering.

Neighbouring Kenya and Uganda also participated in the initiatives aimed to put an end to the war in Eastern Africa. Kenyan government hopes to see a pipeline arriving from South Sudan to its coast which would generate revenues from transit fees. Uganda has some oil reserves at the border with South Sudan and hopes to start production. Both countries fear that instability in South Sudan could push investors away from the region and they will seek business opportunities in a more predictable environment.

There is a likelihood that Chinese involvement contributed to changes in the allegiances and alliances. Khartoum and Salva Kiir are interested in preserving the actual state of play in oil production and transportation, and this stance suits Beijing. Riek Machar has lost the support of his former Muslim allies and now may be receiving the support of the United States.

During the heavy fighting, the rebel spokespersons explained to journalists that their strategy was to establish control over main oil fields. They hoped it would facilitate the task of bringing down the president. In fact, they did not succeed. Fighting in oil rich zones did not halt the production and export flows continued uninterrupted. The Sudanese officials boasted about growing revenues from oil transit fees despite the fighting. Actually, that oil could have originated not from the current production but from the past reserves procured by Juba to prevent them falling into rebels’ hands. Anyway, the cash flows were preserved and it benefited both Sudan and South Sudan.

Will the shaky truce remain intact? Nobody knows for sure. The main conclusion is that China can no longer afford to stay away from the local proxy wars. Hot and cold wars in and around Sudan can be viewed as probably the first case when China was forced to get drawn into the US-led power game over control of global energy resources.

What Is Cooking In Kurdish Territories? Independence, Is It?

It’s a banality to state that Kurds are one of the biggest victims of partitions of old empires after World War I. As a result, this nation has been living for a century in different countries, mainly Turkey, Syria, Iraq and Iran.

Living separately placed Kurds into very different environment, with incompatible political experience and growth potential. The plight of the Kurds under the current developments in the region will have a huge consequence for the energy flows.

It should be noted that Kurds in Iran are in some way cut from the general trend due to the strength of the Iranian state which maintains full control of everything within its borders. In the future things may change, and the “Kurds’ factor” could be used to pressure Tehran, even if Iran and the West, especially the US formally normalize relations.

The three other main Kurd populated zones are evolving in different ways. Kurds are a nation in its own right; they are neither Arabs nor Turks or Iranians, they have their own language and culture, and they are Sunni Muslims.

The most established and institutionalized Kurd government system exists in Northern Iraq. Kurd Regional Government (KRG) has experience in local rule since the early 1990s, when that territory was de facto independent from Saddam Hussein’s Iraq. Its independence was enhanced by the US enforced no-fly zone.

After the US invasion in 2003 and the reorganization of the Iraqi state, the Kurdish North was granted autonomy. Now it relies on an efficient armed forces (peshmergah), huge oil revenues and self consistent administration with not more than formal ties to the central Shiiteled Government. The security environment here is much better than in Arab populated Iraq. However, the KRG has two unsolved disputes with Bagdad. There are zones with mixed, Kurd and Arab population in some oil rich areas, and the sharing model for oil fields there is yet to be agreed upon.

Bagdad is keen to impose centralized governance for the oil and gas industry with only 25% of its revenues going to local authorities. The Kurds disagree and strike oil and gas deals independently, keeping most of the revenues. They find allies not only among small foreign companies but also energy majors, ExxonMobil, Chevron, Total, Gazprom Neft, etc.

Noteworthy, Ankara is very actively intruding into Northern Iraq despite the time-honored (or rather time-dishonored) problems with Kurds within Turkey itself. Turkey has established excellent working relations with the KRG. Turks are extending oil deals. In January 2014, oil started to be pumped from the Tak-Tak field, south of Erbil, to the Kurd capital in Iraq, connected, in Fichkabour, to the big pipeline Kirkouk-Ceyhan.

So far, this pipeline, with a capacity of 1.5 million barrels/day is half empty due to production problems. Kurdish fields are estimated to be able to produce at the initial stage 300,000 barrels/day. The KRG estimates that it possesses hydrocarbon reserves of 45 billion barrels of oil and 3 to 6 trillion cubic meters of natural gas. It plans to export 3 million barrels/day to Turkey by 2019.

That situation puts the KRG in a strong position: it has the potential to become the core of a future possible independent “Kurdistan” but to achieve this cherishing goal it has to preserve good relations with Turkey, its main regional oil partner bound to turn into a regional energy hub.

Kurds in Turkey are passing through more daring times. Almost a year ago there was a lot of wishful thinking claiming that the Turkish Government and the Kurdish Workers Party (PKK), the main independence fighter force, had finally reached an agreement and were about to settle the issue. So far, the so called Imrali process failed to be finalized and bring eternal peace.

The stumbling block is found in the different approach to the core problem. For Ankara, it’s a public security problem, for PKK it’s a political issue. The Government presented its reform package, elaborated in a unilateral way. Kurds found it disappointing. Their expectations were not honored, especially the claim to use and learn the Kurdish language. Although some ridiculous restrictions were eliminated, like the ban to use letters W, Q and X, which are present in the Kurdish but absent in the Turkish language. It was just the beginning, with no constitutional guarantees for ensuring the Kurdish identity, political and cultural, and also no promise to liberate jailed Kurd political activists. At the same time the PKK started to fully implement its commitments, withdrawing its armed militia from the Turkish territory, although this process was halted last fall. To wrap it up, peace has not returned to Eastern Turkey where most local Kurds live.

Syrian Kurds are trapped in the civil war. Their areas of compact residence are located in the North, and local Kurds call it Rojava or Western Kurdistan. Now they are autonomous although they find themselves in an uncomfortable position between the Islamic radicals supported by Gulf petro monarchies on the one side and the suspicious Turkey on the other side. The local mainstream political force, the Democratic Union Party (PYD) is allied to PKK, and Ankara is nervous about the perspective of them joining forces. At the same time, Rojava is not an anti- Assad stronghold and maintains good contacts with KRG in North Iraq. All that creates a complicated situation with conflicting and mutually exclusive interests with Turkey looking like a possible loser.

Syrian Kurds are the weakest link in the Kurdish equation. They do not have experience, either political or military, and no money.

So the three Kurdish groups are drastically different. Basically, Kurds’ independent state would change the political design of the whole region, but its emergence would be damaging to the interests of many actors, Turkey would be hurt in particular. At the same time, Western energy majors are definitely interested in establishing control over only of one of these Kurdish territories that is the Iraqi Kurdistan blessed with huge oil and gas reserves. Other locations with predominantly Kurdish population have no appeal due to lack of natural resources. However, should oil exporting routes pass through these territories, it would elevate the hypothetic Kurdistan into a key player in the energy domain.

For the moment, a least on the official level the US and Western Europe position themselves as champions of maintaining the territorial integrity of Iraq and Syria, but would it last forever? Would preserving Iraq and Syria with the Kurdish enclaves be more attractive to the West than breaking it into minor states which would be more than happy to serve as purveyors of hydrocarbons and in this way ensure their formal independence and wellbeing?

Lebanon Dreams Of Energy Boom Amid Political Turmoil

The bomb attack carried out on January 21, 2014 by the Al Nusra Front in Lebanon, which is next of kin of the same name Al Qaida-linked group in neighbouring Syria, was targeting the Shiites. It elevated the hostilities to new heights and perpetuated the cycle of political violence. No matter how sinister it may sound, this terrorist act was hardly a surprise for Lebanon which is historically torn apart by sectarian enmity. What came as an unexpected move was the sudden statement just a couple of days later by former premier Sa’ad Hariri, exiled in France since 2011. Hariri announced he was ready (and eager?) to form a new government with Hezbollah to pull out of a 10-months stalemate after the resignation of Prime Minister Najeeb Mikati in March last year.

Greece To Invigorate EU Single Energy Market

The current energy security hurdles burdening debt-ridden Greece can be matched only by the teasing opportunities of gaining a solid ground in relative energy self-sufficiency. No matter how uncertain these opportunities are for a country still basically dependent on energy imports. The prerequisites for Greece acquiring a higher degree of energy security amount to a combination of positive trends within the EU energy industry and depend on the consistent efforts by governments, energy companies, investors, and regulators.

Iranian Oil: Prêt A Manger

Tehran ready to storm global markets

How strong are wishful thinking illusions among the Iranian high-ranking mullahs born out of the interim six-month agreement which limited the controversial nuclear program and mitigated the international sanctions regime? Judging by the fidgety activities of Iranian top officials that coincided with the partial lifting of legal curbs on 20 January, Tehran clerical elite is consumed with anticipation of a major breakthrough in relations with the West and the USA in particular. “The implementation of Geneva deal… will bring with it great economic achievements for Iran in all fields, especially the attraction of giant oil companies,” Jalil Jafari, head of the Foreign Investment Committee in the Iranian parliament, professed without giving any details.