By Ahmed Mousa Jiyad. Any opinions expressed are those of the author, and do not necessarily reflect the views of Iraq Business News.
The American – Israeli War Against Iran, the Unprecedented Severe International Energy Crisis and Detrimental Impacts on Iraq
On Friday evening, April 10th, the esteemed “Al-Mushtarak” platform graciously organized a debating event in which I discussed the implications, complexities, and consequences of the above topic. Here is a brief report on the event.
I began the PowerPoint presentation by asserting my conviction that the US-Israeli aggression against Iran has created and continues to create an unprecedented severe international energy crisis. The longer the aggression persists, the deeper the “energy crisis” becomes, and its cumulative consequences could potentially lead to an “energy catastrophe” on a global scale. I argued further that the world may witness and suffer from a form of “Imperialism of capture and control over resources through military means” in tenuous international law and relations.
The first part of my presentation analyses the components, indicators, and developments of the energy crisis. It begins by presenting the reasons that lead to the belief that what we are witnessing is an unprecedented, severe, and impactful international energy crisis. This is followed by identifying key terms for understanding the sequence, hierarchy, and cumulative nature of an international energy crisis: Availability, Reliability, Durability, Accessibility, Deliverability, Affordability, Ramifications, and Actions. Through the dynamics of the energy multiplier, accelerator, and deepener, the energy crisis of today could be worsened into an energy catastrophe on the global level.
Because oil price exhibits the most significant direct consequences of the war, the mechanisms impacting oil price movements — market fundamentals, market sentiments, and the new America-specific TACO (Trump Always Chicken Out) Trading — were analysed, along with their potential to cause stagflation in economic activity. This constitutes the heavy “political cost” of launching and continuing the aggression, especially for Trump.
While the focus, in the prevailing narratives, is on West Texas Intermediate (WTI) and Brent crude prices, I observe that the price levels of other crudes — Dubai, Oman, and Urals/Russian — have been and remain significantly higher than those of WTI and Brent. Since the prices of Dubai and Oman crudes are the benchmarks for pricing, with premium, the Arabian Gulf crude oil destined for East Asian markets, and because East Asian refineries are important sources of exported petroleum products to Europe and America, the impact of increased prices of petroleum and petrochemical products on the final consumer reflects the prices of crude oil imported from the Arabian Gulf countries and Russia more, and far greater, than the increase in WTI and Brent crude prices. Hence, there is a need for a mindset shift when considering oil price consequences. This section was premised on information, data, and statistics compiled from reliable international sources.
The second part addressed the repercussions on Iraq’s oil sector and the measures taken by the authorities to mitigate them.
It began by discussing the importance and necessity of activating the contractual clauses related to force majeure by all Iraqi companies affiliated with the Ministry of Oil. This is vital to avoid potentially very high costs Iraq could incur if force majeure were not invoked, particularly in the upstream petroleum projects under the concluded bid rounds and other modalities. The Ministry’s companies have not yet invoked the article in a contractual, standardized, and comprehensive manner.
This part presented and discussed possible and available alternatives proposed by the authorities for exporting crude oil and fuel oil via pipelines and trucks, highlighting the non-availability, limitations, and lack of economic viability of such alternatives.
Data on Iraqi oil exports indicates very low generated revenues during March due to a thin export volume through the southern outlets. The price levels of Basra Medium and Basra Heavy crude oil in the US markets were higher than those of WTI and Brent crude, since SOMO uses another benchmark — ASCI — for pricing its exports to the American market.
The section also discussed the chronic problem of Iraqi refineries, which is characterised by high fuel oil production and limited production of gasoline and diesel/gas oil. The extent to which official directives disregard this chronic reality by calling for increasing refinery production at maximum capacity, without considering the lack of sufficient storage capacity for the fuel oil surplus production, was also discussed.
The problem of associated gas shortages due to halting oil production was also addressed, along with its repercussions on cooking/heating gas — LPG production — and electricity generation activities. This is a chronic dilemma that Iraq has suffered from for decades, and it will only worsen further with the approaching summer, characterised by soaring temperatures.
The Ministry has taken a number of belated and limited measures that cannot compensate for its failure in previous years to take sufficient precautionary measures to confront the consequences of a well-known and highly probable crisis.
The third part includes a number of other important and relevant considerations of geopolitical, geomilitary, geostrategic, and international relations dimensions, as well as concluding remarks.
The event included discussion, comments, and questions after my presentation. The full recording of the event, in Arabic, can be viewed and downloaded through the following link:
https://www.youtube.com/watch?v=_dBrKmWxiFQ [Arabic]
Mr Jiyad is an independent development consultant, scholar and Associate with the former Centre for Global Energy Studies (CGES), London. He was formerly a senior economist with the Iraq National Oil Company and Iraq’s Ministry of Oil, Chief Expert for the Council of Ministers, Director at the Ministry of Trade, and International Specialist with UN organizations in Uganda, Sudan and Jordan. He is now based in Norway (Email: mou-jiya(at)online.no, Skype ID: Ahmed Mousa Jiyad). Read more of Mr Jiyad’s biography here.
