To Win the Oil Contest, Saudis Must First Win in Yemen and Syria

Business is jumping in and around Tehran. Most Middle East capitals and other parts of the world are getting organized for the aftermath of the still-to-be-concluded final nuclear accord between Iran and the six world powers – some looking out for pickings; others in dread for their security. Most take it for granted that the deal is in the bag.
Vice President Joe Biden laid it on the line when he said April 30 to the Washington Institute: “Let’s get something straight so we don’t kid each other. They already have paved a path to a bomb’s worth of material. Iran could get there now [to eight bombs] if in two or three months without a deal they walked away.
So DEBKA Weekly got it right when it reported in 2012 that Iran had already reached the capacity to build two to four bombs.
It is therefore too late to wonder why American and Israeli leaders lied when they assured the world that Iran could not reach that point before 2016 – or even 2017, or ask why they reneged on their pledge to use military force to prevent a nuclear-armed Iran.
Still, there is no certainty that the negotiations will actually yield a final accord. It is far more likely that the talks will drag on at least until the end of Barack Obama’s second and last term as president in January 2017.
Not that this is stopping the various interests jumping ahead with their plans.

Is anyone holding their horses?

Monday, May 4, Tehran ran this notice: A US delegation will visit Tehran this week to explore investment opportunities in the country’s oil industry. It will hold meetings with Iranian officials, representatives of oil companies and their contractors — and also explore cooperation opportunities with Iranian companies working in the oil industry. The Mehr News Agency reported: “It is predicted that following the visit and possible removal of sanctions against the oil industry, we will witness the presence of major international US oil and gas companies in Iran in the future.”
Just five days earlier, on April 4, when US Undersecretary Wendy Sherman saw India and other customers of Iranian oil seeking to increase their trade with Tehran, she called out: “Hold your horses. We are not quite at an agreement yet.”
Barack Obama, having given the green light to US business interests to start exploring investment opportunities in Tehran before sanctions are lifted, can’t expect to find Gulf Cooperation Council leaders trusting in his bone fides, when they gather at Camp David on May 13 – or Israel’s Binyamin Netanyahu.
To cover this angle, Washington officials have come up with a pretext: The US delegation is not really in Tehran to discuss investment in developing Iranian oil fields – which would be a lengthy project taking at least three years – but to impress Iran with the seriousness of America’s future plans for boosting economic and financial ties.

Salman stakes mastery of the oil market on Yemeni, Syrian war wins

The visit, according to this version, aims at smoothing progress toward a comprehensive nuclear deal, by giving President Hassan Rouhani and Foreign Minister Mohammed Javad Zarif the incentive to prove that domestic hard-liners are wrong to oppose the deal.
Our sources stress that the oil question is just one aspect of the tug-o’-war between Washington, Tehran and Riyadh. They are also maneuvering for the role of senior trendsetter in the post-nuclear accord era.
Saudi King Salman laid down a checker on May 1.
Just two days after his major government reshuffle (DEBKA Weekly 661: Quiet Revolution in Riyadh: Saudi Arabia is Ruled by Its First Royal Triumvirate.), the Saudi king gave his son, Defense Minister Mohammed bin Salman, the added task of chairman of the newly-formed, ten-member Supreme Council of Saudi Aramco.
By this step, the monarch bound the kingdom’s energy and military policies into a single interdependent package. The king was telling Tehran and Riyadh’s Gulf neighbors that the Saudis were determined to come out ahead of the Yemen and Syrian wars and so end up as masters of the world oil market and its pricing policy.

Iran and Iraq step up oil production

Oil prices, which moved up by a moderate $50 in April, are directly affected by two ongoing factors:
1. Until now, the US shale oil price held steady and so kept a lid on crude prices. But of late, Saudi oil experts have discerned a decline in the US shale industry, with some firms holding back on further investment in fracking and, in some instances, shutting shop altogether.
Monday, May 4, financial expert David Einhorn slammed US shale drilling as “wasteful, expensive and a terrible investment.” He singled out Concho Resources Inc, Whiting Petroleum Corp. and Continental Resources Inc. as examples of shale explorers that “spend too much and generate too little cash.”
As well as shale, active US oil drilling has also fallen rapidly this year.
For Saudi Arabia, this is good news, because it knocks down America’s bid to rival the kingdom as the world’s leading producer of oil.
2. But it is also offset by the re-entry into the oil market of Iran, which has managed to expand daily production to 3.4 million bpd, and Iraq, which by last week was pumping 3.2 million bpd and on the way to realizing its potential of 6 million bpd.
It is in Riyadh’s interest to put a cap on the output of Iran and Iraq.
King Salman appears to be working on the premise that if Saudi Arabia is to contain Iran’s expanding influence and establish itself as regional master, it must carry the day in Syria by overthrowing Bashar Assad, and beating back pro-Iranian forces in Yemen.
This struggle for preeminence focuses for the present on oil. The gas war is still to come.