65% of Israelis unable to save
As Iraq and Libya descend into anarchy, they are no longer reliable sources.
Major threats to the regional oil supply are emerging in two countries: Libya, which is moving from failed state to no state status, and Iraq, which is moving towards failed state status.
In Libya, there is no longer a government. Unlike Syria, where the state is battling various insurgent groups as well as the ethnic Kurds in the northeast, Libya no longer has a state for insurgents to attack. It has become the quintessential Hobbesian "war of all against all". The Libyan army and air force have defected en-masse to "General" Hifter (or Haftar), the miraculously resurrected former Ghaddafi army officer Two air force planes have already attacked Islamist bases near Benghazi.
Since the Libyan armed forces were weaker than the various regional, Islamist, and criminal militias, however, their defection to Hifter by no means ensures his success. To this witch's brew must be added the insurgency of the ethnic Berbers in the interior.
What is clear, however, is that given the political anarchy, the economy is crumbling, and in Libya, the economy means oil. Production and exports are already plunging and will undoubtedly decline even more. Libyan crude is light, sweet crude and not easy to replace in refineries not geared to lower qualities of crude. Strike one for the oil price.
Strike two comes from Iraq. There, the Kurdish Regional Government (KRG) just shipped its first oil exports directly by pipeline through Turkey to Europe and beyond. This deal was made between the KRG and Turkey without reference to the authorities in Baghdad. Although, unlike in Libya, there is in fact a state in Iraq, there is for the time being no government because the dominant Shiite parties can't agree on creating a coalition to elect a prime minister. According to the Iraqi constitution, the presidentmust be a Kurd, the vice-president a Sunni, and the prime minister (who has the real power) a Shiite.
In fact, the president is terminally ill and hospitalized in Switzerland. The vice-president was accused of corruption and fled the country. The KRG made its deal and began to export. In retaliation, the government in Baghdad refused to transfer funds due to Kurdistan. On top of all this, an oil tanker carrying Kurdish oil to North America apparently turned around in mid-ocean. Speculation is that the shipper or the potential buyer, or both, were threatened with legal action by Iraq.
Observers await an imminent declaration of independence by Iraqi Kurdistan, which would create a major diplomatic dilemma for other countries. Should they recognize Kurdistan in order to access its oil without fearing legal action? But if they do, what will be the effect on numerous other regional and international independence movements, including the Kurds in Syria and Turkey?
However that works out, the supply of crude from the northern fields controlled by the Kurds is now at risk, another blow to reliable supply. In light of all this, what should other countries and Israel do? The Egyptian government has apparently already decided. It is supplying "Gen." Hifter with equipment and military advisors (the Saudis are providing money) in return for privileged access to the oil of eastern Libya at a concessionary price, which would alleviate the disastrous Egyptian economic and financial situation.
And Israel? Until the oil in the eastern Mediterranean begins to flow, Israel must tie up supplies where it can, and should busy itself with converting its vehicular fleets, such as buses and trucks, to use natural gas instead of gasoline or diesel. In the MENA region (Middle East and North Africa) the unexpected can always be expected. Agility and flexibility are at a premium. Devotion to routine and "received doctrine" are fatal errors.
Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and teaches at the Center for National Security Studies and Geostrategy, University of Haifa.
Published by Globes [online], Israel business news - www.globes-online.com - on June 5, 2014
© Copyright of Globes Publisher Itonut (1983) Ltd. 2013
You comment was recieved and soon will be published.
Thank you for posting your comment, which will be reviewed for publication.
Load more comments
The Central Bureau of Statistics found Israelis gloomier than in the past about their economic prospects.
Lapid: I'll resign rather than raise taxes
The prime minister and finance minister are at loggerheads over the 0% VAT bill.
Shekel flat against dollar
FXCM: NIS 3.67/$ is the rate at which some speculators will choose to realize profits.
Three Israeli universities in world's top 200
QS World University Rankings: Hebrew University is Israel's top placed university.
Exports down only 5% during Gaza conflict
Exports of goods, excluding diamonds, totaled $7.3 billion in July-August.
Q2 growth revised downward to just 1.5%
The previous second quarter growth estimate was 1.7%.
Israel's costliest sports stadiums open
Haifa's Sammy Ofer soccer stadium and Jerusalem Payis basketball arena were inaugurated last night.
Why the shekel is weakening, and who gains
'Globes" talks to leading analysts about the exchange rate trend and the local and global reasons for it.
Flug named among world's best central bank governors
"Global Finance" magazine awards Karnit Flug an "A" rating.
Yesh Atid threatens to quit gov't
Last night, Prime Minister Benjamin Netanyahu froze the party's 0% VAT for first-time homebuyers plan.
Against expectations, CPI falls 0.1% in August
The Consumer Price Index is unchanged over the past 12 months below the government's 1-3% inflation target range.
Israeli businesses target Africa
Infrastructure and services are the focus for Israelis in Africa's fast growing economies.
Treasury sees Israeli economy picking up
Operation Protective Edge will have only a brief impact, the Finance Ministry chief economist predicts.
Treasury: Operation Protective Edge cost NIS 6.5b
The Defense Ministry seeks NIS 9 billion extra for the direct cost of the operation.
Finance Minister rejects NIS 11b defense budget request
All Yair Lapid is willing to concede is a NIS 2.5 billion supplement for salary and pension costs.
Treasury presents 2015 budget
The planned budget includes a 3.18% deficit and no tax increases.
PM: Defense must expand without excessive deficit
Prime Minister Benjamin Netanyahu said Israel's defense spending had to rise, but without the deficit getting out of control.
Yair Lapid: 2015 budget is ready
The Finance Minister said there was a dispute about the defense budget, but that it could be solved.
Lapid and Netanyahu far apart on defense budget
Finance Minister Yair Lapid is not prepared to meet the Defense Ministry's demands for the 2015 budget.
Blavatnik donates $20m to Tel Aviv University
The donation will fund drug development, computer science, cyber research, movie production and more.
Yair Lapid: If Israel were a stock, I'd buy it today
Speaking at the inauguration of the new TASE, the Finance Minister reiterated his promise not to raise taxes in 2015.
Tax chief: We'll get everyone sooner or later
Moshe Asher believes Israelis hold tens of billions of dollars of unreported capital abroad.
2014 state royalties on natural resources: NIS 705m
Tamar gas production pushed natural gas royalties up 51% in the first half of 2014.
Tax revenues soar despite Gaza operation
Tax revenues totaled NIS 21.27 billion in August, NIS 1.5 billion more than the Finance Ministry forecast.
Foreign currency reserves heading for $90b
Israel's foreign currency reserves climbed to a record $87.628 billion at the end of August.
Tax Authority issues ultimatum on o'seas assets
Taxpayers will be given a chance to make voluntary disclosure, or else face criminal proceedings.
One third of Israelis would leave if they could
30% of respondents to a Channel 2 survey said they would emigrate if an opportunity arose.
Who will pay for Operation Protective Edge?
Dr. Werner Puschra argues it is a false notion that welfare states limit the private sector.