DID ARAB UPHEAVAL CHANGE the ENERGY GAME OR the WEST STILL HAVE an EDGE on IT? by Necdet Karakurt, Serhat Çubukçuoğlu and Oğ

DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

by Necdet Karakurt, Serhat Çubukçuoğlu and Oğuzhan Akyener

ABSTRACT politics, balance and role of key oil players in Africa and Middle East will help determine It all started in Tunisia on 18 December how global politics have been reshaped over 2010 and reordered many countries in the Arabic upheaval. To do that, all current im- Arabic Geography. Whereas some govern- port and export rates of the due countries, ments could not manage the upheaval and existing reserves, production and infrastruc- collapsed, some others had to face heavy civil ture of exports, international investors and disorder-protests and occurrences of neces- companies in the region and important proj- sary governmental reorganizations. ects will be considered. In addition, pre-Arab Spring Era situations will be compared with “It all started in Tunisia Many experts have studied and further ana- the current values and changes in energy lyzed the whole aspects of this Arab Spring games will be identified. on 18 December 2010 by the sight of economics, military, sociology, religion and global politics. Obviously, there and reordered many are definite changes in reorders of those af- ARAB SPRING AND ENERGY GEO- fected countries and so their presence in the countries in the Arabic POLITICS OF THE MIDDLE EAST globe requires new policies. As a short note, Geography. Whereas today’s world largely depends on energy pol- Middle East is the most tumultuous region itics because they seem to play a key role in in the world, plagued by sectarian and eth- some governments determining global policies. From a point no-religious violence.1 Situated in a geopolit- of view, it is unclear why nobody has yet re- ical hotspot marked by political uncertainty, could not manage the viewed results of the Arab Spring through the it is a stage of shifting power play of partner- sight of energy policies. It is a good idea to ships, where most countries of the Middle upheaval and collapsed, note that if not all, most of these countries East suffer from democratic deficiencies and are definitely oil producers and their folks weak public confidence in illegitimate lead- some others had to face crave for democracy, which indeed has taken ers. In a multipolar world with diverse na- heavy civil disorder-pro- too many lives to owe. Was it worth taking tional and transnational interests, the region the initiative and walking the democracy line seems to be more fragmented than ever with tests and occurrences of with heavy loses and uncertain future due ensuing intense confrontation from Yemen to to lack of knowledge and control over mili- Syria. Even if this so-called Arab democratic necessary governmental tia groups? Maybe, those folks had no idea movement culminates itself in responsive and about the outcome but the West knew about representative political systems, the transition reorganizations.” how hard the transition would be. Major oil will be long and painful, as seen in the now companies like to have the edge to act inde- four-year old tragic civil war in Syria. pendently or run their international affairs as smooth as possible. They would prefer sur- Perhaps, not a fully appreciated game-chang- passing governments and their laws to extract er behind assessment of the impacts of the and sell oil from known commercial reserves. Arab Spring is the rising importance of nat- Or perhaps, their preference would be caus- ural gas and the power struggle over control ing some changes that are essential as far as of energy sources around the Fertile Crescent. who controls the laws or the oil markets in Clean-burning natural gas, despite its expense such countries. and varying demand, is a major import pillar in OECD Europe, which is more eager than Understanding the causes of the Arab Spring, ever to phase out coal and undertake green- the outcome of collapses, rebuilding and house-gas emissions reduction commitments. highlighting the effective changes in energy While European natural gas consumption is

ENERGY POLICY TURKEY Page 8 projected to grow by 0.3% till 2020,2 Russia’s bility of a political resolution in Cyprus due annexation of Crimea and monopolization to unattractive returns on investment in gas of energy supply routes through Ukraine to finds. This would have been unacceptable for Europe has led energy consumers of the in- the Obama administration scrambling for dustrialized world finally to become serious foreign policy success, simply because rec- about hydrocarbon alternatives. At the G7 onciliation over Cyprus would allow U.S. oil Rome Ministerial Summit in May 2014, companies to make safer investments into gas European leaders highlighted the need to ad- exploration, substantially reduce Europe’s re- dress security challenges and ensure diversifi- liance on Russia for energy supplies – while cation of transit routes to sustain safe and un- giving Cyprus, Israel, and Egypt an edge interrupted access to energy.3 Meanwhile, the over Iran, Iraq and Syria – and help to bring Eurozone crisis since 2008 has been a severe pro-American countries together in a region impediment for Greece and Cyprus, both of that had become increasingly anti-western which found large hopes in offshore energy with the rise of Islamic fundamentalism.9 exploration projects to become net exporters Moreover, standalone production and stor- of oil & gas and recover from bankruptcy in age in an LNG liquefaction facility in Cyprus the coming decades. The Arab Spring thus would have insufficient capacity to economize intersected with Europe’s alarming economic on gas volumes in its own Exclusive Econom- slowdown, creating diverging push and pull ic Zone (EEZ), therefore desperately needing dimensions to the inter-regional relation- Israel’s stake to reach a credible volume. If ship.4 On top of this tectonic shift in ener- Turkey could be part of a brokered peace deal gy geopolitics, Turkey, with a projected use in Cyprus, this would decrease political risk of 2.5 tcf5 of natural gas per year by 2020, and increase affordability of a Cypriot-Turk- “Had the Arab Spring sought to diversify its sources of energy geo- ish pipeline project that may be linked with graphically and translate this into economic the “Southern Corridor” from Azerbaijan to not taken place, Rus- and foreign policy gains.6 Europe and by-pass Russia. sia’s plan to control the

The competition among littoral states of Meanwhile, global economic slowdown and alternative route over the eastern Mediterranean on one side and the accompanying slump in oil prices dragged the Persian Gulf on the other to exploit and down growth in oil exporting countries of Turkey to the West would monetize on rich offshore energy resources is the Gulf. Even though the Gulf Cooperation a by-product of the struggle to exert political Council (GCC) capital markets are viewed have been successfully influence for furtherance of national interests as relatively safe destinations for risk capital in the region. during periods of globally financial market accepted by its major volatility, post-Arab Spring political instabil- Had the Arab Spring not taken place, Rus- ity and a protracted downturn due to fiscal consumer market in sia’s plan to control the alternative route over deficits have negatively impacted the region’s Europe.” Turkey to the West would have been success- overall outlook. Iran’s come-back to the world fully accepted by its major consumer market stage by the prospect of lifting of internation- in Europe. On the other hand, Turkey’s plan al sanctions places it in a better position to to distribute Qatari gas to Europe would in- weather oil-price shocks, while the drop in crease Turkey’s ability to suppress Russia’s oil revenues may squeeze liquidity in the stronghold as the major supplier of Europe. GCC, putting ever more pressure on the rul- However, US$10 billion-worth Iran-Iraq- ing monarchs to carry out crucial reforms to Syria natural gas pipeline7 from Iran’s South contain their closest foe’s heightened political Pars gas field to the Mediterranean would be influence. This complex environment actual- a lifesaver for Europe to by-pass Turkey, Qa- ly presents an opportunity for emergence of tar, and Israel to become the prime supplier a sustainable and inclusive post-oil economy of the region to Europe. Such a move could for Arab states in the long run. outmaneuver Israel’s initiative to export newly found gas from the “world’s biggest deep-wa- Against this backdrop, and thanks to the ter reservoir in a decade”,8 and undermine changing landscape of the region, Turkey Turkey’s key position, and hinder any possi- viewed the Arab Spring as an opportunity

Page 9 FIRST ISSUE DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

and put itself on the map as an important tries are summarized in Table 1. Important player in energy geopolitics, acting as a tran- information presented on the table could be sit route between the Central Asia, Middle listed as follows: East, and Europe. Turkey’s soft power resting “Turkey viewed the Arab on its cultural, historical, and commercial • Only potential exporter and importer links with the neighborhood set the founda- Spring as an opportunity countries are focused. tion stone of this re-alignment. Most recent- • Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and put itself on the map ly, the transport of crude oil to Israel through Turkey’s Mediterranean port of Ceyhan via United Arab Emirates are the most im- as an important player pipelines from the semi-autonomous Kurdish portant exporters in the region, that will Regional Government in Iraq, the holder of be given more attention to. in energy geopolitics, world’s fifth largest deposits,10 underscored • Israel and Syria might be accepted as the Turkey’s tactical maneuverability and keen potential future exporters after 2030. acting as a transit route interest to consolidate its influence as an eco- • The analysis of Arab Spring’s effects from nomic hub in the eastern Mediterranean. In between the Central the view of being an exporter or an im- a region polarized by prolonged conflict, au- porter confirms the following results; Asia, Middle East, and tocratic tendencies, and illegitimate sub-state actors, Turkey still represents the best model • Analysis shows no direct relation between the effect incidence of Europe.” for institutionalized democratic governance and diversified economic development in a Arab Spring and being an exporter Muslim-majority society. or an importer. • The information in the Arab Spring Effect column implies; MIDDLE EAST COUNTRIES: TODAY • HIGH means: “There is a civil (POST - ARAB SPRING ERA) war.”. To successfully evaluate the effects of the Arab • MIDDLE means: “There are spring on the due countries, energy politics, governmental changes or ruin- import and export rates, existing reserves, ous protests or attacks.”. production volumes, related infrastructures, • LOW means: “There are some international investors and active companies mild protests.”. in the region and important projects should be taken under consideration. As far as the production, reserves and export potentials of the due countries are consid- The oil & gas production - reserves - export ered, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, potential volumes of the Middle East coun- and United Arab Emirates can be elected as

Oil Oil Export Gas Export Gas Oil Reserves Gas Production Country Situation Arap Spring Effect Production Potential Potential Reserves (mmmbbl) (bcma) (mbbld) (mbbld) (bcma) (tcm) Iran EXPORTER LOW 3200 1300 158 167 10 34 Iraq EXPORTER MIDDLE 3000 2400 140 0,6 0 3,2 Israel POS. FUTURE EXPORTER NO EFFECT 0,5 0 0,011 6,4 0 0,3 Bahrain IMPORTER MIDDLE 58 0 0,13 13,6 0 0,1 Jordan IMPORTER LOW 0 0 0,001 0,3 0 0,006 Kuwait EXPORTER MIDDLE 2800 1400 104 16 0 1,8 Lebanon IMPORTER MIDDLE 0 0 0 0 0 0 Syria POS. FUTURE EXPORTER HIGH 70 0 2,5 6 0 0,25 Palestine IMPORTER NO EFFECT 0 0 0 0 0 0 Oman EXPORTER LOW 950 830 5,5 30 10 0,9 Qatar EXPORTER NO EFFECT 2050 1400 25,25 156 120 25 Saudi Arabia EXPORTER LOW 11600 6900 269 103 0 8,3 United Arab Emirates EXPORTER NO EFFECT 2800 2500 98 53 8 6,1 Yemen EXPORTER MIDDLE 130 43 3 7,7 6,7 0,5 Turkey IMPORTER NO EFFECT 50 0 0,3 0,5 0 0,007

Table 1: The chart displays oil & gas production - reserve & export potentials of Middle East countries (Production & Reserve values are adapted from CIA FACTBOOK).

ENERGY POLICY TURKEY Page 10 NECDET KARAKURT, SERHAT ÇUBUKÇUOĞLU AND OĞUZHAN AKYENER

the major exporters for the world markets. porting any oil. Syria might be added due to being a popular • The table indicates that nearly all these exporter before the Arab Spring Era. Hence a exporters are selling half of their total new list of countries can be shaped to focus supply volumes to these giant players in and taken into consideration. After select- oil market. ing the main countries in the Middle East in accordance with the importance of ener- In addition to the export rates, understand- gy export (mostly oil), destinations and the ing the relations of these exporters with the percentages of the export volumes for those 5 major players in energy game, huge inter- destinations will have to be analyzed. national ongoing upstream projects (exploration and / or production) and the number of To determine the most important destina- investors working in these exporters’ oil mar- tions, the largest oil and gas importers, their kets are important. Looking at the number of effects on the international politics and the companies from the major oil players of the largest economies in the world are to be ex- world that actively operate in the Middle East amined carefully. The result of this examina- might yield better analysis results to identify tion states that US, EU, China, Russia and the effects of major oil players in those coun- Japan could be highlighted as the first five tries. The number of operating companies is most important energy players in the world. given on Table 3. Table shows the number Table 2 displays the relation between exports

DESTINATIONS US EU CHINA RUSSIA JAPAN IRAN 0% 10% 40% 0% 7% IRAQ 14% 18% 22% 0% 2% KUWAIT 16% 4% 30% 0% 10% QATAR 2% 22% 3% 0% 20% SAUDI ARABIA 10% 10% 15% 0% 10% UAE 1% 2% 10% 0% 32%

EXPORTERS SYRIA 0% 0% 0% 0% 0%

Table 2: Middle East exports chart to due destinations.

of US - EU - China - Russia - Japan orig- of main countries in the Middle East and im- inated operating companies working in due port destinations to those defined above. countries’ upstream market. Note that companies who suspended their activities in the Certain facts can be extracted from Table 2: due country are excluded. However, “force majeure” declared companies are included. • All percentages in the table refer to the Moreover, Canadian companies are accepted ratio of export volume to due destination as US companies. over the exporter countries’ total export volume. As given on the Table 3; • Even though being an important oil exporter country, and also there may be • EU is the most active player in oil game some small volumes of trade with the in the Middle East with 27 companies. Middle East countries, Russia is accepted • US come as the second by count of 13 not importing any oil from the exporters companies. above. • Russia and China both have 7 companies • Due to current sanctions and ongoing in total. civil war inside, Syria is accepted not ex- • Japan seems to be the worst in the game

Page 11 FIRST ISSUE DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

MAJOR PLAYERS US EU CHINA RUSSIA JAPAN IRAN - - 1 1 - IRAQ 7 12 2 4 - KUWAIT - - - - - QATAR 2 5 1 - 1 SAUDI ARABIA 1 1 1 1 - UAE 2 8 1 - 1 1 1 1 1 - EXPORTERS SYRIA

Table 3: A chart displaying the number of upstream companies in due countries.

by only 2 companies but Japan’s involve- tion given on Table 3, 4 and 5, comparison ment in the consortiums is inevitable. charts are formed and illustrated on Table 6 and 7. Major shift in the export potentials Other balances such as investor tendencies, seems to hit Iran, Iraq, Kuwait and Saudi the shifts and other important key notes relat- Arabia. On the other hand, changes in com- ed to the energy markets of the Middle East pany activities are mainly in Iran, Iraq and (Post-Arab Spring Era) will be mentioned in UAE, which note that Arab Spring resulted the next sections. in an inevitable power shift between the key players.

MIDDLE EAST COUNTRIES: BE- After laying out some important facts regard- FORE 2011 (PRE - ARAB SPRING ing what has happened in the due countries’ ERA) energy markets, certain comments and analysis will be presented in the next sections. Making a logical comparison for energy market indicators of due exporters requires analyzing the whole data of the current and WHAT IS DIFFERENT IN THE MID- pre-Arab Spring Era regarding the knowledge DLE EAST: COUNTRY ANALYSIS and information from the Middle East. That’s why; production - reserves - export potentials Changes in each country in the Middle East of the major exporters in the Middle East (See are carefully analyzed to certain extents. Some Table 4) and the changes in the number of of the extents can be mentioned as influence US - EU - China - Russia - Japan originated of foreign investors, production differences, operational companies in the due countries’ political balance, etc. The information pro- upstream market (See Table 5) are prepared. vided below is extracted from IHS database. It is divided into sub categories for each coun- Analyzing Table 1 and utilizing the informa- try and the general summary is given at the

Oil Oil Export Gas Gas Export Oil Reserves Gas Reserves Production Potential Production Potential (mmmbbl) (tcm) (mbbld) (mbbld) (bcma) (bcma) IRAN 4300 2550 137 139 8 30 IRAQ 2400 1900 115 1,2 0 3,2 KUWAIT 2450 2100 104 11,5 0 1,8 QATAR 1400 1200 25,5 117 95 25,4 SAUDI ARABIA 10500 7600 263 84 0 7,8 UAE 2800 2400 98 49 0 6,5 SYRIA 401 260 2,5 6 0 0,25

Table 4: A chart that displays Production - Reserves - Export Potentials of the Middle East exporters (Production & Reserve values are adapted from CIA FACTBOOK).

ENERGY POLICY TURKEY Page 12 NECDET KARAKURT, SERHAT ÇUBUKÇUOĞLU AND OĞUZHAN AKYENER

MAJOR PLAYERS US EU CHINA RUSSIA JAPAN IRAN 1 4 5 2 1 IRAQ 1 3 2 2 1 KUWAIT 0 0 0 0 0 QATAR 3 4 2 0 1 SAUDI ARABIA 1 2 1 1 0 UAE 6 5 2 0 0 2 4 1 0 0 EXPORTERS SYRIA

Table 5: A chart showing the number of upstream companies in due countries.

Difference Between 2015 and 2010 Values Oil Export Potential (mbbld) Gas Export Potential (bcma)

IRAN -1250 2 IRAQ 500 0 KUWAIT -700 0 QATAR 200 25 SAUDI ARABIA -700 0 UAE 100 8 SYRIA -260 0

Table 6: The chart compares Oil & Gas Export Potentials of Middle East countries.

PLAYERS US EU CHINA RUSSIA JAPAN IRAN -1 -4 -4 -1 -1 IRAQ 6 9 0 2 -1 KUWAIT 0 0 0 0 0 QATAR 1 -1 1 0 0 SAUDI ARABIA 0 -1 0 0 0 UAE -4 3 -1 0 -1 SYRIA -1 -3 0 1 0 “Oman: New oil and gas Table 7: A chart displaying the changes in the number of upstream companies that operates in the Middle East. discoveries show a pos- end of this section. gas treatment facilities and allows for export of natural gas. itive outlook for Oman. OMAN Additionally, light tight oil Companies operating in Oman include Changes via Arab upheaval show some prog- American based Occidental Petroleum Corp. unconventional practices ress from democracy perspective of Oman as (OXY) and Petro Tel Inc. of), European based new ‘Petroleum and Minerals Law’ issued by DNO ASA, RAK Petroleum Public Compa- are about to add up to Oman government is taken place in 2011. ny Limited a subsidiary of DNO ASA, Fron- The new law engages the Ministry of Oil and tier Resources International Plc., Circle Oil production.” Gas in being the authority as far as oil and gas Plc. and Tethys Oil AB, and Middle East activities are concerned. New features in the based CC Energy Development SAI Ltd. and law covers environmental protection, natural several Oman companies. Oman appears to

Page 13 FIRST ISSUE DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

“Iraq plans to build oil be unattractive for large scale companies but ing influence in Iraq. Upheaval effect shows a Shell and Total prefer to be shareholders in positive outlook on the reserves but the insur- export pipeline to Aqaba some of the exploration and development gency threats make it hard to bear with. port of Jordan. Agree- contracts. YEMEN ments with Iran over Ira- Petroleum Development Oman Llc. (PDO) plans to build world’s largest solar plant to Public unrest in 2011 ended up in cabinet nian gas exports appear produce steam for use in its unconvention- change that resulted in Yemen’s ambassador to al practices. Other remarkable activities are France as new Oil Minister. Current oil pro- to be Iran’s increasing those ‘Oil Park Project’ awarded to British duction in Yemen is subject to decline steeply based Amec Foster Wheeler and development because of insurgent attacks to pipelines. Se- influence in Iraq.” of new power plants contracted to Hyundai curity threats caused many companies to halt Engineering Company Limited of Korea. their activities throughout the country and some of the operational companies happened New oil and gas discoveries show a positive to withdraw from their licensed contracts. outlook for Oman. Additionally, light tight Major actors in Yemen are a bundle of Ameri- oil unconventional practices are about to add can, European, Middle Eastern, Pakistani and up to production. Iran succeeds constructing Chinese companies. a pipeline to export gas through Oman to Far East. QATAR

IRAQ One of the main issues that Qatar has to resolve is the sharp increase in population since Democracy is at its baby steps in Iraq due the growth is about 300% in the last 10 years. to conflicts between Iraqi Government and Restructuring of Qatar Petroleum has taken diverse sects within the country. Namely place. Large scale companies such as Exxon- Kurdish Regional Government claims some Mobil, Total SA and Shell mostly operates in shares from the oil revenue, which Iraqi Gov- Qatar through downstream projects. Qatar- ernment subsequently started to approve. An gas LNG Process Trains, Pearl Gas to Liquids agreement is signed with Kuwait for the ex- Project, Al Karaana Petrochemicals Complex, ploitation of cross-border fields. Iraqi govern- new condensate refineries in Laffan are -ex “Yemen: Security threats ment establishes new state oil companies to amples of high budget downstream projects. caused many companies increase its exploration and production activ- There is no insurgency in Qatar and oil pro- ities around the country. duction follows a declining trend. to halt their activities Insurgency threats interrupt a fast steady pace SAUDI ARABIA throughout the country of work in the region. However, Kurdish Region of Iraq is able to release tension for King Salman appoints Minister of Petroleum and some of the opera- exploration practices. That is why almost all and Mineral Resources as new Chairman of companies prefer performing in the Kurdish Saudi Aramco. Main actor in Saudi Arabia tional companies hap- Region. Keeping in mind that Iraq is accept- is its own petroleum company, Saudi Aram- ed to having one of world’s largest oil reserves, co, which is also discovering and evaluating pened to withdraw from it attracts companies of all scales. ExxonMo- country’s unconventional potential. How- their licensed contracts.” bil, BP, Chevron, Total SA, DNO ASA, ENI, ever, China Petroleum & Chemical Corp. Kuwait Energy Co., Repsol SA, Talisman (SINOPEC) and Lukoil of Russia continue Energy Inc., Lukoil, Genel Energy Plc., Cres- their exploration activities in the country. cent Petroleum Co. Inc., Chinese national oil On the other hand Total SA in a joint ven- companies and several other are actively oper- ture with Saudi Aramco governs export refin- ational in the region. ery complex. Kellogg Brown & Root (KBR) agreed building billions of dollars’ worth re- Iraq plans to build oil export pipeline to Aqa- finery complex. ba port of Jordan. Agreements with Iran over Iranian gas exports appear to be Iran’s increas- UNITED ARAB EMIRATES (UAE)

ENERGY POLICY TURKEY Page 14 NECDET KARAKURT, SERHAT ÇUBUKÇUOĞLU AND OĞUZHAN AKYENER

International Renewable Energy Agency to American and European companies. The “UAE: Oil and gas re- (IRENA) headquartered in Abu Dhabi in same situation is true for engineering, pro- 2009. UAE Government placed US$136 curement, construction and commissioning serves in UAE appear to million to fund the organization in 2015. In provision. increase steadily.” December 2013, Iran and UAE reached an agreement on Tunb and Abu Musa Islands LEBANON negotiations. National Iranian Oil Compa- ny stops delivery of gas sales and purchase Lebanese government appears to be dys- agreement with Crescent Petroleum Co. Inc. functional. New ministry of Energy signs an based in UAE. Drilling activities are increased agreement with Norway to assist Lebanon in the country resulting in constructing new in oil and gas sector. Oil and gas reserves are rigs. UAE based companies are main actors questionable and Lebanon commences nego- in the country where as Japanese, European tiations with Cyprus to delimit an exclusive and American companies also practice ex- economic zone. US will provide assistance to plorational activities. Dodsal Group of In- do so and Lebanon will be able to open its dia succeeds million dollars’ worth pipeline offshore bid round. “The future of Syria is replacement construction deal. Oil refinery and LNG import facility in Fujairah are up SYRIA still cloudy as the gov- for construction by International Petroleum Investment Corp. (IPIC) based in UAE. Oil The future of Syria is still cloudy as the government and opposition and gas reserves in UAE appear to increase ernment and opposition forces are fighting forces are fighting each steadily. each other. The American and European ban over Syria is ongoing. Production rates other.” JORDAN dropped significantly due to war in the country. Russia’s Soyuzneftegaz starts exploration- Jordan has a new Minister of Energy and al activities in offshore Syria. This might be Mineral Resources as of 2015. The country is Russia’s way of holding power in the Medi- found to be unattractive for oil and gas indus- terranean. try since its reserves are small. Main actors are European companies and major events might ISRAEL be pipelines to export gas from Iraq, Gaza in Palestinian territories and Egypt. Oil shale Major operational companies are Israeli com- practices are favored in Jordan to increase its panies but American based Noble Energy hydrocarbon potential. stands out as a foreign investor in the country. Israel’s oil and gas reserves have a sharp “Israel’s oil and gas BAHRAIN increase after the offshore discoveries in 2010, when Arab Spring started. Perhaps, it is all re- reserves have a sharp The country has an investment plan in the oil lated; Israel has realized discoveries of huge and gas sector for a time range of 20 years, oil and gas reserves that might have ended the increase after the most of which will be spent on exploration power of Oil Rich Arab Era but of course, it offshore discoveries in and production. Japanese and American com- did NOT! panies are operational in the country. Bahrain 2010, when Arab Spring is evaluating its unconventional reserves and IRAN its production is rising significantly. Bahrain started.” Petroleum Co. (BAPCO) is to renew old Sanctions against Iran because of its nuclear pipelines and construct new refineries. program had been effective since 2012 but they are lifted gradually. The sanctions had a KUWAIT notable impact on Iran’s oil and gas reserves since the ban on oil and gas exports dropped Kuwait is one of the largest oil producers in the production rate and hence lowered the oil the Middle East. Kuwait Oil Co. Ltd. over- revenue. National Iranian Oil Co. (NIOC) sees all the explorational activity in the coun- is the major player along with a couple of try. Contracts to extract heavy oil are given Chinese companies since the other operating

Page 15 FIRST ISSUE DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

companies had to leave due to sanctions. Iran er but the idea was presumed by US and EU is trying to build a pipeline web to export its and that is how Syria has got agitated. natural gas by building routes to Pakistan, Iraq and Oman. An important note is that The countries with low to middle effects are EU and US push Iran to allow foreign oil mentioned as having some governmental companies to enter the country right after changes, protests and attacks. Among these lifting the sanctions that will give an oppor- countries (Iran, Iraq, Bahrain, Jordan, Ku- tunity for American and European compa- wait, Lebanon, Oman, Saudi Arabia and Ye- nies to invest in downstream and upstream men), Lebanon, Bahrain and Jordan are treat- “The acts of cold war in projects. ed as Palestine since they are believed to have Syria, which is the most limited reserves. Jordan might be an example The impact of the Arab Spring over Middle country for being unpopular due to having affected country from the Eastern countries (See Table 1) can be relat- no hydrocarbon reserves. The effect of Arab ed to the country analysis data as a result of Spring in this country might be low but un- Arabic Upheaval, have what has changed in the energy game. Several noticed. Bahrain is under American and Jap- countries listed on Table 1 i.e. Israel, Pales- anese influence. The new investment plan in resulted in an unrest that tine, Qatar, UAE and Turkey are not affected the oil and gas sector provides cash flow to from the upheaval. One reason may be they foreign investors. Its oil reserves are based on is triggered by terrorism either have no potential hydrocarbon reserves its unconventional reserves. Lebanon, on the such as Turkey and Palestine or provide safe other hand, seeks assistance from EU and US and insurgency.” investment opportunities to foreign investors to evaluate its offshore reserves and delimita- as Israel, UAE and Qatar do. Turkey has been tion of economic zone with Cyprus. investing its offshore assets in Black Sea and Mediterranean Sea but it has no luck so far. As stated on Table 1, Oman has low impact However, Turkey knows the fact that it is lo- from the Arab Spring and the country re- cated between the oil producer and the con- view approves this finding because changes in sumer countries. This fact drives Turkey to ac- Oman’s oil market are succeeded by the new complish being the energy corridor between Petroleum and Minerals Law. The outcome them. The war in Syria has set back the plans of new petroleum law is giving flexibility to to be an energy corridor. Palestine has not re- foreign investors to sign contracts for big ally attracted any investors because of the se- projects such as power plants, gas treatment curity problems and no possible hydrocarbon facilities and unconventional practices. It is reserves. The rest of the unaffected countries quite possible to imply high European and (Israel, UAE and Qatar) have political sta- US involvement in Oman and Yemen except bility that attracts foreign investors. Qatar’s that threats to pipelines in Yemen imply hard- reserves have already been assessed that there ship on the investors. Saudi Arabia resembles is unlikely a debate for conflict on possible Qatar as the fight for oil is characterized over future reserves. Instead, the debate is for bil- downstream projects such as refinery com- lion dollars’ worth huge downstream projects. plexes since Saudi Aramco is the major player UAE is another perfect environment for EU in its own country but let’s keep in mind that and US companies to overtake high stakes on US influence over Saudi Aramco is inevitable. big upstream and downstream projects. Isra- Kuwait can be accepted as the backyard of US el seems to be staying out of the conflicts in and EU. Kuwait Oil Co. Ltd. oversees all the the region but perhaps, this is because it hides exploration activities but the unconventional behind US, which acts as the main political and downstream projects are rewarded to EU dominator. Israel’s great offshore discoveries and US companies. brought out the idea that Israel could supply gas and be a port to Arab gas to Europe or Iraq has its share from the upheaval since Iraqi to Turkey. This would ease security concerns government seems unable to have control of energy routes and provide an alternative over the Iraqis but again attacks continues to for Russian gas under the stronghold of Is- threat stability since US occupation. Govern- rael over Arab gas. However, discoveries were mental changes still require more work to sta- insufficient for Israel to be the prime suppli- bilize the country. Europe and US’ absolute

ENERGY POLICY TURKEY Page 16 NECDET KARAKURT, SERHAT ÇUBUKÇUOĞLU AND OĞUZHAN AKYENER

influence is based in Kurdish Region as there insurgency and oppositions should be a must seems to be very large oil and gas reserves. to stabilize the region. On the other hand, the diversity of sectarian outlook in the region is open to interference Governmental institution has come to a halt by Iran. The acts of cold war in Syria, which in Syria since Syrian Government is unable to is the most affected country from the Arabic settle an agreement with the opposition lead- Upheaval, have resulted in an unrest that is ers and stimulate the war within its borders triggered by terrorism and insurgency. Syria’s causing a great loss of soil to Syria. Coalition “Since many of the future holds instability since Russia’s military forces formed by US and Europe have been intervention changed the game. Exploitation applying sanctions against Syria and they are tribunal masterminds of its possible offshore reserves will have to trying to dismantle a terrorist group (Daesh) wait until the country stands on its own foot. that threats both Iraq and Syria. Russia, Iran are easily manipulated and China, on the other hand, are acting Iran’s involvement in the Arab Spring is quite by money and power, for- notable in Syria. After US occupation in Iraq as supporting Syrian Government against and / or rebuilding of Iraq, Iran has spread the coalition and the rebel groups. Russia’s eign political involvement through the country due to its great influence aim towards having a share in energy game over a large number of Iraqi Shiites. US and through Mediterranean seems to be paying can easily deteriorate EU forced Iran over its nuclear program by out for good but the Middle East continues applying sanctions but Iran and Russia has to suffer from this act. In fact, the area is region’s fragile structure. gotten closer and both countries acted as al- longing for a prolonged rest. lies over the war in Syria or let’s say the war in Hence, control over energy game. The numbers on Table7 states the number of foreign companies practicing business in tremendous oil reserves, the region decreased since the start of Arab related infrastructures, RESULTS movement. Iran might be omitted because changes in the numbers are due to the sanc- and agreement deals are The unrest in the Middle East still continues tions against Iran’s nuclear program. Perhaps especially in Syria and Iraq, where there are the most important change is the fact that subject to be broken by severe disputes regarding who has the control American and European involvement in the over areas, where radical groups pose threats. Middle East is shifting towards downstream the current authority or The region is susceptible to political influence projects in calmer states since the reserves in because many countries in the region are gov- those countries are bound to decline and to insurgency attacks.” erned by Sultans and religious orientation is mention, American and European companies quite diversified since each tribe has its own already hold shares in the largest producing way of believing in God, living, and acting fields. Small and mid-size companies are by their sectarian traditions. This means if still actively running their businesses in the a Sultan’s ruling weakens, dramatic power south part of Middle East. However, Kurdish shifts and changes in the way of handling the Region of Iraq is the new target for great re- laws and living conditions are expected. Since serves, hence very attractive for major players. many of the tribunal masterminds are easily manipulated by money and power, foreign US and Europe have a direct control over the political involvement can easily deteriorate area, which is why Russia prefers interacting region’s fragile structure. Hence, control over with Syria to have a share from the abundant tremendous oil reserves, related infrastruc- oil and gas reserves. As pointed out earlier in tures, and agreement deals are subject to be this article; if Arab Upheaval had not hap- broken by the current authority or insurgen- pened, EU and US were planning to oversee a cy attacks. This is exactly what is happening pipeline from Iran to Mediterranean through in Syria, Iraq and Yemen these days. Radical Iraq and Syria, which would have been the Islamic groups occupy large areas in Syria and longest in the Middle East, with possible ex- Iraq, and cause chaotic environment to deal tensions to Lebanon and Greece. Along with with. Yemen is suffering from attacks to its Syria being listed as a potential future gas pipelines as these attacks drop the production exporter in Table 1, Iran seems to hold the rate and so weaken Yemen’s stability. Ending edge to be a prime supplier for Europe with

Page 17 FIRST ISSUE DID ARAB UPHEAVAL CHANGE THE ENERGY GAME OR THE WEST STILL HAVE AN EDGE ON IT?

its South Pars Gas Field. Syria’s geostrategic ing country and it has religious ties with Ar- location placed it on the center stage for ri- abs, which will always secure the pipelines. valry between Saudi Arabia and other Sunni Making Turkey an energy corridor to trans- political actors on one side, and Iran and its port Middle East and Caspian gas to Europe Shiite proxies on the other in a struggle for might be the key to resolve the fight over oil regional dominance. The proposed pipeline because all the oil and gas would be aggregat- “The so-called Arab would also provide flexibility to Europe as an ed in Turkey and then distributed to Europe. alternative to its main gas supplier Russia. Es- That way if any of these providers having an Spring started from pecially after Russia’s military intervention in issue with Europe decides to cut oil, Turkey Ukraine and Europe’s unsuccessful attempt to would be able to flow the oil and gas over the Tunisia in late 2010 and suppress the insurgent opposition, this new other two. Additionally, competition among pipeline would reinforce Russia’s dominance the producers would have to make noticeable brought out the hunger of the energy supply routes. For some reason, discounts, which Europe might have never The Arab Spring’s arrival at Syria to start the gotten directly. for democracy through- democracy walk for Syrians and the Russian intelligence to destroy EU and US’ genuine out North Africa and plan coincided. SUMMARY the Middle East. In fact, Attempts for possessing nuclear enrichment The so-called Arab Spring started from Tuni- many Arabs had no in- technology and dismantling of the Iraqi sia in late 2010 and brought out the hunger dictator by US gave Iran an opportunity to for democracy throughout North Africa and tentions to have the right assemble all the Shiites in the Middle East. the Middle East. In fact, many Arabs had no Perhaps, US had not counted on the fact that intentions to have the right to elect or to be to elect or to be elected Iran could to manage to build a Shiite cor- elected but they only cared about having bet- ridor from Persia to Mediterranean when it ter living conditions and grasping their shares but they only cared about invaded Iraq. US concentration on establish- from the great amount of the capital passing ing so-called Kurdish Regional Government through their soil. The resentment caused having better living con- (KRG) in the North was a genuinely de- by energy games in the region have brought ditions.” signed plan because American and European good results in some and worsened the con- companies would have control over large oil ditions in the others. At last, some countries and gas reserves in this region and that KRG learned from their mistakes and corrected would provide a gray area between Sunnis, them for better but some are still making the Shiites and Turks. Russia especially after the same mistakes over and over again. big drop in oil prices and its oil revenues de- cided to gain advantage in the energy game. Democracy might be a correct path to walk Russians made a pact with Iran and China through for Arabs. It might provide peace to support Syrian Government against reb- over disputed areas and calm the lives of in- el groups so that they could save the Shiite nocent people. However, there are set backs corridor to Mediterranean but they underes- since some countries’ aim such as Russia and timated American intelligence as so-called Is- Iran’s differs from that of the American and lamic State (Daesh) fighters were born in one European coalition. China’s involvement in night and appeared to control more like the the area is not as aggressive as Russia and half of Syria and Iraq. Interestingly, Kurdish Iran’s but a notable fact is that the number of Region is safe and sound as it is not disturbed Chinese companies operating in these states by Daesh. is increasing day by day due to lower costs they offer. Russia is exporting oil and gas to Europe’s attempts to find an alternative to Europe but it, with its unavoidable military Russian gas by the help of US require more power, seems to have a high-hand controlling puzzle pieces put together. All the pipeline the oil sources outside its borders. Syria serves alternatives make Turkey stand out as a bet- as the most attractive and closest place for ter option because Turkey has long been an Russia to start with because of the continuing ally of Europe and US. It will never pose a war that suits the cause. At last, Turkey has to threat to Europe since it is not an oil export- pay great attention to what is happening in

ENERGY POLICY TURKEY Page 18 NECDET KARAKURT, SERHAT ÇUBUKÇUOĞLU AND OĞUZHAN AKYENER

the neighboring states as an active war start- Rethink Institute Washington DC, Rethink ed with the energy game right outside of its Paper 09, May 2013; available from http:// southern border places an economic hardship www.rethinkinstitute.org “No matter what the due to the refugees and political disputes that 7 corrupts stability. No matter what the out- F.William Engdahl, “Syria, Turkey, Israel and outcome is, Turkey has come is, Turkey has to be in this energy game a Greater Middle East Energy War”, October and play a key role to resolve the conflict be- 2012, available from http://www.voltairenet. to be in this energy cause energy means oil & gas for the Mid- org/article176200.html dle East. Within the concept of energy and game and play a key role energy politics, Turkey is an inseparable part 8 Ibid. to resolve the conflict of the Middle East and Turkey has to be the 9 Helena Smith, “US vice-president Joe Biden controller of oil and gas markets as it is locat- because energy means ed between the producer and the consumer! pushes energy cooperation in visit to Cyprus”, The Guardian, May 22, 2014 (accessed oil & gas for the Middle September 4, 2014); available from http:// REFERENCES www.theguardian.com/world/2014/may/22/ East.” us-vice-president-joe-biden-visits-cyprus-en- 1 Nicole Leonard, “Turkey’s role as energy hub: ergy-cooperation a sustainable future?”, Your Middle East, Jan- uary 28, 2013, Column: Middle East Oil & 10 Bloomberg, “Iraq Government Condemns Gas (accessed September 4, 2015); available Kurds for ‘Illegal’ Oil Sale to Israel”, Kadhim from http://www.yourmiddleeast.com/col- Ajrash and Nayla Razzouk, June 22, 2014 umns/article/turkeys-role-as-energy-hub-a- (accessed September 4, 2015); available from sus tainable-future_12500 http://www.bloomberg.com/news/2014-06- 22/iraq-government-condemns-kurds-for-il- 2 U.S. Energy Information Administration, legal-oil-sale-to-israel.html Oil and natural gas import reliance of major economies projected to change rapidly, January U.S. Energy Information Administration, 22, 2014 (accessed September 4, 2015); avail- “International Energy Data and Analysis”, able from http://www.eia.gov/todayinenergy/ 2015. detail.cfm?id=14691 U.S. Energy Information Administration, 3 European Commission, “Rome G7 Energy “Country Report: The Middle East”, 2015. Initiative for Energy Security”, G7 Rome En- ergy Ministerial Meeting, IP/14/530, May 6, BP Statistical Review of World Energy 2014, 2014 (accessed September 4, 2015); available “Excel Workbook of Historical Data”, 2014. from http://europa.eu/rapid/press-release_ IP-14-530_en.htm IHS Energy, “IHS GEPS Reports – The Middle East”, July 2015. 4 Kristian Coates Ulrichsen, “A European Per- spective on the GCC Involvement in the Med- iterranean in Light of the Arab Spring”, The German Marshall Fund of the United States, December 2012, Mediterranean Policy Pro- gram.

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6 Ebru Ogurlu, “Turkey Amidst the Shifting Geopolitics in the Eastern Mediterranean”,

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