e a z i n g m a NOVEMBER 2014 The world over a barrel t o h s l i Number a m d e t

e 27 g

r 4.00 EUROS a T

-

4 1 0 2 / 7 2

. o n e n i z a g a m l i O e

n EDITORIAL i z a g a m Eni quarterly Year 7 - N. 27 November 2014 Authorization from the Court of Rome After the sheikhs: The coming No. 19/2008 dated 01/21/2008 The world over a barrel n Editor in chief Gianni Di Giovanni n Editorial committee collapse of the Gulf monarchies Paul Betts, Fatih Birol, Bassam Fattouh, Guido Gentili, Gary Hart, Harold W. Kroto, he entire Middle East region and East situation extremely well, puts Alessandro Lanza, Lifan Li,

e nyone who has anything to cially the United States, the United Kingdom and the a z i n g

Molly Moore, Edward Morse, m a also North Africa appear to be forward the theory - difficult to NOVEMBER 2014 Moisés Naím, Daniel Nocera, do with oil must read European Union; the armed forces; the secret police; The Carlo Rossella, Giulio Sapelli world in the midst of a serious crisis. implement but not Utopian - of an Christopher M. Davidson’s and the backing of many citizens, a rich “nomen- over T n a Scientific committee barrel The epicenter, this time, is Syria and international conference, a sort 2013 book After The Sheikhs: clatura” that enjoys the economic privileges that oil Geminello Alvi, Antonio Galdo, Raffaella Leone, Marco Ravaglioli, Iraq, where a civil war is raging and of new Congress of Vienna. The Coming Collapse of The and the regime bring. Giuseppe Sammarco, Mario Sechi,

Number 27 ISIS is having an increasingly It is a suggestion that governments Gulf Monarchies. Davidson There were, however, pockets of well organized dissent, 4.00 EUROS

Daniela Viglione, Enzo Viscusi

teaches Middle East politics especially after the explosion of the Islamic State. ISIS n Editorial team destabilizing effect. In addition, the should embrace in an urgent effort Coordinator: Clara Sanna in the School of Govern- has not yet touched the monarchies, but Islamic faith tensions in Egypt, instability in Libya by GIANNI to try mediation. However, it Luisa Berti, Evita Comes, ment and International Af- is spreading among the immigrants and the black flags Rita Kirby, Simona Manna, and the precarious political situation DI GIOVANNI appears that new conditions are Alessandra Mina, Serena Sabino, fairs at Durham University. The author of several im- of the militants have already reached the border between Giancarlo Strocchia in Tunisia appear to be equally alarming. required, starting with renewed relations pAortant books and numerous scholarly articles, he writes Iraq and Saudi Arabia, which traditionally has been pen- n Authors In the background are oil and control between the West and the Arab World and, Giuseppe Acconcia, Methaq Al about the region with considerable authority. And so we etrable and impossible to control. Fayad (Ag. Nova), Amer Al Sabaileh, of the enormous energy resources that in this context, the resumption of an initiative must pay close attention to the conclusions reached in It is not the first time that autocratic regimes feel that Daniel Atzori, Tahar Ben Jelloun, CARLO ROSSELLA Bill Farren-Price, Ibrahim Kalin, this region holds and on which the destinies by Europe, rarely active in the region over the is a journalist and executive. his latest work. The Gulf monarchies (Saudi Arabia and Giorgia Lamaro (Ag. Nova), of the entire industrialized world depend. years, to be more involved in the Middle East. He has been the head its five neighbors, the Emirates, Kuwait, Qatar, Oman Fabio Squillante, James Hansen, of La Stampa, Panorama, Nicolò Sartori (IAI), Paradoxically, those riches are at the same The United States has an opinion too: Harold and Bahrain) have been governed for many years by au- Mohammed Shareef, Grant Summer TG1 and TG5 (TV news Fears are growing, even programs). He is currently tocracies, which, aside from small revolts kept under con- n Infographic time incredible riches and a genuine curse Rhode, the longtime Pentagon analyst, finds The design of the map chairman of Medusa Film, trol by the regimes and secret police, moved on un- for this geographical region. that in order to beat the jihadists, America in the palaces of Riyadh. ISIS is of the insert is made by the production company scathed after the Arab Spring. Gianluca Seta-nascuto.com What’s the way out? It’s definitely not through must show that it is committed to winning; of Mediaset. n Photography Though their corruption and authoritarianism is of- a real danger that is threatening AFP, Archivio Eni, Corbis, war. It appears difficult to predict a winner otherwise it will fail. The point of view ten denounced and their imminent collapse often pre- Contrasto-Magnum-Reuters- thrones, big and small alike Redux, Getty Images, Luz-Panos, in the stalemate between the regional powers of neighboring countries should not be dicted, nothing has changed. On the contrary, the Gulf Sie Masterfile, Tips fighting against one another and it looks as overlooked either: countries like Turkey, monarchies have shown themselves to be true bastions n Editing and production Agi, via Ostiense, 72 - 00154 Roma if the armies could be battling a very long time Kurdistan and Israel, whose fears are of stability. Davidson, however, argues persuasively that they are in danger. At the end of the sixties and be- tel. +39 06 51996254 -385 this stability is illusory. And he does so 45 years on from ginning of the seventies, it was Marxism that worried fax + 39 06 51996286 without the prospect of a definitive military expressed by the political systems expert a famous work by Fred Halliday, “Arabia Without Sul- the monarchs, in the form of warfare supported by the e-mail: [email protected] solution. The only practical way forward is and diplomat at large, Avi Pazner. And China www.abo.net tans,” a book forbidden to Ryad as well as to Muscat. U.S.S.R. and China. First came a Marxist rebellion in @AboutOil through diplomacy. should not be forgotten, as it has significant www.facebook.com/ABOaboutoil And he is not the only expert warning of the immi- Dhofar, a governate in the Sultanate of Oman, in 1962. This is the route that Iraq has chosen, as energy interests in the Middle East. A lot n Design nent (in the space of four or five years or perhaps less) Another, next door in Yemen, contributed to the for- Cynthia Sgarallino explained in the pages that follow by Iraqi of space is obviously given to the analysis crisis and the collapse of the monarchies through pop- mation of a Marxist-Leninist state with Aden as its cap- n Graphic consultant Sabrina Mossetto Deputy Minister for Legal Affairs, Mohammed of oil prices—according to Paul Betts of ular revolution. Or about the economic collapse ital. The intervention of the English special forces, the n Graphics and layout Jawad al-Durki, who speaks of “national the Financial Times, OPEC needs to reduce caused by the fall in oil prices created by the enormous SAS, was needed in Oman to defend Dhofar from the ImPRINTing www.imprintingweb.com flow of American gas and oil into international mar- Marxist guerrilla warfare. All the autocrats, except the n Printer reconciliation,” of actions to find agreements prices in order to oppose ISIS. The entire In Italy: Elcograf S.p.A. even with neighboring countries and which, world, and not only the energy world, kets. Important dignitaries in the Emirates, for ex- Shah of Persia, survived this difficult period. Now, how- Via Mondadori, 15 - 37131 Verona ample, are also showing signs of anxiety; in private con- ever, fears are again growing, even in the palaces of In China: Reference Standard as confirmed by the Oil Minister, show is following the Middle East crisis with Limited - Beijing versations and in their writings, they appear over- Riyadh. ISIS is a real danger that is threatening a commitment—in conjunction with other apprehension. Oil simply had to dedicate whelmed by doubt and uncertainty. The boldness of thrones big and small alike. And they are waiting for n Translated by: RR Donnelley OPEC countries—to stabilize the price an issue to it, in the hope of helping to previous times has been lost. Up to now, there have the armed intervention of Obama’s troops, like man- of oil and control exports. Ambassador provide a better understanding of its equally been many reasons for the survival of the Gulf na from heaven. Castellaneta, someone who knows the Middle complex and crucial scenarios. monarchies: the support of western countries, espe- Sent to press on November 7, 2014

Selena Burgo Paper - Naural uncoated C O N T E N T S wood-free paper, 100% recycled, chlorine and acid free. opinions columns Welcome to Oil, a publication of news and 3 Editorial 6 Interview with Iraqi 12 Featured interview 23 Oil industry 32 Kurdistan 41 U.S. 50 Economy THE AND THE NUCLEAR • Publisher eni spa AGREEMENT WITH IRAN ideas for the energy community and beyond. AFTER THE SHEIKHS: Vice Minister Mohammed with Harold Rhode AN UNCERTAIN FUTURE INDEPENDENCE: LEARNING FROM STRUCTURE, FUNDING It provides authoritative analysis of current Chairman: THE COMING COLLAPSE Jawad al-Durki THE AMERICAN ROLE: by Bassam Fattouh TRAPPED IN A DREAM OUR MISTAKES AND WEAPONS by Giuseppe Acconcia Emma Marcegaglia trends in the world of energy, with particu- OF THE GULF MONARCHIES TOWARD NATIONAL PROVING ITSELF A WINNER and Bill Farren-Price by Mohammed Shareef by Molly Moore OF THE CALIPHATE lar attention to economic and geopolitical de- Chief executive officer: 53 Data by Carlo Rossella RECONCILIATION by Daniel Atzori by Antonio Galdo velopments. Claudio Descalzi 26 Israel/Interview 36 Changes 44 China THE “WRONG” WAY by Methaq Al Fayad [ag. Nova] • Oil is published by Eni with the aim of fos- Board of Directors: 4 OIL, GEOPOLITICS 15 Analysis with diplomat Avi Pazner FOR EACH ENEMY, THE EAST IS KEEPING 51 Centers of Gravity by James Hansen tering open dialogue about the challenges of Andrea Gemma, Pietro Angelo AND CRISIS 9 Former Italian Ambassador A COMPLICATED PROBLEM FEAR BEYOND HIS CHALLENGE A WATCHFUL EYE TURKEY AT making energy a reliable and sustain- Guindani, Karina Litvack, 54 Data OIL PRICE IS able contributor to social and economic de- Alessandro Lorenzi, Diva Moriani, by Fabio Squillante Giovanni Castellaneta speaks by Tahar Ben Jelloun THE TERRITORIES by Amer Al Sabaileh ON THE CRISIS A CROSSROADS: WALKING FALLING. OKAY, PANIC? A NEW CONGRESS by Grant Summer by Lifan Li A FINE LINE ON THE velopment. Fabrizio Pagani, Luigi Zingales 19 Prices 38 Interview with Marathon by INVEST – Scenarios, OF VIENNA IS NEEDED ISIS THREAT • For your free subscription to Oil – which THE OPTIMISM 29 Turkey Oil President and CEO Tillman Strategic Options & Investor includes regular e-mail updates on the by Giorgia Lamaro [ag. Nova] by Nicolò Sartori Piazzale Enrico Mattei, 1 OF THE OIL MARKETS THE VIEW FROM ANKARA COUNTING Relations - Eni world of energy and the chance to connect 00144 Roma – www.eni.com by Paul Betts by Ibrahim Kalin ON A “NEW NORMALITY” 52 Dialogues THE EFFECTS with other opinion leaders – please sign up by Rita Kirby OF THE IRAQ CRISIS at www.abo.net he birth of the so- volved in the Syrian conflict, each of ern Iraq Sunni tribes, who, having called Islamic State Once again, the eyes of the world them supporting a local faction in an been ousted from power as a result of and its military suc- attempt to impose its power on the the Shiite sectarianism of President cesses in Iraq and are turning to Iraq, especially energy Middle East and see its model prevail. Nouri al Maliki, want to regain their Syria have taken the Iran supports the secular regime of lost power and thus are supplying ISIS western world by sur- interests in the Middle East and North President Bashar al-Assad, leader of with thousands of motivated fighters, prise. The phenom- the minority Syrian Alawites, affiliat- a large number of them former mem- enon is, however, the Africa. Oil is the real protagonist ed with the Shiite movement. Turkey bers of the security forces and army of by FABIO predictable result of supports the Sunni movements con- Saddam Hussein. T the stalemate in the nected to the Muslim Brotherhood, SQUILLANTE of a conflict that has, for years, civil war in Syria and which are fighting against Alawite the collapse of state dominated this part of the world. domination, but which also constitute THE CURRENT DOMAIN institutions in Iraq. And those de- a danger to the feudal monarchies of OF THE ISLAMIC STATE velopments were, in turn, the result This issue of Oil analyzes the current the Persian Gulf. Lastly, Saudi Arabia The Islamic State currently occupies of competition between countries supports the Salafi and al-Qaeda an area between Syria and Iraq more seeking to become the dominant situation in the region, focusing not movements in an attempt to remove or less the size of Belgium. It can count power in the Middle East. The stand- Iranian influence from Syria, but also on a large part of Syrian oil reserves, off between Saudi Arabia, Iran and only on Iraq but also on the roles in order to contain Turkey’s neo-Ot- deposits of gold and currency looted Turkey is unfolding on geopolitical, toman expansion in the Arab world. from banks in the occupied territories, religious and social, as well as military, The energy riches of the region sim- as well as an army reinforced by dimensions. Beyond the phenomenon and interests of neighboring countries ply intensify the conflict between equipment and weapons taken from of ISIS, which may prove fleeting, the these forces, giving some of the coun- the Iraqi armed forces. Its militias are larger conflict is due to continue for tries involved the financial capacity to countered in the area by the soldiers some time, and it is unlikely that one support entire countries. For example, of the autonomous region of Iraqi Kur- of the main players will emerge as the this is the case with Egypt, devastat- distan, supported by the United States, clear winner of the struggle to gain ed by last year’s military coup that saw the Syrian and Turkish Kurdish mili- control of the Middle East. The so- the fall of the Muslim Brotherhood, tias, supported by Assad, the Iraqi lution could be an international peace which has since been supported fi- armed forces, supported by Iran, the conference aimed at establishing a nancially by Saudi Arabia and its Syrian Sunni militias, both Salafi and general realignment of the Middle Gulf allies. “moderate,” supported by Saudi Ara- East region, a route that is put for- At the beginning of his second term, bia and its allies, and lastly the airforce ward here by Ambassador Giovanni once Hillary Clinton was no longer of the international coalition led by the Castellaneta. But it involves a result his Secretary of State, Barack Obama United States. Although Turkey and that currently appears to be increas- chose the path of dialogue with Rus- Qatar officially belong to the coalition, ingly unlikely. sia and launched direct negotiations they do not take part in bombing mis- with Iran over Teheran’s nuclear sions or provide bases or logistical sup- program. These decisions under- port. The Ankara government has re- THE STRUGGLE mine the credibility of “moderate” fused to let U.S. aid pass through Turk- FOR BLACK GOLD Syrian rebels and are pushing the ish soil to go to help the Kurds in The Middle East, a crossroads be- Saudis to rely even more on extrem- Kobane. tween Europe, Asia and Africa, has ist movements. The vast anti-ISIS camp is concealing been the focus of great power atten- In the meantime, relations between enormous divisions. The war in tion since the beginning of the twen- Turkey and the United States are progress in Syria and Iraq, as we have tieth century, both through the con- going through a tense period. The seen, is the result of an extremely bit- struction of the Suez Canal, which Gezi Park movement and the judicial ter conflict between Saudi Arabia, connects the Indian and Atlantic scandals, which risk toppling Erdogan’s Iran and Turkey to gain power over the Oceans, and especially on account of and perhaps even superior to that of somewhat precarious reignited the organized protests. Equally important organization that was, in some respects the Muslim Brotherhood govern- government, are seen by Ankara as the Muslim Middle East. The aerial of- its extraordinary reserves of oil and gas, Saudi Arabia. It is obvious, therefore, competition for hegemony between Is- was the support the Arab Spring re- reminiscent of 19th century freema- ment. The coup and the subsequent result of the hostility of Obama’s ad- fensive is not enough to destroy ISIS which made the Middle East the that Saddam Hussein remaining in lam’s two large factions. It's worth re- ceived from Recep Tayyip Erdogan, sonry. From a social perspective, the repression of the Muslim Brotherhood ministration. When Hillary Clinton and the current balance between the world’s main energy reservoir. A goal power and governing a country with membering that a Shiite block made the then-Prime Minister and now Arab Spring can be considered the first exposed the bitter conflict between left the State Department, the U.S. three regional powers can be consid- of expanding Iraq’s oil reserves drove such wealth would have constituted a up of Iran, Iraq and Syria would have President of Turkey, a country which great bourgeois revolution of the Turkey and Saudi Arabia, which was sought to reduce the ambitions of Er- ered one way of preventing the emer- Saddam Hussein to invade Kuwait, serious risk for the entire region. Af- huge oil reserves at its disposal, and only a century ago was the great Arab world, with the Muslim Broth- also felt in Syria, where the anti-As- dogan, who was looking to China for gence of one player that is too large. paving the way for the intervention by ter the victory of the international therefore an enormous financial ca- power of the entire Muslim world. If erhood at the forefront. It should sad front split. a new anti-aircraft defense system, and By involving all the key players in the the international coalition, which, in coalition led by the U.S. and the fall pacity and extensive political influence. the competition between Saudi Ara- come as no surprise, therefore, that who had begun to support extremist region, all of which need resources to 1991, inflicted the first serious blow to of Saddam Hussein’s regime, the un- bia and Iran is essentially fuelled by the many oligarchic nationalist regimes Syrian movements capable of coun- support the war effort, the war has also Baghdad’s dictatorial regime. In spite fortunate decision to disband the ancient religious division between (Egypt, Syria, Tunisia) opposed the SYRIA AND ITS MINORITIES tering both Assad and “moderate” pro- created a sharp fall in oil supplies. This of the harsh sanctions imposed on the Iraqi security forces and armed forces THE ARAB SPRING AND Shias and Sunnis, the Arab Spring revolution, as did the monarchies of Syria fell prey to civil war in 2012. Al- Western rebels. development favors consumer coun- country, as soon as they were re- laid the foundation for a prolonged THE START OF A NEW CONFLICT marked the emergence of a new con- the Persian Gulf. The exception is though the Sunni people were in the The Syrian pressure cooker is pro- tries and penalizes Iran and Russia in leased from the possibility of export- destabilization of the country. The on- In January of 2011 the explosion of the flict, this time entirely within the Qatar, which takes inspiration from majority, Syria was governed with an moting the growth of Islamic State particular, which were already in the ing “oil for food,” Saddam managed going civil war, which pitted Arab Shi- so-called Arab Spring marked the Sunni world. The Muslim Brother- the Western social model and, at the iron fist by the Alawites, a Shiite-af- and the disintegration of the Iraqi grip of international sanctions and suf- to cling to power thanks by inflicting ite and Sunni communities against one rise of a third large faction of the Is- hood was established in 1928 by same time, traditionally represents a filiated sect. The Assad family exer- state. In the occupied areas, ISIS fering from stagnant economies. brutality on the civilian population. another, caused the death of tens of lamic world, that of the Muslim Hasan al-Banna, an Egyptian teacher bridge for dialogue with Iran. Having cised their power through the Ba'ath leaders are leaving the public ad- Whether or not the Islamic State The bloody nature of the regime was thousands of people, plowing a furrow Brotherhood, which until then had ex- committed to spreading the values of come to power in Egypt (also thanks Party, a socialist-inspired national ministrations, hospitals and schools in continues for a long time, it is unlikely one of the justifications for the second of distrust that remains to this day. The isted semi-clandestinely in almost all an Islam inspired by the solidarity and to the strong support of Turkey and party supported by the Alawites and place and paying the wages of state that this great Middle Eastern war will Gulf War, together with the pur- attempt by the United States to put an countries in North Africa and the dignity of Suez Canal workers. Over Qatar), the Brotherhood demon- also by a significant Christian minority employees, which is somewhat dif- end with a clear victory for any one of ported presence of weapons of mass end to the violence was aggravated by Middle East. The revolutions were the years, the movement managed to strated that it was incapable of gov- and the Kurdish community, also es- ferent from the behavior of al-Qaeda. the countries involved. The only way destruction in the country, which it was the fierce competition between the supported by Qatar, a moderate- create significant social service net- erning the country, imposing an ex- sentially Alawite. When the revolution Their social model is republican, and a solution could be reached is through later proved did not exist. powers in the region—in particular sized emirate in geographical terms, works that made up for the inade- tremist version of Islam which ter- exploded, the Gulf monarchies, led by more like that of the Muslim Broth- an international conference with mu- Iraq is the second most important Saudi Arabia and Iran—which made but incredibly rich in natural gas and quacies of the governments by pro- rorized the highest levels of society. Saudi Arabia, rushed to support the erhood or the Lebanese Hezbollah tual guarantees from political, eco- country in the world in terms of its oil Iraq into an ideal area of conflict be- capable of deploying the media pow- viding healthcare and free education The failure of the revolution and the Salafi movements, to vie for the lead- Shiite party, rather than the Islamic nomic and security levels. However, it reserves, which are estimated at over tween Shiites and Sunnis. Barack er of Al Jazeera, the most widespread to the poor. Opposed to socialist-in- military coup d’état were promoted by ership of the anti-Assad front against primitivism of the Taliban or Osama appears unlikely that this will happen 280 billion barrels. According to Obama’s decision to withdraw the in- and watched satellite television chan- spired nationalism and feudal monar- the Gulf monarchies, which drove the the Muslim Brotherhood, which were bin Laden. It is also on account of this before a new administration takes up

n some, however, the country’s energy ternational forces at a time when nel of the Arab world. Al Jazeera act- chies, the Brotherhood existed semi- integralist Salafi parties to align them- supported by Turkey and Qatar. All that they can easily manage to forge office in Washington. e

v potential could be significantly greater, peace in the country appeared to be ed as a propaganda machine and even clandestinely, developing an internal selves with the secularists to overthrow three Muslim regional powers are in- an alliance between the central east- e

s r - e y t b n m e u w n t 4 5 Exclusive/Iraqi Vice Minister Mohammed Jawad al-Durki speaks Toward stabilization • new agreements • reconcili reconciliation • new agreements • reconciliation • unity • fed

MOHAMMED JAWAD national AL-DURKI mento • unity • oil law • balance • national sovereig A Shiite from Karbala, Mohammed Jawad al-Durki became Iraq’s ambassador to Belgium in 2009. In 2011, he took over as Chariman of • nuovi agreements • reconciliation • unity • federation • the Organizations Department reconciliation of the Iraqi Foreign Ministry, and in 2013, Undersecretary for Legal Affairs and Multilateral Relations. With his articles he After Prime Minister Haider ciliazione • stabilizzne • crude price • export • unity • reconcilia accused the People’s Mojahedin Organization of Iran (PMOI) al-Abadi forms the new of helping Saddam’s regime. government, Iraq will address all of its problems, even stabilizzazione • nuovi agreements • unity • balance • new ag attempting agreements with neighboring countries. • unità • federalismo • balance • national sovereignty Meanwhile, Iraq’s Oil Ministry is working with OPEC to stabilize oil prices

and control exports everal Iraqi constituencies are pulling together in the form of agreements between Shiite forces and major Shiite parties “to unite efforts against terrorism and terrorist groups.” Iraqi Vice Minister for Legal Affairs Mohammed Jawad al-Durki offers assurance that Iraq will move “toward national recon- ciliation and will find solutions to all S problems,” including forming agreements by METHAQ AL FAYAD with neighboring countries and smoothing (AGENZIA NOVA) tensions with Kurdistan. The Vice Minister also explains that the Ministry of Oil is work- ing with OPEC and other oil producing countries to stabilize oil prices and control exports. n e v e

s r - e y t b n m e u w n t 6 7 THE WORLD OVER A BARREL

of the regions, which have full administrative authority. The Interview/Former Italian Ambassador to the U.S. and Iran, Giovanni Castellaneta regions can also organize internal security forces such as the police or regional guards. The Constitution identifies the president of the region as the governing person who is elected every four years. The Constitution also provides the opportunity for regional councils to have their own foreign diplomatic delegations in order to promote cultural diver- A new Congress sity in their areas. This gives political power to the regions, enabling them to maintain foreign relations and to promote investments and economy in their territories.

The armed conflicts involving Iraq and Syria already show the direct participation of the three of Vienna is needed regional Muslim powers: Saudi Arabia, Iran and Turkey. The influence of these three countries has a direct effect on Iraq’s internal affairs. Do you think that the solution to Iraq’s problems can only be found at the international level? And with the involvement of which global and regional powers? Certainly, the three neighboring countries of Iraq have both negative and positive influences on us, just as Iraq influences them. It is necessary to find a balance of power through a series of agreements between the neighboring countries and those of the region, which, at the same time, must respect the national sovereignty of the individual countries. Iraq is working, through official visits of mem- bers of its government and of Foreign Minister Ibrahim al-Jaafari, with neighboring countries to resolve problems and to initiate cooperation and participation agreements to create this balance.

Despite the armed conflict, or rather, likely because of it, oil prices on the international THE NEW FACE market are falling. How does control of oil OF ENERGY Iraq, in fact, is now divided into three entities: resources determine the course of the conflict, Adil Abdul-Mahdi the central state, which controls the south and what future effects could the war have al-Muntafiki, Shiite, and central-eastern region of the country, on the stability of the international oil market? politician and the autonomous region of Kurdistan and the vast Efforts are being made by the Ministry of Oil, which is economist, was northwestern area which, being largely Sunni, is working with OPEC and other oil producing countries to appointed Minister currently controlled by the so-called Islamic State. stabilize oil prices and control exports. A coordinating com- of Oil in September What are the prospects for peace and the mittee has been created between the Ministry of Foreign 2014. He was one of reunification of the country? Affairs and the Ministry of Oil to examine what the reper- Iraq’s Vice Presidents There are attempts at reconciliation, with conferences and cussions will be for Iraq, and I believe that the Ministry of from 2005 to 2011, and meetings held between the different Iraqi constituencies. Oil will make every effort to stabilize the export of Iraqi oil. he served as Finance Specifically, the southern region has initiated the signing of Minister in the interim agreements between the Shiite forces and major Shiite par- In 2003, shortly after the fall of Saddam Hussein, government. Early in his ties to unite efforts against terrorism and terrorist groups. the then-head of the management of the career he was forced Their fighters have gained important victories, including the occupation of Iraq, Paul Bremer, said that within into exile in France as a liberation of the city of Amrali and the village of Jurf al- five years a law on oil would be approved. result of his association Sakhr. There have also been meetings for reconciliation and In the meantime, international forces have with the Iraqi unity between Sunni tribes in Ramadi, in the western part withdrawn and eleven years have since passed, Maintaining Iraqi unity is he successes achieved by Islamic State in Iraq Communist Party. In the of the country, and tribes of the south. These meetings have but the law has still not yet been approved. are due, to a great extent, to the support that early 1980s he began been sponsored by the government for the purpose of Do you believe that a fair division of resources going to be very difficult– the “caliphate” has found among Iraqi Sun- to adopt the Islamic regaining national unity. Even Iraqi Kurdistan has begun to between the various Iraqi communities could ni communities. In a certain sense, they are principles of Iran, until collaborate with the central government, and a committee promote peace in the country? perhaps the only hope the product of the Second Gulf War, and his appointment as a has been formed to resolve outstanding issues and problems As regards the sources of wealth of the country, such as gas specifically of the difficulties encountered in member of the Supreme between Baghdad and Erbil, which we believe will soon pay and oil, the text of the Iraqi Constitution states that common for a comprehensive the reconstruction of Iraqi state institutions Council for the Islamic off and resolve the crisis between us. goods are the property of all Iraqi people in all regions and after the fall of Saddam Hussein’s regime. We GIOVANNI CASTELLANETA Revolution in Iraq, should be distributed throughout the country according to T asked Giovanni Castellaneta for his per- was the Spokesman solution can come by GIORGIA an opposition party When a national unity government is installed population density. The government has empowered the LAMARO spective on this crucial period in the region. for the Foreign Ministry composed exclusively in Baghdad, will it possibly provide a path leading regions and provinces by giving them the right to manage from an international (AGENZIA NOVA) He has had a long and distinguished career (1990-1991) Italian of Iraqi exiles. Defeated to a federal structure for the country? the country’s assets and resources, outlining a strategic pol- in the Italian government, holding positions Ambassador to Iran by a single vote in a After the Prime Minister, Haider al-Abadi, manages to form icy to get out of this crisis. A bill introduced by the conference for the as Ambassador to Iran, National Security Advisor under Sil- (1992-1995), Australia 2006 run for Prime a new government, I believe that everyone will proceed government on this issue is currently being scrutinized in vio Berlusconi,(during the years of the Iraq war), and final- (1998-2001) and the Minister of Iraq against toward national reconciliation and solutions will be found Parliament and will be examined by the relevant committees. reorganization of North ly as Italy’s Ambassador in Washington. United States of America Ibrahim al-Jaafari, for all problems. As for federalism, the Constitution states (2005-2009). From 2001 Abdul-Mahdi was that Iraq is a united federation and within it we find that the Africa and the Middle Ambassador, you observed both the 1991 and to 2005 he was National re-elected in the same central government has broad powers, but also that impor- 2003 Gulf Wars at close quarters. What elements Security Advisor to year, for the office tant powers are given to the regions. The power of the East, with the participation did they have in common and what were the the Italian Prime Minister. of Vice President, central government is to outline foreign policy, in which the differences between the two conflicts? He is presently the Chairman a position he held regions cannot intervene. It also has the power to conduct of the U.S., Russia and In 1990, I was the Spokesman for the Italian Foreign Min- of Sace, an Italian export

n until May 31, 2011. the armed forces and to control borders and security, but not ister, Gianni De Michelis, and in 2003, I was National credit company. e

v to intervene in local issues. Local issues are the prerogative Security Advisor in the government led by Silvio Berlus- e other important players

s r - e y t b n m e u w n t 8 9 THE WORLD OVER A BARREL

After the lightning war, we went with De Michelis I took part in all the negotiations before the Condoleeza Rice did not have a decisive I never saw duplicity from Bush, he has always to Kuwait a few days after the liberation. Everything March 2003 attack, and I have to say that Berlusconi influence in advising on the armed intervention; been a sincere and direct person, as we found was in flames, fires were everywhere and the always tried to dissuade George W. Bush among Bush’s inner circle, she was the person during an important meeting at Camp David, countryside had a lunar, apocalyptic landscape. from military intervention in Iraq. least inclined toward the intervention. a few months before the start of the war.

coni. I followed all the stages of the war in Kuwait, to which control the situation in the region better. The decision to was the position of Condoleezza Rice? dam, the Americans themselves did not manage to create a Gianni De Michelis adopted a position very strongly in stop, however, was mainly taken by President Bush. The period of the war in Iraq was not one of Colin Pow- proper coalition government. Perhaps it would have been favor of intervention. The most obvious difference between ell's finest moments at the United Nations. He's a good possible to adopt different policies and achieve better the two conflicts was the role of the U.N.: in Kuwait, the When the Second Gulf War broke out you were friend, we are very close, but at the time he was forced to results, but in the light of other interventions, like the one intervention was a lightning war backed up by a United at the Italian Prime Minister’s Office. What was defend the military intervention in Iraq at the U.N. with in Afghanistan, one can say that it’s always difficult to imag- Nations resolution, while in Iraq, in 2003, things were dif- your impression of Italy’s role in that war? information that later turned out to be untrue. As far as ine that countries with very different traditions from our ferent. What the two conflicts had in common was the In my role as National Security Advisor to Prime Minister Rice was concerned, unlike Vice President Dick Cheney, own can move in a short space of time from an autocratic, brutality of the Iraqi regime. After the lightning war, we Berlusconi, I was in contact almost daily with my counter- she did not have a decisive influence in advising on the authoritarian regime to a democratic one. went with De Michelis to Kuwait a few days after the liber- parts in the United States, the United Kingdom, Spain and armed intervention; among Bush’s inner circle, she was the ation. Everything was in flames, fires were everywhere and other countries, which were directly involved in the war in person least inclined toward the intervention. Neverthe- Iraq currently appears to be divided into three the countryside had a lunar, apocalyptic landscape. Our Iraq. I took part in all the negotiations before the March less, as a loyal adviser to the president, she put forward different entities: the Autonomous Region of embassy was riddled with bullets and everyone was telling us 2003 attack, and I have to say that Berlusconi always tried various options, but it was Bush alone who then made the Kurdistan, in the north, which is almost entirely stories about looting by Iraqi troops. The American Presi- to dissuade George W. Bush from military intervention in decisions. He wanted to bring his father’s work to an end independent; ISIS occupying the central and dent, George H. W. Bush, however, in compliance with the Iraq. We believed that intervention without a U.N. resolu- and is still convinced that he did the right thing. He only western areas with a Sunni Arab majority; while U.N. mandate, and also thanks to a more strategic view of tion would be very risky, and Berlusconi always weighed in admits now that the situation “got a bit out of hand” after the central and southern regions, with a Shiite the situation, decided not to go as far as Baghdad. with his reasons for this belief at all the international meet- the conflict. I never saw duplicity from him, he has always majority, appear, perhaps out of necessity, ings. This is the reason why Italy only took part in the been a sincere and direct person, as we found during an to be more pro-Iran than before. Will it be What made the President stop? coalition after the end of the war, sending its own military important meeting at Camp David, a few months before possible to rebuild a unitary state? Bush knew that no one would have defended the Iraqi cap- contingent to Nassiriya during the victory consolidation the start of the war. I honestly don’t know if there is a way out that involves ital and that in half a day the coalition troops would have got stage. maintaining Iraqi national unity. Like Libya, Iraq is a coun- there, also because Saddam’s army turned out to be a paper It was in September 2002… try created under the rule of colonial powers, and its tiger. On the other side, the coalition army was a powerful What can you tell us about the presence of Yes, we were invited, with Berlusconi, to Camp David, the intention to protect those borders at all costs, in spite of force; many countries wanted to be involved thanks to U.N. weapons of mass destruction in the country? President’s country residence. It was a pleasant meeting, like their cautiousness, could prove to be the wrong choice. In support. Bush senior chose the careful route: not having a We were conscious that there were no weapons of mass the one that followed at the Bush family ranch in Crawford, the near future, however, in the light of previous experience, clear exit strategy, he preferred to teach Saddam a hard les- destruction in Iraq. Berlusconi always said so, we always said Texas, where I was given the room that used to be George I believe it is more likely that a “broad” federation could be son, without forcing a change in government. It was a so. I actually spoke about it several times with Condoleezza W’s when he was a young boy: a delightful, yet simple small established. The only possibility for achieving a compre- decision made only after careful consideration, in particular Rice, George W. Bush’s National Security Advisor at the room. At Camp David, Berlusconi made his last attempt to hensive solution would be an international conference for because of the uncertainties regarding the future of the Kur- time. The real justification for the war was not the weapons dissuade President Bush from armed intervention, but Bush reorganizing North Africa and the Middle East, a sort of dish community. of mass destruction, which we did not know about, but the was determined and also supported by the United Kingdom Congress of Vienna which, with the participation of the brutality of Saddam Hussein's regime. In those years, the and Spain, as was later seen in March 2003 during the United States, Russia and other important players in the Did Turkey influence that decision? action of the International Agency for Atomic Energy and famous Azores Summit. I advised Berlusconi not to take region, could agree on a charter of economic and political Definitely, because Turkey is very scared of the Kurdish peo- the Oil for Food program made it almost impossible for part in that summit because it was the meeting in which undertakings. Perhaps this solution is utopian, but some- ple, a population of 20 million scattered in several countries, Baghdad to hide weapons of that sort. I remember that they were preparing for war and, as I’d already said, we did- times it’s worth pursuing utopia. Perhaps the E.U. should a nation which can rely on oil, in the north of Iraq, but which there was also a rumor going round that Iraq was going to n’t want to be involved unless the United Nations had given do more: we, who have lived through world wars and has no access to the sea. Ankara looks fearfully at the birth of buy uranium from Niger with the involvement of some Ital- clear authorization. accepted the existence of small states, even within our bor- a strong Kurdish state at its borders, and the same goes for ians: an absurd theory given that the only uranium mine in ders, perhaps could manage to see beyond the concept of Iran. In my opinion, this is a shame: after years of struggles, that country was strictly controlled by France. For us, I What role did Italy play? “rigid nations.” We can no longer have a defensive attitude the Kurdish people should have more recognition at the must repeat, the only real weapon of mass destruction was At the end of the conflict, the Italian army behaved in exem- about everything that was done in the last century. international level. It is clear that some Kurdish establish- Saddam Hussein himself, with his regime stained by hor- plary fashion. We tried to open a dialogue with the Iraqis ments are more democratic than others, but their struggle rendous crimes, like the gassing of Kurds. and maintain links between the Sunnis and the Shiites, to involves one ethnic principle and one language. However, avoid precisely what went on to happen: a Shiite govern-

n the Turks, after the lesson taught to Iraq, with a weak Sad- Is it true that the then Secretary of State, Colin ment gained the upper hand with all the consequences that e v dam Hussein, definitely thought they would be able to Powell did not agree with the intervention? What we are currently seeing in the region. After the fall of Sad- e

s r - e y t b n m e u w n t 10 11 THE WORLD OVER A BARREL

Feature/Harold Rhode, longtime Pentagon expert analyst The American role: pro ving itself a winner

ISIS has control of oil and is using This is one of the challenges we’re going the income derived from it to build its to have generally, military and signal its power to the world. when you have states In order to defeat the jihadists, America that are failing must demonstrate its resolve and or in the midst of civil war. These kinds willingness to see the fight through of organizations thrive to a decisive victory

Barack Obama U.S. President il provides the Islamic State with funds to buy weapons and, as a result, demonstrate its grow- ing military power. This hard power also has soft power effects. For this reason, the Unit- ed States must work on showing that it is stronger than the Islamic State, as it did with al Qaeda. Harold Rhode, who served as a Pen- tagon analyst for 28 years until retiring in O 2010, provides his view of the Islamic State, by DANIEL ATZORI presents the perspective of other countries, in- cluding China, Iran and Russia, and suggests what America needs to do to obliterate ISIS once and for all.

In your view, is the Islamic State only a regional issue or is it a wider threat to global interests and security, including energy security? The Islamic State (IS) is a threat to the world.

The Islamic State is in control of some oil fields. What do they do with the oil they extract? They are now selling oil from 30 USD a barrel on the in- ternational market. They pay all sorts of people to export oil. Turkey helped the Islamic State to export it. There is no oth- er way that oil can get out. There is no physical way that this can happen. Once oil gets into Turkey, no one knows anymore where it comes from. Then, it is put onto tankers and shipped abroad. Once oil is at sea, it is a fungible asset and could end up anywhere.

What is the importance of gaining oil wealth HAROLD RHODE It is a longterm to the Islamic State’s strategy? is an American expert They buy more weapons. They want to take over the world. on the Middle East. fight. This is difficult, Their message is easy, it’s simple, and it works for many Sun- He worked as an analyst it is complicated. ni men with no future. at the Pentagon for 28 years. It’s going to require Rhode has traveled extensively The Islamic State has made clear its intention throughout the Muslim world, many factors. And to redraw the map of the Middle East. In your and studied and done research view, does the current phase of turmoil represent at universities and libraries in we are working now a sign of crisis of the Arab state system Egypt, Israel, Syria, Jordan, Iran, with coalition partners established by the 1916 Sykes–Picot Agreement, Afghanistan, Turkey, Uzbekistan which reorganized the Middle East after the and Kazakhstan. Currently Chuck Hagel defeat of the Ottoman Empire during World War I? he is a Distinguished Senior U.S. Secretary of Defense The 1916 Sykes–Picot Agreement borders served colonial Fellow at the Gatestone

n interests. They are artificial. They mean nothing to the Institute in New York. e

v locals. There is no reason why these borders should exist. In e

s r - e y t b n m e u w n t 12 13 THE WORLD OVER A BARREL

Analysis/The origins and history of a phenomenon that threatens the world IRAN’S ROLE. A nuclear Iran is more dangerous than the Islamic State. Pictured here, pilgrims near a mosque in Qom. A complicated problem Illegitimate rulers, social injustice and the mistakes of the West have led In the face of this sort to the rise of ISIS, according to a renowned Moroccan-French writer. of evil, we have only one option: To confront The Islamic states must realize that this jihadist state will ruin them it with a holistic global campaign that is committed and capable... enough to ensure, whether in Iraq, Syria, or elsewhere, ISIL cannot find safe haven. It’s about taking out an entire network–decimating and discrediting a militant cult masquerading as a religious movement the Middle East, identities are based on families and tribes. Russia is concerned about its satellite state, Syria. But anyway, The whole map of the Middle East could be redrawn. For we should work privately with the Russians if they don’t want John Kerry example, I see no reason why there should not be an inde- to do this in public. U.S. Secretary of State pendent Kurdistan. (to the UN) What is Iran’s role? What should be the Western strategy toward Iran is the largest Shiite power in the world, and ISIS hates the Islamic State? Shiites. So in theory, Iran has to oppose the Islamic State There is no way to compromise with the Islamic State and with all its might. Yet Iran helped create it in the beginning. there is no appeasing it. The Islamic State is a Sunni organ- The Iranians thought they could control ISIS, or at least ization. It hates Shiites, as well as other Sunnis it disagrees have some influence over that organization, but it did not with. If Sunnis in the Middle East see that the Islamic State turn out that way. If ISIS conquers Najaf and Karbala, it THE AUTHOR is succeeding, more Sunnis will join it. Middle Easterners would destroy the Iranian government’s honor and position Moroccan-born Tahar Ben Jelloun is one of love winners. So, we must defeat them; we must show them in the Muslim world. Now, Iran wants America and the France’s most celebrated writers. He studied to be losers. As fast as ISIS got created, that’s how fast it can West to concentrate their attention on the Islamic State, so philosophy at the University of Rabat and be defeated. There cannot be any compromise here: ISIS the Iranians can develop their nuclear power. And a nuclear received a Ph.D. in psychiatric social work must be destroyed. Iran is more dangerous than the Islamic State. Iran says: from the Sorbonne. Known for his “We will help you, if you give us concessions in the nuclear sophisticated postmodern perspective, he How? deal,” i.e., “We will have our cake and eat it too.” includes among his best known works The If we do not want to have troops on the ground, we cannot Sand Child (1985), The Sacred Night (1987, succeed. So far, we are not inflicting serious damage on them In conclusion, what strategy should the U.S. winner of the Prix Goncourt), Racism with aerial bombardment alone. adopt at this moment? Explained to My Daughter (1998) American leaders should lead and inspire. That’s how Amer- and The Last Friend (2007). If the goal is to destroy Does the Islamic State also represent a threat ica defeated al Qaeda in Western Iraq during the Surge in ISIS, as the president says to other countries, such as China? 2007. Then, the U.S. demonstrated resolve. It destroyed al China has two types of Muslims. The first are Han; they un- Qaeda and worked with the local authorities. The great it is, I don’t believe the derstand that they must get along with the government. Their American General David Petraeus convinced the Sunnis he question will be fact that he would be stopping a boring countries. Iraq has become the LOYALTY THROUGH strategy that he outlined approach is similar to Indonesian Muslims. That is not the that the Marines were the strongest “tribe” and could be posed for a long dictator. What prompted George setting for a new religious war be- THE SUFFERING OF OTHERS will accomplish that. case in Xinjiang: their Muslims are Turkish. They are clos- counted on to win and protect them. In order to defeat ISIS, while about what was W. Bush to involve his country in a tween Shias and Sunnis. If, in the past, Upon visiting the region of Tizi er to Istanbul than to Beijing. There are Uyghurs fighting on America must again demonstrate that America can be the main reason that military mission with numerous, as these two Islamic branches coexisted Ouzou in Algeria, a country he used At the end of the day, the side of the Islamic State in Syria and in Iraq. trusted—that it will not lose interest and run. America must prompted George well as dangerous, consequences and peacefully, George W. Bush, after rav- to love, Hervé Gourdel, an alpine I think it’s going to take lead, and show the Middle East that it is the strongest horse W. Bush to invade implications was oil. Bush wanted aging Iraq, put a prime minister in guide, could never have imagined more than air strikes And what about Russia? and will again protect its friends and allies. Otherwise, Iraq in March 2003. control over the energy of this coun- charge who favored the Shias and hu- running into the bandits who kid- The reason why Russians hate the Islamic State is because America is doomed to fail. As the greatest living Middle It wasn’t the exis- try. The second serious error com- miliated the Sunnis. napped him and held him for ransom, to drive them out of many young Muslim men in Russia have no future. They get Eastern professor, Bernard Lewis, once said, the Middle by TAHAR tence of weapons of mitted by the Pentagon beyond the The DAESH (ISIS)* overtook al attempting to blackmail the French into drugs, sex, and then into mosques, which are funded by Easterner is constantly looking to identify the bandwagon in T mass destruction, nor initial invasion was to disband the reg- Qaeda by a long way. Its determina- authorities into stopping its bombing there. At some point BEN JELLOUN the Wahhabis and other Salafists. Suddenly, these downtrodden the traffic jam. When America demonstrates commitment was it the desire to ular Iraqi army, making it ineffec- tion took the Muslim world and the of DAESH troops. somebody’s boots have Russian Muslims feel they are somebody - they feel impor- and resolve, America will gain allies, and ISIS will be elim- bring democracy to tive—without a purpose and without West by surprise. Abu Bakr al-Bagh- He was slaughtered by the “soldiers to be on the ground. tant: they are in the vanguard. inated. But, given the current leadership in Washington, is the Iraqi people—as if this system of a base. dadi, who is the self-proclaimed Caliph of the caliphate,” the people who had That’s the whole point That is why, for Russians, the elimination of the Islamic State America prepared to do so? For now, President Obama values were a pill to be taken in the The result: Iraq is currently threat- who set up an “Islamic state” in the sworn loyalty to Baghdadi. But this is so important. appears detached, aloof and disinterested. This is not a morning to become democratic by ened by lawless activists with no lands he occupies, demands an oath of oath was not enough, they had to John Boehner recipe for America success in the Muslim world; it is a recipe the evening—and it wasn’t even the faith, imposters and frauds who use Is- loyalty from Muslims throughout the demonstrate what they were capable

n Speaker of the U.S. In your opinion, should the West cooperate for failure. well-being of the population of this lam and the Quran as a means of seiz- world, as in the times when Baghdad of doing to prove their loyalty. This e v House of Representatives with Russia against the Islamic State? country that he had in mind, nor the ing power and expanding into neigh- was the center of the Muslim world. was shown through the beheading of e

s r - e y t b n m e u w n t 14 15 THE WORLD OVER A BARREL

WHAT WILL HAPPEN IN SYRIA? Hervé Gourdel, a man who loved the that “Islam is politics or it is nothing.” A big question of the moment: mountains. Loyalty to the self-styled In the same period, the Afghans Chronology Will the battle against ISIS favor Islamic state was demonstrated by were expelling Soviet occupants in the Bashar al-Assad or hasten his shedding the blood of an innocent name of Islam. The following is downfall? Pictured: a market person. Algeria is conducting an in- known: American intervention in Damascus. of fundamentalism quiry and pursuing these assassins sparked off the power of the Taliban, currently hiding in the forbidding precursors of the barbarism. The mountains. culmination came with the destruc- The Egyptian President, Nasser, These jihadists have allowed them- tion of the Greco-Buddhist art of 1966 had Sayyid Qutb hanged on selves to become involved in a process Gandhara by the Taliban in 1998 and August 29. He was an of violence that kills and destroys the destruction using dynamite of the intellectual from the opposition everyone who is not on their side. Grand Buddha statue in the valley of party and leader of the Muslim Everyone is in their sights: Christians, Bamiyan in March 2001. There were Brotherhood. Nasser ruthlessly Jews, Shia Muslims, and Sunnis who very few protests and no official re- repressed thousands of Islamic are not sufficiently fanatical, but action from the Muslim world. and democratic opponents. democratic and lay. It is what the Al- From the end of the seventies, jihad gerian “soldiers of the caliphate” did and the dream of an Islamic repub- on the afternoon of Wednesday Sep- lic had became popular in the strug- glers and its middlemen. In this case tember 24, 2014 to Hervé Gourdel gles and contaminated the Palestin- there are lots of them and they come Gaddafi rose to power in Libya when France did not respond favor- ian revolution, which had not used re- from neighboring countries. Some of 1969 through a coup d’état on ably to their ultimatum. Now, we ask, ligion and especially not Islam as an them buy this oil at half price and sell September 29. The colonel how it was possible that the civilized ideology. In order to isolate Yasser it, others stockpile it waiting to cash deliberately maintained the world let itself be taken over by this Arafat, Ariel Sharon discreetly en- in later. tribal aspect of the country, band of assassins? couraged the creation of Hamas. America and France have under- financing terrorist movements Shias and Sunnis opposed each oth- stood that these sources of significant throughout the world. er in Libya specifically, where income must be taken out. They THE ORIGINS OF A GREAT Hezbollah was particularly active, and know that from what Obama said on ANOMALY armed and funded by Iran through its September 28, 2014, what we refer to Historical catastrophes don’t happen ally Syria present on Lebanese soil. as “Islamic state” is powerful, well or- by chance. They are planned, and at This movement is currently sup- ganized and determined. They are In the end of the decade, Jihad times even announced. They cannot porting Bashar al-Assad against lay simply a lawless band of criminals, an 70s and Islamic republic concepts even be compared to other events in and democratic rebels. At the same organization with no belief. became popular in the struggles history. If one does a bit of research, time, an agreement has been reached The Gulf countries have a great re- and contaminated the it is possible to retrace their origins, between Assad and jihadist leaders, sponsibility as far as the rise and de- Palestinian revolution, which how their preconditions were estab- who were spared from the bom- the interpretation that you give to funding for this move- velopment of this phenomenon is had not used religion and lished, and the elements that pro- bardments of the former. this or that verse. In spite of this, Is- ment because the mon- concerned. It has overtaken Al Qae- especially not Islam as an moted and prepared them. That’s how The lack of a real democracy in the lam itself has never incited suicide An important date was the ey stolen from the da and has spread across the globe. ideology in the conflict. it is, yet every time we are surprised Arab and Muslim world, the author- aimed at causing massacres, it has birth of the Islamic Republic banks in Mosul was Baghdadi’s caliphate has other am- and cry out at the horror as if we had itarianism of illegitimate leaders and never said that hostages have to be not enough on its own bitions and a greater number of re- never seen it before and have no the accumulation of social injustices taken and beheaded, it has never of Iran with the accession to support such a big sources at his disposal. He received memory of it. increased by corruption and arbi- spread ignorance in order to disori- of Ayatollah Khomeini, who army. The Arab coun- generous support from private indi- The jihadist “Islamic state” of Abu trariness have come together to give entate weak or evil spirits. in 1978 proclaimed that “Islam tries need to wake up viduals in Saudi Arabia, Qatar and The Islamic Republic of Iran was Bakr al-Baghdadi has remote roots. life to aberrations such as the current Such crimes were committed in the and come together, Kuwait. Obviously, we don’t have 1979 born on February 1st with the We must go back to the times before “Islamic state,” which extends into name of Islam. It is up to Muslims to is politics or it is nothing” even just for this once, proof of this funding, even if every- advent of Ayatollah Khomeini, this individual was born. In short, its part of Iraq and Syria and is threat- mobilize themselves to unmask these to isolate the barbar- one is talking about it. The author- who one year before said that origins can be traced to August 29, ening other countries in the region. savages, but they are not doing it be- ians, disarm them and ities have closed their eyes to this as- “Islam is politics or it is 1966, the day on which Egyptian But without the unlawful and sense- cause they have doubts or they are terror in European cities like in the bring them to justice. Otherwise, no pect, thinking that a strong Sunni nothing." In the same period, President Nasser had Sayyid Qutb, an less American invasion of Iraq in scared or, worse still, they silently ap- Maghreb (North/Northwest Africa). one is safe any longer, anywhere. movement would annoy Iran, their the Afghans were expelling intellectual from the opposition par- March 2003, this country would not prove of what is happening. The ji- Radical Islam waged war on Europe lifelong enemy. However, it turned Soviet occupants in the name ty and leader of the Muslim Broth- have become a breeding ground for hadist “Islamic state” is a serious and the Maghreb. The first American out that the caliphate had other of Islam. erhood, hanged. A martyr. In that pe- international terrorism. For this threat, not only for the entire Arab and French attacks have begun. But ISLAMIC STATE OIL plans: establishing an Islamic state, riod, Islam was not yet used as a alone, George W. Bush should be world, but for Europe as well. Thou- it would be a mistake to believe that On September 24, 2014 American air wherever possible. He began to ask weapon of war. Its values are opposed tried by the International Criminal sands of European young people – they will be enough to place al Bagh- strikes targeted a dozen oil refineries the Muslim world to swear alle- to those of Marxist and especially to- Court. But a former American Pres- some of Maghrebian origin, others dadi and his followers in a position located in Rakka and Deir ez-Zor, in giance to him as if we were in the 7th The Talibans destroyed the talitarian progressivism. Nasser ruth- ident is not subject to justice. who converted – currently find them- where they can no longer do harm. A the north-east of Syria, under the con- century, when Islam started ex- 1998/01 Greco-Buddhist art of Gandhara lessly repressed thousands of Islam- The topic of al Baghdadi, his barbaric selves in the frontline of the war that joint policy involving the Arab world trol of the jihadists. The “Islamic panding. Very few met his demands. and, in March 2001, destroyed ic and democratic opponents. Syria methods and his use of the media and the pseudo Caliph is promoting. and the West needs to be estab- State” now controls about twenty oil But the Muslim world, so diverse and the Grand Buddha statue and Iraq followed the Ba’athist ide- social media fascinate and attract One day, they will return to Europe lished in order to stop these criminal wells situated in Iraq and Syria. Since complex, could not, in any case, in the valley of Bamiyan using ology, which was vaguely socialist and young people, not only from Arab and slip back in unnoticed and take aberrations. private financers from some Gulf reconcile itself with accepting an as- dynamite. completely lay. But no Arab state was countries, but also from Europe. action. Because in the mind of Bagh- The subject of Baghdadi needs to be countries had stopped helping them, sassin as the representative of the democratic. Power passed from father A question which makes us feel un- dadi and people like him, the strug- taken seriously. If the necessary the jihadists occupied the oil wells and Muslim people. The interests of the to son or was gained by violent con- comfortable is often heard: does Is- gle against the West is inevitable, just weapons are not used to combat related refineries pretty quickly. They Americans and Westerners needed to quest through coups d’état. A great lam preach this violence? We can an- like the struggle against Arab coun- him, if he is not annihilated militar- sell a barrel of oil (which is worth ap- be targeted directly to provoke a re- admirer of Nasser, the young Gaddafi swer by reminding ourselves of the tries that have not submitted to Islam. ily and physically, he will make ad- proximately $100 on the market) at action. Baghdadi believed that be- rose to power courtesy of a coup d’é- history of Catholicism. But that It remains to be known who is fund- vances and be the cause of misery for between $20 and $60. This guaran- heading hostages like innocent jour- American troops entered Iraq tat on September 29, 1969. He did would mean evading an embarrass- ing and arming this “state.” It is im- the surrounding countries and he will tees them a daily income estimated at nalists and filming these horren- 2003 on March 20. “Without this not turn his country into a modern ing question. Obviously Islam perative to remember that, unoffi- send his henchmen to murder inno- between $1 and $2 million, more than dous acts would make the American unlawful and senseless invasion state; on the contrary, he maintained preaches peace and tolerance, it fos- cially, the Gulf countries supported cent people throughout the world. enough to fund the war they have de- and French leaders give in. It had the – claims Ben Jelloun – this its tribal character and financed ter- ters humanist values, but at the same certain movements in favor of an ob- Even if Islam has broad shoulders, it clared on the world. On September opposite effect. Fortunately, five country would not have become rorist movements around the world. time it includes talks about jihad, a scurantist and totalitarian Islam. is important that Muslim countries 28, the American army also hit Syr- Gulf states (Saudi Arabia, Qatar, the current site of destruction The second important date was the struggle against non-believers, apos- What can be done? If America and are aware that this jihadist state is des- ia’s main gas plant hard in order to de- the United Arab Emirates, Bahrain that it is, a center for birth of the Islamic Republic of Iran tasy and other things that are inter- Europe do not make a greater com- tined to destabilize them and ruin stroy the financial resources of the ji- and Jordan) joined this war. At the international terrorism.” with the accession of Ayatollah preted in different ways. Everything mitment, in a few months we will see them. A rigorous investigation is hadists. Who buys this oil and how? end of September, Turkey decided to Khomeini, who in 1978 proclaimed is relative and everything depends on European jihadists sowing the seed of needed to track down the source of Every war has its traffickers, its smug- become part of the anti-jihadist

17 THE WORLD OVER A BARREL

THE IMAGE OF A BATTLE mitting suicide like the Jihad in- The illustration, preserved in the Museum of Islamic Art in Cairo, tends was never mentioned in Islamic Prices/The crisis in Iraq and its impact on crude depicts the detail of a text of the texts. tenth / twelfth century. What the DAESH is trying to do is to reinterpret Islam with present-day weapons. The texts have been taken out of context. The verses have been used randomly. The black flag is an The optimism aberration: what is actually written is the opposite; to say that “Muhammad is the messenger of Allah,” they wrote: “Allah messenger Muham- mad”. This is all because the name of of the oil markets Allah cannot come after that of Muhammad. Muslims know that innocent people After the escalation at the start are being killed in their name. Some of the summer, oil has dipped below of them mobilized themselves to de- nounce this deviation. The problem $100 per barrel, and so far the situation of young Europeans born following coalition. This is significant because Muslim immigration or who recent- in the Middle East has had a limited Turkey, on account of its geograph- ly converted to Islam and have joined ical location and its links with the the DAESH in Iraq and Syria re- impact on global oil supplies Arab world and with Islam, can play mains. There are thousands of them a decisive role in this war, especial- (roughly one thousand are French). BY PAUL BETTS ly in Syria. It could be an airbase Some believe that fighting for jihad from which to attack the DAESH will guarantee them a place in para- positions. dise, others are attracted by adventure The condemnation has grown. Sau- and war. They all have an identity di Arabia’s Grand Mufti denounced problem and an unstable state of Baghdadi repudiated his claim to mind. The intention of the DAESH being caliph. French Muslims dis- pecting an immediate is to put them to the test in the are- played their categorical rejection of and sizeable response na of war and then send them back to the DAESH by shouting “This is not Several months have passed capable of removing their respective countries to commit Islam” during demonstrations. Youth before world opinion pushed Bashar al-Assad from attacks in the name of the caliphate movements demonstrated in London those in power to create an the scene. But nothing and worldwide hegemony. European under the banner “Not in my name.” happened. He received governments as well as those of the anti-DAESH coalition. It is up a telling off, was made Maghreb fear the return of children to the Iraqi army to fight on the to destroy what re- who have been brainwashed and SYRIA AT THE HEART mained of the chemical turned into commando fighters. The OF THE PROBLEM ground against Islamic State weapons. The tens of question of the caliphate and the es- The other question frequently voiced thousands of people tablishment of an “Islamic state” will is whether the battle against the ji- killed by conventional not end, even if the Americans and hadists will favor Bashar al-Assad or Syrian soil. From the time that about weapons were forgotten about. This their allies manage to beat them. hasten his downfall. The French twenty Islamic commandos pro- was a victory for Bashar al-Assad and eventually decided to support the claimed that they were loyal to Al for Putin, who systematically used his Syrian lay and democratic opposition. Qaeda, other movements like Al Nos- veto against any motion condemning Perhaps thanks to the war against the ra became involved in the Syrian the crimes committed by his Syrian * DAESH: Islamic State, as it is called in Arab and “Islamic state” (which is neither a state conflict, weakening the lay and dem- friend. French-speaking countries. nor is it Islamic), the Machiavellian ocratic opposition. It is thanks to Because America and Europe demon- Derived from the Arab acronym “al-Daoula Al- plan hatched by Putin and Bashar al- this conflict that Baghdadi’s jihadists strated their weakness, their hesitation, [i]slamiya fi al-Erak wal-Cham”. Assad will backfire: in the same way infiltrated Syria and then Iraq, aided their lack of determination, an indi- as at the start of the uprising of the by former officials from the Iraqi army, vidual like Baghdadi felt empowered Syrian people, at the time the people Baathists nostalgic for Saddam Hus- to advance with his mercenary troops, took to the square and demonstrated sein and other opportunists who saw and he soon occupied part of Iraq and peacefully against the dictatorship of “the Sunnis taking revenge on the Shi- Syria. Western hostages had to be Assad (March 2011), the West did not ites” through this movement, given publicly beheaded before world opin- react on the day that Bashar’s army that the Iraqi Prime Minister, Al ion pushed those in power to create fired on the crowd and bombed civil- Malki, did everything in his power to an anti-DAESH coalition. To date, the ian homes. The Syrian National promote the Shiites over the Sunnis only attacks are air strikes. It is up to Council was established abroad: it re- in the country. Through this awful, the Iraqi army to fight on the ground ceives some political support, but partisan and unjust policy, he clearly against the DAESH assassins. does not have an army or soldiers, or paved the way for the DAESH. at least not in sufficient numbers, and America and Europe’s big mistake was it has not received the weapons it to threaten Bashar al-Assad with re- DAESH AND ISLAMIC CULTURE asked for to respond to the onslaughts venge if he were to cross the line by Like all religions, Islam has known pe- of Bashar and his army. using chemical weapons against his riods of violence in which the Prophet The strategy recommended by Putin people. Bashar, probably on the advice Muhammad had to fight for the was simple: infiltrate the lay opposi- of Putin, gassed thousands of Syrians, truth to triumph. He never pro- tion to the Islamic extremists and including a large number of children, claimed that innocent people should spread the message that it’s better to in August 2013. Barack Obama be- be killed or encouraged suicide attacks On www.abo.net, read other opt for a country led by Assad than an came nervous, François Hollande killing other people. Islam forbids al- articles on the same topic

n Islamic republic that would immedi- got angry, and the whole world cried most any form of suicide: it means by Daniel Atzori, Giuseppe e

v ately start killing all the Christians on out at the scandal; everyone was ex- challenging the will of God. Com- Acconcia, Gianmarco Volpe. e

s r - e y t b n m e u w n t 18 19 Source: Eni, Oil & Gas Review 2014 he geopolitical struc- ture created by west- ern powers in the Middle East from the remains of the Ot- toman Empire after World War I is col- lapsing. Even before by PAUL the stunning assault T and advances of Is- BETTS lamic State of Iraq and the Levant (ISIS) extremists this year in Syria and Iraq, the geopolitical architecture of the re- gion was falling apart. The civil war in Syria over the last Reserves: three years has seen the embattled regime of Basher al-Assad under siege from a mainstream opposition of Sunni militants backed by the U.S. The Top 10 and other western allies. It is now also coming under attack from ISIS, even though until recently it seemed The world’s top ten countries that President Assad was providing in terms of oil reserves—most the jihadist extremist movement sup- are found in the Middle East. port in his efforts to counter the Syria is in 33rd place out mainstream Sunni opposition and of a total of 211 countries in the his western enemies. In the north, classification with 2,500,000 bbl. the Kurds had also been intensifying their independence efforts before coming under a vicious attack from ISIS, which forced hundreds of thousands of Kurds to seek refuge Million barrels as at December 2013 across the border in Turkey. ISIS now controls large swathes of Syria’s oil resources, which it has been sell- ing on the black market to fund its operations. The recent intensifica- tion of air strikes and other military interventions by the broad U.S.-led coalition against ISIS may well con- tain and eventually debilitate 18.0% 16.2% 10.4% 9.5% 8.5% 6.3% 5.9% 4.8% 2.9% 2.2% significantly the terrorists and their efforts to set up a new Islamist caliphate. But the ultimate outcome is still more than likely to result in a 48,470 37,140 radical redrawing of the map of 80,000 104,000 97,800 Syria. This too risks being the fate of 140,300 neighbouring Iraq. Following the 173,200 157,300 U.S.-U.K. led invasion of Iraq and 269,350 the collapse of Saddam Hussein’s 297,740 regime, subsequent efforts to estab- lish a stable western-friendly government and reconstruct the country have failed. If these recon- struction and democratisation efforts UNITED had succeeded even in a minimal VENEZUELA SAUDI ARABIA CANADA IRAN IRAQ KUWAIT ARAB RUSSIA LIBYA NIGERIA way, there would hardly have been EMIRATES the need for the U.S. and its other allies to resume bombings in Iraq. Again, whatever the outcome of the current campaign against ISIS, the fact is that Iraq is already split in THE CURRENT SCENARIO term impact of this latest Middle complete control and Sunni ISIS while a possible breakthrough nuclear dispute,” warns a senior THE EXTENT OF THE IMPACT a lead in the anti-ISIS offensive. three, with the increasingly This may in part explain why the oil East crisis or, as the old saying goes, forces are able to operate on a hit between Iran and the U.S. over U.K. diplomat. Yet as the well worn OF U.S. ENERGY Furthermore, sluggish growth autonomous Kurds in the north markets and indeed the financial “are the markets always right even and run basis in the Shiite domi- Iran’s nuclear dispute would eventu- proverb goes: “The enemy of your SELF-SUFFICIENCY prospects in the west and signs of clamouring for outright independ- markets as a whole have so far when they are wrong”? So far, the nated south.” ally reopen Iran to international enemy is your friend” and their Increasing U.S energy self-suffi- weakness in the growth prospects of ence and the establishment of a adopted such a sanguine approach to current Middle East situation has According to BP, three quarters of exploration and production that could clearly be common ground ciency as a result of the U.S. shale emerging countries, especially kurdish state incorporating their Syr- the latest crisis provoked by ISIS. had a limited impact on global oil Iraq’s abundant proven reserves of would eventually more than com- between the U.S. and Iran in break- and tight oil revolution is also China, have additionally eased con- ian cousins, the Sunnis in the middle After spiking earlier this summer supplies and as Professor Paul conventional oil are in the Shiite pensate for supply losses from Iraq ing up, or at least containing the regarded by many industry analysts cern over potential oil supply and the Baghdad regime and its Shi- when ISIS took control of Iraq’s sec- Stevens, an energy expert at the south, while 17 per cent are in the once the necessary reconstruction of ISIS expanding threat. On the other as a reason for the Obama adminis- disruptions. Indeed, some experts ite majority and supporters, not least ond largest city, Mosul, oil prices Royal Institute of International largely Kurdish north. The average oil production facilities have been hand, a top U.S. military advisor tration’s less interventionist foreign have suggested that one way to neighbouring Iran, in the oil rich have since dipped below $100 a bar- Affairs at Chatham House, London, 3.5mb/d Iraq has been producing completed. “No one, however, recently told the U.S. Congress: policy towards the Middle East— undermine ISIS and its reliance on

n southern regions, which have so far rel. Are the markets underestimating points out, this situation “is unlikely this year would easily be replaced by should hold their breath on an “the enemy of your enemy may well that is until recent events that have black market oil would be for e

v largely been spared ISIS incursions. the potential medium and longer- to change unless Baghdad loses Saudi Arabia should the need arise, imminent breakthrough on the Iran still remain your enemy.” forced the reluctant Obama to take OPEC to allow oil prices to drop e s r - e y t b n m e u w n t 20 21 elsewhere, the new government struggles to keep control. “But at least in North Africa the prospects of borders being redrawn is remote. In the Levant it is already happen- ing.” Lord Williams urges the international community, including the UN, to wake up to this “omi- nous development” which is now tearing apart the post-colonial order where strong states once prevailed in the Middle East. For Albrecht Boeselager, the grand 4This8 is the pe%rcentage 3This is3 the annua%l global oil chancellor of the sovereign Order of of proven conventional global PRODUCTION figure that Malta, which has been closely oil RESERVES that the Middle East is responsible for involved in humanitarian operations the Middle East possesses in the war torn Middle East, the region is now being plunged into its own re-enactment of the 30 Years’ War—the 17th century war that was one of the most destructive conflicts in European history and one of the longest continuous wars in modern history. The parallels are indeed dis- turbing. Initially, religion was what sparked the 30 Years’ War as Protes- DOWNWARD 150 dollars/barrel tant and Catholic states fought each PRESSURE Brent other even though many of them The graph shows Wti were or had been members of the the evolution Holy Roman Empire. The war then of the spot price developed into a more general con- 120 of oil (Brent / WTI) flict involving most of the great between September powers of Europe. It became less Oil industry/The differences and October 2014. 100 specifically religious and more a between north and south After ISIS took power play for political pre-emi- control of Mosul 90 nence in Europe. As a consequence, (Iraq), oil prices entire regions of Europe were dev- have continued astated and denuded. to drop down Mr. Boeselager notes that the 30 to below $ 100. Years’ War came to an end only 60 Source: U.S. Energy Information when everybody became exhausted. Administration 23 Sept 2014 30 Sept 2014 7 Oct 2014 14 Oct 2014 21 Oct 2014 27 Oct 2014 Peace treaties were signed, Euro- pean borders and spheres of An uncertain influence were redrawn, but some of the quarrels that provoked the war went unresolved for much significantly. Saudi Arabia could global economy can survive at this throughout the Middle East the longer. It does not take much imag- clearly orchestrate such a fall but is particular stage a major disruption presence of the state is rapidly ination to apply the same historical reluctant to do so given its reliance in Middle East oil supplies. That is weakening. As Lord Michael logic to the Middle East in its pres- future on oil revenues to fund its domestic why the stakes are so high in Syria Williams of Baglan, the former ent parlous state, where conflict and social policies, its arms purchases and Iraq right now. Not so much in United Nations special coordinator terrorism in the name of religion and its support to the current mili- terms of the direct impact the pres- for the Middle East peace process risk destroying centuries of culture tary-led Egyptian government. The ent ISIS conflict in these two and subsequently the former UN and destabilizing the planet. irony is that a dramatic fall in oil countries may have on oil supplies coordinator for Lebanon until 2011 prices would also be unwelcome in which, as we have seen, have so far has written, Iraq and Syria are the Washington, given that U.S. energy been quite limited, but on the two most obvious examples of the self-sufficiency ultimately relies on geopolitical knock on effects of this weakening, indeed collapse, of the a high oil price of around $100 a crisis and its implications for the concept of the state. But he adds barrel to ensure tight oil is eco- future of the entire region, includ- there is considerable concern about nomically viable to extract. U.S. ing Saudi Arabia, the Gulf emirates Libya and Egypt. “The Arab upris- energy self-sufficiency coupled with and last but not least Iran. ings of 2011 have led, with the raq is facing a list of the widespread development of exception of Tunisia, to weaker formidable chal- alternative energy sources may have states which are unable to control While southern oil sector has been able lenges that is grow- lured western governments and THE CONCEPT OF A FALTERING either their territorial integrity or to proceed effectively to date, political ing by the day. One policy makers into a sense of false STATE IN THE MIDDLE EAST the loyalty of their people,” he says. third of its territory is security and indeed in some cases of The map of the Middle East is In Egypt, President Sirsi was On www.abo.net, read other uncertainty in Baghdad has meant further under the control of complacency over Middle East oil being redrawn. The old post- elected in a lower turnout than the articles by the same author. Islamic State (ISIS) supplies. Nonetheless, the Middle Ottoman order and one of the country’s former civilian President delays for the shared infrastructures essential by BASSAM fighters, the Kurdish East still holds about 48 per cent of legacies of World War 1 led to the Morsi. President Sirsi, like all his FATTOUH north is struggling Financial the world’s proven reserves of con- establishment of strong, albeit auto- predecessors, is an army general. Paul Betts has worked for the Iand to protect its territo- Times for the last 36 years, including to the country’s ability to exploit its oil ventional crude oil and accounts for cratic states in the region propped Mr. Morsi, by contrast, was the only BILL ry and keep its inter- 28 years as the paper’s foreign around one third of annual global up by their western allies reliant on civilian to be head of state in the 62 FARREN-PRICE national oil partners correspondent in Rome, Paris, New York potential. The coming months will be of vital n production. It is therefore a highly their expansive oil reserves. That years of the Egyptian republic. Lord and Milan. He is currently based in London. in place, a new Prime Minister in e

v questionable assumption that the order is now disappearing, as Williams also says that in Sinai and Baghdad is grappling with a political e importance in this regard s r - e y t b n m e u w n t 22 23 THE WORLD OVER A BARREL

remit for an inclusive government, intended to make the country an oil gathering and processing to feed and sectarian fault lines within the powerhouse to rival Saudi Arabia power plants has yet to be build population are deepening, as are re- any more than wishful thinking? Put momentum. gional disagreements on how to tack- another way, can we rely on Iraq to If it were not 10 le the ISIS threat. provide the incremental oil produc- 9.6 The current crisis in Iraq has many tion that is so critical to most 9.2 AN OIL INDUSTRY ADEQUATE fathers—the Western intervention analysts’ long-term oil balances? for the crisis FOR THE RESOURCES in 2003 and the subsequent dissolv- The outlook for Iraqi oil depends OF THE COUNTRY ing of the Iraqi army, the partisan very much on where you are stand- Iraq’s plan to build out its oil indus- 3.3 approach of former Prime Minister ing. North of the capital, the bulk of try to match the subsurface resource Nouri al-Maliki’s government and new upstream activity is centered on base will also require coordination spillover from the civil war in Syria. 7.5 with its producer neighbours. In Each has played a part in deepening 2030 today’s well supplied market, the Millions of barrels sectarian fault lines. The coalition of 6.9 State Oil Marketing Organization per day of Iraqi Western and regional powers who 2025 (SOMO) has been forced to dis- oil production to date have come together to confront the 6.1 count crude heavily to win buyers in High scenario ISIS threat is impressive in terms of 5.9 Asia, helping drive discounts from 2020 its political balancing act. Gulf states competing Gulf producers. That edge the plethora of challenges are supporting the military cam- Central scenario policy is not sustainable and Iraq will (security, infrastructure and bureau- paign against IS, but the tensions in at some point have to sit down and cratic) that Iraq faces today. There is this arrangement are just below the 4.2 negotiate a staged expansion of its a realization that it is the more sub- surface. Sunni GCC states are aware 125 oil production that does not risk tle, long-term effects of regional that they risk inflaming unrest at 2015 pressuring global oil prices. Aside political instability that are likely to home by attacking a Sunni Islamist from Iraq’s internal challenges, there leave the most lasting mark on movement that has so far proven to are external factors that will influ- regional oil and gas markets. Poten- be an adept recruiter of disaffected The number, in thousands of 2.7 ence the speed of development in tial repercussions are likely to be felt youth in the region and further barrels of oil per day, that the 2011 the oil sector. The development of through several years of an unstable afield. To date, the jury is still out on Government stated were The International Energy Agency’s optimistic 2012 unconventional oil and gas is having regulatory and investment environ- whether air strikes alone can do exported via Ceyhan forecast of Iraqi oil production (in millions of barrels a dramatic impact on global oil bal- ment, deteriorating security enough to halt the military progress per day)—before the country was embroiled in conflict. ances. Despite Iraq’s significant cost situation, and delay of much needed of IS, whose ability to take and hold advantage over shale oil in the US energy market reform impacting territory from Syrian and Iraqi gov- territory controlled by the Kurdish and oil sands in Canada and else- long-term production and export ernment forces has surprised even Regional Government (KRG), Source: IEA where, sustained high oil prices capacity. Iraq’s immediate and fore- those with an intimate knowledge of which has its own resource manage- around $100/barrel have incen- most challenge is political. the region. ment and export plans. The collapse tivised oil companies to focus their If Iraq’s new Prime Minister, Haider Despite years of training and invest- of Iraqi government forces in the efforts in regions where security and al-Abadi, can successfully pull ment by the West, Iraq’s army has north in mid-summer initially political risk are much lower. together a cross-sectarian govern- proven ineffective and with no appeared to deliver the KRG a huge The near-term target will not be met wider political settlement between the picture so far is positive, the ect is vital to maintaining the reser- Nevertheless, Iraq still plays a par- ment that wins the support of the Defence Minister and a hollowed- political and economic dividend, by due to the disruption caused by the Iraq’s federal government and the long-term problems that are limiting voir pressure in these oil fields ticularly important role in setting oil Sunni tribes, there is hope that the out officer class, the short-term allowing Kurdish administrative withdrawal of international staff in KRG. There are also technical rea- Iraq’s southern exports are unre- needed to meet and sustain produc- price expectations in the medium government will over time be able to prospects for improvement are control to extend to formerly dis- the face of the nearby fighting. In sons why it would be difficult to solved, with at least 200,000 b/d of tion plateau. But delays in agreeing and long term. Before US tight oil reassert control over the country’s bleak. Despite the coalition air puted territories around Kirkuk and mid-June, the KRG said it was pump Kirkuk crude via the new Kur- southern production bottlenecked on the scope of the $5 billion first burst onto the scene, Iraq was to be north and its borders. Further pre- attacks, latest reports have ISIS units Nineveh. exporting 125,000 b/d via Ceyhan, dish pipeline to Turkey. For now by insufficient midstream and export phase of the water project is holding the main contributor to global oil varication by the country’s political within shouting distance of the out- The Kurdish government in Irbil on top of the 60,000 b/d crude and there are insufficient pumping sta- infrastructure. Despite the turmoil up progress. The ability to transport supply growth this decade and next. leadership is simply not an option. skirts of Baghdad. also saw an opportunity to reinforce products trucked to neighbouring tions on the line—and the Kirkuk in the north, the southern mega oil crude to the southern export termi- This is why, in terms of the poten- While the southern oil sector has its claim to proceed with independ- Iran and Turkey. Project expansions crude would need to be batched to projects have been broadly successful nal at Basra and then load it is also tial to add significant production been able to proceed effectively to ent oil exports, a sensitive issue that at Taq Taq and Tawke should, how- avoid mixing with the different qual- at expanding output this year. Iraq’s volumes over a five-to-ten year date, political uncertainty in Bagh- THE FUTURE OF THE OIL lies at the heart of the years-long ever, make total oil exports of ity Kurdish crudes. Meanwhile, ISIS international oil partners have rene- period, Iraq is still the biggest part dad will translate into further delays INDUSTRY IN IRAQ confrontation between the KRG and 300,000 b/d possible by year-end. has attempted to produce oil from gotiated service contracts, reducing of incremental supply. Indeed, to get to the common infrastructure so Western ground troops appear to the federal government in Baghdad. Whether Kurdish officials can per- the heavy oil fields under its control plateau production targets and the long-term global oil market to critical to allowing Iraq to meet its have been ruled out, so we should The KRG also claimed it would be suade their Baghdad counterparts to in northern Iraq. Press reports sug- extending their duration. The prob- balance anywhere near current oil potential. The coming months expect that the outcome of this lat- able to deliver a secure export route allow exports of Kirkuk oil via the gest that it has been able to produce lem in the south is that joint prices rather than far above, most will be crucial in this regard. est conflict will be decided on the for Iraqi Kirkuk crude, whose KRG is another matter and is likely and refine limited quantities of oil, infrastructure, whether terminal analysts require a significant supply- extent to which the Iraqi army and exports have been suspended for to be bound up in discussions over a using the off-spec products to fuel storage and pumping capacity, water side contribution from Iraq. For its Kurdish counterparts can deliver months due to unremitting attacks their military surge, or selling them availability or gas handling, remains instance, back in 2012, the IEA pre- not just an immediate containment by ISIS forces on the northern via a network of traders to neigh- well behind schedule. Water injec- 2.4/2.6 dicted that Iraq’s oil production of ISIS, but also a strategic offensive pipeline through Turkey. The oil bouring countries. tion is one of the most urgent issues. would reach 5.9 million b/d by 2015 that would force them out of the fields that feed into the shut-in These homemade refining opera- The delayed Common Seawater in their high case scenario and 4.2 population centers in the middle and Kirkuk export system in Iraq proper tions are unlikely to have survived Supply Project, which is needed to million b/d in their base scenario. By north of the country. Those with also supply crude to the Baiji refinery the early stages of the air campaign, deliver essential injection water to 2020, output would more than dou- military experience in the region are complex, which has become another but point to a certain degree of inge- the Rumaila, Zubair and West Millions of barrels ble to 6.1 million b/d in their base Bassam Fattouh, in addition to his role as not optimistic. According to former casualty of the fight with ISIS—an nuity, organisation, and the ability to Qurna 1 projects, is not expected to per day exported case or reach a staggering 9.2 million Director of the Oil and Middle East head of British armed forces General uneasy truce between government use and expand existing smuggling start up before mid-2018 at the ear- in the south of Iraq b/d in their high case. The latest Programme, is also Research Fellow Lord Richards, ISIS are “a tough and ISIS forces keeping the complex networks established in Saddam’s liest, implying a period of flat-lining round of violence has definitely at St Antony’s College, Oxford University; conventional army — and know how shuttered now for weeks, and forc- time to raise finance for the ISIS output for those projects after 2015. resulted in a shift in the market’s and Professor at the School of Oriental 300 and African Studies. to fight with tanks, artillery, and ing Baghdad to import extra campaign. In the south, where the Current water injection at Rumaila bottlenecked by the absence of suffi- mind-set. Today, Iraq’s output is at infantry.” Richards said that ISIS will gasoline, diesel and LPG to meet bulk of Iraq’s oil reserves and pro- and Zubair relies on the revamped cient storage and the limitations of 3.3 million b/d and it is unlikely that not be defeated through the present domestic needs. KRG oil export tar- duction are located, the picture is Qarmat Ali intake station on the the existing pumps. Plans to install production will average much more Bill Farren-Price is Founder and CEO strategy and added that no local gets are certainly impressive: Irbil The number, of thousands of somewhat different. The expansion Shatt al-Arab waterway, which is additional tanks and a gas turbine- than that this and next year as the at Petroleum Policy Intelligence. forces would be up to the job of con- initially planned to raise its oil barrels of oil per day, that of production and exports has been being expanded. Further out, West driven pumping system will not be improvement in the south is offset In the past, he was Director of Energy and MENA Countries at Medley Global fronting them on the battlefield for exports to 400,000 barrels per day Kurdistan should be able to able to proceed with very little inter- Qurna 2, Majnoon and Gharraf will complete until 2017 at the earliest. by losses in the northern fields. Even Advisors, Deputy Editor at Middle East years. Under these conditions, does (b/d) by the end of 2014. Longer- export by the end of the year ference, and exports have been need water injection at the end of the Despite years of work to harness before the insurgency and the latest Economic Survey (MEES) and Senior

n Iraq’s oil sector have a future and are term targets are for 2 million b/d of with the expansion of the Taq Taq sustained at 2.4-2.6 million b/d decade when they approach plateau flared gas in the south, power cuts round of violence, some optimistic

e Energy Correspondent at BridgeNews.

v the expansion plans that were exports by the end of the decade. and Tawke oil field projects through the last few months. While output. The common seawater proj- are still frequent and progress on gas forecasts were starting to acknowl- e

s r - e y t b n m e u w n t 24 25 THE WORLD OVER A BARREL

ation with great concern, on the one side seeing the destabilization of the Middle East at the hands of Islamic movements and, on the other side, fearing the emergence of Iran threatening not only Jerusalem, but all the Gulf countries. For this rea- son, we believe that it is a mistake to allow Iran into this conflict.

To what extent do you think that the Islamic State is also AVIEZER “AVI” PAZNER led by energy interests and is an Israeli diplomat and political the need to control energy expert. He joined the Israeli sources to consolidate foreign service in 1965. He its hegemonic positions served as counsellor at Israel’s in the area and support its Embassy in Washington, headed terrorist strategy? the Foreign Ministry’s Press What I should like to say is that Division and served as Ministry while the energy goal is not the main Spokesman from 1981. In 1986 reason these terrorist groups exist he was appointed senior advisor and operate it is obvious that they to Prime Minister Yitzhak Shamir. are not present in petrol extraction In 1991, he was appointed as areas in both Iraq and Syria by Israel’s Ambassador to Italy. chance. It is obvious that even clan- He headed the negotiations destine trading of these resources is with the Vatican, which resulted designed to support the caliphate in the establishment of economically, flogging the oil at a diplomatic relations with Israel. quarter of the official price, and for In 1995-1998, he served as this reason American air raids struck Ambassador to France and was the energy installations first of all in decorated by President Chirac order to prevent ISIS from gaining as Commandeur of the French even more power. I believe that the Légion d’honneur. Pazner West, America and moderate Arab is ambassador at large. countries will manage to beat the Islamic State, in spite of the fact that it will take many months, perhaps even years, but in the meantime, control of the energy market in the Israel/Avi Pazner, diplomat and political expert north of Iraq and in the east of Syria cannot be allowed to fall into their hands. I would like to reiterate that the endgame of the advance of ISIS is the establishment of a great Islamic nation from the Maghreb to Iraq, and that includes control of Fear beyond the Territories energy sources. Since, however, America, Western countries and more moderate Muslim countries, such as Saudi Arabia, Jordan, the While Jerusalem views the Middle East crisis with apprehension, it’s United Arab Emirates and Egypt encouraged by the resolve shown by western forces in response to oppose it, I imagine and I hope that the impact on the energy side will strategy in the knowledge that air ISIS. Offering Iran the opportunity to become stronger is a bad idea have moderate repercussions. strikes alone are not enough to over- come the terrorists; ground attacks Do you believe that Iran, are also needed. America and Euro- playing a part as a pean countries are not ready to collaborator alongside intervene with ground troops, while Western countries with Iran is extremely willing. ISIS is he silence that until ther by taking on an active role. Ob- positions of the neighboring with the Middle East region, at this aim to destabilize the region and are current willingness to support whom its relations have demonstrating inhumane cruelty, now has distin- viously, Israel is not looking on qui- countries in the conflict time, is instability; since I started unfortunately able to count on the action by America and Western been, until now, at odds, is but it would be very easy for Iran to guished Israel’s be- etly at the introduction of international area. Some are interested following international politics 50 loss of power and legitimacy of cen- countries, in our opinion, conceals aiming to get the embargo engage in a counterattack with havior with regard to coalition forces ready to halt the ad- in energy sources, years ago, I cannot remember such tral governments. This poses a very an obvious aim: in exchange for sup- on the sale of oil revised? ground troops, especially if the the turbulent and vi- vance of ISIS with Iran involved. controlled by the Islamic an explosive situation. Some major serious threat to the entire region. port in this battle against the I have already pointed to the nuclear counterattack provided the way for olent development of The former Israeli ambassador to state, while others are countries like Syria, Iraq, Libya and Faced with this scenario, many terrorist movements, Teheran is sector in which Iran has been oper- them to sell their oil freely. In my the Middle East cri- Italy and France, Avi Pazner, very fa- scared of losing visibility Yemen are no longer ruled by nor- believe that the intervention, even asking the West for greater open- ating for some time and about which opinion, offering Iran the opportu- sis has been deafen- miliar with the delicate equilibrium in after a possible easing mal governmental systems, but by military intervention, of Iran could ness toward its nuclear program, new negotiations are currently tak- nity to become stronger in the by GRANT ing. While Jerusalem this area that is always under siege, of relations between the terrorist type pseudo movements, bring a solution to the crisis. In our also under the scope of the ongoing ing place. I would imagine that a Middle East is not a positive T has observed the ad- confirms this fear. United States and Iran. with different names, some of which opinion, in reality, Iran is part of the negotiations in Geneva. Iran has, further rapprochement between prospect. SUMMER vance of the Islamic What is Israel’s position are allied to the new Islamic State, problem and not the solution. A until now, rejected all the proposals Iran and the West could alleviate the State with apparent Ambassador Pazner, with regard to this possible and others which retain close ties radical Islamic government is put forward by Western countries sanctions affecting the Iranian crude What do you think Israel’s indifference, it’s reasonable to surmise looking at the crisis in the change in the geopolitics with al Qaeda. The entire Middle installed in Teheran which, accord- that do not involve the production oil market, making Iran stronger as a reaction would be if faced

n that for the time being, Israel’s lead- Middle East, the world is of the region? East is pervaded with and threat- ing to us, has not abandoned its plan of nuclear weapons, not even in the result. The Tehran government has with a situation in which the e

v ers prefer not to fuel the conflict fur- trying to understand the In my opinion, the main problem ened by fundamentalist factions that to develop nuclear weapons. Iran's future. Israel is looking at this situ- implemented a very sophisticated Middle East were to grow e

s r - e y t b n m e u w n t 26 27 THE WORLD OVER A BARREL

The power TURKEY

Oil pipeline, inactive of the Levant SYRIA Oil pipeline, proposed Offshore oil and natural gas Natural gas pipeline discoveries in the Levant Basin MEDITERRANEAN CYPRUS Natural gas pipeline, inactive - defined as Cyprus, Israel, SEA Natural gas Jordan, Lebanon, Syria, and pipeline, proposed LEBANON the Palestinian Territories - have the potential to significantly alter energy supply dynamics in the eastern IRAQ Mediterranean. This region is WEST currently undergoing changes ISRAEL BANK to its energy landscape. With expected economic growth,

arab and the population of the gas pi JORDAN region forecast to grow p between 58 and 62 million el ine in 2030, energy demand should increase noticeably SAUDI ARABIA over the next two decades. EGYPT

Source: U.S. Energy Information Administration/IHS Edin

stronger through an Do you believe that GAS RESERVES IN EAST MEDITERRANEAN increase in oil exports? Israel could suffer Country Discovery Field Estimated First A scenario of that sort would defi- negative repercussions date name reserves (Tcf)* volumes nitely bring about a rapprochement with regard to energy Cyprus 2011 Aphrodite 7 2017 between Israel and moderate Arab as a result of the current Israel 1999 Noa 00.04 2012 countries, which share the same crisis? 2000 Mari-B 01.05 2004 2009 Dalit 00.05 2013 concerns, especially with regard to Frankly, no. Israel has carried out a 2009 Tamar 10 2013 a possible advance of Iran. I predict great deal of exploration in the 2010 Leviathan 18 2016 a consolidation of relations with Mediterranean along its coasts and 2011 Dolphin 00.08 unknown Saudi Arabia, with whom in recent found huge reserves of natural gas. 2012 Shimshon 00.03 unknown years relations have been rather In a few years we will be totally 2012 Tanin 01.02 unknown “cold” but which, on the contrary, independent, also thanks to invest- 2013 Karish 01.08 unknown Palestinian Territ. 2000 Gaza Marine 1 unknown now sees us being committed to a ments made in photovoltaic energy. * thousands of billions of cubic feet new round of talks, albeit informal, Israel does not have an energy pro- Source: estimates AIE, IHS, Oxford Institute for Energy Studies, Oil & Gas Journal or with the Arab Emirates. Obvi- curement problem; memories of ously, Israel might also wish to the energy crisis in the early seven- How worried are you about some countries in the Middle East strengthen its ties with Egypt and ties during the Yom Kippur War, the threat presented by ISIS region. I believe, however, that mili- Jordan, trying to create an alliance, when we suffered from a harsh and other terrorist tary intervention, especially thanks even if it is not formal by nature, embargo, are distant, but in that organizations? to the commitment of the United based on the shared goal of not case the problem was on a global We are obviously very worried by States and other Western countries, granting Iran the hegemony that it scale. these threats and this, as I said previ- can produce a very positive result in is looking for in the Middle East, Israel can currently get all the ously, confirms the extreme the war against Islamic terrorism. In and which Tehran is currently try- energy it needs easily and, I believe, instability of the situation. The dan- the meantime, we are all going ing to obtain by offering its help to that in two or three years we will ger does not only come from through a time of great uncertainty the West. achieve full energy self-sufficiency. terrorist organizations, but also from which could fuel further conflicts, Turkey/At the boundaries of conflict like the one we were involved in in the summer against Hamas, a branch of the Islamic tree which has branches in Lebanon and other Gulf Israel’s energy numbers countries where there are very sig- nificant energy reserves, like Reserves: 12 million barrels The view from Ankara OIL PRODUCTS DEMAND Bahrain, for example, where in spite as at 31 December of the fact that a moderate govern- Consumption: 244 thousands barrels/day 300 Other petroleum ment is in power, the terrorist danger he extremism of ISIS sense of despair and nihilism, polit- thousand barrels per day products could still take root. For Recep Tayyip Erdog˘an’s in belief and prac- ical and economic injustice and the Residual fuel 250 oil I am, however, more than certain tice is a despicable uneasy relationship between tradition Reserves: 214 billion cubic metres Gas/diesel that, thanks to the determination special advisor, the decision phenomenon that and modernity. as at 31th December 200 Jet fuel demonstrated by the forces in the must be contained ISIS continues to advance to new and kerosene Production: 6.33 billion cubic metres field, victory over the terrorist cru- to adopt a no-fly zone and offer and condemned. But territories in Iraq and Syria. After 150 Motor Consumption: 6.84 billion cubic metres gasoline elty of ISIS is absolutely within the it should also be ac- ISIS was stopped at the borders of Import: 0.50 billion cubic metres Naphta a safe haven for Syrian refugees 100 reach of the West. knowledged that ISIS Iraqi Kurdistan, it began to move LPG and ethane by IBRAHIM is only a symptom of toward Baghdad again, making sig- Source: Eni Oil&Gas Review 2014 Refined is an effective way to empower T a larger problem - a nificant advances toward the Iraqi 50 oil products KALIN production the moderate Syrian opposition problem that goes to capital as of this writing. It remains 0 the heart of the ex- in control of Mosul and other swaths 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

n Source: IEA, Enerdata tremisms of the modern world, the of territory. It will not be a big sur- e

v failure of the international system, the prise if ISIS makes a surprise attack e

s r - e y t b n m e u w n t 28 29 The map shows the distribution on Baghdad when the world's atten- of the Kurdish population between THE AUTHOR Ibrahim Kalin is Deputy tion is turned to the Syrian city of the states of Iran, Iraq, Syria, Turkey Secretary-General Kobani, also known as Ayn al-Arab. Kurds in Middle East and, to a lesser extent, Armenia. of the Presidency It is no secret that ISIS received sup- GEORGIA The Kurds, who number between 35 port from the Assad regime starting and 40 million people, constitute one and Special Adviser in the spring of 2013, when the Free of the world’s largest ethnic groups. to the President Syrian Army (FSA) took major hits The map also shows the major of Turkey. He served in the battle. This was also when the energy infrastructure present as Assistant Undersecretary of State international community failed to between Iraq and Turkey, including and Senior Advisor to the Prime provide help. ISIS moved into terri- the Kirkuk-Ceyhan oil pipeline, and Minister of Turkey. Kalin is the tories cleared by the Assad regime's energy data for oil and gas in Turkey. founding-director of the SETA aerial strikes, whose main targets ARMENIA Source: Eni Oil & Gas Review 2103/2014, Reuters 2014 Foundation for Political, Economic were the FSA and other opposition and Social Research based in Ankara, groups. As ISIS took control of Turkey and served as its director much of the north of Syria, Assad from 2005 to 2009. He is a fellow felt secure because ISIS territories at the Prince Alwaleed Center created some sort of a buffer-zone for Muslim-Christian Understanding, between Damascus and the opposi- Georgetown University. His interviews tion-held areas in the north. TURKEY and pieces have appeared in the Guardian, Financial Times, Washington Post, New York Times, al-Sharq FOR ASSAD, ISIS IS A TOOL al-Awsat, al-Ahram, al-Jazeera FOR WEAKENING SYRIAN Network and al-Arabiyya. OPPOSITION The Assad regime and its allies find CEYHAN ISIS a helpful tool; a useful idiot that can be employed against the YUMURTALIK moderate Syrian opposition to divide and weaken it. MOSUL ARBIL ISIS is also an effective instrument in Assad’s propaganda war; its Reserves: 295 millions of barrels Kirkuk-Ceyhan pipeline scenes of beheadings, barbaric and as at December 31, 2013 KURDISH MAJORITY Repair work on Iraq’s northern oil export pipeline to Turkey horrible as they are, manage to Production: 46 thousands of barrels/day AREAS KIRKUK overshadow the killing of more than Import: 773 thousands of barrels/day is on hold until security forces can beat back insurgents 250,000 people by the Assad Export: 128 thousands of barrels/day MIXED POPULATION SYRIA who have repeatedly regime. It also provides a cover, AREA attacked it. though a temporary one, for the war crimes and crimes against humanity Reserves: 8 billion cubic meters perpetrated by Assad and his com- as at December 31, 2013 manders. The fight against ISIS in Production: 0.53 billion cubic meters OIL PIPELINE IRAN Iraq and Syria is gaining momen- Import: 44.46 billion cubic meters Export: 0.64 billion cubic meters tum and should continue. But OIL PIPELINE BAGHDAD questions remain about the larger UNDER CONSTRUCTION strategy against ISIS. What will be the extent of the operations? Will IRAQ they be limited to hitting ISIS tar- gets alone or will the strategy include taking serious measures Iraq. As for Syria, the root cause of the against the Bashar al-Assad regime problem is the prolonged civil war that is responsible for the environ- that has claimed tens of thousands of ment in which ISIS flourished in the lives and created one of the greatest first place? Will the new Iraqi Gov- ISRAEL humanitarian catastrophes in recent ernment be able to establish a new JORDAN history. It is clear that Mr. Assad can security and political architecture to no longer be part of the solution in secure all Iraqi cities and serve all of EGYPT Syria. He has failed his own people, its citizens? While the world's turned against them and continues to attention has been focused on kill them in cold blood. It is a moral Kobani, the Assad regime continues responsibility and political imperative its bloody war. Most recently, the to stop this massacre in Syria. Oth- regime killed scores of people in erwise, groups such as ISIS will find Damascus and dropped barrel fertile ground in the chaos and anar- bombs in several cities. chy that is Syria today. More people are fleeing Syria, HOW IS THEIR TURKISH Kobani/Ayn al-Arab. Recently, ians, including its primarily Kurdish dogan who, as prime minister, raised not the fundamental rights of Syrian which the allies including the U.S. adding to the number of millions of NEIGHBOR BEHAVING? Turkey has allowed Peshmerga sol- residents. Creating a de facto situa- the issue of recognizing the citizen- Kurds, but rather the PYD’s oppor- and Turkey have already committed refugees and internally displaced The recent violence along the Turk- diers from the Kurdistan Regional tion for control politics is counter- ship rights of Syrian Kurds with Mr. tunist politics and questionable al- themselves. Establishing a new secu- people. With the rise of ISIS, the ish-Syrian border forced tens of Government of Iraq to go to Kobani productive. Furthermore, the PYD Assad in 2009 and 2010 before the liances. A comprehensive and inte- rity structure and generating an in- Assad regime has not become a thousands of people to flee to Turkey. to help defend the city. A number of still needs to come clear about its Syrian war began. Moreover, Turkey grated strategy is needed to counter clusive political environment in Iraq lesser security threat for the Syrian In just three days, Turkey accepted forces from the Free Syrian Army are shady relationship with the Assad has excellent relations with Iraqi the extremism of ISIS on the one is key to returning Iraqi territories un- people and neighboring countries. more than 150,000 people from fighting against ISIS in Kobani. Syr- regime on the one hand, and the out- Kurds and is conducting a compre- hand and the carnage of the Assad der ISIS to its lawful owners. Much To the contrary, the carnage and Kobani/Ayn al-Arab alone. This is ia’s Kurdish Democratic Union Par- lawed PKK terrorist organization hensive peace process with Turkey’s regime on the other. Turkey’s call for of the sympathy that ISIS has gath- chaos it causes continues to be one more than the number all European ty’s (PYD) claim to hegemonic con- on the other. Having said this, it Kurds, ensuring their fundamental a no-fly zone and a safe area for Syr- ered in Iraq is due to the sectarian and of the most fertile and disastrous nations accepted from Syria over the trol of the city is neither realistic nor should be emphasized that Turkey has constitutional rights and providing ian refugees will help both the Syri- oppressive policies of the Maliki era. On www.abo.net, read other

n breeding grounds of extremism in last three years. Currently, Turkey fair. Kobani/Ayn al-Arab, like all nothing against the Kurds of Syria. As services in ways that were impossible an refugees and empower the mod- The new Iraqi Government deserves articles on the same topic e

v the Middle East. hosts about 190,000 residents of other Syrian cities, belongs to all Syr- a matter of fact, it was President Er- until a decade ago. The problem is erate Syrian opposition – a task to our support for a new beginning in by Nicolò Sartori, Fabio Squillante. e

s r - e y t b n m e u w n t 30 31 THE WORLD OVER A BARREL

Kurdistan/Implications and consequences of the rise of the caliphate THE AUTHOR Mohammed Shareef is a fellow of the Royal Asiatic Society (London). He has worked for the UN and is a visiting lecturer at Independence: trapped in a dream the University of Exeter in the United Kingdom and a lecturer in International Relations at the University of Sulaimani in the Kurdistan Region of Iraq. Mohammed completed his PhD in International Relations at the University of Durham and has an MSc in International Re lations from the University of Bristol in the United Kingdom. His research interests range from US foreign policy towards Iraq and the Kurds to US policy towards the Middle East in general. He is the author of the book “The United States, Iraq and the Kurds: Shock, Awe and Aftermath” published by Routledge on 12 March 2014.

he rise of the so- tially two phases in Iraq’s post-Saddam erendum would be held and that the confines of the artificial borders of the the Kurds will ultimately secede. Kurdish rights to oil exploration, The crisis in Iraq offered the called Islamic State history: “before Mosul and after Mo- people would decide, regardless of any Iraqi state. Firstly, genuine power- Both these conditions have now been signing of contracts and independent (ISIS) presented the sul.” He was right. For the Kurds it regional or international opposition. sharing arrangements, manifested in realized. Contributing to this outcome oil sales by the Kurdistan Regional Kurds a historic opportunity. Kurds with both op- was clearly a historical opportunity. In He told the Kurdish Parliament, democratic practice, full implemen- was the Shiite-dominated, divisive, au- Government (KRG). Finally, Baghdad portunity and risk. an interview with CNN’s Christiane “The time has come to decide our fate, tation of the nationally ratified per- thoritarian and sectarian government has also failed to implement Article When ISIS took over Mosul, When ISIS took over Amanpour in June, Masoud Barzani, and we should not wait for other peo- manent Iraqi constitution and broad in Baghdad that has refused to send 140 of the Iraqi Constitution, designed the major Iraqi city of President of the Kurdistan Region, ple to decide it for us.” national consensus in Baghdad. Sec- Kurdistan’s share of the national to reverse Arabization policies im- many Kurds believed the time Mosul on June 10, said that it was time for the Kurdish ondly, a peaceful Iraq absent of vio- budget since February 2014, denied plemented by Saddam Hussein’s by MOHAMMED 2014, the Kurds people to practice their right to self- lence and civil war. Bayan Sami Ab- funding of the Kurdish forces (known regime. These factors exacerbated to determine their own fate T knew that times had determination: “The time is here for THE CONDITIONS dul Rahman, the Kurdistan Region- as the Peshmerga) since 2006, and re- already existing tensions between SHAREEF changed. Nechirvan the Kurdistan people to determine FOR SUCCESSION al Government's High Representative jected Kurdish administration over the Baghdad and Erbil. had arrived. Were they right? Barzani, the Prime their future and the decision of the Since the overthrow of Saddam Hus- to the United Kingdom has repeatedly natural resources situated in the Kur- Iraqi Prime Minister Nouri Al-Ma-

n Minister of the Kurdistan Region, stat- people is what we are going to up- sein in 2003, the Kurds have stressed stated that if Iraq reverts to dictator- distan Region. Baghdad also failed to liki’s government’s dealings with the e

v ed very clearly that there were essen- hold.” He declared that an official ref- two major requisites to stay within the ship or is plagued by civil strife, then recognize constitutionally mandated sizable Sunni minority have been no e

s r - e y t b n m e u w n t 32 33 THE WORLD OVER A BARREL

this, is the strategy to make the necessary preparations for Kurdis- tan's independence. The Kurds are buying time; the Kurdish leadership knows that Kur- dish aspirations will not be realised in Baghdad, as they will never be seen as true partners in Iraq, and nor has the government in Baghdad proved trustworthy. The Kurds see inde- MASOUD BARZANI pendence as the one and only solu- President of the region tion. There is no real will for peace, of Kurdistan (June 2014) “The time has come for the Kurdish people to take their future into their own hands. We will support the people’s decision.”

less controversial. Maliki’s marginal- ization, exclusion and persecution of the Sunni Arabs led directly to the rise of the “Islamic State.” What happened on June 10th was the cli- FAISAL I max of a Sunni Arab uprising, a con- First Iraqi king sequence and creation of Baghdad’s (1932) misguided policies in refusing to en- “I believe that there are no Iraqis gage and alleviate Sunni grievances in Iraq. There are instead many since Saddam Hussein was over- groups without national sentiments, thrown in April 2003. groups rich in superstitions This latest Sunni uprising traces back and false idols, without common to the Hawija revolt in May 2013 – a ground between them.” clear message the Maliki govern- ment refused to notice in an ex- tremely volatile situation that ulti- mately exploded out of control. After ISIS made a huge incursion into reconciliation and coexistence – all Kurdistan, capturing huge swathes of major Iraqi groups have separate Iraqi Kurdish territory on August agendas. The very first Iraqi king, 3rd, the achievable and not so distant Faisal I, stressed this in a 1932 pri- dream of independence suddenly vate memo to a close circle of advi- changed to struggle for mere survival. sors: “In this regard and with my ISIS had overrun Kurdish forces in the heart filled with sadness, I have to say western Iraqi Kurdish towns of Sin- that it is my belief that there are no jar and Makhmour, and had surged as Iraqi people inside Iraq. There are far as the Gwer district, only 31 miles only diverse groups with no nation- from the Kurdish capital city of Er- al sentiments. They are filled with su- bil. And suddenly the unblemished perstitious and false religious tradi- reputation of the Kurdish Peshmer- tions with no common grounds be- ga as battle-hardened, fierce and un- tween them.” Nothing has changed defeatable fighters came into question. not afford nor would it be in their in- ment in Iraq: “They used that time ter, Haidar Al-Abadi, on August 11th question—Masoud Barzani himself in 2014. There is absolutely no trust Kurdish aspirations for independ- terest to lose Kurdistan – a pro- well, and the Kurdish region is func- potentially presents an opportunity has reiterated on many occasions that between Baghdad and Erbil, palpa- ence suddenly seemed crushed in the Western, largely democratic, largely tional the way we would like to see. It for the Kurdish leadership to main- Kurdish affairs will not be con- ble also is the huge tension and am- aftermath of Sinjar. But this unfortu- secular, and economically prosperous is tolerant of other sects and other re- tain Western support and settle their trolled from Baghdad. The Kur- ple mistrust between the Arab Sun- nate turnaround, mostly result of the entity in the Middle East. To this end, ligions in a way that we would like to various issues in Baghdad. The hope dish people have faced economic ni leadership and the Shiite leaders ISIS incursion, unexpectedly provid- major Western powers and in order to see elsewhere. So we do think it’s im- is that Kurdish political, economic hardship since February, a conse- in Baghdad. So effectively, Kurdish ed the Kurds with both unprece- halt and repel ISIS advances, prompt- portant to make sure that that space and military grievances will be ad- quence of Baghdad’s decision to sus- independence has only been post- dented opportunity and major road- ly provided humanitarian assistance, is protected.” The U.S. knew and had dressed in light of the new circum- pend the KRG’s share of the national poned, the vision, view and goal is still blocks. On the one hand, plans for an air attacks and weapons to the Kurds. actually known since 1991 that it stances in Iraq. budget, Kurdish attempts at regain- live and well. independence referendum were President Obama, who had, for most would benefit greatly from the pro- ing Kurdish territory lost to ISIS and abruptly put on hold. On the other of the time been intentionally passive NECHIRVAN BARZANI U.S. Kurds in a largely hostile region. BAYAN SAMI ABDUL RAHMAN the cold reception of Western states hand, however, the cold Western re- and disengaged from the Middle Prime minister of the There is recognition in Washington STRATEGIC PROXIMITY High Representative to Kurdish independence. This does ception to Kurdish calls for inde- East, especially so since the U.S. region of Kurdistan that, in a region with a variety of prob- Baghdad is ever more weakened and of Kurdistan in the UK not mean the Kurds have repudiat- pendence (in early June) were neu- withdrawal from Iraq in December (September 2014) lems, the Kurds are an asset; they get fragmented, and so the expectation (July 2014) ed their ambition for secession from tralized and replaced by huge West- 2011, was greatly alarmed. Describ- “ISIS is a threat to the stability things done and keep their promises. in Erbil is that Baghdad will be “It is not up to the Kurdish Iraq. Hemin Hawrami, head of the ern concern for the protection of the ing the Kurdistan Region as the “is- of the entire region. Facing the significant challenge from more flexible and more inclined to leadership whether we become Kurdistan Democratic Party's For- Kurdistan Region. Almost overnight, land of decency the Kurds have built,” There is only one solution ISIS, however, the Kurds found grant Kurdish requests. The Kurdish independent. It is up eign Affairs Office, has stressed that NATO and the E.U. found on their he expressed his determination to for tackling terrorist themselves politically and militarily return to Baghdad is a purely tacti- to the Kurdish people.” the current Kurdish strategy is to eastern border a radical Islamic preserve this tranquil space as a mod- organizations: to fight. handicapped, and under regional and cal effort to confront the immediate work on two fronts. Firstly, engage On www.abo.net, read further caliphate determined to destroy the el for the rest of Iraq and even the ISIS does not only threaten international pressure, had no choice crisis. The Kurdish leadership has re- Baghdad to participate in the rec- articles about the same issue

n West. After the Kurdish defeat in Sin- Middle East. He viewed the region as us, but also Turkey, Jordan, but to return to Baghdad. The nom- peatedly stressed that Kurdish sub- onciliation process and to allow for by Daniel Atzori and Methaq e

v jar, the West realized that they could a success story of America’s involve- Libya and Saudi Arabia.” ination of a new Iraqi Prime Minis- mission to Baghdad is out of the the stabilization of Iraq. Parallel to Al Fayad. e

s r - e y t b n m e u w n t 34 35 THE WORLD OVER A BARREL

What changes/Practices and ideologies THE AUTHOR Amer Al Sabaileh is of the Islamic State a University professor and political analyst. He is a leading columnist in various newspaper and media outlet beside being part of several Think Tanks. His is emerging as a For each leading expert and commentator on politics in the Middle East. He has a PHD degree from the University of Pisa, Italy,in 2006 focusing on intercultural dialogue and interreligious encounter in the Mediter ranean region. Prior to enemy, his that, he was awarded a Master degree in Education for Peace, International Co-operation, Human Rights and the Politics of the European Union challenge form the university of Rome III. many countries secretly pay huge The most important challenge is amounts to local intermediaries to free their kidnapped citizens. There overturning the stereotype of the are also reports of the increasingly widespread practice of selling women terrorist defined over the last from areas which have fallen under the organization’s control into sexu- three decades; especially now al slavery. Furthermore, these or- ganizations received significant fi- that they have young people with nancial and logistical aid from many countries during the years of the Syr- western appearance and accents ian crisis, in an attempt to overthrow the regime of Bashar al-Assad.

THE SOLUTION IS NOT MILITARY ALONE uddenly many of us into ISIL, the Islamic State of Iraq A common mistake is to believe that are asking questions and the Levant (Eastern Mediter- military confrontation is the only about the unexpect- ranean). It finally became IS, the Is- way for tackling the growing threat ed birth of ISIS and lamic State, especially after the or- of these terrorist organizations. In the so-called Islamic ganization’s announcement of a strat- fact, the world now needs to under- State. You could also egy of future expansion. take the most effective routes for con- say that many would taining the threat of these organiza- like to understand tions and their ideologies--adopting by AMER the fundamental dif- MORE ATTENTION educational, economic and social S ferences between the TO WESTERN SECURITY the birth of modern terrorism cannot large quantity of money it has avail- president Gamal Abdel Nasser and attendant possibility of terrorist at- The enemy is no longer coming strategies worldwide. ISIS and its af- AL SABAILEH Islamic state and Al This desire for rapid expansion rep- be found in global poverty and ig- able to facilitate movements of the or- the sanctification of his leadership, tacks against those sites if ISIS begins from overseas but is already within; filiates have become a real problem Qaeda. While there resents a direct threat for many coun- norance and do not belong to a par- ganization’s members and position which in the end looked toward to lose territory. The organization, especially now that they have young for the United States, Russia, Iran, are no true ideological differences be- tries, and these threats can be divid- ticular geographic area or to a single them to make their operations effec- Moscow. The United States and its al- with its vast wealth derived from the people with Western appearance and Saudi Arabia, Syria and Europe. For tween the two factions, their methods ed into two phases. In the first there language, e.g., Arabic. Today, many tive. Another serious emerging threat lies consider these tendencies a real sale of crude at very low prices, can accents, who are in fact a product of this reason, it is necessary to build an of operation provide a clear distinc- are the countries neighboring Iraq affiliates of these organizations come is represented by the community threat to its interests as they have led use its energy wealth to foment that Western society itself: mastering international coalition to tackle the tion between the two organizations, and Syria, those where the organiza- from diverse societies, including cohesion that is a factor of the or- to the birth of coalitions between re- chaos, and, of course, can directly de- the language and learning its customs problem, one composed of all coun- both of which ultimately share the ob- tion has substantial roots, such as Sau- many European-born, who were ed- ganization and the ideology of many ligious ideologies (theology) and gov- stroy these sources if they risk losing and traditions. Now they are the main tries that believe in a better future for jective of achieving a caliphate. Al di Arabia, Lebanon and Jordan. The ucated in and speak the language of countries, especially after the procla- ernment regimes (dictatorship) and to them. enemy of the Western societies from all people on Earth. ISIS represents Qaeda believes that the time for second phase involves Western coun- their native countries, with Great mation of the caliphate. Where this a significant change in the educational As noted above, many experts believe which they come. Some experts at- a genuine threat to everyone, and the proclaiming the caliphate will come tries the organization considers part Britain and France leading the way in ideology cannot be accessed, the in- and administrative rules of the coun- that the internal and external organ- tribute the birth and rapid prolifer- Middle East in particular, as this or- in a later phase, one preceded by nu- of its future territory, according to this regard. This new form of ter- tentions of the Arab communities is try and a radical change of the com- ization of the Islamic State is not that ation of the Islamic State to the di- ganization’s ideology does not rec- merous preparatory phases for build- strategies regularly published and rorism has spread widely over recent to remedy it and reaching this phase munity. Now these characteristics of a traditional terrorist group. This rect support of sympathetic groups in ognize any geographical border be- ing a solid basis and consolidated in- distributed on the group’s web site. years and will require new ways and is considered a natural product of the are part of the composition of com- can be seen in its vast network of Al other countries. Therefore, to count- tween states under the Sykes-Picot struments in countries considered The organization’s expansionist ide- means of countering terrorism, in par- policy for the Islamization of com- munities and details of the daily lives Qaeda affiliates distributed through- er this organization, it is necessary agreement of 1916. Moreover, the part of that organization’s ambitious ology has given the entire world ticular the use of technology to off- munities that has been in place in the of citizens. out the world. The Al Qaeda affiliates first of all to have genuine interna- proclamation of the caliphate entails design. The Islamic State, on the oth- food for thought regarding interna- set the groups’ use of information region, especially following World see in ISIS a huge opportunity for re- tional will to forbid any type of direct doing away with the concept of a na- er hand, favors the immediate estab- tional security, especially if you con- technologies and other sophisticated War II. History shows that the ma- launching their ideas and resuming or indirect support of such organi- tional state and political geographi- lishment of the caliphate followed by sider that estimates indicate that af- methods of communication. jority of Arab communities have SYRIAN AND IRAQI ENERGY terrorist activities. zations, both by countries and indi- cal borders, and today this represents a strategy of expansion, starting in filiates of the organization exist in Another thing that cannot be ig- lived in a state of cultural liberalism UNDER THE CONTROL OF This now typical and new modus viduals. It is clear that a high per- a high danger especially for the peo- Syria and then moving on to Iraq, many countries and members reside nored is that the Islamic State has and have been implicitly associated THE CALIPHATE operandi of ISIS has surprised glob- centage of the finance of these groups ple of this region who, since the fall which, it believes to be a starting point in more than 70 nations. huge sums of money for buying the with left wing tendencies and secular Together with these challenges to se- al antiterrorism experts, who in recent comes from businessmen from the of Iraq in 2003, have lived in fear of for future expansion. This explains the The most important challenge is trust of security officers and the mil- nationalism. But the transformation curity in the Middle East, there is the years have become accustomed to act- Persian Gulf, Europe and America. ethnic and religious segregation ac- birth of the organization known as overturning the stereotype of the itary forces of its selected country. Es- of these tendencies following the question of energy, especially with ing according to a traditional idea in Furthermore, many terrorist organ- companied by a psychological war of

n ISIS, the Islamic State in Iraq and Syr- terrorist defined over the last three timates suggest that the organization Second World War concern the ISIS controlling many oil wells and which terrorists came from abroad izations adopt kidnapping for fi- fragmentation and discrimination. e

v ia, which then transformed rapidly decades. The factors determining can adopt this technique thanks to the spread of the ideology of Egyptian refineries in Syria and Iraq, and the rather than from within countries. nance purposes. Reports suggest that e

s r - e y t b n m e u w n t 36 37 THE WORLD OVER A BARREL

U.S./Marathon Oil chief, Lee M. Tillman Counting

LEE M. TILLMAN on a “new is President and Chief Executive Officer of Marathon Oil Corporation and a member of the Marathon Oil Corporation Board of Directors. He joined the Company in August 2013. normality” Immediately prior to this, Mr. Tillman served as vice president of Engineering for ExxonMobil Development America’s energy renaissance Company where he was responsible for all global is nothing short of historic, engineering staff engaged in major project concept and lifting the crude export ban selection, and front end would help stabilize global engineering and design. He began his career in the markets and restore the U.S. to oil and gas industry at Exxon in 1989 as a research engineer. the status of energy superpower He has extensive operations management and leadership experience that has included assignments in Jakarta, Indonesia; Aberdeen, Scotland; Stavanger, Norway; Malabo, arathon Oil is count- State jihadists in Iraq, some Equatorial Guinea; Dallas ing on a “new nor- experts stressed the and New Orleans. mality” in Iraq after importance of protecting having been forced the region of Kurdistan, to evacuate its staff because it is vital for many because of the ji- western oil companies like hadist offensive. So Marathon Oil. What’s your stressed Lee M. Till- view of this? by RITA man, President and It’s difficult for me to give an answer M CEO of the compa- about military strategy. Traditional- KIRBY ny, which is aiming ly, Kurdistan offered a safe environ- to become the major ment in which to operate. One now independent oil company of E&P. If has to understand what the “new nor- nothing else, observed Tillman, ISIS’s mality” in the region will be: this is the advance has brought Kurdish au- major question for oil companies thorities closer to the central gov- operating in the country. We re- ernment of Baghdad in order to main optimistic for the future. What fight their common enemy, which, we can hope for is a return to “a new since June, has had the second largest normality” in Kurdistan. OPEC oil-producing country over a barrel. In this geopolitical context, from the perspective of the Is exposure in Iraq a threat oil industry, what should the to Marathon Oil? American administration’s Geopolitical tensions are always a risk priorities be? factor for our industry. In Kurdistan, With regard to policies, in order to we achieved notable success under our promote stability, the American ad- exploration program. The situation ministration should deal with the is- when oil was scarce. Now, we are in answer for producers; it would pro- only drilled 6 years ago. It was in since the seventies. This growth was Where does Marathon Oil fit drastically changing the distribution has changed radically from a securi- sue of removing the ban on U.S. an era of abundance. Independent vide an incentive for drilling wells, it 2008, when oil prices were more led by Eagle Ford together with the into this renaissance? of global supplies as well as the U.S. ty perspective, however. We had to re- crude oil exports. In the past, during research institutes like the Brook- would encourage investments in oil than $147 per barrel because of the Permian Basin, two of the main Marathon Oil, like many other com- economy. call our expats. The safety of our similar crises, oil prices would have ings Institute have come out in favor and gas, it would benefit consumers low domestic production rate and shale fields in Texas. Ours is a dy- panies, is benefiting from this ener- Marathon Oil will also continue to ex- workers is always our number one pri- been under strong pressure to rise, of removing the ban, indicating that in terms of prices and it would cre- the crises in Venezuela and Nigeria. namic industry, with the capacity to gy renaissance. The beginning of pand shale activities in 2015. Our ority. Our offices are currently being but this has not happened. It is the domestic prices at the pump would ate jobs. Up until ten years ago, it The rate of growth in the oil and gas overcome the toughest challenges, this renaissance lies in unconventional proven and probable reserves of un- run by Kurdish employees. American energy “renaissance,” go down. The United States is al- was totally unthinkable that the U.S. industry in the U.S. in these years as fracking has shown. It, together fields. It is an amazing time for those conventional fuel in the U.S. in- through the shale revolution, that is ready exporting refined products. could become an oil exporting coun- was historic. Last April in Texas, with other technologies, has re- in the energy industry. Progress in creased to 3 billion barrels of oil

n The day after the American having such a radical effect. The ban Allowing unconventional products try. It is difficult to believe that the crude oil production reached 3 mil- stored America to the status of en- horizontal drilling and fracking are a equivalent, 520 million barrels more e v air strike against Islamic on oil exports was imposed at a time onto the global market is the right first well in Eagle Ford, Texas, was lion barrels per day for the first time ergy superpower. true American success story that is than at the end of 2013. Together e

s r - e y t b n m e u w n t 38 39 THE WORLD OVER A BARREL

authorities. We believe it is important to be open about the fluid compo- nents used in fracking and we support policies that encourage this trans- parency. We believe that countries are in the best position to regulate frack- ing. We must guarantee common standards among all operators. The shale revolution in North America is offering our industry the opportuni- ty to get back into the game, to re- mind the world what its values are and its role in the global energy scenario.

Three years after Gaddafi’s death, Libya is still not stable, even if production has started to rise again. Do you see the light at the end of the tunnel? Even if the end of the blockade on production, which lasted for 11 months, is good news for interna- tional companies operating in Libya, the political situation and security re- main under close observation. People are turning away but they are not leaving once and for all. Companies are waiting to see what happens. We have investments in Libya through the Waha Concession, world class re- sources which are very important to the company. As a result of the wors- Marathon Oil Corporation ening of the situation over a pro- longed period of time, we have not Marathon Oil Corporation is markets liquid hydrocarbons and been able to export through the Es an independent global energy natural gas outside of North Sider terminal. The situation has company. Based in Houston, Texas, America and produces and improved, but remains unstable from the company has activity in North markets products manufactured a political point of view. Hopefully, America, Europe, the Middle East from natural gas, such as liquefied stability will be achieved, but for the and Africa. The company has three natural gas (LNG) and methanol in time being the situation is compli- reportable operating segments: Equatorial Guinea; and Oil Sands cated. North America Exploration and Mining – mines, extracts and Production (E&P) - explores for, transports bitumen from oil sands Are you looking with produces and markets liquid deposits in Alberta, Canada, and interest at Mexican reforms, hydrocarbons and natural gas in upgrades the bitumen to produce which will put an end to North America; International E&P – and market synthetic crude oil the state monopoly of oil? U.S./The government’s Middle East policy explores for, produces and and vacuum gas oil. We are following the developments in this historic situation closely. It in- volves a courageous move in the energy sector to attract direct foreign with the increase in these resources, fracking techniques use of drinking water and to protect investments in Mexico. North Amer- total wells providing future oppor- responsible for this great aquifers. At Eagle Ford, we have re- ica, with Canada and the U.S., rep- Learning from our mistakes tunities for drilling grew to over boom have also brought duced water consumption by 45 per- resents an immense oil region to 4,600, including Bakken, Eagle Ford as yet unanswered cent. With regard to flaring, which is which Mexico is connected. We are and the Oklahoma Resource Basins, questions surrounding a very visible phenomenon, we are all very enthusiastic, even if things are early 24 years ago, I to breathe—was a vision of a 20th the cornerstone of our portfolio, risks to the environment. constantly looking into projects to cut only at the initial stages. We hope America has a troubling history drove through the century apocalypse. I covered war and where 60 percent of our capital budg- Do you think these emissions, also sharing best prac- that it will be successful and we burning oil fields of crisis in the Middle East for almost 20 et for 2014 is directed. The increase concerns are justified? tices with other companies. At the hope that Marathon Oil can play a of failing to learn from its southern Kuwait, years as a war correspondent for The in drilling activity predicted within the They are questions that legitimately new wells at Eagle Ford, we are part in the future. where Iraqi soldiers Washington Post. During that time, oil year will guarantee momentum for continue to dominate discussions on committed to minimizing the flaring mistakes in the Middle East. had set drilling rigs and energy resources have been at the 2015; we will continue to aim for in- the development of oil and gas re- time between when the well is ready ablaze as they fled core of virtually every conflict: Some- creased acceleration. We are satisfied sources. These problems must be for production and when we install But today the U.S. administration advancing U.S. mil- times as the security excuse the U.S. with our progress in the U.S. and we dealt with appropriately and with a the infrastructures for transporting by MOLLY itary troops in the used to justify an invasion, other expect a double digit increase between sense of urgency, facing up honestly the gas for sale. We count the time in and military do not talk about N first Gulf War. The times fueling the social and eco- MOORE 2015 and 2017 in our three uncon- to anyone who expresses concerns, hours rather than days, and this year sky was so thick with nomic divides that led to a nation’s in- ventional fields. There is still a lot of operating in a way that is safe and sus- we achieved an average of less than 7 defeating the Islamic State, clouds of black ternal unrest and revolution. work to be done in order to reach our tainable and putting forward solu- hours flaring at the well before start- smoke that the U.S. Marines I ac- goal of being recognized as the main tions. At Marathon Oil and in the en- ing to send the gas to the network. they talk about “degrading” it. companied needed flashlights at high E&P independent company, but we tire industry, we are working tirelessly Every single operator must con- noon to read the wrinkled maps WHAT HAS CHANGED AFTER are definitely on the right track. to develop strategies and technologies tribute to these best practices. This And this effort suggests it may spread across the hoods of their ar- TWENTY YEARS? capable of reducing emissions and we takes time, money and tireless dedi- finally be on the right track mored vehicles. The scene—mas- More than two decades after Iraqi n The technological are becoming increasingly efficient. cation. We must work in partnership On www.abo.net, read other sive towers of fire against black skies, forces torched those Kuwaiti oil e v developments and new We are working to minimize the and not in conflict with the regulatory articles by the same author. air so acrid it was nearly impossible fields, Iraq finds itself on the oppo- e

s r - e y t b n m e u w n t 40 41 WHERE TO START IN DEALING WITH THE ISLAMIC STATE? There is little debate that the top pri- ority for Iraq and the rest of the world is cutting off the Islamic State’s fund- ing source. Aerial bombardments, es- pecially if refineries are targets, could limit the energy supply and the Islamic State’s ability to reach its largest cus- tomer base—the 8 million people in Iraq and Syria living on territory A FLUCTUATING REPORT controlled by the group. Though Since 1996, US oil imports from crude oil directly from the wells can Iraq peaked in periods following be sold, it’s the refined oil that fills the major conflicts. Pictured here coffers. And perhaps the U.S. has is the al-Shaheed Monument in learned to curb its bravado in a region Baghdad, known as the Monument where coalitions are difficult enough to the Martyrs, dedicated to to stitch together and even harder to the Iraqi soldiers killed during hold together. Today the U.S. ad- the Iran-Iraq war of the 80s. ministration and military do not talk

Source: U.S. Energy Information Administration about defeating the Islamic State, 40000 they talk about “degrading” it. There is a realization that extremist groups are going to continue to morph into 35000 new organizations using new channels of financing and international support. Today, one of the U.S. administration’s 30000 largest problems in reshaping its Middle East policy is public war fa- 25000 tigue. Even though the Islamic State evokes revulsion with its videos of be- heading journalists and Western aid 20000 workers, the American public has watched war and its subsequent fail- ures to bring peace and stability—es-

15000 s pecially in such a volatile region—with increasing cynicism. And as U.S. do- b a r e l

o f mestic energy production increases, 10000 Americans no longer automatically as-

a n d s sociate Middle Eastern oil with U.S. 5000 national security. There’s one mistake, t h o u s however, that Americans aren’t apt to make again anytime soon and that’s 0 declaring “Mission Accomplished” any where in the Middle East—as JAN. 1996 JAN. 1997 JAN. 1998 JAN. 1999 JAN. 2000 JAN. 2001 JAN. 2002 JAN. 2003 JAN. 2004 JAN. 2005 JAN. 2006 JAN. 2007 JAN. 2008 JAN. 2009 JAN. 2010 JAN. 2011 JAN. 2012 JAN. 2013 JAN. 2014 AUG. 2014 President George W. Bush boasted with his premature banner on a U.S. Navy ship ceremony after the fall of Saddam Hussein. Perhaps there have site end of an invasion by what is per- ping ransoms and other extortion for being exploited for the benefit of ties. The Energy Intelligence Group suing bloodshed and violence among and eventually backed a leader— that for now remains under Baghdad’s been lessons learned after all. haps the most insidious and cunning funding, the Islamic State has crossed terrorism and military operations. wrote earlier this fall: “With the competing warlords who filled the Nouri al-Maliki—whose sectarian control. However, the unstable situ- terrorist group yet to emerge out of a new threshold for financing ex- The terrorist group inflicted so help of local middlemen—who con- vacuum. Then, Afghanis grew weary politics divided the country and ation in the north is driving even the Middle East. When the Islamic tremist recruitment, weapons and much damage on Iraq’s main oil trol the supply chain by extracting of the brutality and embraced the Tal- opened the seams that allowed the Is- more of Iraq’s best and brightest to State first invaded the Sunni-domi- operations. After U.S. troops over- pipeline into Turkey, including oil, trucking it across territory truck- iban when it stepped in to the lead- lamic State to make the inroads we’ve leave the country. Declining global oil nated areas of northern Iraq, Sunni threw Iraqi President Saddam Hus- blowing up the major pumping sta- ing tankers, paying off border ership vacuum. The Taliban quickly witnessed in recent months. In the prices have prompted the Interna- sympathizers assisted its guerilla sol- sein in the spring of 2003, I visited tion, that it has been shutdown since checkpoints and handling sales—the turned brutal, Al Qaeda brought end, according to Washington insid- tional Monetary Fund to forecast that diers in taking over large swaths of Mosul in northern Iraq, where much March and may remain offline for northern part of the Arabian Penin- down the World Trade Center tow- ers, U.S. officials became so dis- Iraq’s gross domestic product will land that included oil fields. Thus, the of the euphoric talk in the tea shops years. Next door in Syria, the Is- sula has become a black-market ers in New York and the U.S. invad- trusting of al-Maliki—whom U.S. of- shrink by 2.7 percent this year, down Islamic State became the first guer- and restaurants centered on the lamic State controls about 60 per- zone funding transnational terror- ed Afghanistan. But the U.S. had no ficials originally supported—that his from the 5.9 percent growth it had rilla terrorist army to seize Middle prospects of international energy cent of that country’s oil assets. It is ism, led by ISIS and other al Qaeda strategy for rebuilding a country and early warnings about the rise of the forecast earlier in the year. “The Eastern oil fields and use those re- companies reinvigorating the re- estimated the Islamic State is pro- splinter groups.” So who’s to blame a government from scratch. Instead Islamic State were dismissed as po- conflict in northern Iraq has started sources to fund the majority of its op- gion’s oil fields, replacing aging ducing about 50,000 barrels a day for this mess? of capitalizing on the wide-spread litically driven rumor on his part. to affect non-oil growth in that coun- erations—by some estimates reaping equipment that had fallen into dis- there—significantly below Syria’ good will I witnessed among the Iraq’s newly elected Prime Minister try,” the IMF wrote, adding, “Al- $1 million to $2 million a day. That repair under the international boy- pre-conflict capacity of about Afghan people when the U.S. and Haider al-Abadi has started down the though most oil production is in the is a seismic shift in tactics for Middle cotts of the Saddam regime and 220,000 barrels a day—but a gener- PAST MISTAKES OF THE U.S. coalition forces pushed out the Tal- right path of attempting to bring the country’s south and oil output levels On www.abo.net, read other East military or terrorist organiza- bringing new technology and new ous source of income for the terror- After two decades in a front row seat iban, the U.S. once again lost inter- country’s Sunnis, Shiites and Kurds have not been materially affected, the articles by the same author. tions. Al Qaeda, the parent group that prosperity to northern Iraq. ist group. Now, some military ana- to U.S. involvement in the Middle est in Afghanistan and decided, in- together. But his challenges from departure of skilled personnel will spawned the Islamic State, depended Instead, at least seven major oil lysts in Washington are debating East, I’ve witnessed a troubling trend stead, to go after Iraqi President the Islamic State are enormous—mil- limit Iraq’s ability to expand or, pos- Molly Moore is a senior vice president on financial “donors” with like-mind- fields in northern Iraq near Mosul, whether the only way to cut off the by the government of my country: Saddam Hussein using specious ar- itarily, politically and economically. sibly, even maintain oil production.” of Sanderson Strategies Group, ed anti-Western ideology from Tikrit and Kirkuk—with a com- Islamic State’s main revenue spigot We don’t seem to learn from past mis- guments about non-existent chemi- Only 10 percent of Iraq’s oil pro- Iraq, which pumps about 3.5 million a Washington, D.C. media strategies around the Middle East to finance its bined capacity of about 80,000 bar- is to bomb oil facilities funding the takes. When the Soviet Union pulled cal and biological weapons and ties to duction is in the Kurdistan Region- barrels per day, is OPEC’s second firm, and a former Washington Post

n operations. And while both Al Qae- rels a day—are now under the con- group. U.S. drones already have at- out of Afghanistan, I watched as the al Qaeda. Again, the U.S. had little al Government-controlled area. The largest exporter after Saudi Arabia. So foreign correspondent. e

v da and the Islamic State use kidnap- trol of the Islamic State and are tacked some mobile refining facili- U.S. lost interest. I covered the en- strategy for rebuilding the country remaining 90 percent is in the south what is the answer? e

s r - e y t b n m e u w n t 42 43 THE WORLD OVER A BARREL

for clean energy in the face of severe countries, Russian and Central Asian supply shortages and the country’s en- energy is of crucial strategic impor- ergy development bottleneck due to tance period. However, even based on relatively high energy dependence. Ac- an optimistic estimate, one in which cording to a forecast by the U.S. De- Russia-China and Central Asia-Chi- partment of Energy, China’s crude oil na energy cooperation and infra- imports will exceed 10 million barrels structure construction such as oil per day by 2030. As such, the outlook and gas pipelines proceeded smooth- for the nation’s petroleum supply se- ly in the next 10 to 20 years, the con- curity is increasingly bleak. China’s tribution by Russia and Central Asia overdependence on Middle East oil is to China’s energy security will only ac- a reflection of the country’s rapid eco- count for between eight and seventeen nomic development and fast-growing percent of China’s total oil imports. energy consumption over the past 30 Hence, China will likely continue its years. Now, as a result of the contin- critical dependence on importing oil uing instability in the Middle East, the from the Middle East given that a con- oil crisis may once again become the servative estimate has shown that the center of attention, given that China’s biggest proportion of China’s future oil dependence on imported Middle East demand, or up to 50 or even 60 per- oil averaged 48.7 percent in the last cent of the country’s total imports, will decade, almost the same as U.S. de- originate from the Middle East region, pendence on Western hemisphere particularly from the regions and imports. According to statistics pub- countries of the Gulf area in the Mid- lished in the “BP Statistical Review of dle East. Energy security considera- World Energy,” China’s oil trade tions will continue to increase the im- portance of Middle Eastern countries in China’s external energy China’s dependence on strategy, and China’s imported Middle East oil energy strategy will in- creasingly highlight and averaged 48.7 percent in the reflect the reality of the last decade, almost the same significance of Middle as U.S. dependence on East oil. How to adjust and formulate China’s Western hemisphere imports energy strategy under such a backdrop and development trend, i.e., how to implement grew by two thirds in 2011, including strategic planning between “diversifi- a 13 percent growth in net oil imports, cation” and “intensification” and how with daily shipment volume of up to to develop political, economic, diplo- six million barrels. At present, China’s matic strategies and policy tools fo- external oil dependence has reached cusing on Middle East oil are major 60 percent, with Middle East oil ac- energy security issues and urgently re- counting for over 40 percent of Chi- quire further study. nese oil imports, while the country only has about 30 days of strategic oil reserves. By one estimate, if the coun- BEIJING’S “MIDDLE EASTERN” try's oil consumption continues at the IMPORTS AND INVESTMENTS present rate, China’s external oil de- China’s energy thirst is not only chang- China/Economic development cannot ignore Gulf oil pendence will exceed 70 percent by ing the global energy setup, it is also 2020, reaching 80 percent by 2035. By boosting the socio-economic prospects that time, there will be a supply of Middle East oil-producing countries. shortfall of 60,000 tons. If China’s en- However, there are risks inherent in ergy security is a question of de- China’s energy cooperation with the pendence on oil, it is, more specifically, Middle East, first among them that The East is keeping a watchful eye on the crisis an issue of dependence on Middle East countries of the world have started to oil. China has imported the biggest compete for oil resources, creating an proportion of its crude oil from the external pressure for China in its effort he latest statistics in- of the nation’s crude oil imports. Chi- ary to May, rising by 2.7 percentage justments to its crisis management Middle East and Africa since 1999. to acquire Middle East oil. Although China’s overdependence on dicate that as an en- na imported 13.38 million tons of points from the same period last year. model for the country's overseas en- The sum of imports from the Middle many countries have boosted their ef- Middle East oil threatens its ergy-scarce country, crude oil from Iran, an increase of Apart from Iran, Middle East crude oil ergy supplies in the wake of U.S. East and Africa accounted for over 70 forts at developing and utilizing new China is still heavily 49.76 percent over the same period last imports from Iraq and Oman have also military strikes against the Islamic percent of its imports. energy sources, contention for tradi- energy security. It must focus reliant on crude oil year, and an average of 2.68 million recorded increases of over 20 percent State (ISIS) inside Iraqi and Syrian ter- Although oil imports from the tradi- tional resources such as oil and gas is imports. From Janu- tons per month. After a 20 percent de- compared to the same period last ritories. tional Asia-Pacific market are still still heating up, while the pace of de- its political, economic ary to May of 2014, cline over two years (2012 and 2013) year, ranking these two countries re- growing, the proportion of such im- mand growth in Asia is still heading the Saudi Arabia, Ango- linked to U.S. sanctions, Iran showed spectively as the fifth and sixth largest ports is steadily declining. From such global league table. On the other THE IMPORTANCE OF MIDDLE and diplomatic efforts by LIFAN la, Iran, Russia, Iraq, the highest rate of increase of the Mid- sources of crude oil import for China. general perspectives as diversifying hand, the U.S., Europe, Japan, Russia T Oman, Venezuela, dle East countries, moving into the The escalating situation in Iraq will sig- EAST OIL FOR CHINA import security, reducing an overde- and other countries have also stepped LI on this problem UAE, Colombia, and ranks of the top three countries from nificantly affect China’s oil imports China’s energy security mainly in- pendence on Middle East oil, as well up the fight for Middle East oil. The Kuwait were the top which China imports oil. Cumulative from that country; indeed, production volves supply security for oil and as strengthening strategic partnership U.S. has done so mostly through the

n 10 countries supplying crude oil to imports of Iranian crude topped activities have already been affected. natural gas. It is a structural problem relations between China and Russia Gulf Wars. Japan is actively building e

v China, accounting for 83.01 percent 10.40% of total oil imports for Janu- China is currently considering ad- engendered by robust rising demand and between China and Central Asian up diplomatic relations with the Gulf e

s r - e y t b n m e u w n t 44 45 THE WORLD OVER A BARREL

According to statistics released by the ternational crude oil market prices. U.S. Energy Information Adminis- Despite the fact that crude oil output A. CHINA’S CRUDE OIL IMPORTS (2013) B. OIL COMPANY POSITIONS IN IRAQ tration (EIA) and other authoritative in northern areas currently controlled OTHERS 12% bodies, crude oil reserves in Iraq by ISIS only accounted for a fairly SAUDI ARABIA 19% Oil field market share by country (%) stood at approximately 90.25 billion small portion of the actual output in BRAZIL 2% barrels, with natural gas reserves at Iraq, Brent and WTI crude oil prices roughly 47.5 trillion cubic feet. Since have increased 4.4 percent and 4.1 per- Saddam’s regime was overthrown, cent, respectively, spurred on by the CONGO 2% China 25.5 Others 16.5 KUWAIT 3% the oil and gas industry in Iraq has re- Iraq crisis as of June 15, 2014, mark- vived and output of crude oil and nat- ing the biggest weekly rise in UAE 4% Indonesia 1.8 ural gas has seen sustained growth. 2014.COMEX WTI light crude fu- The production volume of crude oil tures for July 2014 closed at KAZAKHSTAN 4% ANGOLA 14% U.S. 6.3 reached 3.35 million barrels per day US$106.91 per barrel, the highest set- in 2013 to hit its highest levels in near- tlement price since September 18, Malaysia 10.0 ly two decades, making Iraq the sec- 2013. Brent crude futures delivered in VENEZUELA 6% ond largest oil-producing country in July closed at $113.41 per barrel. UK 20.6 OPEC. Its output of natural gas, However ,from early this October, the

Russia 19.5 meanwhile, was close to 1.1 billion cu- international oil market has changed IRAQ 8% RUSSIA 9% bic feet. The additional Iraqi crude greatly, NYMEX and Brent crude oil output was mainly attributed to a hit a new intraday lows: the Brent oil OMAN 9% IRAN 8% number of large oilfield projects in the futures has reported to $ 90.21 a bar-

Source: data processed by the author Source: Reuters south, including the Rumaila Oilfield, rel in November this year, which is al- Halfaya Oilfield, West Qurna Oilfield most hitting the price of $ 88.11as in (which included two projects: Phase the minimum bottom at the mo- I and Phase II), Maysan Oilfield and ment of the December 2010; As for Zubair Oilfield. These oilfields to- NYMEX crude oil futures in this No- gether with other oilfields in north- vember, also dropped to $ 85.82 a bar- ern Iraq, such as Bai Hassan and rel, edged up $ 0.05 as earlier as hit- Kirkuk, are the main sources of crude ting to a minimum of 83.59 in July oil output in Iraq. However, the re- 2012.The Fall of Crude oil prices are C. CHINA’S CRUDE IMPORTS (from S. Arabia and Iraq) finery and petrochemical industries in mainly because of the slowdown with Iraq are subsisting on weakened in- the global economy , and increasing 6 frastructures with few facilities most- the supply of crude oil from OPEC, ly located in the east and south, while as well as depreciating the prices of all 5 the northern and western regions export products on October 1, 2014. Saudi In other side, the situ- China and 4 crude 4.3 ation in Iraq also neg- atively influent with in- 3 Middle East Oil U.S. has far more diversified ternational energy Iraq prices as an additional 2 crude import sources than China. A: the share of oil imports in China. 2.15 factor. As the output In red, those of the Middle East. 1 The U.S. would be quite likely of oil-producing re- B: the market share of the oil fields to use its dominant position gions in southern Iraq as of 9/30/2014 in Iraq divided by country. 0 in international energy to gain makes up three quarters C: oil imports from Saudi Arabia 2012 2013 2014 of the country’s total Source: Reuters and Iraq to China in the past two years. the upper hand over China output exported via ports in the south, the possibility of continu- ous expansion of ex- States; it decided has decided to em- China would be able to withstand the oil demand is still on political stance of no direct inter- gained a position of prominence in the have relatively few facilities. Based on tremist forces into southern Iraq bark upon Middle East energy diplo- impact of a rise in the price of oil. China will continue its the rise. This has cre- vention on Middle East issues in its Iraqi government’s energy agency published data, there are now 12 re- seems unreality. Along with the in- macy to ensure oil supply stability af- Finally, the notion of a future region- ated an oil consump- policies, and because China’s eco- through a series of competitive ten- finery plants in Iraq with a combined crease of US airstrike to ISIS, which ter the Fukushima nuclear accident. al and local conflict between China and dependence on importing oil tion market of the nomic development is highly com- ders. And on August 28 2014, the Chi- total refining capacity of 592,000 estimated ISIS will be timely trans- Russia is currently trying to return to the U.S. would also would also chal- from the Middle East, given greatest potential for plementary to that of the Middle East na National Petroleum Corporation barrels per day, mainly producing bi- forming and diversify its military the Middle East, and its relations with lenge its ability to respond to rising en- Middle East oil. China countries, there are significant (CNPC) assisted in commissioning tumen, kerosene and diesel. And strategy, judging optimistically, in this Iran and Iraq are attracting much at- ergy demand. China has yet to inte- that the up to 60 percent also has sizeable and prospects for economic cooperation the Badra Oil Transmission Pipeline there are only two petrochemical end of year, prices of crude oil will be tention. All of this will inevitably have grate a model for diversified energy of the country’s total imports stable Forex reserves between the two sides between the for outbound transmission. This plants in Iraq. Up to mid-July 2014, standing around $ 70-80, which in negative repercussions for China’s imports. In contrast, the U.S. has far will originate from this region and a strategy for do- two sides, and for China to further de- pipeline has since become an impor- in parts of northern Iraq (including favour of the development for the utilization of Middle East oil. Secondly, more diversified import sources. Only mestic enterprises to velop its positive image in the region. tant trunk pipeline for Iraq’s strategic the Kurdish Region) crude oil output world economy, particularly pro- China must learn to plan for volatili- 30 percent of imported U.S. energy re- “go global.” All of this • Oil-producing countries of the pipeline networks. Chinese energy reached about 525,000 barrels per day; moting the US and emerging coun- ty in energy prices. Oil price is a sources come from the Middle East. would undoubtedly be Gulf Region have been implementing corporations have evidently partici- specifically, however, production in tries for their economic recovery. cyclical phenomenon: any rise must be With China and the U.S. currently constantly seeking out opportunities highly attractive to Middle East oil. an open-door policy for many years by pated en masse in energy exploitation Anbar, Nineveh and Salah Ad-din Military actions by ISIS almost dis- followed by a subsequent fall. China’s locked in a kind of “non-military” con- for energy cooperation with the Mid- • China will maintain and continue introducing preferential schemes to at- of Iraqi energy resources and pipelines provinces, which were seized by the rupted the crude oil export via energy sector, with only has a short his- flict, the possibility cannot be exclud- dle East, among them: to strengthen its traditional friendship tract international oil capital. This has construction, highlighting an oppor- extremist forces, only yielded 11,000 pipelines in northern Iraq. As of May tory of conforming to international ed for a direct confrontation breaking • A slowdown in U.S. economic re- and political ties with Muslim coun- prompted Chinese energy corpora- tunity for China’s entry into the Mid- barrels per day with a minimal direct 2014, the total export capacity of practice, still lacks the ability to respond out between China and the U.S. on the covery coupled with the successful de- tries in the Middle East. China is the tions to undertake cooperative de- dle East market. impact on oil production in Iraq. crude oil in Iraq came to about 2.58 to international oil market changes. oil issue. In such a scenario, the U.S. velopment and utilization of shale gas only major country in the world to velopment and significant investment ISIS has already caused internation- million barrels per day (seeing a drop Currently there is an oversupply of would be quite likely to use its dom- by the U.S. will bring about a grad- maintain good relations with all the in the Gulf Region. Participation by al oil prices to fluctuate at high levels compared to 2013) all of which were Middle East oil, therefore there is no inant position in international energy ual decline in U.S. demand for Mid- countries and parties of conflict in the Chinese corporations in the privati- THE MIDDLE EAST ENERGY and has thus increased the uncertainty exported via ports in the vicinity of the adverse impact on Chinese import de- to gain the upper hand over China. dle East oil. Due to both technical Middle East. U.S. policy has em- zation processes of large numbers of MARKET POST-2014 IRAQ of future energy prices. Since ISIS’s southern region of Basra, passing mand. However, in the event of an in- The U.S. “pivot to Asia” strategy reasons and geographical limitations, braced double standards in its Mid- Middle East oil assets is gathering CRISIS occupation of Iraq’s second largest city, through the Persian Gulf. If the Iraq ternational oil shock similar to that would seriously affect China’s energy China is still experiencing relatively dle East policy in recent years, and pace. For example, during the first in- The spread of ISIS extremist forces Mosul, in June 2014, regional geopo- crisis worsens and the country’s do-

n which occurred in 1979, we do not security. Naturally, at the same time as rapid growth in demand for tradi- this has hurt its relations with Arab ternational auction of Iraqi gas fields has had an insignificant effect thus far litical risks have been amplified, bring- mestic crude oil pipeline system is sub- e

v know whether an economic giant like containing energy risks, China is also tional energy resources, as domestic countries. But since China adopted a in 2010, Chinese energy corporations on the production of crude oil in Iraq. ing about continuous increases in in- jected to major damage, or if oil-rich e

s r - e y t b n m e u w n t 46 47 THE WORLD OVER A BARREL

towns in the south such as Basra fall stance, investments in oil and gas in into the hands of extremist forces, the Kurdish Region can be gradual- crude oil production in Iraq will suf- ly increased. In this round, the pow- fer severe losses. Current crude oil ex- erful militant forces of the Kurdish ports cannot be guaranteed and there Autonomous Region not only pro- is even the possibility of complete sup- tected the region from attacks by ISIS, ply disruptions.The conflict in Iraq is but also took the opportunity to seize having the greatest impact on the ITP control of the Kirkuk Oilfield, al- pipeline that runs from the Kirkuk lowing them to get a head-start on the Oilfield, passing through Neynewa central government in the rush for oil and Salahuddin and reaching Ceyhan and gas resources. Therefore, the in Turkey. This pipeline has stopped Kurdish Region has and should con- transmission due to attacks since tinue to enjoy comparative advantage March 2014, resulting in reductions in attracting overseas investment, of at least 200,000 barrels per day in and Chinese investment in particular. Iraqi crude oil exports. In May 2014, Chinese companies should offer even total Iraqi crude oil exports exceeded more favorable contract terms with a 80 million barrels, which was shipped rate of return clearly higher than that through ports in the vicinity of the oil- in the production contracts previously rich town of Basra in the south, hit- signed with the Iraqi government, ting a record high in monthly exports gradually making the region a “haven” of crude oil in southern ports since for Chinese investment in energy 2003. The crisis poses threats to resources. Finally, when developing crude oil production in the north-east- China-Middle East energy ties, im- ern Kurdish Region and refinery portance must be attached to the is- plants in the north-western Baiji re- sue of building up cooperative mech- gion, depending on the situation on anisms. China should review and ad- the battlefield. The Kurdish Region just its strategic orientation towards is one of Iraq’s most critical crude oil the Middle East, particularly for na- reservoirs and production regions tions of the Gulf Cooperation Coun- and its crude oil reserves represent cil (GCC) as an important component roughly one third of Iraq’s total re- of national security and external re- serves, with output at about 500,000 lations strategies, elevating the im- barrels per day. Although Kurdish portance of oil-producing countries people in the region are characterized in the Middle East. Present and future by their solidarity, and their ethnic Chinese policies for the Middle East armed forces, the Peshmerga are should place China’s major strategic known to have tough fighting capa- interests (oil and gas) as the overall ob- bilities, gas and oil production in the jective, trying to constantly develop region will nonetheless suffer a heavy and deepen economic and trade con- impact if the extremist forces contin- nections in the field of energy and ue to spread eastwards and clash with helping accelerate peace and stabili- Kurdish armed forces. In July, the ty in the region. In summary, at this Peshmerga took control of the oil-rich time, the application of the state ap- town of Kirkuk in northern Iraq un- paratus and the use of political, diplo- der the banner of defending the matic, economic and military means country against ISIS, and demanded should be considered in order to of- that the proportion of export earnings fer the utmost safeguard for China’s from crude oil production in the overseas rights and interests, and to Kurdish Autonomous Region be in- “prepare for a rainy day, acting with creased to at least 25 percent of the Technical Service Contract of the ated in northern Iraq CNOOC will inevitably be con- producing area in Kirkuk during the vestments in geopolitically sensitive prudence and precaution.” Only these whole country’s gross output vol- Qurna Oilfield in Iraq held by Exxon and is still under the fronted with a situation where they latest episode of the Iraq crisis. Its regions such as the Middle East and key measures can be effective for ume. The central government of Mobil through its wholly-owned The expansion of ISIS has not control of the govern- must evacuate all Chinese staff. If such game-playing with the central gov- North Africa. It is essential to pay con- avoiding the threats to China’s over- Iraq, however, did not reply to this de- subsidiary, further consolidating its had a direct impact on the ment of the Kurdish a situation occurs, the oilfields will ernment in the future will bring stant attention to various investment- seas interests. mand. In the meantime, the Kurdish position in Iraq. In 2012, Iraq became Autonomous Region, have to be temporarily handed over to tremendous uncertainty to Chinese oil related risks in overseas operations. Region continued to unilaterally ex- China’s sixth largest source of im- Chinese projects in Iraq. Projects ISIS extremist forces the Iraqi companies, e.g., The South- companies’ investments and opera- First, it is vital to continue to reduce port crude oil to Turkey, while ISIS ported crude oil. China imported in which CNPC and CNOOC have not been able to ern Oil Company (SOC) and The tions in Iraq. If both sides are to be risk in overseas energy investment. launched violent attacks in some cities 525,000 barrels per day and 568,000 are involved are located in the push into the region Northern Oil Company (NOC). completely thrown out of balance in This measure mainly centers on per- in Iraq and the central government barrels per day from Iraq in 2012 and and thus the produc- Even if Iraq’s state-owned oil com- terms of existing interests, the prospect sonnel safety, asset safety and opera- struggled to deal with the situation. 2013, respectively. By the end of south of Baghdad tion activities of the panies are capable of fully maintain- of oil production in northern Iraq will tion security. Efforts must be made to 2013, output of crude oil produced by project have been free ing the normal operation of the proj- face challenges, which may affect reduce personnel and asset losses as CNPC in Iraq accounted for about from major impact. ects that have been put into produc- SINOPEC’s current investment much as possible, including project CHINA’S APPROACH TO THE one third of the total output of its in the region. Judging by the short- In addition, since SINOPEC took tion, new projects and projects under strategies in the Kurdish Region. management and maintenance for MIDDLE EAST ENERGY MARKET overseas oil and gas operations; the term situation, the expansion of ISIS part in the project as a stakeholder in- construction will unavoidably be projects exposed to risks and proac- On www.abo.net, read other Since the end of the Iraq War, CNPC Maysan project initiated by CNOOC extremist forces has not had a direct stead of an operator, no employee has brought to a halt. Damage done to oil tive advocacy for sufficient protection articles on the same topic has gained partial equity in the Ru- is also due to start generating revenue impact on the production opera- been deployed to carry out production and gas infrastructures in Iraq by FOREIGN INVESTMENT in overseas jurisdictions, including the by Yao Jin, Kevin Doyle, maila Oilfield and Halfaya Oilfield in in 2012. In addition, SINOPEC also tions of Chinese projects in Iraq. operations within the territory of warfare will also affect the return of STRATEGY insertion of relevant protective pro- John L. Still, Minxin Pei. southern Iraq through bidding, while obtained equities in oil fields in the Apart from SINOPEC’s TaqTaq Oil- Iraq. However, in the long term, if ex- Chinese oil companies to Iraq to un- As China introduced the foreign visions upon signing contracts, lodg- The China National Offshore Oil Kirkuk region through the acquisition field project, projects in which CNPC tremist forces were to occupy Bagh- dertake production operations. An ap- policies of the “Silk Road Economic ing claims to relevant authorities in ac- Li Lifan is Associate Research Professor Corporation (CNOOC) has obtained of the Swiss company Addax in 2009, and CNOOC are involved are most- dad and further expand into the propriate increase in crude oil imports Belt” and “Maritime Silk Road” in cordance with international laws and at the Shanghai Academy of Social partial equity in the Maysan Oilfield which became the only petroleum ly located south of the Iraqi capital southern regions, the production and from Iran will be double insurance. 2013, China’s oil companies will di- industry practices, while using various Sciences and Secretary General which is also situated in southern Iraq. project in northern Iraq run by a Chi- Baghdad, and have not yet been at- operational activities of China’s oil Furthermore, the government of the rect more efforts to running the insurance covers. Second, it will be of the Center for Shanghai Cooperation

n At the end of 2013, CNPC acquired nese corporation that has not direct- tacked by extremist forces. Due to the companies in Iraq would certainly be Kurdish Autonomous Region has business operations of their overseas important to seek out safe and stable Organization Studies. e

v a 25 percent interest in the Phase I ly participated in crude oil production fact that SINOPEC’s project is situ- adversely affected. CNPC and sent troops to take control of the oil- oil and gas resources, especially in- “havens” in business dealings. For in- e

s r - e y t b n m e u w n t 48 49 watch watch

Interests and frictions governments in exchange for ECONOMY CENTERS with the United States the freedom of hostages – a The structure, 360° criminal activity, and Turkey at The change of direction very lucrative. Lastly, and announced by Erdogan here they have golden ticket OF GRAVITY brought Turkey closer to the funding and in the area of public funding, a crossroads: United States, with whom there is the revenue from the relations have been sale of fossil fuels. The news lukewarm for some time. from the front, on territories It did not, however, stop the weapons conquered changes day walking a fine U.S. from asking the Turkish by day, especially after the government for a drastic arrival on the battlefield of change of position with of the caliphate the anti-ISIS Alliance made line on the regard to the jihadist armed up of at leas t 40 countries, struggle against Assad. As a and this means the amount result of strategic differences of fossil fuels controlled by with Ankara, Washington ISIS varies. But to give an ISIS threat avo ided asking to use the by ANTONIO idea of the financial potential by NICOLÒ Incirlik Air Base – located in GALDO that the caliphate has SARTORI the south of the country, and available to it, it is worth ideal for launching air attacks ow that the Western remembering that the ong gone seem the in exile. The activity of against ISIS – in order to world is having production of crude oil in Iraq times of the “zero Ankara, however, seems avoid fuelling further Nto face ISIS, the is worth something like Lproblems with to go further: for some time potentially dangerous friction extremist, and terrorist, $120-130 billion. As for neighbors” strategy drawn now, it has been funding within NATO (North Atlantic Islamic State, no longer Syria, the caliphate already up by the Turkish Foreign and supporting the main Treaty Organization). The stateless, it would do well has control of 70 percent Minister of the time, Ahmet armed groups fighting tensions between the allies to understand how this new of its reserves; it draws at Davutoglu—now head of the against the regular forces now appears to have eased, entity functions, what its least $2 million a day from government—in an attempt of the Assad regime. Am ong although the Turkish political and administrative petroleum sales. An entire to normalize relations with these is the militia of the government continues to mechanisms are, and how it black-market has grown up key regional stakeholders Free Syrian Army (FSA)— preach caution with regard distributes power. First and around the barrels of crude and to guarantee Turkey a formerly the main armed to the indiscriminate aerial foremost the ISIS caliphate transported from the pivotal role in a context of opposition group active bombing of ISIS positions, has in a few months, caliphate; its Arab allies play progressive political stability in the country – to which it which risk creating a surge performed a miracle; a central role in its and economic integration. appears that, since 2011, in the flow of Iraqi and Syrian rewriting the defin ition functioning. The previous conflict the Turkish armed forces refugees—whose numbers of the operating form between the Bashar have supplied materials have already well exceeded The arms race: the of the advanced terrorist. al-Assa d regime and the and logistic support, as well alarming levels—across the Islamic Army numbers Compared to today’s rebel groups, and the as assistance and training Turkish border. The configuration, Osama bin And in any case, thanks to advance of the militia of the activities. It is more development of Ankara’s Laden would seem nothing the now stable cash wealth Islamic State (ISIS) in Syria problematic to justify their relations with its regional more than a fugitive and and reliable income, in just and then Iraq are, in fact, support, or at least the partners remains to be seen. visionary bandit. The image a few months ISIS has been shattering Turkey’s ambition complicity of the Turkish The initial non-belligerency of the Al-Qaeda jihadist blurs somewhere near to the control of all of the start-up costs and ordinary able to arm itself to act as a powerful but fair government with active position clearly isolated into often unconnected principles of the federalist caliphate’s propaganda, costs for ensuring a long life comprehensively. Among its regional stabilizer with regard jihadist movements in The message is clear: Turkey will not take part in military Turkey in the Middle East, groups incapable of having nation. At the top of the including the brutal restart for its administrative and armaments are Mig 218’s, to the neighboring countries. the civil conflict in Syria, action against the Islamic State. In the picture, Turkish not only with regard to any sort of effect on other pyramid stands the leader of the practice of political structures. anti-aircraft vehicles, The escalation of hostilities including the militia of the al- Prime Minister Recep Tayyip Erdogan. Shiites and the Kurds directly territories. ISIS, which just Abu Bakr al-Baghdadi, beheadings. Below the level According to reliable armored cars, tanks, M79 in the Levant, in fact, raised Nusra Front group, linked to committed to the stru ggle a few months ago was only self-proclaimed caliph of the of the central government, estimates, ISIS has in its fully grenade launchers, and doubts about the Turkish Al-Qaeda. In 2012, the Front fuelled by the belief that against ISIS, but also with Turkey changes its a network of bitter terrorists, Islamic Sta te. Alongside him there is the federalist liquid and available coffers at heavy artillery. Alongside government’s strategic was in fact added by the relations with the Islamic the Sunni regimes trying to mind over military has made a quantum leap: is a Cabinet of advisers, the structure, with 24 governors, least $2-3 billion. This is an its arsenal, the caliphate has influence, and may affect United States to the list of State could be practical stop the threat of the caliph. intervention against terrorism has become a caliph’s staff made up of his 12 in Iraq and 12 in Syria, enormous figure compared also been able to multiply its Ankara’s status, not only international terrorist groups, for Turkish security by virtue The hesitation of the Turkish ISIS State, with national borders closest collaborators, and each of which control a sub- to the ever scarce resources militia, soldiers paid by the in th eir own neighborhood, fueling many tensions of the possible convergence government with regard to and laws (starting from the two deputies, Abu Muslim region. The scheme broadly of terrorist groups such as regime, thanks to its but also within the entire between Washington and During the 69th session of of objectives in the joint Islamic State risks putting obsessive and paranoid al-Turkmani and Abu Ali follows the model of the Hezbollah and the Taliban. generous supply of cash. global chessboard. Ankara. Nevertheless, in the General Assembly of the struggle against the Assad the brakes on Turkey’s application of the sharia), al-Anbari, responsible for the American states, although But where did so much Here the numbers fluctuate, June 2014, the Turkish United Nations, President regime, but especially the leadership ambitions in the Bashar al-Assad and the ability to collect and territories of Iraq and Syria the 24 governors have to money come from? Initially, but the American intelligence government also decided Erdogan announced his vulnerability of Ankara with Middle East. It now finds is Ankara’s number manage resources according respectively. Central control answer to the caliph’s two while still a group of jihadi sts reports suggest that the to add it to the list of terrorist country’s willingness to join regard to the forces led by itself trying to follow (and not one enemy to highly structured of the caliphate is completed deputies for all matters of in the early phase of the caliphate can now field groups, with doubts the military forces to put up the caliph, which control a dictate) the guidelines of the mechanisms. All of this may with a hierarchy of ministers, their competence. And this Syrian conflict, ISIS received an army of around 100,000. The dictator Bashar remaining regarding the a united front against the large part of Syria near the main players in the region, seem to be a paradox similar to those of Western is because ISIS, over and generous finance from At salaries averaging $600 al-Assad, of Alawite faith, complete non-i nvolvement threat of the Islamic State. border with Turkey, posing and having to reassure the but is mere confirmation Anglo-Saxon democracies. above the needs of federal various Gulf monarchies: a month per soldier, they are is certainly the number one of Turkey in the activities of The announcement came a direct threat to security latter of the credibility of its of the absolute value of our It is very slim, divided into organization and Saudi Arabia, Qatar and well-paid according to th e enemy of Ankara, whose the Front at the border with as a surprise after Ankara in the south of the country. commitment with regard democracy with its rules, eight departments, whi ch mechanisms, remains a Kuwait. With very poor normal parameters of Islamic responsibilities for the folly Syria. The Turkish-Syrian had decided to remain The si ege of the Turkish to the threat of Islamic based on criteria and concern themselves with single State, very centralized judgment, and the hope terrorism. So many men, the and blowback of the Syrian border has in fact become outside of the international Consulate in Mosul, Iraq, extremism. establishment typical the foreign front and internal in its levers of power. of making a geopolitical majority mercenaries, uphold conflict are acknowledged the epicenter of the activities coalition formed in Jeddah, by al-Baghdadi’s men, of Western states. affairs. Among the most investment in the future, a strong, unitary state with (and often criticized) by of organization, planning Saudi Arabia, which saw which culminated in the How it is financed? important portfolios are the Gulf states armed a full war chest. And with an many in the international and procurement of the eleven Arab countries come seizing of over forty The caliphate is not Where does the money Finance, a sort of super the IS militants, with a view organizational model which community. The Turkish militias in the fight against together, namely Saudi diplomats from Ankara, who a dictatorship but a come from and ministry of the economy; to putting the hated enemies bears a strong resemblance government guarantees the forces of Assad. Aid, Arabia, Bahrain, Egypt, the were held hostage for more pyramidal state, with how many there are Armaments, like our (Italy’s) of the Syrian and Iranians to the hated West. political support for anti- ammunition and militants United Arab Emirates, Iraq, than three months, resulted distribution of power in cash now Ministry of Defense; and regimes into a corner. The Assad farces, and it is no themselves are transported Jordan, Kuwait, Lebanon, in stern warnings from Nicolò Sartori is a Senior Fellow The caliphate is an Military Operations, what In a few months the second source developed coincidence that the Syrian to the operational locations Oman and Qatar. The Turkey. It was only following and Director of the Program authoritarian, pyramidal state we called the Ministry of War caliphate has managed over time, thanks to the Antonio Galdo is the author National Council—the across the border with decision helps finally dispel the definitive resolution Energy IAI, where he coordinates rather than a dictatorship. during the conflicts of the to solve one of the hardest res ults of IS’s terrorist of L’egoismo è finito (edizioni political coalition that Turkey, near which – any doubts about the efforts of the Mosul crisis that it projects on energetic security The distribution of power 20th century; Enforcement problems of a state activities, through raids Einaudi) [“Selfishness is over”] opposes the regime of the unsurprisingly – the main actually made by Ankara decided to take action issues, with particular attention presents different weights of sharia, or overseeing the conceived from nothing: on banks and government and runs the website dictator—was formed in strong holds of the rebels to oppose the action of the against ISIS and break to Italian and European external

n and counterweights, central application of religious laws; amassing financial offices, and ransom www.nonsprecare.it 2011 in Istanbul, from where are located, including those militias led by Caliph Abu the non-belligerency pact energy policy. e

v and peripheral authorities, and Communication, with resources, the extraordinary extracted from Western it still acts as a government of the Islamic State. Bakr al-Baghdadi. Doubts formed in recent months. e

s r - e y t b n m e u w n t 50 51 DATADATADATA watch TADATADATADA

DIALOGUES resulting from the conquest THE INTERNATIONAL TRADE OF AMERICAN LIQUEFIED NATURAL GAS of Mosul, the Iranians The effects realized that they had to find an alternative to the Prime Minister Nuri of the Iraq crisis al-Maliki, and they The wrong way managed because political dynamics in Iraq are far smoother than in Syria,” The expansion of the Panama Canal may be completed in time and the nuclear explained Zubaida. The commitment to enable a significant increase in the flow of LNG between of the Iranian agreement diplomacy to protect America and Asia. Their gain may be Europe’s loss the borders Iranian diplomacy is Projects and agreements, with Iran committed, above all, uropean policy MAXIMUM SHIP SIZES numbers and costs by GIUSEPPE to securing the western makers are looking Source: data processed by the author ACCONCIA border with Iraq, with the with great interest PANAMA CANAL The expansion could provide aim of safeguarding Iranian at America’s Length: 965 ft opportunities for American LNG Width: 106 ft plentiful supplies 39.5 60-80 DWT exporters in the global marketplace. he November 24 interests in the neighboring Draft: 39.5 ft deadline for an country, to start, the major of liquefied natural Cheniere Energy hopes to be the Tagreement between project of the pipeline gas (LNG), but NEW PANAMA CANAL first American supplier to begin the United Nations Security between Iran and Iraq, there are signs Length: 1200 ft operation with its Sabine Pass Council countries plus which was halted because emerging that 49.9 60-100 DWT Width: 161 ft facility in Louisiana. Cheniere already Germany (P5+1) and the of the first attacks by ISIS. Eby JAMES much of that LNG Draft: 49.9 ft has signed a twenty-year contract Iranian authorities on Iran’s The gas pipeline (6,000 HANSEN may travel the with Korea Gas, which expects SUEZ CANAL nuclear program is getting kilometers long and costing “wrong way.” Width: 164 ft to purchase 3.5 mtpa beginning closer, but the United $10 billion) will enable 4 That’s good news in 2017. A comparable contract has 66 130-200 DWT Draft: 66 ft States, as a result of million cubic meters of gas for Chinese and Koreans, but bad been reached with Gail India, calling pressure exerted mainly by to be exported to Iraq news for Australians seeking for deliveries beginning in 2016. the Republican Party, has in a few months. Contact markets for their gas in Asia and for STRAIT OF MALACCA Canal expansion will allow the Length: 1312 ft approved new sanctions between the United States European countries that would like company to cut both the time 82 160-320 DWT Width: 193 ft against Iran. The measures and Iran intensified as the to find an alternative to uncertain Draft: 82 ft and cost of its deliveries. According include tougher fines on 25 ISIS jihadists advanced Russian gas supplies. There is solid to the Panama Canal Authority, companies and toward the Iranian border. evidence that potential U.S. The expansion of the Panama Canal, where today only relatively small Cheniere’s travel times could be cut businessmen suspected The Iranian authorities exporters of LNG, who need to ships can pass, will allow the passage of ships up to 120,000 dwt, from 63.6 days to 43.4 days, of having violated the played a vital role in acquire long-term contracts to equivalent to about 80 percent of ships now devoted reducing shipping costs by as much sanctions imposed to date. controlling the Shiite militias justify the huge investments involved to the transport of LNG in the world. This will dramatically later LNG 24 percent, according to the They also target banks in Iraq, which was essential in getting expensive LNG trade patterns. Bloomberg Agency. Another that allowed financial to holding off the jihadist’s infrastructure online, are beginning possible winner is the Cameron transactions with the advance. to look across the Pacific to Asia less certain than once seemed, For that reason, the Panama Canal LNG facility, which received final Iranian government. The final agreement to end for their main markets. This shift since there are emerging doubts is at the moment not an important approval from the U.S. Department Following the the nuclear dispute with in attention has everything to do about the continued expansion energy “highway.” of Energy in early September. The announcement of the new Iran has not yet been with the Panama Canal, but we’ll of the Chinese economy. U.S. That should change with the historic $10 billion project is owned by measures, Iran responded drawn up, while the get to that below. The United States producers will face sharp expansion of the canal. An Sempra Energy, with a 50.2 percent by delaying the inspections deadline of November 24, is in an increasingly strong position competition in Asia from Australian international consortium is building stake. Three other companies each by the International Atomic set by the Geneva to take advantage of Asian demand competitors, who are engaged a system of additional locks that can own 16.6 percent: France’s GDF Energy Agency (IAEA) agreements, fast for natural gas. A total of four in vastly enlarging capacity. The handle much larger vessels. Today, Suez and two Japanese firms, of the country’s nuclear Iranian President Hassan Rouhani speaks at the 69th United Nations General Assembly approaches. However, proposed LNG export terminals country in fact is expected to only smallish ships of the so-called Mitsubishi and Mitsui. For now, the reactors, on which the in New York, September 25, 2014. the skepticism of the ultra in the U.S. have already obtained assemble a total of 63 million tons “Panamax” class of up to 80,000 American LNG export trade is still Iranian authorities had conservative Iranians who the necessary government permits per year (mtpa) of LNG export deadweight tons (dwt) can pass. more theory than fact since, while previously given full oppose the talks with the to proceed, and another 20 are capacity by 2018, an amazing feat The expansion will take the upper the gas is there, the necessary cooperation for site only been postponed. recognition of Iranian law of the Iranian Armed United States, and awaiting clearance. considering it has only about a third limit of ship sizes to 120,000 dwt, infrastructure is not. It now looks like inspections. I am satisfied with the and a civil nuclear program Forces, has excluded America’s Republicans, of that—22.2 million mtpa—at able to carry roughly 680,000 the Panama Canal expansion will be The first approved agreement that Iran should be accepted by “cooperation” between Iran who would like to intensify present. barrels of crude. Something like completed just in time to make Civil society is export project from reached last year in the authorities in Tehran. and the U.S. to tackle the sanctions against Iran, are 80 percent of the existing worldwide possible a major expansion in LNG mobilizing itself America’s East Coast Australia’s vanishing Geneva. I now hope that jihadist advance. prompting the moderates LNG shipping fleet will be able trade flows between the U.S. in order to reach The Middle East geographical advantage the sanctions will gradually In spite of this, according and Iranian civil society to In September, the Dominion to pass through the “new” canal. and Asia - but perhaps not so much an agreement conflict and the be lifted,” explained Ebadi. to Sami Zubaida, Emeritus push for an agreement that Energy’s Cove Point project on Australia proximity to Asian markets However, there is doubt about just to Europe. contracts with the U.S. During discussions held “I am happy that Iran will Professor of Politics and puts an end to ten years the Chesapeake Bay in Maryland has meant lower shipping costs when it will be finished. The in September at the U.N. stop uranium enrichment at When the Iraq crisis broke Sociology at London’s of international sanctions. became the first East Coast LNG and higher margins that can aid in expansion was first approved more General Assembly, the 5 percent. But I believe that out in June, contact Birkbeck University, and an export project to win approval. The acquiring long-term contracts. The than seven years ago, but is now far Iranian President, Hassan we need to discuss nuclear between the Iranian and expert on Iraqi history, Iran three others to have gotten a go- country is, at least in theory, in the over budget and behind schedule. ahead are on the Gulf of Mexico. best possible geographical location The original price tag was supposed Rouhani stressed Teheran’s costs,” added the Nobel United States authorities does have a decisive role to James Hansen provides financial reporting Dominion expects to begin export for serving energy hungry Asia. But to be $5.2 billion, but that may intention of continuing with Prize winner. intensified considerably. play in halting the jihadist’s and international relations consulting operations in 2017 and forecasts its geographical advantage may reach $7 billion on actual its nuclear program, adding Even six Iranian filmmakers This did not have a advance. “The main Giuseppe Acconcia is a journalist to major Italian companies. He came that 85 ships will export LNG from vanish with the completion of a completion. Its opening has slipped how “a compromise and an have entered the fray, conciliatory effect on the combatants in Iraq are and researcher focusing on Iran to Italy as the U.S. Vice-Consul in charge its terminal annually. In spite of its single huge infrastructure project: from October 2014 to the end of agreement on this subject launching a campaign nuclear talks nor did it help the Shiite militias organized and the Middle East. Since 2005 of economic affairs at the U.S. Consulate East Coast location, Dominion is the expansion of the Panama Canal. 2015 or early 2016. But the delays would be in everyone’s to ask the negotiators to to include Iran in the by Iran. The head of the he has lived in Iran, Egypt and General in Naples. He became a targeting the Japanese and Indian The canal, inaugurated in 1914, do not alter the fact that the canal interest.” This was echoed reach a solution on the international coalition al Quds brigades, Qasem Syria. He works for news outlets correspondent for various leading foreign markets. With full federal approval, is just one hundred years old. For expansion could alter LNG trade by the Nobel Peace Prize nuclear program dispute. fighting against the Soleimani, was in Iraq in Italy (Il Manifesto, Il Riformista, press organizations, including domestic political risk for LNG a century it has significantly cut patterns. Completion should winner, Shirin Ebadi, who Abbas Kiarostami, Rakhsan advance of ISIS. Although leading these militias.” Radio 2, RaiNews), the U.K. the International Herald Tribune. exports has mostly disappeared. shipping times between Atlantic and coincide with the opening of the first thought that reaching a final Etemad and Asghar Barack Obama has That’s not all; Iran made (The Independent) and Egypt Then he was appointed spokesman The greater challenge for exporters Pacific nations. But it is outdated major LNG export terminals on agreement on the Iranian Farhadi have joined the conceded that Iran could a contribution to resolving (Al Ahram). He is the author for Carlo De Benedetti, Silvio Berlusconi is securing a stable market for their and cannot handle modern the U.S. Gulf Coast. When these nuclear question would be initiative “No to No deal.” play a “constructive” role in the political crisis in the of La Primavera egiziana and, finally, head of the press office

n product, though a rapid rise in supertankers because its locks and facilities come online, they ought possible in the months to According to the directors, Iraq, Major General Hassan neighboring country. (Infinito edizioni, 2012).

e of Telecom Italy.

v come. “The agreement has a proposal that includes the Firouzabadi, Chief of Staff “With the success of ISIS, worldwide demand for LNG is now passages are too small and narrow. to find Asia suddenly much nearer. e

s r - e y t b n m e u w n t 52 53 DATADATADATA DATADATADATADA BY INVEST – SCENARIOS, STRATEGIC TADATADATADA OPTIONS & INVESTOR RELATIONS - Eni TADATADATADATA

MARKET TRENDS BRENT PRICES

dollars/barrel Oil price is falling. 140 Annual data Monthly data

120 1 . 7 1 . 3

Okay, panic? 1 0 8 . 6

A worsening economic outlook and oversupply push Brent below 100 $/b 100 9 6 . 8 7 9 . 5 80 Oil prices 7 2 . 5 6 5 . 1

ince July, Brent price has been falling and, at the beginning of has not been cutting volumes after the recent fall in prices and decided to 6 1 . 5

60 5 4 . 106.6 September, decline below 100 $/b, the support level since 2011. reduce its official prices, in particular for Asian customers, in order to protect SThe decrease continued in October, when prices moved downward its market share. It’s necessary to wait until the OPEC meeting on in the range 80 -85 $/b, the lowest levels since 2010. Different key factors November 27 for any decisions. Nowadays Riyadh is supposed to stress its 3 8 . 2 are behind Brent fall: central role in the market, also to distract attention from U.S. record growth; 40 3 6 . 0 2 8 . 9

• the worsening of economic outlook—first of all the Chinese slow-down • financial market reactions—the markets sentiment has changed, non-oil 2 8 . 5 2 7 . 5 2 5 . 0 2 4 . 5 and negative European data. The International Monetary Fund (IMF) operators (funds, speculators, etc.) seriously reduced their long positions 2 3 . 7 2 0 . 6 2 0 . 1 9 . 3 1 9 . 1 8 . 4 1 8 . 3 revises downward its forecast for global economic growth for 2014 in the oil market, penalized by worse fundamentals and economic outlook; 1 7 . 8 1 7 . 0 1 7 . 0 1 5 . 8 1 4 . 9 20 1 4 . and 2015; the economy slowdown causes the weakness of oil demand, • strengthening of the dollar—the different U.S. and European monetary 1 2 . 8 with IEA that has halved the forecast of the annual oil demand in the last policies and the different growth potential of the two areas result in an 1 0 . 4

three months; increase in the dollar, the reference currency for the oil market, contributing 1 . 3 • oversupply—the record growth in non-OPEC production, mostly located to the price drop. 0 in U.S.A., the Libya’s recovery and the increase of West African production 4 - 1 4 - 1 4

brought about an oversupply. Geopolitical risk has been overshadowing Are we facing a cyclical phenomenon or a new equilibrium with lower prices? 1 9 7 0 1 9 7 5 1 9 8 0 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 1 9 8 1 9 0 1 9 1 9 2 1 9 3 1 9 4 1 9 5 1 9 6 1 9 7 1 9 8 1 9 2 0 2 0 1 2 0 2 0 3 2 0 4 2 0 5 2 0 6 2 0 7 2 0 8 2 0 9 2 0 1 2 0 1 2 0 1 2 0 1 3 A p r J a n - 1 4 M a r F e b - 1 4 J u l y - 1 4 A u g - 1 4 S e p - 1 M a y - 1 4 while the fall in U.S. imports increased the availability of crude looking for Doubts are growing over what could be the new equilibrium price of crude: J u n e - 1 4 new markets; the current bearish factors may be constrained by the upstream costs • Saudi Arabia on standby—the country, which increased production to offset (on stream and future production) and producing countries fiscal prices, the drop in Libyan production during the new crisis in the middle of 2013, evaluated in the range 90-100 $/b. Source: IEA, Arabian Light spot price (1970-1985); IEA, Brent spot price (1986-1987); EIA-DOE, Europe Brent spot price FOB (from 1988)

Oil demand GLOBAL CONSUMPTION GLOBAL SUPPLY Oil supply

n the third quarter of 2014, global demand for oil reached 93 mb/d, 91.7 90.8 91.3 lobal oil supply in the third quarter of 2014 set a new record (93.2 90.5 93.0 92.8 93.2 89.5 90 92.0 an increase of 0.5 mb/d compared with the same period in 2013. The 90 88.7 91.6 91.5 88.6 mb/d) and strong increases have continued to be recorded for three 87.1 87.3 86.5 86.7 OECD weak demand trend continues (0.4 mb/d), while non-OECD 85.7 85.6 Annual supply 85.5 85.6 85.6 quarters (+1.5 mb/d). Last year only non-OPEC countries showed Annual consumption 84.7 84.8 I 83.4 83.4 G consumption is growing (+0.9 mb/d) albeit with subdued conditions positive increases, in the light of the continued reduction of OPEC Quarterly consumption Quarterly supply since the beginning of the year (2.6% in Q1, 2.5% in Q2, 1.9% in Q3). 80.4 80.3 production, penalized by geopolitical crises. The United States leads 80 80 92.7 78.0 78.7 77.5 OECD Americas demand is stable as a result of growth in the USA 77.3 92.0 77.3 77.3 non-OPEC growth (+1.4mb/d), thank to the development of tight oil, which 76.5 76.0 75.0 and a sharp fall in Mexico. Specifically, in the USA, gasoline demand 74.5 74.8 74.8 currently represents more than 40 percent of the country's crude production. M i l o n b a r e s / d y M i l o n b a r e s / d y recorded positive changes thanks to improving labour market 72.4 72.5 The output level of U.S. oil, which is presently close to 12mb/d, remains 70.5 70.7 conditions and to increasing miles travelled. The recovery path 70 70 stable above the production of Saudi Arabia and Russia. Among the other experienced by diesel was consolidated, in line with the improvement in producers, Brazil stands out with one of the highest increases last year 2 0 1 2 0 1 1 9 5 1 9 6 1 9 7 1 9 8 1 9 2 0 2 0 1 2 0 2 0 3 2 0 4 2 0 5 2 0 6 2 0 7 2 0 8 2 0 9 2 0 1 2 0 1 2 0 1 2 0 1 3 1 9 5 1 9 6 1 9 7 1 9 8 1 9 2 0 2 0 1 2 0 2 0 3 2 0 4 2 0 5 2 0 6 2 0 7 2 0 8 2 0 9 economic activity and commercial transportation. The Mexican demand 2 0 1 (+0.26mb/d): alongside the positive results of the most recent pre-salt plays, 1 Q 2 0 3 2 Q 0 1 3 3 Q 2 0 1 4 Q 2 0 1 3 fall, on the other hand, is related to an increase in the use of natural gas 1 Q 2 0 4 2 Q 0 1 4 3 Q 2 0 1 4 production levels in the Campos Basin are also starting to rise again. Unlike rather than fuel oil in the power sector. In Europe, demand continues to at the beginning of the year, growth in Canada remains modest because of fall to reflect the now noticeably redu ced macroeconomic outlook (-0.2 CHANGES IN GLOBAL CONSUMPTION BY AREA CHANGES IN GLOBAL SUPPLY BY AREA the output of synthetic crude and the maintenance that involved numerous mb/d). OECD Asia Oceania, demand fell strongly (-0.3 mb/d), linked, projects. Within the OPEC, the situation was essentially stable compared 3.5 3.1 3.5 3.2 on the one side, to an economic slow-down in Japan and, on the other 3.0 3.0 with last year, even if the domestic situation in countries suffering from the 2.5 2.6 side, to power‐sector switching out of oil and into cheaper alternatives 2.5 2.2 crisis, continues to create difficulties. In Libya, production during the quarter 2.0 2.5 such as coal. Demand in non-OECD countries reached 47.1 mb/d in 1.7 1.7 increased continuously, reaching 0.8 mb/d in September in spite of its 1.5 1.5 the third quarter of 2014, confirming that it overtook demand in OECD 1.9 1.4 1.9 1.2 chaotic domestic situation. There are still many doubts surrounding the 1.5 1.5 1.1 1.6 1.0 1.5 0.8 1.5 1.5 countries (45.9 mb/d), which h appened for the first time in the first 0.7 1.3 1.6 sustainability of this recovery because of the fragility of the political situation 1.1 1.2 1.0 quarter. Demand in China stood at 10.3 mb/d (+0.2 mb/d), slowing 1.1 0.3 and difficulties of a technical nature. In Iraq, the advance of ISIS is arousing 0.5 0.7 0.5 0.2 0.7 0.1 down considerably compared with the last four years (+0.5 mb/d yearly 0.8 0.5 0.5 concerns at international level, far more extensive than the current problems 0.3 average 2010-2013). Industrial production in August reached the lowest -0.5 -0.5 -0.2 with supply. Production controlled by the jihadists is currently estimated at

level since 2008, and a new action by the government to break the M i l o n b a r e s / d y 0.5 mb/d (compared with the country production of 3.3 mb/d), but crude -0.7 -0.9 M i l o n b a r e s / d y -1.0 generally weak underlying trend appears to be more necessary than -1.5 -1.5 -1.3 exports from the south of the country are not affected; in addition, in the ever. All of this is reflected in a fall in diesel demand, also affected by north, the Kurdish government has been exporting limited quantities to the China and India World OPEC the gradual removal of subsidies, which have been in place since March -2.5 -2.5 Mediterranean for several months via an independent pipeline. The question Other Asia OECD Americas OECD Europe OECD 2013. Consumption of gasoline, LPG and naphtha, on the other hand, Asia/Oceania Non OPEC World of Iran still remains open; there will be a new round of negotiations by Middle East FSU + non OECD Europe Latin America Africa continues to grow, especially thanks to the increase in private transport -3.5 -3. 5 November between Iran and P5+1 countries. The OPEC meeting scheduled and the expansion of the petrochemical industry. In January 2013, India at the end of November could establish a policy to curb supplies in order to 1 9 5 1 9 6 1 9 7 1 9 8 1 9 2 0 2 0 1 2 0 2 0 3 2 0 4 2 0 5 2 0 6 2 0 7 2 0 8 2 0 9 2 0 1 2 0 1 2 0 1 2 0 1 3 2 0 1 1 9 5 1 9 6 1 9 7 1 9 8 1 9 2 0 2 0 1 2 0 2 0 3 2 0 5 2 0 6 2 0 7 2 0 8 2 0 9 2 0 1 2 0 1 also decided to gradually remove subsidies on fuel, particularly diesel, 2 0 4 2 0 1 3 support prices, which have slipped toward 2010 levels. At the moment Saudi Q 2 0 1 4 Q 2 0 1 4 Q 2 0 1 4 Q 2 0 1 4 Q 2 0 1 4 Q 2 0 1 4 1 2 3 1 2 3 n whi ch reached prices close to international levels, with a depressive Arabia seems does not intend to reduce its market share in favor of other

e Source: Eni’s elaboration on IEA data; change vs the same period of the previous year Source: Eni’s elaboration on IEA data; change vs the same period of the previous year v effect on demand. producers, reconfirming in September the previous month production levels. e

s r - e y t b n m e u w n t 54 55

The caliphate’s

oil

BAGHDAD

AQ

November 2014

News and ideas for the energy community and beyond. On paper and online.

For mo re in for ma tio n, vis it w ww.abo .n et Follow us o n @A b o utOi l

Turkey

KURDISTAN Qayyarah refinery Erbil refinery

Bazian refinery Kirkuk refinery Baiji refinery Khanaqin/Alwand refinery Baiji Salah Al-Din refinery Syria Iran Haditha refinery BAGHDAD

Daura refinery

Libya IRAQ Misan refinery

Basra 48,470 mn bbl refinery Najaf refinery 1,551 bn m³ Diwaniya refinery Saudi Arabia Syria Samawah refinery Nasiriya refinery

2,500 mn bbl

285 bn m³

Egypt

4,400 mn bbl Areas of ISIS support/control 2,185 bn m³ Oil fields Pipelines Gas fields Refineries SOURCE: Eni. The data for oil and gas reserves are as of December 31, 2013 Stato Islamico detto anche IL CONTROLLO DELL’ORO NERO Stato Islamico dell’Iraq e della Siria, Stato Islamico dell’Iraq e Petrolio del Levante, Da’esh (acronimo arabo) e Dawla (cioè Stato) 50.000 barili al giorno

GIACIMENTI FINANZIAMENTI Lo Stato Islamico ha preso il controllo di 11 giacimenti di petrolio in Siria (al Omar e al Tanak, nella Valle dell’Eufrate; Shadada, al Houla e Jbeissa nella A provincia di Hassakeh) e in Iraq (piccoli giacimenti petroliferi nella provincia capitali derivanti da attività legate di Salahuddin e nella provincia orientale di Diyala, tra cui Ajeel e Imrin, al contrabbando di petrolio e la raffineria petrolifera di Baiji) proveniente dalle raffinerie siriane e irachene, per un totale di 1/3 PRODUZIONE milioni di dollari USA di entrate al L’Isis controlla il 60% della capacità di produzione di petrolio della Siria. giorno; attività estorsive ai danni di Prima del conflitto, la capacità di produzione della Siria era pari imprese locali (8 milioni di dollari a 385.000-400.000 barili al giorno, quindi il 60% equivarrebbe a più di 200.000 USA al mese); rapimenti; rapine barili al giorno. Ma da ciò che trapela dalla Siria, l’Isis sembra essere in grado (ad es. alla Banca Centrale di di produrre soltanto 50.000 barili circa al giorno Mosul); contrabbando di armi RICAVI B Dai 25 ai 60 dollari USA a barile, per un totale di 3 milioni di dollari USA al capitali ereditati: al Qaeda in Iraq giorno (prezzo standard internazionale: 90 dollari) (AQI) ha raccolto circa 70 milioni di dollari l’anno grazie ad attività criminali C capitali privati: provenienti da sostenitori facoltosi nel Golfo 3.000.000 $ al giorno (25 - 60 $ a barile)

DICASTERI STRUTTURA

FINANZA una sorta di super ministero dell’Economia

Luogotenente Siriano Il Califfo Luogotenente Iracheno Abu Ali al Anbari Abu Bak al Baghdadi Abu Muslim al Turkmani

ARMAMENTI il nostro ministero della Difesa

Siria

OPERAZIONI MILITARI gestisce le attività di occupazione

Iraq

IMPOSIZIONE DELLA SHARIA al quale fa capo il controllo sull’applicazione della legge 12 Governatori 12 Governatori religiosa

2.000 15.000 occidentali 31.500 reclute straniere

COMUNICAZIONE con il controllo di tutte le Miliziani attività di propaganda del (comprese le donne) Califfato

La struttura dello Stato Islamico è una piramide pensata fin nei minimi dettagli per far funzionare il Califfato sui diversi fronti, da quello finanziario a quello militare e mediatico. Al vertice si trova l’autoproclamato Califfo, sotto il quale ci sono i due vice, che coordinano ciascuno 12 governatori, ognuno dei quali risponde di una sotto-regione. Lo schema, in larga parte, riprende il modello degli stati americani, anche se i 24 governatori, in tutte le materie di loro competenza, devono poi rispondere ai due vice del Califfo. E questo perché l’Isis, al di là di esigenze organizzative e di meccanismi di gestione federalisti, resta uno Stato unico, molto centralizzato nelle leve del potere.

FONTE: Istituto Affari Internazionali (IAI)