As the Iranian sanctions ensure that the ante is upped on the global crude oil rates – oil prices hitting a nine month high on Friday, with Brent crude soaring up to over $125 per barrel – it seems as if it is going to be Saudi Arabia to the world’s rescue as the nation has raised oil exports. Ever since United Nation’s nuclear watchdog issued its scathing report against Iran’s nuclear programme, touting it to be within the realm of militaristic nature, there have been apprehensions all over the world regarding sanctions on Iranian oil. While any doubting Thomases, who might have raised their eyebrows questioning the rationale behind the sanctions, would have duly straightened their eyes fearing Washington’s stick, but those Thomases that feared oil price hike citing Iran’s considerable share in the suppliers’ pie chart have been vindicated.
With the void of Iranian oil escalating prices, it is Saudi Arabia that has come to the fore to fill that gaping hole with its own black gold. And even though Asia might have evaded the sanctions mousetrap, as expounded in this space last week, but the impending EU embargo on Iranian oil would have continued to exacerbate the prices. Another potential disastrous façade of this game is that after the UN report ostensibly ‘confirmed’ Tehran’s intentions, Israel has also thrown in its pre-emptive strike threats on Iranian nuclear sites in this TNT that has long been hankering after an excuse to explode.
This year has been marred with precipitously escalating oil prices ever since Tehran pulled out the Hormuz card and threatened to close the strait – which is the principal supply route of Gulf oil. And this hike is of particular concern for Barack Obama, who is also facing the menace of gas price hike in the US after he ordered the delay of the Keystone XL pipeline from Canada. US citizens have been particularly harsh on presidents who have presided over gas and oil crises as Richard Nixon found out after the 1973-74 embargo and Jimmy Carter found out in 1980’s elections; and hence, Obama wouldn’t want to follow suit and has been vying to stabilise the prices ahead of November. This is where he has found an ally in the shape of the Saudi Kingdom.
The Saudi manoeuvre comes amidst the US quest of tapping crude from the Strategic Petroleum Reserve, among other options, to cover for the Iranian supply disruptions. Saudi Arabia has increased oil exports over the past week and has even offered additional crude oil to the biggest customers in a bid to control the prices. According to the numbers being flaunted, even if Riyadh were to maintain its exports at 9 million bpd it would connote record volumes from OPEC’s record producer – at 11 million bpd – which is a million more than the numbers posted last month. Of the 9.75 million bpd exported by Saudi Arabia in January, 2 million was used domestically, 6 million exported to Asia and US had a 1.5 million share of the pie – a three-year high. And these numbers are all set to inflate for the months of February, March and the months to follow with July’s EU embargo instigation still very much in sights.
India’s Bharat Petroleum has also taken its emptying bowls and barrels to the Saudi taps, and has been eying higher supplies for 2012 and 2013 from Riyadh’s oil-works. Saudi Arabia is already the biggest oil supplier to India, and even though New Delhi has as yet paid no palpable heed to the US policy against Iran, it’s the security over Saudi oil and the lack of it for the Iranian counterparts that seems to be luring India and other countries in the region as well.
The US-Saudi collaboration to increase oil supply has thrown a spanner into the works of the oil and game, and a dagger into Tehran’s wallet. With Saudi Arabia having the key to open up the locked door of nuclear programme resolve from Tehran, and not being afraid to pull it out, it is a sorry picture for the Muslim world; as economic ramifications continue to expose and aggravate the divide between the countries in the Islamic domain.
The writer is Sub-Editor, Pakistan Today. He can be reached at [email protected]
