The West’s push to rebuild its influence in Mesopotamia, the geographic and geopolitical heart of the Middle East, has entered a new phase in recent months, with many major American and European oil and gas companies returning to Iraq after a long hiatus. The key objective is to break the long-standing bond between Iran and Iran, which has long exerted influence over its neighbor through its multiple political, economic and military proxies. By doing this, the West hopes to tilt the balance of influence in the entire region toward itself and away from China and Russia, who exert similar influence over Iran as they do over Iraq. In the zero-sum game of Middle East geopolitics, this would mean that the West would maintain the advantage over the East in terms of control over the world’s largest combined oil and gas resources, and the physical land gateway between the two global power blocs. That said, given the West’s history in the Middle East – most notably with its military incursions into Iraq – enjoying the tacit backing of other Middle Eastern countries in these efforts is seen as crucial to the chances of success. This is where the Arabian Emirates (UAE) comes into the equation.
In recent weeks, United Arab Emirates-based companies Dana Gas and Crescent Petroleum announced the start of gas sales from the Khor Mor gas expansion project in the semi-autonomous region of Iraqi Kurdistan (KRI), in the north of the country. The two companies are the largest shareholders of the Pearl Petroleum consortium with a 35% stake each, while the rest corresponds to 10% of the Austrian OMV, the Hungarian MOL and the German RWE. In addition to Kho Mor, the consortium also exploits the Chemchemal gas field in KRI. The start of commercial gas sales marks the eight-month ahead-of-plan completion of the Khor Mor site’s ‘KM250′ project, which adds 250 million standard cubic feet per day (MMscf/d) of new capacity, increasing the gas field’s total production to 750 MMscf/d, according to the companies. The KM250 facility will also produce 7,000 barrels per day of condensate and 460 tons per day of liquefied petroleum gas, increasing the previous respective production of 15,200 barrels and 1,070 tons. Operated by Pearl Petroleum, the Khor Mor site currently meets around 80% of the KRI’s energy needs. The $1.1 billion financing for the Kor Mor expansion project came from the United Arab Emirates’ Bank of Sharjah, Pearl Petroleum’s $350 million bond and the U.S. Development Finance Corporation. Just one day before the Khor Mor announcement, the Ministry of Oil of the Federal Government of Iraq (FGI) in the south hosted senior figures from the UAE’s Abu Dhabi National Oil Company (ADNOC) to discuss strengthening cooperation and exploring investment opportunities in the country’s oil and gas sector. ADNOC stated that it was interested in developing projects in the areas of exploration, production, refining and petrochemicals. Crescent Petroleum signed three 20-year contracts for oil and gas fields in Diyala province (the Gilabat-Qumar field and the Khashim Ahmer-Injana field) and in Basra province (the Khider Al-Mai block).
Boosting KRI gas (and oil) production is a key component in the West’s strategy to move the IGF in Baghdad closer to a model of greater cooperation with the semi-autonomous KRI, with which Washington and London have long maintained strong connections, as I discuss in full in my latest book on the new global oil market order. Basically, they want the Kurdistan Region to end long-term all ties with Chinese, Russian and Iranian companies related to its Islamic Revolutionary Guard Corps. The United States and Israel also have an additional strategic interest in using the Kurdistan Region as a base for ongoing surveillance operations against Iran. This is exactly the opposite of the strategic intentions of China and Russia, as conveyed to Pricedelpetroleo.com some time ago by a high-level energy source working closely with Iran’s Oil Ministry. He said: “By keeping the West out of energy deals in Iraq, the end of Western hegemony in the Middle East will become the decisive chapter in the final demise of the West.”
There have been three major phases in the superpower battle in Iraq since the US military incursion into Iraq began in 2003. First, American oil and gas companies – and many from Europe – invested heavily across the country to cement Western influence on the ground. Aside from the huge sums of money involved, oil and gas companies have the legal right to secure their operating facilities in any way they see fit, as long as the indigenous government agrees. Such measures may include permanently stationing as many security personnel as companies deem necessary and constructing major infrastructure projects to support oil and gas production sites. Chinese and Russian companies were also present in Iraq – north and south – during this period, but initially acted cautiously, given the continued presence of the United States and its allies throughout the country. This was particularly true of China, which preferred over a long period to take on multiple ‘work only’ contracts in oil and gas fields rather than higher profile exploration and development projects, as I also detail in my latest book. The second phase saw increased activity by China and Russia after the United States unilaterally withdrew from the “nuclear deal” with Iran in 2018, allowing Tehran to once again dramatically expand its influence across its neighbor. During the same period, several Western companies left Iraq due to this growing influence and growing corruption in the country’s oil and gas sector. And the third phase began with Donald Trump’s second presidential term. Overall, his “if you are not our friend, you are our enemy” approach appears to have brought renewed clarity to the global geopolitical outlook of many Middle Eastern countries.
Crucially for Washington, this appears to include the United Arab Emirates, which had proven to be a constant concern for former President Joe Biden’s administration. As OilPrice.com highlighted over the years, this included the discovery in late 2021 that China was secretly building a suspected military facility inside the United Arab Emirates’ Khalifa Port. Just a few months later came President Sheikh Mohammed bin Zayed Al Nahyan’s haughty refusal to take an urgent phone call from Biden in early March 2022 as he sought help to deal with rising oil prices following Russia’s invasion of Ukraine. As of now, a high-level Washington-based source working closely with the US Treasury Department recently told OilPrice.com exclusively, all indications are that the UAE is more willing to cooperate in a manner consistent with Trump’s original “normalization of relations” model for key Middle East countries. This made the UAE the first country to sign an ‘Abraham Accord’ with Israel on August 13, 2020. This stance is not only a key benefit to the West’s strategy to expand its influence across the Middle East, but is also extremely important in Washington’s efforts to position India as a political and economic counterpoint to China in the Asia-Pacific region.
By Simon Watkins for Oilprice.com
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