Wanderlust…

The International Reporting (and Life) Adventures of Vivian Salama

Oil Exporters Ignore Iran’s Call for Embargo Over Gaza War

Posted by vmsalama on January 14, 2009

Hello from Lahore, Pakistan!  I just arrived today and plan to base here for at least the next six months.  There is so much going on here at the moment that I feel very fortunate to have a front row seat.  I am extremely eager to hear about new and interesting story ideas here in the country so I invite you all to submit some suggestions.  

In the meantime, I wrote the story below in Dubai last week regarding calls for an oil embargo against supporters of Israel over the Gaza crisis.  As of today, about 1,000 Palestinians have been killed as the result of Israel’s attack on Gaza, most of them civilians.  Please consider ways in which you can help the poor people of Gaza rebuild after this destructive conflict with Israel.

by VIVIAN SALAMA

MIDDLE EAST TIMES

DUBAI, United Arab Emirates — Cozy economic ties with the West and cool heads have led the Arab Gulf’s leading oil exporters to ignore calls by Iran for an oil embargo against supporters of Israel over the Jewish state’s military offensive in Gaza. 

Mirfaysal Bagherzadeh, brigadier-general of Iran’s hard-line Revolutionary Guard, has urged Muslim countries to cut oil exports to Israel’s allies as punishment for their inaction against the its “unequal war” on the Palestinian territory.

Saudi Arabia’s foreign minister, Prince Saud al-Faisal, responded this week saying that the use of oil as a weapon in the Arab-Israeli conflict is not a solution.

“The oil producers who need their income … are not going to do that,” he said at a news conference in Riyadh. “The use of oil, especially at this time, is an idea that is at least past its worth.”

The comments from Tehran echoed sentiments by members of Bahrain’s lower house of parliament earlier in the week that “all retaliation options” should be considered by Arab governments against the Israeli aggression.

While the tiny Gulf kingdom is not a major oil exporter, it is home to the U.S. Navy’s 5th Fleet.

“Bahraini and Kuwaiti parliaments are quite renowned for nationalistic and even Islamist voices that do not necessarily reflect the position of their particular governments,” said Neil Partrick, assistant professor of international studies at the American University of Sharjah.

The renewed Israeli attacks in Gaza have claimed nearly 1,000 lives since they started on Dec. 27.

French President Nicolas Sarkozy and a delegation of European Union foreign ministers have been meeting with Arab heads-of-state in an attempt to broker a cease-fire and bring both parties back to the negotiating table.

Israel’s government has been accused of heavy-handed tactics resulting in huge destruction of infrastructure and high civilian casualties.

Protesters have come out in large numbers in cities across the region demanding that their governments take action to stop Israel and make it take responsibility for the heavy losses.

A statement released this week by the Saudi cabinet accused “the policy of war, violence, murder and torture practiced by Israel against the Gaza Strip and throughout Palestine” as demonstrative of the “extremist political parties in Israel and abroad aiming at [the] restructuring of the region of the Middle East according to their terms.”

The Saudi government also criticized American nepotism toward Israel. Speaking at this week’s U.S.-Gulf Forum, the Saudi deputy foreign minister said that the United States has “adopted policies full of flaws against the Gulf nations and the Middle East while it has been extending all-out support to Israel.”

For countries in the Gulf, their oil wealth has historically proven to be a mighty weapon in times of turmoil. Flash back to the now infamous oil embargo by Arab producers during the 1973 Yom Kippur War between Israel and the armies of Egypt and Syria. The boycott sent shock waves around the world – the market price for oil soaring almost immediately from $3 a barrel to $12.

Arab oil producers would subsequently take a hit, however, as consumption dropped by 5 percent over the following two years. The crisis served as a wake-up call for countries in the West to seek alternative sources of energy and ultimately, reduce dependency on oil imports.

Today, Saudi Arabia is the only major Middle East oil supplier to the United States. The United Arab Emirates, Oman and Iran sell mostly to Asia, while Kuwait divides its exports among countries in Asia and Europe, while sending only a small amount to the United States.

“So the phrase ‘we need to reduce our dependence on Middle Eastern oil’ is actually a misnomer,” said Raja Kiwan, an energy analyst with PFC Energy, a Bahrain-based consultancy. “Most of [Iran’s] oil is sold to Asia, so the comments by the Revolutionary Guard should be seen as political rhetoric.”

Like other oil producers in the region, Iran depends on oil revenue for as much as 90 percent of its foreign income – and is currently suffering as the result of plummeting oil prices. An export ban is therefore believed by analysts to be in no one’s interest – most of all, the oil producers.

“The GCC [Gulf Cooperation Council] has no appetite for an oil embargo because the embargo of the 1970’s was quite damaging economically for the Gulf countries,” noted Partrick.

Martin Lovegrove, vice chairman of oil and gas for Standard Chartered Bank in London said that oil producers must consider the implications an oil embargo could have on their domestic economies.

“Some, if not the majority, of these countries would certainly have to tighten their belts should they have an embargo, and not just for the short-term,” he said.

“An embargo could increase prices again at a time of true economic sensitivity in the world financial, business and personal economic markets [and] this could delay any real term recovery in prices.”

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