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US Interests in Middle East Remain Despite Shale Revolution

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The revival of North American oil and natural gas production, along with the United States' focus shift towards Asia and efforts to withdraw military troops from the Middle East, has created a perception among Middle Eastern leaders interested in building a relationship with the United States that U.S. interest in the region is waning.

However, the perception of declining U.S. interest in the region does not fit reality of the situation, said Ambassador Dennis Ross, counselor for the Washington Institute for Near East, during a panel session at IHS CERAWeek Tuesday in Houston.

Despite the resurgence of oil and gas production, the fact that the Sept. 11, 2001 attacks on the World Trade Center and Pentagon remain in the nation's not-so-distant history means the United States will not pull away from the Middle East completely.

"We know we can't walk away and not have the Middle East somehow visit us," Ross told conference attendees.

The fact that U.S. allies remain heavily dependent on the large pool of energy resources in the Middle East will also ensure the United States continues to play a role in the Middle East as their economic interests remain tied together.

"The United States is not immune to oil prices and instability in the region," Ross commented.

The Middle East is experiencing political upheaval of a level not seen since post-World War II, with Iran's upcoming presidential election and bid for nuclear capability at the forefront of that upheaval.

"If the Obama administration were only dealing with Iran, that would be enough," Ross commented. "If it was only Syria, that would be enough. If it was only the Arab awakening, or only the Israeli-Palestinian issue, that would be enough."

2013 to Be Decisive Year for Iran

This year will likely prove to be a decisive year for Iran, either with Iran striking a deal for its nuclear program, or force being used against Iran, because of the United States' adoption of a prevention objective for Iran's nuclear program. The current pace of Iran's nuclear program – which could put the United States in a position by year-end of being unable to stop Iran – also makes it likely that 2013 will be a big year for Iran, with big changes for better or for worse.

While an Iran with nuclear capability is viewed by its neighbors as a major threat, U.S. intelligence community reports suggest that Iran has not yet made a decision to build a nuclear weapon, and may only be considering the option to give it greater bargaining power in the region.

A deal on Iran's nuclear program will not likely happen prior to the presidential elections in June, said Khajepour. Negotiations over Iran's nuclear program recently reached a turning point, with one of Iran's main demands, the right to possess uranium, now being observed in the new proposal. This would allow Iran to keep the 3.5 percent fuel enrichment facility and some centrifuges to fuel their research reactor.

The year 2013 also will be a crucial year for Iran as the nation seeks to begin repairing the damage done by President Mahmoud Ahmadinejad following elections to name a new president in June, said Bijan Khajepour, managing partner with Atieh International GmbH. As part of these efforts, Iran's Supreme Leader Kotjaba Khamenei is becoming more involved in executive decisions and some of the critical issues and the political parties are positioning themselves for the new political regime.

At the same time, Iran is also undergoing a transformation as the economic sanctions imposed on Iran have caused a significant decline in the nation's oil exports. In January 2012, Iran was exporting 2.3 million barrels of oil per day (bopd); from April of this year, Iran is only exporting 840,000 bopd.

While it's hard to believe the Assad regime remains in power in Syria, the bigger question is who will replace him once he goes. The longer Assad stays in power, the worse the situation will likely become in the country; the situation may already be past the point where governmental institutions are broken down.

"If you see Syria emerge as a fragmented state with stronger potential for Islamist presence, the Las Vegas rules won't apply, meaning that 'what's happening in Syria won't stay in Syria,'" Ross noted.

From the perspective of key states in the region, the situation in Iran and the rise of the Muslim Brotherhood are the two biggest threats in the Middle East today. These threats are embodied in the struggle in Syria, which is why Saudi Arabia is actively supporting the opposition in Syria. Saudi Arabia and other Gulf neighbors not only are concerned about what's happening in Syria, but in Egypt as well, where attempts to govern have been inept the tenor and direction of Egypt's government moves towards greater instability, Ross commented.

Shadi Hamid, director of research for the Brookings Doha Center and fellow at the Saban Center for Middle East Policy at Brookings, pointed out that the five revolutions that have occurred in Egypt, Tunisia, Libya, Syria and Yemen all occurred in nations in which presidents were elected, not monarchies.

Gulf monarchies tend to enjoy more popular support from their subjects due to the strong religious and historical tradition of these monarchies. These countries also tend to be less excessively partisan, which would seem to bode well for stability. However, this trend presents no guarantee, just as high youth unemployment rates or low gross domestic product does not necessarily mean a country is ripe for revolution,

"Just because you can't see it, doesn't mean it won't happen," said Hamid, noting the need to prepare for black swans.

The United Arab Emirates has taken a more aggressive role in dealing with opposition to its government. This preemptive strategy works in the long term, but Hamid questioned whether this strategy was sustainable in the long term.



Karen Boman has more than 10 years of experience covering the upstream oil and gas sector. Email Karen at kboman@rigzone.com.

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