U.S. Must Remain Active to Ensure Middle East Energy Supplies
The United States must continue its activist role, diplomatically and potentially militarily, in the Middle East, to ensure a free flow of oil and natural gas from the region, former U.S. Ambassador to Iraq James Jeffrey said Sunday on Platts Energy Week, an all-energy news and talk show program.
"The region keeps erupting into one kind or another of violence or instability," Jeffrey said on the program. "So we have to be present."
Currently a visiting fellow at the Washington Institute for Near East Policy, Jeffrey was U.S. ambassador to Iraq from 2010 until June 2012 and was U.S. ambassador to Turkey for two years before that.
Jeffrey acknowledged that the current U.S. presence in the Middle East is "adequate."
"We have a strong presence in the Gulf," Jeffrey said. "We have good relations with most of the countries in the region. But even with the pivot to Asia, this is something we have to be very careful about," he said, referring to the Obama administration's 2012 East Asia strategy.
"Oil is fungible," Jeffrey said. "There is one international oil market. Prices go up because of shortages in one area, they are going to go up in every other area, even in the United States, even if we import from safer areas or produce it ourselves.
"Even more importantly, at the very core of America's security relationship since World War II has been guaranteeing supplies of oil and gas to our friends and allies. Even if we are independent in energy, most of our friends in East Asia and certainly in Europe, and elsewhere in the world are not. If we want a stable world, if we want a world that isn't overrun by terrorists and enemies for freedom, we need to be present and we need in ensure that this gas and oil keeps flowing."
Discussing Iraq, Jeffrey said while that country has boosted its crude production to 3.4 million barrels per day (b/d) in December and is on target for 3.7 million b/d this year, earlier stated Iraqis hopes for reaching about 12 million b/d production over the next 20 years are not realistic.
"In fact, the Iraqis themselves are now negotiating to ratchet that down to the 8-9 million b/d, which would be right behind Saudi Arabia, still the second-most important oil exporter in the world," he said.
"The problem," Jeffrey said, "is that Iraq itself is not completely stable and it is anchored between two greatly unstable countries: Syria, which is under total civil war at this point, and Iran, which is under international sanctions and facing possible military action of the nuclear question. And Iraq itself has problems between the Kurds in the north and the central government. Oil companies from all over the world are flocking into northern Iraq because there are extraordinary reserves of oil and gas up there."
Chevron last week signed its third oil deal with the Iraqi Kurdish Regional Government, while ExxonMobil, Total, Gazprom Neft and other international oil companies have reached similar agreements. Iraq's central government considers all of them illegal.
"The U.S. has been very active trying to work out arrangements where everybody cooperates and oil and eventually gas from the north is exported in cooperation with Baghdad," Jeffrey said. "The latest deal has fallen through. People are back arguing and more needs to be done to ensure that a solution satisfactory to everybody can be achieved. Because this involves military as well as energy politics."
But despite much public rhetoric by both the central government and the Kurds, the two sides have cooperated on the shipment of oil when it benefits them, Jeffery said.
"Everybody is playing a veiled as well as open game here. I can’t give specific advice," he said. "This is a sensitive issue. A great deal is at stake, not only in energy, but in the political stability of Iraq, where we lost so many people, and therefore, I know the U.S. government is very energetically engaged in trying to find a solution. "
An advisor on Iran at State Department and White House during George W. Bush Administration, Jeffrey was adamant that U.S. and European Union sanctions over its nuclear program have been "extremely effective" against Iran.
"They've cut Iran's exports by more than 50%," he said. "But because oil markets are extremely flexible, including Iraq with its surge in exports, we've been able to balance that out globally and thus the sanctions have been able to tighten the screws on Iran without impacting world energy markets.
"Iran will be under much more pressure to go to the table, but this requires several things," Jeffrey said. "First of all, an offer that they would find acceptable in terms of ending their enrichment to at least 20%. Secondly, they would have to be persuaded that if they do not go down this route, military action will follow, and they may not be persuaded of that yet."
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