Arguably the two greatest military errors of the 100 years have been Japan’s attack on the U.S. naval base of Pearl Harbour on 7 December 1941 and Russia’s invasion of Ukraine on 24 February 2022. In both cases, they snapped the U.S. out of prolonged moments of introspection, and into the broader focused force for good that it and its key allies represent to many people around the world. In the Middle East, then-President Donald Trump’s comments encapsulated in his ‘Endless Wars’ commencement address to the United States Military Academy at West Point on 13 June 2020, had found resonance in the U.S.’s withdrawal from Syria (in 2019), Afghanistan (2021), and Iraq (2021), as analysed in depth in my new book on the new global oil market order. This allowed its key geopolitical rivals China and Russia to dramatically boost their presence across the region, as they had been itching to do for years without too much on-the-ground interference from Washington. Once President Vladimir Putin ordered his troops into Ukraine, though, it was obvious to the U.S. and other NATO members that this was just the first step in a bigger move westwards aimed at bringing all of Europe under Russian control. To stop this, not only did Ukraine need to be supplied with weapons from the U.S. and its European allies, but several of these countries needed to be provided with long-term sources of energy supplies to make up for those lost from Russia. As China and Russia at that point had significantly strengthened their alliances with the key Middle Eastern states - including Saudi Arabia, Iraq, Iran, Syria, and the UAE - the U.S. needed a new point of entry back into the heart of the Middle East. Egypt was the choice, and new developments in the past few weeks underline that the U.S.’s new Middle East strategy is proceeding apace.
Egypt was chosen as the launching pad for the U.S.’s reassertion of power into the region because historically it holds a unique position in the Middle East and in the Arabic world. For decades, Egypt has been seen by the Arab world as the leading proponent of the ‘Pan-Arab’ ideology that believes enduring strength can only be found in the political, cultural, and socioeconomic unity of Arabs across the different countries that emerged after the two World Wars. The philosophy’s most powerful recent proponent was Egypt’s president from 1954 to 1970, Gamal Nasser. Among the most palpable signs of this movement at the time was the formation of the United Arab Republic union formed between Egypt and Syria from 1958 to 1961, the formation of OPEC in 1960, the series of conflicts with neighbouring Israel over the period, and then the 1973/74 oil embargo, as also detailed in my new book on the new global oil market order. By bringing this leader of the Arab world on side, the U.S. hoped to offset the negative geopolitical impact of long-term ally Saudi Arabia having been lost to the China-Russia bloc. Politically and historically, Egypt is at least as much of a leader in the Arab world as Saudi Arabia has ever been.
Aside from its unique geopolitical significance, Egypt is uniquely positioned too in the global oil market. Over and above its official conservative estimate of around 1.8 trillion cubic metres of gas reserves, Egypt controls the major global shipping chokepoint of the Suez Canal, through which around 10 percent of the world’s oil and LNG is moved. It also controls the vital Suez-Mediterranean Pipeline, which runs from the Ain Sokhna terminal in the Gulf of Suez, near the Red Sea, to Sidi Kerir port, west of Alexandria in the Mediterranean Sea. This is a crucial alternative to the Suez Canal for transporting oil from the Persian Gulf to the Mediterranean. The Suez Canal is one of the very few major transit points that is not controlled by China. Specifically, China already has effective control over the Strait of Hormuz through the all-encompassing ‘Iran-China 25-Year Comprehensive Cooperation Agreement’, as first revealed anywhere in the world in my 3 September 2019 article on the subject and also analysed in full in my new book. The same deal also gives China a hold over the Bab al-Mandab Strait, through which commodities are shipped upwards through the Red Sea towards the Suez Canal before moving into the Mediterranean and then westwards. This has been achieved as it lies between Yemen (the Houthis having long been supported by Iran) and Djibouti (over which China has also established a stranglehold through debts connected to its multi-generational power-grab project - the ‘Belt and Road Initiative’).
Crucially as well, Egypt had earlier been identified as a new potential gas hotspot in the potentially huge Eastern Mediterranean gas hub. The key for the U.S. was to get its own big oil and gas firms in there quickly, with similar firms from its key allies to follow shortly afterwards. Chevron was the key U.S. operator from the start, with an announcement in December 2022 that it had hit at least 99 billion cubic metres of gas with its Nargis-1 exploration well in the eastern Nile Delta, about 60 kilometres north of the Sinai Peninsula. Following that, an announcement came of the discovery with Italy’s Eni of a potentially huge offshore gas field in its concession area in the Red Sea focused on the Nargis-1 well. This augmented its already significant presence in the broader Eastern Mediterranean through its operation of the massive Leviathan and Tamar fields in Israel and the Aphrodite project in offshore Cyprus.
Traders Boost Bullish Bets on European Natural Gas Prices
The U.S.’s beachhead has since been used by several other of its allies’ major international oil companies, most notably Great Britain’s Shell and BP. The latter said recently that it will invest US$3.5 billion in the exploration and development of Egypt’s gas fields in the coming three years. This amount could be doubled if the exploration activity yields new discoveries. Meanwhile, Shell began that development of the tenth phase of Egypt’s Nile Delta offshore West Delta Deep Marine (WDDM) concession in the Mediterranean Sea. This came after the British firm and its partner had developed the previous nine development phases of the WDDM concession that comprises 17 gas fields, located at water depths ranging from 300 metres to 1,200 metres and spanning approximately 90-120 kilometres from the shore. News emerged last week, that the same Shell-led consortium have agreed to begin the 11th phase of the WDDM.
The next phase of the U.S.’s new Middle Eastern strategy appears to be to tie-in big operators from those countries that it considered to have been lost in large part to China and Russia. A key case is the UAE, which had been identified by Donald Trump’s administration as a potential key ally for the roll-out of several ‘relationship normalisation’ deals with Israel across the Middle East during his tenure as President. Indeed, the UAE’s own deal with Israel was ratified by its parliament on 19 October 2020. Several developments after Trump left office – not least the extraordinary refusal of UAE leader Sheikh Mohammed bin Zayed al Nahyan to even take a telephone call from U.S. President Joe Biden as oil prices spiked after February 2022 – indicated to Washington that the Emirate was no friend. However, last week saw BP announce a new joint venture (JV) with the UAE’s flagship oil and gas firm – the Abu Dhabi National Oil Company (ADNOC) – to be centred in Egypt. The concessions included in the new Concessions included in the JV are Shorouk (which contains the producing Zohr field), North Damietta (containing the producing Atoll field), North El Burg (containing the undeveloped Satis field), and further exploration agreements for North El Tabya, Bellatrix-Seti East and North El Fayrouz.
By Simon Watkins for Oilprice.com