Oil markets and geo-politics go hand in hand, the oft-repeated cliché says and indeed not without reason. No other commodity gets so much influenced by geo-politics than oil. The lust for oil is responsible for a number of the problems of this world today, as was in the past too, and for many of the moves that we witness on the global political chess board today, one could safely say. If oil markets are in somewhat turmoil, as every one believes, it is owed mainly to sheer geo-politics. Not the market fundamentals, as should be the case in a free market operation; rather it’s the geo-political forces that are driving oil markets crazy.
But what in reality is this geo-politics. How clearly to define it? Why not call spade, a spade, rather than camouflaging the issue in the garb of the broad, over enveloping term, geo-politics? I was presented and teased with this stark proposition, by none other than a senior, well acclaimed journalist — a well known face of TV journalism at the highest level at a point in time and now in Riyadh with her ambassador husband.
The question indeed had its ramifications and was presented with tongue in cheek. The liberal bias of the free world was very much underlining the proposition. If one starts looking at the geo-political reasons for the erratic behavior of the oil markets today, one could easily point to the ongoing Tehran — Washington tussle as the major cause — besides Iraq — emanating from an innate desire to dominate the oil rich Middle East, indeed.
Unfortunately for some, energy resources are in areas which are unstable; not always willing to give in to the whims and aspirations of the powers to be. Tehran is a pain in the neck and needs to be straightened out, some in concerned capitals argue, rather strongly, even at costs which may be unbearable for the rest of the world.
And if the world has seen some mellowing of the rhetoric against Tehran — at least for the time being — that also pertains to the possible impact of any (mis)adventure on the oil scene. There appear to be too many factors militating against any possible prosecution of war against Tehran. If all the hype over bunker busting B61-11 tactical nuclear options, “imminent” Security Council resolutions, “sanctions,” tough talks and further tough talks has turned out to be whimpers, there are reasons for it.
For with the Atlantic hurricane season just round the corner and the global oil buffer currently standing at just 2 million bpd, no one, not even a hawkish one as that of the neocons, could dare unsettle the delicate balance of chaos in the Middle East, wrote Mathew Maavak in a recent piece.
However, others are also not witnessing events raveling before them helplessly. The struggle for dominance is on and energy resources are a tool to be used in the “battle of nerves,” as some say. With Iran already under pressure and looking for friends and partners, the besieged Iranian president used his oil assets to shore up support. While speaking before the Shanghai Cooperation Organization (SCO), he offered an energy tie-up with the group. Indeed for the energy starved countries of the SCO, especially China, the offer could be too tempting to be rejected outright. Iran also offered to host a meeting of energy ministers from the SCO countries to explore more effective cooperation in the exploration, exploitation, transport and processing of oil and gas. And the point to be noted is that the offer was well received despite serious and deep reservations in the corridors of power in Washington.
The ongoing tussle between Russia and Georgia, with the West keeping a close eye on the ultimate result, on the issue of gas pricing could easily be termed a part of the battle to stamp authority and power and all that is associated with it. Moscow definitely aspires to regain some of the lost glory of the USSR days. The Russian expression of interest at the highest level to let Gazprom participate in plans to build a natural gas pipeline from Iran to India via Pakistan was also not taken without a pinch of salt, and it was not meant to be otherwise too, in the concerned quarters in Washington and elsewhere. Indeed Washington was openly hostile to this very project as it clearly wanted to strangulate Tehran, politically and financially, so as to make it comply with its requirements. And the involvement of too many actors on the stage may spoil the broth, some in Washington definitely fear and perhaps rightly so — from their point of view.
The unleashing of “Awe and Shock” on Baghdad more than three years ago was also with a clear cut oil related agenda, people at least in this part of the world emotionally argue even today. And the world continues to pay a price for this (mis)adventure in more than one ways, including a higher than normal oil prices. The interest of competing nations in parts of Africa could easily be attributed to the oil lust.
Militancy in Nigeria against oil companies could easily be termed as the reaction to the imperialistic streak in powers of the oil majors playing almost the role of the East India Company. If all these factors could somehow be taken off the demand-supply equation, oil prices would definitely go down considerably. But for these to be taken off, people in the concerned quarters will have to give up their imperialistic designs. Not easy to accomplish, the world would continue to pay a price and a steep one, for the lust of some in the world. This is what geo-politics is all about. Indeed oil and geo-politics go hand in hand.