Energy Risks in North Africa and the Middle East

The Burke Chair has developed a detailed estimate of energy risks in the Middle East and North Africa, drawing heavily on the analyses of the Energy Information Agency (EIA) of the US Department of Energy. The analysis is entitled Energy Risks in North Africa and the Middle East and is available on the CSIS web site here.

The analysis is divided into several main sections:

• Section One focuses on demand issues and their impact on global and regional demand for liquid fuels, impact on supply, price issues, and the special conditions affecting US demand for energy imports. It indicates that growth in Asian demand for MENA oil and gas exports will be high through 2035 (the cutoff date for projections), creating a “demand vulnerability” in periods of moderate to high economic growth that will keep prices high and stimulate major increases in production.  It also shows that US political posturing about energy independence is just that – dishonest political opportunism that does not reflect the total different results of US government modeling and analysis. (The text describing current trends is adapted from the EIA analysis from which given graphs and trend estimates are taken.)
• Section Two covers North Africa. It indicates that the projected growth in Algerian and Libyan supply will be limited by global standards, but be of importance to Europe. It also indicates that Algeria and Libya are moderate risk countries because of the political uncertainties in each state and their uncertain ability to attract sustained energy investment over time. (The text describing current gas and oil trends is adapted from the EIA analysis from which given graphs and trend estimates are taken. The summary risk lists are the author’s judgments)
• Section Three Covers Egypt and the Levant. It indicates that Egypt will increase some aspects of gas production, but that both Egypt and Syria are steadily declining oil producers, and increases in Egyptian gas exports may have a local impact but only a token impact on world markets.  Egypt emerges as a moderate risk country and Syria as a high-risk country. (The text describing current gas and oil trends is adapted from the EIA analysis from which given graphs and trend estimates are taken. The summary risk lists are the author’s judgments)
• Section Four covers the Gulf and Yemen. It shows that the Gulf remains the key source of additional oil and gas production in spite of major projected gains in the rest of the world’s output. It also shows that these increases are highly dependent on two high-risk countries – Iran and Iraq. Yemen is a high-risk country, but one with negligible and declining impact on world exports. The Southern Gulf producers –Kuwait, Oman, Qatar, the UAE and Saudi Arabia  -- face some individual problems but are rated as low risk with the exception of the potential impact of a future conflict in the Gulf. (The text describing current gas and oil trends is adapted from the EIA analysis from which given graphs and trend estimates are taken. The summary risk lists are the author’s judgments)
• Section Five covers the risk of a war in the Gulf involving Iran. There is no way to predict the form such a conflict might take or to estimate a probability in any meaningful mathematical model. The risk of some clash in the coming three years is, however, at least moderate and the risk of a serious clash over time will rise to high if Iran does not abandon its nuclear program, and improve its relations with its neighbors.
• Section Six examines the risks that would develop if Iran makes use of its long-range rockets and missiles. It concludes these risk are currently limited, but would change radically if Iran acquired missiles with either nuclear warheads or warheads with terminal guidance.
• Section Seven examines the risk of an Israeli or US preventive strike. Such attacks can come in a wide range of forms and with different intensities and objectives. It is unclear how effective Israel could be. The US has far more capability but such attacks would create major risks for all concerned, and making such a US effort fully effective would require prolonged support from the Southern Gulf states. Such attacks would require either Israel or the US and allies to escalate to very high levels of conflict and could trigger a host of unintended consequences.

This analysis is supported by a series for much more detailed reports onus competition with Iran and the military threats in the Gulf. Two volumes address the military issues involved in detail here.