On August 5, President Masoud Pezeshkian appointed Ali Larijani secretary of the Supreme National Security Council, a role he previously held from 2005-07. This time, he returns to an institutionally altered system and a strategically transformed landscape.

With Supreme Leader Ayatollah Ali Khamenei aging, under threat of assassination, and largely withdrawn from day-to-day command, strategic decisions increasingly emerge from a de facto collective leadership composed of the heads of the executive, legislative, and judicial branches alongside representatives of the Islamic Revolutionary Guard Corps and the army. Regionally, Israel’s September 17, 2024 electronic attacks that neutralized Hezbollah’s networks, the collapse of the regime of President Bashar al-Assad in Syria, and the exposure of Iranian missile and drone vulnerabilities during the June conflict between Israel and Iran have eroded two pillars of Tehran’s deterrence – proxies and missiles – leaving the nuclear program the principal remaining lever to restore balance. Domestically, the state braces for renewed unrest driven by electricity shortages, water scarcity, sanctions, and inflation.

An Iraqi-born native of Najaf but an unmistakably Iranian nationalist, Larijani is expected to leverage his record of bureaucratic competence and global fluency to coordinate Iran’s security bureaucracy. Yet strategic coherence is far from assured. As with his predecessors, entrenched factionalism, institutional rivalries, and Khamenei’s habit of nurturing parallel command structures are likely to constrain his room for maneuver and complicate interagency discipline. A calculating hard-liner, with equal measures of opportunism, pragmatism, and Iranian nationalism shaping his political decision making, he is likely to be a wily operator.  While these traits may prove woefully inadequate in allowing him to effectively steer Iran’s national security establishment at perhaps its most critical moment since the revolution, he also seems the best talent this regime could identify from its thinning bench.

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Chinese energy companies emerged as dominant players in the Iraqi Oil Ministry’s May licensing rounds to auction 29 oil and gas blocks, securing 10 out of 13 oil and gas blocks. Shell was the only Western international oil company to participate, and it did not win any bids. Other Western and U.S. international oil companies showed no interest in bidding, despite improved fiscal terms of the contracts. The resounding success of Chinese firms underscores a significant shift, solidifying Beijing’s already strong position in Iraq’s energy landscape and presenting a substantial challenge to Washington’s strategic position in the region.

The increasing Chinese dominance comes amid a seemingly contradictory development: In April, Iraqi Prime Minister Mohammed al-Sudani signed numerous memorandums of understanding with U.S. energy companies, particularly focusing on gas development and power generation. This focus aligns with Washington’s strategic goals of diminishing Iran’s political influence in Iraq and, by extension, blunting China’s push to dominate Iraq’s hydrocarbon sector. The stark contrast between the memorandums of understanding signed by U.S. companies and the contracts awarded to China demonstrates a significant mismatch between the aspirations of Washington and the realities of the investment environment in Iraq.

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At the end of 2023, the United Arab Emirates hosted what was widely seen as a successful United Nations Climate Change Conference, COP28, in Dubai, where nearly 200 parties agreed to transition away from fossil fuels and step up renewable energy investments. The U.N. stated the outcome of COP28 marked the “beginning of the end” of the fossil fuel era.

One of the most important outcomes of COP28 was the first global stocktake, which reviewed what had been achieved on climate action since the 2015 Paris Agreement and identified the gaps. It recognized that by 2030 global greenhouse gas emissions need to be cut by 43% from 2019 levels to limit global warming to 1.5 degrees Celsius. The findings will form the basis for stronger climate action plans due to be submitted by all parties by 2025.

The final agreement at COP28, the “UAE Consensus,” included a pledge by participants to triple clean energy investment by 2030, which will require trillions of dollars in investments. All Gulf Arab oil producing states signed the agreement, so the clock is ticking to make good on the pledges made in Dubai and speed up economic diversification efforts to ease reliance on oil and gas revenue.

Since December 2023, OPEC has been driving home the message that a transition away from fossil fuels needs to be gradual to avoid a shock to the global economy. Successfully transitioning and reaching decarbonization goals will require greenhouse gas emissions to be tackled from all sources – shipping, aviation, road transportation, heavy industry, agriculture, water desalination, electricity generation, heating, and cooling. This, OPEC Secretary General Haitham Al Ghais has argued, cannot be done overnight.

In a March 11 article for OPEC, Ghais painted an apocalyptic picture of what a world without oil would look like: “If oil disappeared tomorrow, there would be no more jet fuel, gasoline or diesel. Internal combustion engine automobiles, buses, trucks, lorries and coaches would be stranded. Airplanes powered by jet fuel would be grounded. Freight and passenger rail powered by diesel would halt. People could not get to work; children could not get to school. The shipping industry, transporting both freight and passengers, would be devastated.” He added, “If oil disappeared tomorrow, the renewables industry would be impacted. The fibreglass, resin or plastic necessary for the construction of most wind turbines, would disappear. The ethylene used in the production of solar panels would vanish … Yet, despite these realities, there are calls saying ‘Just stop oil,’ ‘Keep it in the ground,’ or ‘don’t invest in new oil and gas projects.’” Ghais added that OPEC wants to see greenhouse gas emissions reduced, noting that the oil industry is “already proactive in this regard.”

Although Ghais did not mention the International Energy Agency, OPEC has been at odds with the Paris-based consumer watchdog over what it says is the “demonization” of the oil industry. The long-term demand forecasts of OPEC and the IEA have diverged, and repeated declarations by Fatih Birol, the executive director of the IEA, that fossil fuels are set to peak by 2030 have also made for a tense relationship between the two organizations. The IEA’s “Net Zero 2050” report published in 2021, interpreted by OPEC as a call on the industry to stop investing in new oil and gas production capacity, was another source of tension.

Saudi Aramco CEO Amin Nasser, speaking in Houston in March, noted that renewables today make up just 4% of the global energy mix, while fossil fuels have held steady over the past two decades at 80%.

Amid the energy transition, the crisis in the Middle East over the war in Gaza and the ongoing conflict in Ukraine have introduced new risk factors, pushing energy security concerns to the top of the political agendas of consuming countries.

Houthi attacks on commercial ships in the Red Sea have disrupted international trade flows and endangered the free flow of energy from the Middle East, though there has been no interruption to oil and gas supplies. Oil prices have remained relatively stable despite efforts by OPEC to steady prices by slashing production by just short of 6 million barrels per day in the last two years.

While the energy transition is taking hold in the Gulf, the Arab oil producing countries will need hydrocarbon revenue to drive the decarbonization of their economies, which are still heavily reliant on revenue from oil and gas sales. This will require stable oil prices at levels that allow for a smooth transition while avoiding fragmentation and social instability.

“The demonization of oil and gas for nearly the last decade … is turning, there is an understanding that there is a need for oil and gas for the long term,” Qatar’s minister of state for energy affairs, Saad bin Sherida Al Kaabi, said at the World Economic Forum in Riyadh.

The role of natural gas in the energy transition is still being debated, but several Gulf countries are expanding their production capacity in the expectation that the cleanest of the fossil fuels will displace coal and retain a significant share in the global energy complex for decades to come.

The next few years will be pivotal for the Gulf and the broader international community as the world’s energy architecture is redesigned to meet net-zero ambitions.

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About Petro Diplomacy

This paper is the scene setter for the 2024 Petro Diplomacy conference. Now in its 10th year, AGSIW’s Petro Diplomacy conference is a signature annual event that brings together stakeholders in the energy sector of the Gulf Arab states, global supply competitors in North America, analysts, and policymakers to discuss how changes in technology, fiscal priorities, and opportunities for growth continue to alter the relationship between politics and energy for both the region and the world.

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The Gaza war, with its potential for regional escalation, is just one (albeit major) concern in a region prone to instability, insecurity, and unpredictability. This paper puts the evolving crisis and nuclear proliferation concerns in the Middle East into global context, alongside other U.S. foreign and domestic policy priorities, such as Russia’s war in Ukraine, competition with China, and the U.S. economy. The paper highlights how the United States and its allies have adapted and established new partnerships. Regarding the U.S. economy, the paper draws attention to how the landmark U.S. Inflation Reduction Act of 2022, including $370 billion in tax credits for the renewable energy industry, could represent both an opportunity to work with developing states on rare earth materials but could also become another source of tension with China over trade policy. The paper concludes that the risks associated with instability in the multilateral political and trading system, on which great power and regional relations pivot, are as urgent to resolve as the short-term imperatives of regional crises.

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The Arab Gulf States Institute in Washington held its ninth annual Petro Diplomacy conference from June 27-28. The event examined how the Gulf Cooperation Council countries are managing the energy transition and expectations for the United Nations Climate Change Conference, COP28, in Dubai beginning in November.

The conference was broken up into four sessions and one keynote address. The first panel discussed the pathways the GCC’s oil producers are charting to decarbonize their energy-intensive economies, build resilience to climate change, and prepare for a post-oil era. The discussion was framed with COP28 in mind, with speakers expressing their views on what is likely to emerge from the 14-day summit. The second panel covered the shifting geopolitics and alliances in the wake of the Russian invasion of Ukraine and how it is reshaping the Middle East, with China ascendant as an investor and economic partner. In his keynote address, Mike Howard, chair of the World Energy Council, covered the role of digitalization in the energy transition and how new technologies are reshaping the energy landscape. The third session, held on day two, was a virtual presentation by the International Energy Agency on its “Oil 2023” report, a five-year forecast of where the oil market is heading and projections of when oil demand is expected to peak. The final session, held virtually, looked at the changing picture of energy systems across the GCC and the shape of the future energy mix as the energy transition gathers pace.

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About Petro Diplomacy

This paper is the report for the 2023 Petro Diplomacy conference. For the ninth consecutive year, AGSIW convened its Petro Diplomacy conference. The conference brought together private and public sector stakeholders from the United States and the Gulf Arab countries to discuss emerging trends in energy markets and regional politics.  

The post Event Report – Petro Diplomacy: The Energy Transition and the Road to COP28 appeared first on AGSI.

Investments in renewable energy rose faster than investment in fossil fuels in 2022 for the first time ever, the International Energy Agency stated in a recent report. Much of the momentum for this shift was driven by the volatility in the oil and gas markets following Russia’s invasion of Ukraine in February amid fears of an energy shock. So where do the Gulf Arab oil and gas exporters stand in this new energy paradigm, and how are they managing their own energy transition? As the United Arab Emirates prepares to host the United Nations Conference of the Parties climate summit, COP28, in November, the role of hydrocarbons in the future energy mix is likely to be one of the more contentious issues – one that will determine the success or failure of the summit.

COP28 will provide an opportunity for the Gulf Cooperation Council states that have set net-zero emission targets to demonstrate that they are taking seriously the threat of climate change and implementing measures to decarbonize and make a meaningful contribution to the global net-zero effort. A number of mega solar and wind projects are in the implementation stages across the GCC at the same time as a budding green hydrogen industry is taking hold, but the process of producing green hydrogen will require a massive scale-up of renewables capacity. Energy efficiency measures need to be implemented more stringently to reduce the region’s high per capita consumption of fossil fuels and diversify energy sources for power generation to curb greenhouse gas emissions.

Although fossil fuels make up around 80% of the global energy mix, the rapid scale-up of investment in renewables and electrification might advance the peak oil demand timeline. The IEA now expects demand for fossil fuels to peak by the end of the 2020s, or earlier, while demand for gasoline will reach a plateau even sooner as sales of electric vehicles multiply. Natural gas has a longer shelf life in the decarbonization scenario, but methane emissions need to be tackled if the cleaner of the fossil fuel family is to serve as a transition fuel.

If the Arab oil and gas producers are to survive in a carbon-constrained energy world, they will have to decarbonize their energy and industrial operations by trapping the carbon dioxide emitted across the value chain as they expand their production capacity to meet future demand and counter natural declines from existing reservoirs. Setting a price on carbon would allow for carbon capture, utilization, and storage to be deployed more aggressively across the Gulf states, which is not currently the case. Oil and gas will continue to have a space in a much smaller market leading up to 2050, assuming the carbon content can be managed. The Gulf Arab producers are well placed to deliver low cost, low carbon intensive oil as higher cost production and carbon intensive oil is left in the ground.

Dependence on oil and gas exports renders the economies of the Gulf Arab states vulnerable to price shocks, which hit hard during the 2020 coronavirus pandemic when demand and prices crashed. This reality underscores the urgent need for the Gulf states to diversify their economies at a much faster pace away from heavy reliance on hydrocarbons. A new economic template is needed to ensure societal well-being and to preserve the environment for future generations in a region that is highly exposed to climate change. The loss of a significant revenue stream for the oil exporting countries carries socioeconomic ramifications and needs careful management.

As one of the world’s biggest oil producers and a leader in renewable energy technologies, the UAE will need to prove that it can provide a neutral space for constructive talks to push the climate agenda toward a conclusion that is acceptable to all parties. It will not be an easy task, but it is one that can no longer be relegated to future summits. As host of what may prove to be a make-or-break summit for climate action, the UAE will need to find common ground to make COP28 a success because time and the Middle East’s remaining carbon budget are running out.

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About Petro Diplomacy

This paper is the scene setter for the 2023 Petro Diplomacy conference. Now in its ninth year, AGSIW’s Petro Diplomacy conference is a signature annual event that brings together stakeholders in the energy sector of the Gulf Arab states, global supply competitors in North America, analysts, and policymakers to discuss how changes in technology, fiscal priorities, and opportunities for growth continue to alter the relationship between politics and energy for both the region and the world.

The post The Energy Transition and the Road to COP28 appeared first on AGSI.

Shia cleric Muqtada al-Sadr, who has been a key player on the Iraqi political scene for nearly two decades, bowed out of politics in 2022. He was manipulated by his Shia rivals, who outmaneuvered – and effectively stole power from – him after the October 2021 parliamentary elections. For the first time since 2005, Sadr has no clear political role and no formal road map to get back into politics until elections are held again in 2025. So where does this leave him and the Sadrist movement, which is comprised of millions of his followers? Iraqis fear he could unleash his supporters and take to the streets, as he has done many times in the past, to regain the political leverage he has lost. This has the potential to spark widespread violence and an all-out intra-Shia conflict.

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Executive Summary

On November 17, 2022, the Arab Gulf States Institute in Washington held its annual UAE Security Forum, with the theme “Expanding Regional Partnerships for Security and Prosperity.” Held at New York University Abu Dhabi, the event gathered top experts from the United States and the Gulf region. Discussions focused on issues currently affecting relations between the United States and the Gulf Arab states, including diverging threat perceptions, maritime security, and the forging of new economic and security partnerships. 

Relations between the United States and the Gulf Arab states are adjusting to a new set of realities. On the economic front, these include a United States that is no longer dependent on Middle East oil and Gulf Arab states that themselves are building post-oil economies, with an overall drive by both toward more self-sufficiency. Geopolitically, the United States has identified China as its prime competitor, while Gulf Arab states are increasingly unwilling to pick a side as the United States competes with China and Russia. Instead, they are pursuing strategies geared toward maximizing their own interests by diversifying partnerships. Regarding security, the militaries of the United States and the Gulf Arab countries may be ill equipped to deal with a new reality of decentralized warfare and the use of cheap precision weaponry, such as drones, as Russia is currently experiencing in Ukraine. 

These new realities are matched with changes in respective threat perceptions, with transformations in relative power balances – regionally and globally – and with adjustments in security strategies. While still mostly aligned, threat perceptions of the United Sates and Gulf Arab partners are diverging. Among other things, there is a disconnect on the line between terrorism and radicalization as well as on tackling the growing problem of nonstate actors. A third important element remains divergence regarding the desired outcome of negotiations with Iran. These have often become too technical with the United States predominantly focused on managing enrichment capabilities rather than creating a framework to generate confidence that other concerns, including proxy groups, the proliferation of weapons in the region, and, ultimately, political ambitions are being addressed. 

Also affecting U.S.-Gulf Arab relations are perceptions around the reliability of the United States as a security partner. The debate over the U.S. force posture, the emphasis on the United States’ “pivot to Asia,” and the U.S. withdrawal from Afghanistan have triggered uncertainty. Nonetheless, the Gulf region remains of strategic importance to the United States, which looks set to maintain its basic security architecture in the region. And regarding Gulf maritime security, the United States remains unrivaled and is building effective partnerships with regional allies. Still, the uncertainty generated has had consequences. First, it has led to an expectations gap, manifested in a demand for clearer U.S. commitments. Second, at least indirectly, the uncertainty has led to the Gulf Arab states pursuing a broad strategy of diversification. 

The coronavirus pandemic has intensified the thinking that multiple partnerships make for greater security, and new partnerships are increasingly being established. Most prominent are those related to the 2020 Abraham Accords and the Gulf Arab states’ opening to Israel. While these new partnerships present opportunities for regional cooperation, they will need to be continuously managed in a way that all sides benefit, while ensuring that collaborations on paper actually materialize.

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The concept of neutrality has legal and political meanings that derive from its historical and geographical genealogy. However, the term is often stretched and its meaning diluted to describe behaviors that go beyond a strict definition of neutrality. This is especially true for Oman. International media has described the country’s foreign policy as hedging, omnibalancing, or asserting neutrality, and sometimes Oman is referred to as the “Switzerland of the Middle East.”

The Omani government has never declared neutrality through international law tools, and the term “neutrality” does not appear among Oman’s foreign policy principles on the website of the Ministry of Foreign Affairs. This paper considers whether Oman’s behavior can usefully be described as falling within the definition of neutrality, despite a lack of formal declaration, by testing theoretical definitions of neutrality and their gradations against Oman’s courses of action over recent decades. The concepts of pragmatism (small state self-preservation), facilitation (between disputing parties), noninterference (through military means in military conflicts), and hedging (between security providers), taken together, probably represent a more precise description of Oman’s policies and the positions it has taken in different contexts and times.

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بعد أكثر من ثماني سنوات من الحرب المدمرة في اليمن، هناك شيء واحد واضح، لا يزال الحوثيون يسيطرون على صنعاء. لم تدفعهم الضربات الجوية السعودية والإماراتية إلى اللجوء للجبال، ولم يجبرهم الضغط الدولي على الاستسلام على طاولة المفاوضات. بهذا المعنى، انتصر الحوثيون في الحرب. في هذا الوقت المتأخر، من غير المرجح أن يتم إجبار الجماعة عسكريًا أو دبلوماسيًا على الخروج من صنعاء.

هناك ثلاثة أسباب رئيسية لانتصار الحوثيين. أولاً، كانت الجماعة أكثر مرونة من خصومها، وقد قامت بعمل أفضل في تحويل الأعداء إلى حلفاء. على عكس التحالف الذي تقوده السعودية، والذي غالبًا ما حوّل الحلفاء إلى أعداء. ثانيًا، استفاد الحوثيون من سلسلة من القرارات السياسية السيئة والأخطاء الفادحة في ساحة المعركة من قبل خصومهم في حكومة اليمن المعترف بها من الأمم المتحدة، وكذلك من التحالف الذي تقوده السعودية.

أخيرًا، استغل الحوثيون الانقسام بين خصومهم، كان هذا هو الحال على الصعيدين المحلي والإقليمي. على الجبهة الداخلية، كان للجماعات المسلحة المختلفة التابعة للحكومة المعترف بها من الأمم المتحدة، مثل المجلس الانتقالي الجنوبي وحزب الإصلاح، أهدافًا مختلفة. وفي بعض الأحيان، دخلت في صراع مع بعضها البعض. إقليميًا، سعت السعودية والإمارات وراء غايات مختلفة وخاضتا حروبًا مختلفة. كل هذا سمح للحوثيين بالاستمرار في السيطرة على صنعاء، والسيطرة على الأرض، وفي النهاية تحقيق النصر.

ومع ذلك، فقد خلق الحوثيون تحديات كبيرة لأنفسهم سيكون من الصعب التغلب عليها في سيناريو ما بعد الصراع. تتعلق العوامل الثلاثة الأكثر إلحاحًا بالحوكمة والاقتصاد والحلفاء المحليين. لم يحكم الحوثيون بشكل فعال أو شفاف، ويفتقرون إلى القاعدة الاقتصادية لدعم دولة مستقلة، ولديهم مراكز قوة منفصلة، ولا سيما العديد من القبائل اليمنية، التي قد يحتاجون إلى دعمها قريبًا. باختصار، سيكون الحوثيون أكثر عرضة للخطر بعد الانسحاب الكامل للقوات السعودية والإماراتية مما كانوا عليه في أي وقت خلال الحرب.

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