Pipelines – Law Street

A Tale of Two Pipelines: The Influence of the Energy War in the Middle East

Kyle Downey — Sun, 25 Jun 2017 21:30:58 +0000

"Damascus" courtesy of Игорь М; License: (CC BY 2.0)

As the civil war in Syria has escalated, American, Saudi Arabian, and Russian interests have played increasingly larger roles. The Obama Administration adopted the stance, shared by the majority of the U.N., that Syrian President Bashar al-Assad was guilty of human rights violations and must be removed from power. Russia, on the other hand, has long been an ally of Syria, and Russian President Vladimir Putin has supported Assad throughout the conflict. This has led to what is in part a proxy war, with Syrian rebels that have been trained and armed by Saudi and American militaries fighting against Assad’s forces, which are armed with Russian weapons and drive Russian tanks. Amid this turmoil has been the growing power of ISIS, opposed in different ways by both the United States and Russia.

As the war has carried on, it has grown increasingly bloody. By the end of 2015, the war had claimed a staggering 470,000 Syrian lives, representing a loss of 11.5 percent of the nation’s population. Even among the survivors, the damage to Syrian national security has been extreme; over half of the nation’s population has been displaced by the war. The Syrian conflict is vast and extremely complicated and both Russia and the U.S. have numerous reasons for their involvement.

However, it’s imperative to analyze one important but under-emphasized element of the war: the role of energy. Both the U.S. and Russia stand to influence the future of the global energy market if their side comes out dominant in this conflict. If the Assad regime maintains control of Syria, it will likely push ahead with current plans to build a natural gas pipeline running from Iran through Syria. The pipeline would be built by the Iranian government in collaboration with Russia’s major gas corporations, and would allow both countries to profit off of the largest gas reserve on earth. On the other hand, the United States and Saudi Arabia have an active interest in preventing this from happening to protect its share in the energy market, as well as the strength of the petrodollar, against Russian and Iranian competition.

President Trump has long denounced America’s anti-Assad position and previously discussed working with Russia, and possibly Assad, against the common enemy of ISIS. However, following the Syrian Air force’s chemical attack in the Idlib Province, Trump at least temporarily reversed his public position on Assad and Russia. Simultaneously, the Trump Administration has grown increasingly closer to Saudi Arabia. Future negotiations will tell whether there is still a possibility for Russia and the U.S. to work together in Syria, and Trump’s ultimate stance on the Assad regime will heavily influence whether the Iranian pipeline is built. We are currently at a critical moment in the future of the Syrian conflict, and for the roles of Russia, Saudi Arabia, and the United States in the global energy market. Read on to see what each side stands to gain and lose as we move forward.

Syria: The Energy Crossroads

The conflict in Syria is fueled by numerous religious and geopolitical divisions within the Middle Eastern Region and energy is far from the only relevant factor in American or Russian involvement. However, the importance of energy within the Middle East and its ever-present role in regional conflict is hard to overstate. Control of the global energy market means being able to exert huge influence on the international economy, and the Middle East’s vast fossil fuel reserves have always attracted the interest of international superpowers. The last two decades of constant regional conflict have been a consistently perilous struggle for power and market control, especially between Saudi Arabia and Iran, the two largest economies in the Middle East.

Syria has attracted international interest because its central location in the Middle East makes it a potential energy crossroads for pipelines that could transport natural gas across the region from the South Pars/North Dome gas field. Because of Syria’s critical position, the results of the war will likely determine who gains access to the gas field, and thus will greatly impact the future of energy sovereignty within the region. The oil and gas trade is very directly related to the strength of the American dollar and both the U.S. and longstanding ally Saudi Arabia are worried that Syria could become the construction site of a pipeline. A new major pipeline could upset the balance of the energy market, and subsequently the power of the dollar and the Saudi Riyal, which is pegged to the dollar.

Saudi Arabia, home to 16 percent of the world’s proven oil reserves and the leader of the Organization of Petroleum Exporting Countries, has long used whatever means are necessary to ensure that its business never shrinks. Recently, as foreign dependence on petroleum in the last few years lessened due to a boost in gas production abroad, the Saudis chose to ignore their 2014 promise to reduce output and actually increased their production up until 2016. This caused international petroleum prices to drop, keeping Middle East petroleum competitive, despite the fact that the price gouge also sent many of the poorer OPEC countries near collapse.

In order to maintain its status as the largest energy producer in the Middle East, Saudi Arabia has also spent the last two decades attempting to block energy infrastructure proposals designed to access the South Pars/North Dome gas field. The South Pars/North Dome Gas Field lies beneath the Persian Gulf, with the northern end of the field in Iranian territory and the Southern edge in Qatari territory. It is the single largest gas reserve on earth, and a pipeline that allowed cross-regional transport of its resources could dramatically change the future of the energy market. The first pipeline was proposed in 2009 and would have carried gas from Qatar through Saudi Arabia, Syria, Jordan, and Turkey, although both the late King Abdullah in Saudi Arabia and Assad in Syria rejected its construction in 2009. It is sometimes falsely claimed that Saudi Arabia supported this pipeline, but the Saudis also opposed its development because a pipeline would have given the E.U. direct access to cheap gas. Saudi Arabia’s relationship with its then ally Qatar had at the time also grown unstable, and the Saudis were skeptical about a large scale business collaboration.

However, in place of the Qatari project, an alternative pipeline was proposed, which would be built avoiding Saudi land and would replace Qatar with Iran as the central supplier of natural gas. Saudi Arabia views Shiite Iran as its primary enemy within the Middle East and is determined to keep it from growing in power in the energy market. However, Assad publicly supported this pipeline, which would give Russian and Iranian business interests primary access to the gas field’s massive resources. Saudi Arabia lacked the veto power it held with the first pipeline, which forced Saudi Prince Bandar Bin Sultan to reach directly out to Putin, promising to ensure that the gas reserve would not be utilized in competition with Russia’s business if Putin abandoned his support of Assad’s regime. Putin refused and Saudi Arabia pushed forward with regime change in Syria by militarizing rebel Sunni groups, including the Free Syrian Army, the Al Nursa Front, and the organization that would become ISIS.

The U.S. and Saudi Arabia

The U.S. alliance with Saudi Arabia is a tense and complicated one. Saudi Arabia has come under international criticism for its human rights record and the Saudis have continuously funded extremist Sunni groups that threaten the Western world. However, the economies of the two nations are tied together through the petrodollar. Petroleum is the most commonly traded substance on earth by volume, and globally, petroleum has been traded almost exclusively in American dollars for the last 40 years. If a country wants to buy oil, it must first purchase U.S. dollars, which increases demand for the dollar and dollar denominated assets. Because of this, the success of the oil industry and cooperation with Saudi Arabia very directly affects our domestic economy. The United States and Saudi Arabia have worked together in coordination for almost three-quarters of a century to influence Middle Eastern geopolitics, from the establishment of the petrodollar system to the Persian Gulf War to both Yemen Civil Wars and the battle against Al Qaeda.

Saudi Arabia has also been a central customer of the U.S. defense industry for decades, although Obama ordered a weapons sales freeze following large-scale civilian casualties from Saudi airstrikes in Yemen. Some have accused this freeze of being largely political theater, since overall the Obama Administration sold over $46 billion in weapons to the Saudis, more than any president in the 71-year alliance. The State Department also went on to grant a pre-planned $3.51 billion initiative to arm and train the Saudi army to defend the Saudi-Yemen border, claiming none of this money would go the actual war it supposedly condemned. While the Obama Administration has been critical of Saudi Arabia, it also continued to support the country and many of its conflicts throughout Obama’s presidency.

While Assad is certainly guilty of human rights violations, the U.S. also has a critical interest in coordinated regime change because the current pipeline proposal would give unfriendly Iran dominant control of the largest source of energy in the Middle East. Furthermore, Russia’s three largest gas companies will play a large part in the development of the pipeline, meaning Russian interests stand to profit directly off the reserve. Russia and Iran are two of the few countries worldwide that refuse to use the petrodollar, so not only does control of the gas field give them a huge business advantage, the greater their share in the market the weaker the U.S. dollar and Saudi Riyal will become. While the United States and Saudi Arabia disagree on many things, the two nations are united geopolitically in their desire to prevent Russia and Iran from gaining greater regional power and control over the energy market through a coordinated business venture.

In 2014, following a meeting between John Kerry and King Abdullah of Jordan, the United States agreed to work with Saudi Arabia on a military offensive in Syria through Operation Timber Sycamore, with Saudi Arabia funding and arming the Free Syrian Army and the CIA training them in preparation for the war. While the stated purpose of U.S. involvement was to counter ISIS, the choice to fund the rebel group looking to overthrow the ruling Baath party reflects the Obama Administration’s consistent desire for regime change.

“Obama/Saudi Ties” courtesy of Tribes of the World; License: (CC BY-SA 2.0)

Russian Involvement

Currently, Syria is Russia’s oldest and strongest ally in the Middle East, although Iran and Russia have grown increasingly closer throughout the last decade. Aside from representing Russia’s foothold in the region, Syria is also the location of Russia’s only Mediterranean naval base. In exchange for this critical regional access, Syria has the support of one of the world’s largest superpowers. The long-standing connection between these countries makes it no surprise that Russia is willing to give political and military support to Assad.

However, Russia also stands to gain significantly moving forward if Assad can suppress the rebel forces. As long as the Assad regime maintains control of Syria, then construction of the Iranian pipeline should move forward as planned. Russia is the second largest producer of fossil fuels globally and recently overtook Saudi Arabia as the world’s top crude oil producer. Together oil and gas exports account for 70 percent of Russia’s $550 billion annual exports. European natural gas imports from Russia dramatically increased from 48 percent in 2010 to 64 percent in 2014, and Putin’s long-term plan is to become an even larger energy superpower, spiking production and exports by 2020 by increasing sales in Europe and expanding into the Asia-Pacific region. It is no secret that the E.U. dreads increasing its dependence upon Russia’s major gas giants. Because of heavy resistance to the Russian energy business in the West, Putin has been continuously looking for new projects in the East, notably in China and the Middle East. Iran has long been looking for international investors in its shale business, and in 2013, the Russian state-controlled gas corporation Gazprom signed a deal with the Iranian government to cooperate in ongoing energy infrastructure development. The infrastructure agreement makes Gazprom the third major Russian corporation to be heavily invested in Iranian energy, following Lukoil and Zarubezneft. The construction of the Iranian pipeline would give these corporations new ability to profit off of huge quantities of natural gas. By ensuring that the field is developed and utilized first by friendly Iran, along with Russian gas corporations, Putin can avoid dangerous new competition in the European energy market as was planned in the original Qatari pipeline, thus maintaining Russia’s position of market dominance.

Fear of Saudi Arabia and increased U.S. support for the Syrian insurgency pushed Assad to request greater assistance from Putin, which resulted in Russia joining the conflict in September 2015, mounting a series of airstrikes both against the Free Syrian Army and ISIS. What followed became an increasingly serious proxy war between the Syrian rebels, backed by the United States, and the Syrian military, backed by Russia. The bloodiest of these conflicts has centered around the City of Aleppo, where over 400,000 have died thus far. The FSA has suffered both massive causalities and the loss of members who have defected to join the more radicalized Al-Nursa Front and Jaysh Army. The Syrian Air Force’s chemical attack on Idlib came shockingly during negotiations that were expected to come out in Assad’s favor. President Trump sided initially with the majority of the Western world and voted in favor of a U.N. resolution to launch an investigation into the attack. The resolution was blocked by Russia and we are currently in a pause, waiting to find out how the conflict will move forward.

“Aleppo, Syria” courtesy of yeowatzup; License: (CC BY 2.0)

Conclusion: What does the Future Look Like?

While Trump has criticized Saudi Arabia in the past for its own role in funding radical Islam, he seems to have recently made a complete reversal on this stance and has even sided with Saudi Arabia in its dispute with U.S. ally Qatar. The Trump Administration and Saudi Arabia have also recently entered into a $110 billion dollar weapons deal, the largest in U.S.-Saudi history. Following the attack on Idlib, it seemed possible that Trump might decide to align with the anti-Assad stances held by the Obama Administration and the Saudi government. However, since the U.S. airstrike and the failed U.N. Security Resolution, the Trump Administration has not publicly emphasized Assad’s removal.

Currently, it’s uncertain whether Trump will side with reestablished ally Saudi Arabia or if his administration still plans to find a way to work together with Russia in Syria. The U.S. warned the Russians prior to the airstrike on the Shayrat base, allowing them to evacuate without casualty. There have also been accusations that the airstrike was essentially political theater to dispel the notion that Trump is compromised by Russian interests, given the fact that Russia chose not to deploy its anti-missile systems, effectively allowing an attack it knew was coming to take place.

While the future of the South Pars/North Dome gas reserve isn’t certain, at this point Assad has successfully dominated the majority of rebel forces in Syria. As long as the Assad regime is still in place, any major cross-regional energy infrastructure utilizing Syrian land will most likely be to the advantage of Assad and his ally Putin. If the Iranian pipeline does end up being built, the reverberations will be felt throughout the global energy market. Saudi Arabia may lose the upper hand in several markets where it competes with Iran and Russia, especially in East Asia where Saudi Arabia has struggled to maintain active business in the face of Russian competition. Furthermore, it is very unlikely that Europe will ever be able to utilize the gas field as a cheap alternative to lessen its dependence on Russia.

If Iran and Russia become larger figures in the energy market, the petrodollar will weaken as less U.S. dollars are needed for oil transactions, which would affect the economies of both America and Saudi Arabia. How dramatic these effects will be is impossible to say. Saudi Arabia still has massive hydrocarbon reserves and is in no danger of being pushed out of the global fossil fuel trade. While the petrodollar has played a large part in the strength of the American dollar since the end of the Gold Standard, it is only one of many factors that contribute to and decide the strength and stability of the U.S. economy. We will have to wait and see what direction the Trump Administration takes American foreign policy in the Middle East to learn the answers to these questions.

Kyle Downey

Kyle Downey is an Environmental Issues Specialist for Law Street Media. He graduated from Skidmore College with a Bachelor’s degree in Environmental Studies. His main passions are environmentalism and social justice. Contact Kyle at Staff@LawStreetMedia.com.

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What’s the Best Way to Transport Crude Oil?

Kyle Downey — Sun, 15 May 2016 13:00:26 +0000

"Pipeline on rails, Trempealeau WI" courtesy of [Roy Luck via Flickr]

In the past 20 years, fuel has been the fastest growing export in the world, both in terms of volume and value. Oil makes up a huge portion of these fuel exports and is also the primary energy source for transportation throughout the world. Currently, the only alternatives to oil for the transportation sector are electric and hydrogen cell powered cars. Both of these are comparatively very small industries and only act as energy alternatives to on-road vehicles, while the transportation sector also includes all the world’s ships, planes, and military vehicles, which are all heavily dependent upon petroleum. As of now, oil is here to stay on planet earth, whatever its consequences may be.

Oil production in the United States has changed a lot in recent years. Following the discovery of the Bakken Shale formation in North Dakota and Montana, the United States increased its domestic production dramatically. The Bakken formation combined with the Eagle Ford and Permian Basins located in Texas allowed the U.S. to produce 66 percent of its oil domestically in 2014. The discovery of the Bakken Shale was hailed by some as an incredible discovery that will allow the United States newfound energy independence. But an equal number of people have objected furiously to our exploitation of the shale patch, claiming that it only further solidifies the United States on a path toward fossil fuel dependence. Our domestic production has decreased somewhat in the last two years as oil prices have dropped abroad, but overall our production rates are higher than they have been in a very long time and there is a considerable push to continue strengthening the industry domestically.

Now that a greater quantity of oil is being produced on the U.S. mainland than before, the amount of oil being shipped via tanker to the United States has dropped dramatically, which means that globally the risk of ocean oil spills has decreased as well. However, transporting oil domestically poses its own environmental problems and even imported oil often needs to be shipped to different parts of the country by land transport. If oil spills on the mainland, it can destroy ecosystems and watersheds and render communities unstable. If oil catches fire, it can lead to gigantic explosions, a few of which have historically had terrible consequences for American towns. Read on to learn about the pros and cons of different methods of oil transportation and the policy fights involved.

Rail

Currently, the most common method of oil transport is by railway. Truck transport of oil now only accounts for 4 percent of all petroleum moved because of its high level of inefficiency and risk. While pipelines can often be more efficient modes of transport, their construction can lead to political battles. The advantage of rail transport is that the infrastructure is already in place and already spans across America–all it needs is to be re-utilized.

Many railroads owners are willing to sign contracts with crude oil companies that allow for their railways to be used for transporting oil. Often these contracts are short term and many railway owners reserve the ability to withdraw from the business relationship later down the road. The railway transport business has grown exponentially along with the upward spike in oil extraction. Only 9,500 carloads of oil were moved on freight lines in 2008; by 2013 435,560 carloads of oil were moved, equivalent to 300 million barrels of oil.

“Crude Oil Storage on Stilts” courtesy of Anthony via Flickr

However, this increase in railway transport has led to an increase in the risk of oil-related disasters. When a train transporting oil (also known as a “bomb train”) runs into a problem, it generally causes the oil to ignite, which results in an explosion. These explosions can be gigantic in size and result in large scale destruction. While railway movement is considerably safer than trucks in terms of land transportation, a single incident can have disastrous effects. This is further compounded by some evidence suggesting that Bakken shale produces a more flammable crude oil because of its specific mineral content. Because of North Dakota’s location in the very center of America, these bomb trains have to span incredible distances to move oil to the coasts of the country, which increases the risk that something may go wrong. Between 2013 and 2015 more than 10 major explosions took place in America.

The explosions can have devastating immediate effects, but oil leakage also poses its own risk. In 2013 alone more than 1.15 million gallons of oil were spilled. Oil leaks can take a considerable amount of time to clean up and the damage can happen very quickly. Oil is mostly made up of a combination of thousands of different hydrocarbons and is generally toxic to almost every living creature. Crude oil, in particular, is oil in its least processed form and poses a greater risk than refined petroleum to an area it enters and contaminates. Because of this, an oil spill can cause tremendous damage to an ecosystem. Furthermore, an oil spill in the ocean will eventually go away, partially through evaporation and partially through breaking down and falling to the ocean floor as an inert tar. However, if oil enters freshwater it can permanently render it undrinkable, which can be particularly serious in areas where humans live nearby and rely on freshwater for drinking water.

Pipeline Alternatives and the Keystone XL Expansion

Right now Canada is the largest U.S. supplier of foreign oil, which offers a certain level of ease of transport because the two countries are on the same landmass. Currently, 70 percent of petroleum products in Canada and the United States are shipped via pipeline. A certain amount of crude oil can be moved over the border on the Canadian Pacific Railway and Canadian National Railway, but there’s been a huge push to connect the two countries via new and larger pipelines. Pipelines would dramatically expedite the process of oil movement by making it both quicker and cheaper, and many argue that it would make the process dramatically safer for Canadian and American communities.

“Trans Canada Keystone Oil Pipeline” courtesy of shannonpatrick17 via Flickr

Much of the argument around pipeline transport has focused on the construction of the Keystone XL Pipeline expansion, a gigantic pipe system that would in theory run 1,661 miles between Alberta, Canada and Illinois. The oil giant TransCanada proposed Keystone XL in September 2008 and estimated that it would cost about $7 billion to create. Most of the labor force that would go into its design would be from the United States, creating up to 20,000 new jobs. It would also generate about $585 million in taxes for the states it ran through and over $5.2 billion in property taxes over the course of its functional lifetime. Many saw the pipeline as an incredible chance to increase energy security and to generate new job opportunities. An equal number of people opposed the movement, saying it only put the United States at greater risk of leaks.

There are others who support the pipeline from an environmental/human health perspective. It’s important to remember that while one can object to oil as an energy source in theory, we still very much need it to live our normal lives. Oil transportation will happen one way or another, and pipelines are generally thought as being safer than trains and therefore the lesser of two evils. However, the distinction really depends on how you measure safety. If you use damage to human life and property as your metric, then trains are the far more dangerous method of transportation because they can generate large explosions. When something goes wrong on a train, the damage is immediate and severe. However, a leak from a pipeline can last indefinitely and may even go unnoticed, pouring a continuous stream of oil into the surrounding areas. Because of this, pipelines cause a much greater level of oil spillage overall than trains and may have a much more severe impact on the environment.

Keystone Pipeline Debate

There was a lot of opposition to the construction of the Keystone XL pipeline from environmentalists as well as worried community members who felt that their areas would be endangered by potential spills. A large portion of the public opposition to the pipeline has come from Native American communities that live in the states the pipe would run through. Several Native American groups in Nebraska especially have argued that the location of the pipeline directly endangers the Ogallala Aquifer, which sustains huge numbers of people and a thriving agricultural business. The sheer length of the pipeline is also alarming to many; while it ends in Illinois, the crude oil will then be processed in-state and shipped south via existing pipelines all the way to the Texas coast. This means that gigantic streams of crude oil would constantly be moving across the center band of the United States.

“pipeline” courtesy of Ripperda via Flickr

TransCanada argued that the pipeline would be built with state-of-the-art safety equipment, including over 16,000 smart sensors along its body, to allow for the quick relay of any problems and relevant information to repair teams. These sensors deliver information to satellites, which then dispatch emergency response crews that are located along the pipeline in each state. This level of security is particularly important because the Keystone XL would transport pre-processed crude oil to refineries. Crude oil is so thick that it has to be continuously heated in order to flow properly, which increases its volatility in the event of a spill.

Four years after it was initially proposed, President Obama rejected the Keystone XL expansion presidential permit in 2012. Not to be deterred, TransCanada began to explore alternative methods of building the pipeline and working closely with Nebraska, which led to the submission of another presidential permit less than half a year after the original rejection. The Obama Administration spent several years refusing to make a final decision on the expansion, saying that while it supports the pipeline’s ability to spur business and create jobs, it wouldn’t make a decision that will cause an increase in greenhouse gas emissions.

In November 2015, President Obama made the final decision to reject the Keystone XL pipeline, claiming that the benefit it would have for the economy in the long term wouldn’t outweigh the damage it would do to U.S. energy security and the country’s role as a progressive energy leader. TransCanada responded by asking for a delay on the review of the Nebraska route, which most likely would have pushed the final decision back for another indefinite period of time. This most likely would have placed the power of approving or rejecting Keystone XL in the hands of the winner of the 2016 Presidential race. However, the Obama Administration rejected this as well, ending the battle over the Keystone XL once and for all.

Conservatives were mostly furious and environmentalists were generally overjoyed. However, from a public health perspective, it isn’t completely clear what impact this decision will have. The risk of oil pollution will decrease but railway oil transportation and its dangers will remain prevalent instead. Furthermore, a large part of the argument from pipeline supporters is centered around energy security; increasing oil imports from Canada is viewed as a much safer business deal than increasing them from the Organization of Petroleum Exporting Countries, for instance. With the pipeline abandoned, it’s possible that the next energy argument will center around increasing oil extraction from U.S. reserves back to their 2014 levels and beyond, which would increase energy independence but also cause greater damage to the U.S. ecosystems and communities.

Conclusion

No method of oil transportation is completely safe, and different methods have their own advantages and disadvantages. Boats are generally the safest method for moving oil but have the greatest possible impact on the environment when they do actually spill. Oil movement on land is a completely different issue because it involves areas where humans live. While oil spills from trains result in higher levels of human death and property destruction, oil spills from pipelines are more common and often more severe, with longer lasting effects on the environment.

The extreme position is to fight against all forms of oil transportation under the argument that every resource dedicated towards oil industry infrastructure takes away from resources that could go to more progressive transportation technologies, such as electric cars and hydrogen fuel cells. Currently, the world is nowhere near ready to wean itself completely off oil, but competitor transportation technologies have steadily grown larger and larger in the past decades.

It’s important to remember that none of these alternatives are perfect and completely environmentally friendly–electric cars require large-scale mining operations to access the lithium iron for their batteries, for instance. However, overall a shift toward non-fossil fuel based transportation alternatives would still dramatically reduce global emissions. The world may not be technologically prepared to survive without oil, but as long as we depend on it, oil transportation and its risks and dangers will always be a factor in our lives and communities.