US oil boom fuels security fears in the Middle East

Washington (Platts)--14Jan2013/301 pm EST/2001 GMT

For more than four decades, the so-called "oil-for-security" deal has worked like this: Saudi Arabia and other Middle Eastern countries have assured the US that they will supply as much crude as America wants to buy. In exchange, the US military has helped keep the peace in the critically important but volatile Persian Gulf region -- a security presence that has allowed those countries to keep their oil exports flowing.

But now that the US is producing much more of its own oil due to the shale-drilling boom, some of America's Persian Gulf allies are growing increasingly fearful that the US will abandon its longstanding security commitments in the region, according to President Barack Obama's former national security adviser.

"In the Arab mind, they can see a scenario where -- maybe not tomorrow, or next month, or next year -- but they can see a long-term scenario where this so-called oil-for-security deal that we've had with them for over 40 years could be at risk," James Jones, a retired Marine Corps general who advised Obama from 2009 to 2010, said in an interview.

Jones, who now works on energy issues at a Washington think tank called the Bipartisan Policy Center, said the Obama administration's efforts to improve trade relations with China and other Asian countries are also giving Middle Eastern oil producers cause to believe that the US is distancing itself from them and their crude.

Jones declined to name the Middle Eastern countries that he says harbor these types of fears, which he summed up as, "Our dependence on their main product will be lessened, and therefore our attention could be lessened."

It is impossible to overstate the significance of the US shale-drilling boom, which started ramping up in earnest in about 2008 due to technological advances in horizontal drilling and hydraulic fracturing. These ongoing developments recently led the Paris-based International Energy Agency to forecast that the US will overtake Saudi Arabia as the world's largest oil producer before 2020, and that America will be energy independent by 2030.

Jones emphasized that he does not believe that the US will abandon its longstanding security commitments in the Middle East, saying America's interests are far too entrenched in the region to risk that kind of break.

"Even if we wanted to disassociate ourselves, I don't think a country like the United States with global security responsibilities could walk away anytime in the foreseeable future from our security obligations in the gulf," Jones said.

Nevertheless, Jones said some of the US' Middle Eastern allies remain unconvinced, and that the Obama administration should do more to ally their fears as a means of maintaining stability in the region.

Jon Alterman, a Middle East expert at the Center for Strategic and International Studies, a Washington think tank, echoed that view. Alterman said officials in Saudi Arabia, Kuwait, the United Arab Emirates and Bahrain have all expressed trepidation over the US shale-drilling boom and the Obama administration's increasing focus on Asia.

"All of these countries have different moods ... but I think there is a general belief that a number of things are coming together that will shift their relationship with the US," Alterman said.

Aside from the surge in US oil production, Alterman and Jones said Middle Eastern countries are also worried about the Obama administration's recently announced "Pivot to East Asia," a strategy which includes developing new relations with China and expanding trade and investment on that continent.

"If you look at the geopolitical situation from their eyes and you throw in the fact that we have announced a pivot towards Asia, when you pivot towards one direction it means you're pivoting away from another," Jones said. "It's a natural reaction."

But according to some policy experts, that fear is largely unfounded -- but for different reasons. Gal Luft of the Institute for the Analysis of Global Security, a Washington think tank, said that for starters, the so-called "deal" involving access to Middle Eastern oil and US security in the region has long been overstated.

"The United States is not dependent on the Persian Gulf for oil, and never in its history was dependent," Luft said, noting that currently, only 9% of the total US oil supply comes from the Middle East, and that it has never been above 15%.

The possibility of the US abandoning its Middle Eastern security commitments thanks to its surge in domestic crude production is also widely scoffed at by senior-level executives from across the oil industry. Only 5% of executives who were polled recently by the Gulf Intelligence UAE Energy Forum said they believed the US will become less willing to provide military security in the Middle East. A full 67% said the US will continue to protect gulf energy exports for at least a decade, on the grounds that the US is still vulnerable to price swings in the global oil market.

--Brian Scheid, brian_scheid@platts.com
--Edited by Jason Lindquist, jason_lindquist@platts.com