The Power Play - The Middle East Region - Markets & Money

The Power Play - The Middle East Region - Markets & Money

No sane person wants war, but with the global economy in tatters and geopolitical tensions rising a serious war looks likely. It's difficult to know where it will start. North Korea, The South China Sea and The Middle East all have the potential to be the spark that sets it in motion. Wherever it starts, when this really kicks off, its likely to escalate quickly into the first major conflict of the 21 st century.

Lets talk about the Middle East we can discuss the other regions another day. The Middle East Power Play at the end of the day the whole mess boils down to politics, power and money. This I expect will not shock you. The main players in the region are The governments of Iran, Iraq, Syria and Lebanon who are controlled by Shi'ite Muslims. While the governments of Saudi Arabia, Qatar, United Arab Emirates and Jordan are ruled by Sunni Muslims.

When it comes down to controlling energy, these groups broadly tend to back their own circle. That's important to know when you analyse the worlds largest natural gas and condensate field - South Pars and North Dome. Is shared by both Iran - Shi'ite ruled and Qatar - Sunni ruled. Both the Shi'ites and the Sunnis want to build their own gas pipeline networks. The Shi'ites want to use the route that runs through Iran, Iraq, Syria, Lebanon and Europe - The Islamic Pipeline. The Sunnis prefer the one that runs through Qatar, Saudi Arabia, Iraq, Syria, Turkey and Europe - The Qatar - Turkey Pipeline.

What's The Catch !!!

Well both groups need to build a pipeline through Syria, and for this reason, Syria represents such huge strategic value. If either the Sunni or Shi'ite groups are going to get their gas piped to Europe, they will have to go through Syria.

The House Of Cards

Syria has been ruled by the Assad family for decades. There has been tensions between the Syrian and Saudi elites for many years. There is huge tension between Saudi Arabia and Iran. The Saudis - the regions major oil producer, feels threatened by Iran's rising dominance in the region , and they have long sought to replace the government. For Saudi Arabia to replace Iran's government with its own ruling party, effectively gaining control over OPEC, it first needs to overthrow the Assad family in Syria. It then hopes to build the pipeline with the help of the other Sunni groups.

The Shi'ites want Assad to remain in power, so they can build their own pipeline with his blessing. The Middle East conflict essentially boils down to a destructive game of poker. To make things worse, a lot of other powerful parties have chips on the table. The US has it's chips on the Sunni side - Saudi Arabia and The Russians and Chinese although China remains officially undeclared are on the Shi'ite side - Syria.

Now you may wonder why the US wants to get involved at all.

Thank's to its fracking technology, it's the worlds biggest oil producer. It does not need Middle Eastern oil anymore.

So what interest does the US have in the region.

Aside from US companies operating in Iraq, they are hoping to help the Sunni cause.

Why ...

If the Sunni natural gas pipeline reaches Europe, Russia's geopolitical influence in Europe will be greatly diminished.

Let The Games Begin.

It is clear that the US wants to isolate Russia - it is the only country - bar China, that really stands up to them. So to put Russia in it's place it's using sanctions and other measures. For example, attempting to cut off Russia's lifeblood - Oil and Gas money. Russia is by far the biggest supplier of natural gas to Western Europe - Where many of America's closest allies - Germany, France and Italy are situated.

So it is a massive bargaining chip. Russia could simply turn off the gas, and cause immense economic and political damage to America's allies. It's already switched off Ukraine's gas a number of times. It could switch off the gas to a number of Eastern European nations if NATO continues to push and build up it's presence of troops on the border.

If Putin does this, it will squeeze Europe's struggling economy even harder. Capital will flee European markets and head towards the US, pushing the US dollar even higher. The European economy is a train wreck, and it's bond markets are ready to crash.

So in the meantime, the US establishment's goal is to isolate Russia. They realise that if Europe can get their gas from the Middle East instead of Russia, Vladimir Putin can no longer threaten to turn off the gas. The Russian gas monopoly trump card will cease to exist.

Russia currently holds long term exploration and development rights to a large part of Syria's offshore waters. These are extremely lucrative and according to some estimates, offer a massive untapped oil supply. If Russia can find oil and gas in the region and have an influence over a pipeline to Europe, it would have control over all gas flowing into Europe.

As you can see everyone has a lot on the table in this game of political brinkmanship. The region is extremely hostile at the moment. The US are pushing Russia to the edge. If it goes into Syria, it will draw Russia and Iran into conflict. So this is coming if we like it or not.

So if you have invested into a stock portfolio for later life retirement, during times of war the demands for most commodities will increase. That should send the best resource stocks through the roof.

Lets hope for a peaceful outcome in the region, but don't hold your breathe.

Published by Julian Groom

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