Oil security maybe not biggest concern

At this point in the Arab world’s Berlin-wal -moment Libya has taken centre stage, with concerns about its impact on oil supplies already reflected in the highest crude-oil prices in almost three years. The events in the Middle East and North Africa, however have much wider implications, also for South Africa. What is happening in the tiny island-state of Bahrain is probably strategically much more serious.

What happens in Bahrain, with its marginalised Shiite majority, can infect Saudi Arabia, impact on the power balance in the Middle East between the Saudis and Iran, and being host to a strategically crucial American navy base it could play  on plans for American withdrawal from Iraq.

In the meantime Europe is already struggling to deal with the influx of refugees and asylum seekers from North Africa. From Tunisia alone more than 5 000 refugees have already fled to the Italian island of Lampedusa, 100 nautical miles to the northeast of their homeland, with its own indigenous population of only 6 000. Many refugees  are  already starting to arrive in counties like France and Germany.

Slippery implications for oil

The eruption of violence in Bahrain, where a Shiite majority is ruled by a Sunni monarchy, brings the spreading revolution to the doorstep of Saudi Arabia and the epicentre of the world’s oil supply. Saudi Arabia’s Eastern Province contains the vast majority of its oil reserves and has a majority Shiite-population.

There are also old family and tribal ties between Bahrain and Saudi’s Eastern Province, from where 10% of the world’s total oil production originates.

The province in 1979 experienced serious unrest in sympathy with the then Iranian revolution. It would seem that the markets are starting to make this connection and by the end of last week the price of crude oil was flirting with $120 a barrel. That is a level above which analyst predict it will become a major impediment for global economic growth.

In South Africa some analysts were warning that consumers should prepare themselves for a jump of as much as 68 cents a litre at the pump within the next few weeks.

Rising oil prices are also becoming an increasing threat to the stuttering global economic recovery in the wake of the great recession of 2008/2009. While the Middle East is home to 60% of the world’s known oil reserves and presently delivers 36% of its supply, even major emerging economies like China are highly sensitive to the price of oil.

The International Energy Agency recently called for $30 trillion worth of investment in energy projects over the next 20 years to keep global growth going and meet the explosive demand from countries like China. Under the present extremely uncertain circumstances it is unlikely that this sort of investment will get going any time soon.

As things stand more than half of Libya’s high-quality oil production has already been shut down by the uprisings there. Although it only supplies 2.3% of the world’s oil output the situation is serious enough to spook the market.

It can also be expected that attempts will be made to fast-track oil exploration and production projects in other parts of Africa, including Nigeria, Angola, Uganda and Ghana.  Pressure to explore possible gas fields in South Africa’s Karoo-region might also increase.

Strategic lynchpin

Besides the implications for oil, Bahrain holds much higher strategic importance than either its tiny size or its population of less than 1.5 million people would suggest.

While the rulers in Saudi Arabia are understandably nervously following developments in Bahrain, its rival on the other side of the Persian Gulf, Iran, is also keeping a keen eye on events. Tehran, according to an article in Spiegel “… already sees Bahrain as Shiite territory and, therefore, as a sort of 14th province of the Islamic Republic of Iran.

“Hence Bahrain, like Lebanon, is a classic client state. Its large neighbours, enemies that each support different segments of the population, are wrestling for influence there. But Bahrain, unlike Lebanon, is in a critical location with respect to  the world's energy supply.”

It is, however not only its location with respect to the world’s oil supply that gives Bahrain special strategic importance. Since the 1990s it is also host to a base for the United States Fifth Fleet as a military force for the Gulf region consisting of more than 6 000 marines and civilian personnel.

The base is  regarded as the core of the US  Iran containment policy. It is also key to the possibility of US withdrawal from Iraq. If the situation in Bahrain gets out of hand and  the US lose the base there, it would find it strategically difficult to leave Iraq.

In such an eventuality and should Saudi Arabia's Shiite minority follow in the footsteps of their kin in Bahrain it could influence the Iranian-Saudi balance of power in the region considerably in favour of Iran.

Refugee problems

Two weeks ago the German newspaper Die Tageszeitung referring to the thousands of Tunisian refugees arriving in Italy warned: “Tens of thousands of people from the nations of North Africa, and tens of thousands more from sub-Saharan Africa who may use the Mediterranean countries as transit states, could soon make their way to Europe.”

The problem already seems to be spreading. There was recently a report by Associated Press that a boat carrying 32 people, believed to be Egyptians was intercepted by Italian authorities off the coast of Sicily.

Libya’s Muammar Gadaffi threatened to open his country’s borders if the European Union should side with the protesters -- in response to threats of sanctions against Libya from some European quarters.

A heated debate has started within the EU community on how the problem should be addressed. While some argue for assistance to countries like Tunisia to create opportunities for its population, others want European countries to accept some refugees in a strategy of joint responsibility with quotas allocated to various countries.

One German publication, the Süddeutsche Zeitung even suggested “… why not alleviate the European shortage of qualified engineers with well-educated university leavers form Tunis? One in three unemployed people in the North African nation is an academic.”

In the meantime Frontex, the EU’s border protection agency has asked for more money and equipment to seal off Europe’s borders to refugees.

It is clear that the impact of what has been happening in the Arab world is far from over and will be felt far and wide across the globe for some time to come.