Egyptian Crisis and Oil Price Politics

-Dr. Abdul Ruff

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ONE

It is fact that hunger for energy has been growing globally. Egyptian crisis has enough impact on the energy situation, fluctuation in the region and West. A war creates panic situation in supply of essential goods, especially today in energy supplies and a revolution in Egypt that control the Suez canal  and serves as a bridge between Europe and Mideast. (Read below the note on Suez Canal)

The Western rogue states do not want any truly Islamic governance any where in the world. West is least bothered about the murder of Muslims in Egypt. The European nations are perturbed by the uprising Egypt chiefly because if it affects the Nile River, the transportation especially of energy resources to Europe would be disturbed. But Egypt cannot strike or stop striking just because Europe is involved in the process as fallout.

Apart from a weakening Israel, it is the energy issue through the Suez Canal that is forcing the Western powers to support the Mubarak regime. Unrest in Egypt has elevated anxiety about the continued operation of the Suez Canal and the Sumed Pipeline, which connect the Red Sea to the Mediterranean. The Suez Canal is a critical transit "choke point" between the Mediterranean and the Middle East and Asia for petroleum products and other types of cargo. Although there have not been indications that either of these choke points have been targeted, it remains a possibility.

The bulk of the rise in oil prices over the last few months reflects buoyant global demand and uncertainty in the Middle East. Oil prices would surely rise much further if there were any serious disruption to production elsewhere in the region or to traffic through the Suez Canal.  Shipping through Egypt's Suez Canal can be affected if Egyptian authorities close the Canal. But the USA and UK put pressure on Cairo regime not to do so.

It appears the strife in Egypt inevitably will have an impact on the western energy availability, especially on the US economy. However, many say that there is no direct threat to the USA from the current protests and the U.S. military is stretched thin in Afghanistan and Iraq.  

USA claims to be standing behind the universal rights of people around the world to assemble and call for political reform. But the US anti-Islamic strategists argue against the uprising because it might not help US cause in Mideast. Mubarak's close relationship with the USA at the expense of Egyptian popular sentiments on a host of foreign policy issues means that Egypt could go the way of Turkey — still a US ally but with a much more independent foreign policy..

But,  there is a view that a democratic Islamic Egypt could enhance US efforts to minimize Iran's influence in the region in the same way that Turkey's popularity has come at Iran's expense. An Islamic democratic Egypt and Iraq would mean that the two most powerful Arab countries will now have representative governments. The impact on the region could be profound.

Obviously, oil investors have been closely watching clashes between supporters and opponents of President Hosni Mubarak in Cairo over the past days after the 82-year-old leader resisted protesters' calls for his immediate resignation. Shipping through Egypt's Suez Canal has not been disrupted, but investors are also concerned political instability could spread to oil rich countries in the Middle East.

Oil prices have been increasing in the past two weeks, and have topped $100.  This will raise some prices and retard a portion of our economic growth. The ongoing uncertainty in Egypt has increased risk premiums on shipping insurance, and that drives up the cost of oil and gas imports as well as other cargo. And it's not just Egypt in turmoil but much of the Middle East.  A zone of instability that Washington thought was fairly stable has erupted — all near some of the world's most important oil and gas reserves.

Oil prices rose to near $91 a barrel on 04 Feb in Asia as traders eyed violent street clashes in Egypt and a key U.S. jobs report. Benchmark crude for March delivery was up 45 cents at $90.99 a barrel at late afternoon Singapore time in electronic trading on the New York Mercantile Exchange. The contract lost 32 cents to settle at $90.54 onFeb 03. In London, Brent crude gained 23 cents to $101.99 a barrel on the ICE Futures exchange. Trading volume was light in Asia as markets in mainland China, Hong Kong, South Korea, Taiwan, Malaysia and Singapore were closed Friday for Lunar New Year. In other Nymex trading in February contracts, heating oil rose 0.5 cent to $2.77 a gallon and gasoline gained 0.6 cent to $2.51 a gallon. Natural gas futures for March delivery were up 1.5 cents at $4.35 per 1,000 cubic feet.

The EU has set itself ambitious energy targets, which will only be achieved by massive investment - some one trillion euro (£850bn; $1.4tn) - in the region's energy infrastructure. The summit was called to focus on energy and innovation, which are critical issues for the EU.

The Egyptian and American militaries closely coordinate and have strong working relations. America is trying to be over cautious. American advice to show restraint seems largely to have been accepted by the Egyptian military so far. Though the Neocon nuts would like it, any serious foreign military intervention would be catastrophic and generate significant blowback.deal with a significant realignment of its military, political, and economic influence in the Middle East. 

Mubarak has sided with US policy in the Arab-Israeli conflict, including in supporting the statusquo in Gaza, promotion of anti-Hamas policies, and emphasis on peace talks (even when they haven't worked). A democratic Egypt will likely still support the Camp David Peace Accords but not the status quo in Gaza or Palestinian disunity.

USA is keen to keep Egypt as a US puppet for many reasons. The USA relies on Egypt to cooperate on a huge range of issues — from assisting with American military logistical and supply operations in Middle East, to counterterrorism, to freedom of navigation and the seas, to Arab-Israeli peace. All of these interests of the United States could be affected positively or negatively by what comes next in Egypt.

But the West is also studying the risks involved as well. A new political order in Egypt also may contain significant elements of the Muslim Brotherhood, a banned political party that has received significant support from Iran and has related networks operating in many states throughout the region.  The United States has been regrettably slow in engaging and interacting with the responsible factions of the Muslim Brotherhood.

This may complicate the situation in Israel but open new opportunities to break the deadlock between Israel and the Palestinians. Only Egypt and Jordan (among Middle East and Muslim states) have peace with Israel. Since signing the Camp David Peace Accords in 1978, Egypt has received $35 billion in U.S. military and economic aid, second only to Israel. Egypt has played the role of America's Arab interlocutor in the peace process. Egypt also helps represent U.S. interests in negotiations between Fatah and Hamas.

USA gets its energy supply from Iraq which is fully occupied and fully controlled by the Pentagon. US lobbyists for Israel worry too much about Zionism that US imperialism and they feel iff the political outcome in Egypt turns out to be highly negative for Israel, there will be serious political echo effects in American politics essentially controlled by CIA- Mossad lobbyists. With a pattern of protest in many vulnerable nations throughout the Arab world, the Obama administration will be expected to roll out a new strategy of engagement that protects America's particularly its energy sector interests.

Washington does not want to appear to be interfering with the democratic aspirations of protestors in Egypt. American influence in the region and its social contract with key stakeholders in the Middle East may need to be "re-visited” with a new strategy replacing the many decades-old one the USA has followed.

-- Suez Canal

Map of the Red Sea

The Suez Canal is an artificial sea-level waterway in Egypt, connecting the Mediterranean Sea and the Red Sea. Opened in November 1869, it allows water transportation between Europe and Asia without navigation around Africa. The canal is owned and maintained by the Suez Canal Authority (SCA) of the Arab Republic of Egypt. Under international treaty, it may be used "in time of war as in time of peace, by every vessel of commerce or of war, without distinction of flag. When first built, the canal was 164 km (102 mi) long and 8 m (26 ft) deep.

By the 8th century, a navigable canal existed between Old Cairo and the Red Sea. A geography treatise by Dicuil reports a conversation with an English monk, Fidelis, who had sailed on the canal from the Nile to the Red Sea during a pilgrimage to the Holy Land in the first half of the 8th century. Napoleon Bonaparte's interest in finding the remnants of an ancient waterway passage^[37] culminated in a cadre of archaeologists, scientists, cartographers and engineers scouring the area beginning in the latter months of 1798.^[38] Their findings, recorded in the Description de l'Égypte, include detailed maps that depict the discovery of an ancient canal extending northward from the Red Sea and then westward toward the Nile. Napoleon had contemplated the construction of another, modern, north-south canal to join the Mediterranean and Red Sea. But his project was abandoned after the preliminary survey erroneously concluded that the Red Sea was 10 metres (33 ft) higher than the Mediterranean, making a locks-based canal too expensive and very long to construct.

In 1854 and 1856 Ferdinand de Lesseps obtained a concession from Sa'id Pasha, the viceroy of Egypt, to create a company to construct a canal open to ships of all nations. The company was to operate the canal for 99 years from its opening. De Lesseps had used his friendly relationship with Sa'id, which he had developed while he was a French diplomat during the 1830s. The Suez Canal Company came into being on 15 December 1858 and work started on the shore of the future Port Said on 25 April 1859. The canal opened to shipping on 17 November 1869. The opening was performed by French Empress Eugenie and the Khedive Ismail of Egypt in the Imperial yacht Aigle

The canal had an immediate and dramatic effect on world trade. Combined with the American transcontinental railroad completed six months earlier, it allowed the entire world to be circled in record time. It played an important role in increasing European colonization of Africa. External debts forced Said Pasha's successor, Isma'il Pasha, to sell his country's share in the canal for £4,000,000 to the UK in 1875, Under the Anglo-Egyptian Treaty of 1936, the UK insisted on retaining control over the canal. In 1951 Egypt repudiated the treaty, and in 1954 the UK agreed to remove its troops, and withdrawal was completed in July 1956.

After the United Kingdom and the USA withdrew their pledge to support the construction of the Aswan Dam due to Egyptian overtures towards the Soviet Union, Egyptian President Gamal Abdel Nasser nationalised the canal in 1956 and transferred it to the Suez Canal Authority, intending to finance the dam project using revenue from the canal. This led up to the Suez Crisis, in which the UK, France and Israel invaded Egypt. The intention was for Israel to invade on the ground, and for the Anglo-French partnership to give air and other support, later to intervene to resolve the crisis and control the canal. A UN force (UNEF) was established to maintain the neutrality of the canal and the Sinai Peninsula.

In May 1967 President Nasser ordered the UN peacekeeping forces out of the Sinai Peninsula, including the Suez Canal area. Despite Israeli objections in the United Nations, the peacekeepers were withdrawn and the Egyptian army took up positions on the Israeli border, closing the Straits of Tiran to Israeli shipping. The canal itself had been closed to Israeli shipping since 1949, except for a short period in 1951-1952. After the 1967 Arab-Israeli war, also called the Six Day War, the canal was closed by an Egyptian blockade until 5 June 1975. Later, when the Canal Clearance Operations were completed, the Suez Canal and its lakes were considered 99% clear of mines. The Canal was then reopened by President Sadat aboard an Egyptian Destroyer which led the first convoy Northbound to Port Said in 1975.

The opening of the Suez Canal in 1869 created the first salt-water passage between the Mediterranean and Red seas. The vast Suez Canal can handle more ship traffic and larger ships than the Panama Canal. There is one shipping lane with passing areas in Ballah-Bypass near El Qantara and in the Great Bitter Lake. On a typical day, three convoys transit the canal, two southbound and one northbound. By 1955 approximately two-thirds of Europe's oil passed through the canal. About 7.5% of world sea trade is carried via the canal today. In 2008, a total of 21,415 vessels passed through the canal and the receipts from the canal totaled $5.381 billion, with the average cost per-ship at roughly $251,000.00.

Suez Canal is the lifeline of Egypt- its people and culture.