Oman occupies an extraordinarily significant geographical position in the world and thus is of equally significant political importance to the two global power blocs: the U.S. and its allies on the one hand, and the China-Russia axis and its allies on the other. The Sultanate has long coastlines along the Gulf of Oman and along the Arabian Sea, away from the extremely politically sensitive Strait of Hormuz, through which passes at least one third of the world’s crude oil supplies. These coastlines offer largely unfettered access to the markets of South Asia, West Asia, and East Africa, as well as to those of its neighbors in the Middle East. For these reasons, Oman is a key logistical land and sea node in China’s multi-generational power-grab project, ‘One Belt, One Road’, and, by default, in the U.S.’s efforts to counter Beijing’s advances in this regard. Oman has long sought to play one superpower off against the other but with an imminent visit to Muscat of Iranian President, Ebrahim Raisi, according to sources close to the Petroleum Ministry in Tehran spoken to last week by Oilprice.com, China’s final push for dominance may be nearing its conclusion. Over and above China’s strategic interest in Oman, Iran has urgent business to conclude with the Sultanate itself, and this is to do, nominally at least, with natural gas. The chief executive officer of the National Iranian Gas Company (NIGC), Majid Chegeni, stated in March that Iran is willing and able to export natural gas to Oman, for which there already exists some infrastructure to do so, as there is with Pakistan and Afghanistan. Such a deal, though, as with all of the similar gas deals struck by Iran for gas exports in the region and analyzed in-depth in my new book on the global oil markets, ties in to Tehran’s ambition to increase its leverage over those countries willing to sign the deals by concomitantly tying them into a regional power grid controlled by Iran. This, in turn, is part of the ongoing attempt by the China-Russia axis – executed in the Middle East principally by Iran – to stoke a true resurgence across the region of a new ‘Pan Arabist’ movement, as highlighted recently by Oilprice.com.
The other side of this latest Iranian push, spearheaded by Raisi, is to finalize the long-stalled idea of finishing the pipeline links between the two countries. This will allow for a dramatic increase in gas exports from Iran to Oman but also, and much more importantly from Iran’s perspective, will also allow Tehran to utilize at least 25 percent of Oman’s liquefied natural gas (LNG) capabilities to allow it to realize its long-term target of becoming a world-leading LNG exporter. This pipeline plan was part of a broader cooperation deal made between Oman and Iran in 2013, extended in scope in 2014, and fully ratified in August 2015 that was centered on Oman’s importing at least 10 billion cubic meters of natural gas per year (bcm/y) from Iran for 25 years beginning in 2017 (equating to just less than 1 billion cubic feet per day and worth around US$60 billion at the time). The target for this was then changed to 43 bcm/y to be imported, albeit for a shorter period, of 15 years, and then finally to at least 28 bcm/y for a minimum period of 15 years.
According to a statement at the time of the signing of the 2014 memorandum of understanding on the deal from the then-managing director of the National Iranian Gas Export Company (NIGEC), Mehran Amir-Moeini, the Iranian company was already working on the different contracts’ mechanisms for the key phases of the project, including the gas receiving facilities in Oman. Specifically, the land section of the project would comprise around 200 kilometers of 56-inch pipeline (to be constructed in Iran), to run from Rudan to Mobarak Mount in the southern Hormozgan province. The sea section would include a 192-kilometer stretch of 36-inch pipeline along the bed of the Oman Sea at depths of up to 1,340 meters, from Iran to Sohar Port in Oman. Iran is set to not only bring on further phases of development of North Pars but also the development with a view to the LNG market of a number of other major gas fields, including most immediately Golshan, Ferdowsi, Farzad A and Farzad B, and Kish. It should not be forgotten that the major field from which Qatar takes the gas to sustain its status as the number one LNG exporter in the world is exactly the same 9,700 square kilometer reservoir from which Iran draws much of its own gas: Qatar’s 6,000 square kilometer side of the field is the North Dome, whilst Iran’s 3,700 square kilometer side is South Pars (North Pars has been treated as an additional site).
The final, tangential, part of this Iranian push is not directly to do with Iran but rather with China. More specifically, it springs from Beijing’s strategic ambition to control all of the major crude oil shipping route chokepoints from the Middle East into Europe and the West that avoid the more expensive and more nautically challenging Cape of Good Hope route around South Africa. The Strait of Hormuz, which allows oil to be shipped out from whichever Middle Eastern countries want to use it, is already effectively controlled by China through its relationship with Iran, cemented in the all-encompassing 25-year deal agreed in 2019. The Bab al-Mandab Strait, through which crude oil is shipped upwards towards the Suez Canal before moving into the Mediterranean and then westwards, lies between Yemen (which is being disrupted by Iran-backed Houthis, just as China wants) and Djibouti (over which China has established a stranglehold, as highlighted by Oilprice.com).
There are other key crude oil infrastructure areas in and around the Middle East and China is already working on securing control over those if it has not already done so: most notably Iran’s Guriyeh-Jask route, some of the UAE’s coastal facilities (the UAE seeks to portray its relationship with China and Russia as part of a ‘balanced’ foreign policy approach but this is not the way either China, Russia, or the U.S. sees it), and Saudi Arabia (also keen to portray the same ‘balanced’ approach as the UAE). It is apposite to note in this context that both Saudi Crown Prince Mohammed bin Salman and the Crown Prince of Abu Dhabi, Mohammed bin Zayed Al Nahyan, recently refused to take an urgent telephone call from U.S. President Joe Biden on the subject of high oil prices and the economic damage being done to developed economies. This brief analysis does not cover all of the other inroads being made in the Middle East by the China-Russia axis at the U.S.’s expense but they are covered in many of my articles for Oilprice.com and in even more depth in my new book on the global oil markets.
The planned visit to Oman by Iranian President Raisi follows the recent talks between Oman’s Assistant to the Chief of Staff for Operations and Planning, Brigadier Abdulaziz Abdullah al-Manthri, and the Chief of Staff of Iranian Armed Forces, Major-General Mohammad Bagheri. “The two countries [Iran and Oman] have conducted several joint naval drills in recent years, but these [recent] talks were concerned with expanding that cooperation both in terms of the armed services involved beyond just the navy and the scope of their joint activities beyond anti-smuggling and dealing with terrorist threats,” an Iranian source who works closely the Petroleum Ministry told Oilprice.com.
Much before this, China has used the financial distress in Oman, exacerbated by the Saudi Arabia-led 2014-2016 Oil Price War, to expand its foothold in Oman. Already accounting for around 90 percent of Oman’s oil exports and the vast majority of its petrochemicals exports, China was quick to pledge a further US$10 billion immediately for investment into Oman’s flagship Duqm Refinery Project’s adjunct oil refinery. Although further investment from China was notionally geared towards completing the Duqm Refinery, Chinese money was also funneled towards the construction and building out of an 11.72 square kilometer industrial park in Duqm in three areas - heavy industrial, light industrial, and mixed-use. This has enabled China to secure deeply strategic areas of land in the Sultanate.
By Simon Watkins for Oilprice.com
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