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Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

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Conflict In Gaza Threatens U.S. Middle East Strategy

The starting point for all sound intelligence analysis of a particular action is to identify who gains from it and what it is that they gain. As the new tit-for-tat conflict between Israel and Palestine continues to escalate such analysis reveals the following: overall Palestine will gain nothing except sympathy from already sympathetic supporters, Israel will gain nothing although it may bolster the flagging domestic support for Prime Minister Benjamin Netanyahu, but those countries that want to destroy the nascent U.S.-Israeli-led ‘relationship normalisation’ strategy stand to gain precisely what they want.

Top of this list of beneficiaries is obviously Iran, which has the motive, means, and opportunity to stoke the ever-simmering conflict between Palestine and Israel to such a point that Arab states that have long seen the Palestine conflict as a reason not to join the new U.S.-Israeli-led initiative (most notably, Saudi Arabia and its King Salman) have been vindicated. Fracturing the relationship between the U.S., Israel and those countries that have already signed up to the normalisation deals – notably the UAE and Bahrain – is also a possibility as evidenced last week.

Up until just two weeks ago, for example, the UAE’s key sovereign wealth vehicle – Mubadala – was intent on formally ratifying an in-principle agreement to buy from Israel’s Delek Drilling its 22 percent stake in the Tamar natural gas field operated by U.S. oil and gas giant, Chevron. Given the size of the deal – at least US$1.1 billion – and the fact that each of the countries behind the U.S.-Israel-UAE normalisation deal signed last August are significantly involved in it – the deal was rightly regarded as being one of the most significant material developments since Israel and the UAE agreed to normalise ties last year. Related: U.S. Oil Rig Count Soars As WTI Recovers


For Israel, over and above the financial value of the deal is the strategic significance of the Tamar gas field that lies in the eastern Mediterranean as it is one of the country’s primary energy sources, able to produce 11 billion cubic metres of gas each year. This is sufficient not just to cover much of the Israeli gas energy market but also to lay the basis for the strategically important roll out of gas exports to Egypt and Jordan. Underlining this, last month saw a comment from Delek Drilling’s chief executive officer, Yossi Abu, that the deal potentially marked: “A strategic alignment in the Middle East, whereby natural gas becomes a source of collaboration in the region.” The deal was to have been finalised this month, which in turn would have opened up the way for further co-operation between Mubadala and Delek Drilling in the nearby – and even larger - Leviathan gas field. Last week, though, Tamar field operator Chevron shut down the offshore Tamar gas platform Israel amid an escalation of violence between Israel and Palestine.

Should this trend of increasing violence between Palestine and Israel continue then this may not be the only commercial deal under threat as the very basis of the relationship normalisation strategy between Israel and Arab States comes into question. This deal between Israel and the UAE – announced on 13 August – came at around the same time as Israel’s Netanyahu announced that he was suspending plans to annex more areas of the West Bank that it seized during the 1967 Six Dar War. At that time, the UAE had two principal aims in signing such an agreement. One was that it wanted to put itself firmly in the U.S.’s most-favoured allies group for receiving future business and financing deals, as it had suffered a big hit from the Saudi-led oil price war that had just ended. The other was that it wanted to be included in the U.S.-Israel intelligence and security network to protect itself from the growing influence of Iran. Related: Hamas Targets Israeli Oil And Nuclear Facilities With Rocket Attacks

For Iran, the potential danger that this new U.S.-Israel power axis posed is huge. Partly this is a result of increased security threats (via a massively expanded Israeli-led intelligence operation) coming from the UAE in its south and south-western provinces and partly this is due to the likelihood that when the current ruler leader of its deadliest regional enemy, Saudi Arabia dies (and King Salman is in very poor health), his successor, Crown Prince Mohammed bin Salman (MbS), may join the relationship normalisation grouping.

Although King Salman told the Organisation of Islamic Cooperation just last year that the Palestinian cause remained a core issue and that the kingdom “refuses any measures that touch the historical and legal position of East Jerusalem,” MbS is believed to be far more sympathetic to the agreement. Even Saudi’s Foreign Minister, Prince Faisal bin Farhan, cautiously welcomed the Israel-UAE agreement, saying: “It could be viewed as positive.” It is also apposite to note that back in 2002 – not that long ago in global geopolitical terms - it was the Saudis who launched the ‘Crown Prince Abdullah Peace Plan’ at the Beirut Arab summit, offering Israel full recognition in exchange for a return to its pre-1967 borders.

That Iran should seek to leverage this perennial and deep-seated issue of Palestine at this point is entirely unsurprising, as Iran has nothing to lose and everything to gain if it plays the situation correctly. On the one hand, the longer the current violence between Palestine and Israel continues – and even better for Iran if Israel launches a ground invasion – the less likely it is that any other Arab state will join the U.S.-led relationship normalisation deal strategy in the region, including Saudi Arabia. On the other hand, given that the key power in Palestine – Hamas – is extremely closely tied to Iran (along with Hezbollah in nearby Lebanon), Iran might eventually be called upon through diplomatic back-channels to broker some sort of peace with Palestine. In such an event, Iran would undoubtedly seek a dropping of Washington’s hardline clauses for the new draft of the nuclear deal that it is currently on-and-off negotiating with the U.S.

Although the relationship between Iran and Hamas had cooled off in around 2012 when the military-political grouping that essentially runs Palestine decided to back the Syrian opposition against ruling President, Bashar al-Assad – contrary to Iran’s wishes - financial necessity on Hamas’s part warmed relations back up again around three years ago. In 2018, according to then-Israeli Defence Minister, Avigdor Lieberman, said that most of the US$260 million that Hamas invested in 2017 in making tunnels and weapons came from Tehran.

Last week, Israel’s Channel 12 reported that Iran had agreed to provide US$30 million per month to Hamas in return for information on Israel’s missile capabilities and its missile locations, following a meeting two weeks ago between nine senior members of Hamas’s militant wing and Iran’s Supreme Leader, Ali Khamenei, in Tehran. Even more recently, the commander-in-chief of Iran’s Islamic Revolutionary Guard Corps, Hossein Salami, warned that Israel was vulnerable to one large tactical operation because the country is so small and highlighted the recent firing of an S-200 missile from Syria as an example of how effective a sustained bombardment by short-range missiles might be.

By Simon Watkins for Oilprice.com

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  • George Doolittle on May 14 2021 said:
    More than a little "hyperbolic" i think all that needs saying is "all oil is still priced in US Dollars" to the extent anyone can even have/possess oil combined with distillate outflows from thereof at the moment.

    Long $ibm International Business Machines
    Strong buy
  • Mamdouh Salameh on May 15 2021 said:
    Despite efforts by the United States and Israel to bury the Palestinian conflict for ever and create a permanent new order in the heart of the Middle East, Palestine remains permanently in the conscience of the Arab nation and the world. It pops up every now and then to threaten the United States’ and Israel’s plans and to remind the world that Palestine and the Palestinian people are alive and they can’t be buried alive.

    And contrary to conventional wisdom, the United States and Israel is one and the same. The proof is that former US President Trump couldn’t do enough during his presidency to strengthen Israel’s position by recognizing Israel’s 1981 annexation of Syria’s occupied Golan Heights, the annexation of the West Bank of Jordan, negotiations of normalization agreements between Israel and some Arab Gulf countries, trying to foster a political alliance led by the US and comprised of UAE, Israel and India to confront the alliance of China, Russia and Iran and the transfer of the American Embassy from Tel Aviv to Jerusalem. His greatest disappointment is that he failed to bring the ‘jewel in the crown’, Saudi Arabia, to normalize relations with Israel during his term in office.

    Against Israel’s overwhelming power, Gaza’s missiles have created havoc and riots inside Israel and its society. They have managed to lower the tone of Israeli arrogance and put Palestine in the heart of the world again. One could then imagine what will happen if in a future conflagration between Iran and Israel, thousands of highly advanced and accurate Iranian missiles rained on Israel.

    The huge losers are therefore the United States and Israel and the clear-cut winners are the Palestinian people and Iran. Any wonder then why China’s and Russia’s credibility and popularity are rising in the Arab world while the United States’ are crashing.

    Geopolitics is always in a state of flux and sooner or later the Arabs will recover their occupied lands and the rights of Palestinians in their land even after 100 years of occupation.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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