Civil war in Iraq could affect oil exports for years

The seizure of Mosul in Iraq by the Sunni ISIS Islamists has stopped efforts to fix Iraq’s main pipeline for crude exports from Kirkuk to the Mediterranean port of Ceyhan. This leaves Iraq with a single outlet, by tanker via the Persian Gulf.
By: "Tea Party culture war; a clash of worldviews"
 
BROOKINGS, Ore. - June 13, 2014 - PRLog -- Some critics believe the quick removal of U.S. troops from Iraq left a vacuum which will be filled by Shia jihadi networks and opposing Sunni Islamists such as the ISIS al-Qaeda offshoot. It appears the ISIS move toward Baghdad may set the stage for a civil war in Iraq for several years.

Growth in Iraq’s oil output has helped underpin OPEC’s supply to global markets to off-set loss of production due to fighting in Libya and sanctions against Iran. Increased violence in Iraq could slowdown the momentum of oil companies seeking to invest in Iraq oil production.

The IEA was counting on Iraq to provide 45 percent of the entire increase in global oil supply by the end of the decade, badly needed to meet growing demand in India and China. Iraq was expected to increase oil production from 3.3 million barrels a day to 8 million by 2035. A sectarian civil war in Iraq could put these plans on hold, and cause a spike in world oil prices.

The coming showdown between Israel and Iran could result in the closing of the Persian Gulf. Iran has warned they would mine the Straight of Hormuz if Iran attacked their nuclear facilities. A closing of the Persian would effect tanker oil shipments from Iraq, Saudi Arabia, Kuwait and Iran. This would eliminate 20 percent of the world’s supply of petroleum and cause a sharp spike in oil.

Senator Ted Cruz recently said he believed an Israeli strike against Iran could happen in a matter of months. He said that Iranian Supreme Leader Khamenei is confident, “there is no credible deterrence from the United States” to prevent Iran from progress in its nuclear development. Senator Cruz said the Obama administration’s policy of weakness and appeasement will force Israel to defend her interests. Cruz, who met with Netanyahu in May, did not say how he came to believe an Israeli strike might happen within months.

Some military analysts believe the only way the Israel Air Force can destroy Iran’s underground centrifuge facilities at Natanz and Isfahan would be to use tactical lower yield nukes. However, Israel appears to have reserved nuclear weapons for defense only. Some experts believe Israel does not have destroy Iran’s underground sights, but merely block access tunnels and damage centrifuges with vibration from bunker busting bombs.

However, the point is academic. If Israel attacks Iran, we can assume Iran will mine the Strait of Hormuz. It follows the U.S. Fifth Feet minesweepers, based in Bahrain, will attempt to remove the mines. The Iranian Revolutionary Guard will presumably sink a U.S. minesweeper with a Russian built sunburn anti-ship missile. It follows the U.S. will bomb Iranian military facilities. President Obama would probably have to put troops on the ground in Iran to open the Strait of Hormuz.

Even without a shooting war between Israel and Iran, a sectarian civil war in Iraq will probably be enough to spike crude oil prices and cause a recession during the 2016 U.S. presidential elections. The Obama administration’s difficulties with the Affordable Care Act, unraveling in the Middle East, and poor economic conditions, may be costly to the Democrat Party.

Eric Cantor’s loss to Tea Party candidate David Brat may be a sign of things to come, and dissatisfaction with incumbent politicians. Many political experts believe the Republican Party may gain control of the Senate in 2014, and the White House in 2016. President Obama’s approval rating has dropped to 46 percent, and many Democrats are distancing themselves from the President. The Tea Party seems to be on the rise as an alternative to big government.

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