6 Global Conflicts That Have Flared Up Over Oil and Gas
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* Egypt cuts off the natural gas flow to Israel: On April 22nd, the Egyptian General Petroleum Corporation and Egyptian Natural Gas Holding Company informed Israeli energy officials that they were “terminating the gas and purchase agreement” under which Egypt had been supplying gas to Israel. This followed months of demonstrations in Cairo by the youthful protestors who succeeded in deposing autocrat Hosni Mubarak and are now seeking a more independent Egyptian foreign policy -- one less beholden to the United States and Israel. It also followed scores of attacks on the pipelines carrying the gas across the Negev Desert to Israel, which the Egyptian military has seemed powerless to prevent.
Ostensibly, the decision was taken in response to a dispute over Israeli payments for Egyptian gas, but all parties involved have interpreted it as part of a drive by Egypt’s new government to demonstrate greater distance from the ousted Mubarak regime and his (U.S.-encouraged) policy of cooperation with Israel. The Egyptian-Israeli gas link was one of the most significant outcomes of the 1979 peace treaty between the two countries, and its annulment clearly signals a period of greater discord; it may also cause energy shortages in Israel, especially during peak summer demand periods. On a larger scale, the cutoff suggests a new inclination to use energy (or its denial) as a form of political warfare and coercion.
* Argentina seizes YPF: On April 16th, Argentina’s president, Cristina Fernández de Kirchner, announced that her government would seize a majority stake in YPF, the nation’s largest oil company. Under President Kirchner’s plans, which she detailed on national television, the government would take a 51% controlling stake in YPF, which is now majority-owned by Spain’s largest corporation, the energy firm Repsol YPF. The seizure of its Argentinean subsidiary is seen in Madrid (and other European capitals) as a major threat that must now be combated. Spain’s foreign minister, José Manuel García Margallo, said that Kirchner’s move “broke the climate of cordiality and friendship that presided over relations between Spain and Argentina.” Several days later, in what is reported to be only the first of several retaliatory steps, Spain announced that it would stop importing biofuels from Argentina, its principal supplier -- a trade worth nearly $1 billion a year to the Argentineans.
As in the other conflicts, this clash is driven by many urges, including a powerful strain of nationalism stretching back to the Peronist era, along with Kirchner’s apparent desire to boost her standing in the polls. Just as important, however, is Argentina’s urge to derive greater economic and political benefit from its energy reserves, which include the world’s third-largest deposits of shale gas. While long-term rival Brazil is gaining immense power and prestige from the development of its offshore “pre-salt”petroleum reserves, Argentina has seen its energy production languish. Repsol may not be to blame for this, but many Argentineans evidently believe that, with YPF under government control, it will now be possible to accelerate development of the country’s energy endowment, possibly in collaboration with a more aggressive foreign partner like BP or ExxonMobil.
* Argentina re-ignites the Falklands crisis: At an April 15th-16th Summit of the Americas in Cartagena, Colombia -- the one at which U.S. Secret Service agents were caught fraternizing with prostitutes -- Argentina sought fresh hemispheric condemnation of Britain’s continued occupation of the Falkland Islands (called Las Malvinas by the Argentineans). It won strong support from every country present save (predictably) Canada and the United States. Argentina, which says the islands are part of its sovereign territory, has been raising this issue ever since it lost a war over the Falklands in 1982, but has recently stepped up its campaign on several fronts -- denouncing London in numerous international venues and preventing British cruise ships that visit the Falklands from docking in Argentinean harbors. The British have responded by beefing up their military forces in the region and warning the Argentineans to avoid any rash moves.