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    Istanbul Event Tests US-Saudi Relations

Summary

A Saudi journalist is believed to have been killed in Istanbul, but the US State Dept instead criticised Russian and Iranian energy policy in London this week.

by: Mark Smedley

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Istanbul Event Tests US-Saudi Relations

President Donald Trump said October 11 US investigators are looking into Saudi journalist Jamal Khashoggi’s disappearance at the Saudi consulate in Istanbul and would have a report out soon.

Turkey has evidence of the Washington Post columnist having been murdered just over a week ago at the consulate, according to western media reports October 12. Ankara first raised its concerns with the Saudis October 5.

Trump does not want US arms contracts, placed by Saudi Arabia, put at risk though pending any investigation. Other western nations too that raised concerns are tempering them against lucrative Saudi oil and arms deals, their economies’ reliance on Saudi oil, and the prospect of a massive Saudi Aramco initial public offering (IPO).

Many thought it had been cancelled but Saudi crown prince Mohammed bin Salman told Bloomberg October 5 it was back on, and planned for early 2021. Financial centres from New York, to Frankfurt, Paris and London are competing for a slice of the IPO business. Saudi sources say Aramco could be worth $2 trillion, making a 5% equity IPO worth $100bn, while others think such values too high. Oil giant Aramco aims to double its gas output over the coming decade to reach 23bn ft³/d.

Neither Khashoggi, the Aramco IPO, or a three-year war in Yemen, however, figured in a speech given October 10 in London at the Oil & Money conference by Francis Fannon, assistant secretary at the US State Department’s Bureau of Energy Resources. Instead Fannon criticised Russian energy companies as “extensions of the state” and said that Moscow, through Gazprom’s Nord Stream 2 pipeline project, was “trying to increase its leverage over Western Europe while dividing it off from Ukraine.”

Fannon also accused Iran of using its energy revenues to fund proxy wars and terrorism, adding that the US was pleased that so many companies and countries around the world were moving forward to stop Iranian oil imports. The US has been demanding such an embargo for six months. Gas from the eastern Mediterranean (Egypt and Israel) could help Europe’s future import diversification – which he said was “unthinkable a few years ago.” Moreover there was a bipartisan approach in the US Congress that 'energy is central to US foreign policy', he insisted.

However fighting in Yemen since 2015 by opposing Saudi and Iranian-backed factions has led to tens of thousands of dead – mostly civilians – through war, disease and famine and forced the closure for three and a half years of Yemen LNG, previously since 2009 a key export earner for a country that, even before the war, was among the world's most poorest.  The war in Yemen has parallels with Syria, a war largely fought by Russia and Iran against western and Gulf Arab proxies, since 2011 to the cost of around half a million mostly civilian dead and some 7.5mn displaced people.

Senators from Trump’s Republican Party have spoken since October 10 in favour of a cooler attitude to Saudi Arabia. One, the influential Arizona senator Jeff Flake, said October 11 the US needed to know what happened in that Saudi consulate in Turkey: “We cannot do business with the Saudi government if they directed or were complicit in the murder of Jamal Khashoggi.”

Russia 'always the bad guy'

Earlier in the Oil & Money conference, the CFO of Russian independent producer and LNG exporter Novatek, Mark Gyetvay, made the point that from the US point of view, Russia was always held to be the villain where energy was concerned. This remained the case even though Russian gas had been needed in the US, which indirectly took a Yamal cargo earlier this year during the cold snap: "We always have to justify ourselves. It is always the US versus Russia," he said, where LNG was concerned: "It is never the US versus Qatar." Qatar is a far bigger LNG exporter but very little of its gas ends up in Europe, compared wth Russia.

He said that it was "time to stop the unpredictability coming out of Washington today. We need all the supplies we can get." He also confirmed that Saudi Aramco officials  have visited the Arctic LNG 2 data room as a possible equity holder in another LNG project of Novatek's.