Producer hostilities cloud prospects for oil-supply accord

Sept. 19, 2016
As major oil exporters discuss cutting production to defend crude prices, market watchers should study pilgrims in Mecca. At this year's Hajj, Sept. 9-14, there are no Iranians.

As major oil exporters discuss cutting production to defend crude prices, market watchers should study pilgrims in Mecca. At this year's Hajj, Sept. 9-14, there are no Iranians.

The Saudi and Iranian governments couldn't agree on immigration and security. They are two of three parties essential to coordination of crude oil supply. The other is Russia.

Already bitter relations between Sunni Saudi Arabia and Shiite Iran have worsened recently.

The immigration flap arose after Ali Khamenei, the Iranian supreme leader, said pilgrims from his country stampeded at last year's Hajj succumbed to "murder" born of inadequate security in the host country. He amplified the insult by questioning Saudi Arabia's adequacy as custodian of eminent mosques at Mecca and Medina.

Saudi Arabia's chief cleric responded by calling Iranian Shias Zoroastrians-fire worshippers.

Complicating sectarian hostility were reports that Russian warplanes in mid-August refueled at an Iranian air base during bombing missions against Islamic State targets in Syria. Since World War II, Iran had scorned foreign military presence.

Controversial even within Iran, the Russian landings highlighted recent improvement in relations between Tehran and Moscow.

That cannot please officials in Riyadh. They worry about Shiite control of a geographic crescent spanning Syria and Iraq and linking Iran with the Bekaa Valley of Lebanon, stronghold of Hezbollah proxies of the Islamic Republic.

Syrian President Bashar al-Assad is enlarging the crescent by forcing Sunni residents out of Damascus suburbs into northern Syria and replacing them with Shias from Iraq. Iran supplies some of his weaponry. Assad, of course, has longstanding Russian support.

Against this backdrop, Saudi and Russian officials agreed Sept. 4 to form a working group on oil production. Russian officials will attend an extraordinary meeting of the Organization of Petroleum Exporting Countries in Algeria Sept. 26-28 to discuss production restraint.

But with Riyadh and Tehran stymied on Hajj travel, and with Moscow ever cozier with Saudi antagonists, prospects for agreement on oil supply can be no better than even worse than usual.

About the Author

Bob Tippee | Editor

Bob Tippee has been chief editor of Oil & Gas Journal since January 1999 and a member of the Journal staff since October 1977. Before joining the magazine, he worked as a reporter at the Tulsa World and served for four years as an officer in the US Air Force. A native of St. Louis, he holds a degree in journalism from the University of Tulsa.