What Every Resource Investor Needs to Know about the Middle East

I’ve long argued that a main war will break out by mid-2017.

I just don’t know where it’ll start…

Ukraine, the South Chinese Sea, and the Middle Eastern all have the potential to be the spark that sets this in motion. Wherever it begins, when this really kicks off, it’s likely to escalate quickly into the first major conflict of the 21st century.

I do not say this to scare you. And it’s not a subject that I enjoy talking about. But someone has to warn you about the real risks that we’re facing. The loss of life in a major conflict will be devastating. However there is nothing you or I’m able to do to stop that.

What you can do is prepare yourself and get your investments, so that if this war escalates when i believe it will, at least your wealth won’t be erased. Right now I don’t want to sound distasteful, speaking about the loss of life and the loss of money in one breath. But again, if this war breaks out you won’t be able to prevent the bloodshed. But you can protect your portfolio.

For now, let’s turn to the Middle Eastern.

The Middle Eastern conflict is continuing to grow around Syria for some time now. And when you’ve ever wondered why a poor country like Syria matters, a minimum of to the US and Saudi Arabia, I’ll explain.

The Middle East power play

And at the end of your day, the whole mess boils down to politics, power and money. I don’t anticipate this to shock a person.

But to kick things off, let’s start with religion at the very surface level. In doing so, please understand that I consider no view on religion. My purpose here is to provide an objective take on the region from an investor’s perspective.

With that said, it’s helpful to understand who the main players are. The governments of Iran, Iraq, Syria and Lebanon are controlled through Shi’ite Muslims. While the governments of Saudi Arabia, Qatar, United Arab Emirates and Jordan are ruled by Sunni Muslims.

When it comes to managing energy, these groups broadly have a tendency to back their own circle. That’s important when you analyse the world’s largest natural gas and condensate field — South Pars and North Dome. It is shared by both Iran (Shi’ite ruled) and Qatar (Sunni ruled).

Both the Shi’ites and also the Sunnis want to build their own gasoline pipeline networks. You can see this on the map below…

Source: passionforliberty.com

Click to enlarge

The Shi’ites want to use the route Iran-Iraq-Syria-Lebanon-Europe (Islamic pipeline); the Sunnis the Qatar-Saudi Arabia-Iraq-Syria-Turkey-Europe route (Qatar-Turkey pipeline).

But what’s the capture?

Well, both groups need to develop a pipe through Syria. And for this reason, Syria represents huge strategic value. If either the Sunni or Shi’ite groups are going to get their gas piped in order to Europe, they’ll have to go through Syria.

This is how it gets interesting…

The home of cards

Syria has been ruled through the Assad family for decades. There have been stress between Syria’s and Saudi’s elites for many years. And there’s huge tension between Saudi Arabic and Iran. The Saudis — the area’s largest oil producer — feel threatened by Iran’s rising dominance in the region, and they have long sought to replace its government.

For Saudi Arabia to exchange Iran’s government with its own judgment party, effectively gaining control over OPEC, it first needs to overthrow the Assad family in Syria. Then it can hopefully build the pipeline with the help of other Sunni groups.

The Shi’ites want Assad to remain in power, to allow them to build THEIR pipeline together with his blessing.

The Middle East conflict essentially boils down to a harmful game of poker.

To make things worse, a lot of powerful outside parties possess chips on the table.?The US has its chips on the Sunnis’ side (Saudi Arabia). And the Russians and Chinese language (although China remains undeclared) are all in on the Shi’ites’ side (Syria).

Now, you might wonder why the US really wants to get involved at all.

Thanks to fracking technologies, it’s the world’s largest essential oil producer. It doesn’t need Middle Eastern oil anymore. Adding to this, it’s in the process of building LNG terminals to export its shale gasoline.

So what interest does the All of us have in the region?

Aside from All of us companies operating in Irak, they’re hoping to help the Sunni cause.

Why?

If the Sunni natural gas pipeline gets to Europe, Russia’s geopolitical influence in Europe will be neutralised.

Geopolitical games 101

It’s clear the US wants to isolate Russia — it’s the only country (bar China) that really stands up to all of them. The US doesn’t like, and is not used to, being told how to proceed. So to put Russia in its place, it’s using sanctions along with other geopolitical tools. For example, attempting to cut off its lifeblood — oil and gas money.

Russia is by far the biggest supplier of natural gas to Western Europe — where many of America’s closest partners (Germany, France, Italy) sit.

It’s a massive bargaining chip. Russia could simply switch off the gas, and cause immense economic and political harm to America’s allies. It’s currently switched off Ukraine’s gas a number of occasions.

If Putin does this, it will squeeze Europe’s economy. Capital will flee Western markets and head towards the US, pushing the dollar even higher. Europe’s economy is a train wreck and its bond markets are ready to crash. US as well as European sanctions are poorly conceived — to say the least — and will jepardize hard.

If this escalates additional, we could see this geopolitical card played out by 2017. But it will have to obtain a lot worse for this to happen.

In the meantime, the US goal to isolate Russia continues. Obama realises that if Europe can get their gas from the Middle East instead of Russia, Vladimir Putin can no longer threaten to ‘turn off the gas’. Russia’s gas-monopoly trump greeting card ceases to exist.

That’s part of the reason that Russia is noisily safeguarding its interests in the region.

But this is not all…

Russia has just secured a major contract with the Syrian government. This now holds long term exploration and development rights to a large part of Syria’s offshore waters. If Russia can find coal and oil in the region AND have influence over a pipeline to Europe, it’s control over all the gas that flows into Europe.

Everyone has a lot on the table in this game of geopolitical chess. And the region is extremely hostile. At the moment, the US is pushing Spain to the edge. If it adopts Syria, it will draw Russia as well as Iran into conflict. This is arriving, whether you like it or not.

I hope I’m wrong concerning the scale of the coming conflicts. But if I’m not, you have to ask yourself, is your portfolio prepared for a global scale war?

Resource Speculator readers have been getting strategic advice for several weeks about the hurdles that we’re facing. They will be prepared for the tough times ahead. Indeed, during times associated with war, the demand for most commodities swells.

You just need to know where, when, and how to commit to maximise your returns. You can see more details here.

Regards,

Jason Stevenson,

Resources Analyst, Resource Speculator

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