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The National
17 hours ago
- Business
- The National
What happens if Israel intensifies attacks on Iranian energy infrastructure
An escalation of attacks on Iran's energy infrastructure could result in a further rise in oil prices, potential supply disruptions and hit countries reliant on Iranian oil, such as China, analysts said. In the first apparent attack to hit energy infrastructure, Iran partially suspended production at South Pars, the world's biggest gasfield, after an Israeli strike caused a fire there on Saturday, the country's semi-official Tasnim news agency said. The South Pars field, offshore in Iran's southern Bushehr province, is the source of most of the gas produced in Iran. While the South Pars gasfield and refineries have been attacked, 'production continues and the damage is not catastrophic yet, but we could see further escalation and strikes, which could annihilate Iran's capacity to tap into this energy field', said Nicolas Michelon, managing partner of Alagan Partners, a Dubai corporate geopolitics consultancy. The Shahran oil depot in Tehran was also targeted in an Israeli attack, Iran said, but added the situation was under control. 'The Shahran fuel and gasoline depot in Tehran, which is one of the largest gas depots in the city, stores enough fuel for about three days' worth of Tehran's fuel needs. This has been hit by Israeli air forces and possibly some sabotage as well by Mossad operatives on the ground,' he said. The Shahr Rey oil refinery in Tehran, one of the largest in Iran and vital for domestic fuel production, was also targeted. Fears about potential disruption to the region's oil exports drove up oil prices more than 7 per cent on Friday even though Israel did not attack Iran's hydrocarbon facilities on the first day. Israel and Iran continued intense bombardments on one another's territories for the third day, amid growing concerns over a wider conflict in one of the world's crucial oil-producing regions. 'From what we know so far, Israel's main targets have been Iranian nuclear and missile facilities and military personnel,' Vandana Hari, chief executive of Singapore-based Vanda Insights, told The National. 'Of course, it could end up deliberately or accidentally also hitting Iranian oil and gasfields and oil storages and export ports. Crippling a major source of the Islamic Republic's revenues would make it harder for it to rebuild its nuclear and missile capabilities.' But striking Iranian energy infrastructure may be a red line for the US. Saudi Arabia, the UAE and Qatar had also pressed Washington in October last year to lean on Israel to not target energy infrastructure for fear that their own sites may come under a retaliatory attack from Tehran, she added. 'I expect [US President Donald] Trump to intervene more assertively if he sees the Israel-Iran attacks starting to encroach on Iranian or regional oil infrastructure, as that could well be the tipping point for a wider regional conflagration and he is loath to higher oil prices.' Mr Michelon said potential future targets may include the Kharg oil terminal, which is where about 90 per cent of Iran's oil exports leave the country, mostly to China; the Abadan refinery, which produces fuel for about 25 per cent of Iran's domestic needs; and Mahshahr oil terminal, which is one of the country's main distribution hubs. If Israel strikes these sites, it would 'seriously disrupt' both domestic supply and global exports. It would cut off Iranian energy exports from crucial markets such as China, he warned. Further attacks to Iran's energy infrastructure could also have a direct impact on energy supply chains, Mr Michelon said. 'We must also consider the Strait of Hormuz, which is a critical chokepoint for global oil and gas trade. It could be threatened if Iran decides to retaliate by trying to block traffic,' he said. Cascading impact If the attacks on Iran's energy infrastructure continue and aggravate, that could also have a cascading effect on countries reliant on Iranian oil, particularly China. About 90 per cent of Iranian oil ends up in China, he said. Naeem Aslam, chief investment officer at Zaye Capital Markets, said the playbook points to Iran targeting Israeli energy infrastructure next. Oil prices could breach $120 if energy infrastructure gets hit, he added. Robert Mogielnicki, a senior resident scholar at the Arab Gulf States Institute, agreed that any escalatory actions affecting regional oil infrastructure and crucial energy trade routes could pressurise oil prices. Striking Iranian energy infrastructure may be a red line for the US Vandana Hari, chief executive, Vanda Insights 'Iran's oil facilities remain a potential target of future Israeli strikes in what [Israeli Prime Minister Benjamin] Netanyahu said could be a multiday battle. Any disruption to Iranian oil infrastructure would directly impact Iran's domestic fuel supply chain and Chinese customers, which are the primary buyers of Iranian crude oil exports,' he said. 'If the Israeli attacks provoke a steep rise in global oil prices, it will be felt far beyond Tehran and Beijing.' Mukesh Sahdev, global head of commodity markets – oil at Rystad Energy, said Iran itself is not the central issue; rather, it's caught in the 'geopolitical crossfire' between the US, Russia and China. The key to watch is how Russia and China respond, rather than Iran itself, he added. US President Donald Trump and Russian President Vladimir Putin discussed the escalating crisis in a roughly hour-long phone call on Saturday. During the call, the Russian leader condemned Israel's military operation against Iran and voiced serious concern over a potential escalation that could have 'unpredictable consequences for the entire region', Russia's Tass news agency reported. However, the oil market overall is very supply resilient today, according to Norbert Ruecker, head of economics and next generation research at Swiss bank Julius Baer. Storage is ample in the western world and especially in China, which built extensive oil inventories over the past decade. Petro-nations such as Saudi Arabia also have plentiful spare production capacity, exceeding 5 per cent of global output, which they just began to bring back to the market, Mr Ruecker said.
Arabian Business
07-05-2025
- Business
- Arabian Business
Trump's Gulf visit looms over new EU-UAE trade talks as president teases ‘very big' announcement
The European Union and United Arab Emirates' newly launched trade negotiations face an uncertain backdrop as U.S. President Donald Trump has teased a 'very, very big' announcement ahead of his Middle East tour beginning next week — a visit experts say could significantly impact regional economic alignments. Speaking to reporters today, Trump described the forthcoming announcement as 'one of the most important announcements that have been made in many years,' adding it would come either 'Thursday, Friday or Monday' before his May 13 departure for the region. The President did not elaborate on specifics but said it was 'as big as it gets' and 'very positive.' The timing creates additional complexity for the EU-UAE Comprehensive Economic Partnership Agreement (CEPA) negotiations announced last month, with reports suggesting Gulf nations are finalising commercial and defence agreements with the U.S. worth nearly $3 trillion. 'It remains to be seen whether what Trump manages to negotiate with those three GCC economies could dampen the region's willingness to move forward with diversification of trade partners,' warned Nicolas Michelon, Managing Partner at Dubai-based corporate geoeconomics consultancy Alagan Partners. EU-UAE talks and strategic timing The EU-UAE trade negotiations, announced on 10 April, came just eight days after Trump unveiled his 'Liberation Day' tariffs — timing that experts view as strategically significant. 'The EU-UAE trade talks were announced on April 10, which is almost to the day, a week after Trump announced his famous 'Liberation Day' tariffs,' explained Michelon. This bilateral approach represents a significant departure from historical practice, where EU-UAE trade discussions were conducted exclusively within the broader Gulf Cooperation Council framework — talks that have remained suspended since 2008. 'Up until this written announcement, all the discussion for comprehensive economic partnership agreements, free trade agreements, call them what you want, between Europe and the UAE were essentially a function of Europe-GCC talks,' Michelon added. Trump's Middle East tour, beginning May 13 with stops in Saudi Arabia, Qatar, and the UAE, now appears poised to reshape regional economic calculations. According to Bloomberg, Saudi Arabia is eyeing a $1 trillion investment in the U.S., while the UAE has pledged to invest $1.4 trillion over the next decade in AI infrastructure, semiconductors, energy, and manufacturing. These potential agreements span defence, aviation, technology, and infrastructure sectors, with weapons sales expected to feature prominently. The U.S. recently approved a $3.5 billion arms package to Saudi Arabia. Balancing Act for Gulf Nations These developments create a delicate balancing act for Gulf nations, particularly the UAE, as they navigate economic relationships with both the United States and the European Union. 'Nobody should underestimate the ability that Washington still has to put pressure on economies to slow down their diversification efforts,' said Michelon. 'The White House seems to have finally understood the potentially catastrophic consequences of its recent trade policy on U.S. economic influence.' Dr Khalifa Al Suwaidi, Research Fellow and Head of the Gulf-Europe Research Programme at the Anwar Gargash Diplomatic Academy, framed the UAE's position as one increasingly defined by pragmatic self-interest. 'National interest trumps this semblance of unity, which is still there but albeit not really as important nor will it ever supersede national interests, at least in the UAE's case,' he added. Complementary EU-UAE interests Despite these uncertainties, the core complementary interests underpinning the EU-UAE trade talks remain compelling for both parties. The EU is already the UAE's second-largest trading partner, accounting for 8.3 per cent of its total non-oil trade, valued at $67.6 billion in 2024. For the European Union, the UAE serves as its largest export destination and investment partner in the Middle East and North Africa region. Sources suggest the central pillars of the negotiations include renewable energy, green hydrogen, critical raw materials, advanced manufacturing, healthcare, logistics, and artificial intelligence. 'Europe has extremely ambitious decarbonisation agenda and Net Zero targets,' said Michelon. 'It necessitates that Europe's member economies must import clean hydrogen massively from high-capacity producers like the UAE.' For the UAE, the interests still lie in diversifying its economy. 'The UAE has outperformed most of its GCC counterparts when it comes to economic diversification. Mostly in part recently due to its emphasis on promoting trade and connectivity and also digital governance,' Al Suwaidi explained. Sense of urgency heightened Trump's teased announcement and the reported scale of potential U.S.-Gulf deals have heightened the sense of urgency for European negotiators, according to experts. 'If I was Europe, I would try to make as much progress on this, on this free trade agreement with the UAE as possible,' Michelon advised. 'Economic blocs like Europe need to move extremely fast, because the GCC economy is welcome under tremendous pressure not to go down that road too aggressively.' In her announcement last month, European Commission President Ursula von der Leyen noted that Commissioner Maroš Šefčovič would soon return to the UAE to advance the negotiations — a timeline that now appears even more pressing as the region awaits Trump's announcement and subsequent visit.
Arabian Business
07-05-2025
- Business
- Arabian Business
Analysis: EU-UAE trade talks signal strategic shift amid global economic pressures
The United Arab Emirates and the European Union launched trade negotiations last month, just days after U.S. President Donald Trump announced sweeping 'Liberation Day' tariffs — timing experts say reveals profound shifts in global trade alignments. The negotiations, announced in early April following a conversation between European Commission President Ursula von der Leyen and UAE President Sheikh Mohamed bin Zayed, mark the first time the UAE has pursued a bilateral trade agreement with the EU outside of the GCC framework — a structure that has governed EU-Gulf economic relations since the 1980s. 'The EU-UAE trade talks were announced on April 10, which is almost to the day, a week after Trump announced his famous Liberation Day tariffs,' Nicolas Michelon, Managing Partner at Dubai-based corporate geoeconomics consultancy Alagan Partners, told Arabian Business in an interview as anticipation builds for potential progress in the negotiations. Breaking from Gulf tradition This bilateral approach represents a significant departure from historical practice, where EU-UAE trade discussions were conducted within the broader EU-GCC framework. Those talks, which began in 1988, have been suspended since 2008, creating a nearly two-decade impasse in formal trade negotiations. 'Up until this written announcement, all the discussion for comprehensive economic partnership agreements, free trade agreements, call them what you want, between Europe and the UAE were essentially a function of Europe-GCC talks,' Michelon explained. The UAE's decision to move forward independently reflects both internal economic evolution and mounting external pressures, according to Dr Khalifa Al Suwaidi, Research Fellow and Head of the Gulf-Europe Research Programme at the Anwar Gargash Diplomatic Academy. 'The UAE has outperformed most of its GCC counterparts when it comes to economic diversification. Mostly in part recently due to its emphasis on promoting trade and connectivity and also digital governance,' Al Suwaidi told Arabian Business. 'In terms of the GCC, it has led somewhat to a mismatch, not a clear-cut divergence, when it comes to the economic priorities of the individual states.' , they face significant indirect consequences as key logistics hubs. The UAE, which has positioned itself as a global logistics centre, is particularly exposed to these ripple effects. 'Even though most GCC economies will be spared all retaliatory tariffs, they are still being impacted by indirect consequences on transit trade,' Michelon said. 'The UAE, which is particularly aggressively positioned as a global logistics hub, they need to sign new free trade agreements because they need to cushion those blows that are coming as we speak.' The timing also reflects deeper geopolitical shifts following the Munich Security Conference earlier this year, where U.S. Vice President JD Vance delivered sharp criticism of European defence spending that many interpreted as signalling broader changes in transatlantic relations. 'Vice President JD Vance basically lectured Europe on the fact that it's forgotten its ways, that it's not investing enough in itself, that the U.S. cannot be picking up the tab every single time and come at Europe's rescue,' Michelon added. 'Europe started to understand, it really started to sink in for European leaders, that this is going to be valid for trade and economic matters.' Complementary strategic interests The EU is already the UAE's second-largest trading partner, accounting for 8.3 per cent of the UAE's total non-oil trade, valued at $67.6 billion in 2024. The UAE, meanwhile, serves as the EU's largest export destination and investment partner in the Middle East and North Africa region. For both parties, the agreement's core focus areas reflect their complementary strategic needs. The central pillars of the negotiations include renewable energy, green hydrogen, critical raw materials, advanced manufacturing, healthcare, logistics, and artificial intelligence. 'Europe has an extremely ambitious decarbonisation agenda and Net Zero targets… extremely ambitious. Some would call it totally unrealistic and somewhat punitive for its own companies,' Alagan Partners' Michelon noted. 'It necessitates that Europe's member economies must import clean hydrogen massively from high-capacity producers like the UAE, which is really ramping up itself as a clean hydrogen power in the region.' For the UAE, the interests lie in diversifying an economy still heavily dependent on hydrocarbon revenues. 'For the UAE…. it's all about diversification of its own economy, scaling up its tech sector by securing easier access to European know-how for tech and easier access to European markets,' Michelon explained. The talks fit within a broader policy trajectory for the Gulf nation, which has aggressively pursued similar agreements with key global partners since the COVID-19 pandemic disrupted traditional trade patterns. 'The UAE has been signing an entire series of comprehensive economic partnership agreements with various countries. To date, the UAE has 27 agreements, six of which are in full effect, that includes with India, Indonesia and Turkey, so three major manufacturing powers and the rest of those agreements are still pending ratification,' Michelon explained. If concluded, the EU agreement could be the UAE's largest since its landmark 2022 deal with India — underscoring its strategic importance for Emirati economic planners. Changing EU approach The trade talks also reflect an evolution in the EU's approach to Gulf relations, according to Dr Al Suwaidi. Where previous negotiations often stalled over the EU's insistence on governance and human rights conditions, economic pressures are creating a more pragmatic approach. 'I feel the EU right now, given the UAE's unflinching stance when it comes to prioritising trade over prescriptive norms of engagement… The fact that the EU now is pushed into a corner strategically when it comes to trade renders it incapable of projecting in many cases those values,' Al Suwaidi said. In her announcement last month, President von der Leyen emphasised the EU's 'strong track record of delivering high-standard trade agreements and building partnerships based on open trade and mutual benefit,' while noting that Commissioner Maroš Šefčovič would soon return to the UAE to advance the negotiations. Potential catalyst for broader talks The success of the EU-UAE talks could potentially reignite broader EU-GCC discussions, though experts caution that political considerations may complicate negotiations with some regional partners. 'I do believe that these bilateral talks between the UAE and the EU could jump start the entire EU-GCC discussion,' Michelon said. 'We could see more bilateral agreements between GCC member economies and the EU, again in the broader context of global geo-economic realignment.' However, he noted that political factors will create variable levels of difficulty.
Arabian Business
19-03-2025
- Politics
- Arabian Business
Explainer: What Putin and Trump agreed on Ukraine's partial ceasefire – All you need to know
Russian President Vladimir Putin and US President Donald Trump agreed to a limited ceasefire in Ukraine during a phone call on Tuesday, but stopped short of the broader 30-day truce that Ukraine had accepted last week. Here's what you need to know about the agreement and what it could mean for the conflict. What did Trump and Putin agree to? After a 90-minute conversation described by the White House as 'productive,' Trump and Putin agreed to an immediate 30-day pause on attacks targeting energy infrastructure in both Ukraine and Russia. This represents a partial ceasefire that would spare power plants, electricity grids, gas facilities and other critical energy sites from bombardment. Putin also agreed to begin technical negotiations on implementing a potential maritime ceasefire in the Black Sea, although no formal agreement was reached on this point. Additionally, the Kremlin announced that Russia and Ukraine would exchange 175 prisoners of war each on Wednesday, with Russia also releasing 23 seriously wounded Ukrainian soldiers as what it called a 'gesture of goodwill.' What the partial ceasefire does not include Crucially, the agreement does not halt fighting along the front lines, where Russian forces continue to advance in eastern Ukraine. It also does not address Russian airstrikes against other civilian or military targets outside the energy sector. Putin refused to endorse the broader 30-day complete ceasefire that Ukraine accepted during negotiations in Saudi Arabia last week. Trump acknowledged this limitation during a Fox News interview after the call, saying a complete ceasefire 'would have been tough' given the current battlefield situation. Watch the latest video at Putin's conditions for a broader peace The Kremlin statement following the Trump-Putin call said that Putin continues to insist on several major concessions before considering a comprehensive peace deal: 'Complete cessation' of all Western military aid and intelligence sharing with Ukraine An end to Ukraine's forced mobilisation of troops Implementation of effective control mechanisms over any potential ceasefire These demands align with Putin's long-standing position that Ukraine must be effectively disarmed and left unable to defend itself against future Russian operations. Since the early days of the invasion, Putin has identified the 'demilitarisation' of Ukraine as a primary war aim. During failed peace negotiations in spring 2022, Russian negotiators demanded Ukraine reduce its armed forces by approximately 95 per cent to just 50,000 troops. 'Ukraine does not have the strategic depth that Russia enjoys, Ukraine doesn't have the industrial depth that Russia enjoys, and Ukraine doesn't have the demographic depth that Russia has,' Nicolas Michelon, Partner at Alagan Partners, told Arabian Business last week. Ukraine's response to the partial deal Ukrainian President Volodymyr Zelenskyy expressed cautious optimism tinged with skepticism following the announcement. 'If there is a partial ceasefire, this is a positive result,' Zelenskyy said at a news conference. He added that he hoped to speak directly with Trump to understand 'what the Russians offered the Americans or what the Americans offered the Russians' during the conversation. Zelenskyy firmly rejected Putin's demand to end Western military support, calling it an attempt to weaken Ukraine's position. He emphasised that any meaningful negotiations must include Ukraine as a direct participant: 'There's two parties in this war, Russia and Ukraine, so without Ukraine I think many negotiations would not result in any help.' The lead-up: Ukraine's acceptance of the 30-day ceasefire The partial agreement comes one week after Ukraine unconditionally backed a United States initiative for a complete 30-day ceasefire during talks in Jeddah, Saudi Arabia. This meeting, led by US Secretary of State Marco Rubio and National Security Adviser Mike Waltz, marked the first high-level diplomatic engagement between the US and Ukraine since a contentious White House meeting between Trump and Zelenskyy on February 28. Following that difficult Oval Office encounter, the Trump administration temporarily suspended intelligence sharing and military assistance to Ukraine — measures that were reinstated after Ukraine accepted the ceasefire proposal in Saudi Arabia. According to the joint statement released after the Jeddah talks, the US committed to 'immediately lift the pause on intelligence sharing and resume security assistance' to Ukraine as a result of Kyiv's cooperation. Trump's diplomatic strategy Trump has made ending the Ukraine conflict a key priority of his administration, even if it means straining relationships with traditional allies who favour a harder line against Russia. Following the Putin call, the White House announced that negotiations would begin 'immediately in the Middle East' on implementing the energy infrastructure ceasefire, as well as working toward a maritime ceasefire in the Black Sea and potentially a comprehensive peace agreement. US Special Envoy Steve , Saudi Arabia, led by National Security Adviser Mike Waltz and Secretary of State Marco Rubio. 'I think it's a relatively short distance to a full ceasefire from there,' Witkoff told Fox News, having spent more than seven hours meeting with Putin in the days preceding Trump's call. Last week's talks in Saudi Arabia also yielded an agreement to pursue humanitarian relief efforts including prisoner exchanges and the return of forcibly transferred Ukrainian children. They also indicated that negotiations on a critical minerals deal between the US and Ukraine would resume, potentially giving Washington access to Ukraine's valuable rare earth mineral reserves. What happens next? The immediate focus will be on implementing the energy infrastructure ceasefire and monitoring compliance by both sides. If successful, this could build confidence for expanded ceasefire arrangements. The Saudi-hosted negotiations beginning Sunday will be critical in determining whether this limited agreement can evolve into a broader ceasefire or potentially a path toward ending the conflict. However, significant obstacles remain, particularly given the gulf between Putin's demand for Ukraine's effective disarmament and Zelenskyy's insistence on maintaining Western military support. As geopolitics expert Michelon told Arabian Business last week, Ukraine 'was nothing but a pawn in this conflict from day one, unfortunately, it has been sacrificed.' The coming weeks will reveal whether the Trump administration can bridge these seemingly irreconcilable positions or whether the energy infrastructure ceasefire represents only a temporary reduction in hostilities rather than a meaningful step toward ending Europe's largest land war since World War II.
