By:  Bob van der Valk
Dateline:  Terry, Montana

A short crude oil pipeline connecting the United Arab Emirates (UAE) with a harbor on the Gulf of Oman was inaugurated on Sunday, July 15, 2012.

Iran will be the biggest loser is this game of brinkmanship and a game changer in future negotiations as a bargaining chip. Ironically, the Iranian theocrats are the main cause of this attempt to skirt the Arabian Gulf, which is currently being used by Very Large Crude Carriers to ship 20% of the world demand for crude oil. This pipeline is a reaction to Iran’s overt threats to shut down the Strait of Hormuz if the US, Europe, Israel and Saudi Arabia push them against the wall over nuclear fuel enrichment and allow UN nuclear inspectors into facilities possibly used for this purpose.

The US military has already bolstered its presence in the region and sent four mine sweeper ships in early June, joining four other mine sweeping vessels already in the region, according to its Bahrain-based Fifth Fleet spokesperson.

On Thursday, July 12, 2012 US officials said the United States deployed a fleet of robot subs in the Gulf to prevent Iran from blocking the strategic Strait of Hormuz with mines making good on their official pronouncements. And in late April, a squadron of F-22 stealth fighters was sent to an air base in the United Arab Emirates.

Crude oil exports have begun through the new pipeline bypassing the Strait of Hormuz by connecting Abu Dhabi, the capital of the United Arab Emirates, to Fujairah on the Gulf of Oman. The operation of the 263-mile $4 billion pipeline could represent about 30% of the amount currently shipped through Persian Gulf and will be sufficient to blunt the impact of any Iranian attempt to seal the Strait of Hormuz.

Fujairah is located in Oman and is the world’s third biggest refueling ports for commercial ships. In case Iran does not make good on its threats, the pipeline still makes economic sense because a new $5 billion refinery will be built on Fujairah, one of the U.A.E.’s seven sheikhdoms, for local sales of oil products. A terminal will also be built at the port for transiting liquefied natural gas.

Regardless of Iran’s actions, the oil pipeline and its future expansion will forever break dependence on the narrow and vulnerable Strait of Hormuz for crude oil bought by the US, Europe and the Far East. It renders hollow the ability of Iran to blackmail its Arab neighbors and the West to extract concessions for its regional ambitions.

The pipeline will also dampen the impact on the global economy, if Israel eventually does bomb Iranian nuclear installations or Washington leads sharper coercion of Tehran. Currently, about one fifth of world’s oil transits through the Strait of Hormuz. Abu Dhabi, which holds over 90 percent of the UAE’s oil, has taken a risk by angering the Iranian regime, although Tehran has dismissed the pipeline’s potential as Western propaganda.

However, Iran may be hit by a double whammy because prospects are increasing of turmoil in world oil and gasoline prices. In July, energy tensions became worse after the European Union started implementing a nearly total ban on crude oil imports from Iran as part of Western economic sanctions. Domestic US crude oil supplies, which are being extracted from shale rock through the use of hydraulic fracturing, will more than offset any of the Iranian crude oil not being shipped due to economic sanctions.

The expanding American domestic supply is turning the US into a decider of world crude oil prices overshadowing Saudi Arabia. American light-sweet crude is not easily exportable but the large supply capacity combined with heavy investments in infrastructure will allow the US to boost exports of products as a substitute for other types of oil.

Proven shale oil reserves have risen by 68 percent in the US and Canada since 1990 and the US may become energy secure by 2025 for both crude oil and natural gas as hydraulic fracturing becomes a widespread method for North America for their energy needs.

Some information for this article was obtained from The Moderate Voice web site by RIJ Khindaria.