Guest post by Gabor Steingart: Revenge for Oil Throttling? 7 reasons why this isn’t a good idea

14/10/2022

At a very tense energy crisis moment because of the Ukraine war, the Saudis have cut oil production, driving up the price. But Germany should also think twice before imposing sanctions on the Saudis. Because that already went wrong with Russia.

Those who have friends like that don’t need enemies any more, thinks in Washington. Because Saudi Arabia and other oil states have ensured in OPEC that the oil production will be reduced a few weeks before the American midterm elections. That damages the reputation of the Democratic President – and uses Donald Trump. Joe Biden and his team are completely off the mark.

Anti-Arab sentiment had been building up in the US administration for some time and is now erupting. Democratic Senator and Senate Foreign Relations Committee Chairman Bob Menendez called for an “immediate freeze on all aspects of our cooperation with Saudi Arabia, including all arms sales and security cooperation.” Joe Biden has already “initiated the strategic reorientation towards the Arab states,” as his national security adviser John Kirby reports on CNN: “I think the President has made it very clear that this is a relationship that we need to continue to reevaluate, that we must be willing to reconsider them in light of the OPEC decision.”

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But beware! The American friend or foe mentality could once again prove to be a trap. Before the Federal Republic repeats the mistake of the Russian sanctions and again burdens its own population – and possibly not the Saudis with the real costs, we should take a look at the facts .

Here are the seven things you should know about German relations in the Arab world:

1. Europe gets almost 30 percent of its oil from OPEC countries. The Federal Republic covers 17.4 percent of its needs with this group of providers. In view of the lack of pipeline gas, one can only say: OPEC oil has never been as valuable as it is today.

2. The Arab region is also an important energy supplier for Europe and the Federal Republic of Germany when it comes to liquefied natural gas (LNG). Qatar is currently behind the USA as the second most important supplier of LNG gas, it was 16 million tons in 2021 – around a quarter of the annual natural gas consumption in Germany. From 2024, Qatar wants to expand deliveries to Europe, especially Germany. That’s why Habeck made his servant.

3. The OPEC countries buy German products worth 19.6 billion euros and in turn deliver 8.2 billion to the Federal Republic. As a bloc, the OPEC countries are the 17th largest trading partner of the Federal Republic. So we achieve an export surplus in this region.

4. Spectacular major projects keep coming up: Siemens Mobility is building Egypt’s first high-speed rail line. The billion-dollar project is intended to connect the Red Sea with the Mediterranean – hence the name “Suez Canal on rails”.

5. Saudi Arabia is Germany’s second most important trading partner in the Arab world after the United Arab Emirates, while Germany is Saudi Arabia’s fifth largest supplier. The most important German export goods are machines, vehicles, chemical/pharmaceutical, electrical, precision engineering and optical products. Made in Germany continues to enjoy a good reputation here.

6. With the Saudi reform program “Vision 2030” and the goal of broadening the economy in Saudi Arabia, there are great hopes of participation in the German economy. Unlike in the EU countries, above-average growth is expected here.

7. With total assets under management of $445 billion, Qatari sovereign wealth fund QIA ranked among the top ten largest sovereign wealth funds in the world. In Germany, there is a stake in the vaccine manufacturer CureVac, Siemens (3 percent), Deutsche Bank (6.1 percent), the Hapag-Lloyd shipping company (12.3 percent), Porsche (4.9 percent) and Volkswagen AG (17 percent). The Qataris are seen as quiet, competent and profit-oriented representatives on the supervisory boards.

Conclusion: The fact that the sheikhs didn’t think about us when they cut oil production, but about themselves, cannot surprise the Realpolitiker. Due to the shortage, prices rise and the OPEC countries earn just as much without having to plunder their oil storage. From an economic point of view, one can only say: Everything was done correctly.

Anyone who draws the conclusion from this that they now have to educate the Arabs and punish them with punitive expeditions will soon become lonely. The idea that supply and demand – and thus the price – should no longer play the decisive role in the global market, but the commitment to the German Basic Law and the American constitution is naïve and not very practical. With this attitude you can found a religious community, but not run an export nation.

Or to put it more clearly: the world doesn’t need any new ayatollahs, not even western ones.

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