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28 June 2014

Press review 28-06-2014 - “Iraq is finished”

The news meat-grinder is still ablaze with Iraq. Day in day out there are reports of Sunni forces lead by ISIL taking another town, another important infrastructure, another border post. ISIL alone seems in control of the whole section of the Euphrates valley between the Turkey-Syria border and the gates of Baghdad. The huge triangle between that valley, the Tigris valley and the Kurdish autonomous region seems also fully controlled by Sunni forces, ISIL or other.

The reporting by the western media is increasingly contradictory, one day ISIL is in complete control of the Baiji refinery, the following day it is still Baghdad in control. Monday the Sunni are reportedly fighting each other, Wednesday al-Nusra militants are pledging alliance to ISIL. But I reckon that reporting on this story must be anything but easy.

If up to now I considered the threats on Baghdad mostly rhetoric, reported gains by ISIL south of the capital call for reconsideration. It is not clear that ISIL has an army powerful enough to take a city of this size, but its breathtaking advance means it can not possibly be underestimated.
“Iraq is finished,” he said. “Maliki is nothing. Baghdad is finished. Now there will only be a Shiite-stan, Sunni-stan and Kurdistan.”

Peshmerga officer to Mitchell Prothero of McClatchyDC.

Slowly, further information on the military capabilities of ISIL is emerging. Among other things, the article below contains the first reference I have seen to the usage of artillery by ISIL, another piece of the puzzle explaining its rapid gains.
ABC
Iraqi Military Out of Hellfires in Battle Against ISIS
Martha Raddatz, 21-06-2014

he Iraqi military ran out of Hellfire missiles six days ago, and though the U.S. is rushing more missiles into the country, Iraq has only two modified Cessna aircraft to launch them in their battle against the radical Islamic militia ISIS.

ISIS has damaged 28 tanks and shot down three helicopters, a significant percentage of the government force, and the militia killed an entire Iraqi Security Force brigade in the last couple of days at the border with Syria, which ISIS now controls.

The losses have left the Iraqi military with no offensive capability, and no real air force.
Earlier this week the Baiji refinery was reportedly taken by ISIL, but other media would continue reporting government control throughout the week. In any event, it is doubtful a refinery under siege can function properly.
UPI
Militants take Iraqi oil refinery
Daniel J. Graeber, 24-06-2014

Islamist militants in Iraq have taken full control of the largest oil refinery in the country, though the government said Tuesday the claims are false.

The BBC reported Tuesday a "reliable source" has said militants with the Islamic State of Iraq and Syria have "full control" over the Baiji oil refinery. The British broadcaster reported there were 160 Iraqi soldiers inside the refinery who agreed to lay down their weapons in exchange for safe passage to Erbil, the capital of the semiautonomous Kurdish region of Iraq.

The refinery in Saladin province, north of Baghdad, has been closed at least since last week. It feeds the domestic market and a U.S. State Department spokeswoman said last week oil exports from Iraq weren't limited by the insurgency.
With the Shiia army pretty much out of the northern provinces, ISIL is now taking control of infrastructure. It has started to seize the petroleum fields around Tikrit and the dams along the Tigris and the Euphrates. The big petroleum prizes are around Kirkuk though, but the region seems at this stage a sort of no-man's-land descending into chaos. The Peshmerga claimed control over Kirkuk, but this is also a Sunni majority stronghold and it is doubtful the Kurds wish to take the role of occupying force the Shiia army played.
Reuters
Iraq insurgents seize oilfields, hit air base as U.S. advisers arrive
Raheem Salman, 25-06-2014

Militants attacked one of Iraq's largest air bases and seized control of several small oilfields on Wednesday as U.S. special forces troops and intelligence analysts arrived to help Iraqi security forces counter a mounting Sunni insurgency.

[...] On Wednesday, militants overran the Ajeel oil site, 30 km (20 miles) east of Tikrit, which contains at least three small oilfields that produce 28,000 barrels per day, an engineer working at the field said.

The engineer said local tribes had taken responsibility for protecting the fields after police withdrew, but that they also left after the nearby town of al-Alam was seized by militants.

Ajeel is connected to two pipelines, one running to Turkey's Ceyhan port and the other to the Baiji oil refinery, which remained a frontline early on Wednesday.
With the war raging on, some observers see the dismembering of Iraq as a positive development to petroleum exports out of the region. Euan Mearns considers the possibility of the Kurdish autonomous region annexing the province of Kirkuk and expanding exports up to 2 Mb/d via Turkey. I doubt the Sunni population will simply let the Kurds take over what the Shiia left behind. I expect most of the petroleum operations in this province to halt, at least up until a clear governing power comes again into place. Naturally, it will take several months before these developments can be seen in the petroleum statistics.
Energy Matters
ISIS, Iraq, Kurdistan and the control of Oil
Euan Mearns, 27-06-2014

News broke on UK terrestrial television on Tuesday 24th of June that Kurdistan forces (The Peshmerga) had captured Kirkuk, a city in northern Iraq that sits on top of the supergiant Kirkuk oil field. This news broke on the WSJ days before.

John Kerry was in Kurdistan trying to persuade The Kurds to lead the way in cementing the new Iraq apparently oblivious to the fact that the Kurds have been working flat out to leave Iraq since the semi-autonomuous Kurdistan Regional Government (KRG) was formed.

Persecuted and gassed by Saddam, Kurdistan gained semi-independence in the wake of GWI in 1992. Since then, the whole region has been licensed for oil and gas exploration to foreign oil companies. Several billions of barrels of oil have been found, a pipeline built through Turkey to the Mediterranean Port of Ceyhan and oil exports have newly begun. None of this has the approval of the Iraqi government that looks set to fall in the weeks ahead.
And then came the news of a failed air strike to ISIL positions in Anbar that killed dozens of civilians. The western press is now saying it could confirm the Syrian origin of the aircraft; on its turn the al-Assad government maintains this attack was authored by the US. In either case it is obvious the border between Syria and Iraq is now just a mirage.
Albany Times Union
Syria warned for bombing Iraq
25-06-2014

Syrian warplanes bombed Sunni militants' positions inside Iraq, military officials confirmed Wednesday, deepening the concerns that the extremist insurgency that spans the two neighboring countries could morph into an even wider regional conflict. U.S. Secretary of State John Kerry warned against the threat and said other nations should stay out.

Meanwhile, a new insurgent artillery offensive against Christian villages in the north of Iraq sent thousands of Christians fleeing from their homes, seeking sanctuary in Kurdish-controlled territory, Associated Press reporters who witnessed the scene said.

The United States government and a senior Iraqi military official confirmed that Syrian warplanes bombed militants' positions Tuesday in and near the border crossing in the town of Qaim. Iraq's other neighbors — Jordan, Kuwait, Saudi Arabia and Turkey — were all bolstering flights just inside their airspace to monitor the situation, said the Iraqi official, who spoke on condition of anonymity because he was not authorized to speak to the media.
The US has remained reluctant to support the Shiia, so far restricting its actions to the deployment of 300 "advisers". But regarding the Sunni, the Obama administration wishes to hike further its commitment, with more military equipment and training operations. Could the US policy in the region be more ambiguous?
Deutsche Wella
Obama requests $500 million from US Congress to support Syrian rebels
26-06-2014

The White House on Thursday proposed the funding for "vetted elements of the Syrian armed opposition to help defend the Syrian people, stabilize areas under opposition control, facilitate the provision of essential services, counter terrorist threats, and promote conditions for a negotiated settlement."

The proposal was part of the $65.8 billion (48.3 billion euros) overseas operations request to Congress for the 2015 fiscal year, which begins October 1. President Obama made the request in a letter to the House of Representatives Speaker, John Boehner.

If approved, the $500 million in funding for Syria would be a significant escalation of US involvement in the more than four-year conflict between rebels and forces loyal to Syrian President Bashar al-Assad. Washington has been weighing options for providing additional assistance to rebel forces beyond the nearly $287 million in non-lethal assistance.
While the US falters the Shiia, Iran does not, with further hints of widening military support to the Baghdad government emerging this week.
UPI
Iran sending drones, military equipment to Iraq, U.S. says
Ed Adamczyk, 25-06-2014

Iran is covertly supplying military equipment to Iraq, as well as using surveillance drones to monitor Sunni militants overtaking the country, U.S. officials said Wednesday.

The programs are meant to gather intelligence and support the government of Prime Minister Nouri al-Maliki, and include a communications-interception unit on the ground in Iraq, as well as drones operated from a Baghdad airfield.

The head of Iran's paramilitary Quds Force, Gen. Qassim Suleimani, has visited Iraq twice to plan strategy and mobilize members of Shiite militias. In addition, Iranian transport planes make two daily flights to Baghdad, each flight carrying 70 tons of military supplies and equipment, the U.S. officials said.
Iran feels naturally emboldened by the disgruntled policies of the US in the region, and perceives the advances of the Sunni as both a threat and an opportunity. If indeed exports out of the northern provinces of Iraq are halting, Iran has effectively the means to make up for it, if economic sanctions by the OECD are lifted.
UPI
Iran can make up for Iraqi oil, minister says
Daniel J. Graeber, 23-06-2014

Iran has the ability to make up for any supply issues stemming from ongoing conflict in neighboring Iraq, the Iranian oil minister said.

Crude oil prices spiked last week on word Islamist insurgents in Iraq had laid siege to an oil refinery north of the capital city Baghdad.

Iranian Oil Minister Bijan Zanganeh said Saturday his country was ready to step in should output from Iraq suffer.

"Iran has currently enough capacity to make up for Iraq's oil supply shortage," he told the Oil Ministry's news agency, Shana, "Iraq's upheavals aside, Iran has always sought to maintain a steady and stable supply in the oil market."
For Russia these sanctions are no longer in place, as the embroilment in Ukraine drives the search for alternative economic partners.
UPI
Russia, Iran nuclear contract imminent
Daniel J. Graeber, 23-06-2014

Russian plans to sign a contract with Iran to help expand the Bushehr nuclear power facility by the end of the year, Russia's nuclear regulator said Monday.

Sergei Kirienko, chief executive at Rosatom State Atomic Energy Corp., said talks with Iranian officials are close to completion.

"We hope that by the end of this year we will move on to the final signing and additions to the intergovernmental agreement, and then the according contract," he said Monday.

Russia supplies Iran with fuel needed to power its Bushehr nuclear reactor.

In March, a spokesman for the Atomic Energy Organization of Iran said the agreement calls for the pair of 1,000-megawatt reactors to be built near the first unit of the Bushehr nuclear power plant.
And on the Ukrainian crisis, some leaders in Europe are slowly acknowledging the problems it is posing to our economies. Will actions match words?
EurActiv
‘Acute’ gas crunch fears push efficiency into spotlight
25-06-2014

Security of supply was now “an acute issue,” Oettinger told the conference. “The developments in Ukraine demand a policy response in the field of energy.”

An ambitious energy savings target for 2030 would not only curb gas CO2 emissions but gas use too, he said, adding that “the Commission estimates that every additional 1% in energy savings cuts gas imports by 2.3%.”

Traditionally, the EU has juggled three energy priorities – competitiveness, sustainability and security of supply – with the ascendance of a competitiveness agenda after the 2008 financial meltdown and the economic crisis that followed.

But last week’s decision by Russia to cut off gas supplies to Ukraine has intensified fears of a fuel crunch as winter approaches. That in turn has spurred calls for action on energy efficiency in a forthcoming review which could propose a target for 2030.
A bit closer to home Rune Likvern has been detailing the slow demise of the petroleum bonanza in Norway. The picture is indeed bleak with an obvious investment drought ahead.
Fractional Flow
Norway's Petroleum Economy struggles with declining debt productivity
Rune Likvern, 14-06-2014

The recent years high spending levels of petroleum related activities offshore Norway were closely linked to the growth in the oil price. Within the oil companies’ discovery portfolios there were discoveries that became commercial with the high oil price.

In 2013 total spending on petroleum related activities were around 9% of Norway’s GDP. Access to debt and lowered interest rates even caused some oil companies to take on developments (overvaluing recoverable reserves) that turned out to be unprofitable and subsequently led to write downs. This became capital destruction and has impaired the oil companies’ abilities for future spending (investments).

Statistics Norway in a recent update expects a considerable decline in spending on petroleum related activities in 2015. Developments that have been sanctioned are likely not to be affected, but the oil companies debt overhang and cash flow developments impair future developments and thus spending levels.
I always warn against news of technological breakthroughs that are supposed to save us from our energy predicament a few years down the road. This time may be no different, but it is important to note the following report comes out of a UK University, where research funding functions in a slightly different way from the familiar marketing driven logic of the US. In recent weeks I received in my e-mail box advertisements to solar cells under 0.5 €/kWp; cost is not exactly a problem for photo-voltaics at this stage. Above all what the article below shows is that costs of free fuel technologies can only go down with time.
The Independent
Breakthrough in solar panel manufacture promises cheap energy within a decade
Steve Connor, 25-06-2014

Researchers believe they have found a way of overcoming one of the most serious limitations of the next generation of solar panels, which are based on toxic cadmium chloride, by simply adding magnesium chloride, an abundant salt found in seawater.

A study has shown that the solar cells produced with magnesium chloride – which is also found in bath salts as well as used to coagulate soya milk into tofu – work just as efficiently as conventional cadmium cells but at a fraction of the cost and with much lower toxicity.

“We certainly believe it’s going to make a big change to the costs of these devices. The cost of solar is going to match fossil fuels eventually but this is going to get us there quicker,” said Jon Major of the University of Liverpool, who led the research.
The Summer is yet to start, but we can still be hopeful. Enjoy your weekend.