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The war in Ukraine has profound ramifications for the Middle East. While the immediate impact of the Russian invasion, and subsequent sanctions on Russia, was to trigger massive volatility in global capital markets and spikes in commodity prices that have compounded the threat of inflation, the long-term effect will see new dependence on Middle East energy.
The mere prospect of energy supplies from the world’s third-biggest oil producer and second-biggest natural gas producer being cut by sanctions saw oil prices surge to nearly $138 a barrel on 7 March, their highest mark since 2008.
The high prices deliver a financial windfall to Middle East oil and gas producers, who will accelerate post-pandemic stimulus spending on infrastructure.
But the invasion has exposed Europe’s overdependence on Russian oil and gas. There will be a strategic realignment of global energy and a European diversification away from Russian energy to alternatives such as renewables, nuclear and Middle East energy.
In the longer term, Middle East oil and gas will be vital to stabilising global energy markets.
Gulf producers have abundant oil and gas reserves and have been reliable suppliers for decades. With its liquefied natural gas expansion programme under way, Qatar will become a major supplier of natural gas to Europe, while Saudi Arabia, the UAE and the region’s other oil producers are well placed to increase their supplies of low-cost oil.
Additionally, Gulf investment in renewable energy and clean fuel technology provides an important ‘green’ angle that aligns with climate change action.
Libya, Iraq and Algeria will receive support to increase output, while the incentive grows to agree a new international nuclear deal with Tehran, even though Russian and Chinese involvement creates political complications.
The Gulf’s oil producers are keen to avoid taking sides in the Ukraine war. But they have an important role to play in the fallout from the conflict.
Must-read sections in the April 2022 edition of MEED Business Review include:
> AGENDA: War’s global dimension
> FROM THE EXPERT: When the unexpected happens
> INFLATION: Russia-Ukraine crisis drives tender inflation
> CURRENT AFFAIRS: Middle East finds 1990 echoes in Ukraine crisis
> BIG INTERVIEW: Abu Dhabi’s NPCC enters growth phase
> MEED GOVERNANCE INDEX: UAE leads MEED's governance index
> TOURISM REPORT: Regional tourism on path to recovery
> SAUDI ARABIA MARKET FOCUS: Riyadh enjoys economic windfall
> TECHNOLOGY: Aramco uses AI to speed up projects
> LEGAL: UAE labour laws boost mental health
> LEADERSHIP: Central banks respond to decline in cash
> GULF PROJECTS INDEX: Gulf Projects Index declines in March
> FEBRUARY 2022 CONTRACTS: Value of deals signed continues to decline
> BUSINESS OUTLOOK: Finance, oil and gas, construction, power and water contracts
We hope you enjoy the April 2022 edition of MEED Business Review.
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