Monday, January 5, 2009

The Oil Route and the Gaza Strip Conflict

There is a plan to transport oil from the Caspain Sea/South Caucasus region to the Mediterranean port of Ceyhan, and thence to the Red Sea port of Eilat, through to supply markets in East Asia. Hamas appears to have been targeting an oil pipeline inside Israel with rocket attacks to disrupt this plan, and this has led to the Israeli invasion and planned occupation of the Gaza strip.
This post has nothing to do with nationalism, religion, or any civil society movements, etc. All the analysis and information here is from public sources of information. This analysis is intended to highlight the connections between the geopolitical developments on the Gaza strip and the financial markets. Contrary to popular press coverage, this is an ongoing conflict which has fairly clear financial causes and consequences. Interested private investors are advised to draw appropriate inferences to their advantage.
Since 2005, 5000 rockets have been fired into Southern Israel, causing 11 casualties amongst Israeli citizens so far. This statistic is from a statement of an Isreali military spokesperson on CNN yesterday. The Israeli military bombed Gaza City over 8 days and yesterday launched a ground offensive into the Gaza strip. Hamas continues to fire more rockets into Israel. In Gaza city there are civilian casualties and there is reportedly destruction of schools, hospitals, mosques, and all kinds of other buildings etc. Supply of electricity and the working of mobile phones has been disrupted. Shops are closed. Landline phones and radios appear to be working.
Israel has stated that the civilian population of the Gaza strip is not its enemy. Israel has assured that humanitarian relief is being provided. There have been pamphlets from the Israeli High Command adivising civilians to evacuate the Gaza strip and allow operations against the Hamas dominated areas. Washington has maintained at the United Nations that "a meaningful ceasefire is impossible at this stage". The Arab League has called for a cessation of hostilities. There have been popular protests against the invasion of Gaza all across various Arab countries and a very large protest in London as well.
It appears that the target of the rocket attacks by the Hamas were not civilians in highly populated areas in Israel. Rather it appears that the target has been the Ashkelon-Eilat oil pipeline inside Israel. Similarly it appears that the target of the Israeli Military is the disruption and prevention of these rocket attacks and not the civilians inside Gaza.
The Baku-Tiblisi-Ceyhan oil pipeline pumps oil from Azerbaijan in the Caspian Sea region to the Mediterranean sea port of Ceyhan in Turkey. More than 30% of this pipeline is owned by British Petroleum. The Ashkelon Eilat pipeline is owned by the Eilat Ashkelon Pipeline Company which began as a joint venture of the Israeli Government and the Teheran government. Since the Islamic revolution Teheran seems to have dropped out of the pipeline ventures of EAPC.
The BTC pipeline transports oil from the Caspian Sea to the Mediterranean and opens the way to supply Europe with Central Asian oil. In 2003 a reverse flow of oil from Ashkelon to the Red Sea port of Eilat was completed successfully. By transporting oil from the Turkish port of Ceyhan to Ashkelon, oil can then be pumped to Eilat and then transported across the Red Sea to the Arabian Sea in order to supply the markets in East Asia.
China already has another new pipeline that runs from the Kashagan oil fields (in Kazakhstan, South Caucasus region) east into China. So India seems to be the primary target market for the oil from the Caspian Sea through this route.
I'm yet to work out the details of the rest of this story. Chevron recently renewed the plan to buy equity stake in Reliance Petroleum. Indian Oil Corporation was a close partner of Istanbul in the construction of the Baku-Tblisi-Ceyhan pipeline.
Additional information/comments/corrections are most welcome.

1 comment:

  1. Just discovered your blog. Good job.
    I was wondering why is the Suez canal route not enough.
    Why is there need of a route through Elat. Is it a capacity issue. Seems like an awful lot of instrastructure for something that already exists and does not have security issues.
    Am I missing something?