As the terrorist attack in Paris sparks worldwide fear of similar reprisals and a bloody shootout and hostage situation in a five-star Mali hotel exacerbates those concerns, global energy security reels under the pressure of unfathomable geopolitics. In an interview with Oilprice.com, Robert Bensh, managing director and partner at Pelicourt, a Western-owned oil and gas company navigating tricky conflict zones, discusses:
• The terrorist threat to global energy security
• What ISIS is really after
• The bigger oil picture for ISIS
• Why Iraq can't cope
• Why Iraqi Kurdistan has disappointed
• Why loose and shifting alliances spell geopolitical disaster
• Whether it's all as doom-and-gloom as it seems
James Stafford: In the aftermath of the terrorist attack in Paris and the shooting rampage and hostage situation at the Radisson Blu hotel in Bamako, Mali, how are we supposed to understand the role of energy in this equation, or the threat to global energy security?
Robert Bensh: We don't have to force a connection here. Every modern-day conflict—even if not immediately evident—has at its heart control over resources, from oil and gas to water. Religion is but a symptom—a tool used to consolidate opinions, cement power and lure in new recruits.
Stafford: How significant a role does oil play in funding the Islamic State?
Bensh: I think we have to look at this from a much broader angle. While ISIS is earning significant income from oil sales, keeping in mind that no one really has a true estimate of volumes, the more dangerous aspect of this is that we are well beyond the point at which this is a crazy group of jihadists running amok.
Stafford: You're speaking about their level of organization and overall capabilities?
Bensh: Exactly. It's not their short-term energy disruptions we should be as concerned about. The bigger picture is that ISIS is trying to build a nation here—a fully functional state with its own oil and gas resources. And one of the most important aspects of their plan is to strangle Iraq's oil revenues in a concerted effort to reduce Baghdad's capabilities to defend its territory. At this rate, ISIS could become the next member of OPEC.
Stafford: Is Iraq even remotely equipped to deal with this threat?
Bensh: The latest disintegration of the Iraqi state came with the war in 2003. The follow-on prime minister, Nouri Al-Maliki, largely destroyed national institutions that would have presented a challenge to his Shi'ite rule. The weakened state that emerged from this has not been able to effectively combat the forward push of ISIS. And while the Kurds in Northern Iraq were a fundamental line of defense for Baghdad, that too is eroding as the Kurds have allowed themselves to become mixed up in disruptive internal politics that will undo all the work made to date towards independence. That development is not sitting well with investors who put a lot of money into what appeared to be a very stable and forward-moving Iraqi Kurdistan.
Stafford: How does Russia fit into this equation?
Bensh: It's all connected. And for the energy sector, it all reverberates globally. Less attention will now be paid to Russia's activities in Ukraine in light of the terrorist attack in Paris and the fear that this has sparked off an extended playing ground for the jihadists. As this happens, it is interesting to watch Russia's relations with Turkey, and the additional insecurity Turkey adds to the conflict in Syria. Turkey's game of playing all sides in the balance of power game is difficult to sustain. The downing by Turkey of a Russian jet conducting air strikes over northern Syria is just the first move in the new phase of this game, and analysts should probably start looking at ISIS oil sales to Turkey in their examinations of why Turkey downed a Russian jet at a time when the Russians were specifically targeting ISIS-controlled oil facilities and tankers.
Stafford: What can we expect from Turkey?
Bensh: President Erdogan has now consolidated his power, thanks to his victory in the recent parliamentary elections. This means a clear Turkish policy of regime change for Syria. This in turn will be taken advantage of by ISIS. ISIS has already taken great advantage of Turkey's double game in the form of boosting Syrian and Iraqi Kurds to keep ISIS back but trying to encourage Kurdish disunity by simultaneously attacking the Turkish Kurds. This is diminishing the Kurds' ability to fight ISIS and also creating a very dangerous situation on the Turkish-Syrian border and across into southeastern Turkey, where oil interests will suffer significantly. Amid the melee, Russia has been launching air strikes against ISIS in northern Syria, too close to the Turkish border for Erdogan's comfort.
Stafford: How can oil and gas investors possibly navigate this geopolitical terrain?
Bensh: They can't. No one can. Alliances are very unclear, and shifting. No one has a clear strategy because it's not just about containing the ISIS advance. It's about who is containing the ISIS advance—even after Paris. Will a Turkish-American air strike combo be the one to kick ISIS out of northern Syria? Or will the Russians? At the end of the day, there is one additional, untapped energy resource to be considered—the Levant Basin. This is where Israel has made game-changing gas finds that will render it energy independent and much more powerful. This is where Lebanon will eventually start exploring, if its political standoff is ever resolved, and if ISIS doesn't upset these plans. What is rarely talked about is Syria's unexplored portion of this highly promising basin. Whoever ends up in power in Syria will end up with this—the longer game.
Stafford: Is it all as doom-and-gloom as the mainstream media portray it?
Bensh: That is always a matter of perspective. It's always important to remember that the Middle East has been in a state of conflict since time immemorial and most likely will be for our lifetimes. It reaches us today in different ways, through the proliferation of various globalized media sources. As such, it always seems to be on our doorstep. At the same time, this same globalization in many ways aids the proliferation of terrorism as a new form of conflict. Whether it is doom-and-gloom is a matter of personal perception. But any way you look at it, these are dire straits out of which no government has a clear path.
Stafford: What advice would you give investors today about venturing into the oil and gas sector outside of North America?
Bensh: Only invest in management that has a certain geopolitical foresight. Oil and gas men tend to be short-sighted—like most other people. Just because you can make a play work in the U.S. does not mean you will succeed in a foreign country in this day and age. Geopolitical insight is paramount to success, and while no one will have all the answers, good management will at least be prepared for a number of eventualities.
This interview was originally published by Oilprice.com.