Busy times along the Asia-Pacific oil supply line

By Eric Watkins

LOS ANGELES, April 13 – Well, it’s long past April Fool’s Day, but only a fool would deny the tension rising in Asia-Pacific over challenges – or should we say threats – to the region’s oil supply line from the Strait of Hormuz to the East China Sea.

North Korea’s failed rocket launch was clearly a damp squib when it comes to actual threats, but no one should think it will deter the North Koreans from seeking a fig leaf to cover their embarrassment. If anything, it will move them to something bigger.

A third nuclear test is in the offing, with political analysts saying that Kim Jong-eun, North Korea’s young new leader, needs a quick fix to cover the embarrassment of the failed Eunha-3 rocket launch.

If so, other experts say it may just be the one more test that Pyongyang needs in order to manufacture a warhead to fit on a long-range missile that would directly threaten the US or any of its allies in the region. They had such a missile in 1999, so don’t let today’s failure fool you.

REPEAT THE PAST

Then again, North Korea might try a repeat of the past by seeking direct confrontation with South Korea on the disputed maritime border off the west coast. That happened in 2010 when Pyongyang sank a warship and bombed an island, killing 50 South Koreans in the process.

Given North Korea’s military links with Myanmar, there’s little wonder why the West is eager to normalize relations with that Southeastern Asian nation. That was certainly a point of contention last November, when Secretary of State Hilary Clinton paid a visit to Myanmar.

According to a senior State Department official traveling with Clinton, the highest priority of a meeting with Myanmar’s foreign minister was to seek assurances that the Southeast Asian nation would halt purchases of missile technology from North Korea.

Not least, US analysts also had examined whether Myanmar and North Korea had been secretly collaborating on a nuclear weapons program, but the senior official said at the time that “we do not see signs of substantial effort at this time.”

NO TIME TO WASTE

Still, there’s no time to waste, and Western officials are wasting no time in getting to Rangoon to continue the process of opening up a country that has for too long loitered in the shadows.

UK Prime Minister David Cameron today became the first Western leader to visit Myanmar in decades, and made clear that he favors suspending sanctions imposed by the European Union on Myanmar, given signs that it is moving towards democracy.

Still, Cameron urged caution: “We must always be skeptical and questioning because we want to know those changes are irreversible, but as we have discussed, I think it is right to suspend the sanctions that there are against Burma – to suspend them, not to lift them.”

Even a suspension would be welcomed by both sides, opening the door to a rush for oil, mining and timber resources in the impoverished country. Then, too, as WWE pointed out earlier this week, it also means that the West could stall China’s growing hegemony in the region.

The events in Myanmar and North Korea come just ahead of the proposed talks between Iran and the five permanent members of the United Nations Security Council — the US, UK, China, France and Russia — along with Germany, the so-called P5-plus-1 countries.

TEHRAN’S HAND WEAKENED

The talks would have had a completely different complexion had North Korea’s missile launch gone off as planned, giving Tehran a much stronger bargaining position. But Pyongyang’s failure has weakened Tehran’s hand, and WWE expects the talks will lead to little more than temporizing by Iran.

Indeed, with nearly two and a half months to go until the EU’s embargo on Iran’s oil takes effect, Tehran has plenty of time to work out its next steps and it will take all of the time that it needs.

One sign of the temporizing came earlier this week when Ferydoon Abbasi, the head of the Iranian Atomic Energy Organization, said his country would consider limits on its home-grown stockpile of enriched uranium.

Iran’s media further quoted Abbasi as saying that other uranium enrichment activities would be restricted to much lower levels of purity needed to fuel power generation reactors.

That offered what seemed a modest compromise to partly meet Western concerns ahead of the planned nuclear talks. But don’t count on that happening this week. Iran has a lot of time to play with before it is forced into any action of consequence.

TIME TO BURN

More important by far is the claim by Iran’s President Mahmoud Ahmadinejad that his country has enough funds to withstand a total embargo on its oil sales for two to three years.

“We must say to them that we have that much saved that even if we didn’t sell oil for two to three years, the country would manage easily,” said Iran’s president.

In the run-up to Saturday’s talks, that sounds like negotiating rhetoric. But the EU’s embargo on Iran’s oil is not due to take effect until July 1, and that gives Tehran plenty of time to maneuver.

During that time, Iran will be doing little more than trying to keep those oil prices from falling too far – even as it pursues what the P5-plus-1 countries believe to be a uranium enrichment program in the service of nuclear weapons.

Up and down Asia-Pacific’s main oil supply line, it has been a busy week. But look out for busier times to come.

© Glamma Productions 2012

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About Eric Watkins

Eric Watkins is a consultant specializing in oil diplomacy. A former journalist, Mr. Watkins's work has appeared in numerous leading publications including The Wall Street Journal, The Economist, The Financial Times, and specialist media such as Oil & Gas Journal, Middle East Economic Survey (MEES), and Lloyd's List.
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