On the menu today: Energy industry analysts warn that the Iranian strikes on Qatari liquefied natural gas have triggered the “Armageddon scenario” for that industry, as getting those facilities back up and running like before will take years. Meanwhile, United Nations Secretary-General António Guterres lets the world know that he is quite upset with the United States, Israel, and Iran, to no consequence. Meanwhile, the Royal Navy is unwilling to send warships to the Middle East because the threat posed by Iran means the situation is “too fluid.” But you know who is sending warships to the Persian Gulf for escort duties? India and Pakistan. Read on.
Energy Crisis in the Middle East
Right now, the world faces a genuine crisis. What started as a war to change the regime in Iran has now become a serious long-term threat to the existing energy infrastructure of the Middle East. The Financial Times headline warns that the “Armageddon scenario” for the liquid natural gas industry has arrived. Reuters reports the grim assessment from QatarEnergy’s CEO and state minister for energy affairs:
Iranian attacks have knocked out 17 percent of Qatar’s liquefied natural gas (LNG) export capacity, causing an estimated $20 billion in lost annual revenue and threatening supplies to Europe and Asia, QatarEnergy’s CEO and state minister for energy affairs told Reuters on Thursday.
Saad al-Kaabi said two of Qatar’s 14 LNG trains and one of its two gas-to-liquids (GTL) facilities were damaged in the unprecedented strikes. The repairs will sideline 12.8 million tons per year of LNG for three to five years, he said in an interview.
That amount of liquid natural gas is enough to serve about 21 million Americans for a year.
State-owned QatarEnergy will have to declare force majeure on long-term contracts for up to five years for LNG supplies bound for Italy, Belgium, South Korea, and China due to the two damaged trains, Kaabi said.
“I mean, these are long-term contracts that we have to declare force majeure. We already declared, but that was a shorter term. Now it’s whatever the period is,” he said.
For those unfamiliar, “force majeure” is a provision in a contract that frees both parties from obligations because of an unforeseeable outside event. ExxonMobil is a partner in the damaged Qatari LNG facilities, while Shell is a partner in the damaged GTL [gas-to-liquid] facility, which will take up to a year to repair. Reuters continues:
The fallout extends well beyond LNG. Qatar’s exports of condensate will drop by around 24 percent, while liquefied petroleum gas (LPG) will fall 13 percent. Helium output will fall 14 percent, and naphtha and sulphur will both drop by 6 percent.
Those losses have implications ranging from LPG used in restaurants in India to South Korea’s chipmakers which use helium.
The damaged units cost approximately $26 billion to build, Kaabi said.
No work is currently taking place on Qatar’s massive North Field expansion project, which could be delayed for more than a year, he said.
The outlook for oil exports from the region is similarly grim. From the Wall Street Journal:
Saudi Arabia’s oil officials are working frantically to project how high oil prices might go if the Iran war and its disruption of energy supplies doesn’t end soon — and they don’t like what they are seeing.
The base case, several oil officials in the Gulf’s biggest producer said, is that prices could soar past $180 a barrel if the disruptions persist until late April.
While that would sound like a bonanza for a kingdom still heavily leveraged to oil revenue, it is deeply concerning. Prices that high could push consumers into habits that slash their oil use — potentially for the long term — or trigger a recession that also hurts demand. They also would risk casting Saudi Arabia in the role of profiteer in a war it didn’t start.
These are projections, not guarantees. As I write this, crude oil is at about $94 per barrel; Brent crude oil is at about $107; heating oil and gasoline are up; but natural gas, which is typically traded regionally, not globally, is actually down a bit. By the time you read this, those numbers will probably have gone up a little or down a little, but they will still be significantly higher than before the war. When some news event like the strike on the Qatari facility makes prices soar, they usually decline somewhat in the following days, but they remain higher than before the event.
Like Every Other Real Problem, the United Nations Can’t Solve This
United Nations Secretary General António Guterres is quite mad about the war with Iran, and at 10:30 a.m. Thursday, at the European Council in Brussels, he demanded that the United States and Israel end the war, and that the Iranians stop attacking their neighbors and open the Strait of Hormuz. “It’s time for the force of the law to prevail over the law of the force. It’s time for diplomacy to prevail over war.”
You probably noticed that the war did not stop.
The “international community” is powerless to stop this war, just as the “international community” was powerless to stop Hamas’s October 7 attacks and Israel’s retaliation, or Russia’s invasion of Ukraine and the Ukrainian resistance, or come to a genuine answer about the origin of the Covid-19 pandemic. Back in 2022, the United Nations issued a major report declaring China was responsible for “serious human rights violations” of the Uyghurs. Since then, very little changed. The report was detailed and reflected fine investigation, but there was little to no consequential follow-through. The Rohingya, the Yazidis, and the Darfuri can tell you that when things get bad, the United Nations will offer words of support when you really need men with guns to protect you.
You Can’t Shape the Outcome of a War If You Don’t Show Up
The only thing that can alter the outcome of this war is hard power, in the form of military force.
You’ve seen a lot of discussion of whether our European allies will help us escort ships through the Strait of Hormuz. There are a lot of European ships in the eastern Mediterranean, protecting Cyprus, but not necessarily near the Persian Gulf.
As of Thursday, the French aircraft carrier Charles de Gaulle is northwest of Cyprus, roughly 62 miles from the Turkish coast, and presumably its carrier strike group is near it:
The French Carrier Strike Group includes: frigate FS Chevalier Pau (D621), a FREMM-class frigate, a fleet oiler and a nuclear powered attack submarine, as well as Spanish Navy frigate ESPS Cristóbal Colón (F105) and Royal Netherlands Navy frigate HNLMS Evertsen (F805). The French Navy also dispatched frigate FS Languedoc (D653) and a French Army ground based air defence unit to defend the Mediterranean island.
British and Greek warships have deployed to protect Cyprus from Iranian strikes. Athens swiftly responded to the strikes with the immediate deployment of F-16 fighters and a pair of frigates, including the Hellenic Navy’s newest warship, the French-built FDI frigate Kimon (F601), to protect the island. British Prime Minister Keir Steimer announced the Royal Navy Type 45-class destroyer HMS Dragon (D35) will head toward the Eastern Mediterranean to bolster air defenses against further attacks from Tehran. Three Royal Navy Wildcat helicopters and a Royal Navy Merlin “Crowsnest” airborne surveillance and control helicopter are now in Cyprus.
The Italian Navy is dispatching guided-missile frigate ITS Federico Martinengo (F 596) to provide air defense coverage for Cyprus, officials announced last week.
Any of those ships could, theoretically, sail down through the Suez Canal and through the Red Sea and around the Arabian Peninsula to arrive for escort duty. But so far that hasn’t happened, and European governments do not appear eager to perform those duties.
The Daily Telegraph reported earlier this week that “the Royal Navy is unwilling to send warships to the Middle East because the threat posed by Iran means the situation is ‘too fluid.’” (I thought navies traditionally worked in fluid.)
The Royal Navy’s options are limited, and not many ships are near the Persian Gulf, as far as we know; nations like to be a little vague about where their submarines are.
But some countries have sent their naval ships to the Persian Gulf to escort their countries’ ships:
The Indian Navy is deploying over half a dozen warships, including logistics vessels, to the area as a precautionary measure, the people said, asking not to be identified as the discussions are private. The warships will be stationed east of the Strait of Hormuz and won’t enter the waterway, they said. Their objective would be to escort the vessels until they reach safer waters in the northern Arabian Sea.
Meanwhile, their nuclear rivals are doing the same:
On March 9, Islamabad kicked off Operation Muhafiz-ul- Bahr, a maritime security operation to escort vessels owned by the Pakistani National Shipping Corporation. Among the deployed forces was PNS Shah Jahan (F264), one of four new Chinese-built Type 054A frigates. The 4,200-ton frigate is one Islamabad’s most capable warships.
India and Pakistan have no interest in getting directly involved in this war. But they’re also keeping their options open and taking steps to ensure they will be in a position to retaliate if, say, some Iranian force targeted their countries’ oil tankers or cargo ships.
There is no foreseeable scenario where the newest ayatollah du jour ends up being reasonable and agrees to end the war on America’s terms. They’re attacking the Qatari energy infrastructure because it’s leverage; they don’t care if they cause a global energy crisis and tank economies from Belgium to South Korea. If that’s what it takes for them to stay in power, so be it.
As much as energy consumers might want the war to end as soon as possible, if the U.S. and Israel unilaterally declared a cease-fire now, the Iranian mullahs will have a de facto win. They will have demonstrated that they effectively control the Strait of Hormuz and decide which ships can pass and which ones get blown up — or at least face the threat of getting blown up. Much of Iran’s traditional military has been blown to smithereens, but the drones, fast boats, and mines will provide Tehran with an asymmetrical advantage. Every country in the region will be tempted to cut a deal with the surviving mullahs and avoid a fight with them in the future.
Strangely, I am reminded of what former President Bill Clinton said when he was told the American people could stomach news of his affair with Monica Lewinsky, but not a cover-up: “Well, we’ll just have to win then.”
ADDENDUM: As noted on yesterday’s Three Martini Lunch podcast, I feel like I know everything I need to know about former National Counterterrorism Center director Joe Kent from the fact that upon his resignation, he decided that one of the best venues to share his important insights about the U.S. war with Iran was . . . Candace Owens’s program. That will show everyone he’s not some nutty antisemitic kook!
What, was Alex Jones booked this week?