A cornerstone of Donald Trump’s foreign policy during his first U.S. presidency was the utilisation of the United Arab Emirates (UAE) as a fulcrum by which he could leverage back China’s growing influence in the Middle East. Through a related energy policy connected to India, he also hoped to counteract Beijing’s increasing dominance in Asia. When the UAE became the first major Arab state to sign an Abraham Accords peace agreement with Israel (brokered by the U.S.) on 13 August 2020, Trump’s Middle East strategy appeared to be going perfectly to plan. However, his loss of the presidency later the same year preceded a complete breakdown of that strategy under new President Joe Biden. During the latter’s tenure in office, China’s influence across the Middle East broadened and deepened at a pace matched only by the U.S.’s loss of power in the region. By the time Russia invaded Ukraine in 2022, the U.S.’s relationship with key leaders in the Middle East had reached such a low point that the UAE’s leader Sheikh Mohammed bin Zayed al Nahyan refused even to take a telephone call from Biden to discuss how he might help alleviate the resultant spike in energy prices. Saudi Arabia’s de facto leader, Mohammed bin Salman treated Biden’s request with the same contempt. It is exceptionally difficult to imagine either of them doing the same to Trump, so it is no surprise to see the UAE making moves to indicate that it may be edging back towards a closer relationship with Washington in his second term as president.
The latest signs of such a realignment have come from the UAE’s awarding of contracts for the massive expansion of its liquefied natural gas (LNG) capabilities, centred on the Ruwais LNG Project. Once fully operational, the Ruwais LNG plant will more than double the current LNG production capacity of the UAE’s ADNOC Gas to over 15 million tonnes per annum (mtpa). Last week saw the UAE energy giant award US$2.1 billion in contracts to bolster its LNG supply infrastructure with the largest (valued at US$1.24 billion) going to a consortium consisting of the Egyptian firms, Engineering for the Petroleum and Process Industries (ENPPI) and Petrojet. As also detailed in my latest book, Egypt has been a key focus of the efforts by the U.S. and its allies to boost gas and LNG capacity to compensate for the loss of the same from Russia as sanctions against it have been ratcheted up since 2022. Multiple U.S. and allied firms – including ExxonMobil, Chevron, BP, Shell, TotalEnergies, and ENI – are now at the forefront of these efforts in Egypt to help wean Europe off its former dependence on cheap Russian energy, which includes extensive on-the-ground presence across the country. These latest contracts for Ruwais are geared toward the build-out of an LNG pre-conditioning plant, compression facilities and transmission pipelines to supply feedstock to the Ruwais LNG Project. These will form a core element of ADNOC Gas’ Habshan 5 plant, which is part of the Habshan Complex and will have a combined 6.1 billion standard cubic feet of gas per day gas processing capacity. The newly awarded transmission pipelines will connect this Complex with the Ruwais LNG facility.
On the other side of the equation, the most recent long-term supply contract for LNG from the plant was December’s 15-year sales and purchase agreement (SPA) for 0.6 mtpa of LNG with major Western firm, Energie Baden-Württemberg AG (EnBW) — one of the largest operators of energy infrastructure in Germany and across Europe. This is the second such long-term deal between ADNOC Gas and a German firm, following November’s SPA for 1 mtpa for 15 years with SEFE Marketing and Trading Singapore Pte Ltd., a subsidiary of Germany’s SEFE Securing Energy for Europe GmbH. Highly significant in this context is the fact that it was Germany above all other countries in Europe that was seen by the U.S. and its key European allies of the U.K. and France as by far the weakest link in supporting meaningful sanctions against Russia after its invasion of Ukraine. Germany’s effective leadership position in the European Union (E.U.) — the U.K. having earlier withdrawn from it — and its longstanding reliance on cheap and plentiful Russian oil and gas to power its economic growth was seen as the key reason for Europe’s muted response to Russia’s invasion of Georgia in 2008 and its first invasion of Ukraine in 2014 (and subsequent annexation of Crimea), as also analysed in full in my latest book on the new global oil market order. Indeed, just after the invasion, the only real flurry of activity within the EU was aimed at ensuring that Russia did not stop supplying its member states with either gas or oil, due to their not being able to pay in the way Moscow preferred. This followed the 31 March decree signed by President Vladimir Putin that required EU buyers to pay in roubles for Russian gas via a new currency conversion mechanism or risk having supplies suspended.
That said, although the UAE had made plain its contempt for Biden in early 2022, its attitude changed later that year after the discovery by U.S. intelligence agencies that there was still activity around the port of Khalifa indicating China’s attempts to construct a secret military facility there had not ended. As highlighted by OilPrice.com at the time, the U.S. had made it very clear after discovering in December 2021 that China had been building such an installation that it looked forward to a new phase in its relationship with the UAE. In 2022, these hopes were conveyed even more forcefully by Washington to the UAE, and shortly afterwards, the UAE-Germany Energy Security and Industry Accelerator was signed with the purpose of ‘advancing cooperation in energy security, decarbonisation and lower-carbon fuels’. In February 2023, ADNOC delivered 137,000 cubic metres of LNG – its first at that point to Germany – to the Elbehafen floating storage regasification unit (FSRU) LNG terminal in Brunsbüttel.
Consequently, Trump still has something of a foundation energy relationship to work on with the UAE, and the Arab state never cancelled the Abraham Accord with Israel either. Hopes are high in Washington that the new Presidential Administration will once again be able to resuscitate the full plan for the UAE over time. As detailed in my latest book, this is centred on the U.S. investing heavily in the UAE’s oil and gas sectors in order to substantially increase the production of both, which would then be directed principally towards India, rather than China, as the primary long-term Asian destination. Washington still sees India as the natural political, economic, and military counterpoint to China’s dominance in Asia, so playing a pivotal role between it and the UAE’s energy resources would benefit Washington’s ambitions both there and in the Middle East. Additionally helpful to the U.S. is that the UAE already has a very close energy relationship with India to build on, with ADNOC being the only overseas company allowed to store crude oil in India’s Strategic Petroleum Reserves (SPR). This is mainly done at the Mangalore strategic storage facility, with the other major SPR pool being at Padur. India has also allowed ADNOC to export this oil to allow it greater operational flexibility. Leveraging this relationship further both from the UAE side into India and from India back into the Middle East is also intended by the U.S. to enable India to make substantive progress on its ‘Neighbourhood First’ policy as an alternative to China’s ‘One Belt, One Road’ initiative.
Source: By Simon Watkins from Oilprice.com