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The Impact of the Arab Spring on the Energy Sector: Opportunities and Risks

November 16, 2012 • GLOBAL ECONOMY, Middle East & Africa

By Gawdat Bahgat

In the late 2012 the Arab World looks very different from what it was just two years ago. The presidents of Tunisia, Libya, Egypt and Yemen, who ruled their respective countries for decades, had been toppled. In Syria, tens of thousands of people had been killed in what is increasingly becoming a civil war between the rebels and the Assad regime. In Bahrain, the majority Shiites have sought to reform the regime and gain political and economic rights. Other Arab countries such as Morocco, Algeria, Jordan and the Arab states on the Persian Gulf have pursued different strategies to contain opposition.

These unprecedented upheavals are likely to have profound impact on the region’s economic and political development. The full impact of these changes is yet to be assessed. The energy sector is, by far, the most vital one in almost all Arab countries (for both consumers and producers). This essay seeks to explore and identify the initial impact of these political upheavals on the region’s energy sector. These political and economic dynamics will be examined within the broader strategic global system. In other words, the essay analyzes the alteration of energy consumption, production and investment patterns in response to political changes in the Arab world, within the context of global financial crisis and comprehensive economic sanctions against Iran.

The high level of energy consumption in the Arab world cannot be divorced from the region’s strong tradition of under-pricing energy.

According to the latest report by the British Petroleum, the Arab states hold approximately 714.6 billion barrels of proven reserves (43.3% of the world’s total) and 46.9 trillion cubic meters (22.5% of the world’s total).1These massive hydrocarbon resources are great blessing. The full and sustainable utilization of these resources, however, depends more on what happens “above the ground” than what is available “under the ground.” In other words, the question is less about geology and more about geo-policy and geo-economy.

 
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