11.03.2016 Author: Salman Rafi Sheikh

How Europe is Playing the Saudia-Iran Rivalry?

21016546133Weary of the House of Saud’s monstrous creation called ISIL and its reach to Europe, European countries seem to be inclining towards creating a ‘distance’ from Saudi Arabia. Or is it? The latest instance of this so-called ‘distance’ came on February 25, 2016 when European Parliament called upon the EU to impose embargoes against Saudi Arabia, saying Britain, France and other EU governments should no longer sell weapons to a country accused of targeting civilians in Yemen. While the language of the resolution and the ‘concerns’ voiced regarding Saudi Arabia’s in-humanitarian policies in Yemen seem good, the fact of the matter is that neither the EU is really touched by the loss of life and property in Yemen nor does it feel compelled to extend relief to the 14.4 million people, who are reportedly reaching the point of starvation in Yemen, by merely imposing embargoes on Saudi Arabia.

While the resolution was quite explicit about the crisis in Yemen, it was conspicuously silent about the humanitarian crisis the Saudi imposed war in Syria has caused. Perhaps, Syria still does not qualify as humanitarian enough! The dual attitude is, in reality, not simply an instance of ‘distance’ between the EU and the House of Saud, it is only a reflection of how the EU is playing the Saudia-Iran rivalry to its own advantage.

Two grasp the full picture of how the ‘Western Continent’ is turning this rivalry, which has only been re-newed by the Iran-nuke deal, into its own advantage, we should look in particular at how Iran’s economic relations are developing with Europe in the post-deal scenario. Recently signed deals of worth billions of dollars notwithstanding, Iran’s preference for Euro over dollar indicates how Europe is going to become, or is already becoming as the deals indicate, Iran’s biggest trade partner. A source at state-owned National Iranian Oil Co (NIOC) was reported to have said that Iran will charge in euros for its recently signed oil contracts with firms including French oil and gas major Total, Spanish refiner Cepsa and Litasco.

The preference for Euro is, therefore, not merely an instance of Iran’s policy to reduce dependence on the U.S. dollar. It is, on the contrary, an indication of how Iran is crafting space for itself in the all-important European market. European companies are rushing to Iran for business opportunities, so it makes sense to have revenue in euros,” said Robin Mills, chief executive of Dubai-based Qamar Energy.

Simply put, Iran wants access to Europe as its biggest provider of oil, and in doing so it will certainly hurt Saudi Arabia’s interest. As such, by facilitating Iran, Europe is only putting Iran and Saudi Arabia face to face and stands to benefit from the consequent low oil prices.

An instance of this ‘low-prices’ for Europe came in January 2016 when Saudi Arabia cut the prices it charges for crude oil in Europe. The cut in price was in sharp contrast to Asia and the U.S. where Saudi Arabia actually increased it. This Europe-centric concession was, therefore, clearly aimed at pre-empting Iran from re-capturing the market it had previously access to. For instance, Italy and Spain relied on Iran for 13% and 16% of their oil imports before the European Union banned such purchases under sanctions related to its nuclear program in 2012. Although the country was replaced in the market by Saudi Arabia and other countries, Tehran is gearing up to re-take its place. Hence, billion-dollar deals with European countries and now the policy to trade in Euro instead of USD.

On the other hand, while Iran was still unable to start selling its oil to Europe, it did cut its nominal oil prices for North Western Europe by 27% in the past year alone. And since the lifting of sanctions, Iran has been setting competitive price for the European market. In the second week of February, Iran revealed its oil prices to European buyers for the first time since sanctions were lifted. The most competitive pricing compared with Saudi Arabian supply in 21 months underscores its intention to win back market share. Iran Heavy, one of the country’s main export grades, will cost $1.25 a barrel less than Saudi Arabia’s most similar crude in March, notices from both nations’ state oil companies show.

Europe, as such, stands to benefit from the Iran-Saudia tussle to dominate the European market. Although the ‘anti-Saudia’ resolution of EU parliament cannot be categorically explained as actual distance emerging between Saudia and Europe, it certainly reflects the European tactic to trick both countries into lowering down the oil prices to the minimum—a situation that directly adds to the Europe’s fragile economic position, help it manage its industrial production costs and balance of payments.

The supposedly ‘historic’ EU resolution, which does not have any legal force behind it, is only a tactic that should help the EU allow for greater supply of Iranian oil, which is not only less costly but also involves trade in Euro. Although this is not the first time Iran has made a towards Euro as it has made such attempts in the past as well, the announcement coming at this particular juncture of time does indicate how Europe is turning into a ‘battle ground’ between Saudi Arabia and Iran and how Europe itself is facilitating this ‘battle’ through political provocation such as the call for embargoes against Saudi Arabia.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”.