Posted on 18 June 2014 with no comments from readers
The security situation in Iraq has taken a dramatic turn for the worse with Al Qaeda offshoot the Islamic State of Iraq and al-Sham now comprising only 10 per cent of a far wider Sunni insurgency, sources on the ground told ArabianMoney today via email.
The main refinery at Beyji has been shutdown, it is presumed though not confirmed due to the Sunni insurgency. There has been panic buying of fuel across the country with long queues forming at gas stations.
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Western media coverage has been focused on the ISIS as a new terrorist threat and diplomatic efforts to remove personnel from Baghdad. The importance of the wider Sunni insurgency has been missed. Yesterday the loss of Tal Afar was another blow to the government. Sections of the Kirkuk-Ceyhan pipeline run through areas now under the control of the insurgency, threatening up to a million barrels of oil per day.
Iran is said to be boosting security along its border with Iraq as the Sunni insurgents come closer. They are the sworn enemies of the Iranian Shiites. What is going to happen next in this rapidly unfolding disaster for Iraq?
Clearly Wall Street’s assumption yesterday that the ISIS terrorists are running out of steam looks very wishful thinking given the far wider Sunni insurgency. The security of Baghdad must also be seriously called into question after the recent desertion of the army in Mosul. No wonder foreign embassies and the United Nations have been hastily evacuating staff.
Threat to oil exports
The idea that Iraq’s southern oil fields are out of harms way is then also nonsense, and a major interruption to global oil supplies on the cards. Iraq is the world’s second largest exporter of oil. Absent Iraq and oil prices will rocket.
The broader implications for financial markets are obvious. Highly-valued global and GCC stock markets will tumble. There will be a flight to safe havens like bonds, cash, gold and silver. The global economy will go into a recession.
For Middle Eastern geopolitics the end-game looks to be a three-way split of Iraq. That’s going to be a messy process and a widening of the violence must be likely. Eventually there has to be a more stable status quo. Quite where it lies is really hard to tell.