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Middle East tensions rumbled on in 2018

Oil prices recovered, but old conflicts remained unresolved

The fate of Middle East oil producers in 2018—and producers elsewhere in the world—remained largely in the hands of Saudi Arabia and Russia. Despite rumours of differences in strategy and objectives, the two giants—producing around 40pc of global output—stuck to their guns and maintained production cuts agreed the previous year. It became increasingly clear that the muscle to influence oil markets had passed from Opec to the Saudi-Russian partnership.

Iran, once a major energy force to match Saudi Arabia, was forced out of the running by US sanctions which, in November, were extended to the energy sector. Fear of global supply shortages resulting from an anticipated dip in Iranian oil exports helped drive the Brent price in October over $80/bl. Intermittent disruption to production and exports in Libya, and the fear of further problems there, contributed to the price spike.

But the Gulf states' relief at the recovery in the volume of oil revenues entering their coffers was tempered during Q4 2018. With the Trump administration granting waivers to eight countries to allow them to continue importing crude oil from Iran and US production surging to 11.6mn bl/d, prices slipped back to the $60/bl range.

If the Gulf states felt some satisfaction at the way oil performed in 2018 they had little else to shout about. The Saudi-UAE-led economic and diplomatic blockade of Qatar showed no signs of ending, leaving the GCC looking impotent and irrelevant. Kuwait and Oman made cautious attempts to mediate in the dispute, wary that they might become targets themselves of blockades for failing to back Saudi-UAE action in Yemen and for maintaining relations with Iran.

Saudi-Iranian tension increased during 2018. The Saudis blamed Iran for supporting Houthi rebels in Yemen and enabling them to launch dozens of ballistic missiles towards targets in the kingdom. The war itself ground on without either side making significant progress. The Saudi-led coalition launched an assault on the Red Sea port of Hodeidah in the hope of forcing the Houthis to the negotiating table. But the offensive, like so many others in the conflict, became bogged down.

The Gulf states in 2018 had little to shout about

All the while, the suffering of the civilian population in Yemen intensified. Hundreds more died as a result of Saudi air strikes and Houthi artillery bombardments. By the end of the year, close to 2mn people faced starvation in the world's worst humanitarian disaster. In the final quarter of the year, international attention finally focused on Yemen. Amid intensified diplomatic moves, both sides in November agreed in principle to join UN-sponsored peace talks in Sweden.

The Yemen conflict attracted global attention because of Saudi Arabia's involvement—for the kingdom in turn had hit the headlines because of the murder of journalist Jamal Khashoggi in the Saudi consulate in Istanbul. The incident seriously damaged Saudi Arabia's reputation and cast a shadow over the ongoing economic reform programme in the kingdom, with the flight of capital accelerating and foreign direct investment slowing down.

Syria, meanwhile, endured yet another year of warfare, which saw the Syrian army, backed by Russian and Iranian forces, claw back more and more territory from rebel hands. Turkey became involved in Syria in a major way, capturing areas that were under Kurdish control. The Turkish government says the Syrian Kurdish YPG group is aligned with the banned Turkish separatist PKK. The US continued to provide support for the YPG in the campaign against jihadist Islamic groups in Syria, a key factor in a year of strained relations between Ankara and Washington.

In September, Russia and Turkey announced an agreement to set up a demilitarised buffer zone between Syrian government forces besieging Idlib and rebels trapped inside. It was a rare piece of positive news to emerge from Syria during the year, even though many Syrians and others were sceptical about the chances of all sides sticking to the deal. For Syria as a whole, the day when stability might return and the rebuilding process begin seemed as distant as ever.

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