Saudi Arabia and Kuwait, as the second and tenth largest oil producing countries in the world, respectively, produce roughly 15,000,000 barrels per day (bpd).
Saudi Arabia and Kuwait, as the second and tenth largest oil producing countries in the world, respectively, produce roughly 15,000,000 barrels per day (bpd). Although an impressive number, this figure could have been even higher had the two Gulf Cooperation Council (GCC) member-states reached an agreement on the exploitation of the Neutral Zone, which lies at Kuwait’s southern border with Saudi Arabia and can potentially produce up to 500,000 bpd. Given the historical closeness between Saudi Arabia and Kuwait, it is remarkable that these Gulf states have been unable to restart production in their shared oil fields since production ceased in 2015 due to a “spat” over an energy concession that Saudi Arabia previously granted Chevron.
Kuwait’s seeming unwillingness to compromise is particularly notable and could be an indicator of Kuwait’s ambition to be a more independent actor in the region. As a relatively small country surrounded by the regional giants of Iran and Saudi Arabia, and having born the brunt of Iraqi occupation in 1990 and 1991, Kuwait, and current Emir Sabah Al-Ahmad Al-Jaber Al-Sabah, in particular, have been very protective of the emirate’s sovereignty and independence. Given the significance of Kuwaiti sovereignty, one can imagine the annoyance when in 2007 Kuwait discovered that the land on which it planned to build an oil refinery had already been granted to Chevron by the Saudis.
It should not, therefore, come as a surprise that Kuwait was rather dismayed when Saudi Arabia unilaterally decided to renew Chevron’s concession to operate in the shared oil field of Wafra in 2009. It is equally unsurprising that Kuwait subsequently started dragging its feet and making life difficult for Chevron to such an extent that operating in Wafra became near impossible. Although Kuwait cited maintenance as the reason for shutting down the oil field in May 2015, some claim it was actually due to Chevron’s inability to obtain the proper supplies and permits from the Kuwaiti government. The shared sea-based oil field, Khafji, had already been closed by the Saudis a year earlier, as they claimed operations there did not adhere to environmental standards.
The issue of the Neutral Zone and the resumption of oil production flared up once more at the end of September 2018. As the upcoming embargo of Iran would reduce the flow of oil entering the market, the US urged OPEC members to increase their production of oil in order to prevent a large spike in oil prices. Although Kuwait was not unwilling to answer Donald Trump’s call to increase its oil production, it faced difficulties in doing so. Given that most of Kuwait’s oil fields were already operating at more or less maximum capacity, the only way in which it could significantly increase its daily production was for Kuwait to reopen the shared oil fields with Saudi Arabia, but negotiations regarding the resumption of production had been stuck for years. Both countries appeared optimistic, however, with Kuwait’s Minister of Energy even eyeing an early 2019 reopening.
Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) would visit Kuwait in what was supposed to be a demonstration of the brotherly ties of the two nations and a foundation for further cooperation.
In September 2018, however, a unique opportunity appeared to present itself. Saudi Arabia’s Crown Prince Mohammed bin Salman (MbS) would visit Kuwait in what was supposed to be a demonstration of the brotherly ties of the two nations and a foundation for further cooperation. Yet the visit did not turn out as expected. Although the state-led media in both countries were quick to tout the great successes achieved during the crown prince’s lightning visit, reports quickly emerged that the meeting between MbS and Emir Al-Sabah had been far from successful.
First, whereas the trip had been scheduled to last several days, Bin Salman only remained within Kuwait for a couple of hours. Second, some sources claim that when Bin Salman brought up the issue of the shared oil fields, the Kuwaitis quickly made it clear that no deal would include Chevron operating in Kuwait under Saudi terms. Naturally, this was unacceptable to the Saudis. The visit also revealed further underlying tensions between the two countries, among which the Kuwaitis’ reluctance to become overly involved in the Yemen conflict and its continued efforts at mediation between Qatar, Saudi Arabia, Bahrain, and the United Arab Emirates (UAE).
Even though MbS claimed the situation would be resolved soon, the visible optimism that surrounded the reopening of the oil field had disappeared like snow under the hot Kuwaiti sun, and the prospect of production resumption was “dead as a doornail” barely two weeks after his visit. In December 2018, the Kuwaiti minister of oil and the CEO of the Kuwait Petroleum Company (KPC) traveled to Saudi Arabia to continue discussions on the topic, but these talks do not appear to have yielded any tangible results. Nonetheless, the Saudi leadership has made it clear that it is seeking an agreement with Kuwait over the Neutral Zone in 2019. On February 20, the Kingdom’s energy minister, Khalid al-Falih, stated that he is “confident” about a resolution this year.
A Fraternal Falling Out
Kuwait’s strife for independence goes beyond merely resisting Saudi attempts at increasing their influence over the divided zone. In fact, over recent years, a trend has become apparent in which the Kuwaitis have taken different positions from Saudi Arabia, the UAE, and Bahrain on contentious issues. For example, Kuwait has made use of its membership of the UN Security Council to reaffirm its dedication to the idea of the Palestinian state and its opposition to Israel. At a time when the U.S. has been working to bring the GCC states closer to Tel Aviv, Kuwait called out Israel for its operations in Lebanon and committing an act which Kuwait considered to breach Lebanon’s sovereignty.
Whereas Kuwait pursues a hardliner stance against Israel, it appears somewhat more neutral vis-à-vis Iran. Although it has complied with the American reinstatement of sanctions on Iran, it continues to look for avenues through which it can enhance economic cooperation with the Islamic Republic. The Emirate also supported Iran’s right to a peaceful nuclear program in the past and expressed its disappointment when Trump pulled Washington out of the Joint Comprehensive Plan of Action (JCPOA).
Moreover, while Kuwait has participated on the side of the Saudis during the civil war in Yemen, its involvement there has been negligible, and support appears to have been of a moral nature rather than a material one. Taking this into account, Kuwait would likely have been unpleasantly surprised by recent comments from the Saudis and Bahrainis at the Warsaw summit which appear to downplay the importance of the Israel-Palestine issue and claim that the sole focus of the GCC states should be on dealing with Iran, rather than with Israel.
Emir Al-Sabah of Kuwait was one of the founding fathers of the GCC, he remains strongly committed to the multilateral organization as a means of solving regional problems.
In addition, as Emir Al-Sabah of Kuwait was one of the founding fathers of the GCC, he remains strongly committed to the multilateral organization as a means of solving regional problems. The Saudis, Bahrainis, and the Emiratis, however, opted to circumvent the GCC entirely when they decided to boycott one of its members, namely Qatar. Their contempt for the organization became even more apparent when the three states opted not to send any high-level diplomat or royal family member to the summit, which was held in Kuwait in 2017.
In an attempt to save the GCC, Kuwait has been profiling itself as a mediator between the parties despite not being able to bring them closer together. This became clear during the GCC-summit held in Riyadh in December, where Sheikh Tamim, the only high-level diplomat present during the previous summit, was replaced by his minister of foreign affairs at the last minute, amid concerns for his safety. Furthermore, the topic of the ongoing boycott against Qatar was not mentioned at all in the final communiqué and reportedly only briefly discussed behind closed doors on the insistence of Emir Al-Sabah.
Looking Beyond the Neutral Zone
As relations with the Saudis remain somewhat tenuous, Kuwait may need to look elsewhere for opportunities to ramp up its oil production when needed. One of these opportunities may lie north, rather than south of the Kuwaiti border. Rather than negotiating with an old ally, it appears as if Kuwait may have found a friend in an old enemy, namely Iraq. Ironically, the very same shared oil fields that kick-started the first Gulf War may now hold the key to preserving Kuwaiti independence.
Although talks between them regarding co-exploitation of the shared oil fields have been ongoing for years, the two finally appeared to make tangible progress in August, when they agreed on studying the idea. Last December, the Iraqi oil minister revealed that a consulting firm had been selected to perform the study, and claimed that “final touches” were being made to an agreement that would provide for Iraq to export gas to Kuwait.
Although the discussions currently appear to be going smoothly, there are several reasons why Kuwait may be hesitant to look north. One of the reasons is that Basra has proven to be an unstable region within Iraq. The unrest that took hold of Basra in September, for example, during which protestors threatened to invade the oil fields there, has subsided but has not been permanently put to rest. Recurrent turmoil in the region may force the Kuwaitis to become a more proactive force in order to ensure that its economic interests are protected, but it is doubtful whether the country would be willing to take up such a role. Instead, a more likely scenario would be that Kuwait will continue to opt for non-military means of crisis alleviation, similar to when it sent 17 power generators to Basra in order to mitigate the effects of the ongoing power-outages there in July. It remains to be seen to what extent this tactic will prove effective, however.
In the end, in the case of both the shared oil fields with Iraq as well as the ones with Saudi Arabia, willingness of all parties to make concessions will ultimately be determined by the price of oil. As it stands, Saudi Arabia has slashed its output of oil, making it clear that it will not be looking to make any concessions in regard to the shared oil fields in the near future. Iraq, on the other hand, has been increasing its production and has even surpassed its OPEC quotas, making it more likely that it would be willing to look into a partnership with Kuwait, especially considering the fact that Iraq will be dependent on oil revenues to fund its reconstruction.