Iran interim agreement: the Minotaur's labyrinth

In the story of the Minotaur, Daedalus was tasked with building a labyrinth under the order of King Minos of Crete to imprison the dreaded creature. The Minotaur, part man part bull, was an unnatural being. He was created when Pasiphae, King Minos’ wife mated with the bull sent by Poseidon; this was made possible by the wooden cow crafted by Daedalus into which Pasiphae climbed into. The Iran framework agreement, is in some respects like the labyrinth – an artificial solution to a man-made problem. As the tale goes, only a great Athenian hero (Theseus) is needed to finally slay the Minotaur.

On 2 April 2015, the P5+1 and Iran had agreed to the framework agreement against all odds. The details of the agreement were also more granular than had been expected by the international community. Initial expectations were that high level terms would be agreed by the end of March deadline, with the finer details to be thrashed out over the following months ahead of the ultimate 30 June deadline. Reaching a nuclear deal with Iran has been a desire for the US for decades, and following lengthy negotiations, it appears that things are now moving in the right direction. Iran has also been more willing to come to the table following years of sanctions which have crippled its economy.

The main elements of this interim deal are:

• Centrifuges: Reduce the number of centrifuges from 19,000 to around 6,000
• Enrichment: To no more than 3.37% for at least 15 years
• Stockpile: 10,000kg stockpile to be reduced to 300kg
• Facilities:
• Fordow to be converted for research purposes with no enrichment
• Enrichment only allowed at Natanz which will house 5,060 first generation centrifuges
• Arak to be redesigned as a heavy water research facility with no plutonium production capabilities
• Monitoring: IAEA to monitor supply, usage and sale of nuclear technology with inspections to last for up to 25 years

In return, sanctions on Iran will be suspended upon IAEA certification of compliance with the final terms of the deal. Any breach of the terms will result in immediate reinstatement of sanctions. However, cracks are already in sight with Iran declaring that there will be no deal unless sanctions are lifted immediately upon conclusion of the deal. Also, in the latest twist of events, the US Senate Foreign Relations Committee voted unanimously (19-0) on 15 April in support of legislations that would give Congress authority to approve any final deal thus undermining the President’s authority to conduct foreign policy with Iran.

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Victoria Oil & Gas: Cameroon's emerging integrated utility

Victoria Oil & Gas is an AIM listed E&P with a 60% WI in the Logbaba field, Cameroon and an associated infrastructure network that supplies gas to the local market. The company acquired its interest in the Logbaba field in 2008 and drilled its first appraisal well (La-105) on the block in 2009, the first onshore well since the 1950s. First production commenced in 2012 with the roll-out of a distribution pipeline network in 2013 Victoria Oil & Gas is now transitioning away from a pure-play E&P to an integrated energy supplier in Cameroon. The next stage of the company’s strategy is to grow its gas-to-power business which supplies gas for power generation by industrial customers and also to the gas grid which feeds into regional power plants. The company also has a 100% WI in the West Medvezhye field in Russia with 2C resources of c.14.4mmboe; this asset is non-core and the company continues to seek options around a partial or full exit.

The Logbaba gas field is located in the Douala Basin, in the eastern suburb of Douala, Cameroon’s largest city. Victoria Oil & Gas has a 60% WI with the remaining 40% held by Grynberg Petroleum. Gross 2P reserves are estimated at 210bcf of gas plus 3.4mmbbl of condensates. Seismic data suggests there may be a larger reservoir c.4km north of Logbaba that could provide future upside. Production is currently from two wells La-105 and -106 which were drilled between 2009 and 2010, and is tied back to 40mmcf/d gas processing facilities that include a gas and condensate separator. These facilities are currently c.20% utilised. The gas is supplied through the company’s pipeline network to customers in the nearby Magzi industrial area and condensates are trucked to other parts of the country.

Victoria Oil & Gas operates its utility business in Cameroon through a wholly owned subsidiary, Gaz du Cameroun (“GDC”), which supplies gas and condensates to the local market. GDC commenced construction of a gas pipeline network in 2013 in Douala to enable the supply of gas to the region’s industrial customers. In 2014, GDC extended the pipeline across the Wouri River, opening up a new market; the pipeline network now extends over 25km. Gas is supplied for industrial processes and power generation. Gas for thermal use is sold at $16/mmbtu for the first 5 years of a 20 year supply contract with the price renegotiated at the end of the 5th year. Gas for power generation is sold at c.$12/mmbtu under a 10 year take-or-pay contract. In December 2014, GDC agreed the initial supply of gas to the domestic grid for power generation at $9/mmbtu. The company is currently evaluating the feasibility of supplying compressed natural gas which would allow the sale of gas outside of Douala by road; this could remove the capital requirements of establishing a pipeline distribution network.

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Suppressing the Brotherhood: Avoiding a Repeat of History

On 4 July 2013, the Egyptian military removed President Morsi and his Muslim Brotherhood from power after four days of intense street protests. General Sisi, the Egyptian defence minister at the time, quickly took the helm and announced the change in government in a televised address to fireworks and cheering crowds across the country. The US, UN and EU were reluctant to describe the ousting as a coup, although all voiced concerns about the situation.

Almost two years on, it is worth revisiting the above event and explore the context behind it in light of the current Houthi conflict in Yemen. Despite the lack of a label as a coup, it is widely accepted that Morsi's removal was an organised affair with Saudi Arabia (and the UAE) pulling strings in the background.

The Gulf States remember well the Nasser regime in Egypt where he toppled the monarchy in 1952 and then attempted to export the revolution throughout the Arab world, promoting nationalism as alternatives to the system of ruling monarchs in the Gulf. Between 1950 and 1970 the monarchies of Iraq, Yemen and Libya fell and in 1969, there was a failed attempt to overthrow the establishment in Saudi Arabia. In fact, Saudi Arabia was in the midst of a proxy war against Egypt in Yemen between 1962 and 1970 where the Saudis backed the return of Imamate rule (following their ousting in the republican revolution of 1962) and Egypt backed the revolutionaries.

It is against this backdrop that Saudi Arabia views the Muslim Brotherhood: an organised political movement that poses a threat to the remaining monarchies in the Gulf. Saudi Arabia made clear that it would welcome Morsi's ouster and a few days after the event actually happened, Saudi Arabia together with the UAE and Kuwait provided millions of dollars in financial aid to help "repair Egypt". This backing clearly demonstrates the Gulf States' support for the new regime in Cairo.

In Saudi Arabia, the Brotherhood is now designated as a terrorist organisation and any support to the group will result in imprisonment. In the UAE, a crackdown has effectively ended the Brotherhood'sactivities in Abu Dhabi and Dubai. Kuwait still has a Brotherhood presence, but is converting its stance to anti-Brotherhood.

Qatar remains a spanner in the works which continues to provided financial and political support to the Brotherhood. To show its disapproval, Saudi Arabia, the UAE and Kuwait withdrew their ambassadors from Doha in March 2014 in a move designed to force Qatar to reconsider its loyalties. However, whether Qatar will submit to its neighbours' desires remains to be seen as it continues to strive to be the premier Gulf State over Saudi Arabia.

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Gulf of Aden: Dire Straits

The Gulf of Aden is a strategically important shipping route linking the Mediterranean Sea and the Indian Ocean. The port city of Aden controls the Bab al-Mandab strait, the gateway between the Red Sea and Gulf of Aden through which 21,000 ships pass through each year. According to the EIA, 3.8mmbbl/d of crude oil and refined products passed through this route in 2013 alone.

The capture of Aden by the Houthis on 25 March 2015 was therefore a huge concern to the international community, with the US, Saudi Arabian and Egyptian navies stepping up its forces in the region. At the beginning of April, the Chinese were reported to be diverting vessels to the region as well.

At first glance, the involvement of Egypt is unexpected. Egypt had learned not to meddle in foreign affairs after its previous military intervention in Yemen in the 1960s led to the death of 26,000 Egyptian soldiers. Back then, Egypt's President Nasser saw that Yemen was going through what Egypt went through a decade earlier - a revolution against the monarchy, followed by what would be an installation of a republic. Nasser, a champion of pan-Arabism, lent his support to the Yemini republicans. However, what was expected to be a swift war turned into "Egypt's Vietnam" that lasted almost a decade.

One of Egypt's key sources of income is now at risk. The Suez Canal contributed over USD5 billion in tariffs in 2013 to Cairo's coffers, now under threat, means Egypt can no longer turn a blind eye to the developments in Yemen. More importantly for Egypt, its participation in Operation Decisive Storm, allows it to demonstrate its loyalty to the Gulf States which have contributed over USD20 billion of aid in funds and oil products to an ailing Egypt since the ousting of Mubarak in 2011.

However, it would be wise to remember that the Saudis and Egyptians were once on opposite sides of the battlefield in Yemen. The Egyptians had backed the republicans in the 1960s civil way, whereas the Saudis lent their support to the ruling Imam monarchy. Saudi Arabia's policy how not changed though - it and its Gulf allies understandably view the protection of the status quo a priority, i.e. protection from any threat against the ruling monarchies. In the 1960s, it was against Nasser's spread of revolutionary ideology. Since 2011, it has actively worked behind the scenes to undermine the Muslim Brotherhood in Egypt, a moderate religious political group which the Saudi's saw could garner popular support in the Gulf if left unchecked. In 2015, the Iranian backed Houthi movement on the Saudi border is the next, and possibly not the last, challenge to the Gulf ruling system.

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Saleh: Enemies become allies

The Houthi movement was founded in the 1990s to revive a branch of Shia Islam known as Zaidism. Historically the Zaidis had ruled over North Yemen until their toppling in 1962 during the Yemen Civil War. Since then, they have been increasingly marginalised by the new regime which viewed Zaidism as a threat.

In the beginning, the Houthi movement was peaceful. It sought a voice in a regime where it was being opressed. It called for a partnership with President Saleh to work things out and not for his overthrow. However, the Houthis also saw the United States as an enemy of Islam and President Saleh’s alliance with the US on the “War on Terror” shaped the events that followed.

President Saleh was seen by the Houthis as a traitor; the Houthis were vocal in pushing for his ousting. In response, President Saleh stepped up efforts to repress the movement, including attacks on Houthi villages. The movement became increasingly military in order to defend itself with six wars being waged upon them by the Saleh Government between 2004 and 2010. The wars led to massive deaths in the Sadaa region, the stronghold of the Houthis, and had the effect of alienating much of the Northern Yemeni population.

The Arab Spring came at an opportune time for the Houthis who capitalised on the Yemeni’s discontent with the government and lack of progress on the economic and security fronts; the Houthis openly supported the protests against President Saleh. Following the removal of President Saleh, the Houthis stepped up as a candidate to fill the power vacuum and vowed to set up its own political party to participate in the country’s next elections. Support for the Houthis grew, although its appeal was probably less to do with its ideology and more of a common hatred against Saleh’s repressive regime.

The Houthis realised that in order to be heard and to make an impact, it would have to do so through the political arena which would legitimise the movement. However, it is now becoming evident that its extension into politics is part of a grander plan to gain governing and military dominance. Three years after the Arab Spring, Yemen’s interim government headed by President Hadi, had yet to make any noticeable improvements to the country. The Houthis saw this as the time to act and in 2014, launched an aggressive military campaign in the north of Yemen culminating in the capture of the capital Sanaa in September 2014. Government departments and the airport were seized and President Hadi was placed under house arrest. The capture of Sanaa was months, if not years in the planning. By mid 2014, the Houthi’s had already surrounded the capital and its final move into the city was executed at lightening speed.

The Houthi’s could not have achieved all this without military support. In a twist of events, this support is coming from ex-President Saleh, who once upon a time, aggressively tried to crush the Houthis during his reign. Saleh’s loyal followers, including those in the country’s army and security services have aided the advance of the Houthis, or in some cases actively chose not to protect against their advances. The Houthi alliance with Saleh is a strange one, but one that has allowed the former to widen and strengthen its grip and the latter to orchestrate the destruction of the new regime and the Hadi government, an act of revenge against those who overthrew him.  How long this alliance lasts, only time will tell, but probably for no longer than one needs the other.

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Yemen: The Islamic Chessboard

Houthi take Sana (check), 

Saudi airstrike,

Next move...

Since the start of the year, the Houthis have risen to fame in the drama that is the Middle East. There was little media coverage of the group previously due to their modest beginnings, but also the difficulty of doing serious investigative journalism in Yemen (due to safety and security). However, the increasing threat of the Houthis is now taking centre stage and the international community is paying more attention.

Yemen: The Islamic Chessboard is a series examining the rise of the Houthis and the conflict in Yemen. For now, Yemen appears to be the battle ground in the continuing fight between the Shias and the Sunnis.

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Tullow in the middle

The fight for oil is nothing new – ownership of oil commands tremendous wealth. Countries fight over the black stuff in wars, and perhaps less barbarically nowadays across a table. Individuals go after it in the hope of getting rich, as evidenced by the large number of independents that have popped up in the past couple of decades.

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