CNA Explains: Why the strike on Iran’s South Pars gas field risks a global energy shock
Israel struck at the core of Iran's domestic energy supply by targeting South Pars and its related facilities.
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SINGAPORE: An offshore natural gas field has become the latest flashpoint in the conflict involving the United States, Israel and Iran.
Israel struck Iranian gas facilities linked to the South Pars gas field on Wednesday (Mar 18), marking a significant escalation and drawing criticism from neighbouring Gulf states.
Even US President Donald Trump sought to distance Washington from the attack.
CNA looks at Israel's decision to strike the gas field, as well as its implications for the war and global energy prices.
What is the South Pars gas field?
South Pars is the Iranian side of the world’s largest offshore natural gas field.
Located in the Persian Gulf, the reservoir is shared by Iran and Qatar. It holds an estimated 51 trillion cubic metres of usable gas - enough to supply the world’s needs for 13 years.
By targeting South Pars and its related facilities, Israel struck at the core of Iran's domestic energy supply.
The Islamic Republic relies heavily on gas to produce electricity and heat homes. The country is the world’s third-largest gas producer and consumes more than 90 per cent of its production domestically.
It is the fourth-largest consumer of natural gas in the world, behind the US, China and Russia, according to the Center on Global Energy Policy at Columbia University, even though its economy is much smaller.
According to trade publication Argus, South Pars accounts for between 70 per cent and 75 per cent of Iran's total gas production.
Tehran described the strike on its energy infrastructure as opening “a new stage in the war”, warning of further retaliation.
"If strikes (on Iran's energy facilities) happen again, further attacks on your energy infrastructure and that of your allies will not stop until it is completely destroyed," Iranian military spokesman Ebrahim Zolfaqari said, according to state media.
The attack would disrupt Iran's local energy supplies at a time when it is already dealing with substantial utility-scale energy gaps internally, said Dr Cauvery Ganapathy, a fellow at policy research think tank The Observer Research Foundation Middle East.
It is widely believed that these gaps fed into the underlying economic causes for protests against the regime before the war began, she added.
What is the global significance of the attack?
Although South Pars mainly supplies Iran’s domestic needs, global markets reacted sharply to the risk of escalation.
The attack was “a serious escalation” due to the threat of Iranian retaliation, said Andres Cala, geopolitical analyst at energy intelligence firm Montel News.
Those fears materialised when Iran retaliated with an attack on Qatar's Ras Laffan facility - the world's largest liquefied natural gas (LNG) complex - damaging infrastructure and raising concerns about prolonged supply disruptions.
Natural gas prices in Europe surged as much as 35 per cent on Thursday while oil jumped as much as 10 per cent before paring gains.
The attack knocked out 17 per cent of Qatar's LNG export capacity, causing an estimated US$20 billion in lost annual revenue and threatening supplies to Europe and Asia, QatarEnergy's CEO and state minister for energy affairs told Reuters on Thursday.
"We are now well on the road to the doomsday gas-crisis scenario," said Saul Kavonic, an energy analyst at MST Financial. "Even once the war ends, the disruption to LNG supply could last for months or even years."
Analysts say strikes on South Pars and the Ras Laffan plant signal a dangerous new phase in the conflict.
"This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines or Strait of Hormuz closure," said Charu Chanana, chief investment strategist at Saxo in Singapore, referring to the closure of a key waterway bordering Iran's coast through which a fifth of the world's crude oil and liquefied natural gas normally flows.
"It is now hitting the plumbing of the global energy system. What is unsettling markets now is the growing stagflation risk," she added.
Attacks on energy infrastructure have a much greater material impact compared to delivery and import bottlenecks caused by the Strait of Hormuz's closure, Dr Ganapathy told CNA.
"The recovery from such attacks takes much longer due to the inherent nature of the industrial engineering of these plants," she said.
She foresees the loss of Qatar's exports having an impact across geographies.
This includes Europe, which diversified its Russian dependence to Qatari supplies, and Asian countries, which started centring their energy portfolio diversification to include natural gas in a more central role as a bridge fuel in both industry and transport, as well as a part of their energy transition, she explained.
"Price spikes will result not just from scarcity in the markets as a direct consequence of this attack ... but also due to countries now seeking to stockpile at an urgent pace," she added.
If attacks on the Middle East's energy infrastructure continue, it will have devastating consequences for global prices, said Mr Lawrence Anderson, a senior fellow at the S Rajaratnam School of International Studies.
Non-energy-producing countries like Singapore would be particularly affected, he told CNA.
Why attack South Pars now?
The strike was likely aimed at increasing pressure on Tehran.
Mr Anderson noted that despite losses to its leadership and military assets, Iran has shown surprising resilience.
“Israel was likely trying to place further pressure on the regime to capitulate,” he told CNA. “This, for now, has proven to be a bad miscalculation and prompted Iran to retaliate.”
Qatari, Emirati and Saudi energy facilities bore the brunt of Iran’s retaliation on Wednesday, with Qatar criticising Israel's attack as "dangerous and irresponsible".
The United Arab Emirates also offered a rare rebuke, calling it a "dangerous escalation".
"Targeting energy infrastructure poses a direct threat to global energy security," the UAE foreign ministry said.
Even US President Donald Trump distanced himself from the attack, stating on Wednesday that his country knew nothing about the South Pars strikes.
Trump said on Thursday that he told Israeli Prime Minister Benjamin Netanyahu not to repeat the attack on energy infrastructure.
"I told him, 'Don't do that', and he won't do that," he told reporters in the Oval Office.
What does Trump’s response show about the US and Israel’s approaches to the war?
The episode has also highlighted differing approaches between Washington and Israel.
While Israel sees Iran as a potentially existential threat, analysts said the US is more focused on avoiding a drawn-out war that could impose high economic costs and damage alliances.
Washington is far more exposed to the economic fallout, particularly rising oil prices and market volatility.
This could have major political consequences for Trump ahead of the congressional elections.
“Trump must be furious at the impact on energy prices with the mid-terms (elections) only months away,” said Mr Anderson.
“This, however, will not undermine the US-Israeli alliance, which remains committed to crippling Iran's nuclear ambitions, missiles, drone supplies and support for its terrorist proxies.”
Analysts say Israel may also be more willing than the United States to tolerate instability in Iran, calculating it would face far less regional fallout, especially after the weakening of its proxies Hamas and Hezbollah over the past three years.
"The objectives that have been laid out by the president are different from the objectives that have been laid out by the Israelis," Tulsi Gabbard, Trump's director of national intelligence, acknowledged in a congressional hearing this week.
Robert Malley, who negotiated with Iran under former president Joe Biden, said that both Israel and Iran had clear goals, with Israel wanting to sow the Iranian government's collapse and Tehran seeking to survive and to externalise the costs of the war.
The unpredictable actor is Trump, who has said both that the war will be short or will intensify and sees world affairs in deeply personal terms, particularly on whether he can claim victory.
"He's offered a series of shifting goals, not just day by day but often hour by hour," said Malley, now a senior fellow at the Yale Jackson School of Global Affairs.
Yossi Mekelberg, a Middle East expert at London-based think tank Chatham House, said that Israel and the US started with an aim of regime change before encountering the heavy counter-attack by Iran.
"When things go wonderfully well, everyone is happy, you know - they all praise each other," he said.
"If it starts going really wrong, and we know that Trump is not the sentimental type, then the blame starts flying," he said.
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