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Analysis: Awash in oil, U.S. reshapes Mideast role 40 years after OPEC embargo

By Warren Strobel

WASHINGTON (Reuters) - Forty years after an Arab oil embargo throttled the U.S. economy, surging North American energy production has brought the United States closer to a long-dreamed "energy independence" that is reshaping its goals and role in the Middle East.

On October 17, 1973, OPEC announced an oil embargo against the United States and any other country that supported Israel in the Yom Kippur War. That use of oil as a diplomatic weapon has driven an American yearning for disengagement from the Middle East and its problems ever since.

Such a strategic divorce is unlikely to occur soon, current and former U.S. officials say. Washington has too much invested in the region, from support for allies like Israel to the fight against Islamic militants.

But the United States is less vulnerable to Middle East oil shocks, current and former U.S. officials say, and may be less likely to station large ground and naval forces in the region in the future.

More problematically, it will have to find a way to cooperate in the Middle East with energy-hungry China, they said. And ties with Saudi Arabia, long nurtured by oil commerce, have been jolted by diplomatic disagreements over Iran, Syria and Egypt, and could fray further.

In the decades that followed the Organization of the Petroleum Exporting Countries embargo, "you could not make plans in the Middle East or involving Middle East crises, without keeping in mind the considerations of the oil market," Henry Kissinger, who was Secretary of State during the 1973 oil shock, said on Wednesday.

"But that is now changing substantially with the, I wouldn't say 'self sufficiency' but narrowing the gap between supply and demand in North America, that is now of huge strategic consequence," Kissinger said at a conference hosted by the group Securing America's Future Energy.

The United States is less reliant each month on Middle East energy, thanks to increasing production of both oil and natural gas from technologies such as hydraulic fracturing, or fracking, which allows extraction of oil and gas from shale deposits.

The country could be energy self-sufficient - producing enough to meet its own needs - by 2020, according to several analyses, and a debate has begun on whether to end an effective ban on U.S. crude oil exports.

The growth of the United States as an energy power is already making a difference in foreign policy.

Last year, Washington and its European allies orchestrated a partial boycott of Iranian oil, to compel Tehran to return to talks about its nuclear program. The sanctions against Iran took roughly 1 million barrels per day off world markets - without the oil price spikes many predicted.

Increased oil supplies from the United States, and elsewhere, "really helped us tremendously in our negotiations," with potential partners, a senior State Department official said.

ENERGY SUPERPOWER

Weary of war after years of costly conflicts in Iraq and Afghanistan, the United States is wary of intervening in crises like that in Syria, and took on a limited role in oil-rich Libya's 2011 civil war.

U.S. oil production has helped dampen price spikes from disruptions in places such as Libya, officials and analysts said, and with it pressure for U.S. intervention.

Retired Adm. Dennis Blair, former U.S. Director of National Intelligence, said that the United States' increased energy output affords it the flexibility to reposition some military forces now in the Middle East "over the horizon," where they could be called on in a crisis.

Blair did not suggest specifics, but said such a change would be a return to the traditional U.S. defense posture before a build up of U.S. forces in the region that began with a major oil tanker escort operation in the Gulf in the 1980s and increased with two wars with Iraq.

"We have the opportunity to refine our policy," he said.

Publicly and privately, U.S. officials increasingly are emphasizing that the United States has no plans to leave the Middle East or retreat into isolationism.

"Reduced energy imports do not mean the United States can or should disengage from the Middle East or the world," then-White House national security adviser Tom Donilon said in a speech in April.

"We have a set of enduring national security interests" in the region, Donilon said, citing Israel's security, the fight against terrorism and "our historic stabilizing role in protecting regional allies and partners."

The United States is also the only country that has been able to bring Israelis and Palestinians together to negotiate peace, and provides security guarantees to Saudi Arabia and other Gulf Arab states.

And America is still affected by global oil markets and the prices they set. The Saudis remain the key producer, with excess capacity to make up for unexpected supply shortages.

A February report by Citigroup said that Gulf Arabs will continue to seek U.S. security guarantees, particularly in the aftermath of the "Arab Spring" revolutions. But it warned there could be fresh tensions between the United States and non-democratic governments in the Middle East and elsewhere due to the change in energy balances.

By the end of the decade, the United States "could be freed from the shackles involved in sacrificing a values-driven policy focusing on human rights and democratic institutions in order to secure cooperation from resource-rich despotic regimes," Citigroup said.

Allies for decades, Washington and Riyadh find their interests now diverging on such key issues as how to support the rebels in Syria's civil war, the intensifying U.S. diplomacy with Iran and the military coup in Egypt.

AWKWARD DUET WITH CHINA

The coming years could see an awkward - or even tense - geopolitical duet between the United States and China in the Middle East, testing Americans' willingness to share responsibility -- and influence.

China's imports are surging and it will overtake the United States as the world's No. 1 oil importer in 2017, according to Wood Mackenzie energy and mining consulting group.

The United States could end up ensuring that energy supplies transit safely to China thanks to U.S. Navy patrols of the Straits of Hormuz at the outlet to the oil-rich Gulf.

The reason: Washington has every interest in seeing energy-hungry China's needs met to avoid global disruption, but does not want to be displaced as the Middle East's dominant outside power, energy analysts said.

U.S. officials appear to have mixed feelings about this scenario, hoping China will help share the security burden - up to a point.

"We don't want China patrolling the sea lanes for us," said Michael Levi, director of the Council on Foreign Relations' Program on Energy Security and Climate Change.

The arrangement opens up other questions, officials and analysts said. Will Washington seek concessions from Beijing in return for its help? Will China supplant the United States as the chief defender of the Middle East status quo?

"There's a set of evolving geopolitical equations here that start to become really interesting," said the State Department official, speaking on condition of anonymity.

"The question that I get asked the most whenever I'm in China is, 'Is the United States still going to be engaged in trying to maintain peace and stability in the Middle East, and in transit lanes?'" he said.

(Additional reporting by Tim Gardner and Arshad Mohammed. Editing by Alistair Bell, Peter Henderson and Grant McCool)

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