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There is no escape from geography. Even though globalization and open markets for trade have transformed the world as if it were a 'village,' facilitating trade exchanges and access to all markets according to economic needs, and thus diminishing the fundamental role of geography, political geography is regaining its dominance over trade routes and exchanges between the world's countries.

The Executive Director of the International Energy Agency, Fatih Birol, analyzes in a strategic article how geopolitical tensions are redrawing the map of global energy markets after confidence in the Strait of Hormuz was shaken, in addition to the shock of Russia's invasion of Ukraine and the European Union's commitment to completely phase out Russian gas imports before the end of this decade. According to his article, confidence in waterways has become a cornerstone for the energy sector (Foreign Policy).

Whether the conflict between the United States and Iran escalates again or ends completely, it will not stop the major changes that the energy sector is witnessing in the wake of two major shocks in international supplies, according to Birol, who wrote: 'In my conversations with government leaders and company executives, the prevailing view was that there is no return to the situation that prevailed before the war broke out on February 28. Whatever the outcomes of the conflict and peace negotiations, the world has now seen that a strait can be closed overnight. Confidence in this waterway as a safe trade route has vanished.'

Birol points out that the two major shocks in 2022 and 2026 have questioned the basic assumption of global interconnectedness upon which the international energy system was built. He says: 'Many of us believed that energy trade is primarily subject to economic imperatives. But today, trade in energy and other goods has become geopolitical tools, representing a potential strategic advantage for some and a potential strategic vulnerability for others.'

While the link between the energy sector and geopolitics is not new, what is new is that we are witnessing today a global energy system that is increasingly influenced by geopolitical forces, rather than the commercial and economic considerations that prevailed in recent decades for this industry.

This shift will have long-term repercussions, according to Birol, explaining that it requires investment decisions and partnerships based on a long-term strategic vision. The world may see a strengthening of some trends that have already begun; he gives examples such as the shift among energy importers toward local energy sources that reduce the need for fuel imports; in addition to what is already happening with the use of alternative routes and the search for additional ways to access markets for energy and other goods, avoiding the Strait of Hormuz. Gulf oil producers are also exploring other solutions to reduce dependence on the strait, such as building oil storage directly in importing countries.

Quoted from Al Jazeera

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