EXPRESS NEWS URDU E-PAPER ENGLISH E-PAPER SINDHI E-PAPER CRICKET PAKISTAN EXPRESS LIVE CAMPUS GURU EXPRESS

S LIVE CAMPUS GURU EXPRESS ENTERTAINMENT FOOD TRIBUNE

  

TODAY'S PAPER | NOVEMBER 24, 2023 | ADVERTISE

HOME LATEST PAKISTAN BUSINESS WORLD OPINION SCI-TECH LIFE & STYLE T-MAGAZINE T.EDIT SPORTS BLOGS VIDEOS SLIDESHOW ARCHIVE OTHER PODCAST WEBINAR

Oil as a weapon
Arabs in the MENA region should leverage their oil wealth in the Gaza-Israel War to call for a ceasefire

Aneela Shahzad November 24, 2023  

Join Us

  

The writer is a geopolitical analyst. She also writes at globaltab.net and tweets @AneelaShahzad

Since the Gaza Israel War there is a lot of pressure on the Arabs in
the MENA region to use their oil wealth and the power they wield
from it to coarse Israel into a ceasefire and withdrawal from the
Gaza Strip. Understanding the dynamics of the oil market and the
forces that dictate it would thus give us a better outlook of the
position of the oil-producing states.

A general notion is that when oil prices climb, industry in oil-importing

countries is hit hard. But studies reveal that the manufacturing sector is
usually performing well when oil prices are high. The reason is that more
manufacturing increases oil demand, and sensing this demand the producers
raise oil price and the manufacturers pay that price because they have
demands to fulfil. Inversely, when the industry is performing badly due to low
demand, the consumption of oil reduces. Oil producers may lower the price to
attract buyers but they still buy less. This would mean that the manufacturing
sector dictates oil prices.

But it is not that simple. The fact that oil works like blood running through the
veins of the global economy inevitably makes it a pivoting element in global
politics. Moreover, not just the industries depend on it, the service sector, the
defence sector, and all sectors comprising day to day life depend upon
movement facilitated by oil and gas. Since control on oil means real power,
ongoing competition amongst oil-producing states adds layers to the
complexity.

Competition between oil-producing states and groupings is noteworthy. Post-

WWII, the US and British dominated Seven Sisters not only commanded oil
extraction and refining industries, they actually dictated global output and
pricing because they owned major shares of oil-fields, especially located in the
MENA region. The 1953 US-led coup against Iran’s Mosaddegh regime was
organised by the Consortium for Iran — another name for the group of
investor-owned oil and gas companies, aka the Seven Sisters. The ouster of
Mosaddegh who had nationalised Iranian oil, and the enthronement of Reza
Pahlavi, was followed by Iran’s Consortium Agreement of 1954 with the
British.

Perhaps learning from this and from how a handful of Western states control
oil-producing states like puppeteers control puppets, in 1960 Iran, Iraq,
Kuwait, Saudi Arabia and Venezuela made the first Muslim-dominated cartel
— OPEC — to exert control of oil-producing states upon the oil market. Later
eight more leading oil-producers joined this club, and suddenly the US and
Seven Sisters found their control on oil pricing and global economy slipping
away from their hands. Yet because the US and Europe had been the major oil-
importers, OPEC, while keeping their coffers filled, kept working in tandem
with the interests of the West.

This changed in the 1973 Oil Shock, when OPEC, led by King Faisal,
proclaimed an oil embargo against states that supported Israel in the Yom
Kippur War, mainly Canada, Japan, the Netherlands, Britain and the US, with
a staggering 300% rise in oil prices. Later in 1979, with the Iranian Revolution
and the ensuing Iran-Iraq War, there was another drastic Second Oil Shock
that doubled oil prices worldwide. Post-War both these major oil-producing
countries have been under US oil-sanctions. They have been exemplified by
the West, so the world knows that anyone not wanting to do business with
them will be punished, by force, by coups or by intrigues — and will not be
allowed to survive. The Arab Spring proved to be another set of punishments
for those who were tilted towards the communist camp.

All this, and yet the world was changing! OPEC was tightening its grip on oil-
price control, many a times in ways detrimental to the US camp. In 2000, US
Congress tried to subject OPEC to US antitrust laws. The 2011 Shale Gas
Revolution quickly propped up the US as one of the world’s top oil-exporters,
enabling it to vie with OPEC as a contender. In 2016, oil prices were falling
due to increases in US shale output, and in response OPEC signed an
agreement with 10 other oil-producing countries, led by Russia, to create the
OPEC+. In 2022, OPEC and OPEC+ countries combined produced about 59%
of global oil production. Together they have exerted decisive influence on
global oil market and oil prices, often adverse to Western interests. The world
had changed also because the West was no longer the major oil-buyers, China
was!

Today, OPEC has the flexibility to either move supply in tandem with non-
OPEC oil-producers, or to offset non-OPEC supply changes, depending upon
their strategic needs. They are able to use two tools: Market Share Targeting
by increasing production; or Price Targeting by reducing production. And
OPEC’s reactions happen in full consultation with OPEC+, as shown post-
Ukraine War, when Saudi Arabia reiterated full commitment with Russia and
OPEC+.

So, OPEC was already at war with the non-OPEC states, when early
September, both the Saudis and Russia announced a 1.3mb/d cut through
December, and immediately crude jumped $90 a barrel. Biden had warned the
Kingdom there would be unspecified ‘consequences’ for partnering with
Russia on cuts, but the Kingdom has not relented.

High fuel prices in the midst of a global economic crisis, when we seem to be
headed towards bigger crashes, looks suicidal. With lower production and
higher oil prices, the system will certainly collapse. But in the world of global
strategies, bigger changes call for bigger risks!
 One must also be reminded that many a time global economics plays out
opposite to what analysts had been predicting. For instance, US oil-embargos
on Iran and Iraq proved to be axe on their own feet, as their absence gave
more sway to the Saudis in OPEC — a sway they used to constantly corner
down the US.

It would be foolhardy for anyone to claim they fully understand the oil market
and its geoeconomics, but it is certain that the OPEC members are in a
position of waging war on the West. They don’t have to lift the sword for that,
they even don’t have to utter a word. They just have to lower production and
the global economy would be on bumps.

Like Israel is using starvation as a weapon of war, like it is tightening its clasps
on the already imprisoned Gaza, the OPEC members are in a position to use
oil as a weapon against Israel and the West, and starve them of energy! But
only time will tell if the OPEC members have played their cards, and have they
played them right!

Published in The Express Tribune, November 24th, 2023.

Like Opinion & Editorial on Facebook, follow @ETOpEd on Twitter to receive

all updates on all our daily pieces.

 

FACEBOOK CONVERSATIONS

0 comments Sort by Newest

Add a comment...

Facebook Comments Plugin

THE EXPRESS TRIBUNE   YouTube 72.2K

Dove Podcast: Empowering Speech- Legal Twist: Imran Khan and Shah Pakistan's Diplomatic Ascent: Bid for PML-N and MQM Unite for
Impaired Lives with Azima Dhanjee Mahmood Qureshi's Court Appearance BRICS Membership in 2024 Collaborative Mission in
Amidst Invalidated Jail Trial

RELATED

Imam-e-Kaaba urges global action to halt Gaza atrocities

Blinken rejects Arabs' calls for Gaza ceasefire

Oil up as Saudi Arabia and Russia stick to supply cuts

RECOMMENDED STORIES

Oil up 2% as war rages in Middle East

The return of geopolitics in Middle East

Israel pummels Gaza as Putin warns conflict could spread beyond Middle East

LATEST

South African 'Blade Runner' Pistorius granted parole a decade after killing girlfriend

Gaza atrocities denounced as Imam-e-Kaaba meets PM, COAS

Israel must be held accountable for genocide of Palestinians: FM Jillani

Facilities provided to Imran in jail more than those provided to others: Bugti

3D bioprinting trials begin for medical breakthroughs

Judge orders Imran to be presented in court on Nov 27 in £190 million case

T.EDIT

One Piece, Three Ways: Khaadi X Esra

Luxembourg: Where fairytales come alive

Style Anatomy: Alicia Khan

‫‪ON EXPRESS URDU‬‬

‫دیوانی آپا‬

‫عام انتخابات‬

‫گولڈن ایپل اور ٹرائے کی جنگ‬

‫ہوش کا دامن نہ چھوڑیں‬

‫سندھ میں پیپلزپارٹی کی گرفت‬

‫جمہوری سیاست کا توازن‬

‫‪MOST READ‬‬

‫‪IMF expects dollar price to improve‬‬

‫‪Govt reduces Hajj expenses‬‬

Pakistan plans to join BRICS next year

Afghan border trade resumes after Pakistan suspends new visa rule

Army vows to defeat attempt at creating despondency

Over Rs3 million worth of Iranian fuel caught

OPINION

The Afghan imbroglio

The war of words — and visuals

Financing ‘loss and damage’

Israel takes down the world Jewry along

Deportation drive targets all illegal aliens, not just Afghans

Reform or rupture: a resilient economy for Pakistan

Pakistan Life & Style Prayer Timing Pakistan About Us Style Guide FOLLOW US
Business T.Edit Weather Forecast Pakistan Online Advertising Privacy Policy
World Sports RSS Feeds Copyright
Opinion Blog Subscribe to the Paper Code of ethics
Videos Contact Us Mobile App
Careers

This material may not be published, broadcast, rewritten, redistributed or derived from. Unless
otherwise stated, all content is copyrighted © 2023 The Express Tribune.