Assignment

Submitted by: Shafi Ullah (Roll no. 2061725)

Submitted to: Prof. Khalid Hussain

Subject: History of Modern Middle East (1945–2017)

Topic: Oil Politics in the Middle East

Department: History

Semester: 7th (VII)

Class No. 32

Date of Submission: 20-11-2023

College: Government Post Graduate Jahanzeb

College, Saidu Sharif, Swat

 Table of Contents

Introduction…………………………………………………………. 1

Importance of Oil…………………………………………………… 2

Oil as a Political Weapon……………………………………….…... 3

Formation of OPEC…………………………………………….…... 4

The Embargo of 1973……………………………………………..…5

USA and other Powers Interest in Middle East…………………...... 6

Petrodollar………………………………………………………..… 8

The Black Gold: Curse or Blessing for Middle East……………..... 8

The Future of Oil Politics….............................................................. 9

Conclusion……………………………………………………....….10
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The Politics of Oil

Introduction

The Middle East has played a significant role in the history and development of humans. It has

been the cradle of civilizations since ancient times. It has a long and rich history. It has been

an important region in international politics. Its importance was further enhanced after the

discovery of oil. During the first Industrial Revolution, industries were run by water power and

then by coal, however, during the second Industrial Revolution, petroleum based industries

were established which increased the importance of oil in the world. It was the oil which has

changed the destinies of the Middle Eastern countries. Oil has been used as a political weapon

by the oil producing countries. Oil was used as a political weapon by Arab countries in Suez

Canal Crisis of 1956, and 1967 Arab-Israel war. However, it was not effective. The oil was

again used by Arab countries as a political weapon in 1973 during the war of Yom Kippur. Oil

embargo was imposed on Israel friendly countries viz. USA and Holland. This embargo was

effective and it enhanced the position of OPEC in the world. Before 1973, oil prices and

production was controlled by the multinational companies known as the Seven Sisters.

However, from 1973 onward, the Seven Sisters has been replaced by OPEC which now

controlled the whip of the oil production and prices. OPEC was formed by five major oil

exporting countries viz. Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela in 1960. The major

powers of the world trying to get their foothold in Middle East because of the abundance of oil.

These powers used every means to secure their interest in the Middle East. The two World

Wars, Arab-Israel Conflict, Suez Canal Crisis, the Gulf Wars are somehow connected with the

politics of the oil. Before the Second World War, Britain and France had maintained their

influence in Middle East. However, after the Second World War, USA emerged as a key player

in the politics of Middle East. USA had tried every way to have their influence in the Middle

East from Toppling down of governments to the waging wars in Middle East. Russia, China
 2

and India are also trying their best to give competition to the USA for gaining influence in

Middle East. The oil has been both a curse and blessing for Middle East. On one hand, the

Middle Eastern governments got a lot of money from selling oil but on the other hand, it became

a major factor for the all the conflicts and problems in Middle East region. It was because of

oil that Middle East has been become a hotbed for the conflicts and rivalries among the major

powers. It will be very interesting to see that how the Middle Eastern countries manage to

reduce their dependency on oil, and how the world will shift to other sources of energy because

oil has to die sooner or later.

Importance of Oil

Oil has very great importance for both oil producing and oil consuming countries. It is the oil

that has enhanced the political and strategic importance of Middle East. Middle East possessed

about 68% of the total World explored oil.1 Oil is essential for the functioning of modern

economies and military organizations. During the first Industrial Revolution, water power and

then coal was used to run industries but during the second Industrial Revolution, petroleum

based industries were established. According to David Harvey, the American Professor of

Geography and Anthropology, “whoever can control the world economy for far future, will

have to control the faucet of World oil and whoever will control the spigot of World oil will

have to control the Middle East2.” It was the oil that “transformed the Arabian Peninsula from

an isolated preserve of Britain to an area of World attention.3”

________________

1. Ghulam Fareed (et al), “Oil Politics in the Middle East: Understanding the Genesis of

Petrodollar Strategy”, Pakistan Social Sciences Review, Vol. 3, No. 1 (June 2019), p. 19.

2. Ibid. p. 32.

3. William L. Cleaveland and Martin Bunton, A History of the Modern Middle East, (Boulder:

Westview Press, 2009), p. 451.

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Oil has brought riches to the Middle East as from Dark Ages to 18th century, the flow of wealth

was from west to east because the Europeans brought used to bring commodities like spices,

silks etc. to Europe from East, but during Industrial Revolution and colonialism, the flow of

wealth turned towards west. The French Historian, Fernand Braudel, believed that the “oil

revolution might be epoch-making because it would reverse the flow of wealth from the West

to the East that had been ongoing for two centuries.4” However, the effects of oil revolution

was not so great because the large sum of money though go to Middle East but much of it

returned to West as investments or was deposited in Western banks. Oil has constructed the

neo-political World Order. Fareed (et al) on the importance of oil writes that “the oil increasing

appeared the soul source of energy for geo-human/ geo-political/ geo-strategic/ geo-economic/

geo-social and geo-cultural development and advancement of states akin to mercy in the

horizon to crystallize and energize overwhelmingly the cosmos.5” In short, oil has enhanced

the position of Middle East region in International Politics and Middle East will continue to

play a key role in International Politics as long as the World depend on oil.

Oil as Political Weapon

In all the conflicts and wars in Middle Eastern, oil has played an important role as Nazli writes,

“the oil market is a pawn in these conflicts because for the producers, oil is an essential source

of funds for military supplies, food, and social benefits and hence of government power.6”

_______________

4. James L. Gelvin, The Modern Middle East: A History, (New York: Oxford University

Press, 2011), p. 261.

5. Fareed. “Oil Politics in the Middle East”, p. 18.

6. Nazli Choucri, “Power and Politics in the World Oil”, Alumini Association of

Massachusetts Institute of Technology, Vol. 85, No. 7 (October 1982), p. 3.

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In First Arab-Israel War, Suez Canal Crisis, and Six Day War, oil was used as political weapon

by the Arab countries but it was not effective. It was the Oil Embargo of 1973 by OAPEC that

oil as a political weapon was successful. Oil was also used as political weapon against some

other countries for political purposes but were unsuccessful. For instance, Iran halted selling

of oil to Philippines as a protest against the repression of Muslim in 1979. Iran also stopped the

selling of oil to Canada when Ottawa threatened to move its embassy from Tel Aviv to

Jerusalem. However, these efforts were of no effective use, and as Nazli writes, “the effects

were mainly psychological.7” Oil was also used as a political weapon during the Iranian

Revolution when the workers refused to export crude oil until the Shah left the country. The

producers also exert pressure on their OPEC colleagues through different means. For instance,

Iraq stopped the delivery of oil through Syria so as to pressurize the Syrian government in a

dispute over transit tariffs. Also, Iraq did the same with Turkey when Ankara failed to pay for

oil it had taken from pipeline. Saudi Arabia flooded the oil market until Iran, Iraq, and Kuwait

gave in to Saudi Arab’s demands for moderating oil prices.

Formation of OPEC

The Organization of the Petroleum Exporting Countries was founded at the Baghdad

Conference in September 1960 by Iran, Iraq, Saudi Arabia, Kuwait, and Venezuela. Its purpose

was “to ensure the unification of the petroleum policies of member countries and the

determination of the best means for safeguarding their interest.8”

_______________

7. Choucri, “Power and Politics in World Oil”, p. 4.

8. Gelvin, The Modern Middle East, p. 259.

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“Before 1973, a cartel of western oil companies known as the Seven Sisters viz. Exxon

(Standard Oil of New Jersey), Mobil (Standard Oil of New York), Chevron (Standard Oil of

California), Gulf, Texaco and British Petroleum (Anglo-Iranian Oil Company) – controlled all

aspects of the oil industry.9” The Seven Sisters controlled about 85% Reserves of International

Petroleum before 1973. However, after 1973, the Seven Sisters was replaced by OPEC.

The Embargo of 1973

“Politics is as important as economics in OPEC price conflicts, and goals change with changing

circumstances.”10 When the War of 1973 or Yom Kippur War broke out between Israel and

Arab countries, the Arab countries of OAPEC imposed oil embargo on the allies of Israel viz.

United States and Holland. It was for the first time in history that OPEC set the prices of oil

without consulting or involving the oil-companies.11 By imposing this embargo, OPEC showed

their power on the oil market. It was successful up to some extent. All the oil importing

countries whether they supported Israel or not experienced some degree of shortfall. The prices

increased fourfold. The oil embargo benefitted the Arab countries politically and economically

but only for time being. After it, International Energy Agency was established in which each

member states was required to maintain 90 days oil reserve in case of oil supply intervention.

________________

9. Gelvin, The Modern Middle East, p. 260.

9. Mary Ann Tetreault, The Political Economy of Middle Eastern Oil, (Boulder: Lynne

Rienner Publishers, 2004), p. 10.

10. Gelvin, The Modern Middle East, p. 260.

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USA and other Powers Interest in the Oil Politics of Middle East

The major powers of the world were interested in Middle Eastern region, however, their interest

was further increased after the discovery of oil in Middle Eastern countries. The major powers

wanted to exert their influence in oil-producing areas and this led to the struggle for dominance

in these key regions. Many scholars believed that the geopolitical importance of oil was first

understand by Winston Churchill. He ordered to convert British warships from coal to oil

propulsion in 1912. In 1914, the British government increased their control over Anglo-Persian

Oil Company and protection of its supply lines was considered as an important matter of

national security. During the First World War, oil demand was high as it was used in oil-

powered tanks, airplanes, and war-ships and so access to oil became a principle objective.12

Therefore, when the war ended, the allied powers tried to redraw the political map of the world

in such a way to increase their access to overseas oil supplies.13 Under the San Remo Agreement

of 1920, Mesopotamia became a British mandate, and France was assured access to 25% of all

produced oil in the territory.14

Similarly, when USA entered into Second World War, it was felt that a foreign reliable

source of oil was needed. The best option for them was Saudi Arabia as it was out of British

control, and the king Abdul Aziz ibn Saud had already granted a substantial oil concession to

an American oil firm, the Standard Oil Company of California. So President Franklin D.

Roosevelt signed an agreement with Saudi Arabia under which USA received privileged access

to Saudi oil in return USA promised to protect monarchy from all sort of enemies.

______________________________

11. Michael T. Klare., The Changing Geopolitics of Oil, (New York: Routledge, 2011), p. 30.

12. Ibid. p. 31.

13. Ibid. p. 3.
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After World War Second, USA left the responsibility of maintaining stability in the

Gulf region on the shoulders of Great Britain. However, when Great Britain announced in 1968

that most of British troops would be withdrawn from east of Suez by the end of 1971, USA

sought the help of Muhammad Reza Shah.15 In 1979, Shah fled the country as a result of Iranian

Revolution, and so USA access to oil was endangered. The situation became more critical when

Soviet Union invaded Afghanistan in December 1979.

In the course of such developments, Jimmy Carter realized that USA interest in the Gulf

should be under the direct protection of American forces. It was known as Carter Doctrine.

According to Carter, “Let our position be absolutely clear: An attempt by any outside force to

gain control of the Persian Gulf region will be regarded as an assault on the vital interests of

the United States of America, and such an assault will be repelled by any means necessary,

including military forces.”16 For instance, when a civil war broke out in Liberia in 1989 to 1996

and again in 1999, and a number of citizens died, USA did not make efforts to resolve the

problem though Liberia was founded by freed American slaves in 1822 and from it onwards it

was like a colony of USA. Even when the Secretary General of UN appealed to USA to send

troops to Liberia in 2003, USA sent only a small force of 200 marines. While on the other hand,

USA has no historical connection with Kuwait but still sent 7 lakhs troops of its own for the

Liberation of Kuwait in 1991. Actually, USA main purpose was to get more military bases in

the Gulf region. According to James Gelvin, “It would be simplistic to say that USA waged the

1991 Gulf War or launched the 2003 invasion of Iraq just for oil.”17

_______________________

15. Klare, The Changing Geopolitics of Oil, p. 33.

16. Ibid.

17. Gelvin, The Modern Middle East, p. 265.

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Before World War Second, the key actors in the geopolitics of oil were the European

powers, USA, and Japan. However, after World War Second, USA and USSR became the

supreme actors in the politics of oil. Now China and India have taken part in the race and as

USSR is no more, Russia emerged as a major player. All these countries need energy and thus

influence in Middle East is their one of the prime motives of foreign policy.

Petrodollar

Petrodollar means no dollar no oil. USA linked dollar to oil in order to sustain economic

stability and to compete with world competitive currencies. In this success of USA, Saudi

Arabia helped a lot with USA. According to Fareed (et al), “Petrodollar is a rational decision

to constructively stabilize and sustain the US global economic lead and world political

hegemony.”18

The Black Gold: Blessing or Curse for Middle East

The discovery of oil has changed the destiny of Middle East. It increased the political and

strategic importance of Middle East. Middle Eastern states are termed as ‘rentier’ states because

most of its revenue derived from other sources rather than taxation. The oil-producing Middle

Eastern states economy is more depend on the export of oil. These countries get a lot of money

from oil which has made these countries very rich. Moreover, the influx of oil money increased

the autonomy of oil-exporting countries, and ended the tradition of Great Power Primacy in the

Middle East that had long shaped the region’s politics in the images desired by outsiders.19

______________________

18. Fareed, “Oil Politics in the Middle East”, p. 33.

19. Tetreault, The Political Economy of Middle Eastern Oil, p. 14.

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However, too much dependency on oil is like the Achilles heel of Middle Eastern governments.

Mary Ann Tetreault writes, “To many oil-producing developing countries, the blessing has

often turned out to be a curse, an invitation to major power intervention, political corruption,

militarization, and paradoxically given its income value, foreign debt.”20 Moreover, the Middle

Eastern government spent billions of oil money on purchasing arms and ammunitions. The oil

money also changed the balance of power between State and society in oil-exporting countries

as it gave the rulers the ability to suppress popular institutions. Hence, Oil has been both a

blessing and a curse for Middle East.

The Future of Oil Politics

The oil politics will be played as long as the world depend on oil. However, oil is not an infinite

thing and one day it has to die. Also, the countries are trying to shift to other sources of energy

in order to reduce their dependency on oil. Many countries are working to increase the use of

solar energy, nuclear power, and water power. According to Mary Ann Tetreault, “So long as

the world relies on oil for a substantial share of its energy supply, nations will compete for

access to the available supply and the geopolitics of oil will play a conspicuous role in

international politics.”21

__________________

20. Tetreault, The Political Economy of Middle Eastern Oil, p. 1.

21. Ibid. 41.

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Conclusion

In conclusion, the relationship between politics and oil in the Middle East has played an

important role in international affairs, shaping the destinies of Middle Eastern nations and the

dynamics of global power. The discovery of oil transformed the region from a historical cradle

of civilizations to a major centre of geopolitical struggles. Oil, often referred to as the "black

gold," has been both a blessing and a curse for the Middle East, bringing wealth to the region

but also entailing political complexities, conflicts, and foreign interventions. Throughout

history, oil has served as a political weapon, used by oil-producing countries to assert their

influence and interests on the world stage. The formation of OPEC marked a significant shift

in the control of oil production and prices, challenging the dominance of Western oil companies

known as the Seven Sisters. The 1973 oil embargo by OAPEC demonstrated their power on oil

market, and started a new era in the geopolitics of oil. The major powers understand the

importance of Middle East, and thus vied for influence in this region. The future of oil politics

is inevitably tied to the transition towards alternative energy sources. As countries seek to

reduce their dependency on oil, the geopolitical importance of oil will also be lower down, but

as long as the world needs oil, the politics of oil will play a dominant role in international

relations.
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MCQs: The Politics of Oil

1. Before 1973, the Oil prices, exploration, and production was controlled by Seven Sister.

2. OPEC was formed in 1960.

3. Middle East possessed about 68% of the total World explored oil.

4. After 1973, Seven Sisters was replaced by OPEC.

5. OPEC stands for Organization of the Petroleum Exporting Countries.

6. The economy of the Middle Eastern governments is mostly depend on Oil.

7. The Embargo of 1973 shocked the world and was successful for the time being.

8. Politics is as important as economics in OPEC price conflicts.

9. Under Carter Doctrine, USA realized that their interest in the Gulf should be under the

direct protection of American forces.

10. Petrodollar means no dollar no oil.

11. Countries are trying to shift to alternative sources of energy in order to reduce their

dependency on oil.