INTERNATIONAL RELATIONS

Presentation on
OIL EMBARGO
 GROUP MEMBERS
• MALIHA SAMI
• TUBA SHAH
• MAVIA UMER
• WASHAL SHAH

BSS-4
 BACKGROUND
OPEC
• Organization of petroleum exporting countries
• Pressure of Seven Sisters
• Strength gained by OPEC
 ARAB-ISRAEL WAR
• Declaration of the creation of Israel.
• Five Arab states (Egypt, Syria, Jordan, Iraq, and
Lebanon).
• Israelis defeat the Arab armies.
• The war thus ended: without a peace treaty
between Israel and any of the Arab states.
 SIX DAY WAR
• The Israeli air force launched a surprise attack on Egypt,
Syria and Jordanian air forces.
• Israel captured the Gaza Strip from Egypt and the Sinai
Peninsula.
• The West Bank of the Jordan River (including East
Jerusalem) was captured.
• As a result of the war:
• The UN Security Council passed UN Resolution 242
• "withdrawal of Israeli armed forces from territories
occupied in the recent conflict“
• The Israeli government formally annexed East Jerusalem.
 WAR (RAMADAN / YOM KIPPUR WAR)

• Syria and Egypt attacked Israel in an effort to

take back the territories taken in six day war.
• A secondary aspect of the war was the 1973-
74 oil embargo and price hike.
• Also, an effort was made to deny certain
states access to oil
 NIXON ADMINISTRATION
IGNORES SAUDI WARNING

“ You may loose every thing

time is running out”

From left, at a meeting in Riyadh, Saudi Arabia: Secretary of State Henry A.

Kissinger, King Faisal and James E. Akins, the United States ambassador to
Saudi Arabia.
 KING FAISAL 1ST TIME IN HIS LIFE
GRANTED INTERVIEW TO AMERICAN TV
• "America's complete support of Zionism
against the Arabs makes it extremely difficult
for us to continue to supply U.S. petroleum
needs and even to maintain friendly relations
with America."
AN EXPLOSION OF PROTEST
 OIL EMBARGO WAS FINALLY IMPOSED

• Riyadh announced at 9 p.m. local time on Oct.

20 that it was imposing a total oil boycott
against the United States.
• The boycott was lifted on March 18, 1974,
leaving economies around the world shattered
and many individuals living poorer lives,
Kissinger admitted: "I made a mistake."
 ARAB CAPITALS THREATENED
• King Faisal sent a stern warning to Washington.
He said bluntly that an embargo would be
placed on all oil shipments to the United States
unless Israel returned to the 1967 lines and the
U.S. stopped its arms supply to Israel. 
• Despite the Saudi warning, U.S. supply
operation would continue in defiance of
Faisal's warning.
 IMPACTS OF EMBARGO
Immediate Economic Effects

• Oil price increment

• Alternate ways to produce oil
• Nationalization of oil companies
• Restrictions on public from U.S
government
• Other countries
 Macroeconomic Effects

• Japan’s Economy
• Decision of Western nation’s central banks to
cut interest rates to encourage growth
• Long term effect– loss of public’s trust
 Effects on International Relations

• Japan and Arab countries

• Alterations in foreign policies of industrialized
governments
• Canada shifted towards pro-Arab position
 DECLINE OF OPEC
• Since 1973, OPEC failed to hold on to its
preeminent position, and by 1981, its
production was surpassed by that of other
countries.

• The world price of oil, which had reached a

peak in 1979 during the 1979 energy crisis.
 ed

• Overall, the reduction in price was a bonus for

the oil-consuming nations: United States,
Japan, Europe, and especially the Third World.

• Electricity generation from nuclear

power and natural gas, home heating from
natural gas and ethanol blended gasoline all
reduced the demand for oil.
• At the same time, the drop in prices
represented a serious problem for oil-
producing countries in northern Europe and
the Persian Gulf region.

• When reduced demand and over-production

produced a glut on the world market in the
mid-1980s, oil prices plummeted and the
cartel lost its unity.
 Impact on Motor Industry
• The motor industry was one of Western
Europe's most affected industries in the wake
of the 1973 oil crisis.

• After the World War II most West European

countries applied heavy taxes to motor fuel as
it was imported, which resulted in the
production of small and economic cars.
• However by the late sixties as wealth increased
car sizes were raising but the oil crisis gradually
saw many West European car buyers move
away from larger to less economical cars.

• The most notable result of this transition in the

car market was the rise in popularity of
compact hatchbacks.
 FORMATION OF G8

• The G8 has its roots in the 1973 oil crisis and

subsequent global recession. These troubles
led the US to form the Library Group.

• Which is a gathering of senior financial officials

from the United States, Europe, and Japan, to
discuss the economic issues.
• CONCLUSION