Oil and Political Economy in the International
Relations of the Middle East – Week 7
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Iraq
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Short History of ME Oil Politics
25th May, 1908
Oil was discovered in Persia by the Anglo-Persian
Oil Discovered in
oil company.Discovery of oil in 1908 in Iran was a
Iran
turning point in the future of the Middle East.
11th Nov, 1918
WWI Ends and the
Middle East
Becomes the World's
Supplier
The US decided to enter the oil game in the
Middle East. The British government allowed the
United States to begin drilling in Iraq and other
countries near the Persian Gulf
1918
The Ottoman Empire
is Defeated
Britain and France. The Middle East was split
between Britain and France. Britain gained control
of the resources in the Middle East.
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The Redline Agreement (1928)
• A consortium of 7 companies ( known as 7 sisters),
5 of which are American, is given financial interst in
Iraq Petroleum Company, and the companies agree
to not indepedently develop oil in an area that spans
form Turkey to Iraq and Saudi Arabia.
• Its ‘self-denial clause’ allows seven companies to
control the bulk of Mideast oil production by the early
1930s.
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The Red Line Agreement (1928) -2
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Seven Sisters
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Developing US-Saudi Arabia
Relations (1943-45)
• In 1938, SA is found vast quatities of oil.
• In 1943, with concerns growing about
diminishing US oil production capacity,
President Roosevelt decleares Saudi Oil vital
to US security and provides financial support.
• A few years later, the world’s biggest oil fields
is found in SA, and it quickly becomes the
world’s largest exporter of oil – though not a
significant US supplier for several decades.
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President Roosevelt and King Abdul Aziz Ibn Saud ( Feb.1945)
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US- Iran Oil Consortium (1954)
• In August 1953, the Iranian military, with the help of
British/US intelligence agencies, overthrows Iranian
Prime
Minister
Mohammed
Mossadeq
–
who
nationalized the country’s oil industry.
• In October 1954, the Iranian government led by the
Shah agrees to a consortium of mainly US companies
to manage Iran’s oil industy.
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The Suez Canal Crisis (1956-7)
• In July 1956, Egypt nationalizes the Suez
Canal, which has been controlled by Britain
and France.
• In a coordinated attack with Israel temporarly
seize the canal in October.
• Half of the canal’s traffic is petroleum, and
the ensuring crisis from its closure threatens
Middle East oil shipments, which supply
about 800,000 barrels a day to Europe.
• Eisenhower compels a withdrawal to avoid
confrontation with the SU.
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1st Jan, 1945
The Need for Oil
Increases
After WWII, the need for oil .Until then
the Middle East was only producing
about 5% of the world’s oil. American
companies going into the oil industry
in the Middle East made the industry
what it is today.
10th Sep, 1960
Organization of the
Petroleum
Exporting
Countries (OPEC)
is formed
In 1960, OPEC was created. These
countries were moving toward
nationalism in the oil industry.
OPEC is Formed:
Continued
OPEC was to protect the oil resources
and how the country gained revenue
from them with foreign companies
having so much control. OPEC is still
a monumental part of regulating oil
and making sure it is fair for all those
involved today.
10th Sep, 1960
1st OPEC Conference, Baghdad, September 10–14, 1960
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First Arab Oil Embargo
• On June 6,1967,Israel enters into an
armed conflict with Eqypt,Syria,and
Jordan,known as the Six Day War.
• In return, Arab oil ministers call for an
embargo on countries friendly to Israel.
• US production surges and largely
offsets the teporary loss of Mideast oil
globally.
• By September, the embargo is lifted.
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Oil Crisis (October 1973)
• On October 6, Syria and Egypt attack
Israel.
• On October 19,the Nixon administration
announces military aid package to
Israel.
• In return, Arab states suspends oil
exports to Israeli allies, reducing traded
oil supplies by 14% internationally and
skyrocketing oil prices.
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Iranian Revolution (1978-79)
• In October 1978, thousands of oil workers go
on strike in Iran, as part of a cycle of unrest
protesting the Shah.
• Doping in Iranian oil output, 5% loss in global
production.
• As a response to the hostage crisis, Pr.Carter
ordered severing diplomatic relations and
embargoing Iranian oil imports.
• Between January 1979-Dec. 1979,global oil
prices more than double.
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Carter Doctrine (1980)
“ 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 force ”
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Iran-Iraq War (1980-88)
• Continuing attacks on both Iraqi and Iranian
oil facilities remove 4 million barrels a day in
oil production from global production.
• Regan’s national security directive in 1983 to
increase the US military presence in the
Persian Gulf to protect the oil facilities and
shipments to allies.
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Iraq’s Invasion of Kuwait (1990-1)
• Iraq invades Kuwait on August 2,1990, following
a dispute over the Rumaila oil field on the
border.
• In response, Bush says Iraq’s aggression poses
an economic threat to the US ,declares the
‘sovereign independence’ of SA a vital interest’
and deploys troops to the country.
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Libya Rocks Oil Markets
• In February 2011,Libya becmoes the first
major oil-producing nation ( 2% global oil
output) to join Arab uprisings.
• Though the country does not supply oil to the
US, concerns grow that the situation in Libya
and potentila unrest in other oil-producing
nation could lead to a new global oil crisis.
• In a March 30 speech, Obama says: ‘ We will
keep on being a victim to shifts in the oil
market we get serious about a long-term
policy for secure, affordable energy.’
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Oil and the Consolidation of the State System
• Strategic interest in oil since early 20th century, e.g.
British policy in the Gulf.
• Fundamental influence in shaping boundaries and
independent existence of many states in the region.
• Instrumental
in
consolidation
by
favouring
aggregation around the oil sector.
• Oil is a supporting cause to violence, but not a
primary one.
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Oil and the International Relations of
the Middle East
• Impact of oil on relations between countries of the region as
well as relations with the rest of the world.
• British, and later American, attitudes towards the Middle East
strongly influenced by oil.
•
Oil as a tool, rather than an objective: sanctions against
Libya, Iraq, Iran make access more difficult in order to
pursue political goals.
•
For producers, oil is not a prominent issue in shaping foreign
policy , but their ‘ regime security’ is .
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Oil and Domestic Politics: The Rentier
State Paradigm
• Oil rents (i.e.petrodollars) are paid directly to the
state from abroad, which in turn supports society by
allocating this rent.
• Production (taxes coming from society) vs
Allocation.
• Not all Arab states are rentier.
• Implications of rentierism for state: no need to seek
legitimacy through democratic representation, and
autonomy in policies.
• Challenge of establishing representative democracy
in a rentier state  prospects for Arab Spring?
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Oil and Inter-Arab Relations
• Dialectic between oil-poor and oil-rich states
in the region.
• Authoritarian rentier states do not need a
“national myth”.
• Oil-poor state claims to share of rent.
• 1970s rent boom led to period of international
redistribution.
• Balance of power has shifted to the newer, oil
rich states such as the countries of the GCC
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Regional/International Environments and
Political Order
• Being an oil producer seems to help against
uprisings.
• Arab Spring’s challenge to Gulf countries:
divided responses.
• Outcome
of
‘revolutions’
will
determine
impact: pressure for democracy in the Gulf, or
business as usual?
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Conclusion
• Middle
East
plays
a
central
role
in
international oil.
• Debate
over
whether
oil
is
a political
commodity.
• Apart from rents, control of oil has not brought
special political or military benefits.
• Polarisation between oil-haves and oil-havenots
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