In recent history, whenever political problems have arisen between major oil exporters and Western importers, such as the U.S., oil has frequently been used as a weapon to achieve political goals. During the Fourth Arab-Israeli War in 1973, also known as the Yom Kippur War, for example, the Saudis discovered the significant role they could play in regional and international politics just by opening or closing oil taps.
Last October, for the first time in over four decades, Saudi Arabia made thinly veiled threats to “weaponize” its oil production again if it faced any punitive measures as a result of the assassination of journalist Jamal Khashoggi.
Several days later, however, the kingdom suddenly changed its combative position. In a statement to Russia’s TASS news agency, Saudi Oil Minister Khaled al-Faleh ruled out the possibility of repeating the events of the Oil Crisis of 1973. “Saudi Arabia is a completely responsible country. For decades, we have used our oil (production) policy as a responsible economic tool and we have kept it apart from politics,” Faleh emphasized.
Riyadh’s recent, and very public, change in attitude towards the deployment of this “weapon” may suggest that it is no longer the effective tool for “managing” relations that it once was.
Throwing Fuel on the Fire
In 1960, five countries, including Iraq, Iran, Kuwait, Saudi Arabia, and Venezuela, founded the Organization of Petroleum Exporting Countries (OPEC) in Baghdad in 1960. The objective of the energy bloc, which some have called a cartel, was to “coordinate and unify” oil policies among member states.
Other Arab countries and oil producers in the developing world joined OPEC in the 1960s and early 1970s. Although the energy bloc had little impact on the global prices of oil when it was first established, just over a decade later, OPEC became a force to be reckoned with.
Ministers from OPEC’s Arab member states met with ministers from the non-OPEC states—Egypt and Syria—in Kuwait, where they made a historic decision. On October 17, 1973, the Arab nations of the energy bloc decided to support Damascus and Cairo’s military offensive during the Fourth Arab-Israeli War with an oil embargo.
Initially, they raised the price of oil exports by 70 percent. Then, OPEC’s Arab nations threatened to reduce their oil production by five percent every month until Israel withdrew from the land it had seized in the 1967 Arab-Israeli War—including the Egyptian Sinai, Syrian Golan Heights, the Gaza Strip, and the West Bank.
When it came to implementing the embargo, the Arab branch of OPEC divided the world’s countries into three categories based on their general political positions on Israel, especially with respect to the 1973 war.
States that were supportive of the Arab cause were classified as “friendly,” and they would not experience any drop in Arab oil imports.
States that were classified as “neutral” would be subject to a five percent reduction in oil imports.
“Hostile” states, or those who were pro-Israel, would “bear the full brunt of the embargo.”
The U.S., the Netherlands, Portugal, and South Africa were characterized as “hostile” and embargoed for their explicit support of Israel in the 1973 war. Although the Arab Oil Embargo only lasted a few months, it led to serious energy crises in the U.S. and in other countries that depended on oil from the Middle East.
The Ramifications of the 1973 Oil Embargo
While the 1973 crisis was not the first time oil had been used as a weapon, and it is unlikely to be the last, it was certainly the instance with the greatest impact on oil-consuming countries. The reduction of Arab states’ oil production caused the prices of crude oil to quadruple, and decreased the overall supply of oil in the span of a few months. The net loss of supply amounted to 4.4 million barrels per day by December 1973, about “14 percent of internationally traded oil.”
The embargoed nations simply did not have enough oil on hand to meet the unexpected shortage caused by Arab oil exporters’ cutbacks. This forced gasoline prices to rise at the pump and led to the strict regulation of oil supply and prices in the U.S. and Western Europe. Images of long lines at gas stations and frustrated drivers became emblematic of the time.
Nonetheless, in March 1974, Arab oil ministers (with the exception of Libya) lifted the embargo on the U.S. after Secretary of State Henry Kissinger succeeded in negotiating a military disengagement agreement between Syria and Israel. However, oil prices remained well above the pre-crisis levels.
Although Arab states were successful in weaponizing oil in 1973, they were not successful in harnessing it to achieve their ultimate goal: the complete withdrawal of Israel from all of the territories it had seized in the 1967 Arab-Israeli war—including the Gaza Strip and the West Bank.
The Search for Reliable Alternatives
The 1973 oil crisis was a wake-up call for Western countries. It highlighted their dependence on Middle Eastern oil and the associated risks. In the years that followed, Western countries began to implement new energy policies to curb the potential threats of future oil embargoes and focus on energy independence.
In fact, the U.S. was so eager to become energy independent that President Richard Nixon announced the launch of “Project Independence” in the midst of the oil embargo on November 7, 1973. This initiative paved the way for the country’s first national energy policy by outlining four main imperatives: the need to establish emergency procedures, the need to fully exploit all energy resources, the need to find new energy sources, and lastly, the need to conserve existing energy sources.
During the Iraq-Iran war, attacks on Iraqi and Iranian oil facilities resulted in the loss of four million barrels per day in oil production from the global market. In response, the Reagan administration issued a national security directive that increased the presence of the U.S. military in the Arabian Gulf “to help protect the oil facilities and shipments.”
Washington continued to increase its military presence in key oil-producing countries—particularly in the Arabian Gulf.
In a speech on August 8, 1990, President George H. W. Bush claimed that Iraq’s aggression posed a threat to the U.S., which imported half of its oil at the time. He also declared “the sovereign independence of Saudi Arabia [a] vital interest” given its position as a principal supplier of oil to the U.S., and deployed American troops to the country soon thereafter.
Fearing another stifling oil crisis after the Iraqi invasion of Kuwait, the Bush administration, anticipating a price shock, ordered the release of 34 million barrels of oil from the U.S. Strategic Petroleum Reserve. However, contrary to earlier predictions, oil prices dropped from about $30 a barrel in September 1990 to less than $20 a barrel in January 1991. In late February, Iraq surrendered, thus bringing an end to the First Gulf War.
With the development of new energy policies and increased domestic production of petroleum, as well as the growth of renewable energies, the most powerful political weapon in the arsenal of Arab oil-producing countries has largely been rendered useless.
In fact, it would seem that this weapon has become a double-edged sword: the world’s major oil-importing countries are seeking to harness the power of energy politics to punish oil exporters when they transgress certain boundaries. Thus, going forward, if Riyadh goes against Washington’s wishes, it could find itself a victim of its own preferred weapon of choice: energy politics.