Global Oil Politics

Farhana Razzak||DU-IR 2012

Introduction

There is no doubt that the country which makes the maximum use of fuel energy is most

likely to be regarded as the most powerful one. Oil is the main ingredient to run machineries of

modern civilization. Oil is by far the largest commodity in international trade, and the oil

industry is one of the largest and most international of all industries in the world. Most of the oil

consumed in the world today has moved from one country to another. This movement is the core

of the initiation of global oil politics. It involves many things. The first thing is that, Oil by its

meaning takes various forms world-wide: fuel, petroleum, gas and many more. So in this

research they are used synonymously. Another thing is that this research will involve multi-

dimensional focal points to examine this global phenomenon. For example, it will portray both

domestic and international impact of global oil politics; include relevance case/area study; study

the role of non-state actors etc. Our research starts from a brief understanding of global oil

politics.

Understanding Global Oil Politics

Oil politics or petroleum politics have a global character as it involves a large number of

states. The politics involves criterions such as pricing, sharing, pumping, refining, transport,

export, import and use of petroleum products. Having a large number of oil effects policies of

any country. It includes both domestic and foreign policy. All of them deal with each other due

to their interest. We find countries competing with each other to grab more and more quantity of

this increasingly scarce but vital resource. Here we find the western powers as active actors

despite of having their own resource. On the other hands Middle East is found to be as a rich

source of oil. They export a huge number of that. They make their maximum earning by this. It is

the reason of their development as well as misfortune in some cases. Again the continent of

Africa and Latin America is another huge source of petroleum. But above all USA is identified

as a contemporary major oil hungry actor who has the ultimate dominating power over the

exporters. Most of the policies of the USA have underlying relation with its interest for oil. The

politics has its own evolution. Starting from business and political diplomacy, the scenario has

now turned into a blood bath. Oil politics now drags the world to inhumanity. To sustain own

dominance, countries are now up to do anything to take over petroleum resources available.


Theoretical Reasoning behind the Politics

A short back ground:

There has been strange kind of relationship between investor and host countries. Because

most of the oil flourished countries are found to be former colonies of developed countries.

While oil was discovered there, they were still very much underdeveloped. One important thing

was that the crude oil in these countries was cheaper than other sources of crude oil-particularly

in the United States. The seven international major companies dominated the world petroleum

industry, especially outside the United States, for the whole of the period from 1950 to 1973. i

Their dominance was sustained by their almost exclusive access to low-cost oil in the Middle

East, Venezuela and. This triangular relationship between companies, host governments, and

home-country governments, is at the heart of policies and politics in the international petroleum

industry. The crisis of 73, 79 re-shaped oil politics, and the formation of OPEC in 60s turned the

politics more intense.

The reasoning:

Oil is such a source of energy which has replaced the use of coal

long time ago. It is very important ingredient of industrialization,

communication and of course militarization. Modern technology

needs huge amount of petroleum. For rapid development LDCs and

development countries need to use petroleum. To hold own

supremacy, developed countries need it. Burning oil/petroleum

petroleum is a mineral recourse. It is a very significant geopolitical

element of a country. If a country possesses an amount of

petroleum reserve, it has bright possibility of getting rich in short

time.

But present world context arouses debate on this imagination. Because today we saw countries

that have such resource are getting strategically attacked by the USA or getting penalized by EU,

NATO or addressed as rouge state. Thus oil is indeed the most powerful political commodity. ii

All these happenings have deep integration with global oil politics. Here buyers, sellers

and the middle actors try their shot about this geopolitical feature. With the reference to Power

Analysis approach of geopolitics, oil is indeed a significant power resource. Here actors try to


find out how this geographic significance of any political unit could be used to accumulate

national power. This power ultimately helps that political unit to appear as influential actor in

international politics. Now here the fact is, due to the imperialist mentality of the great powers,

they try to increase own national power by using others geopolitical advancement. On the other

hand the countries who possesses the resource, naturally tries to utilize it for their national

interest. It sets all of them in a bargaining position among each other. And now great powers are

cunning enough to invade and use muscle power to take over the oil/petroleum of others at low

price of money but high price of lives.

The next part shall highlight some areas relevant to the study of global oil politics.

Area Studies

Middle East:

Oil and oil-related interests has great influence on the political domestic and international

politics of the Middle East. It is said that Middle East simply floats over oil! In includes the

maximum OPEC countries. Decades after decades importers have very tactfully worked to kept

governments of those countries loyal to them. They might be advocates of democracy world-

wide but they really don’t want such democratization of that region. Governments of those

regions exist in such non-democratic form.

Middle East producers possess 65 per cent of the world’s proven oil reserves.iii Their oil is

by far the cheapest to produce. Iran was the first country in the Gulf to become an oil exporter.

Production in Iraq started in 1928 but remained at a low level. Saudi Arabia began producing in

1938; Kuwaiti production began only in 1946 and grew very rapidly, and in 1953 had already

overtaken Saudi production. The production of all three countries—Iraq, Saudi Arabia, and

Kuwait—increased rapidly to compensate for the collapse of Iranian production in 1951–4.

Among them, Saudi Arabia possesses both the world's largest known oil reserves, which are 25%

of the world's proven reserves, and produces the largest amount of the world's oil.


All of the oil-producing countries have faced ups and downs. But all of them have also

faced influence, pressure and interest of the west. West has always tried to interfere in their

domestic politics to form a west-friendly government. In one hand USA or European Union are

found supporting such non-democratic regimes in the Middle East. On the other hand they

compete with each other for the economic and political liberalization of that region. They have

reacted if any of those countries had gone for nationalizing their oil production. They make

friends and enemies only for oil. For example, United States entered in very close alliances with

Saudi Arabia—which was, and continues to be, problematic on most accounts, yet remains

inescapable because of oil. iv But there is no empirical support to the belief that oil produced

from a friend is either more reliable or cheaper. Because, if we evaluate American embargo

against Iran, then Libya, and the UN-imposed embargo against Iraq; we shall find that major

industrial powers have made their own access to oil more difficult by themselves.v They made

political enemy as well as created economic crisis for themselves.

The diplomacy of the oil-producing countries has been busy pursuing objectives that are

either irrelevant or dysfunctional to their position as major exporters of oil. For example, Iran’s

promotion of Islam or the fight against Israel is very irrelevant as an oil-producing country.

The politics also involves the interplay of relationship between oil-poor and oil-rich

states. Oil has had a fundamental influence on inter-Arab relations. The oil-poor states have

articulated a claim to a share of the oil rent, which the oil-rich states never truly accepted as

legitimate.vi

As a contemporary case, Iran has the second largest oil reserves in the world, and the

third largest exporter of it. According to 2006 estimates Iran produced about five percent of total

global crude oil production. Iran held 10.3% of world’s total proven oil reserves and that figures

out to be about 137.6 billion barrels of oil reserves at the end of 2009. vii China and Russia are

their major clients. Now we see that Iran is in a hostile position to the USA and its allies

regarding nuclear issue. Iran has been accused of making illegal drones too. But Iran is not

fearful about USA or its threats. Because it has China and Russia on its back and they shall be in

that place as they have oil-related interest. Here, oil is the main burning fuel of Iran’s

international political attitude.


But not all the countries of the Middle East are lucky enough to break the chain of

western slavery. The misfortune of Iraq is examples of such victimization. We see that alien

troops are still occupying Iraq somehow even after the death of Saddam Husain and finding no

evidence of Iraq’s nuclear armament. But we also know that Iraq is uniquely dependent upon oil

to finance its state. 90 percent of public expenditures in Iraq are financed by oil monies.viii Iraq

holds the world's second-largest proven oil reserves, with increasing exploration expected to

enlarge them beyond 200 billion barrels. These are extraordinarily cheap to produce. These

geographical arrangements are most useful to none other than the USA. After the invasion in

2003 USA got unwritten right over Iraq’s oil treasure. After a blood-shade, USA presented a

puppet government to devastated Iraq. And then by the name of political reformation USA

managed to manipulate Iraq’s constitution and turn it into a slave of west. Inside Iraq Kurdish

achievement of regional control over oil resources in the constitution is perceived as a threat to

Iraq itself.ix Because, the Sunni Arabs perceives it as they are taking advantage of the weakness

of Baghdad. It ultimately poses internal tension in post-2003 Iraq.

Therefore, Middle East consist a number of political shakes only because of having oil.

That’s why experts fear that peace is very far to be achieved in there only because of this.

Africa:

Africa is such a place flourished with enormous natural treasures. Oil is one of those. It

has turned Africa once again become strategic for major actors in the international system.

Africa has attracted a lot of attention among corporate and political decision-makers because of

growing global oil demand. Africa already accounts for more than a quarter of China’s oil

imports today. United States already imports more oil from Africa than from the whole Persian

Gulf.x Malaysia and India are also making significant investments in African oil-producing

countries. It relates with rivalry among themselves in political as well as economic terms.

Nigeria, Libya, Angola, Algeria are members of OPEC. They produce and export a large

number of oil worldwide. Sudan, Congo, Gabon also produce huge amount of oil. They consider

it as “black gold” which shall bring them development.xi But here the irony is that most of them


face high poverty rates, poor health care, high rates of child mortality, and poor educational

performance despite being oil-rich.

Like Middle East here also Oil and centralized rule seem to go together; and oil and

democracy do not generally mix.xii Petroleum dependence is even more likely to be associated

with conflict than any other commodity. In the Republic of Congo, for example, an opposition

group received $150 million funding from the French oil company, Elf-Aquitaine, to support its

takeover of the government so that the company could receive more favorable treatment under

the new regime. The payment financed a four-month war that resulted in 10,000 dead.xiii In

Nigeria its Niger Delta is the storehouse of petroleum resources, which accounts for more than

80 percent of Nigeria’s revenue and more than 90 percent of the total exports.xiv Unfortunately,

the producing region remains infrastructural underdeveloped giving rise to various forms of

violent conflicts, kidnappings and restiveness. It ultimately poses question over their governance

and resource management. Again, despite having such amount of oil, it is still one of the poorest

countries of world. After what happened in Libya, the fate of Nigeria is now at stake as oil prices

are going higher.

Above all contemporary examples, Libya is the ultimate victim of petro-politics indeed.

Arab spring brought an end to Gadhaffi’s regime. Till the execution of him, the world was in

favor of NATO’s intervention. But the truth was out in no time. We saw another Iraq through the

eyes of geopolitics. Libya was a very solvent country. Gadhaffi made his country independent of

foreign loans. It is an OPEC member which has 3% of total world’s purest oil reserve. So using

these clues the equation was clear lately. Now Libya shall turn into another servant of the West

losing all of their oil to the west.

Latin America:

Latin American petro-politics moves around two OPEC members Venezuela and

Ecuador. In 2001 the construction of second trans-Ecuadorian pipeline created domestic tension

in Ecuador regarding the natural rights of her indigenous people.xv It turned Ecuadorian Amazon

petro-politically unstable. But it resulted first time in Ecuador's seventy-year history of oil


exploration - serious dialogue between indigenous peoples and a multinational over petroleum

activity. xvi

Venezuela nationalized its oil industry in 1975-1976. According to the Oil and Gas

Journal (OGJ), Venezuela has 77.2 billion barrels of proven conventional oil reserves, the largest

of any country in the Western Hemisphere. It provides 50 percent of the government’s revenue

and 80 percent of Venezuela’s exports earnings. xvii Oil sufficiency pushed Venezuela to become

a powerful member of OPEC. Due to Hugo Chavez’s contribution, OPEC was powerful again.

When Chavez took office PdVSA he began to influence in the Venezuelan oil industry and a

hugely important influence over the entire Venezuelan economy.xviii Again, oil sufficiency has

made the people of Venezuela obedient toward the government as it has created a lot of

employment. But about ruler ship, Even in Venezuela, where some type of democracy exists, the

lack of taxation has made both representation and state accountability less than expected. Petro-

politics affect the voting behavior of the people of Venezuela. The democratic form of

Venezuela is thus also is not accepted globally. But it is true that the basis of the global attitude

of Hugo or Venezuela is indeed shaped by its richness in oil.

Europe:

Oil is likely to remain a major energy source in Europe in the decades to come, especially

for transport. European Oil-politics is now working under the frame work of European Union. It

combines some of global great powers. The EU focuses on securing oil supplies for Europe and

making the oil market more transparent, fair and competitive.xix The EU exercises its political

power related to oil when it needs. Its recent oil-embargo over Iran is a significant example of

that. They advocate their increasing diplomatic pressure on Iran as sign of effectiveness of

European countries.

On the other hand single Russia remains a world-class player even after the collapse of

USSR. It is the world's largest net exporter of oil except for Saudi Arabia. It is therefore a force

that the market and the OPEC cartel must reckon with. After a somewhat liberal change, oil

development and export sales helped Russia to engage with the outside world, economically and

hence politically.xx Their policy of pluralism helped the domestic integration among government

and private sectors.


The Critical Role of USA in today’s Oil Politics

With approximately 5% of the world's population, the United

States is responsible for approximately 25% of annual global oil

consumption while only having 3% of the world's proven oil

reserves. According to 2008 estimates USA has a per-person

daily consumption rate more than double that of the European

Union. About 86% of all types of energy used in the United

States are derived from fossil fuels. In 2007, the largest source of

the country's energy came from petroleum (40%). This data shows the clear cause behind the

thrust of USA’s for petroleum. It is interested toward others petroleum resources rather than its

own. It shapes USA’s policies and strategies. USA can even go for war to gain more oil. Being a

super power they do this forcefully. Because, USA needs petroleum/oil more than before to

compete with other rising powers.

When the US invaded Iraq, many were screaming about war for oil. Saddam’s biggest crime was

steadily increasing Iraqi oil production. The US oil corporations cannot dictate policies, but they

are influential enough to swing the political balance toward invading Iraq and staying there. The

same thing is now on the way to be repeated in Libya. In case of Saudi Arabia, it produces 3% of

United States’ GDP from its oil resources.xxi Therefore we see in contemporary Arab Spring the

position of Saudi Monarch is still very much secured as it has got USA behind its back.

Petrodollars are oil revenues denominated in U.S. dollars. It is another tool of United States’

petro-politics. Since petrodollars and petrodollar surpluses are by definition denominated in U.S.

dollars, it turns a country dependent on USA in terms of oil production. Because, whenever

economic or other factors affect the U.S. dollar, petrodollars will be affected to the same

magnitude.xxii And as a result the economic situation of oil-producing countries will be affected

too. So like this USA can control over other oil-producing country economically too. And

overall, it keeps changing its strategies regarding oil-politics.

Oil politics is important for United Sates’ internal politics too. The success of government

depends on how efficiently he handles oil prices. Because, now these days Americans blame


both Obama government and Republicans along with oil companies for the spike in oil price.

xxiiixxiv This is believed to affect the electoral behavior of the people.

The Future

Countries like China, India, and Brazil are now coming forward as influential player in

global oil-politics. China is on the way making it the world's third largest consumer of oil, and a

major net importer.xxv

Beijing estimates its consumption will amount to 450 million tons in 2020,

60 percent of which would be imports.xxvi It has a visible competition with the United States in

this case. China has adopted several strategies to achieve over global oil. Its supporting Iran or

dealing with Canada are examples of such activity. Experts afraid that Canada is on the way to

positioning itself as a resource colony for China xxvii The empowerment of Russia is another sign

of change in the future of oil politics.

In these circumstances, political instability of the OPEC countries and the ongoing high price in

fossil fuel makes us tensed about the future of petro-politics. Another threat shall appear when

there will be no oil left to fight for.

Conclusion

It is high time when the world should seek for substitute source of energy. For the sake of

world peace, solvency and environmental goodness, policymakers must come forward to

formulate viable policies to reduce the political influence over petroleum and similar resources.

Oil is now equal in price of blood. This thing needs a change. For a better future we always have

to keep in mind that petroleum is limited in quantity. So there should be no fight about it. Only a

global cooperation can help us to find a solution of all conflicts. It requires the involvement of

great powers as well as developing countries and least developed countries too. Because only

few powerful states and Companies like BP, Texaco, Shell, ChevronTexaco and Exxon cannot

decide the fate of the billion people living on earth.


i Parra, Francisco. Oil Politics: A Modern History of Petroleum, 2004; LB Tauris, London, p 68.

ii Luciani, Giacomo, Oil and political economy in the international relations of the Middle East 11/22/08, p 82

http://www.princeton.edu/~gluciani/pdfs/Chapter%20in%20Fawcett.pdf ; Data available, 15th march, 2012.

iii ibid

iv ibid, p88

v ibid, p 89

vi ibid p 97

viihttp://www.bp.com/liveassets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_revi

ew_2008/STAGING/local_assets/2010_downloads/statistical_review_of_world_energy_full_report_2010.pdf

viii Kane, Sean; IRAQ’S OIL POLITICS: where agreement might be found, United States Institute of Peace, Washington,

2010.p 3

ix Ibid, p 7

x Frynas, Jedrzej George and Paulo, A New Scramble For African Oil? Historical, Political, and Business Perspectives;

Royal African Society. Advance Access Publication; 27 November 2006, P230

xi Karl, Terry L; Oil-Led Development: Social, Political, and Economic Consequences, Center on Democracy, Development,

and The Rule of Law; Freeman Spogli Institute for International Studies January 2007

xii Ibid, p20

xiii Ibid, p 23

xiv Akpan, Nseabasi and S Akpabio, Emmanuel. Governance and Oil Politics in Nigeria’s Niger Delta:The Question of

Distributive Equity, 2010

xv http://enviro.lclark.edu/resources/ecuador/MiningAndOil/OilConflict.pdf ; Data available, march 15th 2012.

xviSuzana, Sawyer; Indigenous Initiatives and Petroleum Politics in the Ecuadorian Amazon ;March 25, 2010;

http://www.culturalsurvival.org/publications/cultural-survival-quarterly/ecuador/indigenous-initiatives-and-petroleum-politics-

ecuad; Data available, march 15th 2012.

xvii Wilpert, Gregory; The Economics, Culture, and Politics of Oil in Venezuela, The Economics, Culture, and Politics of Oil

in Venezuela, August 30th 2003

xviii ibid

xix What do we want to achieve?; European Commission; http://ec.europa.eu/energy/oil/index_en. Data available, march 15 th

2012.

xx Rutland, Peter; Oil and Politics In Russia; Wesleyan University, American Political Science Association; Philadelphia,

September 2, 2006. P 12

xxi Oily politics; http://samsonblinded.org/blog/oily-politics.htm ; September 11, 2008, data available, 15th march 2012.

xxii Definition of Petrodollars; http://www9.georgetown.edu/faculty/imo3/petrod/define.htm; data available, 15 th march 2012.

xxiii

xxivNew poll, endorsements bolster Romney - CNN.com; http://edition.cnn.com/2012/04/17/politics/campaign-

wrap/index.html, April 18, 2012, 15th march 2012. xxv Parra, Francisco. Oil Politics A Modern History of Petroleum, 2004 by LB Tauris, London, p 317

xxvi Frynas, Jedrzej George and Paulo, A New Scramble For African Oil? Historical, Political, and Business Perspectives;

Royal African Society. Advance Access Publication; 27 November 2006, P238

xxvii Energy Bulletin, Archived Feb 23 2012; http://articles.latimes.com/2012/feb/19/world/la-fg-canada-pipeline-20120220

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