The Arab Oil-Exporting Issue - Case Study Example

The Arab oil-exporting countries decided on October 16, 1973 that they would cut oil production and place an oil embargo on the United s and theNetherlands. The OPEC (Organization of Petroleum Exporting Countries) committee composed of the oil ministers of the Gulf member countries consisting of the United Arab Emirates, Iran, Qatar, Kuwait, Iraq, and Saudi Arabia had indicated they would unilaterally increase the posted price of Arabian Light, the marker crude, from US$3.011 per barrel to US$5.119. This move represented a whopping oil price increase of 70 percent. This price decision is now known as the oil price shock. (Bolia, 2005) Prior to this action of using oil as a weapon, the Saudi-Egyptian-Syrian axis had launched the Yom Kippur War or Ramadan War. The Egyptian and Syrian political leaders, President Anwar Sadat and President Assad had made their final decision to attack Israel on October 6, at 2:00 P.M. As a response to the decision of the Arab leaders, Soviet Foreign Minister Andrei Gromyko began evacuating Soviet civilian personnel and their families from Egypt and Syria. The Soviet Union government headed by Leonid Brezhnev did not fully approve of the decision of these two Arab countries. Israel was headed by Golda Meir during the armed conflict. (Israelyan, 1995) The Yom Kippur, or Ramadan War, which started on October 6, 1973 was due to the frustration of the Arab countries with Israeli failure to evacuate occupied territories and to support UN resolutions. (Morse, 1999) These frustrations had been aggravated by persistent perceptions among Arab leaders that the United States was strongly supporting Israel in violation of the Arab situation. Prime Minister Assad of Syria informed the Soviet authorities that the Syrian and Egyptian leaders had decided to prusue a joint attack against Israel on October 6 at 2:00 P.M. This crucial decision had been made on October 4. Both countries had relied on the Soviet Union for understanding and support. (Israelyan, 1995) The combined military forces of Egypt and Syria attacked Israel during the Yom Kippur which was a religious holiday for Israelis, the Day of Atonement. On the Golan Heights, 150 Israeli tanks battled 1,400 Syria tanks and in the Suez area, about 500 Israeli soldiers faced 80,000 Egyptian soldiers. The Israelis were obviously outnumbered. However, the Israeli army called up reserves and engaged the two countries in strategic counter-offensive military actions. (Morse, 1999) Furthermore, the act of using oil as a weapon was enhanced by the efforts of the five Arab OPEC members on October 17 to enlist the support of the oil ministers of Egypt, Syria, Libya, Bahrain, and Syria in order through a Conference of Arab Oil Ministers. The meeting had a political purpose; the ministers mutually agreed on how to use the oil weapon to encourage the United States to re-examine its unwavering support for Israel and to force the evacuation of occupied territories. The outcome of the October 17 meeting was a resolution specifying the appropriate processes steps need to be taken. Nine countries signed the resolution. The members decided that the oil weapon would be deployed as follows: the nine signatory countries would decrease their oil production levels by at least 5 percent from the actual September 1973 levels. Then in the succeeding months, a similar reduction will be applied. The Arab countries will guarantee that friendly states will not be included in the reduction. The oil production cuts would continue until Israel had moved out of the occupied territories and the basic and legal rights of the Palestinian people were upheld. The decision on the production cut was then changed on November in which the reduction of oil production were raised to 25 percent below the September level. This was to be followed by another round of 5 percent reduction in December. The different categories of oil-consuming countries were prioritized accordingly. First, the most favored countries would receive their full oil requirements. Second, preferred countries would be allowed to import "the equivalent of their average imports of Arab oil during the first nine months of 1973 or during the month of September 1973, whichever was greater. Third, neutral countries' imports would be reduced by the 5 percent and by a portion of the additional amounts given to the preferred countries. Fourth, embargoed countries such as the United States, the Netherlands, Portugal, South Africa, and Rhodesia will receive no supply. Japan and the Philippines which were regarded as friendly were exempted. The strategy of using oil as a weapon against the United States and the Netherlands was not successful and sustainable. First, the simultaneous production cuts had increased world oil prices thus, affecting the economies of both friends and targetted enemies. Second, the countries most affected by the reduction of oil exports were the friendly oil-importing developing countries not the United States. These poor and friendly countries bore the adverse economic impacts due to high oil prices in the succeeding months. The United States swiftly responded to the Arab action of oil production cuts. For instance, the loss of one million barrels a day would initially push prices up. The shortfall of one million barrels a day was compensated for by the US by a release of one million barrels of oil from the strategic stocks held in the United States, Europe, and Japan. The US also tapped into the surge capacity of the existing oil-producing countries which were friendly to them. Hence, the oil weapon became a blunt instrument. (Mabro, 2007) Various diplomatic pressures and the capacity of the US to tap into their oil reserves lessened the resolve of the Arab oil ministers. The willingness and ability of the United States to act towards a resolution of the 25-year-old Arab-Israeli conflict by advising Israel was also a positive contribution to the cessation of the conflict. After one month, during a meeting in Kuwait on November 19, 1973, the Arab oil ministers showed that they were slowly open to flexibility. They decided not to impose the 5 percent supply reduction scheduled for December on European Economic Community countries. On December 24 and 25, the 25 percent production reduction rate from the September levels was lessened to 15 percent. Finally, the 5 percent reduction scheduled for January 1974 was abandoned. (Mabro, 2007) A political development involving Egypt also led to end of the oil embargo. Egyptian President Anwar Sadat relied on US Secretary of State Henry Kissinger to relay Arab sentiments to Israel. Sadat was persuaded that the lifting of the embargo on the United States would enable US diplomacy to begin working toward the desired goal of the evacuation of occupied territories. President Sadat then convinced King Faisal of Saudi Arabia, the leader of the oil weapon action to lift the embargo. President Sadat eventually succeeded in his strategy. Then in a Vienna meeting held on March 18, 1974, the Arab oil ministers decided to lift the embargo on the United States. The effective use of the oil as a weapon did not last for more than three months. (Mabro, 2007) Works Cited: Bolia, Robert 2005, "The Yom Kippur War: The Epic Encounter That Transformed the Middle East."Parameters, vol 35, issue 1, page number 143. Israelyan, Victor, 1995, Inside the Kremlin during the Yom Kippur War.: Pennsylvania State University Press. Place of Publication: University Park, PA. Mabro, Robert 2007, "The Oil Weapon: Can It Be Used Today." Harvard International Review. volume 29, issue 3, page number 56. Morse, Edward, 1999, "A New Political Economy of Oil." Journal of International Affairs, volume 53, issue 1, page number 1. Read More