Oil in the Middle East and its Political Effects - Coursework Example

Tutor’s Name] [Grade Course] [Date] Oil in the Middle East and its Political Effects Introduction The most important geopolitical issue that the world has seen is the existence of oil in the Middle Eastern countries. Oil is the most important factor in the Middle Eastern issues that include the geographical issues as well as the political issues. The resources that the Middle East has are enormous and these are the resources that not only form the backbone of the western economies. Countries that are regarded as being the superpowers are the ones who have the main interest in Middle East and this is because of the reason that Middle East holds one of the most important energy resources as oil. The superpower countries that want to have stronger relations with Middle Eastern countries include USA, France, Britain and Russia. Before oil was discovered in the area, Middle East was the region surrounded by many conflicts of religious nature. In the past there have been many wars in relation to the rich energy resources as well as arable land. As history says the interests that the western countries had in Middle East were related to the gain of power to the Ottoman Empire. The Ottoman Empire has been one of the main challenges that Middle East had to face in previous years as well as for the western countries. Therefore, these are the countries which are aware of these kinds of propagandas that arise in the Middle Eastern times. This has been especially noticed in European colonial times. In geopolitical terms it has been noticed that before and after the Ottoman Empire, a negative kind of stereotyping that had been observed was one reason that the superpowers from around the world came into action as they needed to be in the region and this was the reason of their involvement in this region of ultimate importance. Because of this involvement, the super powers also gained powers to Middle East. Emergence of The European World The study carried out by Eric Hobsbawm in his book “The Age of Empire” is the best study to refer to the culminating years related to the European order. This is the study that reflects the fact of the European dominance on the world while having the inability to settle the contradictions and the issues that were being raised within Europe. European nations have been known to be able to make newer and vast empires which were orient in the lesser developed areas of the world. European nations for this reason are known to be the super powers. During this very time the major changes that were taking place within Europe were unable to be dealt with. The changes that were profoundly taking place within the Europe were the changes in democracy, the labor was at a high rise and the rivalries were at an increase. These were the events that took place in the year of 1914 and this was the year when the capitalists had reached the highest point in Europe revealing the strongest of all flaws in the capitalist working. This was the same time when the other changes were taking place in Europe including rise of politics, emergence of women and so on. In relation to this the author Giovanni Arrighi in the book “The Long Twentieth Century” has connected the emergence of the capitalism and power and makes the social theory where it accounts for the structures of the agencies that have helped or played their roles in shaping up the history of the world. The author has compared the ideas that have been presented by Eric Hobsbawm that the capitalism has emerged as a result of the succession of many centuries. The capitalism has matured by the use of the networks that have been using the hegemony and the political networks which made European nations take control over the economic states in the world as has been mentioned by Eric Hobsbawm. By deeply analyzing the changes in the capital, the state power as well as the geopolitics of the European nations as well as within Europe, it has been explained that the capitalistic fortunes were seen to be changing in, Genoese, Florentine, Venetian English, Dutch, and finally American capitalism. Middle East oil and the politics The petroleum discovery in the Middle East has been one of the greatest breakthroughs for Middle East in the case of its economy. Middle East is the region which has attracted the attention of the western world as the western world strongly embraces the fact that Middle East has 65% of the world’s oil. Many trading opportunities have been opened for the Middle Eastern countries owing to the discovery of petroleum. This has caused an increase in the political and bilateral relations between the Middle East and western super powers. Organization of Petroleum Exporting Countries (OPEC) has the control of oil export form approximately eleven countries. The most important fact that needs to be realized as the main rationale of existing politics and economy is that the Middle Eastern oil is the world’s balance wheel. The western countries are always afraid of the conflicts that arise in Middle Eastern countries as the western powers are always afraid that the oil is one thing that they need and the conflicts might put that in danger. In case of the conflicts that arise in Middle East the major back drafts that are faced by western countries is that middle east might stop the supply of oil to them or Russia may be the only country that gains most of the access to the oil reserves in Middle East. These are the back drafts that are viewed by the US in the manner of interpreting that intervention might change the role that is being played by the US to gain access to the oil reserves. In this case it can be added here that the fears that US has in case if Russia gaining control of all the oil reserves in Middle East should not be there as US needs to analyzed that only 3% of the oil supply comes from the middle east. US is immune to be blackmailed if the oil supply from the middle east is stopped however the main fact that needs to be kept in mind is that the middle east has many interest associated with the supply of oil that is provided to the US. Therefore, it can be argued here that the interest that the US has from Middle East is lesser as compared to the political interests that Middle East holds from the US. In addition to this if the point is examined that the interest and the strategies that US has in terms of the oil in the Middle East is of vital importance to the NATO countries as well as Japan, it can be seen that there are many countries that depend on oil supply from the Middle Eastern countries. If the oil reserves are taken into account it can be seen that North Africa as well as the Middle Eastern countries have around 71% of the oil reserves in the world and this totals to about 371 billion barrels of oil reserves. Therefore, it can be seen that the oil needs that are fulfilled on an international scale by these two countries equal to 39%. In the case of Europe, the oil supply that it gets, out of the total, around about 58% of the supply reaches from Middle East and it is consumed within 60 days according to the estimates. Japan is the country that gets 90% of the oil supply from the Persian Gulf. These are the numbers that show that oil is flowing in these countries from the Middle Eastern countries as well as the gulf countries. If these all countries depend on oil supply form Middle East it can be said that the strategy that the US has relates to the flow of this oil in these countries. Seven sisters The oil reserves that Middle East has are controlled by seven different companies which all together are known as the seven sisters. Interestingly the five of seven companies are the ones that are US based including the Jersey Standard, Mobil, Texaco, Gulf and Standard of California while the rest of the two companies are those which are UK based. The oil that is needed by Saudi Arabia is produced by all the US based companies. Moreover, estimates show that 75% of Libya’s oil, 50% of oil for Kuwait, 40% oil for Iran and 25% of the oil for Iraq is produced by US based companies. If the investments are calculated for US based companies it is seen that the total investment is around US$ 3 billion. However, a realistic approach says that the investment totals to about US$ 22 billion, which can be said to be their potential worth in the next ten years. The markets matter These are the companies that make the balance of payments for US. If the US based companies make money by selling the oils to the countries, the dollars are bought by the Middle Eastern countries and this way the US earns money. The oil flow that has been strategically designed and maintained by the US has been because the seven sisters have been able to survive the toughest of times and they have been able to survive the times of wars, the revolutions in different countries as well as the guerrilla attacks. The greatest example of counter acting in the crisis has been that Suez Canal had been closed for approximately a week in the year of 1967. Still the seven sisters continued to produce and distribute the oil. Similarly in the year of 1966 a pipeline known as the Trans-Arabian Pipeline was damaged in Syria and this resulted in a shortage of 500,000 barrels in one day. In this case the reaction that had been noticed from the Syrian side was that the pipeline repairs were refused so that the Saudi Arabian regime could be embarrassed. Moreover, estimates say that the loss that Saudi Arabia had to face each day that the canal was closed added to $100,000. In this case the only choice that has been left was oil in Arabian Gulf. Thereby in this case oil from the Arabian Gulf was being taken to Europe. The needs of Arabs There have seen many crises as we have seen and it is noticed that the Arab oil wells have survived the entire crisis as if they do not survive the crisis the oil supply will be the one that suffers. If Arabs have their oil supplies in risk and if by any means they risk the oil being supplied to the foreigners and the western countries, the oil money that the Arabs get is the one that gets to be in the risk. The Arabs needs the oil money that is earned by supplying oil to the western super powers. It has been estimated that North African countries, Middle East including Iran makes approximately $4.8 billion in one year from all the oil reserves that they have. It is very well realized by the Arabs that oil stoppage to the western countries can be more harmful to the Arabs than to the western countries. If this is the case, the fact that needs to be emphasized here is that revenue collection that these Middle East countries do after the oil supply to these western countries counts. As it has been seen, Arab generates 77% of its revenue from oil reserves only. As far as the rest of the countries are concerned it is seen that Kuwait generates 94% of its revenue from oil reserves, Libya generates 79% of its revenue and Iraq generates 56% of its revenue from oil reserves only. If any of the Middle East countries try to stop the supply of the oil to the western super powers, the consequences that are anticipated include the selling of oil to the other countries at nonprofit rates and this in undesirable by the Middle Eastern countries. Commerce and the Russians For the western countries the Russian intervention in Middle East oil fields is of the most concern. Iraqis have invited Russians to help develop the newer oil fields where in comparison the companies based in the US are working on the older wells. If the Russians are given more opportunities to intervene into the oil fields of Middle Eastern countries, they can persuade the Middle Eastern countries to stop providing oil to western countries. However, the Middle Eastern countries do realize that the revenue that they generate by providing oil to the western super powers cannot be compensated by Russia only alone. The only interest that Russians have in the Middle Eastern oil wells is that they need to fulfill their fuel needs for their eastern European satellites and this is the need that is too large to be accommodated by oil from Siberian fields. Libya is situated close to Europe and it enjoys this fact thereby it usually raises the prices of oil being sold out to the western countries. Europe is in need of low sulfur oil of Libya. 30% of Europe’s oil comes from Libya. Tax upraises and price increases are common issues with Libya. The estimated additional cost that European countries would have to pay for increasing oil process will be equal to $1 billion in one year. If the Middle Eastern countries increase the oil process, the process will be approximately the same at which the US counties produce oil. The need of oil by the US is increasing day by day and that needs US to import the oil and for this the oil is needed from the Middle Eastern countries. If the north slope of Alaska is added in the list of countries having the oil reserves, it is seen that it has only around 10% of the oil reserves as compared to reserves in Middle Eastern countries. The offshore oil fields are also found in Indonesia. However, they are too less to be fulfilling the oil needs of Japan as well. Since 1973, the Arab countries have only one weapon and that is the oil. This is the weapon that has remained in the unused form in a coherent sense. This is the situation that has resulted because of many factors. The most important factor in this case is that the interdependence of the Arab starts with the global economy changes as the Arab states are linked to the global economy. The Arab states realize the fact that the strength and stability of the OPEC economies is linked in a stronger way to the economies of western countries. If the oil process is raised by the Middle Eastern countries, this can cause the OPEC members to rebound. Figure: Comparison of the prices of Arab oil (Nominal and inflation prices). The revenue that is generated by the Arab states makes them more and more dependent on the oil economy. Moreover it has been noticed that there is a strong relationship between the economic recession in the US and oil price inflation. Between the years of 19650 and 1973, oil prices were higher and this is the period when the US economy underwent four major recessions. Figure: Inflated oil prices effects US After the September attacks in US it had been notified by the economists that the economy of the country has been seen to be failing and in this condition the oil supply can be in the danger thus making US go through the oil shock. Conclusion Owing to the discovery of the oil in Middle East the western countries have their eyes on the oil fields. This includes the risks that are being taken. In addition the involvement of Russian countries is the one fear that strikes western countries the most, although it is very well realized that Middle Eastern countries are unable to stop oil supply to western countries. Oil supply to western countries not only fulfills the fuel needs of western countries but it also relates to the need of greater revenue generation of the Arabs. Seven sisters are still in need to maintain their posture as they have in the face of the crisis as it is known that if these US based oil providing companies do not stay firm, in the end this will affect the US economy. Japan is one country that heavily relies on the oil coming in from the Middle East. Although there are other oil reserves but the oil reserves in Middle East are higher than those in the rest of the world. Moreover, the other oil reserves are unable to fulfill the rising demands of western countries especially Japan and US. Although the needs and dependence of US and western countries for oil are higher, the Arabs feel very strongly that their needs for revenue generation are much higher and this is a fact well realized by the Arabs. It is seen that the economists still have failed to predict the oil prices in the future that are to be anticipated from the middle eastern countries. Work Cited Beitz, R. Charles. Political theory and international relations. Princeton University Press, 1999. Read More