There is a sort of romanticism associated with the very idea of oil embargo. It provides a sense of power, of being able to stand up to the onslaught of the major powers, of teaching a lesson to the enemies, yet, the fact remains that times have changed. We are living in the 21st century and the fundamentals today are drastically different from that of 1973.
Incidentally, when the oil embargo was used for the first and probably the last time as a weapon, the producers who decided to put levy an oil embargo were mostly from this part of the world and it was basically used against countries of the West. This geography added another interesting dimension to this otherwise political decision by the oil producers and it remains engraved in the very psyche of the people, both here and in the other parts of the world.
After viewing endless photographs of children, even with their pacifiers hanging on to their necks, it was but natural to ask the question; why not another embargo to force stop the targeting of the innocents, on the streets of Qana, Tyre, Beirut, Gaza, West bank, Herat, Hilmund and others.
The question keeps haunting the minds. At the slightest pretext pundits in Wets start looking at it if any such move is in offing by the oil producing countries of Middle East. And common people on the street thus start thinking, rather romantically, at this possibility as the answer to all their sufferings and humiliation.
But can the politics of embargo be enacted in today’s situation? Whom would it hurt mostly? Can it achieve its expressed objectives? If one starts looking at this from the view point of producers’, the answer to all these question turn out to be a big ‘No.’
And this is what Prince Saud Al-Faisal underlined when he was bluntly asked this question at the height of Lebanon, as emotions were running high. While sitting in a responsible position he could not have played to the gallery, the Arab street in this case.
Ruling out the use of oil as a weapon, Prince Saud did not mince words: “The two issues should not be mixed as oil is among the economic capabilities that countries need to meet their obligations toward their citizens.” If this reality is ignored and producers enter into reckless adventures, the first to be hurt will be the citizens, Prince Saud asserted.
Even when driven with romanticism, one needs to be practical and this is what Prince Saud underlined while answering the question. Incidentally it was Prince Saud’s father, the late King Faisal who was instrumental, with some other stalwarts of the era, in fine tuning the very idea of using oil as a weapon.
Ground realities have changed so drastically ever since, that any such move could even be suicidal, analysts argue today. In sharp contrast to the early 70s, when the regional economies were mostly modest, the income form oil is essentially required by the producers to keep moving the wheel of governance.
Despite all the rhetoric can Tehran afford losing the income from oil? Indeed in recent weeks there has been no dearth of calls to shake the world oil markets. Supreme Leader Ayatollah Ali Khamenei has said in past that the US could “seriously endanger energy flow” by acting against Iran. Oil Minister Kazem Vaziri-Hameneh is also on record of having said, Iran would use “all available means, including oil” if its interests were attacked.
But by threatening to disrupt oil supplies in any confrontation with the US and EU, Iran’s leaders may be pointing a lethal weapon at themselves, analysts are now arguing. Could Tehran really opt for? Cutting off the flow of crude, by far the biggest contributor to Iran’s budget would deprive it of about $5 billion a month. “In case of sanctions ... the president’s prosperity program will collapse,” said Saeed Laylaz, a political analyst and a former economist at the ministry of industry and mines in Tehran.
Iran supplies 4 percent of China’s oil, 7 percent of France’s, 9 percent of South Korea’s; 10 percent of Japan’s; 11 percent of Italy’s, 14 percent of Belgium’s, 22 percent of Turkey’s and 24 percent of Greece’s, according to May data from the Eurasia Group, a New York-based consulting firm.
Should Iran declare an oil embargo, the West could retaliate by cutting petrol exports to Iran, which imports more than one-third of its petrol. And in the midst of all these President Ahmadinejad counts on oil revenues to finance his social program. Estimates put Iran’s oil revenue to cross $55 billion plus mark this year.
The producers have also learned some bitter lessons too. When in 1973 the Arab members of OPEC cut their supplies to supporters of Israel, their market share fell to about 30 percent from 50 during the next 10 years. In an era when they are deeply dependent on revenues from their crude asset, they literally cannot afford losing out any further on this count.
Western countries can now resort to their strategic oil reserves, for a considerable period of time, in order to tire out the producers. Further oil as a weapon has lost some of its significance. In the overall global GDP terms, it is not even one fourth what it used to be in the mid 70s.
The fact remains that the friends of Israel will not be hurt to the extent they were during the embargo of 1973. Unfortunately this is state of thing today and cannot be denied by saner elements. And the major loser in this battle of wits would be none else than the common man on the streets.