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Arab oil embargo?
Anger is seething in Arab streets. Rulers are under pressure to act, use all the tools in their hands to prevent the ongoing killings in Gaza, force Israel to agree to an immediate ceasefire and work for a fair resolution of the decades-old Israel-Palestine issue. What the Arab leaders could do?
Whenever there is a crisis in the Middle East, and the battle lines between Arabs and Israel heat up, there is always the lingering fear in the Western world of the Arab oil embargo, of the use of oil as a weapon by the Arab oil-producing nations against the countries supporting Israel during the 1973 war.
That fear continues to this day — five decades later. Murmurs are already there in Washington and elsewhere, of a possible Arab oil embargo. The 1973 oil shock “has disturbing parallels today,” a Wall Street Journal op-ed warned in early October. Quoting a Bloomberg opinion column, Bob King said in a piece on October 19, “The parallels between October 2023 and 1973 are easy to draw.”
The White House is also mindful of the possibility. The United States is confident that the Arab states will not use oil supply as a weapon as they have done in the past, White House energy security adviser Amos Hochstein told the Financial Times in an interview. “Oil has been weaponised from time to time since it became a traded commodity, so we’re always worried about that, working against that, but I think so far it hasn’t,” Mr Hochstein told FT last week.
It would tarnish the image as reliable suppliers that the Persian Gulf states have carved over the past decades
Can the Arab world really use oil as a weapon to penalise the countries supporting Israel in the ongoing crisis? Is such an embargo possible today, and are the Arab leaders prepared to do so?
The answer is a simple no. And there are ample reasons for that.
Today is not 1973. The glitter in Riyadh, Abu Dhabi, Kuwait, and all other Arab oil capitals is only because of oil. To meet their exponentially rising budgetary requirements, all Arab oil producers are in fact, striving to enhance their income, and not reduce it by putting an embargo on their oil exports.
Saudi Arabia has many ongoing mega projects, including the $500 billion “smart city” Neom — the ‘futuristic city’ — 33 times the size of New York. All these need to be financed by selling oil.
And to be fair, it was the Saudi Arabia of King Faisal who had the guts to tell the then US state official Henry Kissinger if pushed to the wall, ‘we would burn our oil wells and go back to tents.’ Today, Saudi Arabia, or for that matter, any oil-dependent sheikhdom, cannot even think of going back to pre-1973 tents. Generations have changed and realities are different.
Over the last five decades, the global oil scenario has also undergone a massive transformation. The Organisation of the Petroleum Exporting Countries’ share of the oil markets has dwindled to around 30 per cent from almost 50pc. Supplies are plenty and alternatives are on the horizon. The world still needs oil, yes, but it is not as dependent on oil as it was in 1973.
Arabs are pragmatic. They know they have limits. Hence, efforts to put up a joint, diplomatic stand against Israel and its allies are not bearing fruit. When, in mid-October, Iran’s Foreign Minister, Hossein Amir-Abdollahian, called for Islamic countries to boycott Israel, including stopping oil shipments to Israel, it did not have many backers within the Organisation of Islamic Cooperation (OIC).
And this was despite the fact that the Iranian resolution was literally toothless. Persian Gulf supplies virtually no oil to Israel. Although Israel imports nearly all its oil, analysts said any such embargo, as Iran proposed, would have had little immediate impact because the country does not buy oil from major Persian Gulf oil producers like Saudi Arabia and the United Arab Emirates or Iran.
Instead, Kazakhstan, where oil is mostly produced by joint ventures involving Western companies such as Chevron and Exxon Mobil, and Azerbaijan, are among Israel’s biggest suppliers. Nigeria is also a substantial supplier. Israel also imports some oil from Angola.
Later, on November 11, during a joint Arab League and OIC summit in Jeddah, some member countries, including Algeria and Lebanon, proposed to stop oil supplies to Israel and its allies as well as severing the economic and diplomatic ties that some Arab nations have with Israel, diplomats reportedly said.
However, at least three countries — including the United Arab Emirates and Bahrain, which normalised ties with Israel in 2020 — rejected the proposal, said the diplomats, speaking on condition of anonymity.
The London-based news website Al-Araby Al-Jadeed (New Arab) reported on November 11 that four “influential countries” in the Arab League had prevented the adoption of proposals that carried concrete measures against Israel.
The divisive clauses are believed to have included prohibiting the use of military bases in Arab countries by the US and countries who supply Israel with weapons and ammunition, freezing Arab diplomatic, economic, security, and military relations with Israel, and leveraging oil and Arab economic capabilities against Israel and its allies.
These measures were proposed and endorsed by 11 Arab countries of the 22-member body, including Palestine, Syria, Algeria, Tunisia, Iraq, Lebanon, Kuwait, Qatar, Oman, Libya, and Yemen. However, the names of the four countries that voted against the resolution or those that abstained were not disclosed.
The oil-rich Persian Gulf states are not ready to say yes to any hint of an oil embargo on the West. It would emit wrong signals to the West, they know fully well. It would tarnish the image of a reliable supplier they have carved with enough effort over the past decades.
The possibility of any oil embargo thus remains minimal — if not — absolutely zero.
Published in Dawn, The Business and Finance Weekly, November 27th, 2023
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