The international oil industry has expanded in the world largely after the Second World War. Oil and the politics in the Middle East act as the brothers of the same mother. Sometimes oil controls the politics and sometimes politics controls the oil. Most of the countries in the Middle East, including Saudi Arabia (KSA), United Arab Emirates (UAE), Kuwait, Iraq, Qatar, and other countries like Venezuela, Iran, Libya, and Nigeria etc. play an important role in the economy of the Middle East as well as economy of the world by producing oil. Since, in the preset era, oil is one of the key factors of the world economic order, the economically robust countries want to control it and try to implement their agenda for being benefited economically and politically.
There are two blocks for the oil economy in the world and they are OPEC (Organization of Petroleum Exporting Countries) and Non-OPEC. The Total reserve of crude oil is 1482.77 billion barrels (OPEC estimate, 2017), among them 268.56 billion barrels, held by Non-OPEC (that is18.11%) and 1214.21 billion barrels, held by OPEC (that is 81.89%).
Kingdom of Saudi Arabia and the Islamic Republic of Iran are two major players of the Middle East who are fighting each other for dominating the Middle East through politically as well as economically. Both countries depend largely on the oil economy. The economy of Saudi Arabia is dependent on oil and has strong government control over major economic activities. The Saudi economy is the largest in the Arab world. The petroleum sector accounts for roughly 87% of Saudi budget revenues, 90% of export earnings, and 42% of GDP (Saudi Arabia, Forbes. Retrieved 2018-02-23). Saudi Arabia is considered an “Energy Superpower”. On the contrast, the petroleum sector accounts for IRAN roughly 80% of export earnings, at the 2006 levels of the production, it is the 18.7% of the GDP. So we can say, both Iran and Saudi Arabia are immensely dependent in the oil industry. This acute dependency on the oil industry for the economic development, made a severe enmity among the oil nations in the Middle East, especially between Saudi Arabia and Iran.
These two countries want to create two blocks in the Middle East and apparently, they have succeeded in this outline. Saudi Arabia, UAE, Bahrain, and Egypt coalition, a coalition of Arab countries led by Saudi Arabia imposed a historic land, maritime and air blockade on Qatar, owned about 25.24 billion barrels’ oil reserve, the other influential and rich country in the Arab world for so-called supporting terrorist matter. But Qatar has rejected the accusations and the demands, calling the blockade politically motivated attempt to undermine its sovereignty. In this situation, Iran, the rival and combat opponent of Saudi in the Middle East extended support to Qatar. Basically, Iran helped by sending perishable food items such as fruit and vegetables. Iran helped Qatar not for the friendship but for taking new advantages for forming anti-Saudi sentiment and coalition in the Middle East. There is a famous saying in the international politics ‘My enemy’s enemy is my friend’ so far Iran took this saying by heart. This unexpected conflicts made an unannounced breach in the Gulf Cooperation Council (GCC), a regional intergovernmental politics and an economic union consisting of all Arab states of the Persian Gulf except Iraq.
This game of skirmish is not played only by Saudi or Iran, but there are also third parties who want to control the politics of the Middle East ultimately target is exploiting this region for capturing petrol economy. And these parties are clearly the USA and the west who are playing the game in the Middle East field and who has a lengthy gaming experience about the Arab world. In view of the critical importance oil holds for the Western capitalist world as a commodity, and for the oil industry as a source of income, the political conflicts between the Western countries and the people of the Middle East take on a clearer focus. Before the decade was out, Western governments sorted to large-scale armed intervention in the Middle East to secure their interest both political and economic. The first was the British-French-Israeli aggression against Egypt in 1956, following the nationalization of the Suez Canal. Another one was The American and British Military Intervention in Lebanon and Jordan, following the Iraqi revolution in July 1958. So many game of conflicts has been played by the west and USA to control the Middle East so far.
The recent episode of breaching the nuclear deal between Iran and P5+1( China, France, Germany, Russia, the United kingdom and the United States ) by Trump administration which was made on Friday, July 14,2015 during the regime of Obama administration took in front again oil politics. To diminish the economy of the Iran, Trump, Mr. President again took steps to play the oil card. On June 30, 2018 at 5:37 PM, Donald J. Trump twitted that he asked Saudi Arabia to upsurge oil production and he stated that it would be up to 2,000,000 barrels and he also guaranteed that King Salman has given his consent with this proposal. So this is clear why America and Saudi are doing so, because of taking the oil industry more and weakening their main rival in the Middle East, probably the prime rival in this present world. According to simple economics theory the demand-supply equation says the more supply will decrease the price of the oil and that’s why Iran will be looser by this mechanism. And the last update is Saudi Arabia increased its oil production and now it is approximately 10.7 million barrel and it was even below the 7 million barrel before the month of May. After increasing the oil production, the price of oil became US$77.99 and that is 24% more than before the price. Saudi Arabia boomed its economy after inception of oil in 1930 and in the mid-1980s the oil price dropped from a high of US$40 per barrel to around US$5, and the country’s economy collapsed and Saudi built up a massive overseas debt. So if US-Saudi can do this obviously Iran’s economy will suffer. Iran will experience this situation not for the first time. After the Islamic revolution in Iran in 1979, the price of per barrel oil dropped up to US$ 8 when Saudi, Kuwait and UAE increased the oil production to reduce Iran’s economy and this extra oil was bought by the USA and made an enormous reserve of oil they named it ‘Strategic Reserve’ for making oil economy more protected for them.
The USA is playing even a hard game in the Middle East to regulate the economy as well as politics because it wants to dominate the world endlessly. Saudi wants to control the Middle East by their Sunni alliances. The country or person who may be the threat to the Saudi regime will be treated enemy and fight against them. But the fact, Iran is not a baby or inexpert performer in this game, they are habituated to play this game and obviously will play with Saudi and America. Hasan Ruhani, the president of Iran already announced if the USA creates any mock barrier in exporting the oil, he would stop the Gulf countries’ exporting by stopping Hormuz Strait, 30% of total oil is traded by this route. But it would not be easier as said by Mr. Ruhani, if Iran stops this straight how Iran itself export its oil. Besides, this decision would make relationship poorer with China, India, Japan, and South Korea which are important oil markets for Iran. About 45% of the oil has been exported from China and India in this year (Al Jazeera). Another important fact is Qatar, the friend of Iran, does 3.7 billion cubic feet LNG business through this strait and that is 30% of total export of Qatar.
We can’t say right now that who will win finally in this game. We have to wait very tolerantly to observe the future circumstances to see the winner. But it is clear that the US will try heart and soul to continue to rule the Middle East both economically and politically because none wants to lose dominance in the earth. Only one thing can make both Saudi and Iran benefited and that is united. But will they?
Afzal Hosain is pursuing MBA in
Finance & Banking at the Manarat International University.