The Oil Politics

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By Farida Tareen : –

A severe petroleum crisis struck Pakistan just a month after the Peshawar incident. Long queues of people were lined up on petrol pumps around whole Punjab and petrol was sold for 200 rupees a liter. It is often quoted that several hundred people amassed huge riches during the twelve days breakdown. Lack of furnace oil led to long hours of load shedding thus pouring more salt on wounds of common people. Petrol was sold at $150 per barrel back in 2008 but is recently sold at the lowest rate of $53 per barrel thus putting Pakistan at an advantageous position by saving its billions of dollars as import cost.

Natural gas and oil have played a crucial role in world economy, trade and politics since past 115 years. The first natural gas and oil wells were discovered in 1821 and 1859 respectively in America. Oil was first discovered oil in Punjab province of Pakistan before its creation in 1887.Some analysts view that had wells been discovered in Taftan or Mirjawa, areas which Ayub khan sold to Iran, we would have been self-sufficient in oil because according to International law, if oil is first discovered in a country near the border of another then it cannot be extracted from few hundred kilometers of the other country. Pakistan first discovered Natural gas in 1952 at Sui area of Balochistan while extraction process started in 1955 leading to a spendthrift use for next 40 years. Presently, the total number of oil and gas wells in the world exceeds 950000 and Pakistan has 3200 wells. Oil reserves in Pakistan amount to 1180 million barrel while gas reserves are 766 billion cubic feet. It imports 90600 barrel oil a day. Daily worldwide production of oil is 75 million.

Trade, economy and industry got a boost at the start of twentieth century. Factories, cars and airplanes needed more fuel for consumption therefore oil gained importance in politics too. Soon after the downfall of Turkish caliphate in First World War, all Arab and oil rich Muslim countries were overpowered by European powers; Britain, France, Italy and America. Russian revolution started in 1917 during the First World War and all the oil reserves of Russia and Middle East remained with former Soviet Union. Cold war started in 1945 and once again European countries got hold of oil reserves. First Arab-Israel war occurred as a result of creation of Israel in July 1948. Israel defeated Egypt, Syria and

Jordan in the 6 days war and occupied Bait-ul-muqadas from Jordan, Sinai Peninsula from Egypt and Golan heights from Syria. Israeli jets simultaneously attacked and demolished air bases of these three Arab countries along with air planes. As a result, a well known Arab leader, Egyptian president Gamal Abdel Nasser, resigned but thousands of Arabs protested and compelled him to take his decision back. Gamal Abdel Nasser later asked former Soviet Union to either provide Egypt with SAM missiles, a modern weapon of that time or end its security pact thus allowing Egypt to seek the assistance and security of any other power. Ironically, Israel provided SAM missiles to Egypt. Anwar Sadat succeeded Gamal Abdel Nasser after his death. Israel was attacked by four Arab countries; Egypt, Syria, Jordan and Lebanon while Jews were celebrating religious festival on 6 October 1973. This war was called as Yom Kippur War aimed at regaining their lost areas by Arab countries leading to occupation of one side of Suez Canal by Israel and another by Egypt.

America provided high flying air planes to Israel, surrounded by hostile enemy from all sides, under operation Nickel Grass. Using oil as a weapon of pressure, Egypt, Syria and Tunis stopped supply of oil to Israeli allied countries especially America, Japan, Netherlands, Canada and Britain on 16 October 1973. Soon after the Arab-Israel truce, the then American president requested Congress to sanction $ 2.2 billion emergency aid to Israel. This was a very huge aid amount of the time thus inflaming Arab countries’ sentiments and OPEC, an organization of oil exporting countries, imposed sanctions on supply of oil to Europe including America thus plunging them in severe oil crisis. Following this, American Secretary of state, Henry Kissinger and the then American president Nixon convinced Israel for the evacuation of Arab territories who finally handed over Sinai Peninsula after rounds of talks. Raza Shah Pahlavi, considered the guardian of American interests, advocated hike in petroleum products while giving an interview to New York Times,

“If you can increase wheat, sugar and cement price up to 300 %, we also have the right to increase petroleum prices”.

Muslim leaders for the first time showed unity and passed some important decisions under the auspices of Islamic cooperation organization’s conference held at Lahore in 1974. Oil prices escalated from $3 in 1973 to $12 per barrel in 1974. These increased prices

tremendously increased the economy of oil producing countries. when the process of development started in oil producing countries, almost 35 lac people from Pakistan only, migrated to Arab countries in search of better income thus bringing more foreign reserves to Pakistan. Similarly poor and middle class got opportunity for better income and a positive wave of social and political development took place. Europe on the other hand, adopted three tier strategies to counter oil crisis and its use as a tool of pressure by Arab world. According to this strategy, European stooges were given the reins of power in oil producing countries while Europe itself started search for alternative oil and gas sources in their own continent. Solar energy was discovered as a result of this strategy and more attention was given to the production o atomic energy. Several Shale gas reserves have been discovered in America during past few years and are being brought in use now. The unity of Arab world was dismantled by getting them involved in different issues. The entire world witnessed that all influential Arab leaders were killed after 1973 and the political crises in these countries got worse converting them to war hubs.

When Gorbachev took hold of power in former Soviet Union after the end of cold war in 1988, not only communism died under glasnost and perestroika but Soviet Union also broke into fifteen independent states. Communist governments were replaced by capitalists in Eastern European countries of Poland, Czechoslovakia, Yugoslavia, Rumania and Hungary. Russian economy fell to an unprecedented level and its currency Rouble lost value. One Dollar equaled 450 Roubles. Boris Yelstin succeeded Gorbachev and the deteriorated more but Vladimir Putin successfully steered Russia out of crisis and Europe could no more use Russian oil and gas resources in its favor.

Differences started rising up between Russia and Ukraine since 2004. Almost 22% Russians lived peacefully with 77% Ukrainians until 1999 but now they have gone into revolt against each other. Sanctions on oil supply to Europe by Arab countries as a result of 1973 war led to a hike in petroleum products while American sanctions against Russia produced completely reverse results. Instead of increasing oil and gas prices, these have been purposely kept low while their supply is doubled. Today America is not only the largest user of coal, oil and natural gas but also the biggest importer of oil. Its daily uses

7.5 million barrel crude oil and has become the biggest producer of natural gas since 2010. It is expected to outdo Saudi Arabia in the production of oil by 2019.

America is using oil as a tool but this term is not used in the same sense as during 1973 war rather a general perception is given that increase in oil production and subsequent decrease in prices is an outcome of supply and demand in independent market. Today America has not only increased the production rate of Shale gas, natural gas and oil but is also in a position to export oil. Its allied countries have also doubled their oil production rate. Though Saudi Arabia surpassed Russia in oil production in 2013 but 2014 statistics have not yet come to the fore. Iran is not exporting oil due to sanctions by UNO, Iraq and Libya has fallen into crisis while Kuwait, Qatar and Oman have followed American line of action. Oil producing and trade companies around the world have explained that it will not be possible to keep oil prices lower than $45 per barrel but countries especially Saudi Arabia will go on increasing its production until it surpasses Iran and Russia. Renowned economists opine that Saudi Arabia possesses oil reserves worth $800 trillion and it is producing one third of world oil products. It is also speculated that oil prices may increase up to $ 100 per barrel in next eighteen months.

Now a question arises that will the present wave of crisis in Yemen, Syria, Iraq, Afghanistan, Russia, Ukraine, Egypt and Turkey extend to Saudi Arabia, United Arab Emirates, central Asia and India? Russia and Ukraine have already expressed their fear that American imposed economic and political decisions may lead to a third world war. Today Saudi Arab is worried due to conflicts in its neighbors; Iraq and Yemen. Turkey is being dragged into war by Kurdish rebels while Afghanistan, Pakistan and India are at the height of political unrest.

Ukraine hosts 77% Ukrainians and 22% Russians along with some minority groups. A war like situation is created by the sectarian, linguistic and political differences since 2011. Russia fulfills 80% natural gas requirements of Ukraine and the gas pipelines pass through European Union countries. A conflict arose between Ukrainian and Russian companies in 2005 over the cost of passing oil pipelines through Ukraine. Russian company always complained against Ukraine over not paying natural gas costs. Conflicts escalated slowly and gradually and finally gas supply was stopped to European countries.

Russian company did a loss of $101 trillion whereas European countries fell a victim to economic crisis. Hence is widely believed that America is using oil as a tool in different shapes since 1972.

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