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News and views on Israel, Zionism and the war on terrorism.

February 05, 2003

THE OIL WEAPON

A good article in The New Yorker on why the threats of Arab oil boycotts are now more disadvantageous to them than to us. They need us more than we need them.
(...)Thirty years later, [after the '73 war between Israel and Egypt] we can't see past that darkened tree. The embargo, which lasted only a few months, still shapes the way we think about the politics and economics of oil. Ever since, the spectre of Arab countries using oil as a political weapon has haunted discussions of the Middle East and the global petroleum market, and has kept U.S. policymakers obsessed with "energy security" (which in practice has meant sucking up to the Saudis) and with "energy independence" from what has come to be known, in the Times and elsewhere, as "the axis of oil." Fear of the oil weapon leads commentators to fret over how the Arab states will react to President Bush's ambitious plans for the Middle East, even as it inspires some advocates of those plans to declare that they will bring, as Bush's former speechwriter David Frum put it in his recent memoir, "new prosperity to us all, by securing the world's largest pool of oil." In the popular imagination, oil remains what the Kuwaiti Ambassador to the U.S. called it in 1973: "high-octane political fuel."...If the Arab states slashed oil production to protest U.S. policies, it would cause us pain. But it would hurt them more. Forty per cent of Saudi Arabia's G.D.P. comes from oil revenues, and other Persian Gulf economies are similarly dependent. The oil boom of the seventies inflated the standard of living in much of the Arab world and created expectations that could be fulfilled only by a continued flow of petrodollars. In 1973, the production cutbacks didn't actually cost the Arab states anything—they sold less oil, but at a much higher price. An extended embargo today, though, would cost them tens of billions of dollars. (After all, if they could make bigger profits in the long run by cutting production, they would have done so yesterday.) Without those petrodollars, they'd fall to pieces [more]