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Oil and Politics

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OIL AS A WEAPON

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The Montreal Review, May, 2010

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The concept of oil as a weapon first appeared in 1935-1936 when the League of Nations was considering oil sanctions against Mussolini's Italy. The League did not use the oil embargo against Italy because it was not able to stop the supply from third-country sellers. The U.S. used oil sanctions for the first time against Japan in 1941. The reason for the embargo was Japan's occupation of China. The measure was effective, but only because Japan's oil supply routes were vulnerable, and more importantly, 80% of the oil in Japan was coming from the United States. Roger Stern argues in his research paper "Oil Market and United States National Security" that the Pearl Harbor attack was a countermeasure to the oil weapon.

In the 1950s, oil became a cheap and abundant commodity and the American oil producers, who felt the threat of the international competition, persuaded Congress to restrict the foreign import of oil arguing that the "national security" would be endangered if in future foreigners decide to increase the prices. In his article, Stern writes "the oil weapon had emerged from the fog of protectionism." But this weapon was effective, according to Stern, only in situations similar to those in which Japan fell in1941.

During the October war in the Middle East in 1974, the Arab producers menaced U.S. and Holland with an oil embargo, but the threat quickly faded and the embargo was abandoned. The fact that the Arab producers did not have strong nerves to use the oil weapon did not convince Western Europe and the U.S. that this threat is ineffective in a world of multiple suppliers and open routes.

In his article, Stern concludes that the real danger to the US national security is not the oil, but the power of oil cartels over the market. The manipulation of supply and prices is more dangerous than all fears related to the scarcity of oil. "We hypothesize that threats do arise in the oil market, not from the oil weapon but from the cartel's management of abundance," Stern says.

The idea that the oil can be used as a potential and powerful weapon is rarely questioned. Stern argues the opposite to the fears: the oil weapon seems an implausible threat when the economic, geographic, and military attributes of prospective user and victim are considered.

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Source: Oil Market Power and United States National Security, Roger Stern, Proceedings of the National Academy of Sciences of the United States of America, Vol. 103, No. 5 (Jan. 31, 2006), pp. 1650-1655

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