Oil and War in the Middle East

Oil and War in the Middle East

US interventions in the Middle East are often presented as being related to an economic need to import oil from this region. Nothing could be further from the truth. First, in 2023, with an oil production of 827 million tonnes, the United States was the world's leading producer, responsible for 18% of world production (EI Statistical Review of World Energy): much more than Russia (542 million tonnes), and Saudi Arabia (532 million tonnes). Second, the United States is self-suQicient in oil - it only needs to import because it exports a portion of its production. Third, of these imports by the United States, the vast majority come from Canada, Mexico, and other Latin American countries. Very little is imported from the Middle East - 17 million tonnes from Saudi Arabia (3% of its production) and 11 million tonnes from Iraq (5% of its production). Middle East oil exports go mainly to Asia: China absorbed 261 million tonnes in 2023, Japan 120 million and India 109 million. European countries imported 101 million tonnes.

These data allow three observations to be made about the impact of war in the Middle East. First, because it imports very little oil from this region, the United States does not have many economic concerns if the war destabilizes the oil market. Furthermore, it could have a positive impact on its economy: if oil prices rise, the value of its own oil reserves will also increase and, as a consequence, the value of the dollar. The main negative impact would be for its main competitors – China, India, Japan and Europe – on their balance of payments, their exchange rates and their economic activity. In this context, it can be argued that chaos in the Middle East is consistent with the strategic interests of the United States.

Second, because Middle Eastern oil is critical to Asian economies, we will see more and more interventions by these countries, and especially by China, to stop the war or, if necessary, to participate in it (so far, and in contrast to the US, China has not sent a major naval force to the Gulf) – a scenario that evokes fears of a third world war. In this context, China’s Foreign Minister recently told Israel that, “The humanitarian disaster in Gaza must not continue...and that responding to violence with more violence is not an adequate response for all parties involved.” (Al Jazeera, 14-10-2024).

Third, the sanctions that have accompanied the war with Ukraine have resulted in China becoming the most important destination for Russian oil. The same had already happened with Iran under the impact of US and EU sanctions. Thus the ties between Russia, China and Iran have been strengthened around energy and outside the ‘dollar’ world – the fact that China also pays for its oil with renminbis has stimulated the import of Chinese goods by Russia and Iran, especially of technology, while Iran also became a source of weapons for Russia.

Thus if Israel attacks Iran again, and also destabilizes the oil exports of other Middle Eastern countries, it would put powerful interests at stake worldwide. At the moment

Israel believes that it can escalate its massacres based on what it perceives as its own interests, and always with the military support of the United States. However, this behaviour would be that of a rogue state that puts world peace at risk. As the Chinese have just emphasized, it is of the utmost importance to stop it immediately.

Philip Wright

Observatory of the Colombian Caribbean

October 2024