World’s future holds much uncertainty due to rapidly expanding COVID-19 outbreak all over the world. Its drastic impacts will be out of control as well as unimaginable in today’s context. The post COVID-19 period will be remembered as tragic event of the twenty first century with numerous looming challenges.
Emergency in health care system, economic recession, mass recovery in very domain of life, anti globalization sentiments, rise of nationalism mind set state control protectionist Policies, trade war technological advancements, emergence of populist figures will have unprecedented impacts on future international milieu.
In contemporary international scenario oil politics taking immense popularity among nations, academia and intellectual circles. Oil war between OPEC member countries and Russia further intensified geopolitical, geoeconomic situation.
Oil plays vital role in international politics, according to Lutz Kleveman “oil is like devil’s tear”. Where there is oil there will be great game, power politics blood and cries.
Tsarists Russia and Great Britain encircled each other in central Asia. Both powers strive to made their free and valid access to Central Asian untapped resources. Iran ,Caspian Sea, Caucasian states and Central Asian Republics are the epicenter of Great Game Theory. Central Asia still hold magnificent importance due to its geostrategic location oil and pipeline politics. Russia has been fueling ethnic sectarian sentiments in new independent republics in Caucasian states to unleash it’s military presence and put a check on other existing powers. US bypass Russia via Westward Azerbaijan,Georgia and then Turkey. China initiated new pipeline to maintain incessant supply via Eastward routing Iran, Tajikistan Kazakhstan etc. in case of maritime block from US and its allies in South China Sea and Indian ocean. These land routes will provide safe supply to China. US justified its physical presence in Afghanistan through GWAT (Global War Against Terror). Every regional non-regional powers meddling in Afghanistan quagmire due to oil and pipeline politics in the region. Iran-Pakistan gas pipeline, Turkmenistan, Afghanistan, Pakistan, India gas pipeline, Iran-China gas pipeline newly designed route under BRI projects are hinging in the unkind, war-torn terrains of Afghanistan and Central Asian Republics.
OPEC an organization of petroleum exporting countries consists of 14 members states spanning from different parts of the world including Middle East, African continent and Latin America. OPEC holds 40% of oil resources in international market. It has been playing vital role in Oil Market as like Cartel. In 1973 surprise attack from Syria and Egypt on Israel first time exacerbated its valid importance when US supplied USD 2 billion worth military equipment to Israel . Gulf state’s imposed oil embargo on US and many of Israel supporter’s.
OPEC facing several challenges. Antagonism among members states, Iran, KSA rivalry , clashes with Non members oil producing countries particularly Russia, US shale gas revolution, crude oil production, Venezuela internal ruined situation, new technological advancements, less dependency on oil, inventions of renewable energies,Climate issues decrease in Corbon emissions & so on .
Iran-Iraq war, Saddam Hussain and 2003 US invasion curtailed Iraqi oil production. Economic sanctions & deteriorated situation massively hit Iraqi foreign investment which tools twelve years of pumping capacity of pre-revolution period 1979. Soviet Union story is similar to Iraqi oil production during collapse of USSR & post cold war era.
From Gerald Ford to Donald Trump every US president considers OPEC as potential threat to US economy due to controlled price system and extensive monopoly on oil industry.
OPEC was created in 1960, before it oil market was dominated by the western led Multi National Corporations (MNCs). Dr. Musaddaq’s nationalization of Irani Oil products from Britain and OPEC members consequentially changed oil producing states’ policy in international oil market with increased state control mechanism .
Gulf OPEC members states enjoyed better price rate due to Venezuela internal turmoil & civil war in Libya. Oil production get fragile from Venezuela and Libya which benefited others members states to pump more oil in Market.
Current scenario.
Oil war between Saudi Arabia & Russia finally settled with some gain bargain settlement. KSA which has less oil resources than Russia, even Iraq ,Venezuela and America but its pumping capacity gave her upper hand in oil Market. Its extra oil pumping capacity gives it a staunch position in OPEC and oil market.
COVID-19 outbreak shockingly hit oil industry in the world. Severe lock down in China which is the largest oil importing consumer country in the world created a massive disruption in supply and demands. Oil prices went to its historical downturn. US oil industry badly crashed with lowest oil prices in US history.
Mismanagement of oil supplies imposed by endogenous or exogenous forces has created unprecedented uncertainty globally. COVID-19 created some tricky miseries in oil field . Due to overwhelming lock down in the world oil demand become lowest in the history.
The most notable factor is possible damage to oil production for long term. If the oil demands does not pick-up sufficiently in the coming days it will dry some oil wells and old oil production facilities. Not all oil fields are geologically alike, and some are easier to close and restore later than others. In case of long term logistic problems, further decrease in oil demands may shut in most of the oil wells in the world. Offshore and sea based production facilities are more in a stake. Venezuela and Libya are in severe risk.
Oil turmoil will surely push KSA ,Russia, Qatar ,Kuwait, Algeria and other oil producing countries to severe economic stagnation. Oil and gas contribute 50% in KSA GDP and 70% in exports . Russian GDP 30% relying on oil and gas 60% in exports. KSA earning 20 to USD 40 billions from Haj sector, if oil prices remain at 30 b/d it means KSA would generate USD 110 to 130 billions annually. KSA’s budget is above USD 290 to 310 billions. It means, KSA will take enough loans internally and externally which ultimately lead KSA to huge budget deficit and low oil price will harm MBS’s economic vision of 2030 which need huge amount of finance to materialize desired Goals.
Non-producing countries, particularly Pakistan, India and Bangladesh are in reciprocal conditions. These countries spend huge amount of money for oil imports. They will be benefited from low oil prices but due to severe economic crises in Gulf oil rich states, they will be deprived from desired remittance. It will create problems for millions of South Asian people .
Qaiser Mahmood undergraduate' student of international relations, International Islamic University Islamabad.