The world faced a serious oil crisis in the wake of Arab-Israeli war of October,1973 when the Arab members of the Organisation of Petroleum Exporting Countries(OPEC) decided to impose oil sanctions against countries which were friendly to Israel. The main objectives of this sanctions was to pressurise the Western countries to compel Israel to come to an understanding with the Arabs.
Background:
Phase-I
Right from early years of nineteenth century a struggle ensued between the various powers over the possession of gigantic oil reserves in the Middle East.
Background:
Phase-I
Right from early years of nineteenth century a struggle ensued between the various powers over the possession of gigantic oil reserves in the Middle East.
- Great Britain was the first country to secure oil concessions in the region. In 1980, it formed Anglo-Iranian Oil Company in co-operation with the Government of Iran.
- Russia in the meanwhile also coveted the oil of the Middle East and reached an agreement with the British Government whereby Iran was partitioned into spheres of influence and areas of exploitation.
- Briatain got the Southern province of Iran while Russia got the Northern one.
- Between 1912 and 1939 the oil resources of the region were mainly exploited by the Anglo-Persian (subsequently Anglo-Iranian) Oil Company.
- During Second World War(1939-45), the Soviet-Iranian Oil Company was formed which secured oil concessions from Iranian Givernment in 1946.
- In the post World War-II, there was deterioration of economic status of Iran due to the monopoly of Anglo-Iranian Company which encouraged the natioanlists to launch movements against economic domination of foreign capital.
- USA provided military credit of 25million dollars to Iranian Government and prompted it to cancel its agreement with the Soviet Union.
- In 1950-51, the National Front Goverment of Iran led by Dr. Massadeq started clamouring for nationalization of Anglo-Iranian Oil Company.
- In April 1951, the Iranian Majlis(Parliament) passed a bill nationalizing the oil industry and nationalised the Anglo-Iranian Oil Company(AIOC).
- All the foreign employees were withdrawn from the oil fields as well as Abadan Refinery.
- Great Britain opposed the nationalisation of AIOC and made an appeal to the International Court of Justice.
- ICJ directed the Govt. of Iran to maintain status quo.
- Govt. refused to comply with the directions of the court and withdrew from its membership.
- In 1953, USA tried to intervene in the dispute and offered financial aid to Iran. But the offer was turned down by the Govt.
- Britain refered the case to the Security Council but failed to achieve anything.
Phase-II
- Due to lack of technical hands, Iran continue to suffer from finacial instability. This led to wide-spread demonstrations against Prime Minister Mossadeq.
- In August 1953, the Shah of Iran replaced Mossadeq by General Zahedi, who had staged a successful military coup.
- In 1953, the then US President Eisenhower extended a grant of 42 milion dollars to Iran on the condition that oil dispute with Britain be settled.
- In 1954, Iran signed an agreement whereby an International Consortium consisting of eight oil companies was formed.
- Forth-percent of the shares in this Consortium were reserved for the Abglo-Iranian Oil Company(AIOC).
Phase-III
- In the late 1950's there was serious competition amongst the companies to sell crude oil to the refineries which led to the decline in the prices of the oil.
- In 1955, the official prices of oil were also cut down.
- Greatly disturbed by the steep fall in the revenue due to cut in prices by the big oil consumers, the oil exporting countries held a meeting at Baghdad(Iraq) in 1960 and formed Organisation of Petroleum Exporting Countries(OPEC).
- The founder members of OPEC were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela.
- Subsequently, Algeria, Ecuador, Gabon, Indonesia, Libya, Nigeria, Qatar, United Arab Emirates were also joined as members.
- The main objectives of OPEC were-- to make efforts to restore prices of crude oil, effect stability in oil prices, to carry out consultations among companies, to control production, to ensure regular production, and to hold regular investors.
Facts
- Arab Israel war and Oil crisis: Due to the war in 1973, unprecented rise in prices of oil came to shock to the developed countries which were already passing through a phase of recession. The developed countries in order to meet the crisis situation, drastically reduced use of oil.
- Arab countries have made an effective use of oil as an instrument to pressurise the western countries to compel Israel to come to an understanding with the Arabs.
- In March 2003, US-Britain took armed action against Iraq on the plea of unseating Saddam Hussain and punishing him for possession of weapons of mass destruction. But in reality, the motive behind such attack was to secure Iraq's oil fields and resources.
