An Effective Reverse Energy Weapon?

Much coverage about using energy as a weapon has been on the traditional energy weapon: the refusal of producing nations to supply consuming ones.  The effect of this was a decrease in supply and increase in price in those consuming nations that were affected.  The energy weapon has been used very effectively historically.  For example, the 1973 oil embargo drove supplies in the United States down, prices up, and created a gasoline shortage that caused thousands of people to wait in lines for fuel around the nation.  Even today, supplying nations wield some power.  For example, in 2008 Saudi Arabia was threatened with sanctions for its refusal to raise production in response to high worldwide prices.  Also, Canada has used threats of supply interruptions as a bargaining chip with the United States over the years in order to affect US trade policy.

Recently, however, a new “reverse” energy weapon has been used.  In response to nuclear ambitions by Iran, the United States and the European Union have lead a worldwide coalition of countries in sanctioning Iran through the refusal to purchase its oil.  In 2011, Iranian oil revenue was $95 billion.  As an effect of the sanctions, oil revenue for 2012 fell 27.4% to $69 billion:

Graph of iran's crude and condensate exports, as explained in the article text[1]

According to the US Energy Information Agency, oil revenues account for 80% of Iran’s export revenue and 50% to 60% of its government’s revenue.  Clearly, the sanctions are having an impact on the ability of the government to fund its operations.

Additionally, the sanctions are more comprehensive than previous rounds.  They impact both foreign investment and technology transfers into Iran, hampering production.  Specifically, sanctions have “have prompted a number of cancellations of upstream projects and have resulted in declining oil production capacity.  Sanctions have also impeded the import of refined products, effectively reshaping the midstream sector and forcing Iran to become self-sufficient.” [2]

US and EU policies have clearly demonstrated the ability to effectively use the oil weapon today, albeit in a method rarely feasible in the past.




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