Page 1 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 805
Oil Diplomacy in West Asia: Challenges & Opportunities
Deepak Kumar
Assistant Professor in Political Science
Government College for Women, Rewari (HR)
Abstract: In the post-World War period, most of the states have realized that not everything can
be accomplished by means of direct warfare and military force. Therefore a right mix of political,
economic and trade diplomacy holds the key to accomplish international objectives. Post war
institutions like the UN focus on this only and therefore none of its decisions are binding.
Diplomacy and sanctions are therefore the tools used to assert its dominance. In today’s world,
the international market is multipolar. The gulf countries which were once considered poor are
now thriving at par with developed nations due to the extensive oil trade. Oil has brought
prosperity in the arid regions which were once unfit for commercial activities. However, oil has
also led to multiple wars in the regions as the powerful nations often try to destabilize the
regimes in the region which are not in their favor. Oil diplomacy has become a binding factor for
the west Asian countries of which OPEC is a prime example. By controlling the large share of oil
reserves, these countries control a significant share of the world economy which was evident
from the oil glut of the 1980s caused by the Iranian revolutions. The world economy today again
stands at a point where, the gulf war can again inflate the prices, giving setbacks to the world
economy. The present research paper highlights the challenges and opportunities of oil
diplomacy in West Asia.
Keywords: Oil Diplomacy, Shale Oil, Market Volatility, OPEC, Arab Spring, Security Council.
Introduction: It is a well-known fact that today, the large as well as household consumers are
directly affected and concerned with the oil prices. Peace prevailed in much of West Asia before
the discovery of oil. However, post discovery, may players roped in to claim a share in the
Page 2 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 806
powerful resource leading to large scale conflicts in the region. This has also affected the other
economies of the world dependent on oil to meet their energy needs. Instability in the west Asian
region has also led to volatility in the international markets. Even in the year 2018, this roller
coaster ride of oil prices has continued and same can be expected in the coming few years. Crude
prices saw a rise of around 30% from a period of January and October. The initial rise was from
$60/bbl to $78/bbl which later on crashed around December. It is alarming that oil prices are
fluctuating as much as 5%. This is a sign of high volatility on the market and is therefore
worrisome for the economists. These volatile oil prices depend on multiple factors like the supply
of crude oil which is in turn dependent upon new oil discovery, the demand based on economic
performance and other geopolitical factors. The oil monopoly of OPEC has been challenged by
the massive Shale Revolution in the United States. Post shale discovery, the United States has
now become the largest crude oil producer in the world. It has surpassed the most influential
country in the OPEC, Saudi Arabia with its productions of 11.4 million barrels per day. Moreover,
in November this year, the US finally exported more crude oil and refined products than it
purchased. Thereby granting it the status of a net energy exporter for the first time since 1991.
Although other avenues of energy like solar, wind etc are being improved upon but it is highly
unlikely that any of them will replace oil in the coming few decades. However, OPEC is likely to
suffer from shale oil problems and electric vehicles taking a share out of its revenues in the
coming years.
Geographical Distribution of West Asia: Western Asia is situated directly to the south of Eastern
Europe. The Western-Asian region is surrounded by seven major seas. Namely, the Aegean Sea,
the Black Sea, the Caspian Sea, the Persian Gulf, the Arabian Sea, the Red Sea, and the
Mediterranean Sea. The Caucasus Mountains demarcates the boundary between Europe and the
north of West Asia. To the southwest, West Asia is separated from Africa by the Isthmus of Suez,
while to the east, the region adjoins Central Asia and South Asia.
Page 3 of 9
European Journal of Business &
Social Sciences
Available at https://ejbss.org/
ISSN: 2235-767X
Volume 07 Issue 03
March 2019
Available online: https://ejbss.org/ P a g e | 807
The largest economy in the area is Turkey. Saudi Arabia stands a second along with Iran. Both
these economies are fueled by oil. Oil is the major contributor to the economy in the region.
According to estimates, more than half of the world's oil reserves and around 40 percent of the
world's natural gas reserves are located in the region. Out of all the countries in the region, Saudi
Arabia holds the world’s largest reserves of oil, and largest oil production capacity. As a result,
Saudi Arabia is also a major player in the region and a security partner of the smaller Gulf States.
Saudi Arabia is a partner of United States in the international stage.
Historical Background: Most of the scholars agree to the fact that, securing oil supplies is crucial
for any nation to meets its energy security. Many countries even use it as a ‘strategic weapon’.
The west Asia has been involved in trade and commerce activities since the Mesopotamian times.
Although the first successful oil production began on 1859 in Pennsylvania, USA, the west Asia is
at present the largest and most influential oil producer. The first successful oil discovery in west
Asia was made in Persia (present day Iran) by a British company. This started a chain reaction of
oil exploration in the gulf region. Thereafter, in 1906 oil was discovered in Majid-i-Suleiman in
Iran. In the early 1930s Britain controlled a large share of Iranian oil reserves. So, to break the
British monopoly, United States discovered oil reserves in Kuwait and Saudi Arabia.
Formation of OPEC: OPEC stands for the Organization of the Petroleum Exporting Countries
whose members presently hold around 81.89% of World Oil reserves. The formation of OPEC
took place at Baghdad Conference on September 10–14, 1960. The foremost founding countries
were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. The main objectives of OPEC is to monitor
the oil policies around the world. OPEC influences the crude oil prices around the world and
therefore has the strategic power to influence any economy. Before OPEC, the oil market was
largely controlled by the MNCs and the Soviet Union. At present, 15 countries are the members
of OPEC out of which Saudi Arabia is the most influential one. What cements its position in the
OPEC is that Saudi Arabia has an extra capacity of between 1.5 million and 2 million barrels per
day. Thus allows Saudi Arabia a minimal storage to fight higher oil prices during market volatility.
