Natural Resources And The Politics Of Middle East Essay

Oil production in the Middle East has not only been a subject of geology or exploiting the lowest-cost field. Where exploration is performed and what fields are developed has been influenced as much by political as by economic factors. Until the late 1960s oil production and exports from the region significantly reflected the major western oil companies’ need to cope with the demands of the different governments in the Middle East, all of whom wanted to see more oil produced in their territories in order that they could get more revenue. The oil companies were as well concerned with the political stability of the regimes in the oil-exporting countries, the dependability of supply, the likelihood of the nationalisation of oil company facilities, demands over royalty levels and pressures to make use of and train local nationals. In view of the fact that then, what gets produced where and exported has depended on political and economic muscle within OPEC which efficiently determines country quotas. Iran was the first country in the Middle East in which oil was exploited with test production starting in 1903 and a key discovery in 1908. Under Reza Shah the country was politically stable, and the oil concession agreement which was signed with D’Arcy in 1901 on very positive terms was to run until 1994. The Anglo-Persian Oil Company, which afterwards turns into British Petroleum, was founded in 1909. Oil was not discovered in Iraq until 1927, however by that time Persian production was well established, plus a slow growth of demand, reflecting the fragile state of the international economy at the time, intended Iraqi oil exploitation was restricted in these early years. (Mohamed Rabie, 1992). Which oil fields were developed as well reflected rivalries in Middle Eastern interests between the major western powers. Britain, through the Anglo-Iranian Oil Company, had a virtual monopoly of exploration in Iran, consequently the United States had little choice however to look to Saudi Arabia on the other side of the Gulf, the one area that had not come under European imperial influences. In the 1930s the oil fields of the eastern province were opened up, plus the Arabian American Oil Company (ARAMCO) was formed by a consortium of leading United States oil companies. It was ARAMCO that developed the Ghawar and Safaniya fields in the Dhahran area which were to prove to be the largest and most dynamic in the entire world. ARAMCO carries on to account for most Saudi Arabian oil production and exports, although it was nationalised in the 1970s and the role of the American associate companies is now restricted to specialist support and marketing. There was huge resistance to attempts to take over the oil concessions awarded to western multinational oil companies. Conflicts between the oil companies and host-country governments over revenues date back to the 1920s and 1930s when oil started to be exploited in noteworthy quantities, however it was the Iranian government which was the first to demand control of production. After Dr Musaddiq consolidated his power as prime minister in 1952 he set up the National Iran Oil Company, a state-owned entity, to take over Iran’s oil from the Anglo-Iranian Oil Company. This aggravated a two-year boycott of purchases of Iranian oil by the major western oil companies. Purchases were merely started again when Musaddiq was overthrown and terms were agreed which were satisfactory from the viewpoint of the oil companies. (John Page, 1999). In the meantime the Anglo-Iranian Oil Company had changed its name to British Petroleum. It was to focus on developing the oil fields of the Emirates on the Arab side of the Gulf, where the rulers were much more co-operative. It was this new orientation and the co-operation with Shell, the Anglo-Dutch company, which were to consequence in the major developments in Kuwait, Qatar and Abu Dhabi, and ultimately Oman. The increasing importance of the Arab Emirates as oil suppliers was not so much a reflection of the quality of their oil or relative cost factors, to a certain extent what mattered was the political environment and the security of oil supplies. Iran, and subsequently Iraq, had their exploration and production curtailed on account of their political intransigence. The beneficiaries were the Arabian Peninsula states that had their oil fields developed and exploited to a greater extent than might otherwise have been the case on the basis of geological decisions alone. (Nora Bensahel, Daniel L. Byman, 2003).