Written under the auspices of the
Center for International and Strategic Affairs,
University of California, Los Angeles.
(A list of other Center publications appears at the back of this book.)
Copyright 1990 by The University Press of Kentucky
Scholarly publisher for the Commonwealth, serving Bellarmine College, Berea College, Centre College of Kentucky, Eastern Kentucky University, The Filson Club, Georgetown College, Kentucky Historical Society, Kentucky State University, Morehead State University, Murray State University, Northern Kentucky University, Transylvania University, University of Kentucky, University of Louisville, and Western Kentucky University.
Editorial and Sales Offices: Lexington, Kentucky 40508-4008
Library of Congress Cataloging-in-Publication Data
Energy & security in the industrializing world / edited by Raju G.C.
Thomas and Bennett Ramberg.
p. cm.
Includes bibliographical references.
Includes index.
ISBN 978-0-8131-5520-3
1. Energy policyDeveloping countriesCase studies. 2. Energy industriesPolitical aspectsDeveloping countriesCase studies. 3. Developing countriesNational securityCase studies. 4. Developing countriesForeign relationsCase studies. 5. Nuclear weaponsDeveloping countriesCase studies. 6. Developing countriesMilitaryCase studies. I. Thomas, Raju G. C. II. Ramberg, Bennett. III. Title: Energy and security in the industrializing world.
HD9502. D442E49 1990
90-12513 333.79091724dc20
This book is printed on acid-free paper meeting the requirements of the American National Standard for Permanence of Paper for Printed Library Materials.
1
The Relationships among Energy, Security, and the Economy
RAJU G.C. THOMAS
With the oversupply of oil on world markets and the fall in international oil prices from $32-41 per barrel in 1980 to mid-1989 levels of $15-20 per barrel, the international energy crisis that followed the 1973 Arab-Israeli war appears to have passed. The world has shifted from devising strategies of crisis management to strategiesalbeit rapidly fadingfor avoiding similar crises in the future. Such were the lessons learned from the sustained energy crisis of the 1970s, which severely affected both the industrialized and developing countries for almost a decade.
For the Western industrialized nations, economic dependency and vulnerability in the hands of a small number of developing countries, mainly in the Islamic Middle East, came as a rude shock. In the crisis, only a radical reevaluation of Western diplomatic and strategic policy in the Middle East could keep the oil flowing to the West. Attitudes toward the Arab-Israeli dispute, particularly the Palestinian issue, had to be adjusted in the Westespecially in the United Statesso as not to alienate the conservative Arab oil-producing states. Whereas few Americans had previously known the difference between Persians and Arabs, or between Shiite and Sunni Muslims, these distinctions were quickly learned. Monarchies such as Iran and Saudi Arabia assumed considerable importance, both as major suppliers of petroleum and as markets for massive sales of military hardware, intended to reverse the flow of petrodollars.
The competition among the industrialized weapons suppliers, especially between Eastern and Western bloc countries, and the sudden accumulation of advanced weapons among oil-exporting countries of the Middle East threatened to upset the military balances that had prevailed among Israel, the conservative and radical Arab states, and Iran. At the same time, the prolonged oil crisis established the economic and strategic interdependence of the Western industrialized countries and the Islamic Middle East. It became clear that conflicts and domestic political upheavals in the Middle East could not be ignored, since every major disturbance implied the threat of a disruption in the oil flow to the West.
The economic consequences for the developing countries were no less severe, although the Western nations had substantially more prosperity at stake. For example, oil demand in the United States in 1973 was 28.61 barrels of oil equivalent per capita, compared with only 1.38 barrels per capita for the Less Developed Countries. Nevertheless, in many industrializing countries, such as India, Pakistan, and Brazil, economic shocks from the oil crisis led to severe foreign exchange shortages and the curtailment of various development programs. Unlike wealthy countries, low-and middle-income states were unable or unwilling at the time to trade arms for oil to correct their trade imbalances. (The notable exception is Brazil, which more recently has managed to step up its overseas sales of small arms and ammunition.) Instead, some of these states resorted to other economic tactics. For example, by encouraging unskilled and semiskilled labor to work in the Middle East oil-producing countries, India, Pakistan, South Korea, and Taiwan were partly able to offset the high cost of oil imports through petrodollar remittances from their export labor forces. Despite the economic near-catastrophes suffered as a result of the much higher oil prices demanded by the oil-exporting countries of the Middle East, the diplomatic strategy of the developing countries took on an unexpectedly supportive role for the Organization of Petroleum Exporting Countries (OPEC), in the hope of obtaining special economic concessions and trade and investment benefits.
An offshoot of the 1970s energy crisis was the belief by some of the developing countries that a long-term solution could be found by embarking on or accelerating nuclear energy programs. The dramatic drop in oil prices that began in the mid-1980s has not necessarily reversed the commitment to nuclear energy development in many industrializing states. The choice of this energy alternative, especially by countries with prevailing or perennial security fearsamong them India, Pakistan, South Africa, South Korea, and Taiwanhas renewed the concern that resources and capabilities acquired in the nuclear energy sector could make more difficult the control of nuclear weapons proliferation.
While the world in 1989 is no longer in the midst of an energy crisis, it should be clear that there are underlying relationships among (a) a nations energy needs and external dependency; (b) its economic and political stability; and (c) its broader security concerns. The intensity of these relationships will, of course, vary from country to country in the developed and developing worlds, and within each country over time. Perhaps in the current framework of an international oil oversupply and low prices, the basic relationships may appear obscure, and crisis prevention inappropriate. Much of the new mood of optimism arises from oil discoveries, increases in energy efficiency, especially through advances in computerized automation, and the prospect of tapping alternative energy sources. However, none of these conditions appears to guarantee the longterm resolution of the energy problem. Lessons and legacies forgotten are no less relevant. For example, the rapid consumption of oil discovered in the Gulf of Mexico, the North Sea, and Alaska since 1974 only underlines the inevitable limitations of world oil reserves. Energy conservation through automation also has its limits. While computer technology may fine-tune energy usage in vehicles and buildings, such systems, costly in themselves, can only slow, not halt, the escalating demand for energy. Nor is there yet any clear alternative energy with the exception of atomic power, which in itself constitutes part of the energy-economy-security problem.
