Oil Links to International Relations

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Table of Contents

Introduction
Export and import relations
Economic sanctions
Oil and the environment
Conclusion
References

Introduction

Since the onset of the industrial age, energy has gained significant prominence due to exponentially growing demand for its many uses. Growing usage of machines has seen their primary energy source, oil, becoming a major aspect in the economies of the majority of countries and the global economy as a whole. As an international commodity used in nearly all countries, it bears huge significance in dealings between countries and country organizations.

Export and import relations

Russia and China top the lists of energy producers and consumers in the world respectively. Recently, oil deals have been the main negotiating aspect between the two as their cooperation has been enhanced with oil as the main link. The Russian administration is looking to shore up Chinese investment in the upgrading and modernizing of its own factories as part of the oil deal. The Chinese appeared to want to deal with Russia exclusively on the issue of energy thus, they continue to frustrate the Russians who are interested in pursuing their manufacturing needs as part of the deals with China[1].

The Chinese have also signed agreements with Russia that will see the Russians provide oil and coal energy to China for an extended period of between 20 to 25 years in exchange for a loan of over $30 billion. The two countries have also agreed on a $5 billion joint investment in an oil refinery venture[2]. However, there has been a failure on an agreement on the supply of natural gas which Russia is keen to secure and increase its market beyond Europe.

The issue of gas supply to China has been on the pipeline for a long time and the major stumbling block hindering its finalization is pricing. Russia wants to secure the Chinese market in terms of gas while China, plans on an overall reduction in oil consumption by replacing a significant percentage with gas. The significance of this partnership is highlighted by the fact that China is looking to increase oil supply from Russia with whom they jointly inaugurated a direct land pipeline. This is despite the aforementioned planned oil cuts which mean other oil exporters to China will lose out[3].

The close beneficial ties between the two neighbors as a result of the established oil links are set to be exploited further through the expected gas supply. Negotiations were advanced further by an agreement of the timeline for finalizing the agreement which has been under intense pressure from the beginning, especially due to pricing concerns[4].

Economic sanctions

Iran is fourth among the largest oil-exporting countries, meaning that oil represents a large proportion of its exports (about 80%)[5]. As can be understood, any sanctions placed on the oil sector in Iran have the possibility of crippling its economy. The international community through the United States, the United Nations, and the European Union recently announced sanctions that are specifically aimed at the Iranian oil sector. This is part of a broader campaign aimed at discouraging what is perceived as Iran’s nuclear armament plans.

The sanctions on the oil industry have resulted in some giant companies understandably halting trade in Iranian crude oil since they affect crucial aids to crude oil trade like transport and insurance. This increases the risk of doing business and also requires a large capital threshold by the companies intending to continue buying Iranian crude. These measures have, however, not prevented large companies like Shell and Total from increasing their acquisition of Iranian crude oil. Iranian oil is in surplus and the companies are seen to be taking advantage of the sanctions to obtain oil cheaply[6], something that they deny.

The sanctions are not succeeding in isolating and crippling Iran, primarily due to the strong lure of oil that attracts individual countries. The significance of oil internationally can be highlighted by the fact that the sanctions are not aimed directly at oil. As a result, the Iranian government claims that the economy is still strong even with the sanctions in place[7]. This situation has also encouraged the Iranian government to work toward self-sufficiency by importing fewer oil products and looking to export more in terms of gasoline[8].

Oil and the environment

The oil complexities have also been caught up by environmental issues and particularly, on how greater sustainability can be achieved. Ecuador is a good example of countries facing the dilemma of choosing between oil and the natural environment. The country’s energy minister has come up with a proposal to the international community where his country seeks payment for not drilling vast oil reserves and therefore, prevents harming the environment[9]. The proposed drilling site is located in a national park whose existence and that of the animals living in it would virtually be destroyed were drilling to commence[10].

Ecuador is seeking pledges similar to the international payment plan afforded as a result of reducing carbon footprint. The proposed payment Ecuador is seeking represents about half of the projected net earnings from the oil it wants to avoid drilling. Some countries like Japan have already pledged some money and it remains to be seen whether the pledges will reach the $100 million first-year target it has set out to gauge whether the campaign will pick up.

Conclusion

Many countries are driven into establishing trading ties with a particular interest in securing energy deals. Oil is perhaps second to the weather in the world when it comes to exacting influence on people’s everyday life. As it continues becoming scarcer and demand for energy continues to increase, it is inevitable that other more sustainable energy solutions should be sought to avert a possible energy crisis in the future.

References

Azadi, Ghasedane. “Oil firms reap benefit of Iran’s build-up of crude stocks.” Guardian. 2010.

Booth, Robert. “Shell increases oil trade with Iran – despite sanctions.” Guardian. 2010.

“Ecuador Requests International Reimbursement to Keep its Oil in the Ground.” Huffington Post. 2010.

Gronholt-Pedersen, Jacob. “Russia, China in Deal on Refinery, Not Gas.” Wall Street Journal. 2010.

“Iran economy strong despite sanctions.” Press TV. 2010. Web.

“Iran stops gasoline imports, planning for exports.”Tehran Times. 2010.

James, Brooke. “Russia and China Reverse Trade Roles.” VOA News. 2010.

Pronina, Lyubov and Baizhen, Chua. “Russia, China Expand Relations with Gas, Oil Accords.” Bloomberg News. 2010.

“Russia-China Energy Deal in the Works.” Oxford Analytica. 2010.

Vidal, John. “Oil: Can Ecuador see past the black stuff?” Guardian. 2010.

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