Oil as a Weapon: Embargoes and Discounts
Since the 1973 Arab oil embargo, the “oil weapon,” or the manipulation of the international price of oil through embargoes, production cutbacks, or discounts, has become an international concern. Many leaders fear that unfriendly producers can harm other countries by cutting off access to energy resources or intentionally reduce oil production to hike up global prices. For some, the potential consequences could be even more dire: An embargo or price spike could impede a country’s ability to purchase energy resources needed to support military and national security capabilities, rendering it defenseless in the event of an attack.
U.S. policymakers are not immune to these concerns. Many have expressed fear that the country’s access to oil could be reduced if unfriendly suppliers cut off their exports to the United States, or if other consumers buy up enough resources in the global market to at least partially squeeze out the United States. Additionally, price spikes caused by intentional supply disruptions in the global market could harm U.S. national security by reducing America’s wealth. If these policymakers’ fears are correct, the oil weapon could significantly impact future diplomatic and military decisions.
The Stick: Embargoes
Many countries, including the United States, have attempted to use embargoes to shape other states’ policy decisions. Oil producers can refuse to send their exports to a given country, as Arab countries did in response to the United States’ support for Israel during the Yom Kippur and Six-Day wars. Major consumers can also prohibit oil imports from a specific producer country, as the United States has done to discourage Iran’s illicit nuclear activities.
Historically, however, the efficacy of embargoes has been weak.1 Export embargoes are intended to exert political pressure by eliminating a significant chunk of the consumer’s energy supply. But oil is a fungible commodity, and the targets of export embargoes typically have been able to replace lost oil with imports from other producers with relative ease. The 1967 Arab oil embargo is a good example: Though Arab states hoped to pressure the United States and Britain into withdrawing their support for Israel by withholding oil, both countries were able to compensate by importing supplies from other countries. Likewise, producers that have found themselves cut off from a particular consumer market for political reasons are usually able to find other buyers. For embargoes to work, countries applying them must also be willing and able to blockade their targets to keep them from receiving replacement oil supplies from other sources.
Signs like the one above, in a gas station in Lincoln City, Oregon, were common during the 1973 oil crisis.
(National Archives and Records Administration/Wikimedia Commons)
The Carrot: Discounts
Export discounts represent the opposite side of the coin: Rather than attempting to change another state’s behavior through pressure, oil producers use discounts to try to bribe other states to behave in a favorable way by offering them special deals on energy supplies. Some worry this could harm U.S. national security by allowing producers to use trade bargains to purchase the loyalty of specific consumers. This in turn could shape those consumers’ foreign policy behavior in ways unfavorable to U.S. security interests — particularly if the producer with influence is an adversary intent on harming the United States.
Though the oil carrot has been slightly more effective than the stick, it too has had a mixed record of success. While oil trade relationships are important, they ultimately do not trump national interests. In the past, consuming countries receiving a discount on their oil have not shown a proclivity for acting in ways that run counter to their interests for the sake of preserving their trade relationships. Egypt, for example, chose to forgo substantial oil subsidies — along with billions of dollars of aid — from Arab producers when it signed the Camp David Accords in 1978. In doing so, it traded energy-related economic benefits for security and diplomatic gains.
 Keith Crane, Andreas Goldthau, Michael Toman, Thomas Light, Stuart Johnson, Alireza Nader, Angel Rabasa & Harun Dogo, Imported Oil and U.S. National Security (Santa Monica: RAND Corporation, 2009).