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Oil probably won’t cause a war with Iran, but it certainly adds fuel to the blaze

Tensions are high, and liquid natural gas tankers are vulnerable to attack.

- July 20, 2019

Iran, Britain and the United States are engaged in a struggle for control over the flow of oil through the Persian Gulf. A fifth of the world’s daily oil supply moves through the narrow Strait of Hormuz, offshore of Iran. Given the history of oil and war in hot spots from Iraq to Libya to Sudan, many wonder whether the situation can be defused.

Yet the relationship between oil and war is actually quite complicated — and much of the time, oil disputes are resolved peacefully. The more dangerous disputes are those where tensions over oil exacerbate other factors on the road to war.

What’s happening in the Persian Gulf?

On Friday, the Iranian Revolutionary Guard seized a British-flagged tanker called the Stena Impero. Iran says it halted the ship because of regulatory violations, but the British government is “deeply concerned.”

Iran’s actions come in the wake of deepening tensions, which started with President Trump’s decision to unilaterally abandon the nuclear deal negotiated with Tehran by the Obama administration (the Joint Comprehensive Plan of Action, or JCPOA). In April, the United States imposed new sanctions, setting off an escalating spiral of actions. Many experts viewed the U.S. move as foolish.

A series of attacks on oil tankers began in May. Iran denies responsibility for those attacks. In July, the British navy seized an Iranian tanker near Gibraltar, and the United Kingdom views last week’s tanker seizure by Iran as a reply to that event.

Iran and the United States also have destroyed each other’s drones in the area. The United States accuses Iran of shooting down its drone over international wars, but Iran argues that the drone was violating Iran’s territorial airspace.

Now the United States is deploying troops and Patriot missiles in Saudi Arabia. This could be in response to oil infrastructure vulnerabilities, though experts view that type of missile attack as unlikely to work. More ominously, many observers wonder whether war is coming.

Oil can amplify political tensions

Since the 1970s, oil has played a major role in between a quarter and a half of all wars, depending on how one counts. My research shows that oil fuels international conflict through eight distinct pathways.

One of those pathways, which is perhaps the most relevant to the current crisis, is clashes over control of energy transit routes, such as shipping lanes and pipelines. For instance, as Rosemary Kelanic describes, the United States’ oil embargo in 1940 put a stranglehold on Japan’s economy. In response, Japan attacked the Dutch East Indies to gain access to oil and other raw materials, setting the stage for the Pacific theater of World War II. More recently, the backdrop to Russia’s 2014 invasion of Crimea was its struggle with Ukraine over transit pipelines for natural gas in 2005-2006 and 2007-2008.

Yet transit routes are never the sole cause for war. Together with other (non-energy) issues at stake, one or more of the other seven oil pathways often play a role. First, there are resource wars, in which states try to acquire oil reserves by force — but these are rare. Second, some conflicts are triggered by the prospect that a state might come to dominate oil markets, such as the United States’ war with Iraq over Kuwait in 1991.

Third, oil can provide financing for insurgencies. For instance, Iran has funneled oil money to Hezbollah and to its proxies in Yemen. Fourth, there is petro-aggression, where oil insulates aggressive leaders such as Saddam Hussein from domestic opposition, and therefore makes them more willing to engage in risky foreign policy adventurism. (Iran’s behavior in the 1980s and 1990s might be considered petro-aggression.)

Fifth, civil wars in oil-producing states sometimes get externalized, spilling over into the international realm — as happened in Libya in 2011. The current war in Yemen is different, since Yemen produces little oil. However, it involves Iran, Saudi Arabia, and the United Arab Emirates, each of which is a major oil producer.

The last two pathways are oil-related grievances, whereby the presence of foreign workers in petrostates helps extremist groups such as al-Qaeda recruit locals; and oil-related obstacles to multilateral cooperation on security issues like Iran’s nuclear program.

But war is far from inevitable

Despite all of these ways that oil can cause or exacerbate conflict, states typically find a way to resolve their differences.

Moreover, even though wars can be disruptive, oil markets have proven remarkably resilient. During the Iran-Iraq war in the 1980s, for instance, both sides tried to sink the other’s oil tankers — with almost no success. Tankers are so massive that they are hard to sink. While it is flammable, crude oil is not volatile, meaning that it is unlikely to explode. The fortunate result, as Caitlin Talmadge’s research shows, is that the Strait of Hormuz is not easily closed.

Perhaps that is why global oil markets are so calm about recent tensions. Despite a small jump after Friday’s ship seizure, the price of oil actually declined by almost $5 per barrel in the week ending July 19.

Still, there is no room for complacency. Unlike in the 1980s, a large number of liquid natural gas tankers now sail through the Strait of Hormuz. Those tankers are far more vulnerable to attack than oil tankers are.

Just as importantly, the recent tension around oil tankers is in part a product of more fundamental disputes about Iran’s nuclear program, funding of various violent insurgents, and ongoing rivalry with Saudi Arabia. In turn, Iran’s actions stem from what it sees as Trump administration belligerence.

War is far from inevitable, even when it involves disputes over oil. Still, the ongoing political tensions in the Persian Gulf are enough to make anyone’s heart skip a beat.

Jeff Colgan is the Richard Holbrooke Associate Professor of Political Science at Brown University. He is the author of “Petro-Aggression: When Oil Causes War” (Cambridge University Press, 2013). Follow him on Twitter @JeffDColgan.