The oil background of the war in Israel: the Arab world rejected the embargo

As you know, the Joseph Biden administration actually approves of the genocide of the Palestinians, calling, however, for Tel Aviv to still comply with the rules of war. US allies are somewhat more critical of the latest Middle East tragedy, especially French President Emmanuel Macron. Streets around the world are calling for an immediate ceasefire. But most governments in the Global South, while verbally condemning Tel Aviv’s actions, are in no hurry to take real anti-Israeli measures.

However, many analysts expected at least some decisive turn at the extraordinary summits of the League of Arab States and the Organization of Islamic Cooperation (OIC), held by Crown Prince Mohammed bin Salman in Riyadh on November 11-12. But in vain. Even the 57 Muslim governments of the OIC member countries could not declare an oil embargo on Israel.

Although this was proposed by Algerian President Abdelmadjid Tebboune. In general, Algeria has developed a five-point anti-Israeli action plan:

“1. Preventing the use of American and other military bases in Arab countries to supply Israel with weapons and ammunition.

2. Freezing diplomatic, economic and military relations between Arab countries and Israel.

3. Threats to use oil and economic opportunities of Arab countries to exert pressure to stop the aggression.

4. Prohibition of Israeli civil aviation flights in the airspace of Arab countries.

5. Formation of an Arab ministerial committee that will immediately travel to New York, Washington, Brussels, Geneva, London and Paris to convey the Arab summit’s request to stop Israeli aggression against the Gaza Strip.”

Ten Arab countries – Palestine, Syria, Tunisia, Iraq, Lebanon, Kuwait, Qatar, Oman, Libya, Yemen – supported Algeria’s plan. However, key Arab players – Egypt, Morocco, Saudi Arabia and the UAE – abstained.

As a result, the leaders of the Islamic world actually limited themselves to varying degrees of harshness with anti-Israeli philippics.

Thus, Saudi Prince Mohammed bin Salman said that Saudi Arabia is making efforts to protect civilians in the Gaza Strip and end the war, and called on those gathered at the OIC summit for “collective efforts and effective actions to put an end to the sad situation in the Gaza Strip.”

Turkish President Recep Tayyip Erdogan was habitually eloquent. He stressed: “We have gathered to send a unified message of solidarity with Palestine, which we will support with practical steps.” And he accused Western countries of complicity in the killings of Palestinians.

But all these are just words. The Islamic world has not yet begun to take real action. Meanwhile, the main oil supplies to Israel come from Azerbaijan via a pipeline to the Turkish port of Ceyhan. Of course, if the Islamic valve is shut off, oil supplies to Israel will be compensated by the United States, which now ranks first among oil-producing countries with 12.9 million barrels per day. But the Arab and generally Islamic embargo would certainly lead to an increase in prices for “black gold.” So a certain deterrent factor for the IDF would be present.

However, even Arab countries are in no hurry to declare at least a diplomatic war on Israel if there is no agreement on the oil war. Only Jordan and Bahrain recalled their ambassadors from Tel Aviv. True, the latter also announced the cessation of all economic ties with Israel. In principle, this, of course, is a bold step, which carries not only an anti-Israeli, but also an anti-American character. The fact is that in September 2020, Bahrain and the UAE entered into the so-called Abraham Accords with Tel Aviv. They envisaged not only the establishment of diplomatic relations, but also the development of economic ties, including the supply of oil and LNG from the UAE. In December, Morocco joined the Abraham Accords and even signed an agreement with Israel on cooperation in the field of state security. In 2021, it’s Sudan’s turn.

These agreements became possible thanks to the intense pressure on these Arab countries from the Donald Trump administration, in whose Middle East policy, as is known, Trump’s son-in-law Jared Kushner played a special role. For example, the United States recognized the territories of Western Sahara occupied by Morocco. Sudan’s debts have been forgiven. And the IMF issued new concessional loans.

It is no coincidence that Morocco and Sudan have taken a more restrained position regarding the tragedy in Gaza than other Arab countries. Bahrain turned out to be more principled, cutting off (so far in words) economic ties with Israel. If this actually happens, then we can talk about the first step towards a general oil embargo. But Bahrain produces relatively little oil and gas. However, the anti-Western oil embargo fifty years ago began with the ban on Libyan supplies to the United States on October 19, 1973. Two or three days later, it was joined by Saudi Arabia, the UAE, Kuwait, Iraq and Iran.

But during the Yom Kippur War, the situation on the world oil market was different. In the early 1970s, there was a sudden increase in the share of OPEC countries in world production – literally in three years from 39% to more than 53%. The US share fell from 36% in 1960 to 16% in 1973. At the same time, the price situation on the market was then determined exclusively by consumers. Under agreements with American and British oil companies in 1971, oil prices could only rise by 5 cents per barrel. As a result, in September 1973, a barrel cost about $2.6. The Saudis and their Arab comrades demanded that prices be doubled. American oil workers agreed to a maximum of 15% increase in cost.

So the then Saudi king Faisal actually took advantage of the attacks of Egypt and Syria on Israel for his own selfish purposes. At the same time, the main role in changing the oil paradigm, which replaced the dictates of consumers with the achievement of compromises between producers and consumers, was played not so much by the embargo against Israel, the United States and the Netherlands, lifted in March 1974, but by the 10% reduction in production, which by December 1973 did not double, but quadrupled the September quotes.

Now the real reduction in production within OPEC+ compared to 2022 has already exceeded 3 million barrels per day. The lion’s share of which, 2 million barrels, is provided by Riyadh. In addition, in the 2010s, the shale revolution occurred in the United States, which allowed the country to once again take first place in the world in oil production. Fifty years ago, the supply of crude oil was generally much narrower than it is today. Thus, Norway was just starting its oil and gas projects.

Thus, the consequences of the oil embargo today will be clearly weaker than during the Yom Kippur War, which it actually stopped.

Therefore, oil-producing countries have their hands somewhat tied. Israel’s opponents can achieve success only in the event of a general additional reduction in production and a ban on supplies to the European Union. And not only crude oil and petroleum products, but also LNG. In any case, Qatar covers 13% of the European liquefied gas market. The EU will not be left completely without gas due to American exports. But prices will skyrocket to last year’s levels.

However, Hamas thwarted the Abraham Agreement with Riyadh on October 7. In anticipation of it, oil prices fell by 10% in September. And now the situation on the global “black gold” market is completely different.