Let’s try to take the measure of what exactly is at risk in the current tumult.As a start, there is almost no way to give full justice to the critical role played by Middle Eastern oil in the world’s energy equation. Although cheap coal fueled the original Industrial Revolution, powering railroads, steamships, and factories, cheap oil has made possible the automobile, the aviation industry, suburbia, mechanized agriculture, and an explosion of economic globalization. And while a handful of major oil-producing areas launched the Petroleum Age -- the United States, Mexico, Venezuela, Romania, the area around Baku (in what was then the Czarist Russian empire), and the Dutch East Indies -- it’s been the Middle East that has quenched the world’s thirst for oil since World War II.
In 2009, the most recent year for which such data is available, BP reported that suppliers in the Middle East and North Africa jointly produced 29 million barrels per day, or 36% of the world’s total oil supply -- and even this doesn’t begin to suggest the region’s importance to the petroleum economy. More than any other area, the Middle East has funneled its production into export markets to satisfy the energy cravings of oil-importing powers like the United States, China, Japan, and the European Union (EU). We’re talking 20 million barrels funneled into export markets every day. Compare that to Russia, the world’s top individual producer, at seven million barrels in exportable oil, the continent of Africa at six million, and South America at a mere one million.
As it happens, Middle Eastern producers will be even more important in the years to come because they possess an estimated two-thirds of remaining untapped petroleum reserves. According to recent projections by the U.S. Department of Energy, the Middle East and North Africa will jointly provide approximately 43% of the world’s crude petroleum supply by 2035 (up from 37% in 2007), and will produce an even greater share of the world’s exportable oil.
To put the matter baldly: The world economy requires an increasing supply of affordable petroleum. The Middle East alone can provide that supply. That’s why Western governments have long supported “stable” authoritarian regimes throughout the region, regularly supplying and training their security forces. Now, this stultifying, petrified order, whose greatest success was producing oil for the world economy, is disintegrating. Don’t count on any new order (or disorder) to deliver enough cheap oil to preserve the Petroleum Age.
To appreciate why this will be so, a little history lesson is in order.
The Iranian Coup
After the Anglo-Persian Oil Company (APOC) discovered oil in Iran (then known as Persia) in 1908, the British government sought to exercise imperial control over the Persian state. A chief architect of this drive was First Lord of the Admiralty Winston Churchill. Having ordered the conversion of British warships from coal to oil before World War I and determined to put a significant source of oil under London’s control, Churchill orchestrated the nationalization of APOC in 1914. On the eve of World War II, then-Prime Minister Churchill oversaw the removal of Persia’s pro-German ruler, Shah Reza Pahlavi, and the ascendancy of his 21-year-old son, Mohammed Reza Pahlavi.
Though prone to extolling his (mythical) ties to past Persian empires, Mohammed Reza Pahlavi was a willing tool of the British. His subjects, however, proved ever less willing to tolerate subservience to imperial overlords in London. In 1951, democratically elected Prime Minister Mohammed Mossadeq won parliamentary support for the nationalization of APOC, by then renamed the Anglo-Iranian Oil Company (AIOC). The move was wildly popular in Iran but caused panic in London. In 1953, to save this great prize, British leaders infamously conspired with President Dwight Eisenhower‘s administration in Washington and the CIA to engineer a coup d’état that deposed Mossadeq and brought Shah Pahlavi back from exile in Rome, a story recently told with great panache by Stephen Kinzer in All the Shah’s Men.
Until he was overthrown in 1979, the Shah exercised ruthless and dictatorial control over Iranian society, thanks in part to lavish U.S. military and police assistance. First he crushed the secular left, the allies of Mossadeq, and then the religious opposition, headed from exile by the Ayatollah Ruhollah Khomeini. Given their brutal exposure to police and prison gear supplied by the United States, the shah’s opponents came to loathe his monarchy and Washington in equal measure. In 1979, of course, the Iranian people took to the streets, the Shah was overthrown, and Ayatollah Khomeini came to power.
Much can be learned from these events that led to the current impasse in U.S.-Iranian relations. The key point to grasp, however, is that Iranian oil production never recovered from the revolution of 1979-1980.
Between 1973 and 1979, Iran had achieved an output of nearly six million barrels of oil per day, one of the highest in the world. After the revolution, AIOC (rechristened British Petroleum, or later simply BP) was nationalized for a second time, and Iranian managers again took over the company’s operations. To punish Iran’s new leaders, Washington imposed tough trade sanctions, hindering the state oil company’s efforts to obtain foreign technology and assistance. Iranian output plunged to two million barrels per day and, even three decades later, has made it back to only slightly more than four million barrels per day, even though the country possesses the world’s second largest oil reserves after Saudi Arabia.