Sanctions impact - Oil & Gas Journal, April 2-8
Excerpt from the article "Effective US energy policy critical to world energy balance"
by Cyrus H Tahmassebi
Many observers branded the 1973 Arab oil embargo as a political blunder.
If it indeed was a political blunder, the indiscriminate use of economic
sanctions by the West against a number of major oil-producing countries
over the last 2 decades should be branded as a super political blunder.
Whereas the Arab oil embargo lasted for only a short while, the economic
sanctions deployed by the US and the United Nations against Iran, Iraq, or
Libya have been in force for years.
Just as the Arab oil embargo failed to achieve its goals, so have the economic
sanctions that the US and others imposed on those oil-producing countries.
And just as the ill-effects of the Arab oil embargo eventually engulfed
all of the oil-producing countries within OPEC, the adverse consequences
of the US economic sanctions, manifesting themselves in the form of tight
markets and higher prices, are impacting all of the major oil-consuming
countries and their economies.
History shows that most US economic sanctions have begun with the strong
support of its allies.
As the sanctions drag on, and the results become difficult to ascertain,
however, the political objectives of the US and its allies begin to diverge,
and eventually the allies gradually back away.
Consequently, after a few years, the US government not only finds itself
alone and isolated but also betrayed by its former allies' rapproche- ment
and business dealings with the target country. Thus, the US ends up bearing
all or the lion's share of the economic burden resulting from the lost
trade.
History also shows that economic sanctions seeking to achieve financial
goals-i.e., opening markets to imports or lifting tariffs-have a much better
chance of succeeding.
On the other hand, sanctions seeking political gains often fail, even if
they remain in effect for years. In fact, some observers believe that politically
motivated sanctions have often rendered results that are exactly the opposite
of the ones intended.
For example, most Middle East experts believe that the UN economic sanctions
against Iraq have actually helped Saddam Hussein consolidate power and
rally the Iraqi nation behind him. This is mainly because political sanctions
do not bear fruit for very long, if ever.
Consequently, as these sanctions drag on and exacerbate the poverty and
sufferings of the common people in the target country, public opinion gradually
turns against the sanctioning country rather than against the leader of
the country whose policies are alleged to have instigated the sanctions.
Some believe that Iraq is a good example of this kind of backlash.
The US-Iraqi relations turned sour in 1990 when Iraq invaded Kuwait, and
the US government took the initiative to organize the military coalition
that eventually forced Iraq out of Kuwait. At that time and in the following
few years, most Arabs, particularly the Kuwaitis, were quite appreciative
of the US efforts. Now, after a decade, when these people see that Saddam
Hussein is still in power and the innocent Iraqi people are the ones who
are suffering from lack of food, medicine, and other necessities, they
are becoming increasingly more sympathetic towards the Iraqi people and
consider the sanctions no longer justified.
There are no reliable estimates of the exact impact of UN and US economic
sanctions on the aggregate world oil supply. However, some analysts believe
that Iran, Iraq, and Libya would have had the capability to produce 3-6
million b/d of additional oil without the sanctions.
For example, without the US sanctions, Iran would have been able to develop
and better maintain its onshore and offshore oil fields and possibly would
have become a major gas exporter to the rest of the world. Iran also could
have been a major conduit for oil and natural gas exports from the former
Soviet republics in the Caspian Sea region.
Moreover, some political observers believe that, if the sanctions had not
been in place, political and economic issues would have caused more market-share
rivalry among Persian Gulf oil producers.
In addition, without the sanctions, a country such as Iran probably would
have been much more amenable to increasing OPEC production quotas, because
Iran would have benefited also from higher production volumes.
Without much spare capacity or any potential benefits from higher volumes,
however, countries such as Iran naturally would be against quota increases.
Applying sanctions
Obviously, each sanction case has its own peculiarities and may require
a set of specific policy measures appropriate for it. However, there seems
to be a consensus among the experts on a number of major points:
* First, unilateral sanctions are more frequently doomed to fail, particularly
if world opinion considers the issue in dispute highly controversial and
having no direct bearing on the national security of the country imposing
it. Therefore, unless unilateral sanctions can guarantee a quick resolution
of the dispute, chances are they would eventually fail.
* Second, imposition of economic sanctions to achieve political objectives
is predicated on the assumption that the hardship resulting from the sanctions
will prompt the populace to rise against their leaders and force them to
alter their policy or behavior that the sanctioning country is seeking
to change.
It is obvious that in countries where there are no free elections or free
expression of popular will, the much-hoped-for internal pressure on the
leaders may never materialize. Instead, the sanctions may provide an opportunity
for demagogue and a pretext for the government's economic failures.
* Third, there is no guarantee that even a multinational sanctions policy
would succeed if the issue in dispute is highly controversial or if the
political objectives sought by the sanctioning coalition are considered
unjust by the majority of the people in the target country.
There is a distinction between sanctions deployed for commercial purposes
and those used to achieve political objectives. While the former often
lends itself to an objective cost-benefit analysis devoid of emotions,
the latter can easily invoke nationalism and other sentiments.
Therefore, unless politically motivated sanctions are deployed justly,
consistently, and in an even-handed fashion, it is more than likely that
they may eventually backfire and result in more harm than good to the sanctioning
countries.
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