Many of the world’s most serious security threats are enabled—directly or indirectly—by revenues from the high oil prices (about $100 per barrel) prevalent in world markets in recent years. If these prices were reduced substantially (e.g., by 20-30 percent), the liquidity that fuels the threats would probably shrink, as would the threats themselves.
Moreover, several feasible measures can contribute to lower oil prices, and these measures may be abetted by other trends that are independently moving in the same direction. Consequently, reducing oil prices should be a prominent part of strategies designed to disable the aforementioned threats.
Four threats are salient:
- Iran’s nuclear development—i.e., the Shiite bomb;
- the Sunniled ISIS threat in Syria, Iraq, and beyond;
- Hamas attacks on Israel from Gaza using rockets and tunnels;
- Russia’s threat to Ukraine via the separatists it has armed in east Ukraine and the military units it has stationed along the border with Ukraine.
The driving forces behind these threats are many and complex, rooted in ethnic, religious, political, ideological, cultural, and historical conflicts. Neither energy issues in general nor oil prices in particular are among the drivers of the threats. Revenues from oil exports are enablers of the threats, not their drivers.
Since the start of this century, oil prices have tripled: The Dubai spot price of crude oil was $35 per barrel in 2000; during the period from 2011 to early 2014, prices varied between $106 and $109 per barrel. How do these sharply increased oil prices affect each of the threats?
Iran’s oil exports generate revenue of $90 billion per year, comprising about 35 percent of Iran’s GDP. Iran’s officially reported defense spending is 4.1 percent of GDP, and spending on the country’s Atomic Energy Organization may be as large or larger. Reducing oil prices by 20-30 percent would reduce Iran’s GDP by 7 percent. Although nuclear development and defense spending are among Iran’s priorities, this drop in GDP would seriously constrain these priorities. It would impose an additional burden of internal frictions and squabbles within Iran’s opaque decision-making process, quite apart from whether current negotiations to curtail enrichment succeed or fail.
Funding for ISIS extremists appears ample and diversified. Their extensive funding network includes oil properties seized in eastern Syria and along the Syrian border with Turkey, plus individual solicitations—some voluntary, others perhaps coerced—from wealthy donors in Kuwait, Saudi Arabia, and the Gulf emirates.
Suppose daily oil revenues accruing to ISIS are between $2 million and $5 million (estimates in the press have ranged between $1 million and $6 million); also, assume that ISIS fighters number between 10,000 and 30,000 (mainly from Arab countries, but also including hundreds from Europe, the United States, and other non-Arab countries). Suppose further that these revenues are mainly used to pay and sustain ISIS fighters, while other ISIS operating costs and equipment are either acquired in-kind (from stocks left by fragmented Iraqi units) or defrayed from the other revenue sources mentioned above. These revenues would easily support the reported payments of $1,000 per month to ISIS fighters (per the king of Jordan)—many times higher than the corresponding opportunity-wage in their homelands.
Substantially lower oil prices would likely cut this wage and erode ISIS’s appeal to fighters, resulting in disruptively frequent or permanent AWOL.
The main funding for Hamas’s rockets and tunnels threatening Israel is provided by Iran, with equipment supplied by both Russia and Iran. Hamas also gets political and economic support from Qatar and Turkey. Consequently, the effect of lower oil prices in constraining Iran’s bomb development would probably limit Hamas’s threat to Israel, as well.
Russia’s funding and equipping of thousands of separatists in east Ukraine has been similarly enabled by abundant oil revenues. Russia’s crude oil production (second-largest in the world) rose in 2013 for the fifth consecutive year. Its daily oil exports are the world’s second-largest (after Saudi Arabia), estimated at 5 million barrels in 2014. Annual oil export revenues of $180 billion represent 8.2 percent of Russia’s GDP, nearly three times its officially reported defense budget. Sharply lower oil prices would impose serious constraints on Russia’s willingness and ability to pursue its aggressive threat to Ukraine.