In September 1960, representatives of Iraq, Iran, Venezuela, Saudi Arabia and Kuwait met in Baghdad to found Opec.
In 2011, Donald Trump told the Wall Street Journal, “I would take the oil. I would not leave Iraq and let Iran take the oil.”
Now, with Venezuela’s oil sales under US supervision, is the clock turning back on national sovereignty over natural resources?
It is not just Caracas under pressure. The aircraft carrier USS Abraham Lincoln and its support group are steaming towards Iran. Washington has reported threatened the “nuclear option” of cutting off the supply of US dollars from Iraq’s oil sales if its new government includes undesirable representatives. Last week was absorbed by the White House’s demands to annex Greenland, enticed by prospects of minerals and oil.
As now the world’s biggest oil and gas producer, US nervousness over energy supplies makes little sense. But worries over critical minerals are more understandable. China’s success in dominating international supply chains for cobalt, nickel, rare earths and other essential materials brings it temporary strategic security, at the cost of alienating not just Washington, but also Brussels and Tokyo.
It is understandable, if regrettable, that Beijing feels it needs such leverage against US weapons of sanctions and tariffs.
Grabs for natural resources were a big part of 19th century imperialism. The drive for self-sufficient “spheres of influence” in the 1930s encouraged resource-poor Germany and Japan to attempt to conquer oil, rubber, iron and farmland from their neighbours. Postwar decolonialisation only slowly relinquished western corporate ownership.
Opec today is most familiar for co-ordinating production levels between its members and hence avoiding damaging over-competition.
But for its early history, it had a much further-reaching goal. Its founders, and subsequent joiners such as Libya (1962), Abu Dhabi (1967) and Nigeria (1971), formed a common front against the dominant international oil companies.
The Opec states sought a fairer share of taxes, “participation” by growing equity shares for their national oil companies, and control over the official pricing of petroleum sales. From 1970 onwards, they secured these aims, including price rises beyond their wildest dreams.
Eventually during the 1970s and 1980s, they nationalised their industries, totally in Venezuela, Saudi Arabia, Iraq and Kuwait, or partly as in the UAE, Libya and Nigeria. The Opec countries knew they needed this united front because of the bad experience of oil-exporting countries that had gone it alone.
The US intervened militarily in Mexico following its revolution in 1914, badly damaging future relations. Mexico, by the 1920s the world’s second-biggest producer, nationalised its petroleum industry in 1938.
Eventually, it paid modest compensation and the US and Britain reluctantly accepted the fait accompli. Foreign companies would not return to Mexico’s upstream petroleum sector until 2015, and even since then, their role has been very circumscribed and vulnerable to reversal.
Iran’s experience was rawer and set up a national tragedy from which it is yet to escape. When prime minister Mohammad Mossadegh nationalised Iran’s oil industry in 1951, kicking out the forerunner BP, the UK and US organised a boycott. Under severe economic pressure, Mr Mossadegh was overthrown by a British and American-supported coup in 1953.
When the 1979 Islamic Revolution toppled the shah, a key source of anger against him was the purported subservience to western oil interests.
The modern world of resources is more complex than that of the 1950s or 1970s. On one hand, exporters today have more options. Most crucially, if they fall out with Washington, China is a much more serious alternative than the Soviet Union ever was – it brings a huge consumer base, technology and finance. Customers in general are more diversified, and markets for oil and other commodities are flexible and liquid. Hence, Iran and Russia have been able to survive western sanctions, albeit with economic pain.
But on the other hand, resource exporters now face greater vulnerabilities. As Canadian Prime Minister Mark Carney told the Davos gathering on Tuesday, “Great powers have begun using economic integration as weapons. Tariffs as leverage. Financial infrastructure as coercion. Supply chains as vulnerabilities to be exploited.”
Most striking is the 21st century readiness of the US to use force against major resource exporters. During the oil embargo by numerous Arab nations in 1973-1974, US national security adviser Henry Kissinger vaguely threatened military action, but did not dare to follow through.
The 2003 US invasion of Iraq was, of course, often criticised as a “war for oil”. But if that was the US aim, it was notably unsuccessful. Chinese companies emerged as the main operators of Iraq’s fields, while American companies withdrew in the face of political obstacles and unattractive contractual terms.
But Mr Trump thinks differently. The seizing of Venezuelan President Nicolas Maduro earlier this month and the US and Israeli assassinations of Iranian leaders and allies throughout the Middle East since October 7, 2023, are warnings to other politicians.
Baghdad, the new government in Damascus, and the embattled government in Kyiv, have all come under pressure to admit American companies to their petroleum and minerals. Elements in a possible Russia-Ukraine peace deal involved US access to Russian energy and metals.
Such deals may be profitable for select individuals and companies. But they are not a sustainable way to assure access to key resources.
First, minerals are just not worth that much. The most valuable, oil, is approximately a $2 trillion global business, compared to world gross domestic product of $117 trillion. Its importance is likely to fade with the rise of renewable energy and electric vehicles.
The cost of the Iraq War to the US has been estimated at nearly $2.89 trillion. Even if the US somehow seized and sold all Iraqi oil for free, making Iraqis destitute, it would not recover its money until 2060.
Second, major oil producers sought a fair return and control over their natural resources for good reason. Colonial-era terms had become intolerable. Through persuasion, demonstration, strikes, sabotage and the overthrow of unpopular governments, people throughout the developing world made it clear that their consent was required.
Third, resource-rich countries who feel threatened will band together, finding like-minded allies as the Opec nations did, seeking a larger protector, and selling to customers who respect their sovereignty. The US, China or any other country can have sustainable access to key natural resources by respecting national and popular sovereignty.
Seeking temporary advantage by coercion, corruption or one-sided contracts will backfire.
