China has been rapidly acquiring interests in
countries rich in hydrocarbons like Kazakhstan,
Russia, Venezuela, Sudan, West Africa, Iran, Saudi
Arabia and Canada in the expectation of growing
future dependence on oil imports. Despite these
efforts to diversify its sources, China has become
increasingly dependent on Middle East oil. Today,
58% of China’s oil imports come from the region. By
2015, the share of Middle East oil will stand at 70%.
Americans are profligate users of energy and will
continue to be as long as oil is cheap. The US uses
25% of all oil consumed, whereas it only represents
5% of the world’s population. Many observers
recognise that dwindling reserves and increasing
demand are two conflicting factors which are bound
to intersect in the near future. The consequent
increase in price will be the catalyst for a crisis similar
to those of 1973 and 1979.
In 1973, OPEC (the Organization of Petroleum
Exporting Countries, of which the UAE is a founding
member) decided to limit production in response to
the US stance on the Arab-Israeli conflict. This lasted
for six months and served to create chaos in western
markets that could no longer access the cheap oil
they needed.
In 1979, the overthrow of the US installed puppet
leader, the Shah of Iran, in the Islamic revolution,
a coup d’etat lead by Ayatollah Khomeini resulted
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in another oil crisis which drove prices up and had
devastating effects on western economies.
These historical examples illustrate the geopolitical
power held by a small Emirate like Abu Dhabi, as the
leading federal state of one of the main countries in
the OPEC group.
Fortunately for a consumer country like the
US, relations with OPEC have generally proved
favourable over the course of time.
In 1971, an OPEC meeting decided that oil was to be
traded in US dollars, no matter where in the world,
or between whom, the transaction took place. Due
to the fact that everybody had then to buy dollars in
order to buy oil, the US Federal Reserve was put in
an enviable position. Central Banks around the world
stockpiled dollars for their oil needs, enabling the
US to be the number one debtor nation in the world
today.