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Global Financial and Economic Crises

Oil and the Organization of the Petroleum Exporting Countries

Project: Global Financial and Economic Crisis 2007-Present
Open-Content project managed by KJF, mtuck

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The Organization of Petroleum Exporting Countries (OPEC) announces a planned meeting set for September 22, 1971 to call for a larger share of assets, profits, and management of oil companies operating in its countries. The relevant oil companies refuse its demands. OPEC specifically states in its announcement that it wants to “take immediate steps toward the implementation of the principle participation in the existing oil concessions.” [New York Times, 8/14/1971]

Entity Tags: Organization of Petroleum Exporting Countries

Category Tags: Oil and OPEC

Senator J. William Fulbright (D-AR) of the Foreign Relations Committee warns of further turmoil in the Middle East due to dependence of foreign oil and the US stance on Israel. He states his assertion that forcible acquisition of Middle East oil rights and supplies is imminent given the current course he sees. He proceeds to outline a vision for a political solution amenable to all sides recognizing Israel’s security interests, the need for stability in the region to guarantee oil exports, as well as recognizing Arab state economies. Senator Henry “Scoop” Jackson (D-WA) immediately replies to Fulbright’s statements, calling them “irresponsible” and goes to support Israel in the debate. Fulbright responds with his plan for keeping a calm Middle East, but also warns of the possibility of terrorist actions perpetrated by Middle Eastern powers and individuals stemming from current policy stances taken by the US and Israel. He also cautions on the possibility of an oil embargo should the current policy proceed unabated. [New York Times, 5/22/1973, pp. 5]

Entity Tags: Henry (“Scoop”) Jackson, J. William Fulbright

Category Tags: Oil and OPEC, Commentaries and Criticisms

Organization of Arab Petroleum Exporting Countries (OPEC) announces five percent cutbacks for all members on oil exported to the United States and the Netherlands in a meeting held in Kuwait. This event ushers in the era of “oil as a weapon” in foreign policy utilized by Arab powers. Protesting the US and the Netherlands’ support of Israel in the on-going Yom Kippur War, OPEC sets the tone for other Arab and Muslim nations. [New York Times, 10/18/1973, pp. 1]

Entity Tags: Organization of Petroleum Exporting Countries

Category Tags: Oil and OPEC

Iranian President Mahmoud Ahmadinejad orders that his country’s foreign exchange reserves be moved from the dollar to the euro, setting the stage for the Iranian Central Bank to cut its foreign currency reserve interests rates from 12 percent to 5 percent. The estimated rate cut makes it cheaper for the bank to acquire foreign currency. “They have been talking about switching their foreign currency reserve from the dollar to the euro for a while now, but it makes them more dependent on the euro and the European Union,” says Dr. Ali Ansari, director of Scotland’s St. Andrews University Iranian Studies Centre.
Followed Call Addressed to OPEC - Ahmadinejad’s decision comes shortly after he called for the Organization of Petroleum Exporting Countries (OPEC) to discard the dollar as the currency standard for oil-related deals. Despite recent declines in dollar value and the fact that most major oil producing countries are outside the US, the dollar remains the prevailing currency for pricing a barrel of oil. The dollar also remains the most frequently used international trade currency.
Possible Motivation - Some analysts believe that exchanging the dollar for the euro may be Iran’s attempt to lessen the effects of US economic sanctions in force since the 1979 Islamic revolution when the US backed the overthrown Shah of Iran, who was replaced by an Islamic republic. US sanctions include prohibiting US involvement with Iran’s petroleum development, as well as prohibiting all trade and investment activities by US citizens around the globe. Sanctions were softened somewhat in 2000, when the US Treasury amended its prohibition edict by allowing US citizens to buy and import carpets and food products like dried fruits, nuts, and caviar produced in Iran. Recent media reports suggest, however, that President Obama is considering an increase in sanctions if Iran persists in its alleged development of nuclear weapons. Iran maintains that its nuclear program is solely for power production. [Media Line, 9/22/2009]

Entity Tags: Iran, Organization of Petroleum Exporting Countries, Mahmoud Ahmadinejad, Ali Ansari

Category Tags: Oil and OPEC, Other Nations

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