Oil and power

Mao Zedong said: “Power grows from the barrel of a gun.” He might have said: “Power grows from the barrel of oil.”

Control of oil resources lends credibility and finance, if not legitimacy, to those who assert statehood. And inability to control oil resources sets think-tank analysts muttering about failing states — 300,000 b/d of Nigerian crude lost to theft, according to state-owned NNPC; Yemen’s chaos epitomised by governmental inability to keep pipelines operating.

When the organisation that called itself Isis rebranded as Islamic State (IS) and declared a caliphate, it did so not only on the back of territorial gain but independent financing, partly from oil smuggling, that allows it to promise food and services to the people under its control. The US Treasury has guesstimated IS oil income at around $1mn/d. Sanctions and police action against smugglers and middlemen, plus military action — the defence of Iraq’s Baiji refinery, bombing of tea-kettle refineries — are aimed at making Isis weaker and less credible in the areas it controls.

The struggle for political control of part or all of Libya is also played out in control of oil resources. Late 2013 and early 2014 saw the group claiming right of government over the eastern region of Cyrenaica try to bolster its revenues and credibility by setting up Libyan Oil and Gas in Tobruk with the intention of exporting crude independently of NOC (see Petroleum Argus, 10 January 2014, p7). At least one tanker attempted to buy crude from this entity.

A year later, NOC issued a new warning against unlawful attempts to buy Libyan crude as a Panama-flagged tanker approached Ras Lanuf. Two governments — one internationally recognised and the other not — are vying for access to oil revenues, control of NOC and even representation at Opec.

And then to Iraqi Kurdistan where the Kurdistan Regional Government (KRG) last year began exporting crude by pipeline from fields under its control, independent of the central government. Schooled by betrayal, butchery, internal division and false dawns since 1920, the Iraqi Kurds have not been so foolish as to declare political independence. But Baghdad’s fury and threats were an acknowledgement that the KRG will use — has already used — its relative military competence and its control over oil fields and export infrastructure to create the conditions for an independence that it will declare if a new federal Iraq is not to its liking. And its liking or lack thereof will depend largely on the distribution of oil revenues, a factor that bears directly on political rhetoric.

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