Page 1

Letter from Secretary General Hello again, I am Sreekar Reddy, a fourth year mechanical engineering student of CBIT, I was introduced to MUNs at CBIT beginning as a director in the 2011 edition and currently serving my second term as Secretary General of this great conference , needless to say it is indeed an honour and a privilege. For two years we have stood up and redefined MUN conferences in India, For two years we have led the way with innovation. We wanted to deliver a phenomenon We wanted to be the difference. For two editions now we have been and done all that but we come back for the third time promising the same and even more. When a team creates something spectacular it leaves a greater responsibility in the hands of the next team, it leaves a legacy, a legacy that must continue. Moving forward with this responsibility on our shoulders we would assure the participants who have supported us since 2011 that the best is yet to come and to those who have missed the last two editions we would like to tell you that it’s never too late to be a part of something that shall become a collection of memories to cherish. To put it simply, hello delegate, welcome to CBITMUN. Sreekar Reddy Secretary General CBITMUN

GENERAL ASSEMBLY MANDATE The General Assembly is the main deliberative, policymaking and representative organ of the United Nations. Comprising all Members of the United Nations, it provides a unique forum for multilateral discussion of the full spectrum of international issues covered by the Charter. The Assembly meets in regular session intensively from September to December each year, and thereafter as required. The functions and powers of the General Assembly are as follows, The General Assembly can: • Consider and make recommendations on the general principles of cooperation for maintaining international peace and security, including disarmament; • Discuss any question relating to international peace and security and, except where a dispute or situation is currently being discussed by the Security Council, make recommendations on it; • Discuss, with the same exception, and make recommendations on any questions within the scope of the Charter or affecting the powers and functions of any organ of the United Nations; • Initiate studies and make recommendations to promote international political cooperation, the development and codification of international law, the realization of human rights and fundamental freedoms, and international collaboration in the economic, social, humanitarian, cultural, educational and health fields; • Make recommendations for the peaceful settlement of any situation that might impair friendly relations among nations; • Receive and consider reports from the Security Council and other United Nations organs; • Consider and approve the United Nations budget and establish the financial assessments of Member States.

Effects of sanctions on Economy, Humanitarian Aspects and Education INTRODUCTION TO AGENDA Sanctions, defined as mostly economic but also political and military penalties introduced to alter political and/or military behaviour are employed to discourage the proliferation of weapons of mass destruction and ballistic missiles, bolster human rights, end terrorism, thwart drug trafficking, discourage armed aggression, promote market access, protect the environment, and replace governments. Economic sanctions used in isolation from other policy instruments are extremely unlikely to force a target to make major policy changes. Even when combined effectively with other foreign policy instruments, sanctions usually play a subordinate role. They may even be counterproductive when a target regime responds by increasing its internal control over resources. Often, greater emphasis on economic, diplomatic and security incentives will be more effective. Nevertheless, economic sanctions can, on occasion, contribute substantially to achieving objectives when combined appropriately with other instruments of foreign policy. Comprehensive sanctions are likely to result in severe suffering among the general population. In the case of Iraq, comprehensive sanctions helped secure major concessions but did so at great human cost. In the case of Burma, sanctions are said to be targeted but are nevertheless wide enough in their impact to hurt the general population. Yet they have secured no progress towards democratisation or increased respect for human rights.

CURRENT SITUATION Although economic sanctions have long been an occasional tool of British foreign policy, recent years have witnessed a significant increase in the use of targeted sanctions, particularly in relation to financial transactions, and there is an active current debate about whether economic sanctions could help to achieve desired aims in relation to Iran, North Korea, and Syria and, most recently, Sudan.

SYRIA The international community has imposed wide-ranging sanctions on President Bashar al-Assad's regime, in an attempt to put pressure on the Syrian government to stop using violence against demonstrators. The Arab League, European Union, United States and Turkey have all imposed economic sanctions on Syrian individuals and companies.

Sanctions already in place on Syria The EU, Syria's biggest trading partner, has imposed travel bans and asset freezes on more than 120 individuals and 40 companies. These include President Assad and most of his close family, the Syrian Central Bank and senior officials, including seven ministers. Last year, the EU banned crude oil imports from Syria and in February it expanded sanctions to block trade in gold, precious metals and diamonds with Syrian public bodies and the central bank. The US designated Syria a "state sponsor of terror" in 1979, a label which brought a raft of sanctions with it. Those have been added to since, by the Bush administration in 2004 and last year by Barack Obama in response to the current crisis. In August 2011 President Obama signed a new executive order, imposing sanctions on Syria's energy sector and freezing all Syrian government assets in the US. Arab League members suspended Syria last November and imposed sanctions. They include the freezing of Syrian government assets in Arab countries, stopping dealings with the Syrian central bank, the suspension of commercial flights to and from Syria, halting investment by Arab governments for projects in Syria, and a travel ban on senior officials. However, some Arab states - particularly Syria's neighbours, said the sanctions would be difficult to apply. Turkey announced plans to freeze Syrian government assets and suspend all financial dealings with Turkey on 30 November 2011. Foreign Minister Ahmed Davutoglu also said a co-operation agreement with Syria would be suspended until a new government was in place. Canada, Australia and Switzerland have also imposed sanctions. What is likely to have the biggest impact? The EU's oil import ban is likely to hit Syria's economy hardest. Oil revenues account for around 20% of Syrian GDP. Before the EU ban, 90% of oil exports went to the EU, mainly to Germany, Italy and France. According to some experts, when the ban came into force, Syria was confident that other buyers could be found, in China and India for example. However, initial indications are that other buyers have been harder to find than first thought and that production may have fallen as a result. Enforcing a wider trade embargo may be more difficult, given that Syria's long borders have been historically porous and prone to smuggling, particularly those with Lebanon and Iraq. Syria's largest trading partners According to the European Commission, in 2010 the EU was Syria's biggest trading partner, accounting for 22.5% of Syrian trade, followed by Iraq (13.3%), Saudi Arabia (9%) and China (6.9%.) Turkey was in fifth place with 6.6% and Russia was ninth with 3%. Who opposes sanctions on Syria? Three members of the Arab League voted against Syria's suspension - Syria itself, Lebanon and Yemen, with Iraq abstaining. Syria still exerts substantial influence in the politics of neighbouring Lebanon, which also abstained in a UN Security Council vote in October 2011 on a resolution backing the use of "targeted measures" against Syria if the clampdown continued. That resolution was vetoed by Russia and China, who have expressed their opposition to UN involvement in Syria's internal affairs. Russia's UN Ambassador VitalyChurkin

expressed concerns that a resolution could lead to a Libyan-style foreign military intervention in Syria.

IRAN On May 29, 2013, further additions to the sanctions against Iran under the Special Economic Measures Act (the SEMA), due to Iran’s failure to respond to the confidencebuilding measures proposed by the P5+1 group (the five permanent members of the UNSC + Germany ) in the Almaty, Kazakhstan talks in April 2013, and the resulting absence of progress with both the P5+1 and the IAEA. The latest amendments impose a complete ban on imports from Iran and exports to Iran, subject to certain exemptions; add 82 new entities and 30 new individuals to the list of designated persons subject to a dealings prohibition; add an exemption aimed at increasing the availability of consumer communication technologies that contribute to internet freedom; add an exemption for goods used to purify water for civilian and public health purposes, and for the provision of listed medical equipment; and expand the existing exemptions for the provision of legal services.

Sanctions under the Special Economic Measures (Iran) Regulations prohibit all of the following: • dealing in the property of designated persons (as listed in Schedule 1); • exporting, selling, supplying or shipping goods, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carred on in or operated from Iran, subject to certain exemptions; • transferring, providing or communicating to Iran or any person in Iran any technical data related to goods listed in Schedule 2, or any technical data required for: o the manufacture, use or maintenance of arms and related material, o the refining of oil or the liquefaction of natural gas, o the production of petrochemicals, o the building, maintenance or refitting of ships, o the transportation or storage of crude oil, or petroleum or petrochemical products, o drilling and mineral surveying and exploration, or o the processing, storing or handling of liquid natural gas; • importing, purchasing, acquiring, shipping or transhipping any goods that are exported, supplied or shipped from Iran after May 29, 2013, whether the goods originated in Iran or elsewhere, subject to certain exemptions; • providing or acquiring marketing services, or any financial or other services in respect of the import, purchase, acquisition or shipment of natural gas, crude oil, or any petroleum or petrochemical products from Iran; • providing or acquiring financial services to allow an Iranian financial institution (or a branch, subsidiary or office) to be established in Canada, or vice versa; • conducting any financial transaction with Iran, subject to certain exemptions; • making an investment in an entity in Iran; • providing or acquiring insurance and reinsurance to, from or for the benefit of, or on the direction or order of, Iran or any entity in Iran; • establishing correspondent banking relationships with Iranian financial institutions, or purchasing any debt from the government of Iran; • providing a vessel owned or controlled by, or operating on behalf of the Islamic Republic of Iran Shipping Lines (IRISL) with services for the vessel's operation or maintenance; and • providing any flagging or classification services to Iranian oil tankers or cargo vessels. Sanctions under the Special Economic Measures (Iran) Regulations prohibit all the following: • dealing in the property of designated persons (as listed in Schedule 1); • exporting, selling, supplying or shipping goods, wherever situated, to Iran, to a person in Iran, or to a person for the purposes of a business carried on in or operated from Iran, subject to certain exemptions; • transferring, providing or communicating to Iran or any person in Iran any technical data related to goods listed in Schedule 2, or any technical data required for: o the manufacture, use or maintenance of arms and related material, o the refining of oil or the liquefaction of natural gas, o the production of petrochemicals,

the building, maintenance or refitting of ships, o the transportation or storage of crude oil, or petroleum or petrochemical products, o drilling and mineral surveying and exploration, or o the processing, storing or handling of liquid natural gas; importing, purchasing, acquiring, shipping or transhipping any goods that are exported, supplied or shipped from Iran after May 29, 2013, whether the goods originated in Iran or elsewhere, subject to certain exemptions; providing or acquiring marketing services, or any financial or other services in respect of the import, purchase, acquisition or shipment of natural gas, crude oil, or any petroleum or petrochemical products from Iran; providing or acquiring financial services to allow an Iranian financial institution (or a branch, subsidiary or office) to be established in Canada, or vice versa; conducting any financial transaction with Iran, subject to certain exemptions; making an investment in an entity in Iran; providing or acquiring insurance and reinsurance to, from or for the benefit of, or on the direction or order of, Iran or any entity in Iran; establishing correspondent banking relationships with Iranian financial institutions, or purchasing any debt from the government of Iran; providing a vessel owned or controlled by, or operating on behalf of the Islamic Republic of Iran Shipping Lines (IRISL) with services for the vessel's operation or maintenance; and Providing anyflagging or classification services to Iranian oil tankers or cargo vessels. o

• • • • • •

DEMOCRATIC PEOPLES’ REPUBLIC OF KOREA On 12 June 2009, the United Nations Security Council approved its strictest economic sanctions to date against North Korea in response to a series of provocative acts, including the detonation of a nuclear device.The United States is also considering expanding sanctions and has appointed a high level task force to coordinate military, political, and financial strategies against North Korea. However, economic sanctions are being considered with virtually no public discussion of their potential effects on the North Korean people. Notably, even the health community has been silent. North Korea’s economy plummeted under the combined effects of economic sanctions and the fall of the Soviet Union. It’s economic and public health systems further buckled with successive years of floods and droughts, leading to widespread malnutrition and up to one million excess deaths in the 1990s. Although many of the US trade sanctions against North Korea were lifted during the 1990s, the sanctions that are currently in place continue to handicap North Korea’s attempt to recover from the on-going public health crisis. Despite their stated intent of targeting illegitimate activity, recently enacted financial sanctions and sanctions on “dual use” items have been implicated in restricting legitimate trade. Dual use refers to technology that may be used for civilian or military purposes. In North Korea, sanctions on such goods have restricted the import of items needed to build a modern economy, such as personal computers. Ultimately, North Korean civilians are harmed.

SUDAN Sanctions placed by the US The United States maintains a range of economic sanctions on the Government of Sudan. The United States generally restricts foreign aid because Sudan has been found, by the Secretary of State, to be a supporter of acts of international terrorism, is operating under a military dictatorship, and has fallen into arrears in its debt repayment. The United States has also suspended bilateral preferential trade treatment, restricted commercial exports and imports, denied the export of defence articles and defence services, and refused to support requests from Sudan for funding Program support in the international financial institutions for reasons related to terrorism, regional stability, and human rights — including religious freedom, worker rights, and trafficking in persons.

LIBIYA On 26 February 2011, acting under Chapter VII of the Charter of the United Nations, the United Nations Security Council adopted Resolution 1970 (2011) imposing sanctions against Libya in response to the situation in the Libyan Arab Jamahiriya involving violence and the use of force against civilians. The Regulations Implementing the United Nations Resolutions on Libya implement the decisions of the Security Council in Canadian domestic law. Implementation of the travel ban imposed by Resolution 1970 (2011) is ensured in Canada under existing provisions of the Immigration and Refugee Protection Act. In addition, since Resolution 1970 did not impose measures against the Libyan Government itself or its institutions and agencies, the Regulations went beyond the sanctions imposed by the United Nations Security Council by adding "Libya" as a designated entity. In order to do this, the Regulations were enacted under two separate pieces of enabling legislation: the United Nations Act (the "UN Act") and the Special Economic Measures Act(the "SEMA").

Purposes of sanctions Sanctions can be applied for a variety of reasons including to punish or weaken a target, to signal disapproval, to induce a change in policy, or to bring about regime change. They can be imposed to try to avoid war or to pave the way to war. Domestically, they may be aimed at mollifying domestic pressure groups or giving the public the impression of decisive action but without any expectation that the target will suffer significant costs or change its behaviour. In practice, those who apply the sanctions may have multiple objectives, although one objective may be of over-riding importance. Similarly, the primary objective may be ambitious, such as US unilateral sanctions aimed at inducing a target to end its efforts to acquire weapons of mass destruction, as with Libya in 2003, or they may be

relatively minor, as in 1999, with UN sanctions aimed at inducing Libya to hand over for trial two of its citizens suspected of involvement in the bombing of Pan Am flight 103 over Lockerbie. Negotiated regime change is an objective that is pursuedrelatively rarely, and sanctions tend to be used as part of a package of measures. This was the case in 1994 in South Africa, for instance, when apartheid gave way to majority rule. The UN Security Council imposes mandatory sanctions under articles 39 and 41 of Chapter VII of the UN Charter. Article 41 specifies measures that include “complete or partial interruption of economic relations and of rail, sea, air, postal, telegraphic, radio, and other means of communication, and the severance of diplomatic relations”. Article 39 states that the purpose of such measures is “to maintain or restore international peace and security”. In assessing the impact of sanctions, key analytical issues are measuring success and failure and then separating out the role of sanctions from other policy instruments in that outcome. The simplest situation to analyse is whenthere is a single over-riding and clear policy goal, when the outcome can be characterised neatly as either complete success or complete failure and when policy-makers relied almost exclusively on sanctions in pursuit of that goal. However, the evidence we received indicates that influence attempts involving sanctions do not necessarily conform to that pattern. There can bemultiple, sometimes competing, policy goals being pursued by different actors; success and failure can be a matter of degree; and sanctions are often combined with diplomacy, incentives and threats of force.

The UN Context There is a significant of the UN in relation to UK sanctions policy.By virtue of its position as a permanent member of the Security Council, and its more general commitment to involvement in these issues, the UK has been a major actor in UN sanctions. Up to the 1990s, the Security Council had imposed Chapter VII mandatory sanctions only twiceon Southern Rhodesia in 1966 and South Africa in 1977. Since 1990, the UN has imposed such sanctions on Afghanistan, Angola, Côte d’Ivoire, the Democratic Republic of the Congo (DRC), Ethiopia and Eritrea, Haiti, Iraq, Liberia, Libya, Rwanda, Sierra Leone, Somalia, Sudan, the former Yugoslavia, North Korea and Iran UN sanctions, economic and/or non-economic, continue to be applied to Côte d’Ivoire, the DRC, Liberia, Rwanda, Sierra Leone, Somalia, North Korea and Iran. Previous measures against Sudan were lifted, but new ones were put in place in 2005. In the case of Iraq, only some prohibitions related to the sale or supply of arms and related material and trade in cultural property remain. Sanctions on Afghanistan were lifted, but those relating to alQaeda and the Taliban remain in force. In addition, the Security Council requires all countries to impose financial freezes on suspected terrorists and their supporters, and to impose financial freezes and travel bans on thosesuspected of involvement in the

assassination of former Lebanese Prime Minister Rafik Hariri and the murder of 22 other people in February 2005. Sanctions on Burma are currently being considered by the Security Council.

HUMANITARIAN ASPECT There may be occasions when comprehensive (rather than targeted) sanctions may be more effective, but all the evidence suggests that comprehensive sanctions are likely to have significant humanitarian costs.The experience from Iraq in the 1990s strongly supports this view. Burma also represents a case in which the application of general as well as targetedsanctions has almost certainly imposed costs on the general population. Targeted financial sanctions have been less effective than is sometimes suggested. They have been imposed on people and entities selected on non-transparent or dubious grounds; they have hit few targets and not hit them hard. The evidence presented earlier suggests that the Government has retained the option of applying comprehensive sanctions and appears to believe that they can be effective in achieving political objectives without imposing unacceptable humanitarian costs. This view contrasts with the widespread belief that the severe humanitarian costs of the sanctions on Iraq effectively ended the possibility of using comprehensive sanctions and ushered in a new era of targeted sanctions. It also contradicts the Government’s policy principle that sanctions should hit the regime rather than the people. Even if it is regarded as necessary to retain the option of comprehensive sanctions, it should be recognised that this is not compatible with the claim that UK sanctions should hit the regime rather than the people, and we are not persuaded that humanitarian exemptions can adequately solve the problem. The UN has developed systematic technical guidelines for evaluating the humanitarian implications of sanctions before, during and after their imposition, and also for mitigating their effects.The Government should ensure the application of the UN’s humanitarian assessment procedures to any sanctions with which it is involved, especially those which damage the target country’s economy in a general way. It should also provide a public account of the application of the UN guidelines.

EDUCATION The humanitarian toll of economic sanctions on Iraq extends beyond observed negative effects on public health, affecting reduction in net primary school enrolment rates. These negative effects are distinct and separate from changes in enrolment caused by war. Using time series data on Iraq from 1978 until 2008, this study analyses the impact of the 19902003 United Nations Security Council economic sanctions on primary school enrolment. The analysis separates the effects of war from the effects of sanctions to find that economic destabilization brought on by sanctions is associated with significant drops in school enrolment figures. The impact of the UN Oil-for-Food Program, which loosened part of the

restrictions imposed by the sanctions regime, shows significant palliative effects on the shocks to school enrolment associated with sanctions. Establishing the negative shocks to school enrolment, an important measure of human development, can edify future policy regarding the use of sanctions, which is generally accepted as a “feel-good” substitute for the use of military force.

Agenda 2: Impact of Economic crisis and Political conflicts on Oil Investments Introduction: Conflict over the control of valuable oil supplies has been a persistent feature of international affairs since the beginning of the 20th century. The conflicts are of varying nature, ranging from territorial disputes over control of border areas that have high concentration of oil resources to internal struggles in oil-rich countries to inter-state wars over the control of these oil zones. As oil becomes more scarce and valuable, the frequency and severity of such conflict is likely to increase. Petroleum is critical to the global economy because it is the world’s major source of primary energy, accounting for approximately 39 percent of global energy consumption. (By comparison, coal accounts for 24 percent of world energy use, natural gas 23 percent, nuclear power 7 percent, and all other sources 8 percent.) Oil is especially vital to ground, air, and sea transportation, providing approximately 95 percent of all energy used for this purpose. In addition, petroleum is the basic component (or “feedstock”) for most plastics, pesticides, paints, solvents, and other vital products. Because oil plays such a critical role in fuelling the world economy, any prolonged shortage in its availability can produce a global economic recession, for example, as occurred in 1974 (following the Arab oil embargo), 1979 (following the Iranian revolution), and 1990 (following the Iraqi invasion of Kuwait ). Petroleum is also a vital factor in the military strength of nations, in that it supplies most of the energy used to power tanks, planes, missiles, ships, armored vehicles, and other instruments of war. Vast amounts of petroleum are consumed in modern combat operations, and so every major power seeks to ensure its access to adequate supplies. (During the 1991 Gulf War, for example, U.S. and allied forces consumed an average of 19 million gallons of oil per day – equivalent to the total daily consumption of Argentina.) Because oil is so vital to the conduct of warfare, its possession has been termed a “national security” matter by the United States and other countries, meaning something that may require the use of military force to protect.

Petroleum exports are also extremely lucrative, especially for those producing countries that rely on it as a major source of foreign earnings. According to the Energy Information Administration of the U.S. Department of Energy (DoE), oil exports account for approximately 90-95 percent of Saudi Arabia’s foreign earnings, 90-95 percent of Nigeria’s, and 80 percent of Iran’s. Oil exports are also expected to provide a very large share of the funds available to the U.S.-imposed Interim Government in Iraq . Arab countries possess 65% of the world's oil reserves and 45% of its gas reserves. Exporting oil and gas generates 50% of GDP in Arab countries and 80% of revenue (IMF, 2009). These countries mainly depend on oil exports, and by extension fluctuating international markets, for strengthening their economy. These countries face fundamental challenges. They need to become knowledge-based societies by deepening economic diversification, creating a competitive productive system and reforming their education systems. In sum, greater political and economic co-operation among Arab countries is needed to manage the region’s natural resources more effectively and co-ordinate economic policies.

Global Economic crisis of 2007-2008: Oil producing countries (Saudi Arabia, Kuwait, UAE, Qatar, Oman, Bahrain, Libya, and Algeria) of the Arab region have the highest level of GDP per capita and lowest unemployment rate when compared to the other countries in the region. For these countries oil contributes 36 per cent of total value added, 85 per cent of export revenues and 71 per cent of government fiscal receipts, indicating that these economies still overwhelmingly dependent on petroleum. While the value added of the petroleum industry represents 36 per cent of the region’s aggregate GDP, its contribution to employment, including all petroleum-related activities, is less than 5 per cent. Thus, for these countries, the economic implications of the crisis may not be considerable, as they have accumulated high reserves during periods of oil price increases (an increase of about 50 per cent in 200607). The initial impact of the financial crisis varied considerably amongst Arab countries. The financial crisis quickly triggered a real decline in the demand for goods and bank credit contraction. Because of the economic crisis and sanctions placed on few of the countries in the region(like Iran), no third world bank was willing to process the transactions which affected the trade market. Countries like Iran could not process its trade transactions and export levels fell. With bad banking systems and infrastructure, the scope for investments declined. In 2005, the amount of oil consumed by the OECD reached a peak and has begun to decline since then. The prices of oil began to increase at the same time the amount of oil that OECD was able to purchase declined. The main issue was that there were many bidders to buy the oil that was available. OECD wanted more oil and so did the producer nations and

developing nations like India and China. In response to this demand, the oil prices began to rise drastically but the supply could not increase at the same rate. The first pains of the higher prices started being felt in 2006, and rose in a crescendo until a major breaking point was hit in July 2008. In that month, the highest world oil production of all time and the highest price of all time both occurred, followed by a major break in the financial markets. Raw material prices fell dramatically, especially oil prices which lost more than two-thirds of their values within a few months. Indeed, as a result of speculation on oil prices, rates decreased in the last three months of the year 2008 to less than 40 dollars a barrel, after having risen from 90 dollars to 148 dollars a barrel at the beginning of the year.The plunge in oil prices to around $50 a barrel and natural gas to $7 per mcf restricted E&P(Exploration and Production) companies from spending on new projects, limiting production growth. E&P companies cut back their capital budget and drilling plans for the remainder of 2008 and 2009. Once prices dropped from the high levels obtained in July 2008, companies suddenly became a great deal less interested in producing oil. New projects were put off, because the available price of oil dropped below the cost most companies needed to bring on new production. Responding to falling oil prices, the Organization of the Petroleum Exporting Countries (OPEC) announced a cut in daily oil production by 4.2 million barrels (compared to its level in September 2008) starting January 1, 2009. Prior to the drop in price, it looked like world oil production would continue on a plateau for a while longer, or possibly even increase a bit. Once companies understood the drop in price, they started deferring production plans until prices were better. But existing fields continue to decline due to depletion. It seems that the amount of investment is likely to drop, even below the level it is today. The reason that investment is likely to drop is because the credit unwind is only part way finished. Without growth, the credit unwind can only continue. With low credit availability, prices will stay low. The amount of cash flow oil companies and other energy companies will have will stay low. With little opportunity for borrowing, there will not be very much income available for investment.

Oil weapon: One important source of political conflict was the "oil weapon". The deployment of the oil weapon in Arab-Israeli wars dates back to 1948, when saboteurs blew up oil installations, including sections of the Iraq Petroleum Company pipeline, during the struggle for the control of Palestine. In 1956, Arab countries used the oil weapon during the Suez crisis,

stimulating oil companies and governments to establish procedures to deal with oil supply interruptions. In 1967, as a result of the Six Day War, Arab governments attempted to use the oil weapon again, imposing an embargo against countries supporting Israel. But none of these applications of the oil weapon was effective. The lack of effectiveness of the oil weapon had many causes.One was the willingness of other oil producers, including some non-Arab OPEC members, to expand production during embargoes. During the 1967 embargo, Iran and Venezuela joined with the United States to increase production levels to compensate for the losses due to the Arab exporters. Another cause was the effectiveness of oil companies in diluting embargo effects by careful supply management. The participation of US companies in these ad hoc regimes to manage oil crises was underpinned by anti-trust waivers, and assisted by government policy intended to thwart the political and economic effects of all attempts to apply the oil weapon. Another cause of ineffectiveness was dissent among the Arab states. They were all against Israel but the cost of attacking it fell entirely on the Arab exporters. The conservative Arab oil exporting governments depended heavily on oil revenues and resented losing out their revenue to non Arab states.

The 1973 Arab Oil Embargo Throughout 1972-73, Arab governments promised openly and repeatedly to use the oil weapon against the United States if a Middle East settlement conforming to United Nations Resolution 242, requiring Israeli withdrawal from the occupied territories, were not achieved. They said that another war between Israel and Arab states was inevitable and that if it came to it, Arab exporters would cut off oil supplies to the supporters of Israel.When war came in October 1973, the Arab governments waited for some sign that the United States would respond. Finally, on 17 October, at the request of the Arab League, OAPEC imposed an oil embargo against Israel's allies. This move was intended to be effective as political weapon. It was both extensive and discriminating, making certain that oil was kept from enemies of the Arab states while allies were supplied sufficient amounts. Some aspects of the embargo were very successful. Total supplies of oil to the world market were cut and the effects were translated into local shortages and higher prices in most oil importing countries. Another success was that the general perception of the Arab governments as weak and ineffective was altered by the impact of oil shortages and high prices. The most important effect of the embargo was to consolidate the oil price revolution. Bids for spot or individual cargoes of crude oil during the crisis reached very high levels. The "price hawks" in OPEC, countries like Libya, Iraq, and Iran, insisted that OPEC members stop negotiating with the companies and simply set their own prices--very high. Others, like Saudi Arabia, supported setting an OPEC price but opposed the size of the price increase

advocated by the price hawks. The two groups fought during OPEC's December 1973 meeting and eventually compromised on a price between the two extremes. This price was four times higher than the average price of OPEC crude just a year earlier.

The Suez Crisis of 1956 and the Six day war: Suez crisis and the Six-Day affected global oil supplies primarily because the Suez Canal was closed – for a short period in the first case and a much longer period in the second. The shortage was primarily because of the issues in transportation rather than actual shortage in the oil resources. Since the Suez Canal which acted as an easier transportation link was closed, the Ultra Large Crude Carriers (ULCC) and Very Large Crude Carriers(VLCC) were forced to circumnavigate the entire African Continent.

The Iraq-Iran war (first Gulf war) : The war began on 22 September 1980, when Iraqi troops entered Iranian territory, and ended with a ceasefire on 20 August 1988. It is quite clear that oil played a major role in the war as it acted as source for money needed to continue the war for a very long time. As oil revenue acted as economic and financial basis for conducting the war, each country tried to interrupt the other country’s oil exports though this did not produce any remarkable effect. In this period, there was substantial reduction in the OPEC members’ production levels. However, this was due to decline in OPEC’s overall share of oil, rather than the war. If we consider the period 1970-78, we find that Iran produced on average 5.31 million barrels per day (b/d), Iraq 2.04 million, Kuwait 2.65 million and Saudi Arabia 7.22 million. In the period 1982-87, Iran produced on average 2.25 million b/d (42% of the previous level),Iraq 1.51 million (74%), Kuwait 1.10 million (41%) and Saudi Arabia 4.98 million (69%). Iraq had better production levels than Saudi Arabia and Kuwait had the least levels. Iran fared better than Iraq, but its production decreased rapidly in 1978-80 but this was due to the Iranian revolution of 1979 and not the war. The only period where the war had a significant impact was in 1980-81. During this period, the Iranian and Iraqi levels of productions declined significantly while Saudi Arabia’s production level were very high. In the first days of the war, Iran attacked the pipelines through which Iraq exported oil to the Mediterranean across Syria and Turkey. But by the end of November 1980, Iraq had resumed exports via Turkey at an estimated level of 400,000 b/d. At the same time, Iraq also attacked Iranian export installations and caused considerable damage, but within a month Iran was exporting again, at a level of 300,000-400,000 b/d. It was at the very beginning of the hostilities that the war had the most severe impact on oil production. As the war progressed, both the countries maintained high levels of production despite increased intensity attacks on the oil installations. This shows that installations may

in fact be far less vulnerable than is often assumed, and emergency organization and procedures may be highly effective in maintaining a minimum level of operation. Iranian planes attacked the Iraqi pipelines through Syria but Iraq repaired the damage quickly. Possibly in retaliation for the closure of the pipeline across Syria, Iraq first attacked Kharg, the main Iranian loading terminal, on 25 August l982, causing a reduction in the export levels by half. But only a week later, export levels had been restored to the previous July peak of 1.8 million b/d. Iraqi military action did not prevent 1982 Iranian exports increasing significantly over those of the previous year. Iran never attacked the Iraqi pipeline across Turkey, nor did it exert diplomatic pressure on Turkey to have it closed. Indeed, the fact that Turkey was able to maintain good relations with both belligerents is quite remarkable. The possibility of an Iranian pipeline across Turkey was discussed at the time and rejected because of Iran’s insistence on having an outlet to the Black Sea rather than to the Mediterranean, which would inevitably have come very close to the head of the Iraqi pipeline. Turkey’s ability to maintain good relations while actively supporting Iraqi oil exports was a further indication that economic interests can, under appropriate conditions and through the use of diplomacy, be isolated from political and military conflicts. The Iraq-Iranian war experience suggests that it is easier to repair the damage caused to oil transportation via pipelines than sea transportation. Also, the world can be less apprehensive about the danger of interruption of oil flow from the Gulf as it became clear that it is highly improbably to deny permanently, a country’s means to export oil.

The Iraqi invasion of Kuwait (second Gulf war): The first gulf war’s outcome had a signification on this one. When Saddam’s government waged a war against the Iranian regime, Kuwait and Saudi Arabia provided financial aid. Kuwait expected this ‘loan’ to be repaid. This resulted on Saddam invading Kuwait and annexing it as an Iraqi province. The invasion and the international reaction led to boycott of exports by both Iraq and Kuwait which provoked oil collapse in each country. When international coalition was formed to liberate Kuwait, Iraqi troops set more than 600 oil wells in Kuwait on fire. The last fire was extinguished in November 1991 but it wasn’t until 1993 that Kuwait got back to its previous production levels. It was clear from this war that the only way to inflict damage on oil installations, especially upstream oil installations, is to be physically present at each well. Only a force controlling the territory can inflict major damage on the oil installations. If the enemy has control, it usually has no incentive in destroying the installations. In Kuwait, the retreating Iraqi troops deliberately sabotaged by setting the oil wells on fire. Also, Iraqi production was restricted

because of the sanctions imposed by United Nations and not because of the damage caused by the war.

The US-led coalition intervention for regime change in Iraq (third Gulf war): The end of hostilities in the second Gulf war did not mark a permanent end to the conflict. Sanctions against Iraq continued for another 12 years until an international coalition led by the United States was formed to bring down the regime of Saddam Hussein. Sanctions did have an impact on the availability of crude oil to the world and there is little doubt that Iraq would have produced more than it did had international oil companies been allowed to sign the contracts that were on offer during the 1990s. Arguably, sanctions imposed by importers have had a very significant impact on oil production, much more significant than most conflicts, terrorism or ‘resource nationalism’. The decrease in level of production resulting from the sanctions placed was of little concern to the US and the world because the world market was sufficiently supplied with oil and the prices remained reasonably low. This, however, changed when an offensive attack was led by the coalition in 2003 and many felt that an increase in the Iraqi oil production should be a major aspect of the regime change. But this was not met. The deterioration in the political climate and intervention by the coalition caused the levels to drop immensely and it wasn’t until 2008 that the production levels began rising again. Still another way of looking at things is to consider the fact that in 1979 Iraq had produced an average of close to 3.5 million b/d, while in the subsequent 29 years (1980-2008), its production averaged 1.7 million b/d. This shows that the cumulative cost of the three successive wars in which Iraq was embroiled was of the order of at least 1.8 million b/d, and that adds up to 19.05 billion barrels over the period.

War, sanctions and Iranian petroleum production Estimating the effects of the war and sanctions on Iranian production is rather more complicated. The war ended for Iran in 1988 and the country has been living in peace ever since, though its equation with the countries could be very well questioned. At any rate, the Iranian production has not recovered to anywhere near the levels of production reached in 1972 and 1975. The initial decline was certainly due to the revolution rather than the war and was to some extent deliberate. The painful climb back to four million barrels per day may be attributed to the combination of external sanctions and internal disturbance and lack of pragmatism, all of which have seriously hindered the potential for attracting outside investment.


The case of Nigeria offers a striking illustration of the impact of civil war and of strife subsequently continuing because of serious unresolved domestic political and institutional issues. None of the civil wars in oil producing countries had any remarkable effect on global oil market before and yet civil wars have an impact on the development and exploitation of oil resources. The Biafra civil war had a considerable effect on production levels. Oil installations were affected and the civil war had an impact on Nigerian production. In the first year of the civil war (1967) average daily production declined about 24%, from 417,000 to 319,000 b/d. The decline continued in the following year, when Nigerian production reached a minimum level of 141,000 b/d. However, already in the third year of the war, production jumped and surpassed the level recorded before the conflict began. The war ended only two years later. The end of the Biafra civil war did not solve the root causes of the problem. Ethnic tensions have continued in the region, fuelled by a sense of grievance among the local population, who feel deprived of their ‘fair share’ of the oil revenue. Many communities in the oilproducing region in the south-east of the country, the Niger Delta, have resented not receiving what they consider to be fair compensation. The government is unwilling or unable to improve infrastructure facilities which means that majority of population is still living in poverty. Reforms have been promised, but Royal Dutch Shell, which is the dominant oil company in the country, has complained that it cannot implement gasgathering infrastructure as long as militants continue to attack its facilities. In 2003 an estimated 800,000 barrels per day was shut in by civil unrest. Since then the situation has deteriorated. In June 2008, an attack was carried out on Shell’s largest producing field, Bonga, even though it is more than 100km offshore. Bonga is responsible for 10% of Nigerian output, or about 200,000 b/d.In April 2008, the Financial Times reported that Nigeria risks losing a third of its output by 2015 unless it finds ways to boost investment in joint ventures with foreign energy companies. In conclusion, Nigerian oil production has, with relatively slight fluctuations, risen gradually over the past 27 years. There are two significant periods of decline: in the early 1980s and after 2005. In the former, it is difficult to formulate the exact nature of the reason why the production declined- internal or external, since there is no proper information available. The latter could be attributed to the increase in criminal networks in the Niger Delta regions.

Angola The Angolan civil war lasted 27 years, from 1975 to 2002. It was both a war for the control of power in Angola proper and a war against the secession of the Cabinda enclave where onshoreoil production is located. The civil war had limited impact on the progress of Angolan oil production. Production stagnated for a period roughly coinciding with the first

ten years of the civil war (1974-83). This was a time when OPEC production was contracting andother non-OPEC producers were expanding rapidly (North Sea, Alaska, Mexico, etc). It is reasonable to conclude that in the absence of civil war, Angolan production might have expanded earlier, but then it did increase very rapidly even during the last 17 years of civil war. Longer-term prospects appear sound as well. There is no active civil society in Angola advocating change and the 30 years of civil war that ended in 2002 have left few with an appetite for violence. The biggest threat to oil supplies lies in the Cabinda province. Two thirds of Angola’s oil is found there, although this proportion is decreasing as offshore megaprojects come onlinefurther south. There is a separatist movement in Cabinda, known by its initials FLECFAC,but at the moment it does not seem to have visible armed power. There have been no regular actions and unlike in Nigeria, they have not targeted the oil facilities. Sudan Sudan has known civil war almost without interruption since its independence and it stilldoes today. The first civil war lasted 17 years, from 1955 to 1972, and saw the south of thecountry fighting for greater autonomy from the north because of ethnic and religiousdifferences between the two regions. The second civil war started in 1983 and was concludedonly in 2005. The referendum held in January 2011 sanctioned the independence of southernSudan, and time will tell how this affects oil production. Oil in this region was discovered in the 1970’s and the civil war has majorly affected the exploration and development. Thus, production in this region is rather recent. The original discoveries were made by Chevron, which later divested itself of its interests because of frustration with the political situation. Today, the major producing company in the country is China’s CNPC. The region where oil is concentrated lies at the border between north and south Sudan which makes the situation more complicated. However, exploration in the country is underway. Though Sudan has been a relatively small producer, the levels have been increasing considerably. Questions a resolution must answer: How to boost exploration processes and investments in the middle east in the current global economic scenario

Gastudy guide