How Collapsing Oil Prices Could Unravel Global Security
From Russia to Saudi Arabia to Latin America, the costs of the energy industry reckoning are proving enormous.
As the coronavirus wears on, global fossil fuel is collapsing. We’ve come a long way since the commodities boom of the post-9/11 years, which saw the industry reach by the summer of 2008. The financial crisis that year, combined with the rise of the United States and other countries as serious energy players, created a on the market.
Now the COVID-19 pandemic and the recent price war between Russia and Saudi Arabia has brought a to the worldwide energy industry. In the United States, these trends have created domestic uncertainty for energy-producing states like , which is a must-win for President Trump in November. are cheering the financial problems facing fossil fuels, hoping it will boost alternatives ones, even though those sources are facing the issues.
Yet the disruptions go beyond economics. The oil crash has the potential to shift geopolitics, and not in a more stable direction.
Many frontier states in Africa and the Middle East are now facing regional interstate tensions, higher domestic unemployment rates, and higher financial burdens, all exacerbated by low fossil fuel prices. Meanwhile, Vladimir Putin’s Russia is facing serious domestic and geopolitical challenges that have the potential to incite more conflict on Europe’s peripheries.
Oil-dependent, fragile South Sudan has seen internal tensions amid low prices and fear of COVID. Nigeria, plagued by inter-regional tensions and an Islamic State-inspired insurgency, is looking at a over the course of this year. In North Africa, the news is not much better. Egypt, facing staggering and enormous , is likely to see any prospect of erased.
The same goes for the Arab Spring’s only success story, Tunisia, which is now facing a negative financial outlook by the ongoing crisis facing hydrocarbons, an increasingly important for the North African nation. These developments are ominous news in a region where economies are already fragile, dependent on commodity products to provide for their growing populations, and frequently roiled by conflict.
Saudi Arabia has announced it will be implementing to curb social spending due to declining energy revenues. There are growing questions about the sustainability of the Kingdom’s political economy, given its fast-growing population, which is . Iran, the arch-rival of the House of Saud, is facing a similar situation. And historically low oil prices are threatening Iraq with a total and renewed ISIS
Professor Alex De Waal, executive director of the World Peace Foundation at the Fletcher School of Law and Diplomacy, provides insight into this trend:
As it happens, I am just initiating a project which is a comparative political economy analysis of what we call “traumatic decarbonization” in fragile oil producers (Iraq, Nigeria, South Sudan, Sudan). The basic hypothesis is drawn from my political marketplace model, which is that the structure of political financing (rent re-allocation to pay for political support) determines regime structure and stability, and when that political budget shrinks, but the market price of loyalty doesn’t shrink, instability follows. It fits the cases pretty well. And the current oil price collapse is a real-time test of the hypothesis, with the fast-developing seizing up of the Iraqi political system as exhibit A.
The result of this collapse is the exact opposite of what American energy independence advocates . They’d hoped domestic fracking would create a more peaceful global security situation that would make us less at risk of getting dragged into costly foreign conflicts to ensure supply chains. Yet now we see that low petroleum prices can incite turmoil across the Middle East and Africa, disrupting the access of major economies to fossil fuel producers in the global south.
Further to the north, in Eastern Europe, frozen conflicts could unfreeze. Low energy prices have previously the Russian economy, already by sanctions due to the Ukrainian intervention and threatened by emerging . Russia now has the number of COVID-19 cases worldwide, while Vladimir Putin is using the pandemic to consolidate more power by presidential term limits. The to Russia’s commodity-dependent economy might inspire him to go even further, breaking the or pursuing military action elsewhere.
What would stop him from doing that? The United States is distracted by COVID and , not to mention , which is spilling over into the foreign policy establishment. Washington’s NATO allies are also dealing with the pandemic, amid among European states resulting from self-preservation and inaction. Richard Weitz, a senior fellow at the Hudson Institute, comments:
It is very had to predict, especially when you add in second-order effects and confounding variables. On the one hand, it could make Russia less assertive due to the reduced funds available for defense spending. On the other hand, if the reduced government funding on social programs leads to unrest, the government may choose to provoke a foreign crisis to distract popular attention and mobilize nationalist support.
The collapse in energy commodities is a trend that could inflame instability from the former Soviet Union to Africa. We might also see an increase in problems in Latin America, where producers like Brazil, Mexico, and Venezuela are threatened by the coronavirus. The same applies to North Korea, where the regime profits from outside of sales of military hardware and illicit goods.
Far from ushering in a more secure world, declining energy prices will create a more globe through declining state revenues, lower social subsidies, and leaders seeking to distract their own impoverished citizenries. A sense of within hydrocarbon markets is urgently needed to prevent unforeseen risk. If not, the aftershocks might last years after the coronavirus has subsided.
Kevin Brown holds an MSc. in International History from the London School of Economics and Political Science (LSE) and will matriculate for global energy in the fall at Tufts University’s Fletcher School of Law and Diplomacy. His work has been featured in Real Clear Defense and The National Interest.