Terrorism and Oil

The Nobel Foundation's decision to award this year's peace prize to the International Atomic Agency and its director, Mohamed El-Baradei, highlights the importance of the energy sector in today's world. Despite the enormous effort put into the search for alternative sources of energy, most controversially nuclear, oil remains the principal source of energy worldwide. It also stands at the heart of many of the crisis situations threatening global stability. Indeed, it would be no exaggeration to say that solving the oil problem would help solve many other intricate problems as well.

With oil still the fuel that drives the global economy, the sudden unprecedented rise in oil prices, which experts predict will not go down in the foreseeable future, is a particularly disquieting development. Actually, the rise could be as much of a bane for the oil-producers themselves as it is for the oil-importing countries. The proceeds of the first price hike in the 1970s did more to spread corruption and deepen social ills than promote development and growth. Will the tragedy be repeated this time round?

Oil producing states have been divided into two categories: states with small populations and huge oil reserves and states with large populations and oil reserves incommensurate with their high population density. The discrepancy between these two categories of states has been a permanent source of friction between them. The states with rich reserves and limited populations are tempted to keep the oil as long as possible under the ground, while the second category has no choice but to bow to heavy consumption demands at the expense of preserving their oil wealth.

In a category of its own is Saudi Arabia, the largest oil producer in the world. Though technically part of the first group of states, it is in fact under tremendous pressure to use up its oil reserves far more rapidly than is necessary to cover the needs of its population. Blurring as it does the lines of demarcation between the two categories, Saudi Arabia further complicates the already complex oil equation, multiplies the possible scenarios and was partly responsible in the 1970s and 1980s for the intensification of inter-Arab conflict and the collapse of oil prices.

Another special case is Iran. Once the second largest oil producing country in the world, its known oil reserves have been severely depleted over the years. Still, it remains a major player in the oil market and its destabilisation is bound to impact negatively on the market. It is to nobody's advantage to expose Iran to turmoil and yet that seems to be what the Bush administration is trying to do. Its confrontation with Iran, part of the "axis of evil", is now limited to a war of words but things could turn ugly if the standoff over Iran's nuclear programme is not resolved.

Since 2000, oil prices have tripled and the combined revenues of oil-producing countries now stand at $2 billion a day. The average price of a barrel has risen from $20 to $60. In Saudi Arabia, which suffered from a sharp depreciation of its oil revenues throughout the 1990s, the price of oil has increased by 40 per cent. There has been a number of other positive developments. The last few years have seen petrodollars being invested in the oil- producing counties themselves rather than in foreign holdings and assets, as was the case up until the 1990s. In less than one year, funds once invested in the US, Europe and Japan have helped revitalise the stock exchanges in many of the oil-producing countries. However, expectations have not been fulfilled on all fronts, with Russia unable to re-establish itself as the world's second superpower and Africa unable to achieve its takeoff.

A tremendous amount of work still remains to be done. Millions of jobs will need to be created, especially in Africa and the Middle East. Contrary to what happened under the first price surge, work is being done to build an infrastructure in a variety of fields such as roads, port, communication and tourist facilities. When it comes to education and health, however, not enough is being done and the whole field has been left largely to initiatives by conservative Islamic groups.

The two scourges of our time, terrorism and poverty, are inextricably linked. Unless and until the world works out a fair distribution of wealth, the war against terrorism cannot succeed. We must declare war on poverty and take serious measures to eradicate it. This entails fighting corruption, waste and various forms of pollution, not only of nature, but also of societal values. The current surge in oil and gas prices must be put to good use to avoid a repeat performance of what happened with the first oil price hike.

Fighting terrorism will not succeed as long as a shattering blow has not been delivered against poverty. And this means, first and foremost, unyielding war against corruption, waste, the various forms of pollution, not only of nature, but also natural pollution, on which depends the ability of a society to stand up and launch its development programmes.

Efforts are furnished here and there. But they are still marked by vacillation, by various types of shortcomings and by the resistance of vested interests that are deeply entrenched in society and difficult to uproot.

And yet something is in the making, albeit to take its final shape. Can we benefit from the lessons of the past decades to eradicate poverty and terrorism, or shall we passively accept our fate and let terrorism get the upper hand?