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International Relationships with Oil Report


Condoleezza Rice’s visit to Kazakhstan

Visits by top United States officials to Kazakhstan elicited reactions from the Russian authorities that the west was trying to lure away its partners. However, this was dismissed by Rice, the US Secretary of State, during her visit with Kazakh foreign minister. Washington was seeing Kazakhstan’s economic potential in expanding the economic capability of central Asia.

Kazakhstan had tried to balance its international relations by being in good books with Russia apart from connecting with the west for expansion of oil exports. The war between Russia and Georgia prompted Moscow’s allies to reconsider their ties with both Russia and the west.

Although there were a lot of expectations on Rice’s agenda as she visited Kazakhstan, no serious agreements were expected to be arrived at between the United States and Kazakhstan despite America having invested heavily in the Kazakhstan’s economy’s oil money.

After Kazakhstan being appointed the chairman of the organization for security and Cooperation in Europe, international stakes were raised as far as democracy and human right dealings are concerned.

During September 2010, South Korea reported its intentions to ban both oil and gas investments in Iran. This was a way of collaborating with the U.S, United Nations and other nations in placing sanctions on Iran due to its nuclear plan. South Korea further prohibited any other business transactions between it and Iran. This was despite Iran being one of the largest suppliers of oil to South Korea.

Later on the Korean government announced that transactions not attributed to the Iranian nuclear program will go on as well as importation of oil. This was to lead to the paralysis of Iran’s bank Mellat that was said to have been involved in transactions entailing the development of the nuclear program. The transactions involving oil business between Iran and Korea were to be conducted via Iran’s central bank.

With sanctions taking effect, both Hyundai and Kia Motors had to cease exportation of their products to Iran in July 2010. After some time, the Korean government stopped its engineering firms from winning orders in Iran as oil importing organizations were allowed to continue operating.

Apart from suspending bank Mellat’s financial transactions between Korea and Iran, it was further revealed that the bank was now required to be accountable to the Korean authority regarding each foreign transaction that it engaged in. this was to be enforced even after suspension was over.

Israeli’s prime minister also recommended that the United Nations and the world as a whole should not import refined petroleum from Iran as a way of sanctioning the former to prevent it from developing a nuclear program. The Israeli prime minister emphasized the need for the United States to lead other nations in hindering the success of Iran’s nuclear program.

Tony Blair likened the current worries about development of a nuclear plant in Iran to the worries that led to eruption of war between Iraq and the United States. Israeli has pressured the US to impose sanctions that will disable Iran’s operations. However, the Obama administration responded saying that their intention was to put pressure on the Iran government and not the people.

Israeli fears that the development of Iran’s nuclear weaponry may threaten the security of the region and has hinted military action if diplomacy does not seem to work. This is despite Iran’s claims that their program is geared towards increasing oil exports rather than engaging in military.

The EU and US sanctions against Iran thwarted plans by three Indian based companies to begin a gas based project in Iran. It was not possible to access both funding and US liquefaction technology to enable them move on with the project.

The recently adopted UN Security Council Resolution prohibits sale of heavy weaponry to Iran but does not hamper investment in the country’s energy sector. The US sanctions on the other hand restricts a more than $20 million energy investment in Iran by a foreign nation.

Iran – Africa Relationship

In a two day Iran – African summit in Tehran, the Iranian president expressed optimism that the relationship between Africa and Iran was going to be strengthened have a lot in common. The summit was aimed at devising means of enlarging the political and economic relations between Iran and Africa.

Malawian president envisioned expedient developments between Iran and Africa that could lead to establishment of numerous Iranian firms in Africa. Iran has in the past invested in Senegal, Nigeria and Sudan. Whereas Iran opened a car assembly line in Senegal, plans are underway to help Nigeria generate electricity from nuclear energy.

Iran shares strong ties with Sudan than any other African nation. This ranges from signing a military agreement between the two nations in 2008 to plans concerning opening a Saipa Motor factory in Sudan and its neighboring countries.

In an attempt to both remain relevant in global issues and get over its alienation from the west, Iran works to concentrate on its ties with China besides Africa. Although China is reported to be in support of the UN sanctions towards Iran, the relationship between China and Iran is said to be motivated by China’s demand for oil and gas resources and Iran’s demand for the Chinese technology.

Although, there have been calls from western governments urging China to cut its economic and energy relations with Iran, China has always dismissed this.

EU’s further sanctions to Iran and reactions from other nations

A move by Turkey and Brazil to vote against the UN Security Council’s fourth round of sanctions surprised the US in a move that seemed to be Iran’s new strategy of dealing with its isolation by the west. Despite opposition from Cyprus, Germany and Sweden, the EU calls for additional sanctions to those earlier agreed upon in New York.

The sanctions prohibit new investment, technical aid, and movement of know how, equipment and services. The Iranian president dismissed them all. It is also reported that Spain was in full support of the new sanctions.

After several months of diplomatic efforts for China to lower its stand on both the United Nations and European Union regarding Iran’s nuclear program, an agreement was reached with not only China, but also other nations that were previously opposed to it. After sometime, the sanctions had a negative economic impact on Iran although the Iranian president denied this reality.

This not withstanding, Iran is known for exportation of oil but it imports gasoline. Plans are underway to reconfigure its industries to manufacture gasohol so as to benefit from the Washington market that is likely to be due as from July.

Ecuador has been asking for donor support to help it protect its Yasuni jungle that is endowed with oil deposits. This aimed at not only combating global warming, but also preserving the Amazon. The funds were to be administered by the United Nations Development Program. Chile, Germany and Spain were expected to be among the first donors to respond.

Incase the estimated amount ($ 100 million) is not raised by 2011, Ecuador reserves the right to refund the donors without interest as well as go ahead with its oil extraction plan. Contributions are aimed at enhancing conservation, reforestation and poverty reduction, fuel efficiency and creation of alternative energy sources.

Changes in the global energy map

Facts reveal that the top producers of oil in 2009 were Saudi Arabia, US, Russia, China and Iran while the United Arab Emirates, Nigeria, Russia, Saudi Arabia and Iran were the global leaders in oil exports. The world’s biggest deposits of oil sand are in Canada and Venezuela.

The leading gas producers are Russia, Iran, Qatar, Saudi Arabia and United States. Trade in Liquefied Natural Gas has taken a global perspective with Australia expected to lead in exportation. As far as coal energy is concerned, China leads in production, America tops in reserves while Australia leads in exports.

China-Russia Trade Relations

Although China and Russia are to complete talks on gas supplies next year, the two have resolved to put up a $ 5 billion refinery in China. Majority of the supplies will be from Russia and the rest from Arab nations. Moreover, China is planning to collaborate more with Russia in areas like coal, gas, oil and nuclear energy. Additionally, Russia and China are swapping their bilateral trade roles.

Previously, Russia sold raw materials, cars and machinery to China but is lately importing Chinese finished products as it sells raw materials to China. Under recently endorsed deals, China will be importing both oil and coal from Russia.

There was a symbolic installation of pipeline between Russia and China which is expected to be effected from January 2011. It is also reported that Russia’s decision to focus on China may weaken its economic ties with Europe, a major consumer of Russian oil and gas. This may lead to disagreements on oil and gas prices.

Other latest developments

Bangladesh is planning to limit the entry of old Kuwait’s petrol vessels on safety and environmental grounds due to oil spillage. This happens despite Kuwait being the major supplier of oil to Bangladesh. Elsewhere, Inpex corp, a Japanese oil developing firm has decided to pull out from its development projects with Iran’s Azadegan oil field. The decision will cause Japan to reevaluate its energy plan and resource diplomacy in the Middle East.

The move meant that Inpex is not on the list of companies subject to the US sanctions. The decision was made by the Japanese government after Iran had directed more investment in the Azadegan project, yet this project was too risky.

Russia is in the process of changing its economy from resource-based to innovation-oriented. It was reported that Russia and China have the potential to cooperate in both the energy sector and financial services. There has been an ongoing currency war for production of commodities such as gold and oil, among others.

Occasionally, there have been diverse proposals on currency including Iran’s oil Bourse but in the long run, most commodities are traded in dollars.

In a more recent incident, a new atmosphere has been created to encourage foreign industries and the private sector to invest in Iran’s economy. Russia has been the first to express interest in investing in Russia’s energy sector, infrastructural industry and air transport.

Additionally, after several months of the US sanctions towards Iran have been in place, South Korea announced new mechanisms of resuming oil trade with Iran. The move was meant at allowing Iran to deposit proceeds from oil in two of South Korean banks: Woori bank and the Industrial bank of Korea.

Conclusion

Oil has affected international relations both positively and negatively. In the positive sense, China-Russia, and Iran-Africa ties have been strengthened but negatively, US-Iran, Kuwait-Bangladesh, US-China, and Korea-Iran ties, among many others have been weakened. Oil has also affected the political relations both within a nation and its relations with others.

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IvyPanda. 2020. "International Relationships with Oil." January 27, 2020. https://ivypanda.com/essays/international-relationships-with-oil/.

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IvyPanda. (2020) 'International Relationships with Oil'. 27 January.

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