Varun Sivaram

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A New Study on Oil Trade and International Relations

by Michael Levi
December 19, 2012


Policymakers, analysts, and pundits regularly argue over whether countries should care about who they buy their oil from. Economist usually insist that, because markets are flexible, the precise patterns of oil trade don’t matter. Security strategists often insist that they must.

It’s long bothered me that despite voluminous writings that explore whether oil trade patterns should affect international relationships, there’s basically nothing out there on whether they actually do affect international relationships in practice. To address that gap, Blake and I brought together a great group of scholars, practitioners, and businesspeople earlier this year. The group prepared case studies of a dozen pairs of countries in advance. Then the collected participants discussed their implications.

Blake and I have now published an article in Survival that draws lessons from the studies. (An ungated pre-publication version is available here.) We’ve also collected most of the case studies at a special CFR website here. We learned a lot in the course of researching and writing it, and hope that the case studies and the final article help others do the same.

I won’t step through the whole thing, but I do want to highlight one lesson that stood out for me: the details of oil trade often influence political relationships because leaders think that they do. If, for example, U.S. leaders believe that they should afford special treatment to the countries that supply their oil, that will have consequences for international relations, no matter what their economic advisers tell them about fungible commodities and liquid markets. This lesson, along with the others in the paper, is worth keeping in mind as analysts and policymakers try to sort through the upheavals currently underway in the world of oil.

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