Energy: Economics, Politics, and Security

Author(s): David A. Deese

Source: International Security, Vol. 4, No. 3 (Winter, 1979-1980), pp. 140-153
Published by: The MIT Press
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 Energy: Economics, DavidA. Deese
Politics, and Security

Over five years since

the world's firstenergy crisis and well into its second, "energy security"
remains a widely discussed but littleunderstood problem. Iran has accen-
tuated the supposed lesson of the Arab oil embargo of 1973-self-reliance in
national energy supply must replace dependence on imported oil. Careful
analysis, however, of the meaning of energysecurityand its role in the range
of broader securityissues is stilllacking.
Energy securityis defined as a condition in which a nation perceives a
high probabilitythat it will have adequate energy supplies (including tradi-
tional sources such as firewood, and plant and animal residues that are
frequentlynot traded in the marketplace) at affordableprices. Prices are
definedas affordableiftheystop shortof causing severe disruptionof normal
social and economic activity.Leaders must perceive months in advance that
theircountrieswill have adequate energysupplies at affordableprices. With-
out such perceptions, normal social and economic activitymay be curtailed
by market,distributionor planning constraints.
There are two principal economic and political components of energy
security.Firstis the set of all actions that affectthe quantityand reliability
of indigenous energysupplies. The second includes actions affectingexternal
energy supplies. The two components are closely linked, especially in that
problems with indigenous supplies create pressure for increasing energy
imports.It is the external.component-energy imports-that poses the most
immediate problems for national security.1Energy securityis improved by
managing energydemand, increasingdomestic energysupply, or increasing
the reliabilityof imported or domestic supplies. National and international
securitymay be analyzed in terms of three components: 1) social, cultural
and political; 2) economic; and 3) military.Problems of energy securityin-
teractwith all three components of broader securityconcerns.
Actions taken by countriesin pursuit of energy securitymay increase or

forcomnients
The authoris gratefuil on earlierdraftsfromHarveyBrooks,WilliamHogan,
and criticisms
RobertKlitgaard,MichaelMandelbaum,and JosephNye.

David A. Deese is a researchfellow,CenterforScienceand International

Affairs,HarvardUniversity.

1. The importanceof oil importsas the link between the domestic and internationalproblems
of energy is described with great clarityin Thomas C. Schelling, ThinkingThroughthe Energy
Problem(New York: CommitteeforEconomic Development, 1979).

140
 Economics,Politics,and Security| 141

decrease overall independence of action and security;the outcome of this

interactionmay, in turn,feed back and influencethe level of energysecurity.
This relationshipformsone part of a broader and even more complex inter-
action among domestic politics,foreignpolicy and internationalpolitics. For
present purposes, it is assumed thatthe influenceof internationalpoliticson
foreignpolicy (especially for economic and securityissues) and domestic
politics is just as importantas that of domestic political factorson foreign
policy and internationalrelations.2 The issues of energy and securityare
taken to be one component of political economy, or "the reciprocal and
dynamic interactionin internationalrelations of the pursuit of wealth and
the pursuitofpower." 3 Emphasis is placed on the inseparabilityof economics
and politics.
Even reaching coherent definitionsof the centralquestions and issues of
energysecurityand some sense of theirrelativeimportanceremains difficult:
the lessons of 1973 are still being assimilated. The effects,for example, of
past energy price increases and governmentmeasures on conservation,in-
flationand economic growthrates are not fullyknown. Assuming eventual
masteryof the complex set of social, economic, political,legal and technical
variables in the energyand securitycalculus, oil-importingcountriesstillface
formidable obstacles to launching domestic and internationalresponses.
Lulled into near apathy by late 1978 (owing to the temporaryexcess in oil
supplies and the seeming resilienceof the internationalmonetaryand finan-
cial systems),many nations were jolted by events in Iran and the realization
that the internationalenergy supply systemwas again stretchingtoward its
limits.

2. This assumption representsa synthesisof the nationalist,realist and neo-liberalparadigms

of internationalrelationsalong the lines of that developed in Robert0. Keohane and Joseph S.
Nye, Powerand Interdependence (Boston, Mass.: Little,Brown & Co., 1977) and Peter Gourevitch,
"The Second Image Reversed: The InternationalSources of Domestic Politics," International
Organization,Vol. 32, No. 4, Autumn 1978, pp. 881-912; see also the discussions in David R.
Cameron, "The Expansion of the Public Economy: A Comparative Analysis," The American
PoliticalScienceReview,Vol. 72, pp. 1243-1261; Odd Aukrust,"Inflationin the Open Economy,"
in Lawrence B. Krause and WalterS. Salant, eds., Worldwide Theoryand RecentExperience
Inflation:
(Washington, D.C.: Brookings Institution,1977), pp. 107-153; Charles W. Ostrom, Jr., "A
Reactive Linkage Model of the U.S. Defense ExpenditurePolicy-MakingProcess," The American
PoliticalScienceReview,Vol. 72, pp. 941-957; Peter J. Katzenstein, "InternationalRelations and
Domestic Structures:Foreign Economic Policies of Advanced Industrial States," International
Organization,Vol. 30, pp. 4-13; and Robert Gilpin, "Three Models of the Future," International
Organization,Vol. 29, pp. 37-60.
3. Robert Gilpin, U.S. Power and theMultinationalCorporation(New York: Basic Books, 1975),
p. 43.
 Security| 142
International

Section II of this articleproposes typologies forthe growing literatureon

energy security,based on five principal clusters of issues and five sets of
responses available to national governments.The central issue for present
purposes-energy economics, domestic politics and internationalsecurity-
is analyzed in Section III. The final section offerssome preliminaryfindings
and conclusions.

A Framework
forAnalysis:EnergySecurity,ForeignPolicyand International
Politics

The literatureon energy securityand analysis of energy securityas an ele-

ment of foreignpolicy and internationalpolitics hinge on several groups of
issues and several sets of national policy responses. Although the interaction
among most of the issues and responses is strong,each emerges as a discreet
organizing mechanism. The five principal groups of issues are horizontal
nuclear proliferation;the geopolitics of scarce resources; energyand military
readiness; politicalchange and externalinterventionin the Persian Gulf; and
energy,political change and conflictbehavior.
One of the most widely discussed but increasinglydifficult issues of energy
securityis horizontal nuclear proliferation.Considerable attentionhas been
devoted in the literatureto the issues of the nuclear fuel cycle and prolifer-
ation, with heavy emphasis on weapons acquisition by governments and
some treatmentof the threatsposed by individuals and organized groups.
Recent discussions focus on implicationsforNorth-Southrelations and de-
pendency theory,U.S. nonproliferationpolicy, relations among OECD na-
tions, and specific problems posed for bilateral relationships and regional
security.Only recentlyhave these issues been analyzed in broader contexts
such as energy security,4conventional arms transfersand arms controlne-
gotiations.
Geopoliticalimplicationsof resourcedistributionare also betterunderstood
owing to recent analyses.5 Energy resources distributionis assessed from
perspectives such as U.S.-Soviet relations, North-South relations, multiple
uses of ocean space and border and territorialdisputes. The literatureis

4. See, forexample, Joseph S. Nye, "Balancing Nonproliferationand Energy Security," Tech-

nologyReview,December 1978/January 1979, pp. 48-57.
5. GeoffreyKemp, "The New StrategicMap," Survival,March/April1977, pp. 50-59; Geoffrey
Kemp, "Scarcity and Strategy,"ForeignAffairs,January1978, pp. 396-414; and Nazli Choucri,
David Scott Ross and Dennis L. Meadows, "Towards a ForecastingModel of Energy Politics:
InternationalPerspectives,"JournalofPeace Science,Spring 1976, pp. 97-111.
 Economics,Politics,and Security| 143

growing on conflictpotential in specificbilateral or regional contextsfrom

the Aegean Sea to the South China Sea.
The thirdgroup of issues-energy and militaryreadiness-has been ana-
lyzed as an element of modern warfare. Yet the structuraland operational
problems of peacetime militaryforcesfacingenergy constraintson training,
maintenance and emergency stockpilingremains only sparsely assessed in
the open literature.One recentreportattemptsto assess specificU.S. prob-
lems with fuels formilitaryforcesand theirimportancein preventingas well
as conductingarmed conflict.6
The fourthissue, political change and externalinterventionin the Persian
Gulf region, may be classified as a part of eitherthe geopolitics of resource
distributionor the nextand finalissue of energy,politicalchange and conflict
behavior. Yet increasingly,and especially afterevents in Iran, it is treatedas
a distinct topic for analysis. This includes the elements of economic and
political interdependence between OPEC and oil-importingcountries,7as
well as the implicationsof superpower capabilitiesto intervenein the Persian
Gulf region.8 It also involves the relationship between oil revenues and
conventionalarms transfers.
The finalissue-energy, politicalchange and conflictbehavior-is a special
case of the literatureson economics, domestic politicsand national security.
To date it includes only analyses of the internationaland domestic economic
effectsof increasing oil prices, with some mention of possible political im-
plications.9 Most of the literaturelaments the effectson the international

6. Howard Bucknell III, et al., "National Security,MobilityFuels, and the Defense Production
Act," A Report Prepared forthe Subcommitteeon Economic Stabilizationof the House Com-
mitteeon Banking,Finance, and Urban Affairs,The Ohio State University,March 1979.
7. The complex web of economic and politicalrelationships,both among oil-exportingcountries
and between themand oil-importingcountries,is assessed in Nazli Choucri,International Politics
of EnergyInterdependence (Lexington, Mass.: Lexington Books, 1976); see also, Walter J. Levy,
"Oil Policy and OPEC Development Prospects," ForeignAffairs,Winter 1978/79,pp. 287-306,
and JahangirAmuzegar, "OPEC and the Dollar Dilemma," ForeignAffairs,July1978, pp. 740-
750.
8. The implicitU.S.-Soviet agreement on the limitsof Third World interventionis assessed in
James M. McConnell, "The Rules of the Game: Superpower Coercive Diplomacy in the Third
World," in Bradford,Dismukes and McConnell, eds., SovietNaval Diplomacy(New York: Per-
gamon Press, 1979). See also Robert W. Tucker, "Oil: The Issue of American Intervention,"
Commentary, January1975, pp. 21-31; Miles Ignotus (pseudonym), "Seizing Arab Oil," Harper's,
March 1975, pp. 45-62; and Mohammed Ayoob, "The Super-Powers and Regional 'Stability':
Parallel Responses to the Gulf and the Horn," The WorldToday,May 1979, pp. 197-205.
9. See, forexample, Edward R. Fried and Charles L. Schultze, eds., HigherOil Pricesand the
WorldEconomy(Washington, D.C.: Brookings, 1975); Yoon S. Park, Oil Money and the World
Economy(Boulder, CO: Westview Press, 1976); and T. M. Rybczynski,ed., The Economicsof the
Oil Crisis (New York: Holmes and Meier Pubs., Inc. 1976).
 International
Security| 144

economy and the associated problems faced by OECD nations; there has
been some assessment of effectson Eastern Europe and the implicationsfor
OECD-Soviet relations. Only recently have even the Western press and
governments begun serious assessment of the effectsof energy security
problems on oil-importingdeveloping countries.
Two questions merit greatlyincreased attention:What can the study of
energy securityproblems reveal about the traditionalrelationshipbetween
economics and national security,and why are the effectsof energy on na-
tional securitydifferentfromthose of othereconomic commodities?Evidence
is lacking to support the dire predictions made in the mid-1970s that the
Arab oil weapon would crumbleWesternpower relativeto the Soviet Union
and dramaticallyalter the internationalorder.'0 Even so, the consequences
for internationalsecurity of continuing the current system of energy de-
pendency are extremelyserious.
The United States is not alone in its seeming incapacityto respond effec-
tively.Energyproblems have arisen suddenly; theyare afflicting many coun-
triesworldwide simultaneously;and theystrikea diverse and highlysensitive
set of interestsin many departmentsof national governments.They are also
interlockedin a very complex and interdependentinternationaleconomic
systemthat is not at all well understood. The political and militaryimplica-
tions of the internationalenergy systemargue stronglyforattentionfromat
least oil-importingnations' departmentsof energy,departmentsof defense,
foreignministries,financeministriesand departmentsforresearch,environ-
ment and industry.
Cases must be developed and hypotheses tested on the links among doc-
umented internationaland domestic economic problems, domestic political
events and national securityin oil-importingLDCs, OECD nations and even
Eastern Europe. This will provide the basis for evaluating the implications
for broader North-South and U.S.-Soviet relations. It is essential to avoid
the major pitfallsof much of the currentliterature:oversimplifiedviews of
the internationaleconomic and politicalstructuresand one-sided national or
regional perspectives on the causes of worldwide inflationand slowed eco-
nomic growthrates.
There are five major clusters of policy responses that nations can take to

10. See, for example, Edward Friedland, Paul Seabury and Aaron Wildavsky, "Oil and the
Decline of WesternPower," PoliticalScienceQuarterly,Vol. 90, No. 3, Fall 1975, as adapted from
Friedland, Seabury and Wildavsky, The Great DetenteDisaster: Oil and the Decline of American
ForeignPolicy(New York: Basic Books, 1975).
 Economics,Politics,and Security| 145

reduce theirvulnerabilityto disruptionof energy supply: 1) demand reduc-

tion and restructuring; 2) arrangementssuch as stockpilesand sharingplans
for emergencyconditions; 3) development of alternativedomestic supplies;
4) development and diversificationof sources of external supply; and 5)
diplomatic,industrialand militarymeasures. The costs and effectivenessof
these measures vary for differenttypes of countries. They also vary widely
in importanceover differenttime frames.
Most of the literatureto date addresses primarilydomestic demand man-
agement and the developmentof domesticsupplies. Relativelylittleempirical
research exists on the other responses and the interactionsamong the five
clusters of policy responses. And even the answers to relativelywell re-
searched questions such as the effectsof governmentconservation efforts
and government incentive systems for increasing fossil fuel development
remain highlyuncertain.
Although detailed assessment of these responses is beyond the scope of
this article,the most strikingresultfrompast analyses of policy responses to
achieve energy securityis how littlemost oil-importingnations can do over
at least the next threeto fiveyears. When the responses are evaluated in the
contextof likelydomesticand internationalconstraintssuch as environmental
concern and investmentcapital, near-termpotentialis expected fornational
oil stockpiling;forsome switchingand diversificationof domestic sources of
supply; and forlimitedinternationalcooperation, especially in oil allocation
systems. Such steps can help mitigatepoliticalmanipulationby oil-exporting
nations and competitionamong Western governmentsover scarce oil sup-
plies.
The prospects forlonger-termresponses such as major reductions in de-
mand and development of new sources of domestic supply are highly un-
certain. The negative short-and long-termeffectson oil-importingnations
of oil price increases do not appear to be matched by the prospects for
countermeasures.Most of the potential forreal increases in the securityof
national energysupplies involves the responses thatare least useful over the
nextthreeto fiveyears. The resultis major uncertaintyforthe energysecurity
of many oil-importingnations.

EnergyEconomics,DomesticPoliticsand International
Security

Of fundamentalimportanceto internationalsecurityis the increasingprob-

problems in and among the oil-importingdevel-
abilityof political-military
oping countries(OIDCs), the OECD nations and even Eastern Europe as the
 International
Security1 146

fulleffectsof oil price increases filterthroughthe internationalsystem. The

workinghypothesisis that the problems of access to and risingcost of fuels
will increase, or at least aggravate, the domestic problems of effectively
governingnations and the occurrencesof conflictbehavior between nations.
Indicatorsof problems of governingnations, or domestic politicalinstability,
include both public events such as strikes, demonstrations,outbreaks of
violence and armed conflictand governmentreactionssuch as police action,
rescheduled elections, shiftsin political party and coalition structures,im-
position of martiallaw and domestic deploymentof militaryforces.Conflict
behavior between nations is defined as both "crises," and low-intensity
interactionssuch as "disputes," "disagreements," "press wars," or "bad
relations."
An internationalcrisisis a sequence of interactionsbetween the governments
of two or more sovereign states in severe conflict,short of actual war, but
involvingthe perceptionof a dangerously high probabilityof war."I
In the face of dramaticjumps in both perceived and real oil prices, gov-
ernments from the United States and United Kingdom to Hungary and
Bolivia have experienced higher rates of inflationand unemployment,and
slower economic growth. They are perceived as less and less able to deliver
on the most politicallydeterminativeissue of all-domestic economic pros-
perity.As risingsocial expectationsworldwide, but especially in many of the
LDCs, clash with declining economic development rates, the probabilityof
domestic political instabilityincreases. Weaker governingcoalitions are less
able to take strongeconomic measures. Alone or in combination,escalating
economic problems and political instabilitiesare likely to increase the fre-
quency of domestic and internationalviolence. Increases in politicalinstabil-
ities and conflictbehavior in oil-importingLDCs, Western countries and
Eastern Europe are likely to increase the probabilityof U.S.-U.S.S.R. and
U.S.S.R.-China confrontations.
Externalthreatsto energysecurity,as well as energy-relatedeconomic and
political problems within nations, will lead to low-intensityconflictand
crises. It is, however, the internalcauses thatare most directlyrelevanthere.
The externalthreatsto oil-importingnations are best demonstratedby the

11. See Glen H. Snyder and Paul Diesing, ConflictAmongNations:Bargaining,DecisionMaking,

and SystemStructurein International
Crises (New Jersey:PrincetonUniversityPress, 1977), pp.
6-7.
 Economics,Politics,and Security| 147

energysecurityissue clusterdescribed above on politicalchange and external

interventionin the Persian Gulf. It is also the background causes, or what
Snyder and Diesing termthe "general precipitants"of crisis, as opposed to
the "1specific"or final precipitantsthat are most pertinentfor present pur-
poses.'2 Over periods of months and years, the internalproblems reduce a
nation's economic viability,politicaleffectiveness,prestigeand independence
of action, creatinga more vulnerable national securityposition fromwhich
it must address specific external threats such as reduced oil imports from
Iran.
The OECD nations are the major actors in an extremelycomplex and
interactiveinternationaleconomic system. Increasingreal prices of OPEC oil
are both a cause and a resultof theirdomestic economic problems. Tight oil
supplies lead directlyand indirectly,throughgovernmentpolicies, to slower
economic growth, increasing domestic energy prices and strongerconser-
vation measures in OECD nations. The resultsare increases in idle resources,
inflationand social and political stress. These results in the United States,
combined with increased importsof oil at higher prices, decrease the value
of the dollar.
Real GNP in major industrialcountriesrose at an average rate of 2.5 percent
a year in 1974-78, compared with almost 5.0 percent in the preceding five-
year period. Western Europe and Japan experienced a particularlyslow re-
coveryfromthe 1974-75 economic recession. . . Among the major countries,
only the United States achieved real growth close to its 1960-73 average.
Priorto the Iranian crisismost observersexpected some improvementin the
growthperformanceof OECD countriesover the next several years. Growth
of about 3.5 percenta year throughthe early 1980s was generallythoughtto
be feasible. . . (But) higher prices, including those which have already oc-
curred,will tend to hold down economic growth. Although the outcome is
uncertain, the average rate of economic growth for OECD countries in
1979-82 seems unlikelyto exceed the 1974-78 average of 2.5 percent.13
These economic shocks can be expected to increase political instabilities
and decrease the base of public support required forstrongpoliticalleader-
ship fromOECD governments.Although furtherempiricalinvestigationof
this relationship is required, it may already be demonstratedin countries
such as Britain,Italy, Spain and the United States. The most serious threat,

12. Ibid., p. 11.

13. National Foreign Assessment Center of the U.S. Central IntelligenceAgency, "The World
Oil Marketin the Years Ahead," ER-79-10327U,August 1979.
 Security| 148
International

however, is likely to be the role of these domestic economic and political

problems in increasinglow-intensityconflictamong OECD nations and be-
tween OECD nations and both the Soviet bloc nations and the LDCs.
Despite its inabilityto enact strong domestic energy policies, the United
States relies much less on imported oil, especially from the Persian Gulf,
than most other OECD countries;and when compared to a countrysuch as
Japanthe United States has a much largerarrayof energysupply possibilities
that may pay off in the future. The resulting differencein views on the
urgencyof nuclear power, alternativeenergy sources, and even fossil fuels
creates a diplomaticand broader internationalpolitical climate conducive to
misunderstanding and apprehension. OECD nations already compete
sharply in areas such as reducing their balance of payments deficits(and
surpluses) throughtrade, gaining the largestpossible share of recycledOPEC
investments,and maximizingthe flow ofoil to theirown portswhen supplies
are restricted.
The United States, in particular,must realize that the greatest energy-
related threatto its own national securitylies in the vulnerabilityof Japan,
Western Europe and at least some less-developed countries to severe eco-
nomic disruption.Regional militarybalances, such as those in centralEurope
and East Asia, depend upon the internaleconomic and political strengthof
nations in the area as well as of the United States. Japan,WesternEuropean
countries and LDCs such as Jamaica, Kenya, Pakistani, Peru, the Sudan,
Thailand, and Turkey will continue to encounter delicate energy-related
economic and political problems that require both adroit domestic manage-
ment and effectiveexternalsupport.
The United States and its allies must jointly anticipate temptations to
governmentsin these and other nations to take aggressive externalpolitical
or militaryaction in order to help mask internaleconomic or political prob-
lems related to energy, as well as temptationsto take advantage of such
problems in apparentlyweak neighboringcountries. Leadership and conti-
nuity is badly needed in long-termU.S. foreignpolicy, but especially in
foreigneconomic and securitypolicy relatingto energy. There is an urgent
demand formutual U.S., European and Japanese plans and action to address
relationswith Persian Gulf nations, especially Saudi Arabia, regional energy
securityissues, nonproliferationpolicy, and problems with trade and mul-
tinationalcorporationsin energymarkets.
Most urgent is continued or even greater emphasis by the government,
the private sector and interestgroups in the United States on 1) convincing
 Economics,Politics,and Security| 149

OPEC nations of the huge stake they have in the health of the international
economy; 2) making immediate reductionsin American oil importsin order
to release pressure on the internationaloil market;and 3) takingverycarefully
thought out action to meet the increasing threat to the West's oil supply
lines. Reduced to its simplestform,the problemis inspiringthe nationwhose
economic, political, and militarysystems are least vulnerable to energy se-
curityproblems to react to the broader securitythreatsposed by economic,
political, and possible militaryproblems confrontingWestern and less-
developed countries.
The greatest potential for longer-term,fundamentaldisruption of inter-
national securitymay derive from the oil-importingdeveloping countries
(OIDCs).14 Of the seventy-fourLDCs which importoil, forty-eight depend
on it for 90 percent or more of their commercial energy use.15 Except for
India, Pakistan, South Korea and Zambia, all the other OIDCs are between
50 and 90 percent dependent on oil imports.
At the same timethatdramaticenergypriceincreases and energyshortages
hitthe OIDCs, economic slowdowns and inflationin the industrializedworld
threatenthe only avenues of response available to the OIDCs short of re-
ducing their economic growth rates. The abilities of OIDCs to increase the
price or volume of theirexports and to gain access to capital forbalance-of-
paymentsand foreignexchange problems are sharplyrestrictedby economic
hard times in the North and structuralinternationaleconomic factors.There
have been two unpleasant results: first,the average economic growthrates
of OIDCs have dropped rapidly-by about 50 percent in 1975 as compared
to the early 1970s, although they startedto recoverin 1976; and second, the
level of reliance on externalfinancing,especially fromprivate sources, has

14. The group of OIDCs does not include the thirteenmembers of OPEC and the non-OPEC
oil-exportingcountries-Angola, Bahrain, Bolivia, Congo, Egypt, Malaysia, Mexico, Oman,
Syria, Trinidad and Tobago, Tunisia and Zaire. Another group of developing countries-the
exportersof commoditiessuch as cocoa, coffee,tea and tin which have also experienced strong
price increases since 1973, have been able to offsetsome of the economic shocks of the oil price
increases. But commodityprices in otherareas have decreased, and even where increases have
occurred,the prices fluctuatewidely and the increases are nowhere as large as the seven to ten
times experienced in petroleum.
15. See World Bank, A Programto AcceleratePetroleumProductionin the DevelopingCountries
(Washington,D.C.: World Bank, 1979), p. 23. Any discussion of the commercialenergysectors
in LDCs must be put in context.Noncommercialfuels such as firewood,charcoal, animal dung
and crop wastes stillconstituteabout half of all LDC energyuse and over 85 percentof energy
use in ruralareas. They also look much more economicallyattractivesince the oil price increases
of the 1970s.
 International
Security| 150

skyrocketedsince 1974. Imports criticalto economic growth, including oil,

have been curtailedin many countriesand only greatlyincreased officialaid
flows and commercial borrowing have made continued economic growth
possible. 16
The intermediateand longer-termimplicationsof these events are not yet
clear. But it is certainthatthe net flow of financesto the OIDCs in 1974-1976
was about double thatbetween 1971 and 1973, and that the flow was based
heavily on commercialbank credits,especially fromthe United States. One
source cites an estimated increase in amortizationpayments of four billion
dollars in 1976 to sixteenbillion dollars in 1978.17
Although oil and other fossil fuel production is increasing in the OIDCs,
consumption is increasing even more rapidly as many of these countries
approach stages of economic growthwhich demand intensifiedenergyuse.
Shortages of foreigninvestment,fertilizerand food, and importedmanufac-
tured goods in the 1970s may give way to severe structuralproblems in the
OIDCs by the 1980s. Very scarce foreignexchange will be drawn offto bring
in crucialimports;countriesbeyond Argentina,Britain,Egypt,Italy,Jamaica,
Kenya, Pakistan, Peru, the Sudan, and Turkeywill default,require massive
externalreliefon theirinternationaldebts, or assume enormous new external
debts. Poland, the Soviet Union and other Eastern European countrieswill
continue to borrow beyond the seven billion dollars obtained fromthe Eu-
rocurrencymarket between 1973 and 1976.18 Decreased economic growth
and inflationworldwide may allow domestic political forces to furtherag-
gravate the currentprotectionisttrend in internationaltrade.
Governments in many of these countries have already adopted, or will
soon have to adopt, stringentdomestic economic measures as conditionsfor
externalloans. Externalfinancingof balance-of-paymentsproblems will give
way to the politicallyveryunpopular shoulderingof new economic realities.
But at least some regimes will resistthese measures at almost any cost since
they may well bring about major political change. Because of theirsensitive

16. See, for example, Economic Policy Council of UNA-USA, The Global EconomicChallenge
(Volume 1: Trade Commodities Capital Flows) (New York: UNA, 1978), pp. 37-50.
17. JackZurick and Richard K. Goeltz, "U.S. Banks Are Making Foreign Policy," The New York
Times,March 18, 1979, p. 14F. This huge aggravation of foreigndebt affectsLDCs in different
ways according to their relative level of economic development; see, for example, Paul H.
Boeker, "DepartmentDiscusses Debt Situationsof Developing Countries and the Role of Private
Banks," DepartmentofStateBulletin,Vol. 76, pp. 441-444.
18. See Richard Portes, "East Europe's Debt to the West: Interdependence Is a Two-Way
July1977, p. 758.
Street,"ForeignAffairs,
 Economics,Politics,and Security| 151

political situations,coalition governmentsor other politicallyweak regimes,

such as that in Turkey,are particularlyunwillingto take many, if not all, of
the difficulteconomic measures required. Martial law is imposed in Turkey
to quell violence within conflictingreligious, political and militarygroups.
But
which point to bank-
(t)he factionalismis exacerbatedby economic difficulties
ruptcy.Turkey's foreignhard-currencydebt is more than $12 billion, much
of which must be repaid or rescheduled this year and next. Its industryis
runningat 50 percentcapacity. Unemploymentis more than 20 percentwith
nearly twice that number marginallyor underemployed. More than two
million people live in the slum areas of Istanbul, Ankara and Izmir. These
urban shanty-townsare growing by 6 percent a year-more than twice the
national growth rate-and have become seedbeds for political terrorism. 19

And Turkey is not alone in this respect. Many other countries have inten-
tionallyavoided the reduced economic growth rates required to face up to
inflationand recession. Brazil, Finland, Peru, the Philippines, Jamaica,and
Spain,-among others,have clearlyturnedto foreignand internationalfinan-
cial assistance as a means to minimize the erosion of domestic political
support. Even with the price of coffeeup by a factorof fourbetween 1973
and 1977, Brazil faced an inflationrate of forty-onepercentin 1978, a foreign
debt of forty-three billion dollars, and a dependence on importsto cover 80
percentof its oil use. By 1979 the price of coffeehad dropped back to double
the 1973 level. It is not at all clear that even the new president,Figueiredo,
will take the required economic measures. Finally,many of the least devel-
oped LDCs which face the same foreignexchange and import constraint
problems as these countries have no choice but to slash economic growth
rates because they lack access to commercialfinancing.

Conclusion

Strategicissues of energy now controla number of importantnational and

internationalsecurityissues. From macroeconomic problems of unemploy-
ment, inflationand reduced rates of economic growthin many oil-importing
countries,to sensitivemilitaryquestions of protectingoil productionfacilities

19. David A. Andelman, "Turkey, Splintered and Broke, Remains 'Sick Man of Europe,"' The
New YorkTimes,March 4, 1979, p. E3; see also, The New YorkTimes,February20, 1979, p. 1;
March 8, 1979, p. A8; March 18, 1979, p. E3; and March 25, 1979, p. 6.
 Security| 152
International

in the Persian Gulf and oil supply lines worldwide, energy issues now
demand treatmentby defense departmentsas well as by the other depart-
ments of government.Although furtherstudy is required to determinethe
full political and militaryimplicationsof the economic problems caused by
increasing energy prices and shortages, certain consequences are already
clear.
The internationalenergy system will follow one of three general patterns
over the next decade. Firstis a series of increases in the real prices of energy
sources, with some reduced pressure on internationalenergymarketsduring
periods of slow economic growth,but withno significantsupply disruptions.
The second patternis similar,but withcontinuallytightinternationalmarkets
and one or more importantshocks to the internationaloil marketalong the
lines of that resultingfromevents in Iran in 1979. The final and most im-
portantpossible patternfroma securityviewpoint includes a major shock,
such as a major supply disruptionforat least several months, in the inter-
national energysystem. Direct militarysecurityproblems would almost cer-
tainlyresultin the last case; severe politicaland militarysecuritythreatsare
likelyin the second case.
Even in the firstcase, with no significantsupply disruptions, economic
growthrates in oil-importingcountriesworldwide will be hinderedby energy
problems. The United States,'with the greatestabilityand the least willing-
ness to act, will continue to be the most insulated fromshocks in the inter-
national energy markets. Countries in Western Europe, and especially the
oil-importingless-developed world, will generallybe the most exposed to
price increases and shortages. The Soviet Union and Eastern Europe will
have their own energy-relatedeconomic problems, including the indirect
effectsof slower economic growthelsewhere; but increasingworld prices for
oil and gas will relieve some of the pressure on the Soviet Union to maintain
levels of exportssince fewerexportswill produce the same amount of foreign
exchange.
Regardless of the relativelycomfortableposition of the United States, at
least in the short term,many of the externaleconomic effectswill translate
to political and militarysecurityquestions of immediate concern. U.S. mili-
tary and foreignpolicy planners will confrontincreasing opportunitiesfor
the Soviet Union to influenceevents in the Persian Gulf; difficultquestions
of militaryrelationshipswith Saudi Arabia and militarydeployments in the
Indian Ocean; problems of maintainingstrongand visible securitysupport
forJapan and Western Europe in the face of differencesover energy prob-
 Economics,Politics,and Security| 153

lems; and decisions over how to respond to instabilitiesand conflictin the

oil-importingdeveloping countries,such as in Turkeyand the Horn of Africa.
Woven throughoutthese issues is the problemof preventingand being ready
to respond effectivelyto sabotage and terrorismworldwide which is aimed
at domestic electricalgeneratingplants and grids,nuclear fuelcycle facilities,
oil storage facilitiesand fossil fuel pipelines. The United States, however,
still has the opportunityto address political instabilities,unsteady alliance
structuresand militaryconfrontationswhich are aggravated,or even caused,
by energy problems much more effectivelythan it has handled domestic
energypolicy.