AMUN 2017

THE UNITED NATIONS ECONOMIC AND SOCIAL COUNCIL

STUDY GUIDE

AGENDA: OPEC OIL CRISIS

INTRODUCTION: HOW TO USE THIS GUIDE?

Hello delegates! I hope all of you are geared up for the upcoming
AMUN session. This study guide has been made with the main aim of
providing you with an overall view of the agenda i.e the OPEC Oil Crisis
1973 as well as helping you understand important terminologies
pertaining to the topic.

The study guide has been divided into three parts viz ‘Economic
Terminologies’, ‘Important Events and Organizations’ and ‘OPEC Oil
Crisis: An overview’

The first two parts will help you know and understand the various
terms, concepts and events so that you get a clearer picture of the issue
which will be discussed in the third part.

Wishing you all the best.

Regards,
The ECOSOC Chair

PART I : ECONOMIC TERMINOLOGIES

1. ASSET:​ ​ An asset is a resource with ​economic value​ that an
individual, ​corporation​ or country owns or controls with the expectation that it will
provide future benefit. An asset can be thought of as something that in the future
can generate ​cash flow​, reduce expenses, improve sales, regardless of whether
it's a company's manufacturing equipment or a patent on a particular technology.
An asset represents a present economic resource of a company to which it has a
right or other type of access that other individuals or firms do not have. A right or
other access is legally enforceable, which means that a company can use
economic resource at its discretion, and its use can be precluded or limited by an
owner.

2. BALANCE OF PAYMENT :​ ​A statement that summarizes an

economy’s ​transactions​ with the rest of the world for a specified time period. The
balance of payments, also known as balance of international payments,
encompasses all transactions between a country’s residents and its nonresidents
involving goods, services and income; financial claims on and ​liabilities​ to the
rest of the world; and transfers such as gifts. The balance of ​payments​ classifies
these transactions in two accounts – the ​current account​ and the capital account.
The current account includes transactions in goods, services, ​investment
income​ and ​current transfers​, while the ​capital account​ mainly includes
transactions in ​financial instruments​. An economy’s balance of payments
transactions and international investment position (IIP) together constitute its set
of international accounts.

3. BALANCE OF TRADE: ​The balance of trade (BOT) is the difference

between a country's ​imports​ and its e
​ xports​ for a given time period. The ​balance
of trade​ is the largest component of the country's ​balance of payments​ (BOP).
The balance of trade is also referred to as the trade balance or the international
trade balance.

4. CAPITAL: 
There are 3 definitions for capital viz-
i) Wealth in the form of money or assets, taken as a sign of the financial strength
of an individual, organization or nation and assumed to be available for
development or investment.
ii) Accounting- Money invested in a business to generate income.
iii) Economics- Factors of production that are used to create goods or services
and are not themselves in the process.

5. CARTEL: ​A cartel is an organization created from a formal agreement 

between a group of producers of a good or service to regulate supply in an 
effort to regulate or manipulate prices. In other words, a cartel is a collection of 
otherwise independent businesses or countries that act together as if they were 
a single producer and thus are able to fix prices for the goods they produce and 
the services they render without competition. 
 
The ​Organization of Petroleum Exporting Countries (OPEC)​ is the world's largest 
cartel. It is a grouping of 14 oil-producing countries whose mission is to 
coordinate and unify the petroleum policies of its member countries and ensure 
the stabilization of oil markets. 
 
6. CENTRAL BANK: ​A central bank, or monetary authority, is a
monopolized and often nationalized institution given privileged control over the
production and distribution of money and credit. In modern economies, the
central bank is responsible for the formulation of ​monetary policy​ and the
regulation of member banks.

Central banks are inherently non-market-based or even anticompetitive

institutions. Many central banks, are often touted as independent or even private.
However, even if a central bank is not legally owned by the government, its
privileges are established and protected by law.

The critical feature of a central bank — distinguishing it from other banks — is

legal monopoly privilege for the issuance of bank notes and cash; privately
owned commercial banks are only permitted to issue demand liabilities, such as
checking deposits.

7. CLOSED ECONOMY:​ A closed economy is an economy in which no 

activity is conducted with outside economies. A closed economy is 
self-sufficient, meaning no imports are brought in and no exports are sent out, 
the goal being to provide consumers with everything they need from within the 
economy's borders. A closed economy is the opposite of an open economy, in 
which a country conducts trade with outside regions. 

 
8. CURRENT ACCOUNT: 
The difference between a nation’s savings and its investment. The current
account is an important indicator about an economy's health. It is defined as the
sum of the ​balance of trade​ (goods and services ​exports​ less imports), ​net
income​ from abroad and net ​current transfers​. A positive current ​account
balance​ indicates that the nation is a net lender to the rest of the world, while a
negative current account balance indicates that it is a ​net borrower​ from the rest
of the world. A ​current account surplus​ increases a nation’s ​net foreign assets​ by
the amount of the surplus, and a ​current account deficit​ decreases it by that
amount. The current account and the ​capital account​ are the two main
components of a nation’s ​balance of payments​.

9. DEFICIT: ​A deficit is the amount by which a resource falls short of a mark,

most often used to describe a difference between cash inflows and outflows. Deficit is
the opposite of surplus and is synonymous with shortfall or loss.

The term deficit is generally prefixed by another term to refer to a specific situation,
a ​trade deficit​ or ​budget deficit​, for example.

A trade deficit exists when a nation has exports of $2 billion and imports of $3 billion in a
given year. The country’s deficit is at $1 billion for that year.

A budget deficit occurs when a government has revenues lower than its expenditures.
Lets say a small country has $10 billion worth of revenue for a year and its expenditures
were at $12 billion for that same year, it would be running a deficit of $2 billion.

An income deficit isn’t quite the same as a budget or trade deficit. A measurement used
by the ​U.S. Census​, an income deficit is the dollar amount by which a family’s income
falls short of being at or above the ​poverty line​. If the poverty line is $17,000 a year for a
family of three, and the family income is at $15,000, then the family’s income deficit is
$2,000.

10. DEMAND: ​Demand is an economic principle that describes a consumer's

desire and willingness to pay a price for a specific good or service. Holding all other
factors constant, an increase in the price of a good or service will decrease demand,
and vice versa.

Think of demand as your willingness to go out and buy a certain product. For example,
market demand is the total of what everybody in the market wants.

Demand is closely related to supply. While consumers try to pay the lowest
prices they can for goods and services, suppliers try to maximize profits. If
suppliers charge too much, demand drops and suppliers do not sell enough
product to earn sufficient profits. If suppliers charge too little, demand increases
but lower prices may not cover suppliers’ costs or allow for profits. Some factors
affecting demand include the appeal of a good or service, the availability of
competing goods, the availability of financing and the perceived availability of a
good or service.

Aggregate demand​ refers to the overall or average demand of many market

participants. Individual demand refers to the demand of a particular consumer.
For example, a particular consumer’s demand for a product is strongly influenced
by her ​personal income​. However, her personal income does not significantly
affect aggregate demand in a large economy.

The point where supply and demand

curves intersect represents the market clearing or market equilibrium price. An
increase in demand shifts the ​demand curve​ to the right. The curves intersect at
a higher price and consumers pay more for the product. Equilibrium prices
typically remain in a state of flux for most goods and services because factors
affecting supply and demand are always changing. Free, competitive markets
tend to push prices toward market equilibrium. Equilibrium is condition or a state
of rest. It is the point where the market demand and supply are equal.
11. DEVALUATION : ​Devaluation is a deliberate downward adjustment to the
value of a country's currency relative to another currency, group of currencies or
standard. Devaluation is a ​monetary policy​ tool used by countries that have
a ​fixed exchange rate​ or semi-fixed exchange rate. It is often confused
with ​depreciation​, and is the opposite of ​revaluation​.

Devaluing a currency is decided by the government issuing the currency, and

unlike depreciation, is not the result of non-governmental activities. One reason a
country may devaluate its currency is to combat trade imbalances. Devaluation
causes a country's ​exports​ to become less expensive, making them more
competitive in the global market. This, in turn, means that ​imports​ are more
expensive, making domestic consumers less likely to purchase them, further
strengthening domestic businesses.

While devaluating a currency can seem like an attractive option, it can have
negative consequences. By making imports more expensive, for example, it
protects domestic industries who may then become less efficient without the
pressure of competition. Higher exports relative to imports can also
increase ​aggregate demand​, which can lead to ​inflation​.

Example

The devaluation of currencies arises in many situations, but comes about due to
specific government action. For example, Egypt has faced constant pressure
from a black market for U.S. dollars (USD). The rise of the black market came
about due to a foreign currency shortage that hurt domestic businesses and
discouraged investments within the economy. To stop the black market activity,
the central bank devalued the Egyptian pound in March 2106 by 14% when
compared to the USD.

The Egyptian stock market responded favorably when the currency was
devalued. However, the black market responded by depreciating the exchange
rate of USD to the Egyptian pound, forcing the central bank to take further action.

12. DEPRECIATION: ​Gradual decrease in the value of an asset with the

influx of time is termed as depreciation.​ ​Depreciation is an accounting convention
that allows a company to write-off the value of an asset over time, but it is considered a
non-cash transaction.
13. EMBARGO:​ A
​ n embargo is a government order that restricts
commerce or exchange with a specified country or the exchange of specific
goods. An embargo is usually created as a result of unfavorable political or
economic circumstances between nations.
The restriction looks to isolate the country and create difficulties for its governing
body, forcing it to act on the underlying issue.
14. EXCHANGE RATE: ​The price of a nation’s ​currency​ in terms of another
currency. An exchange rate thus has two components, the domestic currency and a
foreign currency, and can be quoted either directly or indirectly. In a direct quotation, the
price of a unit of foreign currency is expressed in terms of the domestic currency. In an
indirect quotation, the price of a unit of domestic currency is expressed in terms of the
foreign currency. An exchange rate that does not have the domestic currency as one of
the two currency components is known as a cross currency, or ​cross rate​.
Also known as a currency quotation, the ​foreign exchange​ rate or ​forex​ rate.

An exchange rate has a ​base currency​ and a counter currency. In a direct quotation, the
foreign currency is the base currency and the domestic currency is the counter
currency. In an indirect quotation, the domestic currency is the base currency and the
foreign currency is the counter currency.
Most exchange rates use the US dollar as the base currency and other currencies as
the counter currency. However, there are a few exceptions to this rule, such as
the ​euro​ and Commonwealth currencies like the British pound, Australian dollar and
New Zealand dollar.

Let’s consider some examples of exchange rates to enhance understanding of these

concepts.

● US$1 = C$1.1050. Here the base currency is the US dollar and the ​counter
currency​ is the Canadian dollar. In Canada, this exchange rate would comprise a
direct ​quotation​ of the Canadian dollar. This is easy to understand intuitively,
since prices of goods and services in Canada are expressed in Canadian dollars;
therefore the price of a US dollar in Canadian dollars is an example of a direct
quotation for a Canadian resident.
● C$1 = US$ 0.9050 = 90.50 US cents. Here, since the base currency is the
Canadian dollar and the counter currency is the US dollar, this would be an
indirect quotation of the Canadian dollar in Canada.
 ● If US$1 = JPY 105, and US$1 = C$1.1050, it follows that C$1.1050 = JPY 105,
or C$1 = JPY 95.02. For an investor based in Europe, the Canadian dollar to yen
exchange rate constitutes a ​cross currency​ rate, since neither currency is the
domestic currency.

Exchange rates can be floating or fixed. While ​floating exchange rates​ – in which
currency rates are determined by market force – are the norm for most major nations,
some nations prefer to fix or peg their domestic currencies to a widely accepted
currency like the US dollar.

15. EQUITY:​ Generally speaking, equity is the value of an ​asset​ less the amount
of all ​liabilities​ on that asset. It can be represented with the ​accounting equation​: Assets
-Liabilities = Equity.

The following are more specific definitions for the various forms of equity:
1. A stock or any other ​security​ representing an ownership interest. This may be in a
private company (not publicly traded), in which case it is called ​private equity​.
2. On a company's ​balance sheet​, the amount of the funds contributed by the owners
(the shareholders) plus the ​retained earnings​ (or losses). Also referred to
as ​stockholders' equity​ or ​shareholders' equity ​.
3. In the context of ​margin​ trading, the value of securities in a​ margin account​ minus
what has been borrowed from the brokerage.
4. In the context of ​real estate​, the difference between the current ​fair market value​ of
the property and the amount the owner still owes on the ​mortgage​. It is the amount that
the owner would receive after selling a property and paying off the mortgage. Also
referred to as “​real property​ value.”
5. In terms of investment strategies, equities are one of the principal ​asset classes​. The
other two are ​fixed-income​ (​bonds​) and ​cash/cash-equivalents​. These are used in ​asset
allocation​ planning to structure a desired ​risk and return profile​ for an
investor's ​portfolio​.
6. When a business goes ​bankrupt​ and has to ​liquidate​, the amount of money remaining
(if any) after the business repays its ​creditors​. This is most often called “ownership
equity” but is also referred to as ​risk capital​ or “liable capital.”

16. EXPORT:​ ​An export is a function of international trade whereby goods

produced in one country are shipped to another country for future sale or trade.
The sale of such goods adds to the producing nation's gross output. If used for
trade, exports are exchanged for other products or services in other countries.

​ 7. EXPENDITURE:​ ​Payment of cash or cash-equivalent for goods or

1
services or a charge against available funds in settlement of an obligation as
evidenced by an invoice, receipt, voucher, or other such document.

18. FIXED EXCHANGE RATES : ​A fixed exchange rate is a

country's ​exchange rate​ regime under which the government or ​central bank​ ties the
official exchange rate to another country's currency or to the price of gold. The purpose
of a fixed exchange rate system is to maintain a country's currency value within a very
narrow band.
Fixed rates provide greater certainty for exporters and importers, which also helps the
government maintain low ​inflation​, which in the ​long run​ will tend to keep interest rates
down and stimulate increased trade and investment.

Most major industrialized nations have had floating exchange rate systems since the
early 1970s, while developing economies continue to have fixed rate systems.

19. FLOATING EXCHANGE RATES : ​A floating ​exchange rate​ is a

regime where the ​currency​ price is set by the ​forex market​ based on ​supply and
demand​ compared with other currencies. This is in contrast to a ​fixed exchange rate​, in
which the government entirely or predominantly determines the rate. The currencies of
most of the world's major economies were allowed to ​float​ freely following the collapse
of the Bretton Woods system in 1971.

Floating exchange rate systems mean that while long-term adjustments reflect relative
economic strength and ​interest rate differentials​ between countries, short-term moves
can reflect ​speculation​, rumors and disasters, either natural or man-made. Extreme
short-term moves can result in intervention by ​central banks​, even in a floating rate
environment.

20. FLOATATION: ​Going public. When shares in a company are sold to

the public for the first time through an initial public offering. The number of shares
sold
by the original private investors is called the "float". Also, when a bond
issue is sold in the financial markets.

21. FOREIGN DIRECT INVESTMENT (FDI): ​Foreign direct

investment (FDI) is an investment made by a company or individual in one
country in business interests in another country, in the form of either establishing
business operations or acquiring business assets in the other country, such as
ownership or controlling interest in a foreign company. Foreign
direct ​investments​ are distinguished from portfolio investments in which an
investor merely purchases ​equities​ of foreign-based companies. The key feature
of foreign direct investment is that it is an investment made that establishes
either effective control of, or at least substantial influence over, the decision
making of a foreign business.

Foreign ​direct investments​ are commonly made in open ​economies​, as opposed

to tightly regulated economies, that offer a skilled workforce and above average
growth prospects for the investor. Foreign direct investment frequently involves
more than just a capital investment. It may include provision of management or
technology as well​.

22. FINANCIAL INSTRUMENTS: ​Financial instruments are assets

that can be traded. They can also be seen as packages of capital that may be
traded. Most types of financial instruments provide an efficient flow and transfer
of capital all throughout the world's investors. These assets can be cash, a
contractual right to deliver or receive cash or another type of financial instrument,
or evidence of one's ownership of an entity.

Financial instruments can be real or virtual documents representing a legal

agreement involving any kind of monetary value. Equity-based financial
instruments represent ownership of an asset. Debt-based financial instruments
represent a loan made by an investor to the owner of the ​asset​. ​Foreign
exchange​ instruments comprise a third, unique type of financial instrument.
Different subcategories of each instrument type exist, such as preferred share
equity and common share equity.

22. GROSS DOMESTIC PRODUCT(GDP): ​Gross domestic

product (GDP) is the monetary value of all the finished goods and services produced
within a country's borders in a specific time period. Though GDP is usually calculated on
an annual basis, it can be calculated on a ​quarterly​ basis as well (in the United States,
for example, the government releases an annualized GDP estimate for each quarter
and also for an entire year).

GDP includes all private and public consumption, government outlays,

investments, private inventories, paid-in construction costs and the foreign ​balance of
trade​ (​exports​ are added, ​imports​ are subtracted). Put simply, GDP is a
broad ​measurement of a nation’s overall economic activity​ – the godfather of the
indicator world.

GDP is commonly used as an indicator of the economic health of a country, as well as a

gauge of a country's ​standard of living​. Since the mode of measuring GDP is uniform
from country to country, GDP can be used to compare the ​productivity​ of various
countries with a high degree of accuracy. Adjusting for ​inflation​ from year to year allows
for the seamless comparison of current GDP measurements with measurements from
previous years or quarters. In this way, a nation’s GDP from any period can be
measured as a percentage relative to previous periods. An important statistic that
indicates whether an economy is expanding or contracting, GDP can be tracked over
long spans of time and used in measuring a nation’s ​economic growth​ or decline, as
well as in determining if an economy is in ​recession​ (generally defined as two
consecutive quarters of negative GDP growth).

GDP’s popularity as an economic indicator in part stems from its measuring of ​value
added​ through economic processes. For example, when a ship is built, GDP does not
reflect the total value of the completed ship, but rather the difference in values of the
completed ship and of the materials used in its construction. Measuring total value
instead of value added would greatly reduce GDP’s functionality as an indicator of
progress or decline, specifically within individual industries and sectors. Proponents of
the use of GDP as an economic measure tout its ability to be broken down in this way
and thereby serve as an indicator of the failure or success of economic policy as well.

Providing a quantitative figure for GDP helps a government make decisions such as
whether to stimulate a stagnant economy by pumping money into it or, conversely, to
slow down an economy that's getting over-heated.

Businesses can also use GDP as a guide to decide how best to expand or contract their
production and other ​business activities​. And investors also watch GDP since it
provides a framework for investment decision-making. The "corporate profits" and
"inventory" data in the GDP report are a great resource for ​equity ​investors, as both
categories show total growth during the period; corporate profits data also displays
pre-tax profits, ​operating cash flows​ and breakdowns for all major sectors of the
economy.
 

23. GROSS NATIONAL PRODUCT: ​Gross national product (GNP) is

an estimate of total value of all the final products and services produced in a given
period by the means of production owned by a country's residents. GNP is commonly
calculated by taking the sum of ​personal consumption expenditures​, private
domestic ​investment​, government expenditure, ​net exports​, and any income earned by
residents from overseas investments, minus income earned within the domestic
economy by foreign residents. Net exports represent the difference between what a
country exports minus any imports of goods and services.

GNP is related to another important economic measure called ​gross domestic

product​ (GDP), which takes into account all output produced within a country's borders
regardless of who owns the means of production. GNP starts with GDP, adds
residents' ​investment income​ from overseas investments, and subtracts foreign
residents' investment income earned within a country.

GNP measures the total monetary value of the total output produced by a country's
residents. Therefore, any output produced by foreign residents within the country's
borders must be excluded in calculations of GNP, while any output produced by the
country's residents outside of its borders must be counted. GNP does not include
intermediary goods and services to avoid double-counting since they are already
incorporated in the value of final products and services.

GNP and GDP are very closely related concepts, and the main differences between
them comes from the fact that there may be companies owned by foreign residents that
produce goods in the country, and companies owned by domestic residents that
produce products for the rest of the world and revert ​earned income​ to domestic
residents. For example, there are a number of foreign companies that produce products
and services in the United States and transfer any income earned to their foreign
residents. Likewise, many U.S. corporations produce goods and services outside of the
U.S. borders and earn profits for U.S. residents. If income earned by ​domestic
corporations​ outside of the United States exceeds income earned within the United
States by corporations owned by foreign residents, the U.S. GNP is higher than its
GDP.

While GDP is the most widely-followed measure of a country's economic activity, GNP
is still worth looking at because large differences between GNP and GDP may indicate
that a country is getting more ​engaged in international trade​ , production or financial
operations. Finally, real GNP may prove to be a more useful measure, since it factors
out any changes in national income due to inflation. The real GNP takes ​nominal​ GNP
measured in ​current prices​ and adjusts for any changes in ​price level​ for goods and
services included in the calculation of GNP.

24. GOLD STANDARD: ​The gold standard is a monetary system where

a country's currency or ​paper money​ has a value directly linked to gold. With
the ​gold standard​, countries agreed to convert paper money into a fixed amount
of gold. A country that uses the gold standard sets a fixed price for gold and buys
and sells gold at that price. That fixed price is used to determine the value of the
currency. For example, if the U.S. sets the ​price of gold​ at $500 an ounce, the
value of the dollar would be 1/500th of an ounce of gold.

The gold standard was completely replaced by ​fiat money​. The term fiat money is
used to describe currency that is used because of a government's order — or fiat
— that the currency must be accepted as a means of payment

Gold System vs. Fiat System

As its name suggests, the term gold standard refers to a monetary system in
which the value of currency is based on gold. A fiat system, by contrast, is a
monetary system in which the value of currency is not based on any physical
commodity, but is instead allowed to fluctuate dynamically against other
currencies on the foreign-exchange markets. The term “fiat” is derived from the
Latin fieri, meaning an arbitrary act or decree. In keeping with this etymology, the
value of fiat currencies is ultimately based on the fact that they are defined as
legal tender by way of government decree.

In the decades prior to the First World War, international trade was conducted on
the basis of what has come to be known as the classical gold standard. In this
system, trade between nations was settled using physical gold. Nations with
trade surpluses accumulated gold as payment for their exports. Conversely,
nations with trade deficits saw their gold reserves decline, as gold flowed out of
those nations as payment for their imports.

25. IMPORT:​ ​An import is a good or service brought into one country from
another. The word "import" is derived from the word "port," since goods are often
shipped via boat to foreign countries. Along with ​exports​, imports form the
backbone of ​international trade​; the higher the value of imports entering a
country, compared to the value of exports, the more negative that
country's ​balance of trade​ becomes.

26. INCOME: ​Income is money that an individual or business receives in

exchange for providing a good or service or through investing capital. Income is
consumed to fuel day-to-day expenditures.

27. INTERNATIONAL MONETARY FUND: ​The ​International

Monetary Fund (IMF)​ is an international organization created for the purpose of
standardizing global financial relations and ​exchange rates​. The IMF generally
monitors the global economy, and its core goal is to economically strengthen its
member countries. Specifically, the IMF was created with the intention of:

1. Promoting global monetary and exchange stability.

2. Facilitating the expansion and balanced growth of international trade.

3. Assisting in the establishment of a multilateral system of payments for current

transactions.

Fixed exchange rates​, also known as the ​Bretton Woods system​ (named after
the original ​UN​ conference at which the IMF was conceived), refer to the value of
a ​currency​ being tied to the value of another currency, or to gold. The system of
fixed exchange rates was established by the IMF as a way to bolster the global
economy after the ​Great Depression​ and World War II. This system was
abolished in 1971, and ever since, the IMF has promoted the system of ​floating
exchange rates​, which means that the value of a currency can change in relation
to the value of another. This is the familiar system today. For example, when the
U.S. economy suffers, the dollar's value goes down in relation to that of, say,
the ​euro​ of the ​European Union​, and the opposite is also true. The ​exchange
rates​ established by the IMF allow countries to better manage ​economic
growth​ and trade relations. These exchange rates are set in order to
prevent ​economic collapse​, which can occur with runaway exchange rates, which
occurs when the rates continue to rise.
The IMF vs. the World Bank
The IMF works hand-in-hand with the ​World Bank​, and although they are two
separate entities, their interests are aligned, and they were created together.
While the IMF provides only shorter-term loans that are funded by
member ​quotas​, the World Bank focuses on long-term economic solutions and
the reduction of poverty and is funded by both member contributions and ​bonds​.
The IMF is more focused on economic policy solutions, while the World Bank
offers assistance in such programs as building necessary public facilities and
preventing disease.

28. INFLATION: ​Inflation is the rate at which the general level of prices for
goods and services is rising and, consequently, the ​purchasing power​ of currency is
falling. ​Central banks​ attempt to limit inflation, and avoid ​deflation​, in order to keep
the ​economy​ running smoothly.

As a result of inflation, the purchasing power of a unit of currency falls. For example, if
the inflation rate is 2%, then a pack of gum that costs $1 in a given year will cost $1.02
the next year. As goods and services require more money to purchase, the implicit
value of that money falls.

The Federal Reserve uses core inflation data, which excludes volatile industries such as
food and energy prices. External factors can influence prices on these types of goods,
which does not necessarily reflect the overall rate of inflation. Removing these
industries from inflation data paints a much more accurate picture of the state of
inflation.

The Fed's monetary policy goals include moderate long-term interest rates, price
stability and maximum employment, and each of these goals is intended to promote a
stable financial environment. The Federal Reserve clearly communicates long-term
inflation goals in order to keep a steady long-term rate of inflation, which in turn
maintains price stability. Price stability, or a relatively constant level of inflation, allows
businesses to plan for the future, since they know what to expect. It also allows the Fed
to promote maximum employment, which is determined by nonmonetary factors that
fluctuate over time and are therefore subject to change. For this reason, the Fed doesn't
set a specific goal for maximum employment, and it is largely determined by members'
assessments. Maximum employment does not mean zero unemployment, as at any
given time people there is a certain level of volatility as people vacate and start new
jobs.

Monetarism​ theorizes that inflation is related to the ​money supply​ of an economy. For
example, following the Spanish conquest of the Aztec and Inca empires, massive
amounts of gold and especially silver flowed into the Spanish and other European
economies. Since the money supply had rapidly increased, prices spiked and the value
of money fell, contributing to economic collapse.

29. LIQUIDITY: ​Liquidity describes the degree to which

an ​asset​ or ​security​ can be quickly bought or sold in the market without affecting
the asset's price.

Market liquidity refers to the extent to which a ​market​, such as a country's stock
market or a city's real estate market, allows assets to be bought and sold at
stable prices. ​Cash​ is the most liquid asset, while ​real estate​, fine art and
collectibles are all relatively illiquid.

30. LIABILTY:​ A liability is a company's financial ​debt​ or obligations that 

arise during the course of its business operations. Liabilities are settled over 
time through the transfer of economic benefits including money, goods or 
services. Recorded on the right side of the ​balance sheet​, liabilities include 
loans, ​accounts payable​, mortgages, ​deferred revenues​ and ​accrued expenses​. 
 
31. MACROECONOMICS: ​Macroeconomics is a branch of the
economics field that studies how the aggregate economy behaves. In
macroeconomics, a variety of economy-wide phenomena is thoroughly examined
such as, ​inflation​, price levels, rate of growth, national income, ​gross domestic
product​ and changes in unemployment. 

It focuses on trends in the economy and how the economy moves as a whole.

 
32. MICROECONOMICS: ​Microeconomics is the social science that
studies the implications of individual human action, specifically about how those
decisions affect the utilization and distribution of scarce resources.
Microeconomics shows how and why different goods have different values, how
individuals make more efficient or more productive decisions, and how
individuals best coordinate and cooperate with one another. Generally speaking,
microeconomics is considered a more complete, advanced and settled science
than macroeconomics.
33. MONOPOLY: ​In business terms, a monopoly refers to a sector or
industry dominated by one corporation, firm or entity.

Monopolies can be considered a extreme result of ​free market​ ​capitalism​: Absent

any restriction or restraints, a single company or group an enterprise becomes
big enough to own all or nearly all of the market (goods, supplies, commodities,
infrastructure and assets) for a particular type of product or service. ​Antitrust​ laws
and regulations are put in place to discourage monopolistic operations –
protecting consumers, prohibiting practices that restrain trade and ensuring a
marketplace remains open and competitive.

"Monopoly" can also be used to mean the entity that has total or near-total
control of a market.

34. MONOPOLISTIC MARKET: ​A monopolistic market is a

theoretical construct in which only one company may offer products and services
to the public. This is the opposite of a perfectly competitive market, in which an
infinite number of firms operate. In a purely monopolistic model, the monopoly
firm is able to restrict output, raise prices and enjoy super-normal profits in the
long run.

35. MONOPSONY: ​A monopsony, sometimes referred to as a ​buyer's

monopoly​, is a market condition similar to a ​monopoly​ except that a large buyer,
not a seller, controls a large proportion of the market and drives prices down.

A monopsony occurs when a single firm has market power in employing its
factors of production. It acts as a sole purchaser for multiple sellers, driving down
the price of seller inputs through the amount of quantity that it demands​.

36. NATIONALISATION: ​Nationalization refers to the process of a

government taking control of a company or industry, which generally occurs
without compensation for the loss of the ​net worth​ of seized assets and potential
income. The action may be the result of a nation's attempt to consolidate power,
resentment of foreign ownership of industries representing significant importance
to local economies or to prop up failing industries.

37. OLIGOPOLISTIC MARKET: ​Oligopoly is a market structure in

which a small number of firms has the large majority of ​market share​. An
oligopoly is similar to a ​monopoly​, except that rather than one firm, two or more
firms dominate the market. There is no precise upper limit to the number of firms
in an oligopoly, but the number must be low enough that the actions of one firm
significantly impact and influence the others.

38. OPEN MARKET: ​An open market is an economic system with no

barriers to ​free market​ activity. An open market is characterized by the absence
of ​tariffs​, taxes, licensing requirements, ​subsidies​, unionization and any other
regulations or practices that interfere with the natural functioning of the free
market. Anyone can participate in an open market; there may be competitive
barriers to entry, but there are no regulatory ​barriers to entry​.

39. PEGGING : ​Pegging is a method of stabilizing a country's currency

by ​fixing​ its ​exchange rate​ to that of another country. This term also refers to the
practice of an investor buying ​large amounts of an underlying commodity​ or
security close to the ​expiration date​ of a ​derivative​ held by that investor. This is
done to encourage a favorable move in ​market price​ of the ​underlying security​ or
commodity, which may increase the value of the derivative.
If a country’s currency value has large fluctuations, foreign companies have a
more difficult time operating and generating a profit. If a U.S. company operates
in Brazil, for example, the firm has to convert U.S. dollars into Brazilian reals to
fund the business. If the value of Brazil’s currency changes dramatically
compared to the dollar, the U.S. company may incur a loss when it converts back
into U.S. dollars. This form of ​currency risk​ makes it difficult for a company to
manage its finances. To minimize currency risk, many countries peg an
exchange rate to that of the United States, which has a large and stable
economy.

40. PROFIT: ​Profit is a financial benefit that is realized when the amount of
revenue gained from a business activity exceeds the expenses, costs and taxes
needed to sustain the activity. Any profit that is gained goes to the business's
owners, who may or may not decide to spend it on the business.

Calculated as:
41. PURCHASING POWER PARITY: ​Macroeconomic analysis
relies on several different metrics to compare economic productivity and
standards of living between countries and across time. One popular metric
is ​purchasing power parity (PPP)​.

Purchasing Power Parity (PPP) is an economic theory that compares different

countries' currencies through a market "basket of goods" approach. According to
this concept, two currencies are in equilibrium or at par when a market basket of
goods (taking into account the exchange rate) is priced the same in both
countries.

This is how the relative version of PPP is calculated:

Where:

"S" represents exchange rate of ​currency​ 1 to currency 2

"P​1​" represents the cost of good "x" in currency 1

"P​2​" represents the cost of good "x" in currency 2

To make a comparison of prices across countries that holds any type of meaning,
a wide range of goods and services must be considered. The amount of data that
must be collected, and the complexity of drawing comparisons makes this
process difficult. To facilitate this, the International Comparisons Program (ICP)
was established in 1968 by the University of Pennsylvania and the ​United
Nations​. Purchasing power parities generated by the ICP are based on a
worldwide price survey that compares the prices of hundreds of various goods.
This data, in turn, helps international macroeconomists come up with estimates
of global productivity and growth.
Every three years, ​the World Bank​ constructs and releases a report that
compares various countries in terms of PPP and U.S. dollars.

Both the International Monetary Fund (IMF) and the Organization for Economic
Cooperation and Development (OECD) use weights based on PPP metrics to
make predictions and recommend economic policy.

These actions often impact financial markets in the short run.

Some ​forex traders​ also use PPP to find potentially overvalued or undervalued
currencies. Investors who hold stock or bonds of foreign companies may survey
PPP figures to predict the impact of exchange-rate fluctuations on a country's
e​conomy.

42: RECESSION: ​A recession is a significant decline in activity across the

economy, lasting longer than a few months. It is visible in industrial production,
employment, ​real income​ and wholesale-retail trade. The ​technical indicator​ of a
recession is two consecutive quarters of negative ​economic growth​ as measured
by a country's ​gross domestic product (GDP)

43. REVENUE: ​Revenue is the amount of money that a company actually

receives during a specific period, including discounts and deductions for returned
merchandise. It is the "top line" or "gross income" figure from which costs are subtracted
to determine net income.

Revenue is calculated by multiplying the price at which goods or services are sold by
the number of units or amount sold.

Revenue is also known as "REVs."

44. SHARES: ​Shares are units of ownership interest in

a ​corporation​ or ​financial asset​ that provide for an equal distribution in any
profits, if any are declared, in the form of ​dividends​. The two main types of
shares are common shares and ​preferred shares​. Physical paper ​stock
certificates​ have been replaced with electronic recording of stock shares, just
as ​mutual fund​shares are recorded electronically.
When establishing a corporation, owners may choose to issue common stock or
preferred stock.

Most companies issue common stock. The stock may benefit shareholders
through appreciation and dividends, making common stock riskier than preferred
stock. Common stock also comes with voting rights, giving shareholders more
control over the business. In addition, certain common stock comes with
pre-emptive rights, ensuring that shareholders may buy new shares and retain
their percentage of ownership when the corporation issues new stock.

In contrast, preferred stock typically does not offer appreciation in value or voting
rights in the corporation. However, the stock typically has set payment criteria; a
dividend that is paid out regularly, making the stock less risky than common
stock. Also, preferred stock may often be redeemed at a more beneficial price
than common stock. Because preferred stock takes priority over common stock,
if the business files for bankruptcy and pays its lenders, preferred shareholders
receive payment before common shareholders.

45. STOCK: ​A stock is a type of security that signifies ownership in

a ​corporation​ and represents a claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. ​Common stock​ usually
entitles the owner to vote at shareholders' meetings and to receive dividends. ​Preferred
stock​ generally does not have ​voting rights​, but has a higher claim on assets
and ​earnings​ than the common shares. For example, owners of preferred stock
receive ​dividends​ before ​common shareholders​ and have priority in the event that a
company goes bankrupt and is liquidated.

Also known as "shares" or "equity."

46. STAKEHOLDERS: ​A stakeholder is a party that has an interest in a 

company, and can either affect or be affected by the business. The primary 
stakeholders in a typical corporation are its ​investors​, employees and 
customers. However, the modern theory of the idea goes beyond this original 
notion to include additional stakeholders such as a community, government or 
trade association. 
Stakeholders can be internal or external. Internal stakeholders are people whose 
interest in a company comes through a direct relationship, such as through 
employment, ownership or investment. External stakeholders are those people 
who do not directly work with a company but are affected in some way by the 
actions and outcomes of said business. Suppliers, creditors and public groups 
are all considered external stakeholders.
 
 
47. STAGFLATION: ​A condition of slow ​economic growth​ and relatively
high ​unemployment​ – economic ​stagnation​ – accompanied by rising prices, or
inflation, or inflation and a decline in Gross Domestic Product (​GDP​). Stagflation
is an economic problem defined in equal parts by its rarity and by the lack of
consensus among academics on how exactly it comes to pass.

Usually, when ​unemployment​ is high, spending declines, as do prices of goods.

Stagflation occurs when the prices of goods rise while unemployment increases
and spending declines. Stagflation can prove to be a particularly tough problem
for governments to deal with due to the fact that most policies designed to
lower ​inflation​tend to make it tougher for the unemployed, and policies designed
to ease unemployment raise inflation.

This happened in the United States during the 1970s when world oil prices rose
dramatically, increasing the costs of goods and contributing to a increase in
unemployment. The following stagnation increased the inflationary effects on the
economy. Since the crisis in the 1970s, there has been little consensus on what
exactly caused the economic problem. Each school of economics offers their
own understanding on what exactly went wrong and why.

48. SUBSIDY: ​A subsidy is a benefit given by the government to groups or

individuals, usually in the form of a cash payment or a tax reduction. The subsidy
is typically given to remove some type of burden, and it is often considered to be
in the overall interest of the public.
Often considered a form of financial aid, a subsidy is a payment, provided directly
or indirectly, that provides a concession to the receiving individual or business
entity. Subsidies are generally seen as privileges, as they lessen an associated
burden that was previously levied against the receiver or promote a particular
action by providing financial support.

A subsidy is generally used as a form of support for particular portions of a

nation’s economy. It can assist struggling markets by lowering the burdens
placed on them, or encourage new developments by providing financial support
for the endeavors. Often, these areas are not being effectively supported through
the actions of the general economy, or may be undercut by activities in rival
economies.

49.SUPPLY: ​Supply is a fundamental economic concept that describes the

total amount of a specific good or service that is available to consumers. Supply
can relate to the amount available at a specific price or the amount available
across a range of prices if displayed on a graph. This relates closely to
the ​demand​ for a good or service at a specific price; all else being equal, the
supply provided by producers will rise if the price rises because all firms look to
maximize ​profits​.

Supply and demand​ trends form the basis of the modern economy. Each specific
good or service will have its own supply and demand patterns based on
price, ​utility​ and personal preference. If people demand a good and are willing to
pay more for it, producers will add to the supply. As the supply increases, the
price will fall given the same level of demand. Ideally, markets will reach a point
of ​equilibrium​ where the supply equals the demand (no excess supply and no
shortages) for a given price point; at this point, consumer utility and producer
profits are maximized.

The concept of supply in economics is complex with many mathematical

formulas, practical applications and contributing factors. While supply can refer to
anything in demand that is sold in a competitive marketplace, supply is most
used to refer to goods, services or labor. One of the most important factors that
affects supply is the good’s price. Generally, if a good’s price increases so will
the supply. The price of related goods and the price of inputs (energy, raw
materials, labor) also affect supply as they contribute to increasing the overall
price of the good sold.

The conditions of the production of the item in supply is also significant; for
example, when a technological advancement increases the quality of a good
being supplied, or if there is a ​disruptive innovation​, such as when a
technological advancement renders a good obsolete or less in demand.
Government regulations can also affect supply, such as environmental laws, as
well as the number of suppliers (which increases competition) and market
expectations. An example of this is when environmental laws regarding the
extraction of oil affect the supply of such oil.

Supply is represented in ​microeconomics​ by a number of mathematical formulas.

The supply function and equation expresses the relationship between supply and
the affecting factors, such as those mentioned above or even inflation rates and
other market influences. A supply curve always describes the relationship
between the price of the good and the quantity supplied. A wealth of information
can be gleaned from a supply curve, such as movements (caused by a change in
price), shifts (caused by a change that is not related to the price of the good) and
price ​elasticity​.

50. TARIFF: ​A tax imposed on imported goods and services. Tariffs are
used to restrict trade, as they increase the price of imported goods and services,
making them more expensive to consumers. A specific tariff is levied as a fixed
fee based on the type of item (e.g., $1,000 on any car). An ​ad-valorem tariff​ is
levied based on the item’s value (e.g., 10% of the car’s value). Tariffs provide
additional revenue for governments and domestic producers at the expense of
consumers and foreign producers. They are one of several tools available to
shape trade policy.

Governments may impose tariffs to raise revenue or to protect domestic

industries from foreign competition, since consumers will generally purchase
foreign-produced goods when they are cheaper. While consumers are not legally
prohibited from purchasing foreign-produced goods, tariffs make those goods
more expensive, which gives consumers an incentive to buy domestically
produced goods that seem competitively priced or less expensive by comparison.
Tariffs can make domestic industries less efficient, since they aren’t subject to
global competition. Tariffs can also lead to ​trade wars​ as exporting countries
reciprocate with their own tariffs on imported goods. Groups such as the ​World
Trade Organization​ exist to combat the use of egregious tariffs.

Governments typically use one of the following justifications for implementing

tariffs:

● To protect domestic jobs. If consumers buy less-expensive foreign goods,

workers who produce that good domestically might lose their jobs.
● To protect infant industries. If a country wants to develop its own industry
producing a particular good, it will use tariffs to make it more expensive for
 consumers to purchase the foreign version of that good. The hope is that
they will buy the domestic version instead and help that industry grow.
● To retaliate against a trading partner. If one country doesn’t play by the
trade rules both countries previously agreed on, the country that feels jilted
might impose tariffs on its partner’s goods as a punishment. The higher
price caused by the tariff should cause purchases to fall.
● To protect consumers. If a government thinks a foreign good might be
harmful, it might implement a tariff to discourage consumers from buying it.

PART II : IMPORTANT EVENTS AND ORGANISATIONS

1.) ORGANISATION OF PETROLEUM EXPORTING 

COUNTRIES (OPEC): 

 
The Organization of the Petroleum Exporting Countries (OPEC) was founded in
Baghdad, Iraq, with the signing of an agreement in September 1960 by five
countries namely Islamic Republic of Iran, Iraq, Kuwait, Saudi Arabia and
Venezuela. They were to become the Founder Members of the Organization.

These countries were later joined by Qatar (1961), Indonesia (1962), Libya
(1962), the United Arab Emirates (1967), Algeria (1969), Nigeria (1971), Ecuador
(1973), Gabon (1975), Angola (2007) and Equatorial Guinea (2017).

OPEC had its headquarters in Geneva, Switzerland, in the first five years of its
existence. This was moved to Vienna, Austria, on September 1, 1965.

In accordance with its ​Statute​, the mission of the Organization of the Petroleum
Exporting Countries (OPEC) is to coordinate and unify the petroleum policies of
its Member Countries and ensure the stabilization of oil markets in order to
secure an efficient, economic and regular supply of petroleum to consumers, a
steady income to producers and a fair return on capital for those investing in the
petroleum industry.

OPEC’s formation by five oil-producing developing countries in Baghdad in

September 1960 occurred at a time of transition in the international economic
and political landscape, with extensive decolonization and the birth of many new
independent states in the developing world. The international oil market was
dominated by the “Seven Sisters” multinational companies and was largely
separate from that of the former Soviet Union (FSU) and other centrally planned
economies (CPEs). OPEC developed its collective vision, set up its objectives
and established its Secretariat, first in Geneva and then, in 1965, in Vienna. It
adopted a ‘Declaratory Statement of Petroleum Policy in Member Countries’ in
1968, which emphasized the inalienable right of all countries to exercise
permanent sovereignty over their natural resources in the interest of their
national development. Membership grew to ten by 1969.

2. SEVEN SISTERS: 
  
Seven Sisters Oil Companies is a phrase that was made famous by Italian state
oil Company ENI Chief and Italian businessmen Enrico Mattei back in the 1950s.
Mattei used this phrase disparagingly, which he coined in order to refer to the
seven Anglo-American oil companies that had formed the “Consortium for Iran”
cartel. They became so powerful that they soon dominated the universe of the
worldwide petroleum industry in the years from the mid 1940s through the early
1970s.
The group was made up of seven American and British firms Anglo Persian Oil
Company (today’s British Petroleum), Gulf Oil (most of which became part of
British Petroleum and the other parts which joined Chevron), Standard Oil of
California or SoCal (today’s Chevron), Texaco (later a part of Chevron in
a ​merger​), London headquartered Royal Dutch Shell, Standard Oil Company of
New Jersey (Esso which became Exxon), and Standard Oil Company of New
York or Socony (Mobil, which merged with Exxon to become ExxonMobil).
Before the 1973 oil crisis, the different companies from the Seven Sisters
controlled approximately 85 percent of the global oil reserves. Since then, this
has shifted dramatically away from the Seven Sisters Oil Companies over to a
combination of the ​OPEC​ oil cartel nations as well as several state controlled gas
and oil companies in the emerging world economies. These include notably
Gazprom of Russia, Saudi Aramco of Saudi Arabia, China National
Petroleum ​Corporation​, PDVSA/Citgo of Venezuela, National Iranian Oil
Company, Petrobras of Brazil, and Petronas of Malaysia.
The Seven Sisters Oil Companies’ common history stretches back to the Iranian
1951 nationalization of its foreign dominated oil industry. The Anglo-Iranian Oil
Company, which became BP, at this time controlled the Iranian oil industry.
Because Iran opted to nationalize its ​assets​ and seize the petroleum reserves,
the international community placed an ​embargo​ on Iran. Once Iran agreed to
return to the international oil markets, the State Department of the United States
suggested that the oil majors create a major oil companies consortium.
Interestingly enough, a few of them were the scions of billionaire oil man John D.
Rockefeller and his original American oil ​monopoly​ the Standard Oil Company.
As a result of the State Department’s appeal, the “Consortium for Iran” arose and
saw seven oil majors brought on board the lucrative and influential project.
Anglo Persian Oil Company of the United Kingdom was the original player in Iran
and a major player in the Seven Sisters Oil Companies consortium for Iran. The
company changed names to the Anglo-Iranian Oil Company before finally
becoming British Petroleum. After the company took over the Standard Oil
Company of Indiana, which was better known as Amoco, and Gulf branded gas
stations, British Petroleum shortened their name to BP back in 2000.
American Gulf Oil was the second company. SoCal acquired much of Gulf in
1984, and this larger firm changed its name to Chevron. Though some of its Gulf
service stations in the Northeastern part of the U.S. still bear the Gulf name, the
majority of these were bought out in the East coast by either BP or Cumberland
Farms.
Royal Dutch Shell of Great Britain and the Netherlands was the third company.
American Texaco was the fourth company. They were absorbed by Chevron in
2001. Chevron itself arose from the fifth company in the consortium Standard Oil
of California, or the SoCal company of the United States. It changed its name to
Chevron in 1984 after acquiring much of Gulf Oil.
The sixth company was American Standard Oil of New Jersey, or Esso. It later
changed its name to Exxon before renaming itself Exxon Mobil in 1999 after it
acquired the seventh consortium member Mobil. The American company Mobil
itself was earlier known as Standard Oil Co. of New York, or Socony.
Interestingly enough, all of these oil companies were either American or British
headquartered. ENI, the state oil company of Italy, wished to be a member of the
Consortium for Iran, but was turned away by the other members of the
Anglo-Saxon controlled Seven Sisters Oil Companies. These seven companies
went on to dominate the oil production of the Middle East following the Second
World War.
Because they were well-funded and -organized and operated effectively as an
economic cartel, these Seven Sisters managed to exercise great power over the
resources, markets, and politics of the Third World oil producers. Yet the power
of these seven original oil behemoths became challenged by the rise of OPEC,
which was established in 1960. The rise of the all-powerful state owned and run
oil companies in many emerging national economies also dealt the Seven Sisters
a body blow. Finally, there was a deteriorating global share of both gas and oil
reserves held by their home countries of the United States and Great Britain over
the years that weakened their home markets in the world oil production arena.
Today only four of the original seven sisters remain, thanks to merger
and ​acquisition​ activities over the intervening decades. This became necessary
for the oil majors to compete against OPEC and the state owned oil companies.
The remaining entities are now BP, ExxonMobil, Chevron (Texaco), and Royal
Dutch Shell. They are collectively a part of the seven or eight super-major oil
companies of the globe also called Big Oil.

3. US FOREIGN MIDDLE EAST POLICY: ​American policy

during the ​Cold War​ tried to prevent ​Soviet Union​ influence by supporting
anti-communist regimes and backing ​Israel​ against
Soviet-sponsored ​Arab​ countries. The U.S. also came to replace the ​United
Kingdom​ as the main security patron of the ​Persian Gulf​ states in the 1960s and
1970s, working to ensure a stable flow of Gulf ​oil​.

The contradicting policy of the US backing Israel against the Arab countries and
buying oil from the OPEC countries was one of the main causes behind the
OPEC Oil Crisis of 1973.

4. COLD WAR POLITICS IN THE MIDDLE EAST: 

  
This topic focuses on the Cold War between 1955 and 1983, largely with respect
to the Arab-Israeli conflict. Soviet interests in the Middle East throughout the Cold
war were threefold. First, the Soviets attempted to achieve strategic parity with
the United States, by expanding its naval and military reach through Middle
Eastern ports and bases, and securing positions of geostrategic strength.
Second, with the Soviets intent upon the ideological domination of Eurasia, the
Soviets nurtured local Communist movements in the Middle East, and curried
favor with anti-Israeli, nationalist, Middle Eastern regimes. Finally, the Soviets,
recognizing the necessity of prolonged entrenchment in the Middle East to
achieve long-term ambitions of hegemony, “sought to prevent the alleviation of
regional conflict thereby assuring the USSR of continued access to the region,
while also seeking to prevent the escalation of these conflicts to the level of
superpower confrontation”. Against this agenda of Soviet power projection and
the integration of the Middle East into the Soviet sphere of interest, the United
State’s ambition in the region were largely the opposite. America sought to deny
the Soviets access to Middle Eastern territory and, through the policy of
containment, inhibit the expansion of the Soviet sphere of influence. This
defensive agenda has been complemented by the guardianship of Israel,
attempts to broker Arab Israeli peace, and preserve US access to oil.

The central strategic agenda of the Soviet Union, as mentioned, was neutralizing
the American strategic advantage in Eurasia, and assuming a position of
increased geostrategic strength through establishing naval and military bases
throughout the region. In this regard, the Soviets, beginning in 1955, found a
promising start and fertile grounds for Soviet expansion in Syria and Egypt. With
Egypt at the cultural and political center of the Arab world, and the acutely felt
vulnerability of Syria to the adjoining Israel and unfriendly Western-backed
neighbors, the Soviets were able to exploit the “tide of Arab nationalism
and…Arab-Israeli enmity”. Given ready recipients of patronage, the Soviets “by
meeting Abdel Nasser’s need for massive deliveries of modern arms in 1955
[and] by taking up the role of arms supplier and protector of…Syria”, in addition
to “Soviet political support in response to the Suez crisis which persisted through
the Six-Day war” reaped substantial strategic dividends. Soviet provision of
patronage, resulted in “accommodation of Soviet strategic interests, in the form
of naval and air facilities”.

The aforementioned Soviet military entrenchment neutralized the American

strategic advantage in several respects. First, Hanson Baldwin asserts that
“Soviet control of bases in Egypt and Syria…neutralize[d] the present Western
geographic and base advantage” held in Saudi Arabia and Cyprus. Simply put,
Soviets now had bases that numerically rivaled that of America in the Middle
East. Further, however, with access to “strategic bomber bases” within range of
America’s European allies, the Soviet nuclear deterrent capability was much
enhanced. With regards to naval power, the Soviets, abetted by newfound “use
of facilities in Alexandria, Port Said [and] Latkia” were able to redress a great
source of Soviet weakness: Western control of the Mediterranean. With the
deployment of the US sixth fleet and Polaris nuclear submarines, outflanking “the
strong Soviet positions in the Eastern European satellites and in Western
Russia”, the West maintained a permanent and proximate threat to vulnerable
Soviet territory. Accordingly, as Syrian and Egyptian ports provided inroads into
the Mediterranean, the Soviet embarked upon a rapid naval buildup in the region,
creating a permanent Mediterranean force. With “the presence of the Soviet
squadron [demonstrating] the Mediterranean is no longer an American lake”,
Soviet control of Middle Eastern naval facilities, “had the specific purpose of
buttressing Soviet freedom of action and limiting that of the United States”.

Clearly then, the Soviets were able to parlay anti-Western sentiment, and
provision of arms, aid and assistance, into strategic strength. However, the
sources of Soviet strength also proved its limits: where anti-Israeli or
anti-American sentiment ran dry, the Soviets made little headway. Thus,
throughout the Cold War, the Soviets were largely unable to overcome the
entrenchment of the United States in the most strategically valuable areas:
Turkey, and Iran under the Shah. This “Northern Tier”, contiguous to Soviet
territory, “continued to look to the United States for its supply of modern arms
[and] has held to its security agreements with the United States…and to NATO”.
Despite employing the strategy of aid in exchange for influence, in increasing
Soviet-Turkish trade, and extending “credits totaling $500 million” to Iran in 1965,
the Soviets had little success in lowering the Northern Tier’s “barrier to direct
territorial contact between the Soviet Union and its allies in the Arab world”.
Thus, despite Soviet strategic gains, and the partial outflanking of the northern
Tier, the US geostrategic advantage, though eroded, remained.

Further highlighting the limits of Soviet strength, was its inability to expand its
ideological sphere alongside its sphere of influence. The historical record does
not corroborate the assertion that “indigenous Communists…aided with funds,
propaganda, arms and experts” were effective in nurturing “creeping
communism, internal subversion, and conquest by proxy”. Indeed, in this regard,
Soviet penetration must be considered an absolute failure. As Fred Halliday
observes, the Soviets “did not produce a pro-Soviet revolutionary movement” in
the Middle East. Further, the only potential mass communist movement of note,
the Tudeh party in Iran, headed by Mossadegh, was peremptorily dealt a fatal
blow by the US coup of 1953. Thus, Walter Lacqueur asserts “a dismal picture
from the communist point of view”, wherein Soviet ideological expansion was
restricted to the sponsorship of politically peripheral local Communists that
proved either impotent resistant to direction from Moscow. With the “Iraqi
communist party…in a state of disarray [and] in Syria, Lebanon, the Sudan and
Yemen pro-Chinese factions…competing with the orthodox communists…the
communist parties [had] no chance to become mass parties”. Robert Freedman
notes that this condition prevailed throughout the Cold war, observing that local
Communist actions unsanctioned by Moscow, such as “the communist supported
coup d’etat in Sudan in 1971…and the activities of the Tudeh party in Khomeini’s
Iran” “caused a sharp deterioration in relations between Moscow and [the local]
Communist party”

Bereft of any substantial ideological attraction, the provision of arms and aid in
exchange for influence was the sole method of enticing Arab clients to the Soviet
standard. To the credit of the Soviets, prior to 1973, it must be said this strategy
served them well: bypassing the Bagdad pact and breaking the monopoly on
arms sales held by the US in the Middle East, the Soviets were able to make
themselves indispensable in fueling the warmaking desires of Arab states in the
Arab Israeli conflict. Lacquer claims that in 1967, Nasser “[seemed] to have
decided that he [had] no choice but to tie his fate to the Soviet alliance and to
become absolutely dependent on this”. Having hitched Egypt to the Soviet
wagon, Nasser “welcomed the presence of Soviet forces in the Mediterranean
and [purged] the army and the state apparatus of all people considered by
Moscow to be undesirable”. The Soviets thus, despite having little success in the
way of cultivating local communism, managed to nonetheless gain a similar
effect in expanding Communist influence. Soviet shows of support, and even
force, in defense of their Arab protégés, as evinced in the replenishing of Arab
military capabilities after the routing of the 1967 war, and in basing of “some
20,000 air and naval personnel in Egypt, which stopped the Israeli raids” of 1970.
also enhanced the Soviet cachet in the Arab world. Prior to 1972, the effectively
monopoly the Soviet Union wielded as the arms dealer of the Arab world,
“enabled the Soviet Union to appear as the only effective guardian of the Arab
countries against a Satanic conspiracy between Israel and the West”.
Nevertheless, notwithstanding the virtues of Soviet patronage, the connection
between arms and influence was tenuous at best. In multiple cases it proved
ineffective to align the interests of client states with the Soviet agenda, or to
housebreak client states to Soviet control. The central example of these failings,
and their undoing of Soviet objectives, is the war of 1973, and the events
immediately preceding and prior, as will be addressed below.

As of the Moscow Summit of 1972, the Soviets found themselves torn between,
“Moscow’s opposition to a war, and the deepening of superpower détente”, and
its countervailing commitment as military patron to an Arab world intent on
prosecuting war against Israel. However, the attempt to frustrate Egypt’s
warmaking plans by denying them “defensive and tactical offensive weapons”,
was met with Sadat’s expulsion of 20,000 Soviet military advisors from Egypt.
Unable to turn Egypt from its course, the Soviets were compelled, with
reluctance, to abandon détente. Nevertheless, the Soviet commitment to détente
again “prompted the Soviet union once again to risk disfavor with the Arabs by
pressing them to agree to a ceasefire almost immediately after the opening of
hostilities”. As demonstrated, the horizon of Soviet superpower ambitions was
restricted, paradoxically, by its regional dependents. The Soviet Union found
itself in a dilemma: it could not relinquish its commitments without resigning its
position of influence yet extension of arms gave clients free rein to pursue
policies running counter to Soviet agenda. Thus, Galia Golan finds the resultant
reluctance to “fulfill the role of warmaker…greatly reduced [Soviet} relevance to
the Arab states”.

Nevertheless, putting the Arab cart before the Soviet horse boded equally ill for a
central US interest in the region: sparing its allies Arab aggression. As Janice
Gross Stein argues, of the “six major attempts to deter military actions of varying
scope and intensity against an ally in the middle east…[the United states] failed
in four of the six cases”. However, the United State’s failure to keep the peace
was far the better of Soviet reluctance to make war. The United States
outclassed the Soviets in one critical respect: it was the sole guarantor of security
to Israel and its regional allies, and could bring overwhelming force to bear in
their defense. By contrast, the Soviet Union, having no leverage over Israel, and
proving unable to bring its Arab allies to the negotiating table, was proving itself
unbearably unattractive in both securing war and peace.
This failure was fatally exacerbated by other Soviet inadequacies. The Soviets,
not only refused to “sell [Sadat] her best fighter planes” but also “insisted he pay
for [arms] in hard currency”.To add insult to injury, not only was it commonly
perceived that “Western arms technology was better than Soviet”, but the sole
regional options for procuring said arms, were “the oil rich Arab gulf states which
were conservative, anti-communist and anti-Soviet”. Sadat, faced with the
choice of an war unwinnable without its obstinate Soviet ally, and a peace
possible only through United States agreement to “push Israel out of the Sinai”,
chose to disengage himself from the Soviet Union.

The secession of the Egyptian satellite from the Soviet Orbit was, as argued by
Efraim Karsh a blow from which the Soviet Union would never wholly recover.
With Egypt “unilaterally [abrogating] its 1971 Friendship and cooperation treaty
with the Soviet Union” the Soviets were severely weakened in three respects.
First, the loss of naval access to Egyptian ports heightened Soviet vulnerability
on its Mediterranean flank. Second, “the loss of Soviet facilites in
Egypt” prompted Moscow, to seek “a strategic alternative” to no avail. Syria,
followed by Libya and Iraq, proved poor successors to Egypt, and equally defiant
of “Soviet attempts at arms blackmail”. This view is substantiated by Karen
Dawisha, who noting that despite “Moscow’s [increased] dependence upon Syria
as the mainstay of its policy in the area”, it was unable to induce the Syrians to
allow the Soviets access to the “extensive repair and resupply facilities in Latakia
and Tartous” to replace those lost in Egypt. Iraq proved no better, outright resign
“to grant the Soviet Union extraterritorial rights for naval facilities”. Thus, with
Syria “ignoring repeated Soviet pleas…to attend the Arab-Israeli peace
conference…in December 1973” and subsequently “[opting] for an American
sponsored disengagement agreement with Israel”, the final Soviet weakness,
marginalization from the Arab-Israeli peace process, became apparent.

It seems therefore, that the Soviets became prisoners of its own practices of
arms provision and exploitation of the Arab Israeli conflict. The former proved too
weak to survive the vigor of the latter. As John Campbell summarizes “the Soviet
position on a settlement makes no hay with the moderates and is too moderate
for the extremists”, resulting in a situation that, by 1983, found “neither the
Egyptians, nor the Lebanese nor the Jordanians nor the Saudis seem to want the
Soviets involved”. The United States had succeeded, almost without caveat, in
implementing containment in the Middle East.

Against Soviet failure, the United States’ Cold War performance in the Middle
East seems pronouncedly positive, in large part due to the fact its interest were
largely centered on frustrating the Soviet agenda. However, the United States
likewise found success on its own strengths as a viable regional peacekeeper,
and, with more extensive basing rights and naval access, the strategic superior
of the Soviets. Nevertheless, two points ought to be raised to qualify American
success. First, the 1973 oil embargo, damaged a US interest remained a
pertinent and permanent US concern in the region prior to, and through, the Cold
War: consistent access to Arab oil. Oil was critical not merely with regard to US
energy security, but also as cheap prices were necessary to rehabilitating the
post-WWII economies of Europe and aiding the economies of the Third World.
Accordingly, the 1973 embargo initially appeared to augur well for the Soviets: it
witnessed a united Arab world arrayed against the United States, and its defense
of Israel, a policy which, in the long term would have aggravated the American
economy and those of its European clients. However, the United States quickly
proved to shift the balance in America’s favor, moderating its position from the
“’no peace, no war’ situation between Israel and the Arabs” towards “insisting on
Israeli concessions to make a settlement possible”. Further, as the United States
retained access to Iranian and Saudi oil throughout the bulk of the Cold War,
while it remained a central US interest, its pertinence in regards to the Cold War
was raised only in 1973, and to a far lesser extent, in 1967.

In conclusion, with the Arab world turning almost unilaterally towards the United
States in arbitrating the conflict, the Soviet Union found itself strategically
emasculated and diplomatically isolated, and thus ultimately unsuccessful in
maintaining a preponderance of influence in the Arab world and resolving its
strategic insecurities. Despite initial successes, the Soviet agenda was frustrated
in two regards. First, despite provision of arms and aid, the Soviets were neither
able to discipline unruly client states, nor permanently align client’s interests with
those of the Soviets. As interests diverged, the Soviets were increasingly
unwilling to perform their role as “warmaker”, by delivering unconditional aid,
arms and protection. Second, the Soviets were entirely unable to function in a
peacemaking or peacekeeping capacity. While, the US maintained a monopoly of
influence over Israel, and was thereby necessary to pursuing a peaceful
resolution to Arab-Israeli conflict, the Soviets had no leverage in that direction.
Further, as the US was capable of reproducing the Soviet strategy of providing
arms for influence, Soviet clients such as Egypt exhibited a disquieting tendency
to “cross the floor”, and solicit American support. The sum effect was to make
America the far more indispensable patron, which served it well in preserving
access to oil and eroding Soviet influence. However, American success
throughout the Cold war was tempered by failures to deter Arab aggression and
the loss of its Iranian ally. Both indicate the US was more successful at
containing Soviet expansion than arresting conflict.
5. THE ARAB-ISRAELI CONFLICT:  

 
​The conflict between Palestinian Arabs and Zionist (now Israeli) Jews is a
modern phenomenon, dating to the end of the nineteenth century. Although the
two groups have different religions (Palestinians include Muslims, Christians and
Druze), religious differences are not the cause of the strife. The conflict began as
a struggle over land. From the end of World War I until 1948, the area that both
groups claimed was known internationally as Palestine. That same name was
also used to designate a less well-defined “Holy Land” by the three monotheistic
religions. Following the war of 1948–1949, this land was divided into three parts:
the State of Israel, the West Bank (of the Jordan River) and the Gaza Strip.
It is a small area—approximately 10,000 square miles, or about the size of the
state of Maryland. The competing claims to the territory are not reconcilable if
one group exercises exclusive political control over all of it. Jewish claims to this
land are based on the biblical promise to Abraham and his descendants, on the
fact that the land was the historical site of the ancient Jewish kingdoms of Israel
and Judea, and on Jews’ need for a haven from European anti-Semitism.
Palestinian Arab claims to the land are based on their continuous residence in
the country for hundreds of years and the fact that they represented the
demographic majority until 1948. They reject the notion that a biblical-era
kingdom constitutes the basis for a valid modern claim. If Arabs engage the
biblical argument at all, they maintain that since Abraham’s son Ishmael is the
forefather of the Arabs, then God’s promise of the land to the children of
Abraham includes Arabs as well. They do not believe that they should forfeit their
land to compensate Jews for Europe’s crimes against Jews.
 The Land and the People
In the nineteenth century, following a trend that emerged earlier in Europe,
people around the world began to identify themselves as nations and to demand
national rights, foremost the right to self-rule in a state of their own
(self-determination and sovereignty). Jews and Palestinians both started to
develop a national consciousness and mobilized to achieve national goals.
Because Jews were spread across the world (in diaspora), the Jewish national
movement, or Zionist trend, sought to identify a place where Jews could come
together through the process of immigration and settlement. Palestine seemed
the logical and optimal place because it was the site of Jewish origin. The Zionist
movement began in 1882 with the first wave of European Jewish immigration to
Palestine.
At that time, the land of Palestine was part of the Ottoman Empire. This area did
not constitute a single political unit, however. The northern districts of Acre and
Nablus were part of the province of Beirut. The district of Jerusalem was under
the direct authority of the Ottoman capital of Istanbul because of the international
significance of the cities of Jerusalem and Bethlehem as religious centers for
Muslims, Christians and Jews. According to Ottoman records, in 1878 there were
462,465 subject inhabitants of the Jerusalem, Nablus and Acre districts: 403,795
Muslims (including Druze), 43,659 Christians and 15,011 Jews. In addition, there
were perhaps 10,000 Jews with foreign citizenship (recent immigrants to the
country) and several thousand Muslim Arab nomads (Bedouin) who were not
counted as Ottoman subjects. The great majority of the Arabs (Muslims and
Christians) lived in several hundred rural villages. Jaffa and Nablus were the
largest and economically most important towns with majority-Arab populations.
Until the beginning of the twentieth century, most Jews living in Palestine were
concentrated in four cities with religious significance: Jerusalem, Hebron, Safed
and Tiberias. Most of them observed traditional, orthodox religious practices.
Many spent their time studying religious texts and depended on the charity of
world Jewry for survival. Their attachment to the land was religious rather than
national, and they were not involved in—or supportive of—the Zionist movement
that began in Europe and was brought to Palestine by immigrants. Most of the
Jews who emigrated from Europe lived a more secular lifestyle and were
committed to the goals of creating a modern Jewish nation and building an
independent Jewish state. By the outbreak of World War I (1914), the population
of Jews in Palestine had risen to about 60,000, about 36,000 of whom were
recent settlers. The Arab population in 1914 was 683,000.
 The British Mandate in Palestine
By the early years of the twentieth century, Palestine had become a trouble spot
of competing territorial claims and political interests. The Ottoman Empire was
weakening, and European powers were strengthening their grip on areas along
the eastern Mediterranean, including Palestine. During 1915–1916, as World
War I was underway, the British high commissioner in Egypt, Sir Henry
McMahon, secretly corresponded with Husayn ibn ‘Ali, the patriarch of the
Hashemite family and Ottoman governor of Mecca and Medina. McMahon
convinced Husayn to lead an Arab revolt against the Ottoman Empire, which was
aligned with Germany against Britain and France in the war. McMahon promised
that if the Arabs supported Britain in the war, the British government would
support the establishment of an independent Arab state under Hashemite rule in
the Arab provinces of the Ottoman Empire, including Palestine. The Arab revolt,
led by Husayn’s son Faysal and T. E. Lawrence (“Lawrence of Arabia”), was
successful in defeating the Ottomans, and Britain took control over much of this
area during World War I.
But Britain made other promises during the war that conflicted with the
Husayn-McMahon understandings. In 1917, the British foreign minister, Lord
Arthur Balfour, issued a declaration (the Balfour Declaration) announcing his
government’s support for the establishment of “a Jewish national home in
Palestine.” A third promise, in the form of the Sykes-Picot Agreement, was a
secret deal between Britain and France to carve up the Arab provinces of the
Ottoman Empire and divide control of the region.

After the war, Britain and France convinced the new League of Nations
(precursor to the United Nations), in which they were the dominant powers, to
grant them quasi-colonial authority over former Ottoman territories. The British
and French regimes were known as mandates. France obtained a mandate over
Syria, carving out Lebanon as a separate state with a (slight) Christian majority.
Britain obtained a mandate over Iraq, as well as the area that now comprises
Israel, the West Bank, the Gaza Strip and Jordan.
In 1921, the British divided this latter region in two: East of the Jordan River
became the Emirate of Transjordan, to be ruled by Faysal’s brother ‘Abdallah,
and west of the Jordan River became the Palestine Mandate. It was the first time
in modern history that Palestine became a unified political entity.
Throughout the region, Arabs were angered by Britain’s failure to fulfill its
promise to create an independent Arab state, and many opposed British and
French control as a violation of Arabs’ right to self-determination. In Palestine,
the situation was more complicated because of the British promise to support the
creation of a Jewish national home. The rising tide of European Jewish
immigration, land purchases and settlement in Palestine generated increasing
resistance by Palestinian peasants, journalists and political figures. They feared
that the influx of Jews would lead eventually to the establishment of a Jewish
state in Palestine. Palestinian Arabs opposed the British Mandate because it
thwarted their aspirations for self-rule, and they opposed massive Jewish
immigration because it threatened their position in the country.
In 1920 and 1921, clashes broke out between Arabs and Jews in which roughly
equal numbers from both communities were killed. In the 1920s, when the
Jewish National Fund purchased large tracts of land from absentee Arab
landowners, the Arabs living in these areas were evicted. These displacements
led to increasing tensions and violent confrontations between Jewish settlers and
Arab peasant tenants.
In 1928, Muslims and Jews in Jerusalem began to clash over their respective
communal religious rights at the Western (or Wailing) Wall. The Wall, the sole
remnant of the second Jewish Temple, is the holiest site in the Jewish religious
tradition. Above the Wall is a large plaza known as the Temple Mount, the
location of the two ancient Israelite temples (though no archaeological evidence
has been found for the First Temple). The place is also sacred to Muslims, who
call it the Noble Sanctuary. It now hosts the al-Aqsa Mosque and the Dome of
the Rock, believed to mark the spot from which the Prophet Muhammad
ascended to heaven on a winged horse, al-Buraq, that he tethered to the
Western Wall, which bears the horse’s name in the Muslim tradition.
On August 15, 1929, members of the Betar Jewish youth movement (a pre-state
organization of the Revisionist Zionists) demonstrated and raised a Zionist flag
over the Western Wall. Fearing that the Noble Sanctuary was in danger, Arabs
responded by attacking Jews in Jerusalem, Hebron and Safed. Among the dead
were 64 Jews in Hebron. Their Muslim neighbors saved many others. The
Jewish community of Hebron ceased to exist when its surviving members left for
Jerusalem. During a week of communal violence, 133 Jews and 115 Arabs were
killed and many wounded.
European Jewish immigration to Palestine increased dramatically after Hitler’s
rise to power in Germany in 1933, leading to new land purchases and Jewish
settlements. Palestinian resistance to British control and Zionist settlement
climaxed with the Arab revolt of 1936–1939, which Britain suppressed with the
help of Zionist militias and the complicity of neighboring Arab regimes. After
crushing the Arab revolt, the British reconsidered their governing policies in an
effort to maintain order in an increasingly tense environment. They issued the
1939 White Paper (a statement of government policy) limiting future Jewish
immigration and land purchases and promising independence in ten years, which
would have resulted in a majority-Arab Palestinian state. The Zionists regarded
the White Paper as a betrayal of the Balfour Declaration and a particularly
egregious act in light of the desperate situation of the Jews in Europe, who were
facing extermination. The 1939 White Paper marked the end of the British-Zionist
alliance. At the same time, the defeat of the Arab revolt and the exile of the
Palestinian political leadership meant that the Palestinians were politically
disorganized during the crucial decade in which the future of Palestine was
decided.
 The United Nations Partition Plan
Following World War II, hostilities escalated between Arabs and Jews over the
fate of Palestine and between the Zionist militias and the British army. Britain
decided to relinquish its mandate over Palestine and requested that the recently
established United Nations determine the future of the country. But the British
government’s hope was that the UN would be unable to arrive at a workable
solution, and would turn Palestine back to them as a UN trusteeship. A
UN-appointed committee of representatives from various countries went to
Palestine to investigate the situation. Although members of this committee
disagreed on the form that a political resolution should take, the majority
concluded that the country should be divided (partitioned) in order to satisfy the
needs and demands of both Jews and Palestinian Arabs. At the end of 1946,
1,269,000 Arabs and 608,000 Jews resided within the borders of Mandate
Palestine. Jews had acquired by purchase about 7 percent of the total land area
of Palestine, amounting to about 20 percent of the arable land.

On November 29, 1947, the UN General Assembly voted to partition Palestine

into two states, one Jewish and the other Arab. The UN partition plan divided the
country so that each state would have a majority of its own population, although
a few Jewish settlements would fall within the proposed Arab state while
hundreds of thousands of Palestinian Arabs would become part of the proposed
Jewish state. The territory designated for the Jewish state would be slightly larger
than the Arab state (56 percent and 43 percent of Palestine, respectively,
excluding Jerusalem), on the assumption that increasing numbers of Jews would
immigrate there. According to the UN partition plan, the area of Jerusalem and
Bethlehem was to become an international zone.
Publicly, the Zionist leadership accepted the UN partition plan, although they
hoped somehow to expand the borders assigned to the Jewish state. The
Palestinian Arabs and the surrounding Arab states rejected the UN plan and
regarded the General Assembly vote as an international betrayal. Some argued
that the UN plan allotted too much territory to the Jews. Most Arabs regarded the
proposed Jewish state as a settler colony and argued that it was only because
the British had permitted extensive Zionist settlement in Palestine against the
wishes of the Arab majority that the question of Jewish statehood was on the
international agenda at all.
Fighting began between the Arab and Jewish residents of Palestine days after
the adoption of the UN partition plan. The Arab military forces were poorly
organized, trained and armed. In contrast, Zionist military forces, although
numerically smaller, were well organized, trained and armed. By early April 1948,
the Zionist forces had secured control over most of the territory allotted to the
Jewish state in the UN plan and begun to go on the offensive, conquering
territory beyond the partition borders, in several sectors.
On May 15, 1948, the British evacuated Palestine, and Zionist leaders
proclaimed the State of Israel. Neighboring Arab states (Egypt, Syria, Jordan and
Iraq) then invaded Israel, claiming that they sought to “save” Palestine from the
Zionists. Lebanon declared war but did not invade. In fact, the Arab rulers had
territorial designs on Palestine and were no more anxious than the Zionists to
see a Palestinian state emerge. During May and June 1948, when the fighting
was most intense, the outcome of this first Arab-Israeli war was in doubt. But
after arms shipments from Czechoslovakia reached Israel, its armed forces
established superiority and conquered additional territories beyond the borders
the UN partition plan had drawn up for the Jewish state.
In 1949, the war between Israel and the Arab states ended with the signing of
armistice agreements. The country once known as Palestine was now divided
into three parts, each under a different political regime. The boundaries between
them were the 1949 armistice lines (the “Green Line”). The State of Israel
encompassed over 77 percent of the territory. Jordan occupied East Jerusalem
and the hill country of central Palestine (the West Bank). Egypt took control of the
coastal plain around the city of Gaza (the Gaza Strip). The Palestinian Arab state
envisioned by the UN partition plan was never established.
 The Palestinian Refugees
As a consequence of the fighting in Palestine/Israel between 1947 and 1949,
over 700,000 Palestinians became refugees. The precise number of refugees is
sharply disputed, as is the question of responsibility for their exodus. Many
Palestinians have claimed that most were expelled in accordance with a Zionist
plan to rid the country of its non-Jewish inhabitants. The official Israeli position
holds that the refugees fled on orders from Arab political and military leaders.
One Israeli military intelligence document indicates that through June 1948 at
least 75 percent of the refugees fled due to military actions by Zionist militias,
psychological campaigns aimed at frightening Arabs into leaving, and dozens of
direct expulsions. The proportion of expulsions is likely higher since the largest
single expulsion of the war—50,000 from Lydda and Ramle—occurred in
mid-July. Only about 5 percent left on orders from Arab authorities. There are
several well-documented cases of massacres that led to large-scale Arab flight.
The most infamous atrocity occurred at Dayr Yasin, a village near Jerusalem,
where the number of Arab residents killed in cold blood by right-wing Zionist
militias was about 125.
 Palestinians

Today this term refers to the Arabs—Christian, Muslim and Druze—whose

historical roots can be traced to the territory of Palestine as defined by the British
mandate borders. Some 5.6 million Palestinians now live within this area, which
is divided between the State of Israel, and the West Bank and Gaza; these latter
areas were captured and occupied by Israel in 1967. Today, over 1.4 million
Palestinians are citizens of Israel, living inside the country’s 1949 armistice
borders and comprising about 20 percent of its population. About 2.6 million live
in the West Bank (including 200,000 in East Jerusalem) and about 1.6 million in
the Gaza Strip. The remainder of the Palestinian people, perhaps another
5.6 million, lives in diaspora, outside the country they claim as their national
homeland.
The largest Palestinian diaspora community, approximately 2.7 million, is in
Jordan. Many of them still live in the refugee camps that were established in
1949, although others live in cities and towns. Lebanon and Syria also have large
Palestinian populations, many of whom still live in refugee camps. Many
Palestinians have moved to Saudi Arabia and other Arab Gulf countries to work,
and some have moved to other parts of the Middle East or other parts of the
world. Jordan is the only Arab state to grant citizenship to the Palestinians who
live there. Palestinians in Arab states generally do not enjoy the same rights as
the citizens of those states. The situation of the refugees in Lebanon is especially
dire; many Lebanese blame Palestinians for the civil war that wracked that
country from 1975–1991, and demand that they be resettled elsewhere in order
for the Lebanese to maintain peace in their country. Some elements of
Lebanon’s Christian population are particularly anxious to rid the country of the
mainly Muslim Palestinians because of their fear that the Palestinians threaten
the delicate balance among the country’s religious groups. Palestinians in Syria
have been caught up in violence since the uprising against the regime there
started in 2011.
Although many Palestinians still live in refugee camps and slums, others have
become economically successful. Palestinians now have the highest per capita
rate of university graduates in the Arab world. Their diaspora experience
contributed to a high level of politicization of all sectors of the Palestinian people,
though this phenomenon faded in the 2000s as political factionalism increased
and the prospects of a Palestinian state receded.
 Palestinian Citizens of Israel
In 1948, only about 150,000 Palestinians remained in the area that became the
State of Israel. They were granted Israeli citizenship and the right to vote. But in
many respects they were and remain second-class citizens, since Israel defines
itself as a Jewish state and the state of the Jewish people, and Palestinians are
non-Jews. Until 1966 most of them were subject to a military government that
restricted their movement and other rights (to work, speech, association and so
on). Arabs were not permitted to become full members of the Israeli trade union
federation, the Histadrut, until 1965. About 40 percent of their lands were
confiscated by the state and used for development projects that benefited Jews
primarily or exclusively. All of Israel’s governments have discriminated against
the Arab population by allocating far fewer resources for education, health care,
public works, municipal government and economic development to the Arab
sector.
Palestinian Arab citizens of Israel have had a difficult struggle to maintain their
cultural and political identity in a state that officially regards expression of
Palestinian or Arab national sentiment as subversive. Until 1967, they were
entirely isolated from the Arab world and often were regarded by other Arabs as
traitors for living in Israel. Since 1967, many have become more aware of their
identity as Palestinians. One important expression of this identity was the
organization of a general strike on March 30, 1976, designated as Land Day, to
protest the continuing confiscation of Arab lands. The Israeli security forces killed
six Arab citizens on that day. All Palestinians now commemorate it as a national
day.
In recent years it has become illegal in Israel to commemorate the ​nakba— ​ the
expulsion or flight of over half the population of Arab Palestine in 1948. Israel’s
Central Elections Committee has several times used patently political criteria to
rule that Arab citizens whose views it found objectionable may not run in
parliamentary elections. While in all cases the decisions were overturned by the
Supreme Court, they contributed to anti-Arab hysteria and anti-democratic
sentiment, which increased dramatically among Jewish Israelis after 2000.
 The June 1967 War
After 1949, although there was an armistice between Israel and the Arab states,
the conflict continued and the region remained imperiled by the prospect of
another war. The sense of crisis was fueled by a spiraling arms race as countries
built up their military caches and prepared their forces (and their populations) for
a future showdown. ​In 1956, Israel joined with Britain and France to attack
Egypt, ostensibly to reverse the Egyptian government’s nationalization of
the Suez Canal (then under French and British control) and to neutralize
Palestinian commando attacks on Israel from the Gaza Strip. Israeli forces
captured Gaza and the Sinai Peninsula, but were forced to retreat to the
armistice lines as a result of international pressure led by the US and the
Soviet Union (in an uncharacteristic show of cooperation to avert further
conflict in the Middle East). By the early 1960s, however, the region was
becoming a hot spot of Cold War rivalry as the US and the Soviet Union
were competing with one another for global power and influence.
In the spring of 1967, the Soviet Union misinformed the Syrian government that
Israeli forces were massing in northern Israel to attack Syria. There was no such
Israeli mobilization. But clashes between Israel and Syria had been escalating for
about a year, and Israeli leaders had publicly declared that it might be necessary
to bring down the Syrian regime if it failed to end Palestinian guerrilla attacks
from Syrian territory.
Responding to a Syrian request for assistance, in May 1967 Egyptian troops
entered the Sinai Peninsula bordering Israel. A few days later, Egyptian
President Gamal Abdel Nasser asked the UN observer forces stationed between
Israel and Egypt to redeploy from their positions. The Egyptians then occupied
Sharm al-Sheikh at the southern tip of the Sinai Peninsula and proclaimed a
blockade of the Israeli port of Eilat on the Gulf of ‘Aqaba, arguing that access to
Eilat passed through Egyptian territorial waters. These measures shocked and
frightened the Israeli public, which believed it was in danger of annihilation.
As the military and diplomatic crisis continued, on June 5, 1967, Israel
preemptively attacked Egypt and Syria, destroying their air forces on the ground
within a few hours. Jordan joined in the fighting belatedly, and consequently was
attacked by Israel as well. The Egyptian, Syrian and Jordanian armies were
decisively defeated, and Israel captured the West Bank from Jordan, the Gaza
Strip and the Sinai Peninsula from Egypt, and the Golan Heights from Syria.
The 1967 war, which lasted only six days, established Israel as the dominant
regional military power. The speed and thoroughness of Israel’s victory
discredited the Arab regimes. In contrast, the Palestinian national movement
emerged as a major actor after 1967 in the form of the political and military
groups that made up the Palestine Liberation Organization (PLO).
 UN Security Council Resolution 242
After the 1967 war, the UN Security Council adopted Resolution 242, which
notes the “inadmissibility of the acquisition of territory by force,” and calls for
Israeli withdrawal from lands seized in the war and the right of all states in the
area to peaceful existence within secure and recognized boundaries. The
grammatical construction of the French version of Resolution 242 says Israel
should withdraw from “the territories,” whereas the English version of the text
calls for withdrawal from “territories.” (Both English and French are official
languages of the UN.) Israel and the United States use the English version to
argue that Israeli withdrawal from some, but not all, the territory occupied in the
1967 war satisfies the requirements of this resolution.
For many years the Palestinians rejected Resolution 242 because it does not
acknowledge their right to national self-determination or to return to their
homeland. It calls only for a “just settlement” of the refugee problem without
specifying what that phrase means. By calling for recognition of every state in the
area, Resolution 242 entailed unilateral Palestinian recognition of Israel without
reciprocal recognition of Palestinian national rights.
 The Occupied Territories

The West Bank and the Gaza Strip became distinct political units as a result of
the 1949 armistice that divided the new Jewish state of Israel from other parts of
Mandate Palestine. During 1948–1967, the West Bank, including East
Jerusalem, was ruled by Jordan, which annexed the area in 1950 and extended
citizenship to Palestinians living there. In the same period, the Gaza Strip was
under Egyptian military administration. In the 1967 war, Israel captured and
occupied these areas.
Israel established a military administration to govern the Palestinian residents of
the occupied West Bank and Gaza. Under this arrangement, Palestinians were
denied many basic political rights and civil liberties, including freedoms of
expression, the press and political association. Palestinian nationalism was
criminalized as a threat to Israeli security, which meant that even displaying the
Palestinian national colors was a punishable act. All aspects of Palestinian life
were regulated, and often severely restricted. Even something as innocuous as
the gathering of wild thyme (​za‘tar​), a basic element of Palestinian cuisine, was
outlawed by Israeli military orders.
Israeli policies and practices in the West Bank and Gaza have included extensive
use of collective punishments such as curfews, house demolitions and closure of
roads, schools and community institutions. Hundreds of Palestinian political
activists have been deported to Jordan or Lebanon, tens of thousands of acres of
Palestinian land have been confiscated, and thousands of trees have been
uprooted.
Israel has relied on imprisonment as one of its key strategies to control the West
Bank and Gaza and to thwart and punish Palestinian nationalist resistance to the
occupation. The number of Palestinians arrested by Israel since 1967 is now
approaching 1 million. Hundreds of thousands of the arrestees have been jailed,
some without trial (administratively detained), but most after being prosecuted in
the Israeli military court system. More than 40 percent of the Palestinian male
population has been imprisoned at least once.
Torture of Palestinian prisoners has been a common practice since at least 1971.
In 1999 Israel’s High Court of Justice forbade the “routine” use of such
techniques. Dozens of people have died in detention from abuse or neglect.
Israeli officials have claimed that harsh measures and high rates of incarceration
are necessary to thwart terrorism. Israel regards all forms of Palestinian
opposition to the occupation as threats to its national security, including
non-violent methods like calling for boycotts, divestment and sanctions.
Israel has built 145 official settlements and about 100 unofficial settlement
“outposts” and permitted 560,000 Jewish citizens to move to East Jerusalem and
the West Bank (as of early 2013). These settlements are a breach of the Fourth
Geneva Convention and other international laws governing military occupation of
foreign territory. Many settlements are built on expropriated, privately owned
Palestinian lands.
Israel justifies its violation of international law by claiming that the West Bank and
the Gaza Strip are not technically “occupied” because they were never part of the
sovereign territory of any state. According to this interpretation, Israel is but an
“administrator” of territory whose status remains to be determined. The
international community has rejected this official Israeli position and maintained
that international law should apply in the West Bank and Gaza. But little effort
has been mounted to enforce international law or hold Israel accountable for
violations it has engaged in since 1967.
Some 7,800 Jewish settlers in the Gaza Strip were repatriated in 2005 following
an Israeli government decision to “evacuate” the territory. Since then, Israel has
maintained control of exit and entry of people and goods to the Gaza Strip and
control of its air space and coastal waters.
 Jerusalem

The UN’s 1947 partition plan advocated that Jerusalem become an international
zone. In the 1948 Arab-Israeli war, Israel took control of the western part of
Jerusalem, while Jordan took the eastern part, including the old walled city
containing important Jewish, Muslim and Christian religious sites. The 1949
armistice line cut the city in two.
In June 1967, Israel captured East Jerusalem from Jordan and almost
immediately annexed it. It reaffirmed its annexation in 1981.
Israel regards Jerusalem as its “eternal capital.” Most of the international
community considers East Jerusalem part of the occupied West Bank.
Palestinians envision East Jerusalem as the capital of a future Palestinian state.
 The Palestine Liberation Organization
The Arab League established the PLO in 1964 as an effort to control Palestinian
nationalism while appearing to champion the cause. The Arab defeat in the 1967
war enabled younger, more militant Palestinians to take over the PLO and gain
some independence from the Arab regimes.
The PLO includes different political and armed groups with varying ideological
orientations. Yasser Arafat was PLO chairman from 1968 until his death in 2004.
He was also the leader of Fatah, the largest PLO group. The other major groups
are the Popular Front for the Liberation of Palestine (PFLP), the Democratic
Front for the Liberation of Palestine (DFLP) and, in the Occupied Territories, the
Palestine Peoples Party (PPP, formerly the Communist Party). Despite these
factional differences, the majority of Palestinians regarded the PLO as their
representative until it began to lose significance after the 1993 Oslo accords and
the establishment of the Palestinian Authority in 1994. Hamas, which is an
Islamist group and not a component of the PLO, emerged in the late 1980s. The
rise of Hamas, especially in the 2000s, further diminished the authority of the
PLO.
In the late 1960s, the PLO’s primary base of operations was Jordan. In
1970–1971, fighting with the Jordanian army drove the PLO leadership out of the
country, forcing it to relocate to Lebanon. When the Lebanese civil war started in
1975, the PLO became a party to the conflict. After the Israeli invasion of
Lebanon in 1982, the PLO leadership was expelled from the country, relocating
once more to Tunisia.
Until 1993, Israel did not acknowledge Palestinian national rights or recognize
the Palestinians as an independent party to the conflict. Israel refused to
negotiate with the PLO, arguing that it was nothing but a terrorist organization,
and insisted on dealing only with Jordan or other Arab states. It rejected the
establishment of a Palestinian state, demanding that Palestinians be
incorporated into the existing Arab states. This intransigence ended when Israeli
representatives entered into secret negotiations with the PLO, which led to the
1993 Oslo Declaration of Principles.
 The October 1973 War and the Role of Egypt
In 1971, Egyptian President Anwar al-Sadat indicated to UN envoy Gunnar
Jarring that he was willing to sign a peace agreement with Israel in exchange for
the return of Egyptian territory lost in 1967 (the Sinai Peninsula). When this
overture was ignored by Israel and the US, Egypt and Syria decided to act to
break the political stalemate. They attacked Israeli forces in the Sinai Peninsula
and the Golan Heights in October 1973, on the Jewish holy day of Yom Kippur.
The surprise attack caught Israel off guard, and the Arabs achieved some early
military victories. This turn of events prompted American political intervention,
along with sharply increased military aid to Israel.
After the war, US Secretary of State Henry Kissinger pursued a diplomatic
strategy of limited bilateral agreements to secure partial Israeli withdrawals from
the Sinai Peninsula and the Golan Heights while avoiding negotiations on more
difficult issues, including the fate of the West Bank and Gaza. This strategy also
positioned the United States as the sole mediator and most significant external
actor in the conflict, a position it has sought to maintain ever since.
6. THE BRETTON WOODS TREATY: 

 
The Bretton Woods system was a remarkable achievement of global
coordination. It established the ​U.S. dollar​ as the ​global currency​, taking the
world off of the ​gold standard​. It created the ​World Bank​ and the ​International
Monetary Fund​. These two global organizations would monitor the new system.
Bretton Woods established America as the dominant power behind these two
organizations and the world economy.
That's because it replaced the gold standard with the U.S. dollar. After the
agreement was signed, America was the only country with the ability to ​print
dollars​.
The Bretton Woods Agreement
The Bretton Woods agreement was created in a 1944 conference of all of the
World War II Allied nations. It took place in Bretton Woods, New Hampshire.
Under the agreement, countries promised that their ​central banks​ would
maintain ​fixed exchange rates​ between their currencies and the dollar. How
exactly would they do this? If a country's currency value became too weak
relative to the dollar, the bank would buy up its currency in ​foreign exchange
markets​. That would decrease the supply, which would raise the price. If
its currency became too high, the bank would print more. That would increase
the supply and lower its price.
Members of the Bretton Woods system agreed to avoid any trade warfare. For
example, they wouldn't lower their currencies strictly to increase trade.
But they could regulate their currencies under certain conditions. For example,
they could take action if ​foreign direct investment​ began to destabilize their
economies. They could also adjust their currency values to rebuild after a war.
How It Replaced the Gold Standard
Before Bretton Woods, most countries followed the ​gold standard​.
That meant each country guaranteed that it would redeem its currency for its
value in gold. After Bretton Woods, each member agreed to redeem its currency
for U.S. dollars, not gold. Why dollars? The United States held three-fourths of
the world's supply of gold. No other currency had enough gold to back it as a
replacement. The dollar's value was 1/35 of an ounce of gold. Bretton Woods
allowed the world to slowly transition from a gold standard to a U.S. dollar
standard.
The dollar had now become a substitute for gold. As a result, the ​value of the
dollar​ began to increase relative to other currencies. There was more ​demand​ for
it, even though its worth in gold remained the same. This discrepancy in value
planted the seed for the collapse of the Bretton Woods system three decades
later.
Why It Was Needed
Until World War I, most countries were on the gold standard. But they went off so
they could print the currency needed to pay for their war costs. It
caused ​hyperinflation​, as the ​supply of money​ overwhelmed the demand.
The ​value of money​ fell so dramatically that, in some cases, people needed
wheelbarrows full of cash just to buy a loaf of bread. After the war, countries
returned to the ​safety of the gold standard​.
All went well until the ​Great Depression​. After the ​1929 stock market crash​,
investors switched to ​forex trading​ and ​commodities​. It drove up the ​price of gold​,
resulting in people redeeming their dollars for gold. The ​Federal Reserve​ made
things worse by defending the nation's gold reserve by raising ​interest rates​. It's
no wonder that countries were ready to abandon a pure gold standard.
The Bretton Woods system gave nations more flexibility than a strict adherence
to the gold standard, but less ​volatility​ than no standard at all. A member country
still retained the ability to alter its currency's value if needed to correct a
"fundamental disequilibrium" in its ​current account balance​.
Role of the IMF and World Bank
The Bretton Woods system could not have worked without the IMF.
That's because member countries needed it to bail them out if their currency
values got too low. They'd need a kind of global central bank they could borrow
from in case they needed to adjust their currency's value, and didn't have the
funds themselves. Otherwise, they would just slap on trade barriers or
raise ​interest rates​.
The Bretton Woods countries decided against giving the IMF the power of a
global central bank, to print money as needed. Instead, they agreed to contribute
to a fixed pool of national currencies and gold to be held by the IMF. Each
member of the Bretton Woods system was then entitled to borrow what it
needed, within the limits of its contributions. The IMF was also responsible for
enforcing the Bretton Woods agreement.
The World Bank, despite its name, was not the world's ​central bank​. At the time
of the Bretton Woods agreement, the World Bank was set up to lend to the
European countries devastated by World War II. Now the purpose of the ​World
Bank​ is to ​loan money​ to economic development projects in ​emerging
market​ countries.
The Collapse of the Bretton Woods System
In 1971, the United States was suffering from massive ​stagflation​. That's a
deadly combination of ​inflation​ and ​recession​. It was partly a result of the dollar's
role as a global currency. In response, ​President Nixon​ started to deflate the
dollar's value in gold. Nixon revalued the dollar to 1/38 of an ounce of gold, then
1/42 of an ounce.
But the plan backfired. It created a run on the U.S. gold reserves at ​Fort Knox​ as
people redeemed their quickly devaluing dollars for gold. In 1973, Nixon
unhooked the value of the dollar from gold altogether. Without price controls,
gold quickly shot up to $120 per ounce in the ​free market​. The Bretton Woods
system was over.
 

 
 

PART III: THE OPEC OIL CRISIS 1973- AN OVERVIEW

PART III, the final section, will include the main agenda of the ECOSOC
committee. It is strongly recommended that you skim through PART I AND II
before starting with PART II.

Once you are well-versed with the Economic terms and the Important events
discussed above, your understanding of the topic will be very clear.

Unlike the above two parts, this one is a rather concise one

PART III will discuss the following points:

● The main issue

● Causes
● Effects
● Timeline
● Conclusion
 
 
During the 1973 Arab-Israeli War, Arab members of the Organization of
Petroleum Exporting Countries (OPEC) imposed an embargo against the United
States in retaliation for the U.S. decision to re-supply the Israeli military and to
gain leverage in the post-war peace negotiations. Arab OPEC members also
extended the embargo to other countries that supported Israel including the
Netherlands, Portugal, and South Africa. The embargo both banned petroleum
exports to the targeted nations and introduced cuts in oil production. Several
years of negotiations between oil-producing nations and oil companies had
already destabilized a decades-old pricing system, which exacerbated the
embargo’s effects.
The 1973 Oil Embargo acutely strained a U.S. economy that had grown
increasingly dependent on foreign oil. The efforts of President Richard M. Nixon’s
administration to end the embargo signaled a complex shift in the global financial
balance of power to oil-producing states and triggered a slew of U.S. attempts to
address the foreign policy challenges emanating from long-term dependence on
foreign oil.
By 1973, OPEC had demanded that foreign oil corporations increase prices and
cede greater shares of revenue to their local subsidiaries. In April, the Nixon
administration announced a new energy strategy to boost domestic production to
reduce U.S. vulnerability to oil imports and ease the strain of nationwide fuel
shortages. That vulnerability would become overtly clear in the fall of that year.
The onset of the embargo contributed to an upward spiral in oil prices with global
implications. The price of oil per barrel first doubled, then quadrupled, imposing
skyrocketing costs on consumers and structural challenges to the stability of
whole national economies. Since the embargo coincided with a devaluation of
the dollar, a global recession seemed imminent. U.S. allies in Europe and Japan
had stockpiled oil supplies, and thereby secured for themselves a short-term
cushion, but the long-term possibility of high oil prices and recession precipitated
a rift within the Atlantic Alliance. European nations and Japan found themselves
in the uncomfortable position of needing U.S. assistance to secure energy
sources, even as they sought to disassociate themselves from U.S. Middle East
policy. The United States, which faced a growing dependence on oil consumption
and dwindling domestic reserves, found itself more reliant on imported oil than
ever before, having to negotiate an end to the embargo under harsh domestic
economic circumstances that served to diminish its international leverage. To
complicate matters, the embargo’s organizers linked its end to successful U.S.
efforts to bring about peace between Israel and its Arab neighbors.
Partly in response to these developments, on November 7 the Nixon
administration announced Project Independence to promote domestic energy
independence. It also engaged in intensive diplomatic efforts among its allies,
promoting a consumers’ union that would provide strategic depth and a
consumers’ cartel to control oil pricing. Both of these efforts were only partially
successful.
President Nixon and Secretary of State Henry Kissinger recognized the
constraints inherent in peace talks to end the war that were coupled with
negotiations with Arab OPEC members to end the embargo and increase
production. But they also recognized the linkage between the issues in the minds
of Arab leaders. The Nixon administration began parallel negotiations with key oil
producers to end the embargo, and with Egypt, Syria, and Israel to arrange an
Israeli pullout from the Sinai and the Golan Heights. Initial discussions between
Kissinger and Arab leaders began in November 1973 and culminated with the
First Egyptian-Israeli Disengagement Agreement on January 18, 1974. Though a
finalized peace deal failed to materialize, the prospect of a negotiated end to
hostilities between Israel and Syria proved sufficient to convince the relevant
parties to lift the embargo in March 1974.
The embargo laid bare one of the foremost challenges confronting U.S. policy in
the Middle East, that of balancing the contradictory demands of unflinching
support for Israel and the preservation of close ties to the Arab oil-producing
monarchies. The strains on U.S. bilateral relations with Saudi Arabia revealed the
difficulty of reconciling those demands. The U.S. response to the events of
1973–1974 also clarified the need to reconcile U.S. support for Israel to
counterbalance Soviet influence in the Arab world with both foreign and domestic
economic policies.
The full impact of the embargo, including high inflation and stagnation in oil
importers, resulted from a complex set of factors beyond the proximate actions
taken by the Arab members of OPEC. The declining leverage of the U.S. and
European oil corporations (the “Seven Sisters”) that had hitherto stabilized the
global oil market, the erosion of excess capacity of East Texas oil fields, and the
recent decision to allow the U.S. dollar to float freely in the international
exchange all played a role in exacerbating the crisis. Once the broader impact of
these factors set in throughout the United States, it triggered new measures
beyond the April and November 1973 efforts that focused on energy
conservation and development of domestic energy sources. These measures
included the creation of the Strategic Petroleum Reserve, a national
55-mile-per-hour speed limit on U.S. highways, and later, President Gerald R.
Ford’s administration’s imposition of fuel economy standards. It also prompted
the creation of the International Energy Agency proposed by Kissinger.

● TIMELINE
● January 1973—The ​1973–74 stock market crash​ commences as a
result of inflation pressure and the collapsing ​monetary system​.

● August 23, 1973—In preparation for the Yom Kippur War, Saudi
king ​Faisal​ and Egyptian president ​Anwar Sadat​ meet in ​Riyadh​ and
secretly negotiate an accord whereby the Arabs will use the "oil
weapon" as part of the military conflict.

● October 6—​Egypt​ and ​Syria​ attack ​Israeli​-occupied lands in

the ​Sinai Peninsula​ and G
​ olan Heights​on ​Yom Kippur​, starting
the ​1973 Arab–Israeli War​.

● Night of October 8—Israel goes on full nuclear alert. Kissinger is

notified on the morning of October 9. United States begins to
resupply Israel.

● October 8–10—OPEC negotiations with major oil companies to

revise the 1971 ​Tehran​ price agreement fail.

● October 12—The United States initiates ​Operation Nickel Grass​, a

strategic airlift to provide replacement weapons and supplies to
Israel. This followed similar ​Soviet​ moves to supply the Arab side.

● October 16—​Saudi Arabia​, Iran, ​Iraq​, ​Abu

Dhabi​, ​Kuwait​ and ​Qatar​ raise posted prices by 17% to $3.65 per
barrel and announce production cuts.​[21]

● October 17—OAPEC oil ministers agree to use oil to influence the

West's support of Israel. They recommended an embargo against
non-complying states and mandated export cuts.

● October 19—Nixon requests Congress to appropriate $2.2 billion in

emergency aid to Israel, which triggers a collective Arab
 response. ​Libya​ immediately proclaims an embargo on oil exports to
the US. Saudi Arabia and other Arab oil-producing states follow the
next day.

● October 26—The Yom Kippur War ends.

● November 5—Arab producers announce a 25% output cut. A further

5% cut is threatened.

● November 23—The Arab embargo is extended

to ​Portugal​, R
​ hodesia​ and ​South Africa​.

● November 27—Nixon signs the ​Emergency Petroleum Allocation

Act​ authorizing price, production, allocation and marketing controls.

● December 9—Arab oil ministers agree to another five percent

production cut for non-friendly countries in January 1974.

● December 25—Arab oil ministers cancel the January output cut.

Saudi oil minister ​Ahmed Zaki Yamani​ promises a ten percent
OPEC production rise.

● January 7–9, 1974—OPEC decides to freeze prices until April 1.

● January 18—Israel signs a withdrawal agreement to pull back to the

east side of the Suez Canal.

● February 11—Kissinger unveils the ​Project Independence​ plan for

US energy independence.

● February 12–14—Progress in Arab-Israeli disengagement triggers

discussion of oil strategy among the heads of state of ​Algeria​,
Egypt, Syria and Saudi Arabia.

● March 5—Israel withdraws the last of its troops from the west side of
the ​Suez Canal​.

● March 17—Arab oil ministers, with the exception of Libya, announce

the end of the US embargo.

● May 31—Diplomacy by Kissinger produces a disengagement

agreement on the Syrian front.
 CONCLUSION 

The timeline for the committee will be up to January 10,1974 .

Delegates are requested to prepare for the topic keeping in mind
the position and foreign policy of their designated countries.

Hoping that the upcoming session of AMUN is filled with healthy

debates and discussion and proves to be a fun-filled learning
experience for you.

MUN ON DELEGATES!