Does the Persian Gulf Still Matter?

Since suffering the economic impact of the 1973 oil embargo, the United States has considered the free flow of oil from the Persian Gulf to be of the utmost importance to its economic and national security. More than fifty years since the events of 1973, the United States is now considering a security pact with Saudi Arabia, a proposal driven, at least in part, by the supposed importance of U.S. access to Persian Gulf oil.

Washington maintains that the Persian Gulf is central to U.S. security interests for several reasons. First, the United States views the safe transit of oil out of the gulf as a vital economic and security concern. Second, dominance in the Persian Gulf means dominance over three critical chokepoints in maritime commerce: the Hormuz Strait, the Suez Canal, and the Bab el-Mandeb Strait. Third, the investment of the Saudi oil surplus into U.S. government obligations maintains a global oil market priced in U.S. dollars, which in turn is a core component in maintaining the position of the dollar as the global reserve currency and underwrites U.S. financial supremacy.

These three core reasons are then accompanied by a fourth: If the United States does not continually assert its dominance over the region, then a competing great power (formerly the Soviet Union and now China) will seek to bring the region into its own sphere of influence. However, the global economy has changed dramatically since the 1970s, as have the geopolitical security dynamics. Is the Persian Gulf still as vital to U.S. security? Is it worth an additional security obligation?

First, there is the ever-important question of the Western need for Persian Gulf oil and the fear that the 1973 oil embargo instilled. While the United States has consistently been a top oil producer, it has also been among the largest oil consumers throughout the same period. Therefore, despite its own production, its economy has always needed additional oil imports. As a rising oil power in the 1970s, this dynamic gave Saudi Arabia and OPEC power over the U.S. economy. However, since the 1970s, the United States has made significant efforts to decrease its dependence on foreign oil, and it has successfully done so. Furthermore, the modern oil market is much more flexible than that of the 1970s, meaning it is much easier now for the market to adapt and accommodate changes.

Second, two of the three maritime chokepoints, the Suez Canal and the Bab el-Mandeb Strait on either side of the Red Sea, are not absolute. Trade can move instead around the southern cape of Africa. It’s a much longer route and would disrupt trade, but that impact is unlikely to be economically devastating. In the case of the 2021 Evergreen incident, when a container ship blocked the Suez Canal, the direct impact of a Suez closure was observable. 

While it was not optimal, it was far from economic doomsday. In the current conflict in the Middle East, the Houthis have taken advantage of the Bab el-Mandeb Strait, and again, we’ve observed inconveniences rather than catastrophes. The Strait of Hormuz, through which 20-30 percent of the world’s daily oil consumption must pass with no alternative sea route, is the only true chokepoint in the region. Despite its threats, many experts question the capability of Iran to blockade the Strait. Furthermore, the United States has successfully managed Iranian threats to oil access before, so why would it need to increase its obligations to the region to do so again?

Then there is the claim that U.S. commitment to the gulf is necessary to protect dollar supremacy through the recycling of petrodollars. Despite ongoing speculation about the diminishing hold of petrodollars over the global currency system, we have not actually observed any drastic diminishing of U.S. financial power. A large reason for this trend is that the global financial system lacks a convincing alternative. The Euro lacks a eurozone-wide “safe” government-backed asset necessary for a reserve currency, and the fate of the Yuan is too unpredictable, subject to government control and potential domestic instability. Furthermore, impending shifts in energy markets with the introduction of green energy in the next twenty to fifty years mean that the United States should consider what that means for the fate of the petrodollar, not doubling down on its commitment to the petrodollar system with security guarantees to key investor states.

Lastly, there is the final assumption that if the United States doesn’t continuously maintain its grip and project an image of strength in the region, a rival power will slowly start to creep in and extend its influence, threatening the previously discussed “vital” U.S. interests. This fear has allowed Saudi Arabia to overinflate its power in the relationship to get what it wants without making concessions. The United States has remained unwaveringly committed to Saudi Arabia, even as the kingdom has unilaterally cut oil production, waged war in Yemen, and committed a long string of human rights violations, including the killing of dissident journalist Jamal Khashoggi.

Overinflating the Persian Gulf’s importance contributes to American overcommitment and represents a continual drain on U.S. resources. Washington is concerned about Chinese influence in the region. Yet, the current situation has China free-riding on U.S. security costs—China is dependent on the import of Persian Gulf oil to a much greater extent than the United States. Yet, China is freely provided with secure access to Persian Gulf oil, courtesy of the United States military. A rethink of this strategy is surely warranted.

Sabreena Croteau is a Research Fellow at Defense Priorities ​​and a PhD Candidate in Political Science at the University of Chicago.

Image: Nick Fox / Shutterstock.com.