Air University Review, January-February 1980

NATO and Oil
conflict and capabilities

Since the celebrated oil crisis of 1973-74, there have been an increasing number of studies, analyses, and articles published dealing with the controversial subject of energy shortages and their consequences; energy seems to be the new bandwagon of public policy much as the Great Society was during the mid-1960s. Yet in the intervening five years since the oil embargo, the fundamental issues of resource shortages, the potential for conflict, and the impact on military capabilities have only been tangentially alluded to if at all. Former Secretary of State Henry A. Kissinger warned the oil-producing nations in 1974 that cutting off oil supplies was "economic strangulation" and the U.S. would react "appropriately."¹ In 1978, Under Secretary of State for Economic Affairs Richard N. Cooper warned that failing to prepare for the coming oil shortage threatens ". . . the prosperity and cohesion of the western industrialized nations. . . putting in jeopardy our own security and ultimately our way of life."²

Even though history shows that resource shortages have frequently been a major source of international conflict—even war—and have adversely affected military preparation for conflict, why do we ignore lese central issues? Indeed, unless the possibilities are identified and explored, there lay be little hope of avoiding the apparent consequences. That such a potential for conflict and diminished deterrent capability still exists in Western Europe, a geographical area of major importance to the U.S., is the thrust of this article. At worst, impending oil shortages within the next ten years could be the source of conflicts within the North Atlantic Treaty Organization countries, between NATO countries and the United States, and between NATO countries and the Soviet Union and/or Eastern Europe; at best, oil shortages may adversely affect the military preparedness of the alliance. These possibilities thus have major policy implications relating to NATO political solidarity as well as to economic issues affecting its ability to adequately perform its alliance function of meeting external military threats. This study explores the issues of conflict and capability by addressing the broad question of oil shortages, examining the question in terms of Western Europe, looking at the energy situation in the Soviet Union, and attempting to draw some conclusions about NATO political solidarity and military preparedness.

An Oil Crisis?

Studies of resource shortages range from doomsday predictions that if present consumption patterns continue the world will soon run out of key resources, resulting in a collapse of the economic and social system as we know it,³ to more optimistic views that most of the earth's essential resources are virtually infinite and that advances in technology will allow us to exploit them, substitute one resource for another, or recycle present materials. Then there is the argument that the oil companies and governments have conspired to contrive shortages in order to force up prices.⁴

On the other hand, it is argued in the literal sense that there is no crisis but only a problem: people can still buy as much energy as they wish even though the price may be high. Thus, the shortages are a problem of distribution rather than a matter of supply. Indeed, the shortages are nothing more than a manifestation of a normal economic phenomenon: the decreased supply and increased cost of a commodity are reflections of an impending scarcity. Addressing the problem now might avoid a true future crisis.

From the confusing, often competing views of the nature of the resource problem, there nevertheless seems to be emerging a consensus that some natural resources—oil in particular—are finite. Concerning oil, most differences exist over the timing of exhaustion rather than the question, with the timing of oil depletion appearing to be a function of several factors: consumption demand, conservation measures, and the substitutability of other resources for oil.

Several recent studies indicate that despite the warning inherent in the 1973-74 oil embargo, world demand for oil as an energy source continues to increase in spite of efforts to reduce consumption.⁵ The increasing demand appears to come from several sources: a lack of awareness or acceptance of the fact that shortages are imminent; a lack of commitment to conserve;⁶ pressure on governments to stimulate economic growth in order to reduce unemployment and compensate for unfavorable trade balances* (many as a result of buying oil); and the increasing delay rates in finding suitable substitutes for oil as an energy source.

*Several studies have correlated annual changes in gross national product with annual changes in energy consumption and found a direct relationship: an increase in GNP of 1 percent generally leads to an increase in energy consumption of 1 percent, although the pat few years have indicated that a break of this link is possible. ("Major Oil Shortages Seen by 1985," Washington Post, June 6, 1978, pp. A-1, A-7) When GNP was overlaid by oil consumption rates, they, too, followed in lockstep with GNP (William D. Wiard, Energy Section of the Systems Acquisition Study, Andrews AFB, Maryland: Headquarters Air Forces Systems Command, 27 October 1977).

The substitution problem is particularly acute. In most industrialized countries, for example, hydroelectric sources are presently developed almost to capacity. Nuclear energy has not become the panacea it was first thought to be because of technical problems and environmental concerns. Technology to use coal more efficiently or oil shale as a source is at least a decade away, as is the economic use of solar energy.⁷ This is not to imply that substitutes will not be found, but only to emphasize the point that the delay in doing so means that demand for oil as the primary energy source will continue to increase significantly through the 1980s until suitable substitution begins to have an impact in the 1990s.

Thus, even with major energy savings forecast as a result of conservation and slower economic growth (savings estimated to be 10 to 15 percent in the U.S. and 5 to 10 percent in Japan and Western Europe),⁸ the total demand of the industrialized nations is conservatively estimated to increase to 15 percent of the 1976 consumption by 1980 and to 40 percent or to about 100 million barrels per day (mb/d) energy equivalent by 1985.⁹ These figures do not include Soviet/ Eastern European demand nor that of the developing nations .

Demand forecast figures obviously have meaning only in relation to projected supply forecast figures for the same period. Between now and 1980, industrialized country energy production is expected to expand at the rate of about 4 percent per year, reflecting significant increases in oil production from the North Sea and the opening of the Alaskan pipeline. Beginning in 1980, how-ever, production growth is expected to slow significantly, perhaps to as low as 1 percent annually.¹⁰ This means that by 1985, the industrialized countries will be producing only 63 to 66 mb/d oil equivalent,* or about two-thirds of the projected demand. The gap will thus have to be filled by imports from external sources--the nations of the Organization of Petroleum Exporting Countries (OPEC)-during this period as significant substitutes for oil as a major energy source are unlikely to be available until the early 1990s.

*A term describing the total energy from various sources (such as coal, nuclear-generated electricity, natural gas) equated to their equivalent energy output in barrels of oil.

Turning to the OPEC nations to supply oil, however, assumes that they will be both willing and able to fill the supply gap. Several studies indicate that aside from the issue of willingness, OPEC nations may be unable to provide the necessary oil required by the industrialized nations.¹² By 1985, total world demand for OPEC oil, including that of nonindustrialized and communist countries, is likely to be from 47 to 51 mb/d.¹³ Yet maximum production capacity--even if expanded significantly by Saudi Arabia, the only producer with reserves sufficient to support production at this level--will fall short of these figures by from 4 to 12 mb/d, or about 16 percent of total world demand.¹⁴

As the Saudis are the key to the severity of the shortages in the mid-1980s, some mention needs to be made of their willingness to expand production. Even if they could expand production to meet world demand, they would very likely resist pressures to do so because the required production rates would risk rapid resource depletion as well as create overwhelming capital surpluses--at present prices ( and the prices would almost certainty rise with increased demand) about $128 billion per year. Such surpluses would have important international economic consequences since the Saudis would be unable to absorb that much per year.¹⁵

In summary, several studies indicate that beginning in the early 1980s, world oil demand will exceed total production capacity by significant amounts. The point is this: as substitutability of other energy sources is unlikely to be possible before the 1990s, when worldwide oil depletion will be occurring at rapid rates,¹⁶ the 1980s promise to be a decade of increasing and intensive competition among the industrialized nations for the available limited supply of oil. Since we are particularly concerned with an impact on NATO, an analysis of the projected oil situation in Western Europe will be useful.

The pressures on the industrialized nations as a whole leading to increased demands for oil are presently no less severe in Europe than in the rest of the industrialized world. Europe, too, is sensitive to the need to increase industrial growth in order to offset imports and reduce unemployment; it is also having technological and cooperative problems with substitutions,¹⁷ and is having problems in conservation due to a general lack of consensus over the severity of the need.

Europe differs slightly from the rest of the industrialized world in that demand will remain relatively constant at 25 to 27 mb/d oil equivalent through 1980 and then increase gradually to about 33 mb/d oil equivalent by 1985. In terms of oil demands, this translates to about 14 mb/d through 1980 and about 17 mb/d in 1985.¹⁸ (The figures include a saving of 3 mb/d oil equivalent because of slower capital investment and economic growth rates than most of the rest of the industrialized world over the period.)

Western Europe is unique among the Western industrialized nations in that it alone has major energy sources that can be developed between now and the mid-1980s to satisfy a major portion of its increasing demand for energy: North Sea oil and gas. Indeed, projections indicate that Western European energy production will almost double by 1985 (from 11 mb/d oil equivalent in 1976 to between 19 and 21 mb/d oil equivalent), largely as a result of oil and natural gas production from the North Sea oil fields.¹⁹ Apart from North Sea resources, however, nuclear energy is the only alternative source that can be exploited before the mid-1990s, and technological and environment problems will limit its contribution to energy supplies to about 2 mb/d oil equivalent by 1985.²⁰

Although North Sea oil has great potential for British and Norwegian energy needs, is not the panacea for the West European energy demand it was hoped to be. Indeed, the most optimistic production figures of from 4 to 5 mb/d of oil and 5 to 6 mb/d oil equivalent of natural gas by 1985 will supply only about one-third of the West European total energy demand and only about one-fourth of its oil needs. Far from being an oil exporter in 1985, for example, Britain will only be energy self-sufficient. More important, however, the mid- to late-1980s is the period in which North Sea oil production is expected to peak and gradually begin to fall off, again making Great Britain a major oil importer by the early 1990s.²¹

Thus, the prospect of Western Europe's being able to double its energy production by the mid-1980s cannot mask the problem it has in common with the rest of the industrialized world: a significant gap between total energy demand and supply--some 12 to 13 mb/d oil equivalent by 1985. Even though Western European countries can expect to lower the amount of its total energy needs contributed by external sources, ²² either by using North Sea oil and gas or substituting nuclear energy, dependence on imported oil from the Middle East will continue.

Even though our focus is on NATO, oil, and the potential for conflict, it is not a problem that can be considered in isolation. Just as it was necessary to review briefly the world’s oil supply and demand situation to put the NATO issue in perspective, it is also necessary to review the Soviet oil supply and demand situation since it has direct bearing on the question of NATO.

Like the Western industrialized nations, the Soviets also have a problem with a projected gap between energy demand and supply. Unlike the West, however, it appears that the Soviet problem is driven more by future production limitations than by a rapidly escalating demand for energy. Nevertheless, increasing demand is clearly a major factor in the Soviet Union as well.

The Soviets currently produce more oil than they use and export about one-fourth of their production.²³ However, their exports are a major source of a projected demand increase since more than half of their exported oil furnishes almost three-fourths of the oil required by the communist countries of Eastern Europe. Inasmuch as supplying oil obviously provides significant influence in Eastern European affairs, it seems likely to be a relationship that the Soviets would like to continue. With the countries of Eastern Europe as anxious to expand their economy as the rest of Europe, rapidly increasing demand in Eastern Europe thus means increasing demand on Soviet resources. In addition, exports of oil provide a major source of foreign exchange, the hard currency needed to buy Western technology and equipment, much of it for the more efficient exploitation of its own petroleum reserves. The Soviets also need hard currency to buy Western goods and technology to continue expansion and modernization of its own industry, the expansion of which will also contribute to an increasing energy demand.

In addition to increasing Eastern European demand and the need for foreign exchange, several other factors will also contribute: the introduction of a rapidly growing number of trucks and cars; increased efforts to mechanize agricultural production; and efforts to shift industrial growth and production into an energy-intensive consumer goods sector. In summary, the Soviets' energy consumption demand is increasing at an annual rate greater than their annual production increase.

Oil production appears to be the major problem area contributing to the projected Soviet demand-supply gap. The nature of the problem is twofold: new Soviet deposits will not be found rapidly enough to ensure acceptable reserves-to-production ratios; the Soviet Union is experiencing severe difficulties in production.²⁴ As a result Soviet oil production is expected to peak by the early 1980s and then decline sharply. The problems apparently derive from the Soviet approach to developing their oil resources, identified as a "forced draft approach":²⁵ short-term production goals are floors rather than ceilings; rewards for exceeding goals are given without regard to productivity over the long-term. The consequences are emphasis on development drilling rather than new exploration and overproduction of existing fields using low productivity techniques that reduce the total amount of recoverable oil.²⁶

Several other factors also contribute to the projected decline in Soviet oil production. First, while substitutability of other resources for oil will be possible in the long run—mainly using coal, natural gas, and hydroelectric and nuclear power—delays are likely to last for many years because of the large capital investments required and the technical problems of long-distance power transmission.²⁷ Second, since Western Soviet oil fields are beginning to become depleted, the Soviets must turn to reserves located in primitive areas east of the Urals and in the northern half of West Siberia. The inaccessibility of these areas makes development very costly and difficult. In swamp areas, for example, road construction costs exceed 500,000 rubles per kilometer (roughly $1,642,000 per mile). * Great numbers of tractors and heavy equipment are lost in the marsh areas each year, and each well requires a man-made island which takes years to construct. In northern West Siberia and most of East Siberia, road construction costs are reportedly 1.1-1.6 million rubles per kilometer (roughly $3,000,000 per mile).²⁸

*Official exchange rate: 1 ruble = $1.33.

Third, Soviet energy production and transportation consume a significant amount of the product, thus reducing the net energy available to meet demand. Fourteen percent of the energy produced from oil is consumed in refining and field operation; 100 kilowatt-hours of electricity is expended per ton of oil produced; for every 1000 kilometers (625 miles), gas pipe-lines consume 6 to 7 percent of the gas carried; 15 percent of the gross electrical consumption is accounted for by line losses and station usage.²⁹

The Soviets are, of course, aware of their own problems of declining production and the impending demand-supply gap. An indication of their awareness can be inferred from two sources: (l) reluctance to make long-term Soviet commitments to sell oil, apparent in their response to Japanese efforts to buy Soviet oil and their refusal to commit more than 200,000 b/d to the U.S. in grain bargaining;³⁰ and (2) intense Soviet efforts to purchase Western oil equipment, much of it designed to increase extraction productivity. From 1971- 76, Soviet orders for Western oil and gas equipment have totaled about $3.1 billion.³¹ Imported equipment of greater efficiency and productivity, however, will probably only slow the rate of production decline since the decline is based on a more fundamental cause: poor oil exploitation and extraction techniques that have caused widespread damage to their major oil reserves.

The point is clear. Whether due more to the low productivity of their oil extraction techniques, exceedingly high costs of developing oil reserves in inaccessible and inhospitable areas, lengthy delays in developing alternative energy sources, or low net-energy production (or more probably from a combination of all), the result is the same. The Soviets will also be experiencing an increasing gap between rising energy demands and decreasing oil production through the 1980s, the period in which the Western industrialized nations (as summarized above), will be doing likewise. By 1985, the Soviets will change from net exporters to net importers of oil at the rate of 3.5 to 4.5 million barrels per day³² and will thus become competitors with the West for limited Middle East oil.

The "Worst" Case: Conflict

The foregoing analysis of the probability of a major world oil shortage by 1985 is to serve as background for the thesis of this study. At worst, the impending oil shortage will be the source of potential competition and conflicts among NATO countries; at best, it will be the cause of a lack of training and readiness, which will adversely affect NATO military capability.

Conflict potential is high in three areas: among Western European members of NATO, Western European members and the United States, and NATO European nations and Eastern Europe or the Soviet Union.

The nature of potential conflict among NATO European countries is twofold: (a) over individual nations' efforts to secure oil sources from the Middle East and (b) over distribution of the available energy resources within Europe. The clearest indication of the potential for conflict over supply from the Middle East is the experience which grew out of the "artificial" oil shortages created by the 1973 oil embargo. While the experience ultimately resulted in cooperative measures, such as the establishment of the International Energy Agency,³³ a comparison of the circumstances that surrounded the 1973 shortages and those likely to occur in a future shortage indicates that the end result may be quite different.

The 1973 oil embargo was, first, an artificially induced shortage based on a political issue that linked the embargo to support of Israel. Second, the impact of the shortage was ameliorated significant by the freedom with which multinational oil corporations were able to redirect, transship, and redistribute the large amounts of oil in transit from and to countries not involved in the embargo. Third, U.S. success in negotiating an Arab-Israeli disengagement and further efforts to bring an overall settlement to the area effectively led to the end of the embargo. Indeed, it was only after it became clear that the embargo would not last long and that its effects would not be as severe as feared that the highly competitive unilateral efforts of West European countries to obtain secure Middle East oil ended (efforts which were leading to conflict), and the cooperation began which resulted in the formation of the International Energy Agency.

The nature of future shortages, however, may be different. They may well not be "artificial" in the sense that oil will be withheld; they may be based on actual shortages growing out of a declining supply. While the multinational oil companies may be able to balance the distribution somewhat, if they have the freedom to do so,³⁴ they will be working with a dwindling resource. The United States, far from being the ameliorator, will be a competitor. Under these conditions, it seems as likely (if not more more likely) that the competition and conflict in Europe over individual nations' oil security and the unilateral arrangements for supply which typified the beginning of the 1973 embargo will intensify, perhaps being the rule rather than the exception. Are we perhaps naïve if we assume cooperation? Indeed, history suggests more evidence for conflict than for cooperation over such competition.

The potential for conflict heightens when we link competition for supply of Middle East oil to inequities in the distribution of available oil resources within Western Europe. North Sea oil, for example, will allow greater self-sufficiency within Britain and Norway (and also West Germany, which claims a small part on the North Sea), but it adds nothing to the self-sufficiency of France, Belgium, and Italy, countries within the alliance unable to supply even 25 percent of their own energy needs. Further, Europe's large, exploitable coal reserves are concentrated largely in Great Britain and West Germany. The Netherlands has large reserves of natural gas; other continental countries have none.

Overlaying competition for Middle East oil and distribution inequities over the fact of differing national energy interests and goals heighten the potential even further. For example, Great Britain would not allow itself to be represented by the European Community during the 1975 North-South conference on energy and raw materials; it insisted on a separate seat. Second, in the management of the North Sea resources, Norway is determined to be conservative in the development of its sector since it is less dependent on foreign sources than the rest of Europe; Great Britain intends to develop its sector as rapidly as possible. Third, even though European continental refining capacity is not fully utilized and Britain’s is overtaxed, Britain has decreed that all oil produced in the British sector be landed there and that two-thirds of it be refined in British refineries.³⁵

In summary, it is the presence of such factors of conflict within Western Europe--which have manifested themselves in even a period of relative abundance--that have resulted in the following two warnings of the high potential for intra-European NATO conflicts:

Both NATO . . . and the European community . . . weakened under the pressure of the oil embargo and the consequent political malaise. . . . Alliances are temporary coalitions. Crises expose differences and can lead to fragmentation. . . . Economic interests could fracture an alliance that, in the minds of many citizens, has seen the threat evaporate.³⁶

This inattention to the IEA is disheartening. The organization is perhaps the absolutely critical tool the western world has for coping with its fundamental energy dilemmas. Without it, the western allies could find themselves angry rivals in a battle for scarce and very expensive oil a decade from now.³⁷

Disagreement and conflict within NATO are not new. Yet clearly the potential for intra-European conflict over oil is real and has significant implications for NATO solidarity. While these factors of potential conflict now cause only inconveniences, they could erupt into intense competition and noncooperation—perhaps even hostilities—under the pressures of future debilitating petroleum shortages. Indeed, even if the shortages do not cause the disintegration of NATO, they will unquestionably be the source of continuing disputes and conflicts within NATO Europe, which in themselves could nullify the effectiveness of the alliance.

conflict between NATO Europe
 and the United States

Historically, conflict between the United States and NATO Europe is also nothing new. But the potential for conflict between the U.S. and NATO Europe over oil shortages is as high if not higher than that among NATO European countries. Over the years there has always been an implied and sometimes stated fear within NATO that the United States might sacrifice European interests for the "broader world interest" of détente and "world peace"; that out of fear of Soviet nuclear retaliation the U.S. would not really come to the aid of Europe if Warsaw Pact troops invaded. While these fears have never been tested and differences over the interests and roles of Europe NATO and the U.S. have been reconciled, it has been done within the context of relative resource abundance and mutual interests. If abundance is lacking and interests over acquiring oil diverge, then the conflict potential between the U.S. and Europe would be high.

As in the case of potential conflicts within Europe, the 1973-74 oil embargo also gives an indication of the potential for conflict between NATO Europe and the U.S. in future shortages. The 1973-74 embargo and resulting political and economic pressures intensified the fundamental and long-standing differences between U.S. and NATO European perceptions of power relationships, domestic problems, and national objectives. The U.S. proposals for a comprehensive consultation and collaboration program, for example, was viewed by many in Europe as another attempt by the U.S. to assert even greater influence over European affairs. The French viewed U.S. policy as a design to undermine European efforts to establish a "special relationship" with oil-producing states for oil supplies.³⁸

Europeans were resentful that the United States acted in the crisis without consulting them, even though the issue clearly had an impact on Western European economic life. It heightened the continuing fear that the U.S., after all, did have competing interests and might have promoted a settlement serving U.S. interests but sacrificing European interests—such as a U.S.-Soviet agreement to stabilize the status quo in the Middle East without ending the embargo. Again, it was only because the oil embargo was temporary and of short duration that these basic differences did not develop into significant conflicts at the time.

In future oil shortages, might NATO European fears of competing U.S.-European interests be well-founded? During the 1973-74 embargo, the U.S. agreed that if Europe would join in a consultation scheme to present a "united" front to the oil producers (rather than negotiate unilaterally) that the U.S. would aid them with oil supplies. It did so, largely by relying on the oil multinational corporations to redistribute the supply. In future shortages, however, there could be a severely limited supply: the emergency standby capacity of U.S. wells is only about 350,000 barrels per day, well below even U.S. needs in a shortage. Thus, the U.S. could be a strong competitor for the limited Middle East oil rather than a partner in supply.

In addition, the Western industrialized country that figures most prominently in plans to reduce consumption in order to forestall shortages--a goal of the International Energy Agency--is the United States, which consumes half of the oil used by the 19 IEA countries. Yet in four years since the oil embargo, U.S. consumption rates have increased more rapidly than those in Western Europe. To the Europeans, then, their efforts at conservation have benefitted the United States, not Europe. Again, the United States is a competitor (who seems to be winning) rather than a partner.

Further, while Europe is making some progress toward less dependence on Middle East oil, it will still be dependent on the Middle East for at least 40 percent of its oil needs. On the other hand, the U.S., with its more abundant energy alternatives, has the prospect of becoming less dependent on the Middle East, even though in total consumption the U .S. is likely to import more oil in the future than the more dependent Europe. More oil for the U.S. means less oil for Europe.

These factors suggest two points: first, the United States will become a competitor with Western Europe over the same limited supply of Middle East oil. Intensified European efforts to secure oil for its needs--a greater percentage of which must come from the Middle East than will be the case with the United States--will be increased by the European perception that the U.S. is using more than its share. Second, as a competitor for a declining amount of oil, is it unthinkable that the U.S. might enter into an agreement with the Middle East to secure its supply over the interests of the other industrialized nations—including Europe? In the oil-short environment of the mid-1980s, these differences will become more apparent as they overlay and reinforce the historical differences between the United States and NATO Europe.

conflict between NATO Europe and
Eastern Europe and the U.S.S.R.

While our analysis of potential conflict based on oil shortages has thus far focused on intra-NATO conflicts, a final area of potential conflict concerns competition between NATO Europe and the U.S.S.R. or the East European countries of the Warsaw Pact. Indeed, in a highly competitive re-source environment, it is a conclusion that should not be too surprising, given the history of overt competition and hostilities of the past three decades. While the potential for conflict is certain, however, the direction of conflict is less so.

As outlined above, the Soviets are quite likely to become competitors for the scarce and limited supply of Middle East oil by 1985, competing for about 4 million of the 4 to 12 million barrels per day shortfall anticipated then.³⁹ Again, a major reason for Soviet dependency on Middle East oil will be its desire to supply Eastern Europe with oil. If, given its own needs, the Soviets determine that Eastern Europe must find its own supplies, then Eastern Europe becomes a major competitor with NATO Europe for oil. Coupled to major ideological, historical, and political differences, potential Eastern Europe competition for oil with NATO Europe could progress from economic sanctions to outright hostilities; perhaps even to military disputes over North Sea oil.

If, on the other hand, the Soviet Union decides that its shortages of oil are severe enough to react by moving into the Middle East or Persian Gulf region (i .e . , Iraq , Oman, Yemen, Libya), then Eastern Europe could continue its oil dependence on the Soviet Union. More important, the Western European countries could decide in this case that ideology and a remote military threat are less important than economic security (which depends on oil) and also seek supplies from the Soviets, which they are now doing at the rate of more than 1.5 million barrels per day.⁴⁰ Indeed, Soviet controlled Middle East oil supplies could provide a more reliable source than the remaining "free market" Middle East oil would provide.

Paradoxically, the oil shortage could also serve to unify NATO Europe if it were coupled to an external threat. If Western Europe became a competitor with Eastern Europe (Eastern Europe being forced to obtain its own oil), then the ensuing potential for hosti1ities might be so high that it could lead to the desired greater NATO solidarity.

While much of this analysis is speculative , it is nonetheless based on emerging trends and possibilities. Whatever the scenario, the fact of oil shortages in the 1985 time period clearly points to an increasing potential for conflict involving NATO: among NATO European countries; between NATO Europe and the U.S.; and between NATO Europe and the Warsaw Pact countries of Eastern Europe. Such high potential has major implications for U.S. policy in the near future.

The "Best" Case: Capabilities

Since the potential for conflict over oil shortages in the mid-1980s seems so high, we have addressed at length the "worst case" issue of conflict involving NATO. However, it may be possible that conflict could be avoided by anticipating the problem of oil shortages and working out multinational cooperative programs to share, redistribute, and substitute for oil. If a more cooperative scenario occurs, then what will be the most likely effect of oil shortages on NATO?

Unless it is coupled with an increased external threat--a possibility already addressed--the NATO Europe countries will probably weigh a remote military threat against an immediate economic threat directly affecting their prosperity and decide in favor of the latter. In such a case, the pattern has already been established in other periods of scarce resources: attempts to constrain military costs by reducing military commitments and force readiness. This was indeed the pattern in the U.S. following the 1973-74 oil shortages. During that period, the U.S. Navy decreased the time its ships spend at sea by 20 percent, and the Air Force reduced flying time by 33 percent.⁴¹ The reductions were caused by two problems: first, the military services experienced increasing difficulty in procuring sufficient fuel to support air and ground missions and, second, the cost of fuel increased dramatically and thus required a greater share of limited defense budgets.

A similar pattern was experienced in NATO. By December of 1973, the fuel shortage was beginning to have an effect on NATO's day-to-day operations. Even though NATO was using just under 4 per-cent of Europe's fuel stocks, force sharing among NATO countries had already begun--Dutch air and ground forces had to be refueled at U.S. bases in Germany and Great Britain. Training exercises were cut back and priority lists were worked out for various types of unit exercises that consumed fuel. The shortage had a significant effect on training exercises which involved mass transportation of men and equipment and seriously impacted NATO war reserves.⁴²

The important point is that even though the shortage was temporary, its effect on defense was immediate and significant. In the face of prolonged and severe oil shortages, as they are likely to be in the 1980s, the prospect of ill-trained and supply-short NATO forces is even more serious. Pilots who fly only one or two sorties per month and train largely in simulators are much less combat ready than those who fly training exercises frequently; ground combat training requires large amounts of fuel to transport troops and power tanks. The choice in the 1980s may thus be between depleting war fuel reserves for the sake of training or maintaining the reserves at the expense of training. Indeed, countries may even be unwilling or unable to commit and leave in such an unproductive state that large and expensive petroleum reserves required for mobilization.

In addition, the rapidly increasing cost of petroleum in continuous short supply means that less of the already limited defense budget will be available for force modernization—including efforts to develop more fuel-efficient weapon systems—already lagging behind in many NATO countries.

Even if the governments are willing to commit the required petroleum to training and war reserves, public sentiment may limit their ability to do so as is sometimes illustrated graphically by public criticism of the high cost of military exercises. At best, the "best" case is thus very likely to have server and serious consequences for NATO military capabilities in the 1980s resulting in an effective degradation of NATO’s deterrent potential.

The impending oil shortage is a fact that is becoming increasingly recognized and commented on in terms of possible consequences. Surely the purpose of the speculation, even though it may at times reach tenuous conclusions, is to identify current emerging trends that might have serious results if not recognized and addressed before they become too fixed to change. So it is with the issue of oil shortages and its impact on defense policy—in this instance on NATO.

Little has been written and published that addresses the sensitive subject of oil shortages, conflict, and their impact on military capabilities and preparation. Yet current trends and patterns of relationships clearly indicate that there is a high potential for conflict and/or reduced capabilities, and this study identifies trends involving the U.S. and NATO. The 1973-74 oil embargo suggested patterns of conflict among the West European members of NATO and between NATO Europe and the United States which could be the rule in future shortages rather than the exception they were in 1973-74; the 1973-74 embargo was of short duration and based on a political issue, whereas future shortages will be of long-term and increasing severity based on a depleting resource. Overlaying traditional and longstanding national differences within the alliance, these emerging patterns of conflict could at worst lead to the disintegration of NATO or at best severely limit the deterrent capability of the alliance. Obviously, the extent to which they do or do not depends on steps taken by members now to prevent their occurrence. If the issue is not addressed, however, it is unlikely that any steps will be taken.

Notes

1. New York Times, January 10, 1974, p. 17; January 12, 1974, p. 3.

2. Richard N. Cooper, "Energy Prospects for the Next Decade," Department of State Bulletin, February 1978, pp. 27-28. See also Roy A Werner, "Oil and US Security Policies," Orbis, 20 April 1978, pp. 651-70.

3. Donella H. Meadows et al., The Limits to Growth (New York: New American Library, 1972).

4. As quoted by Robert Ellsworth, "Strategies for Dealing with Risks," NATO Review, April 1978, p 19.

5. Washington Post, June 6, 1978, pp. A-1, A-7.

6. Cooper, p. 26. Several newspaper articles also address the issue: New York Times, January 8, 1978, p. 20, column 5; January 17, 1978, p. 1, column 5; January 18, 1978 p. 16, column 1, Also arguing against conservation is the fact that if by reducing oil consumption we reduce our oil imports, domestic production will continue unreduced to meet the demand The net result is that our reduced consumption will save someone else oil--not us.

7. "Europe’s Energy," The Economist, March 25, 1978, p. 95. See also Horst Mendershausen, Europe’s Changing Energy Relations, Rand Report R-2086-ISA, December 1979, pp. viii, 37-53.

8. The International Energy Situation: Outlook to 1985, Washington, D.C.: Central Intelligence Agency, Study ER 77-10240U, April 1977.

9. Ibid.

10. Ibid, p. 8.

11. Ibid.

12. Ibid., pp. 15-18. See also Ragaei El Mallakh, "OPEC: Issues of Supply and Demand," Current History, March 1978, pp. 126-27.

13. The International Energy Situation, p. 15.

14. Washington Post, pp. A-1, A-7.

15. The Absorptive Capacity of OPEC Countries, U.S. Department of Treasury, September 5, 1975. See also The International Energy Situation, p. 18.

16. William D. Wiard, Energy Section of the Systems Acquisition Strategy (Andrews AFB, Maryland: Headquarters Air Force Systems Command, 27 October 1977).

17. Louis Turner, "European and Japanese Energy Policies," Current History, March 1978, p. 129. See also Guy De Carmoy, Energy for Europe (Washington, D.C.: American Enterprise Institute, 1977), pp. 92-93.

18. The International Energy Situation, p. 13.

19. Ibid., p. 10.

20. Ibid.

21. Paul S. Basile, "The United Kingdom," in Energy Demand Studies, edited by Paul Basile (Cambridge, Massachusetts: M.I.T. Press, 1976), p. 455.

22. Turner, p. 108.

23. Wiard.

24. Prospects for Soviet Oil Production, Central Intelligence Agency, Study ER 77-10270, April 1977, p. 9.

25. Ibid., p.1.

26. For example, the Soviets inject large amounts of water into fields in which oil pressure drops to increase pressure and thus stimulate increased oil flow. However, although flow is increased for a time, the water finds a channel of least resistance and breaks through to the producing well leaving much oil behind in the less permeable portions of the formation.

27. Prospects for Soviet Oil Production, pp. 8-9.

28. Leslie Dienes, "Soviet Energy Resources and Prospects," Current History, March 1978, p. 120.

29. Ibid., p. 118.

30. Stewart W. Johnson, Petroleum and National Security, Air War College, Air University Report No. 5958, April 1976, p. 47.

31. Prospects for Soviet Oil Production: A Supplemental Analysis, Central Intelligence Agency, Study ER 77--10425, July 1977, p. 1.

32. The International Energy Situation, p. 13.

33. Joseph Szyliowicz and Bard E. O’Neill, Petropolitics and the Atlantic Alliance, National Security Affairs Monograph 76-1 (Washington, D.C.: National Defense University, 1976).

34. Roy A. Werner, "Oil and U.S. Security Policies," Orbis, 20 April 1978, pp. 64-65.

35. Mendershausen, p. x.

36. Werner, p. 658.

37. Daniel Yergin, "Killjoy of the Western World," The New Republic, February 25, 1978, p. 19.

38. Szyliowicz and O’Neill, p. 10.

39. Ibid., p. 1.

40. John Starrel, "The United States and Western Europe," Current History, November 1977, p. 147.

41. As cited by Chris L. Jefferies, "Defense Policy and Limited Resources," Air University Review, July-August 1975, p. 32.

42. Aviation Week & Space Technology, December 17, 1973, p. 19.

Major Chris Jefferies (B.A., Brigham Young University; M.P.A., University of Pittsburgh) is attending the Armed Forces Staff College. He was Assistant Professor of Political Science, USAF Academy, when this article was written. As a navigator, he has flown 817 combat airlift missions in C-130s, strategic airlift in C-141s, and in the Belfast transport aircraft while on exchange assignment with the Royal Air Force. Major Jefferies is a Distinguished Graduate of Squadron Officer School and the RAF School of Administration. He has published in American Defense Policy, Public Administration Review, and is a previous contributor to the Review.

The conclusions and opinions expressed in this document are those of the author cultivated in the freedom of expression, academic environment of Air University. They do not reflect the official position of the U.S. Government, Department of Defense, the United States Air Force or the Air University.

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