invasion of Ukraine, Europe has feared that the Russian leader might use his hold over global energy supplies to further his war aims. The sabotage of the Nord Stream gas pipelines in the Baltic Sea last week only exacerbated those concerns. Though Mr. Putin hasn’t claimed responsibility for the attack, the bombing represents a dangerous escalation aimed at the foundation of Western economies.
But the West isn’t helpless in defending itself against a weaponized energy sector. Its greatest asset will be found in its corporations, not in conventional armies. There is no better example than the Yom Kippur War, the last time the energy weapon was deployed in earnest.
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On Oct. 6, 1973, the armies of Egypt and Syria launched a surprise attack against Israel. The Arab armies greatly outnumbered Israel’s in both the Sinai and the Golan Heights, posing an existential threat to the small nation-state. The U.S. began airlifting weapons and supplies to support Israel, and the Soviet Union supplied both Egypt and Syria. Though Israeli forces initially mounted a valiant defense, leaders in Cairo and Damascus were confident of victory.
Eleven days after the war began, Middle Eastern oil ministers, including representatives from Egypt and Saudi Arabia, met in Kuwait and announced that their countries would impose an oil embargo—first on shipments to the U.S., and later to European nations. The oil ministers threatened further unspecified energy restrictions if their demands for Israel to capitulate and the U.S. to cease support weren’t met. As Iran’s Shah Mohammad Reza Pahlavi said, “the industrial world will have to realize that the era of their terrific progress and even more terrific income and wealth based on cheap oil is finished.”
The oil embargo remained in place for the next five months, from October 1973 to March 1974, and caused massive disruptions in the world’s economies—especially in Western Europe, which had imported around 80% of its oil from Arab nations. Governments struggled to respond, lacking the necessary expertise, resources and political will to confront the crisis. President
railed against oil companies over what he deemed to be profiteering. Secretary of State
who was tasked with negotiating with Middle Eastern countries, floundered in the intricacies of international oil markets. “Don’t talk to me about barrels of oil,” he told his aides. “They might as well be bottles of
I don’t understand!”
But while Western governments flailed, their largest oil companies got to work. Intensive negotiations between
and its counterparts, including Texaco and Mobil, led to an agreement on how to coordinate shipments and minimize disruptions. Oil produced in Arab countries would be redirected to non-embargoed countries—and oil produced elsewhere would be sent to embargoed nations. It was a devilishly complex system, requiring the multinational corporations to track thousands of tankers and barrels of oil moving around the world.
The arrangement, which under the principle of “equal suffering” sought to allocate oil roughly proportionate to pre-embargo levels, with all nations facing similar cutbacks, did a remarkable job at smoothing out what could have been a catastrophic shock to world energy supplies. Oil supply dropped some but not nearly as much as many had predicted. When the Federal Energy Administration later issued a report on the crisis, it emphasized that “U.S. companies helped to blunt the edge of the Arab oil weapon by redistributing global supplies so that the construction of supplies was fairly evenly allocated.” The report concluded: “It is difficult to imagine that any allocation plan would have achieved a more equitable allocation of reduced supplies.”
Corporations today earn their fair share of scorn, some of which is deserved. They’re no more angels than humans are. But more important is that they’ve proved themselves uniquely talented vessels for bringing together talent, industry and technology in the name of peace and progress. Far from mindless avatars of greed, they are indispensable tools for promoting the public good. As winter in Europe approaches, we need such corporate might more than ever.
Mr. Magnuson is a professor at Texas A&M Law School and author of “For Profit: A History of Corporations,” forthcoming Nov. 8.
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