The evolution of oil as a weapon

IN the age of derivatives, swaps, and electronic money transfers, a new form of warfare has emerged: financial warfare.

Recently, the US has passed sanctions on countries such as Syria, Venezuela, and North Korea, but the majority of energy-related sanctions passed have been targeted at Iran and Russia.

An estimated 68 per cent of Russia's government revenue is derived from oil and gas exports, while 80 per cent of Iran's revenue comes from oil exports. That presents a very large target for the use of financial weapons.

To understand why financial warfare is now so commonplace, one must understand how it came into existence and what has been achieved taking such an approach.

The oil weapon first came into existence in 1965, when Egypt nationalised the Suez Canal. What resulted from this was a declaration of war by France,…