A handshake between then-British Prime Minister Tony Blair and Muammar Gaddafi in the desert in 2007 meant more than just strengthening Libya’s ties with an old enemy. It also became an obvious symbol of the role that major oil producers played in foreign policy.

During that trip, BP struck a major exploration deal that crowned its efforts to push the British government to re-establish ties with the late North African leader, opening up vast hydrocarbon resources close to Europe.

The struggle over fossil fuels has influenced geopolitics for many decades, from the eruption of conflicts and the shaping of relations between the West and the Middle East to today’s disputes over the Nord Stream 2 pipeline to supply gas from Russia to Western Europe.

But today, the relationship between Western oil companies and governments is undergoing major changes as governments increase their environmental responsibility and fossil fuels lose popularity. The trend intensified in April when US President Joe Biden convened an international climate summit to pressure countries to cut emissions.


“It has always been thought that geopolitical power in general is linked to access to oil,” said Greg Priddy, a former energy analyst with the US government. – Even during the Obama administration, there was a feeling in the United States that large manufacturers abroad were of strategic importance. But everything changes. “


Oil sunset

Last month, the International Energy Agency released a report that argued that in order to reduce greenhouse gas emissions to zero by 2050 – a prerequisite for meeting the Paris Climate Agreement’s goals of limiting global warming to 1.5 ° C above pre-industrial levels – immediately stop the exploration of new oil fields.

Even before the report, oil companies cut investment in risky exploration in remote regions, fearing that oil consumption could peak in the next decade.

However, the influence of countries where oil executives may once have played almost as large a role in relations with foreign leaders as ambassadors is diminishing. Critics have even complained that officials have taken up positions in the oil industry after completing their political careers. But analysts say governments are no longer willing to support fossil fuel companies overseas by promoting a domestic renewable energy program.

In the United States, the world’s largest producer and consumer of oil, the Biden administration acceded to the Paris Agreement, halted the Keystone XL pipeline and offered unprecedented investment in clean energy. At the same time, on the international stage, the White House insists that other countries refuse to finance coal projects abroad: last month, the G7 countries promised to do this by the end of this year. He also chaired the climate summit.


“Following the change of administration in Washington, it is likely that the US government’s relationship with oil companies has begun to decline,” said Helima Croft, a former CIA analyst who researches commodities at RBC Capital Markets.

“In the past, Washington considered securing access to resources an important issue, but now this importance has declined as the focus is mainly on the energy transition and climate change,” she added.


Not so simple

However, an attempt at a global transition to renewable energy sources requires complex calculations, observers warn.

Major oil companies say that, despite support, they have never relied on government assistance to secure access to resources, and they are still expected in many countries.

However, according to industry officials, politicians risk losing global influence by weakening ties with national oil and gas companies and forcing developing countries to ditch fossil fuels. They believe that, for example, the US should use its vast hydrocarbon resources to support potential allies that might otherwise supply fuel from countries like Russia.


“There is a geopolitical struggle with China for economic influence in many parts of the world,” said a former senior US national security adviser who now works for a major US oil company. “The US has advantages in supplying LNG, but it seems that they are not particularly interested in using them.”


Jason Bordoff, former special assistant to Barack Obama and director of the Center for Global Energy Policy at Columbia University, noted that global oil demand has declined only marginally.


“The IEA roadmap is great at describing what needs to be changed, but it is also striking that nothing has changed so far – demand for oil continues to grow,” added Bordoff.


According to him, the role of natural resources in foreign policy will evolve as the energy transition progresses. Sourcing the metals needed to make batteries, or providing access to alternative fuels such as hydrogen, mean that the relationship between large producers of raw materials and governments will change rather than just disappear.


“Even if it were possible to solve all the problems in the field of energy geopolitics through decarbonization, the energy transition will undoubtedly create new difficulties,” he said.


After all, high-level political support cannot protect oil companies. Blair may have cleared the way for BP, but the company’s investment in Libya fell short as the 2011 civil war and subsequent unrest disrupted her plans. In 2018, the company sold half of its exploration rights to Italy’s Eni.


“There has always been an interesting relationship between the government and the major oil companies, but I have never been sure how influence is exercised,” said Professor Paul Stephens, Emeritus Chatham House Fellow. “But now that oil is becoming obsolete … companies are fighting behind the scenes and there is little the government can do for them.”



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