Iran, Oil, and the Carter Doctrine

With little fanfare, this year marks the 30 th anniversary of the Carter Doctrine, when President Jimmy Carter warned against “outside” control of the oil-rich Persian Gulf.  The U.S. effectively enforced an implicit corollary to that doctrine—to prevent control by a regional power—in the Iraq wars of 1991 and 2003. But today, the Carter Doctrine must make a powerful and swift return: Iran’s nuclear ambitions threaten the Gulf, posing perhaps the greatest immediate threat to U.S. national security and a great threat to U.S. economic interests by provoking a long-term spike in oil prices.

U.S. President Jimmy Carter came into office declaring the energy challenge the “moral equivalent of war.” He eventually came to designate energy supply as a cause for an actual war. Events in late 1979 conspired to threaten the free flow of oil in the Persian Gulf:  Ayatollah Ruhollah Khomeini became supreme leader of the new Islamic Republic of Iran; militants took over the U.S. embassy in Tehran, seizing 53 hostages; armed radicals opposed to the Saudi regime stormed the Great Mosque in Mecca; and the Soviet Union invaded Afghanistan, Iran’s eastern neighbor, bringing Russia closer to its long-held desire to reach the Persian Gulf. The next year, Carter, perceived weak internationally, dramatically expanded the perimeter of the U.S. defensive shield by declaring: “Let our position be absolutely clear: An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force.”

The Carter Doctrine is as relevant today as it was thirty years ago. The Persian Gulf’s oil production capacity as a proportion of global demand is roughly the same today—about 28 percent–as it was in 1980.  If a hostile power controlled the Gulf, it could unduly influence countries such as China and the U.S., the first and second largest energy consumers, respectively, and play a highly influential role in OPEC, which would effectively hold the global economy hostage to its demands.

Today, the biggest challenge to the Carter Doctrine is Iran’s nuclear ambitions, but not because of the destabilizing fallout of a potential military strike against its nuclear facilities.  U.S. or Israeli military action in Iran would trigger a jump in oil prices. However, as long as oil facilities in the Persian Gulf are not dramatically impacted by Iranian reprisals, which is possible, increased Saudi oil production and release of oil stored on tankers and in national reserves could return oil prices to pre-conflict levels within six months. This might derail the fragile global economic recovery, but ultimately the impact could be contained.

A far greater threat to the oil market would be Iran’s attainment of a nuclear weapons capability. The U.S. Fifth Fleet and its other military assets in the region guarantee the free flow of oil through the Persian Gulf. But a nuclear-armed Iran would gain de facto immunity from a conventional attack from another country, significantly limiting the effectiveness of U.S. force projection in the region.

Nevertheless, there is a growing belief in Washington that a nuclear-capable Iran can be contained, just as the Soviet Union was during the Cold War. But while the U.S. could try to impose a nuclear shield around its regional allies and to help contain Iran, it will not be effective. United States’ credibility, so integral to effective deterrence, would be seriously diminished, if after repeatedly issuing warnings to the contrary it permitted Tehran to cross the nuclear threshold. Restoring U.S. credibility would, then, require extraordinary action, while nuclear capability would only embolden the already risk-tolerant Iranian regime. Moreover, the United States lacks politically stable, militarily robust and reliable Arab allies who would permit the permanent stationing of U.S. troops as a tripwire.

Its revolutionary regime makes a nuclear Iran far more dangerous and destabilizing than if Iraq’s Saddam Hussein had developed such capability. It would embolden sizeable Shia populations in Sunni countries, and thus undermine our oil rich Sunni Arab allies in the region (for example, in Saudi Arabia). Some oil rich neighbors would feel compelled to accommodate Iran, including its desperate need for higher oil prices to offset declining production. A nuclear Iran would also set off a proliferation cascade across the Middle East, further radicalize the region, end hope for an Arab-Israel peace, potentially transfer nuclear materials to its terrorist allies, and perhaps back up its threats to destroy Israel. Major energy importing countries, primarily Asian countries, would be forced to walk a delicate tightrope between the United States and Iran.

As these developments play out over months and years, a significant conflict in the Middle East, involving the United States, will become more likely and the region’s long-term oil supply becomes unreliable. The net result will be soaring oil prices.

The best hope for continued U.S. enforcement of the Carter Doctrine and its corollary—protecting against control by a hostile regional power—is to prevent a nuclear Iran. A recent Bipartisan Policy Center report, “ When Time Runs Out,” proposes a triple track approach involving diplomacy, sanctions, and visible and credible preparation for a military strike.  The Obama administration has focused mostly on the first two tracks. However, diplomacy and sanctions will only have the chance to be effective when simultaneously coupled with an active and open preparation for the military option.

There are a number of things, short- and long-term, the U.S. can do to mitigate Iran’s impact on the oil market.  First, the U.S. should do whatever it can to encourage Iraq’s ambitious oil development plans, one of the most promising in the world. Even if Iraq achieves only about half its stated goal, it could meet 40 percent or more of the estimated global oil demand growth over the next decade. Second, the U.S. Department of Energy needs to test different release rates of its Strategic Petroleum Reserve (SPR), which stores about 700 million barrels of crude oil as a strategic cushion. The SPR needs to be fully tested to make certain it can achieve its stated release rate. Third, the administration should ask the Saudis to commit to ramping up oil production if U.S. differences with Iran intensify. Fourth, the U.S. should explore routes to export Persian Gulf oil that avoid the Strait of Hormuz. For instance, the Saudis and Iraqis could rejuvenate the old Iraq-Saudi pipeline to the Red Sea, work with Iraq and Turkey to refurbish and expand Iraq’s two pipelines through Turkey, and examine the feasibility of a new Iraq-Jordan pipeline. Finally, the U.S. must develop a bipartisan, comprehensive energy policy that encourages reduced oil consumption and diversifies our energy supply. As Winston Churchill, as first lord of the Admiralty, stated in 1913 about the nation’s new oil policy, “Safety and certainty in oil lie in variety alone.”

Much is at stake with the Iran issue: U.S. national security, nuclear proliferation, Arab-Israel peace, moderation of the Islamic world, security of Israel and Arab allies, the U.S. global position, and the secure supply of crude oil from the Persian Gulf that is so integral to our economy. It is vital, therefore, for the United States to continue to enforce the Carter Doctrine.

Michael Makovsky, foreign policy director of the Bipartisan Policy Center, was a special assistant for Iraqi oil policy in the Office of the Secretary of Defense from 2002 to 2006 and author of Churchill’s Promised Land. Lawrence Goldstein is a founder of the Energy Policy Research Foundation (EPRINC) and former consultant to the Office of the Secretary of Defense.

Originally appeared in The Weekly Standard on August 13, 2010.