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9 January 2020, Gateway House

Conflict with Iran primes U.S. economy

Oil prices, arms exports and conflict are inter related especially when it comes to the U.S. Its arms industry grows when high prices and conflicts coincide. This has kept West Asia on a perennial geopolitical boil. This infographic charts the highs and lows of U.S. arms sales, especially in the light of conflicts centred around West Asia

Fellow, Indian Navy Studies Programme

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Behind the sturm and drang of U.S.-Iran accusations and counter-strikes is a graphic of interwoven interests: the price of oil and the sale of U.S. arms, especially in West Asia. Studies of 60 years of oil prices[1] and arms exports[2] show that a convergence of high oil prices and conflict has helped U.S. arms exports grow. This combination has kept the region on geopolitical boil and given the U.S. a permanent presence there.

The chart shows three significant convergences of oil prices and arms sales.

1976-77: Oil prices gain over 300% since 1973. U.S. arms sales are at historic highs: Iran is buying almost 25% of the total arms.

1981-88: High oil prices during the Iran-Iraq War supports increased arms sales over the lows of 1979.

2014-17: High oil prices during the Iraqi Civil War supports increased arms sales over the lows of 2017.

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2020: The assassination of Iran’s Maj Gen Qassem Soleimani by the U.S. and the retaliation from Iran, which fired 15 ballistic missiles at U.S. forces in Iraq, is a significant escalation. It has once again created a perfect moment for the convergence of high oil prices and increased arms sales by the U.S. to the region. Within 24 hours of the Soleimani incident, Brent Crude Oil jumped 4.4% to $69.16.

This benefits the U.S, a new oil exporter, as also traditional West Asian oil producers, who can once again afford to buy the fancy new U.S. arms on sale. The winner is the U.S. arms industry, whose sales had peaked in 2017 during the fight with ISIS, and which will once again find demand in the region.

This round goes to President Trump and the U.S. economy.

Cdr. Amrut Godbole is a serving officer of the Indian Navy and currently Indian Navy Fellow, Gateway House.

The views expressed in this report/article are those of the author and do not necessarily reflect the official policy or position of the Indian Navy, the Ministry of Defense, or India.

This infographic was exclusively created for Gateway House: Indian Council on Global Relations. You can read more exclusive content here.

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References 

[1] World Bank, CMO – Historical Data, http://pubdocs.worldbank.org/en/561011486076393416/CMO-Historical-Data-Monthly.xlsx

[2] Stockholm International Peace Research Institute, ‘Importer/Exporter TIv Table’, http://armstrade.sipri.org/armstrade/page/values.php

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