Voluntary Trade General Information OPEC Currency The 1973 Oil Crisis
General Information • Most countries in the Middle East depend on voluntary trade, where people in different countries buy and sell because they see the opportunity to make a profit. • Most of their food and products for living must be imported, so they depend on trade with other countries. Money is Transferred
More General Information about Voluntary Trade • Many Middle Eastern nations signed an agreement with the European Union in 1995 to end trade tariffs on their products by 2010. This will make the products cheaper to buy. • Physical Trade Barriers: • few rivers suitable for travel or transportation • many deserts • Mountains in Turkey, Iran and Afghanistan
Oil is the Largest Export of the Middle East (Southwest Asia) • Countries here control about 65% of the world’s supply of oil. Oil provides most of the income of the Persian Gulf countries. • The Persian Gulf is a major asset to trade in the region, since ships can easily transport goods out of it.
OPECOrganization of Petroleum Exporting Countries • OPEC includes these countries in the Middle East: Iran, Iraq, Saudi Arabia, and Kuwait • OPEC develops policies about oil production and trade • OPEC raises and lowers the price of oil according to market demand, availability, and other factors
Currency in the Region Countries in the Middle East have different forms of money Countries must have an exchange rate in order to trade with one another. The exchange rate determines how much money a currency is worth in another currency. Examples of currency names: Israel: the shekel Saudi Arabia: the riyal Jordan: the dinar
The 1973 Oil Crisis • In 1973, Egypt (a Muslim nation) had a war with Israel (a Jewish nation). • OPEC decided that to support Egypt, its member nations would not ship oil to countries that had helped Israel. The USA and many European nations were affected. • OPEC also raised the price of oil by 70%. Gasoline in the USA increased by 4x over several months. • These actions impacted industrialized nations due to their growing dependency on oil and gas.
More about the 1973 Oil Crisis… • The crisis caused the value of the American dollar to drop, and it had a negative impact on the world economy. • OPEC began shipping oil again in 1974. • The 1973 Oil Crisis is an example of a political trade barrier. • Wars are also political trade barriers; Iraqi oil production has been decreased by violence since the U.S. invasion of Iraq.