By Eric Vandenbroeck and co-workers

Throughout much of the modern era, limiting or disrupting the flow of energy was a highly effective tool of global power. In 1923, Admiral Reginald Bacon of the Royal Navy declared that the United Kingdom’s oil blockade of Germany in World War I was the powerful economic weapon to which “the ultimate collapse of that nation and her armies was mainly due.” A generation later, Soviet leader Joseph Stalin attributed the Allied victory over Nazi Germany to the Red Army’s success in denying Hitler access to oilfields in the Caucasus. Then there was the 1973 Arab oil embargo, which caused a nearly 300 percent rise in the price of gas in the United States and miles-long lines of cars at gas stations, an experience that has remained seared in national memory.

For much of the next 50 years, however, the use of energy as a coercive tool of statecraft largely subsided. The disastrous effects of the Arab oil embargo on the global economy led both producer and consumer countries to think differently. Over the years that followed, consumer countries sought to make their energy flows more resilient and build stronger and more transparent international markets, while producers reined in their propensity to use their energy prowess as a geopolitical cudgel. The end of the Cold War and the subsequent acceleration of globalization boosted reforms that further integrated oil markets and diversified energy supplies. In the early years of the twenty-first century, even soaring prices and fears about peak oil—the notion that global oil production was close to its maximum and would soon begin an inexorable decline—proved short-lived as the American shale-drilling revolution brought unprecedented new volumes of oil to the market. Oil prices continued to fluctuate during major conflicts such as the first Gulf War and the Libyan civil war and global crises such as the Great Recession and the COVID-19 pandemic. But throughout this era, consumers, particularly in advanced economies, were increasingly confident that markets would deliver the energy they needed. Over time, many countries were lulled into complacency about energy security.

Today, that complacency has been upended. Following its 2022 invasion of Ukraine, Russia inflicted enormous economic pain on Europe by slashing its natural gas deliveries to the continent and sparking an energy crisis with global reverberations. As part of its larger trade confrontation with the United States, China has periodically restricted the export of key critical minerals and rare-earth elements—parts of a supply chain that is crucial to semiconductors, military applications, batteries, and renewable energy. The United States itself has also politicized the flow of energy, demanding that Europe buy more American energy to gain relief from threatened trade tariffs. Even countries such as Canada have entered the fray, with Ontario imposing a surcharge on electricity exports to the United States in retaliation for President Donald Trump’s sweeping new tariffs on Canadian goods. As producers wield the energy weapon that was largely sheathed for the last several decades, the United States and others are also rebrandishing their influence over the production and purchase of energy, as seen in Washington’s recent moves to prohibit most American oil and gas firms from operating in Venezuela and to consider steeper sanctions on countries buying Russian and Iranian oil exports.

In a world that had grown accustomed to relatively stable and secure energy markets and was under the illusion that the clean energy transition would neutralize energy geopolitics, the return of the energy weapon has caught many by surprise. Yet this trend is unlikely to end soon for two broad reasons. First, at a time of renewed great-power competition and economic fragmentation, energy has once again become an attractive instrument of geo-economic coercion. Second, significant developments within the energy sector are creating new opportunities for weaponization even as they mitigate some others.

Fortunately, there are a variety of policy tools to address these threats—most of which are compatible with and enhanced by the clean energy transition. Indeed, by making a faster shift toward zero-carbon sources of energy, countries can eventually build a strong form of resilience against energy weaponization, especially if such a push is coupled with efforts to diversify clean energy supply chains. To mount an effective response, however, policymakers need to recognize the forces driving weaponization and the broader risks they pose to national security and the global economy. With more countries threatening to make coercive use of more different kinds of energy flows, the world could be at the dawn of a new age of energy weaponization.

 

Global Entry

Throughout much of the twentieth century, controlling the flow of oil was considered an essential component of foreign policy and military strategy. Countries endowed with energy riches used those resources as a means to achieve objectives outside the energy realm. And those whose geology was lacking often saw the need for energy as an end—a reason to harness military, economic, and diplomatic power in its pursuit. For decades after oil became the dominant global energy source, producers were in a strong position. By the 1970s, oil supplied about half the world’s energy needs. And since it was typically sold in long-term contracts at administered prices set by a small number of governments, producers could assert control over both supply and price. With such levers, countries with major oil reserves could seek to sway international policies in the realm of politics. In 1973, after the outbreak of war between Israel and its neighbors, the Arab members of OPEC restricted oil exports to countries supporting Israel and incrementally curtailed global supply to compel the United States and other Western powers to cease support for Israel and force Israel to withdraw from captured territories. The move triggered what one adviser to U.S. President Richard Nixon called an “energy Pearl Harbor.” By the end of the year, the price of a barrel of oil, which three years earlier had been $1.80, reached $11.65—the equivalent of more than $80 today.

Yet the Arab oil embargo proved to be a turning point. It produced a wide array of negative consequences, including stagflation in advanced economies and a massive debt burden in the developing world. It also failed to compel the West to abandon Israel. It did, however, drive many countries to launch an intense effort to conserve energy, boost oil production outside OPEC, reduce imports, and prioritize energy security. In 1974, advanced economies came together to form the International Energy Agency (IEA), the centerpiece of which was an agreement to build strategic oil reserves for coordinated release in times of emergency. As it became clear that price controls and energy rationing had exacerbated the effects of the embargo, U.S. leaders and policymakers also realized that more flexible, integrated, and well-functioning global oil markets could disperse the impact of supply disruptions—spurring efforts to liberalize the oil trade. In the early 1980s, governments sought to improve the quality and transparency of energy data and to deregulate oil pricing, helping pave the way for the inclusion of crude oil futures on the NYMEX commodity futures exchange. Thereafter, oil went from being largely traded in long-term contracts at fixed prices—an approach that made it difficult for buyers to find alternative sources of supply during disruptions and thus vulnerable to producer pressures—to the most traded commodity in the world.

Although the process was slower and looked very different, natural gas markets were also becoming more globally integrated. After the first shipment of liquefied natural gas sailed from Louisiana to the United Kingdom in 1959, successive waves of supply growth—including from Algeria in the 1980s, Qatar in the 1990s, and the United States in the last decade—transformed the natural gas trade. They contributed to a more integrated and flexible LNG market that could better respond to changes in supply and demand than fixed gas pipelines, since tankers can deliver to many destinations and are easily redirected. Starting in the 1980s, despite Europe’s growing dependence on Soviet—and later Russian—gas, policymakers and buyers became more confident that competitive markets and mutual dependence would shield the continent from geopolitical vulnerability. Indeed, for much of the Cold War, many leaders perceived the energy trade between western Europe and the Soviet Union as a moderating influence on the larger geopolitical rivalry.

The end of the Cold War only accelerated these positive trends. The collapse of the Soviet Union in 1991 paved the way for the 1994 Energy Charter Treaty, which created a multilateral legal framework for energy cooperation. Initially intended to provide a legal structure for energy trade, transit, and investment between Western Europe and post-Soviet states, the treaty later expanded to incorporate countries from other regions. Investments began flowing into Russia and former Soviet republics from Western energy companies such as Exxon, BP, and Total, further increasing interdependence and the breadth and depth of global markets. In this new era of cooperation, the United States and Russia created a Megatons to Megawatts program, in which the United States purchased excess highly enriched uranium from Russia’s defense sector and turned it into low-enriched uranium for civilian reactors; for years, policymakers seemed unfazed that the United States was dependent on Russian fuel to operate its nuclear power plants.

The integration of global energy markets was given a huge boost by China’s accession to the World Trade Organization in 2001. To fuel its staggering industrial and manufacturing expansion over the decade that followed, China had to quadruple its oil imports, forcing it to rely heavily on the markets of the Middle East and Central Asia. Over time, Beijing moved away from a “going out” strategy that focused on physical control over energy resources in Africa and beyond to an approach that sought to ensure access to energy from a diverse group of suppliers. Later, through its Belt and Road Initiative, the Chinese government financed pipelines, ports, refineries, and power plants overseas, investing in a network that could help it obtain a consistent supply of energy from multiple points around the world.

As economic relations became more globalized and energy markets became more interconnected, exporters largely set aside the energy weapon. Certainly, there were notable exceptions, as when Russia cut off gas exports to Ukraine in 2006 and 2009. Yet the ensuing European debate over whether the cuts were commercial or political in nature weakened the collective European response to coercion. At the time, most producers seemed to recognize that well-integrated global energy markets limited the impact of withholding or denying energy deliveries to a particular country or region, making calculations about embargoes unattractive. As fiscal budgets ballooned in the Gulf and other OPEC countries, producers were reluctant to take action that could jeopardize their revenue streams, and the threat of another oil embargo by the cartel faded. The net result was that by the early years of this century, there was a general sense among advanced economies that energy security had improved significantly since the 1970s, even as reliance on oil imports continued to grow.

To be sure, energy weaponization did not entirely go away during this era of relative stability, although the sort exercised in the decades after the Cold War was of a different variety. Whereas the globalizing economy and integrated markets made trade sanctions on oil producers less effective, economic interdependence and the dominance of the U.S. dollar made the financial system ripe for weaponization. Consumer countries, particularly the United States, politicized their consumption and deployed financial sanctions against some of the world’s largest oil producers, such as Iran. Energy thus remained a means for advancing foreign policy in this surprising way.

 

Power Play

In the last several years, the circumstances that set the stage for this extraordinary period of energy cooperation have begun to shift. Perhaps most importantly, by 2020, the era of closer cooperation among great powers, unfettered trade, and faith in markets was coming to an end. The integration of global markets that had been central to the energy security of so many countries was no longer assured; shifting geopolitical forces were creating economic fragmentation, and governments were beginning to intervene in private enterprise in more far-reaching ways. Major powers are now pivoting toward state capitalism, using trade restrictions and industrial policy to achieve economic and national security aims. In the United States, this shift began during Trump’s first term, continued under the Biden administration, and has expanded further under the second Trump administration, with the government using tariffs as a form of economic coercion in far more aggressive ways. China, which has long engaged in state capitalism, is both pulling back from global markets in many commodities and honing its ability to use sanctions and other state interventions to advance its interests. In this increasingly uncertain geoeconomic environment, countries in Europe and other parts of Asia are finding it harder to assume that markets alone will deliver the energy supplies they need.

Paradoxically, perhaps, the pullback from the integrated global markets that have long helped stabilize energy flows has been partly driven by policymakers’ growing concerns about energy security. In many countries, escalating geopolitical threats, great-power rivalry, high energy bills, risks of supply shortfalls caused by underinvestment in oil and gas, competition for leadership in power-hungry artificial intelligence, and worsening climate impacts have all contributed to a sense that energy security is on the line. Rather than leaning in to global markets, governments may be more inclined to reduce their energy trade and curb their exposure to volatile international forces. Consumer countries increasingly seek to produce more domestic energy and import less, and producer countries may be tempted to curb exports to prioritize their own needs. In early 2025, Norway’s two governing parties pledged to cut power exports to Europe amid concerns about soaring electricity prices at home. Similar pressures may soon arise in the United States. Voters confronting higher utility prices could pressure the government to restrict the country’s burgeoning exports of natural gas in the belief that doing so will lower their bills. In fact, any such moves could undermine the very integration that has helped tame energy weaponization in recent decades.

Alongside a fragmenting global economy, changes in the energy landscape will encourage renewed use of the energy weapon, even if other developments will cut the other way. Take the oil sector, in which two of the main conditions for past weaponization could reemerge in the years ahead: the tightening of markets and the concentration of supply. Discussions about the implications of global oil demand peaking are gradually being replaced by questions about the consequences of the shale oil boom coming to an end. In September 2025, the oil giant BP acknowledged that oil demand, which it had previously forecast would peak this year, will continue climbing for the rest of the decade. According to a report published by Bloomberg, in a draft of the IEA’s forthcoming 2025 World Energy Outlook, the agency presents a scenario based on current policy alongside one reflecting policies and measures that have been formally announced or are under development. In previous IEA reports, the latter scenario projected global oil demand to peak by the end of this decade; in the draft, the former scenario shows it continuing to grow through 2050. Meanwhile, oil executives and analysts are becoming skeptical that U.S. shale oil production, which met most of the growth in global demand over the last decade, will continue to rise. The U.S. Energy Information Administration has projected that U.S. oil production will decline next year. Major oil companies have also scaled back exploration efforts worldwide, with investment in upstream oil and gas projected to fall in 2025 to its lowest level since the pandemic. As more of today’s existing production capacity is called on to meet rising demand, the amount of spare capacity in the global system will shrink, leaving less of a buffer to cope with price shocks. As a result, the oil market may tighten significantly toward the end of this decade, creating more chances for countries to target the oil supply—through infrastructure attacks, export restrictions, sanctions, or other steps—in ways that inflict economic pain.

In addition, the renewed concentration of supply in the hands of fewer countries will exacerbate the risk of coercion. By 1985, OPEC’s share of the world’s oil production had fallen from about half before the Arab oil embargo to just 27 percent, as huge volumes of non-OPEC oil came to market from the North Sea and other areas. But with the U.S. shale boom slowing and other non-OPEC producers experiencing only modest supply growth, the IEA now projects that the cartel’s share of the global market will rise again to at least 40 percent by 2050, a level not seen since the 1970s. If demand continues to be strong, this concentration of supply will make OPEC countries even more geopolitically influential.

The global gas market may also soon experience changes, including further concentration, that make politicization more likely. It is true that over recent decades, the rise of liquefied natural gas and the emergence of a more globally integrated gas market have greatly reduced opportunities for coercion. When Russia cut off most of its pipeline gas exports to Europe in 2022, for instance, European countries were able to cushion the loss by securing supplies of globally traded LNG, albeit at much higher prices. Nonetheless, shifting dynamics in global gas markets suggest that new dangers may lie ahead. In the coming years, supplies will be more concentrated among a handful of producers, even if Russia’s plan to triple its LNG export capacity by 2030 does not materialize. The sharp growth in LNG exports from Qatar and the United States—in combination with growing European and Asian dependence on LNG—means that more gas will travel through the Strait of Hormuz and from the U.S. Gulf Coast, creating new geopolitical targets. Moreover, although the rise of the United States as an LNG superpower was once seen as a salve for geopolitical risk, the Trump administration’s use of economic coercion against allies and adversaries has stirred fear among energy importers that the United States may no longer be a reliable, apolitical supplier.

 

 

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