Officially, Libya denies sponsoring the bomb that destroyed Pan Am Flight 103 on December 21, 1988. In 2002, however, Libya offered $2.7 billion to in compensatory payments to the victims’ families. That money was only possible because of Libya’s dominant export industry: oil.
Before oil was first exported in commercial quantities from Libya in 1961, it was one of the poorest countries in the world, with GDP per capita estimated at $25 in 1951. Oil has made it rich. Much of that money was used to support the Libyan government’s military adventurism under Muammar al-Qaddafi.
Libya is not alone. Other oil-rich “petrostates,” like Iraq, Iran, and Saudi Arabia have all sponsored terrorism or political violence in various hotspots around the world. Academic research shows how oil is linked to wars, civil wars, terrorism, and corruption. With respect to terrorism specifically, the oil sector is linked to political violence in three main ways.
Petrostate-sponsored terror or violence
First, petrostates sometimes directly conduct or indirectly sponsor violent attacks. For instance, at the height of its revolutionary period under Qaddafi, 1969-1991, Libya engaged in a multitude of international conflicts. In addition to wars and other interstate conflicts, Libya supported a wide range of foreign insurgencies and rebel groups, from the radical Palestinian group Abu Nidal to the Irish Republican Army and the Black Panthers. It sustained a nuclear weapons program for more than three decades before reversing course in 2003 as part of its reconciliation with the West. And it was involved in terrorism.
Besides the Pan Am Flight 103 airline bombing, Libya sponsored two other major acts of international terrorism in the late 1980s. In 1986, a bomb in a German discotheque called La Belle exploded, killing three and injuring over two hundred civilians and off-duty US servicemen. Then in 1989, the French airliner UTA Flight 772 was bombed in midair over Niger, killing all 156 passengers and 15 crew members. The Libyan government officially denied sponsoring both incidents, same as with the Pan Am 103 bombing. Libya also stood accused of trying to assassinate multiple world leaders, such as US President Reagan and Saudi Arabia’s Crown Prince Abdullah. The U.S. State Department first added Libya to its list of state sponsors of terror after Libyans attacked the U.S. embassy in Tripoli in December 1979 and set it on fire. Libya would remain on the terrorism list until 2006.
"Oil money has enabled Libya and other countries to engage in acts of terror, like Iraq and Iran."
Oil money also enabled other countries to engage in acts of terror, like Iraq and Iran. In the late 1970s, as Iraq’s oil income increased, terrorist groups such as Abu Nidal and the Popular Front for the Liberation of Palestine set up shop in Baghdad with the support of the Iraqi government. In Iran, there is a special division of the Islamic Revolutionary Guard, known as the Qods force, that is tasked with special operations. The Qods forces are suspected of having carried out lethal operations in multiple countries. In 1997, the German courts convicted an Iranian official for killing four Iranian Kurdish opposition leaders in a restaurant in Berlin, along with four others in absentia, including President Rafsanjani and Supreme Leader Khamenei. Iran’s involvement is suspected in two attacks in Argentina in 1992 (a bombing of the Israeli Embassy, killing 29 people) and 1994 (a bombing of a Jewish community center in Buenos Aires, killing 85 people). In November 2006, warrants were issued for the arrest of former Iranian president Akbar Rafsanjani and eight other Iranian officials.
Oil and Non-State Violent Groups
The second way that the oil sector is linked to terrorism or political violence is through non-state actors like al-Qaeda. For instance, the Islamic State, also known as ISIS, conquered much of Iraq and Syria on the back of an extensive petroleum operation. Oil helped ISIS in three ways: it was used as fuel for ISIS trucks and military operations; oil sales to local consumers within its territory generated revenue; and sales to external, black-market customers generated additional revenue. ISIS was reported to have made as much as $3 million per day from producing and selling oil in its territory 2014-2017. At one point, ISIS employed nearly 2000 oil workers.
Sometimes it is not the oil money but rather the presence of foreign workers or oil companies in a petrostate that supports terrorism. Local people often resent the economic inequality and perceived exploitation associated with the oil industry. Some jihadist networks, such as al-Qaeda, feed on this and other grievances. Osama bin Laden once described the Saudi state as complicit in the “greatest theft in human history,” because it kept oil prices too low. Of course, al-Qaeda has a range of grievances, and oil is not at the root of all of them. Still, Osama Bin Laden found it easy to rhetorically link the Saudi oil industry, the U.S. military presence in Saudi Arabia, and the grievances in Saudi society. This rhetorical link gave him a powerful tool for recruiting and generating support for al-Qaeda’s terrorism.
Oil financing for political violence
Third, the oil sector is linked to terrorism and political violence in myriad indirect ways, principally as a source of financing. Often this involves petrostates directly funding foreign insurgencies and rebel groups. For example, Libya supported approximately thirty revolutionary groups and foreign insurgencies around the world in the first two decades of Qaddafi’s rule. Without oil, it is highly unlikely that Libya would have had the resources to fund those groups. The details are highly uncertain due to their covert nature, but the groups supported by Qaddafi can be loosely placed into three categories. First, there were several anti-Israeli groups that trained in Libya or received material support, such as Abu Nidal and the Palestinian Liberation Organization (PLO). Second, Libya supported one or both sides in several African internal conflicts or civil wars, including those in Guinea-Bissau, Mozambique, Somalia, Zimbabwe, Namibia, South Africa, and Angola. It also organized several coup attempts, such as in Chad (1971) and Sudan (1972). Third, Libya sponsored rebel groups outside of Africa, such as the Irish Republican Army (IRA), the Black Panthers in the US, and various groups in Nicaragua, El Salvador, Grenada, and Guatemala.
Saudi Arabia, Iran, Iraq, and Venezuela each have used some of their oil money to sponsor foreign insurgencies, too. As part of the implicit US-Saudi alliance, Saudi Arabia spent vast sums to support the global anti-Communism effort during the Cold War. Most famously, the Saudis spent billions of dollars of oil money to support the mujahedin in Afghanistan, who were fighting a resistance war against the Soviet occupation. In just the years 1987-1989, the Saudis gave the Afghan mujahedin at least 6.75 billion riyals (US $1.8 billion). Saudi financing for insurgents in the 1980s extended far beyond Afghanistan and included support for groups in Angola, Sudan, Ethiopia, Yemen, and elsewhere, wherever there was an active battle against Communists. The Saudis worked hand in hand with the US, even facilitating funding for the Nicaraguan contras that lay at the heart of the Iran-contra affair.
Iran is also active in fomenting insurgencies. Hezbollah’s leaders were inspired by Khomeini and created their organization after the Israeli invasion of Lebanon in 1982. Hezbollah’s forces were in part directly mobilized and trained by the Qods force. Iran is estimated to provide $200 million per year to Hezbollah, making it the group’s principal funder. Iran and Syria are suspected of exerting considerable direct influence over the organization, although they officially deny it and precise details are impossible to obtain. In Afghanistan, Iranian forces are believed to have supported various rebel factions for decades. In Iraq, Iran has supported Kurdish and Shiite insurgent groups continuously since the 1979 revolution, a practice that escalated after the fall of Saddam in 2003. The Egyptian government has repeatedly accused Iran and Sudan of collaborating to arm, finance, and train Muslim militants to carry out violent acts of subversion in Egypt. Finally, Iran and Hamas have a strong relationship. Iran gives Hamas an estimated $30 million per year, plus military training and ideological support.
From oil to violence
In short, the global oil system is connected with political violence and even terrorism in multiple ways. Sometimes that connection is direct—such as when terrorist groups produce oil and sell it on illicit markets to fund their operations—but often it is more indirect and insidious.