Oil, Terrorism, and Violence

Anti-government Libyan rebel in front of oil refinery

Anti-government Libyan rebel in front of oil refinery in Ras Lanouf, Libya.

Oil is the world’s single most important commodity, generating much wealth as well as far-reaching political effects. Oil-rich “petrostates” have 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.

A clear example of terrorism was the bombing of Pan Am Flight 103 on December 21, 1988, over Lockerbie, Scotland. Officially, Libya denies sponsoring the bomb attack. In 2002, however, Libya offered $2.7 billion 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 far richer. Much of that money was used to support the Libyan government's military adventurism under Muammar al-Qaddafi’s 42-year rule.

An escalating spiral of hostility in U.S.-Libyan relations set the stage for the Pan Am 103 attack. In January 1986, the U.S. had increased its economic sanctions on Libya and frozen Libyan government assets in the United States. A West Berlin discotheque bombing in April 1986 was widely seen as a Libyan reaction to the U.S. sanctions. In response, on April 15, 1986, the United States launched air strikes on Libya. There were 40 reported Libyan casualties from the attack, and one U.S. plane was shot down. Some experts believe the Libyans sought revenge with the 1988 Pan Am bombing.

Libya is not alone in using its oil money to fund violence. Other oil-rich “petrostates,” like Iraq, Iran, and Saudi Arabia, have all sponsored terrorism or political violence. 

With respect to terrorism specifically, the oil sector is linked to political violence in three main ways:

A U.S. soldier stands guard duty near a burning oil wel

A U.S. soldier stands guard duty near a burning oil well in the Rumalia, Iraq oil field, 2 April 2003. 

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 200 civilians and off-duty U.S. 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 U.S. President Ronald Reagan and Saudi Arabia’s Crown Prince Abdullah.[1]  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; the courts also convicted four others in absentia, including President Akbar Rafsanjani and Supreme Leader Ali 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.[2]

Petrostate-sponsored terrorism is not always aimed at the United States, but there is considerable anti-American hostility in many petrostates. Often this hostility is related to the history of U.S. actions associated with the global oil industry. For instance, Iranians bitterly recall the U.S.- and U.K.-sponsored coup in 1953 against the democratically elected prime minister of Iran, Dr. Mohammad Mosaddegh. In 1951, the British-owned Anglo-Iranian Oil Company, now known as BP, refused to cooperate with the newly elected prime minister’s request for an audit of oil revenues. In response, the parliament (Majlis) nationalized the Iranian oil industry, which meant expropriating British assets. The British responded by organizing a worldwide boycott of Iranian oil, with support from the United States. The boycott crippled the Iranian economy for two years, laying the political foundation for “Operation Ajax” by British and American intelligence services (the CIA and MI6). That operation supported a coup that removed Mosaddegh, restored the Shah Pahlavi to power, and led to the restoration of Anglo-American corporate control over the Iran oil industry.[3]

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.[4] ISIS was reported to have made as much as $3 million per day from producing and selling oil in its territory 2014-2017.[5] At one point, ISIS employed nearly 2,000 oil workers.[6]

Sometimes it is not the oil money but rather the presence of foreign workers or oil companies in a petrostate that contributes to terrorism. Local people often resent the economic inequality and perceived exploitation associated with the oil industry. The American oil companies’ history of racism and poor treatment of local workers did not help.[7] For many years in some countries, like Saudi Arabia, white American oil workers lived in separate enclaves where the laws were different, and amenities were better, than those the locals could expect.

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.[8] 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.[9] This rhetorical link gave him a powerful tool for recruiting and generating support for al-Qaeda’s terrorism.

The links between Saudi Arabia and the September 11, 2001, attacks are complicated. There is no robust evidence that the Saudi government was involved in the attack or desired it. Still, 15 Saudi nationals participated in the 9/11 hijackings, working for al-Qaeda. Moreover, the Saudi government initially showed little contrition over the role of the Saudi nationals and placed most of the blame on Israel and Zionists. The Saudi response stemmed from perceived American indifference to the brutality of the Israeli military and the plight of the Palestinians, a view that was widely shared in the Arab world. Just prior to the attacks, on August 27, 2001, Crown Prince Abdullah had sent a sharply worded letter to President George W. Bush, suggesting that the U.S.-Saudi relationship was near an end. Consequently, the Saudi regime was initially lukewarm at best to the U.S. interest in combating terrorism—before Saudi Arabia suffered the first of several terrorist attacks on its own soil in May 2003.

Saudi Aramco’s oil storage facility

Saudi Aramco’s oil storage facility in Jeddah hit by Houthi attack.

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 30 revolutionary groups and foreign insurgencies around the world in the first two decades of Qaddafi’s rule.[10]  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 U.S., and various groups in Nicaragua, El Salvador, Grenada, and Guatemala.[11]  

Saudi Arabia, Iran, Iraq, and Venezuela each have used some of their oil money to sponsor foreign insurgencies, too. Some petrostates have used their oil wealth to fund the teaching of a radical version of Islam that has indirectly fueled global jihadism. Some of the same petrostates have also spent money that directly financed political violence. For instance, as part of the implicit U.S.-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).[12]  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 U.S., 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 Ayatollah Ruhollah 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.[13]  Iran is estimated to provide $200 million per year to Hezbollah, making it the group’s principal funder.[14] 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.[15]  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. 

U.S. oil Embargo on Iran

U.S. oil Embargo on Iran.

Additional pathways from oil to international conflict

Beyond these three links between oil and terrorism, or the kind of political violence that some would see as terrorism, there are a broader set of links between oil and interstate conflict. My research identifies eight pathways, including: resource wars, in which states try to acquire oil reserves by force; petro-aggression, whereby oil insulates aggressive leaders such as Saddam Hussein or Ayatollah Ruhollah Khomeini from domestic opposition, and therefore makes them more willing to engage in risky foreign policy adventurism; the externalization of civil wars in petrostates; and conflicts triggered by the prospect of oil-market domination, such as the United States’ war with Iraq over Kuwait in 1991.

There is a sharp debate about the role of oil in the U.S.-led 2003 Iraq War. Some argue that America’s oil dependence was a crucial underpinning of the war. Some, including Donald Rumsfeld, President George W. Bush’s Secretary of Defense, argued that the war had nothing to do with oil. By contrast, Alan Greenspan, former chair of the U.S. Federal Reserve, wrote in his memoirs that “the Iraq War is largely about oil,” though he later sought to clarify in a Washington Post interview that securing global oil supplies was “not the administration’s motive.” Critics also pointed out that Vice President Dick Cheney’s former company, Halliburton, gained access to new customers and contracts as a result of the war, and that the Bush family had deep connections to the oil industry. My own view is that was not a classic resource war, in the sense that the U.S. government did not directly seize oil reserves for profit and control. Competition for Iraqi oil contracts after the war was open to other countries, like France, Russia, and China. Nonetheless, oil did affect the 2003 Iraq War by setting the strategic context for U.S. military involvement in the Persian Gulf.[16]

From oil to violence

Overall, the global oil system relates to political violence and even terrorism in multiple ways. Sometimes the 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.


  1. Elwarfally, Mahmoud G. Imagery and Ideology in U.S. Policy Toward Libya, 1969-1982. Pittsburgh: University of Pittsburgh Press, 1988; Tyler, P. “Two Said to Tell of Libyan Plot Against Saudi.” The New York Times, June 10, 2004. Note that the alleged attack on Crown Prince Abdullah did not occur until 2003.  In both cases, there is considerable uncertainty and little public evidence.

  2. Norton, Augustus Richard. Hezbollah: A Short History. Princeton, NJ: Princeton University Press, 2009: p. 79.

  3. Van Heuvelen, Ben. “Armed with Intel, U.S. Strikes Curtail IS Oil Sector.” Iraq Oil Report (blog), December 28, 2015. http://www.iraqoilreport.com/news/armed-intel-u-s-strikes-curtail-oil-sector-17473/.

  4. Colgan, Jeff D. Partial Hegemony: Oil Politics and International Order, (New York: Oxford University Press, 2021).

  5. Cronin, Audrey Kurth. “ISIS Is Not a Terrorist Group: Why Counterterrorism Won’t Stop the Latest Jihadist Threat.” Foreign Affairs 94 (2015): p. 87.

  6. Faucon, Benoit, and Margaret Coker. “The Rise and Deadly Fall of Islamic State’s Oil Tycoon.” Wall Street Journal, April 24, 2016. http://www.wsj.com/articles/the-rise-and-deadly-fall-of-islamic-states-oil-tycoon-1461522313.

  7. Vitalis, Robert. America’s Kingdom: Mythmaking on the Saudi Oil Frontier. (Palo Alto, CA: Stanford University Press, 2007).

  8. Quoted in Mahmoud A. El-Gamal and Amy Myers Jaffe, Oil, Dollars, and Debt Crises: The Global Curse of Black Gold (New York: Cambridge University Press, 2010): p. 66.

  9. For instance, in 1996 bin Laden argued, “The ordinary man knows that his country is the world’s largest oil producer . . . our country has become an American colony. The Saudis know their real enemy is America.” Quoted in Moran and Russell, Energy Security and Global Politics, p. 82. See also Bruce Lawrence, ed., Messages to the World: The Statements of Osama Bin Laden, annot. ed. (London: Verso, 2005); and Randall B. Hamud, Osama Bin Laden: America’s Enemy in His Own Words (San Diego, Calif.: Nadeem, 2005).

  10. The precise number of groups that received aid by Libya is unknown.  In 1989, the US government estimated at least thirty groups. (Vandewalle, Dirk. A History of Modern Libya. New York: Cambridge University Press, 2006: p. 132) This estimate is consistent with reports by independent scholars of Libya, e.g., M. Elwarfally, 1988.

  11. Elwarfally, Mahmoud G. Imagery and Ideology in U.S. Policy Toward Libya, 1969-1982. Pittsburgh: University of Pittsburgh Press, 1988.

  12. Hegghammer, Thomas. Jihad in Saudi Arabia: Violence and Pan-Islamism since 1979. New York: Cambridge University Press, 2010.

  13. Cordesman, Anthony H. “Iran’s Revolutionary Guards, the Al Quds Force, and Other Intelligence and Paramilitary Forces.” CSIS, 2007

  14. Giraldo, Jeanne K., and Harold A. Trinkunas. Terrorism Financing and State Responses: A Comparative Perspective. Stanford: Stanford University Press, 2007.

  15. Cordesman, Anthony H. “Iran’s Revolutionary Guards, the Al Quds Force, and Other Intelligence and Paramilitary Forces.” CSIS, 2007

  16. Wurmser, Meyrav. “The Iran-Hamas Alliance.” InFocus 1, no. 2 (2007). http://www.jewishpolicycenter.org/57/the-iran-hamas-alliance.

  17. Colgan, Jeff D. “Fueling the Fire: Pathways from Oil to War.” International Security 38, no. 2 (2013): 147–80; see especially p. 176-177.

Related Articles

Partial Hegemony Cover

Partial Hegemony: Oil Politics and International Order

By Jeff Colgan

Jeff Colgan's recent book Partial Hegemony: Oil Politics and International Order (Oxford University Press, 2021) investigates how countries and other actors have been able to sustain meaningful international governing arrangements to solve tough problems, and uses that history to consider climate change.

Cover of Petro-Aggression When Oil Causes War

Petro-Aggression: When Oil Causes War

By Jeff Colgan

Why are some but not all oil-exporting 'petrostates' aggressive? In Petro-Aggression: When Oil Causes War (Cambridge University Press, 2013), Jeff Colgan develops and tests a theory of aggressive foreign policy preferences.

The Oil Curse Cover

The Oil Curse: How Petroleum Wealth Shapes the Development of Nations

By Michael L. Ross

In The Oil Curse: How Petroleum Wealth Shapes the Development of Nations, Michael L. Ross explains why good geology often leads to bad governance, and how this can be changed.

Belfer Policy Brief Extract

Abstract of Fueling the Fire: Pathways from Oil to War

By Jeff Colgan

The sum total of the political effects generated by the oil industry makes it a leading cause of war.

Cover of Journal of Conflict Resolution Vol 62 Issue 5

Abstract of Oil and Terrorism: Uncovering the Mechanisms

By Chia-yi Lee

The sum total of the political effects generated by the oil industry makes it a leading cause of war.

Terrorism Financing Cover

Terrorism Financing and State Responses: A Comparative Perspective

By Jeanne K. Giraldo and Harold A. Trinkunas

Through a series of thematic chapters and organizational and regional case studies the authors provide a comprehensive assessment of the state of our knowledge about the nature of terrorism financing

Your story is our history

Give voice to your unique story about how the December 21, 1988, terrorist attack against America impacted your life. Preserve your memories and legacy by helping to create the most extensive curated digital library of personal Pan Am 103 Lockerbie stories for our Historical Archives.