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The Great Game
Jeff Vail, A Theory of Power
The global struggle for geopolitical domination never really stops, but it certainly has its periods of storm and calm. Historically, the storm never seems to develop quite where people are focused. Right now all eyes are turned towards a potential US confrontation with Iran-and as a result, virtually no one is watching the recent moves made by the Shanghai Cooperation Organization (SCO).
Founded (out of the Shanghai Five Mechanism) in 2001 between China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan, the organization’s stated goal was to facilitate “cooperation in political affairs, economy and trade, scientific-technical, cultural, and educational spheres as well as in energy, transportation, tourism, and environment protection fields.” Recently, however, the SCO is beginning to look more like a modern-day Warsaw Pact, an energy-financial bloc in central Asia consciously constructed to serve as an anti-pole to US hegemony.
While no such intention is explicitly stated by the group, recent actions speak for themselves. So far in 2006, the SCO has extended de-facto offers of membership to India, Mongolia, Pakistan, and most importantly to Iran (who will officially be invited to become a full member at the SCO June 15th meeting). Beyond their expansion, the SCO member states are also taking steps to separate themselves from US-petrodollar imperialism: Russia has announced that it will open a Ruble-denominated oil and gas bourse in late 2006; China recently announced the intention to move its reserves away from the dollar and that it will use $40 billion in US dollars to purchase gold reserves; Russia’s state-owned, Vladimir Putin-controlled natural gas transport monopoly Transneft has further consolidated its pipeline control to become the sole exporter of Russian natural gas (by far the largest reserves in the world). With Iran, the SCO will control the vast majority of the world’s natural gas reserves, as well as a significant portion of its oil reserves, not to mention potential control of the Strait of Hormuz.
These moves are significant because they amount to an act of energy encirclement. Central Asia, the greatest remaining promised land for oil and gas development, is completely enveloped within the SCO, limiting hydrocarbon access to non-SCO nations. China ensures the supply of energy that it will need to continue its amazing economic growth. Alternative supply sources of oil and gas to Europe now run exclusively through SCO-controlled export pipelines, allowing for a new OPEC-style cartel to bleed Europe at the optimal rate. And the ability to force the West to purchase energy in something other than dollars (to a greater extent than is currently the case) will help balance China’s export-driven surplus of foreign currency-at least until the rise of a consuming middle-class in India and China can become a self-sustaining market for their own economic production.
(16 May 2006)
Less Oil, More Wars
Michael T. Klare, TomPaine.com
To explain the current run-up in gasoline prices, pundits throw out many reasons, including concern over a possible war with Iran, insatiable demand from China, inadequate refinery capacity, greedy oil companies and the gradual depletion of the world’s oilfields. All of these do bear some degree of responsibility, but they are not the fundamental cause. There has been a historic shift in the center of gravity of world oil production from the global North-the older industrialized countries-to conflict-plagued areas of the global South-the developing world. Because this shift is all-encompassing and irreversible, global oil output will remain vulnerable to overseas instability and gasoline prices will remain high.
What explains this shift in production, and why does it cause perennially high gasoline prices?
…The empires which colonized most of the major oil-producing regions of the world created modern oil-producing countries out of previously separate (and mutually antagonistic) entities by drawing arbitrary lines through their territories. They practiced divide-and-conquer tactics, favoring some groups over others-the Sunnis in Iraq, the Hausa in Nigeria-creating (or deepening) schisms that fester to this day.
In many cases, traditional modes of governance were swept aside in favor of centralized, autocratic regimes that persist in varied form, such as the ex-Soviet apparatchik kleptocracies that now rule Azerbaijan and Kazakhstan. Imperial invasion and domination also sparked the emergence of anti-imperialist movements-and these, too, still play a role in many oil-producing areas.
Add oil into this volatile mix and the risk of explosion grows. In most of these countries, control over the distribution of petroleum revenues has been monopolized by a particular clan, tribe, or clique-, while other groups have been excluded from the economic benefits of production (but often subjected to its environmental damages). Needless to say, this only adds to the grievances of the less-favored groups, adding to their determination to alter the balance of power.
And because the oil-besotted elites are equally determined to retain their hold on power and wealth, the stage is set for recurring strife, rebellion and civil war-precisely the situation we see today.
…It should be obvious that there are no easy policy solutions to this predicament. Sending more U.S. troops to areas of instability-as advocated by some-will only make the situation worse, because of the anti-imperial sentiments that abide exist in so many of these countries. Nor can we assume that exploiting untapped reserves in Alaska or in the hurricane-prone waters of the Gulf of Mexico will fix the problem-these deposits are too small to satisfy even a tiny percentage of our current requirements.
The only practical way to protect ourselves from economic trauma caused by inadequate and unreliable supplies of oil is to use less petroleum-period. Because so much of our consumption is tied to ground transportation, this means driving fewer miles and trading in gas-guzzlers for more fuel-efficient vehicles, or using other alternative modes of travel altogether.
Ultimately, we will have to develop alternatives to petroleum-preferably of a renewable sort-but in the meantime, we must all work together to overcome the nation’s oil habit.
Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America’s Growing Dependency on Imported Petroleum (Owl Books, 2005).
(16 May 2006)
NY Times columnist Thomas Friedman lays out his “laws of petropolitics” (video and transcript)
OnPoint, E&E TV
Will increased competition between China, India and the United States for oil and gas supplies lead to increased cooperation on energy issues, or a race for the remaining reserves? During today’s E&ETV Event Coverage of a panel sponsored by Foreign Policy magazine, New York Times columnist Thomas Friedman, Sen. Richard Lugar (R-Ind.) and Foreign Policy editor Moises Naim discuss the correlation between the price of oil and global security concerns. Friedman talks about the importance of advancing green technology in the United States and predicts it will be the leading industry of the 21st century. Plus, Lugar addresses some of the barriers to widespread use of ethanol and other alternative forms of energy
(17 May 2006)
The Deep Breath Before the Plunge
Ryan McGreal, Raise The Hammer
Iranian President Mahmoud Ahmadinejad just announced that starting this July, Iran will stop trading oil for dollars. Instead, anyone who wants to buy oil from Iran will have to pay for it in euros.
Coming on the heels of the Iranian Oil Bourse (IOB), an energy exchange Iran just registered on the Island of Kish on May 5, this looks like a calculated effort to undermine the US dollar.
It’s too early to say what firms will trade on the IOB, but Iran’s decision to require all oil purchases to be made in euros certainly creates a natural market for a euro-denominated exchange. Iran currently produces just under four million barrels of oil per day, about five percent of the world’s total. (All oil production figures cited from the CIA World Fact Book.)
In related news, Russian President Vladimir Putin has announced a similar plan: he is calling for Russia to establish an oil exchange denominated in rubles. Depending on how Russia is prepared to go in its requirements for selling oil, this could prove far more damaging to the global market for petrodollars.
Russia is the world’s second largest oil producer after Saudi Arabia, producing some nine million barrels a day, or about ten percent of the world’s total.
Combined, Russia and Iran account for fifteen percent of global oil production.
(16 May 2006)
