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Lubricating an oily path to the Middle East
Kenneth Davidson, The Age
The American dollar, as the international reserve currency, is the secret element to its military might.
I CAN’T believe that the Defence Minister, Brendan Nelson, made a mistake when he said on Thursday afternoon that part of the reason why Australian troops would remain in Iraq was to secure global oil supplies.
Prime Minister John Howard immediately went into damage control and denied that the Government was trying to exploit voter anxiety over petrol prices in order to undermine support for Labor’s policy aimed at getting combat troops out of Iraq quickly.
But Howard had already made the link earlier in the day when he launched the strategic defence update and acknowledged energy was part of the reason why Australian troops had to stay in the Middle East.
The connection has been made. It has been underlined by the Howard denial that the oil connection played any part in the Australian decision to invade Iraq alongside the Americans.
…Irrespective of what Howard or Nelson think, to the extent that the Coalition decided to join the “coalition of the willing” in order to guarantee access to Middle East oil, Australian motorists have been sold a pup.
As senior lecturer in strategic studies at the Australian Defence Force Academy, Clinton Fernandes, pointed out in 2002 before the decision to invade was announced, the US didn’t need to go to war with Iraq to get access to Iraqi oil, it had to go to war if it wanted to retain control of Iraqi oil.
According to Dr Fernandes, “access to oil” means the US wishes to buy oil like any other country; that it wants oil at a reasonable price.
“Control of oil” means that the US can use oil to exert influence against Europe, China and Japan. The point is made by Zbigniew Brzezinski, the former national security adviser to President Jimmy Carter: “Not only does America benefit economically from the relatively low costs of Middle East oil, but America’s security role in the region gives it indirect but politically critical leverage on the European and Asian economies that are also dependent on energy exports from the region.” (“Hegemonic quicksand”, The National Interest – Winter 2003-04.)
Fernandes points out that “control of oil” also means control of profits as oil money is recycled back to the US to purchase advanced US weapons systems.
…The US has gone full circle since the dollar was backed by gold and a healthy trade surplus until the 1980s. Now the main backing for the dollar as the international reserve currency is America’s military might.
…The non-problem about “access to oil” should be even more obvious than in 2002.
The question is succinctly put by Gwynne Dyer in his book The Mess They Made: The Middle East After Iraq: “Today every major oil-producing country in the Middle East depends on the cash flow from oil exports to feed its growing population, so they are all compelled to sell pretty much every barrel they can pump – and to sell it into a global market that sets the price for buyer and seller alike. So it doesn’t matter to us who runs these countries”.
(9 July 2007)
The world has two energy crises but no real answers
Gideon Rachman, Financial Times
How very shocking! Brendan Nelson, Australia’s defence minister, has caused sharp intakes of breath by saying something that is obviously true. He remarked last week that the Middle East was “an important supplier of energy, oil in particular” and that – as a result – people “need to think what would happen if there were a premature withdrawal from Iraq”.
Mr Nelson did not say that Iraq was a “war for oil”. He merely noted that there was a lot of the stuff sitting under the ground there – and that this mattered.
This is not news. If you look at the biggest geopolitical questions facing the world, energy is at the heart of most of them.
The world is, in fact, facing two energy crises. The first is rooted in scarcity and traditional power politics. It involves the struggle by the world’s largest and most energy-hungry economies to get hold of the natural resources they need. Just yesterday the International Energy Agency warned that the world oil market would be “extremely tight” over the next five years. Demands from China and other emerging economies are rising. But Mary Kaldor – co-author of a new book called Oil Wars (Pluto) – points out the struggle to find new oil is a familiar sort of conflict, reminiscent of the 19th century “great game” or earlier imperial clashes.
The second energy crisis is new. It is driven by climate change. It demands international co-operation rather than competition. While the first crisis leads politicians and businessmen to search out ever more oil and gas, the second demands that they radically reduce their economies’ dependence on hydrocarbons.
(9 July 2007)
Contributor Mark O’Sullivan writes:
Doesn’t specifically mention the geological limits of oil extraction but just wide of the mark – the energy crises he mentions arise from geopolitics and climate change, in his view. Still, impressive to see in the Financial Times
Iran’s Oil Industry: A House of Cards?
Gal Luft, IAGS Energy Security
At first glance, Iran looks like an energy superpower. It is the second largest oil producer in the Organization of Petroleum Exporting Countries (OPEC). It owns 11 percent of the world’s conventional oil reserves, second only to Saudi Arabia. It also sits on 16 percent of the world’s gas reserves, the largest reserve after Russia. With rising oil prices, Iran’s oil export revenues have increased steadily, from $32 billion in 2004, to $47 billion in 2006. Finally, its geographic position on the world’s most important energy corridor, the Strait of Hormuz, through which 40 percent of the world’s oil traffic passes, gives Iran the ability to disrupt the flow of oil to global markets.
A closer look, however, reveals that Iran’s energy sector is a house of cards. It is neglected, crumbling and underinvested. Many of its oil and gas fields are in dire need of foreign technical expertise to help reverse their natural decline. An analysis published last year in Proceedings, a journal of the National Academy of Sciences, asserts that, “Iran is suffering a staggering decline in revenue from its oil exports, and if the trend continues, income could virtually disappear by 2015.” Iran’s deputy oil minister, Mohammed Hadi Nejad-Hosseinian, confirmed recently that, “if the projects for increasing the capacity of the oil and protection of the oil wells will not happen, within ten years there will not be any oil for export.”
Oil may be Iran’s greatest strength, but it is also Iran’s greatest weakness. As such, the debate in the West on how to prevent Iran from developing nuclear weapons should focus less on the risky military option, or the seemingly ineffective diplomatic option, and more on a comprehensive economic warfare strategy that targets Iran’s energy sector. With oil exports accounting for half the government’s budget and around 80 to 90 percent of total export earnings, the surest strategy to bring down Tehran’s Islamic regime is to break its economic backbone.
Dr. Gal Luft is executive director of IAGS. This article was originally published in inFocus Summer 2007.
(July 2007)
The Institute for the Analysis of Global Security (IAGS) is an American think tank which lobbies for energy independence in the U.S. national interest. Advisors include R. James Woolsey and Robert McFarlane. From the About IAGS page:
IAGS seeks to promote public awareness to the strong impact energy dependency has on our economy and security and to the myriad of technological and policy solutions that could help us move into an era of energy independence, and increase peace, prosperity and stability in the world.
-BA
