Home > Oz Politics, World Events > All about oil ? – repost

All about oil ? – repost

July 6th, 2007

The government has got itself into an awful mess over whether, and in what sense, the Iraq venture is a “war for oil’. Brendan Nelson says it is, Peter Costello says it isn’t, and John Howard is equivocal. I thought I’d dig out my thoughts on the topic from April 2003, which are over the fold. There are a couple of minor errors (for example, the US managed to get UN approval for the occupation) but I don’t think they affect the analysis much.

In particular, the first point in my explanation – that the (supposed) right of the US and its allies to run the affairs of a distant part of the world is based on the (supposed) strategic centrality of oil – is, pretty clearly, the claim being made by Nelson and partially endorsed by Howard.

All about oil ? – repost from 2003

While we wait for the fall of Baghdad, and hope that it is as quick and bloodless as possible, it’s hard to think about much else but war. However, I have no idea what will happen next and no capacity to influence it, so I’m going to try to stick to economic aspects of the war for the moment.

Quite a few people have asked me to respond to various scenarios involving the role of the US and euro as competing reserve currencies. Since all these scenarios involve oil, I thought I’d try to clear the ground a bit by discussing the question “Is it all about oil?”.

The crudest (I use the term advisedly) version of a war for oil would be one in which the US seized Iraq’s oilfields and took the oil without paying for it. A more standard imperialist procedure would be to impose a highly unfavorable contract on the defeated government or a puppet government imposed by the conquerors. I don’t think the invasion of Iraq is a war for oil in this sense.

A more subtle idea is that the aim of the war is to expand Iraqi production and thereby drive down the price of oil. This kind of thinking is certainly present among those who pushed the war, but it must be remembered that high oil prices are good for the US oil industry which is obviously influential. So again, I don’t think a plan to drive down oil prices is a major motive for war.

There are however, several senses in which it is ‘all about oil’. First, the idea that the US (and to a lesser extent the UK) should have a big say in the way the Middle East is run is based on the assumption that oil reserves are crucial. There’s a nasty dictatorship in Burma, but don’t expect to see the Marines there any time soon.

Second, although the US oil industry as a whole has no interest in overthrowing Saddam, companies that supply oil industry services, like Halliburton and Brown and Root stand to do very well out of things, and have already grabbed the most lucrative jobs in the putative reconstruction.

Third, and most importantly, the logic of the postwar outcome ensures that it will be about oil to a large extent. It looks certain that the immediate outcome of the war will be US military rule which is illegal in terms of international law – having purportedly invaded to uphold UN resolutions, the US & UK have no grounds for resisting UN control of Iraq, but this is evidently unthinkable.

Hence, the only legal way to deal with the oil would be to leave all the earnings with the UN either to buy food and medicine or in trust for some democratically elected Iraqi government in the future. But that would leave the US footing the bill for reconstruction, and this is not going to happen – there is hardly any money allocated for it and the US is deeply in deficit. Nor is there any serious prospect of internationally supervised democratic elections in the next year or two

Hence, sometime shortly after the war, either the US or a puppet government imposed by the US military will assert ownership of the oil by right of conquest and will use it to start paying the bills for reconstruction, most of which will go to US contractors. This isn’t exactly the same as pumping out the oil and shipping it back to the US without payment, but I don’t think that the difference will impress the rest of the world.

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  1. July 6th, 2007 at 08:02 | #1

    of course it’s about oil. of course it’s about american profits. of course america is an imperial aggressor. of course oz is a lapdog riding along for perceived political benefits. but does it matter?

    morality is not practiced by governments. and most americans are perfectly willing to trade middle eastern lives for cheaper petrol. most ozzies, too. and the silence of governments not in the coalition of the willing (to do murder) reflects their recognition that speaking out will be costly.

    the only real cost of realpolitic is the perception among young people that their elders are corrupt, or fools, or both. nothing new there, either.

  2. July 6th, 2007 at 09:29 | #2

    Of course oil is a reason for invasion and a good one at that. Would you want a major part of the world’s extant oil reserves under the control of Saddam or a terrorist-supporting regime in Iran?

    What would they do with this vast wealth if not constrained by US policy?

    It is the combination of vast oil reserves on which the West depends with the existence of horrific regimes that drives US Middle East policy and the Iraq intervention.

    The dependence of the US on fossil fuels has fallen a bit but it is still very significant. Moreover, it is probably bad for the environment to be burning off limited stocks of oil when we are confronted by a frightening climate change future.

    The dependence itself is non-optimal given the costs of maintaining it – hence the suggestion by some that the US levy a tax on oil use to reflect the cost of its Middle East policies.

    But the dependence exists and won’t shift soon. It needs to be considered.

    By the way this type of argument is another example of the ‘motives fallacy’. Who really cares what US motives for intervening in Iraq were? Shouldn’t the policy be assessede independent of its motives – what effects does it have?

    I agree on that grounds it doesn’t look that good.

  3. gandhi
    July 6th, 2007 at 09:38 | #3

    Was Howard flying a kite? Was Nelson off-message because Sidonis is gone?

    The media has been all over the place with this story. Is this self-censorship, sloppy reporting, or media manipulation? I have detailed how the original story yesterday morning got swamped by Howard’s damage control machine before the evening news came out. Check this out.

    JQ readers might also be interested in a much longer piece (4,000 words) that I have just finished putting together, which documents the whole litany of lies that were woven together as excuses for Australian participation in the US invasion of Iraq. In the light of what we now know, it is very revealing to go back and look at Howard’s original statements, and his government’s actions. Click here for A Good Long Look At John Howard’s War In Iraq.

    (/blog-whoring)

    Little mentioned in all this brouhaha is the fact that our nation’s defence policy has just been fundamentally changed. Defence has become Offence. Control of resources (ie, oil) is now a legitimate reational for further pre-emptive wars. Our military spending is growing at an astonishing rate, but Howard is criticizing China for their arms buildup!?

  4. Peter Evans
    July 6th, 2007 at 09:46 | #4

    The cold fact about oil is that the Iraq invasion was a win both ways for the Bush faction (neocons, call them what you will). Easy success or drawn out quagmire, oil prices could be or would be kept high, so they’d win either way.

    But there’s a catch, a really big catch. High oil prices are a necessary condition to keep the following regimes in power: those of Iran, Russia, Venezuela, and Saudi Arabia. Oops. Every time the leader of the government of one of those countries opens his mouth, almost guaranteed it’s sabre rattling to talk up the price of oil (Ahmedinejad the most egregious example). Military confrontation with Iran would send oil up 5 or 10 fold, but there’d be serious American blood spilt. It’s a much harder trade-off to manage.

    China is interesting. They want lower oil prices, but 9/11 and Iraq means that the US is off their back. The Bush faction came to power expecting, some wanting, a military confrontation with China, but that’s all gone to pot now. China’s game name is to ease the US out of Iraq and lower oil prices, maintaining good ties with Iran, now that the Bush faction is spent. The Russians have armed Iran with weapons the US is mortally concerned about to maintain the status quo. There will be major oil tension between Russia and China in the not too distant future.

  5. swio
    July 6th, 2007 at 10:17 | #5

    The international obsession with oil goes back to WWII. If you look at the losers in that conflict they had one thing in common, no access to oil. Oil was the fastest consumed most widely necessary commodity. Without it military operations cease very quickly.

    Since WWII the US has long been aware of this. Its desire to control middle east oil does not come from the potential profits involved. It comes from the strategic power it gives.

    Even today Japan is utterly dependent on the United States for access to oil. Similarly with Europe. A war with China could be won simply by stopping tankers to China in the Straights of Malacca.

    The United States unchallenged blue water navy and its numerous oil rich client regimes in the Middle East give it the ability to shut down anyone’s economy by cutting off their oil supply. Ever wondered why there is no oil pipeline from the ME to Europe ?

  6. July 6th, 2007 at 10:23 | #6

    hc – “Of course oil is a reason for invasion and a good one at that. Would you want a major part of the world’s extant oil reserves under the control of Saddam or a terrorist-supporting regime in Iran?”

    Yes we are addicted to oil so how could we tolerate our supply being in the hands of others. Therefore that justifies the use of any means, genocide, invasion, replacing governments with cooperative puppets etc, to assure that supply. The Iraqi people should realise this and just give it up without a fight. Same for the Iranians and anyone else with that has the misfortune to have supplies of our oil.

    Anyone else see the problem with this???

  7. jquiggin
    July 6th, 2007 at 11:06 | #7

    On the motives fallacy, the motives for invasion determine, to a large extent the way the war and occupation are managed.

    In this case there were lots of different motives, implying lots of different wars, but each group backing the war assumed that their own wishes would prevail. That made for an irresistible push towards war and a catastrophic mess thereafter.

    As regards oil, its importance is grossly overstated. The US could easily reduce its consumption by half in an emergency – this would be a far more effective counter to any attempted strategic manipulation that maintaining massive armed forces.

  8. July 6th, 2007 at 11:16 | #8

    Ender,
    Just to quote myself over at LP:

    Just thinking about this – can anyone point out to me any countries with:
    * a lot of oil;
    * governments that are actually accountable to the people; and
    * governments that would want to stop or even slow down the pumping of oil on to the world market at prices even close to the current ones?
    I can’t think of any.
    .
    If there is one thing that I see time and again it is the confusion of the interests of the people with those of the government. They are rarely the same – even in Australia, never mind those countries where there is no need to have a democratic mandate to govern.
    .
    N.B. – I am not saying we should invade all or any of them, just trying to ensure the debate looks at the consequences of the argument. It will lead to the impoverishing of the people of the country.

  9. July 6th, 2007 at 11:39 | #9

    jquiggin – “As regards oil, its importance is grossly overstated. The US could easily reduce its consumption by half in an emergency – this would be a far more effective counter to any attempted strategic manipulation that maintaining massive armed forces.”

    Are you sure about this? Sure they could do it for a week or so however for longer than this would lead to dramatic problems with the US economy and people.

    Andrew – “If there is one thing that I see time and again it is the confusion of the interests of the people with those of the government.”

    You are correct here.

  10. gandhi
    July 6th, 2007 at 12:27 | #10

    The US could easily reduce its consumption by half …

    But not while the President and the Veep are both former oil CEOs, obviously.

  11. wise_but_poor
    July 6th, 2007 at 13:04 | #11

    In the short term waging a war for oil may be a strategically favorable option, but in the medium and long term it may not be a great idea because:

    1. It makes the young people of the invading countries more sceptical about life, when they see their elders being greedy and utterly selfish.

    2. Countries like US and Australia will asymtotically(currently US has 32% people who are non-white and Australia around 10%) become a colored country, so in the future this could lead to social strife. This could make future integration between different ethnic groups in these countries to be a slow and difficult process.

    3. Also this kind of greed is what makes people(mostly uneducated) to become extremists. Just look from Iraqi point of view. What kind of reaction does one expect from an average Iraqi(or an Arab) when he/she sees the west(most of them ethnically white, of European descent) plundering their country, under the pretext of “liberation”?

  12. wilful
    July 6th, 2007 at 16:21 | #12

    The thing I find impressive is that you basically don’t need to say much here in 2007, you can reasonably accurately say “I told you so” from four years ago!

  13. gaddeswarup
    July 6th, 2007 at 16:33 | #13

    Reading some of the comments, I remembered this from David Brin’s website: http://www.davidbrin.com/

    Take this oft-quoted passage from Ron Suskind’s N.Y. Times article “Without a Doubt” – interviewing a Bush White House aide:
    “The aide said that guys like me were ‘in what we call the reality-based community,’ which he defined as people who ‘believe that solutions emerge from your judicious study of discernible reality.’ I nodded and murmured something about enlightenment principles and empiricism. He cut me off. ‘That’s not the way the world really works anymore,’ he continued. ‘We’re an empire now, and when we act, we create our own reality.'”
    I wonder whether there is any objective reality any more.

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