Oil and Economics

The issue of oil is still coming up as one of the issues regarding the war in Iraq, and US relations with the Middle East more generally. To get a bit of perspective on this it’s useful to look at some numbers. Currently world oil production is about 80 million barrels each day, of which the US consumes about 20 million. This is about a third of total energy consumption. (a useful conversion factor, if I have it right is that a million barrels of oil yields about 5 terajoules of energy, which is about the output of 10 1000MW power plants).

Saudi Arabia typically produces about 8 million barrels per day, but has the flexibility to range between about 6 and 10. Prewar Iraq was producing around 3 million barrels per day. An optimistic outlook is that a functional government there could produce up to 6 million barrels per day.

There are various ways of looking at this, which I’ll discuss, but a convenient starting point is to focus on a change of 3 million barrels a day in the supply-demand balance. This is the amount of extra Iraqi oil in the optimistic scenario, and was the amount that Saddam could have cut off at short notice if he’d been left in place and in unfettered control of Iraqi oil. It’s also a pretty good measure of Saudi capacity to swing the oil market around.

3 million barrels a day is equal to 15 per cent of US oil consumption and about 5 per cent of US energy consumption. Over the short run, say a year, it would be easy to meet such a shortfall by drawing on stocks (including the ‘strategic reserve’) and by modest rationing measures like ‘odds and evens’. To look at the longer-term economic impact, it’s best to think what tax change would be required to yield this kind of reduction in use. I’ll assume the medium-term elasticity of demand for oil products is about 0.5, which implies that a 30 per cent tax would be needed. Some more rough calculations, available on request, suggest that the economic welfare cost of such a tax would be around $10 billion per year. (This assumes that the price is right to start with. It seems more likely that gasoline is undertaxed in the US, relative to the social costs of car use, and that a tax would be welfare-improving.)

Clearly the cost of domestic action to reduce US oil demand by 3 million barrels a day is a lot less than the cost of the Iraq war (amortised over any plausible time span) or the continuing cost of an expanded military.

The upshot of all this is that any* analysis of the war that places heavy weight on the role of oil implies that the US has adopted a policy adverse to its own interests. This could be because the Administration doesn’t understand the issues, because it thinks a war would be more popular than a petrol tax or because it is acting at the behest of oil industry interest groups. Alternatively, it might be better to conclude that oil (Iraqi or Saudi) was not one of the primary motives for war.

* I leave aside the idea that Iraq is supposed to serve as a springboard for an invasion of Saudi Arabia. If the US wanted to invade Saudi Arabia, it could do so easily, with no need for a springboard, and 9/11 provided the best pretext that’s ever likely to arise.

24 thoughts on “Oil and Economics

  1. http://www.tni.org/reports/seen/crude.htm

    Crude Vision: How Oil Interests Obscured US Government Focus On Chemical Weapons Use by Saddam Hussein

    Jim Vallette, Steve Kretzmann, Daphne Wysham
    SEEN / Institute for Policy Studies
    24 March 2003


    Examining recently released government and corporate sources, the report has uncovered new evidence that oil has long been the driving concern behind US-Iraqi relations. Key figures associated with the Bush Administration, in particular Defense Secretary Donald Rumsfeld, pressed Saddam Hussein during the mid ’80’s to approve the Aqaba pipeline project from Iraq to Jordan. The report reveals that the diplomatic pressure from Rumsfeld and the Reagan administration happened during and despite Hussein’s use of chemical weapons. Behind the scenes, these officials worked for two years attempting to secure the billion dollar pipeline scheme for the Bechtel corporation. The Bush/Cheney administration now eyes Bechtel as a primary contractor for the rebuilding of Iraq’s infrastructure.
    Bechtel’s pipeline would have carried a million barrels of Iraqi crude oil a day through Jordan to the Red Sea port of Aqaba.


    Crude Vision reveals how the White House, through the Department of State and the National Security Council, pressured the U.S. Export-Import Bank (Ex-Im) and U.S. Overseas Private Investment Corporation (OPIC) to approve financing for this deal. Reagan officials knew of numerous human rights violations by Saddam Hussein while they pursued US taxpayer support for the pipeline. And it notes that the break in US-Iraq relations occurred not after Iraq used chemical weapons on the Iranians, nor after Iraq gassed its own Kurdish people, nor even after Iraq invaded Kuwait, but rather, followed Saddam’s rejection of the Aqaba pipeline deal.

    “In their own words, we now see that for Administration officials, a dictator is a friend of the United States when he is willing to make an oily deal, and a mortal enemy when he is not” said Vallette.

  2. The theory of a staging point for an action against Saudi Arabia is not punctured by merely stating such an action culd be launched without a land base in Iraq. The US first needs a to secure oil resources to compensate for loss of Saudi oil during the lead up to hostilities. Also the US needs to resolve the Palestinian question. Invasion of Saudi would be war on the entire Arab world.

  3. Your calculation ignores the political cost of the 30% tax, which in the USA would be high.

    A war, on the other hand, has resulted in political gain for its prosecutors.

    You also ignore the cost to the economy of restraining oil consumption. I’m no economist but I thought oil was the life blood of any economy, still.

  4. The political issue in the Gulf is military security revenue benefits to the US admin’s enemies, not the oil properity costs for the US admin’s allies.
    How to minimise the oil revenue funded disposition-influence of:
    – Saudi fundamentalists on terrorism and
    – Iraqi fascists on militarism
    Until this fact is recognised, the analysis of US admin behaviour will lack predictive utility.
    (hint: check out the web sites of the white house
    and CENTCOM for a primer of US policy)

  5. Jack,
    If the Iraq war was about oil or SA to Iraq why are the Ivy League so-called Neo-Cons being so comprehesively being outwitted by the ill educated mad mulahs of Iran.
    It doesn’t seem to be a great way to go after winning a war to then lose the country unless you had no plan in the first place!

  6. * I leave aside the idea that Iraq is supposed to serve as a springboard for an invasion of Saudi Arabia. If the US wanted to invade Saudi Arabia, it could do so easily, with no need for a springboard, and 9/11 provided the best pretext that’s ever likely to arise.

    GW II was not “a springboard for an attack on Saudi Arabia”.
    It was a substitute for such an attack.
    By regime changing Iraq, the US hopes to make Iraq the new US client state in the Gulf.
    SH could not be trusted as a client. This is a fact that needs no further explantation – his whole career as a fascist militarist aggressor was one long exercise in despotic-aggressive machiavellianism.
    But SA can no longer be trusted as the US’s premier Gulf client state – the 911 attacks revealed it to be a hostile fundamentalist state with terroristic sympathies. US security managers now expect that the Saudi regime’s days are numbers and that it is more likely to go out with a fundamentalist reactionary bang than a freedom loving whimper.
    This article confirms in detail my pessimistic prognosis of the prospects for the Saudi regim.
    The fall of the House of Saud
    If you don’t believe me, ask yourself: how many feudal kingdoms are there left in the world, esp ones that are corrupt root-and-branch?
    but populist fundamentalism is on the uptick, see Amorosi. Apparently 90% of saudi males sympathised with Bin Laden.
    However SA could not be regime changed as this would reveal the half-century US alliance with it as a giant corrupt con (eg Carlyle group, Kissinger And Associates).
    Hence the investigations into 911 was first stymied by by the White House
    – selecting Kissinger as chairman and then
    – censoring key sections of the report dealing with the Saudis.
    Such coverups are implied by my model, which places responsibilities for 911 with the US’s corrupt alliance system with fascist (Paki) and fundamentalist (Saudi) states directly on the shoulders of the Saudi arms-for-oil faction US ruling class – this was the US’s dominant faction until GWB took over the reigns.
    This article confirms in detail the assumptions of my model of the Saudi-American relationship:
    Addicted to Oil
    Post 911 a “relaxed policy” towards SH was not an option, hence sanctions could not be lifted.
    By subsituting Iraq for Saudi as the primary client state in the GUlf, the US made a number of simultaneous security value-adding moves:
    – got troops out of Saudi, which was the proximate cause of 911, but which cannot be declared hostile (see above) without purging the US ruling class
    – got troops into Iraq, whch has been a US-hostile state since GW I, and which had a history of militarism both WMD and conventional
    – keeps troops in the Gulf region, containing fundamentalism and fascism, and creating a “new dynamic” balance of power favouring freedom in the Gulf (see modfications to the behaviour of Israel, Syria, Iran, & Saudi)
    – created an alternative Gulf cheap crude oil-supplying swing producer, which was impossible for Iraq under SH since sanctions on oil production/distribution were the main political instrument disabling SH’s fascist-agressive regime
    None of these actions are profit-maximising, they are loss-minimising. The US is a security-hegemon, not a prosperity-imperium.
    There are easier and cheaper ways than regime change for super-states to make money for their firms, if money was the only thing that mattered.
    But the US wants to make sure that it is top-gun and that there are no nuclear Pearl Harbours emanating from the toxic mess that is Gulf political culture. Check out all their films for the past century for an existence proof of the pyscology behind this strategy.
    Fundamentalist terrorist states have to be reformed or destroyed.
    Fascist militarist regimes have to be disarmed or changed.
    It is as simple as that.
    Peaceful co-existence with terrorists and tyrants (and their enablers) is no longer an option.

  7. Jack,
    I like your thesis but it seems to me Iran is more likely to benefit from a post war Iraq than the US!
    It doesn’t seem to me that the US had a post war gameplan for post war Iraq whereas the Irani Mullahs certainly did.
    Hence it seems to me at present it could be argued (Though this is not my thesis) the war in Iraq was as much about revenge ie W making up for H.

  8. Jack, among the lessons of 9/11, the most obvious is that client states are more trouble than they are worth. The Americans are relearning this lesson in Iraq.

    To use your phraseology, the optimum policy is “ditch Saudi, ditch Sharon, and don’t get hitched again”. Anything else is a triumph of hope over experience.

  9. Jack, one problem with your model, is that it fails to explain the classified Saudi section in the Sept 11 report. The Saudi government wants it to be released, the US government is refusing.

    If the Saudi’s had something to hide, then it would be in their best interest to have it classified. If the US want to ditch SA, then the opposite would apply.

  10. Ken says:

    If the Saudi’s had something to hide, then it would be in their best interest to have it classified. If the US want to ditch SA, then the opposite would apply.

    Bush Refuses to Declassify Saudi Section of Report
    No Ken, This is part of the blame game. The Saudis want the classified bits of the report released so they can put their spin on them.

    Mr. Bush’s decision came after Saudi officials sought the release of the still-classified section of the report, which was denounced today by the Saudi foreign minister, Prince Saud al-Faisal, as an “outrage” that “wrongly and morbidly” accused Saudi Arabia of complicity in the attacks.

    Who would believe what they have to say about a report, given the fact that
    – the secular rulers of SA are corrupt and
    – the spiritual rulers of SA are insane
    Plus the US is desperately trying to cover up the links between it’s ruling class and the SA ruling class. Hence Kissinger’s (Sheik Yamanis twin) appointment and resignation as head of the commission.
    Evidently things between the US and SA are actually worse than I thought, which reinforces rather than weakens my model.

  11. Pr Q says

    client states are more trouble than they are worth…the optimum policy is “ditch Saudi, ditch Sharon, and don’t get hitched again”. Anything else is a triumph of hope over experience.

    Client states are sometimes the lesser evil when the alternatives are anarchy or tyranny.
    There is nothing wrong with hegemony per se. Microsoft are reasonable enough to secure the peace in PC wars. Germany and Japan are client states to the US and they are no trouble.
    Australia is too, sort of. What’s not to like?
    The problem is the Gulf region’s culture, not the function US hegemony. These people have been politically bothersome for two millenia – read the Bible, listen to the Romans re the zealots, look at the history of jihad.
    I would agree that Israel is alot of trouble and the Likud are a pain, but the Islamacist and ultra-nationalist Arabs are rejectionist and liquidationist towards the Zionist entity.
    Your non-aligned approach assumes that the default position of former client states in this region would be sane and reasonable co-operation with the hegemon.
    Some have played along eg Jordan.
    But the evidence of Arab political culture over the past generation indicates that most radical Arabs were getting worse whilst the US was getting better. The war lords and withdoctors in the region want to get their hands on the Prize (Gulf oil). Think sub-saharan Africa plus jihad and ten trillion dollars of oil revenue.

    The trend line of Arab self-destructive violence is getting worse independent of the ideological valency of the hegemonic server (cf Algeria, Barak’s Israel, Clinton’s US, the Taliban).
    Your “relaxed policy” towards these nutso nuclear and terrorist states, like Iraq or the Sauds, would indeed represent “the triumph of hope over experience” and I think, lead to a Carthaginan retaliation by the US, which would not be nice.

  12. Jack, if the classified section of the report does revel that the Saudi’s are sitting on a giant can of terrorist worms, then nobody will pay attention to their spin.

    An alternative explanation is that the Saudi’s believe that the various rumors about the relationship between them and OBL are rubbish, but trying to rebut a mass of rumors is next to impossible, whereas a concrete claim can be properly analysised.

    This is similar to the uranium from Africa claim, where the Niger claim can be rejected, British claims of other intelligence unreleased information cannot.

  13. Jack,

    If the main aim of the US is to deny Gulf oil revenues to hostile fundamentalist states, and it thinks SA is, or is about to turn into such a state, how is pulling out of there going to help? If Iraq is successfully made into a client state (looking like a big “if” at the moment), it could provide an alternative oil supply and a military base. This would reduce the impact of a hostile SA cutting off oil supplies, provide some leverage over oil prices thus reducing revenues to a hypothetical SA terrorist state, and allow the US armed forces to play GloboCop more easily if the region really turned hostile. These are all plausible motivations. But since you specifically said that the invasion of Iraq was an alternative to the invasion of SA, and that the aim is to deny potential enemies control over oil, this can’t be your main point. If SA does go the way you think, having Iraq as a client will still leave SA with a lot of oil that can be turned into a lot of money and a lot of bombs/chemicals/whatever.

  14. Declan asks some very good questions about weaknesses in my thesis and also shows that he has a solid grasp of the fundamentals of security policy:

    how is pulling out of [SA] going to help?…If SA does go the way you think, having Iraq as a client will still leave SA with a lot of oil that can be turned into a lot of money and a lot of bombs…

    The beauty of GW II is that it kills two birds with one stone ie
    – gets rid of a fascist state
    – gets out of a proto-fundamentalist state.
    Think of GW II as a simulataneous application of:
    – US anti-trust policy with Saudi oil monopolists
    – Roman “divide and rule” policy with fundamnetalist’s unruly tribes
    Providing an alternative cheap sweet crude oil suupliers to the Saudis is essential as a mode of improving effective competition between OPEC suppliers. At the moment the Saudis have too much monopoly power which makes the US too vulnerable.
    Reducing the chances of a fundamentalist takeover of SA’s oil fields is the driving goal of US Gulf policy. The Reagan codicil to the Carter Doctrine indicates that it is US policy to establish a Gulf military force (RDF, CENTCOM) to stop an Iran-style revolution in SA.

    “We will not permit” Saudi Arabia “to be an Iran.”
    Pentagon’s secret Defense Guidance document (1982)

    If worst comes to worst and SA is lost to fundamnetalism, then the US will have to directly occupy the SA oil fields.
    It is vital to stop any more 911-scale attacks that might be associated with a fundamentalist uprising in SA, elsewise the US will just turn the major terrorist-harbouring cities of the area into a nuclear-baked glaze.
    Turning Iraq into the US’s main Gulf client state is not inconsistent from distancing the Saudis as the previous favoured clients. It may be that both states can be groomed for a more stable and less corrupt cliency. Having more than one improves the chances that at least one will work.
    Pr Q’s suggestion that having no client states is an option runs into the problem that the Gulf oil prize “is just too valuable for [radical ie fundamentalist/fascist] Arabs to be allowed to control it.” H. Kissinger

    “Ditch Saudis” exit strategy will enable US Gulf security policy in four ways:
    First: The essential and proximate cause of 911 was the presence of Crusader US troops in the Holy Lands of Mecca etc. This is perceived by Gulf fundamentalists as the ultimate insult to Allah, thereby provoking OBL-types to issue fatwahs calling for terrorist jihad – Kill all Americans, Jews etc. Pulling out of SA will obviously reduce the US military’s viral irritation to the Saudi’s fundamentalist lymph nodes.
    Second: The pull-out, which I predicted, has given the SA govt some social reform “breathing space” to start democratic reforms, which may take the sting out of fundamentalist demands to turn the oil over to the Islamacist ulemas. This process is already feebly underway.
    Third: By moving into a proximate state (Iraq) the US is still able to provide a rapid reaction containment force to crush any fundamentalist reaction staged by the SA National Guard or Al Quaed.
    Fourth: By pushing into Iraq and getting rid of SH the US removed the closest alien threat to the security of the SA oil fields, and hence the reason that US troops were stationed there in the first place. This was specified by Wolfowitz in his Vanity Fair interview.

    Declan seems to be grasping my argument and it’s wekanesses “(looking like a big “if” at the moment)”
    The two basic weaknesses in my thesis are:
    – the risk of staying in Saudi may not be as great as perceived, as the econo-cons from the Carlyle Group have been arguing (Scowcroft, GBH, Powell)
    – the reward of moving into Iraq may not be as achievable as predicted, as the paelo-cons from the Buchanan faction have been arguing (Steve Sailer)

    the aim is to deny potential enemies control over oil


    If Iraq is successfully made into a client state…[it] could provide an alternative oil supply and a military base


    This would reduce the impact of a hostile SA cutting off oil supplies


    provide some leverage over oil prices thus reducing revenues to a hypothetical SA terrorist state,


    allow the US armed forces to play GloboCop more easily if the region really turned hostile.


    As noted above, my model is simply the intellectual appliation of standard US strategic policy to the new post-911 political realities. There is nothing very original in it – I just look at US military-poltical web sites and apply standard balance of power theory.
    It is bizarre in the extreme that my model is not being recongised as at least the beat approximation of the truth, since it fits these facts of policy and theory and is generating correct predictions.
    I predict that the US will not attempt to forcibly regime change Syria, Iran or North Korea.

  15. Ken Miles says:

    if the classified section of the report does revel that the Saudi’s are sitting on a giant can of terrorist worms, then nobody will pay attention to their spin.

    Ken, everyone in the US security-apparatus now knows that the Saudi nation has been playing a Janus-faced game.
    OTOH, they are guilty of propagating Wahabist fundamentalism and Islamacist terrorism, in order to cement their domestic political legitimacy with the populist ulemas, of whom OBL is a crude representative.
    OTOH, they are also guilty of being corrupt clients of the US security-propsrity apparat in that they skim the cream off the oil revenue take and use it for their own hedonistic purposes.

    The tussle over the release of the classified sections of the report is a spin-battle beyween the US admin and
    – the Saudi state, which seeks to clear itself of the charge of being a terrorist-enabler, which has been thrown at it by the US admin
    – the Democratic opposition, which seeks to pin the blame for terrorism on the US admin’s obliviousness to the Saudi threat
    My guess is that the US admin is much more worried about the Democrats finding out about how “asleep on the job” the Bush admin was in respect to warnings about terrorist threats.

    The deeper problem is how to manage the SA/US client/hegemon relationship without falling into the corruption and oblivion of the past. Internal reform of both states is necessary, and by that I mean Watergate style purges.
    But where is the Left in all this?
    Still fussing over non-existent WMDs.

  16. Jack, I still don’t think you’ve shown any benefit from having an Iraqi client state that could not be realised more cheaply and safely by other means.

    The main point of my post was to show that the US could have more impact on the Saudis by cutting domestic consumption than by controlling an increased flow of Iraqi output.

    As regards the military, the combination of land bases in Kuwait and Qatar and unchallenged sea and air dominance leaves nothing for Iraq to do except tie down most of the divisions in the army, which it is doing very effectively right now.

  17. So, by moving from SA to Iraq, the US reduce the chance of an Iran-style revolution in SA (this is what I didn’t pick up in my first post) while retaining all the previous benefits of the SA base. Isn’t this just storing up trouble for the future – why will Iraq like being a client any more than SA? Even if the US is proceeding on the assumption that client states only have a useful life of half a century or less, and that periodic replacement is necessary, that doesn’t work if the Iraqis are just as pissed off right now as the Saudi Arabians are. Also, why the special emphasis on denying oil revenue to enemies rather than 1. ensuring supply for yourself (and a bit of profit for your mates as a not insignificant extra), 2. retaining the ability to cut off supply to the rest of the world, and 3. maintaining worldwide military supremacy?

    Incidentally, what about the WMDs? I’m not that surprised that Bush, Blair & Howard wildly exaggerated the issue, but you’d think that SH would have kept something after all the trouble he went to. Or did he destroy what little he had (maybe just blueprints) to give his postwar resistance more credibility?

  18. Declan,
    I like you find it curious that SH didn’t keep back any WMD. However, I think we should still be careful not to make the assumption that none exist, remembering that a man who needs food, water, air and the occasional spot of sunshine is still eluding some of mankind’s best intelligence to unearth him. How much harder to find inert products. It could be that the area of Tikrit(which still hides Saddam) may be concealing more. At any rate, all we can say about tyrranical dictators, is that they will ultimately fall, because they will not hear any dissenting advice.

  19. Pr q says:

    I still don’t think you’ve shown any benefit from having an Iraqi client state that could not be realised more cheaply and safely by other means.

    It all depends on how much the:
    US was willing trust SH to not be a security threat to the Gulf
    RoW is willing to trust the US to be a prosperity/liberty-enabler for Iraq
    How much could the US trust SH to behave himself, if the US had to:
    get it’s military bases out of Saudi, to remove the internal provocation to the fundamentalists whilst maintining an effective containment force in the Gulf
    lift it’s oil sanctions on Iraq, to build up an alternative Gulf cheap sweet crude oil supplier
    The answer to that is: not much – and who can blame them? If you asked the Iraqi Man In The Street he would respond likewise. No doubt the IMITS he would also want the US out of Iraq to, as would the average US soldier. But that is impossible until some new & enduring security and prosperity arrangements can be achieved in Iraq, and to the UN I say: bring ’em on.
    The economic benefits of lifting sanctions on Iraq, with or without SH, have always been clear. Ask Iraq’s pre-school children.
    The political cost of that is the fact that it entails trusting SH in a revived Iraq. Ask his weapons and palace builders.
    He has in the past many times proven his untrustworthiness and wickedness, using Iraq’s oil revenues to finance militarism, both conventional & unconventional:
    – military invasions,
    – domestic repressions,
    – attempted assasinations
    – inspections evasions.
    In the heightened security sensitivity aftermath of 911, the US was not prepared to risk letting SH re-start his regime. It would entail the US conceding defeat to a chronic security threat when what the world needs now is a balance of power changing victory.
    “relaxed policy” is not the way a hegemon conducts it’s business if it needs to project power in the midst of a global security crisis. Better to regime change SH and then lift the sanctions, by which the US got the best of both worlds. Gains for the US in both (pdf):
    Military: National Security
    Economy: Oil Prosperity
    The US (& RoW) has already reaped major security gains in & out of the ME.
    The military costs of invading Iraq, as Pr Q correctly points out, are huge. But the political benefits may be correspondingly large, if a more stable, freer and prosperous Iraq can be built. All depends on the ability and willingness of the US to finance and oversee such a reconstruction. It remains to be seen whether they follow through as much as required. I accept Pr Q’s point that domestic politico-economic (fiscal/electoral)considerations may cause the US to “take it’s eyes off the strategic ball” in Iraq. It is still an open question on whether this will happen, but the US’s past record is not wholly reassuring.
    One hopes that some reconciliation can be achieved between the US executive military branch and the UN resolutive political apparat to reconstruct and reform Iraq.
    Regarding domestic oil consumption again, Pr Q’s post is well-argued and I would agree that curbing world (esp US) demand for hydro-carbon based fuels makes environmental and political sense.
    But whatever the world demand for oil is, it remains a fact that the world supply of oil will mostly be provided for by Gulf states. Again I come back to my basic point, the US is not worried so much about the:
    distribution of oil costs amongst it’s allies
    as it is about the
    concentration of oil revenues to it’s enemies
    So long as the major Gulf oil states (Saudis and Iraqis) have untrustworthy & unstable regimes, then so long will the US be forced to intervene in their polities, either:
    indirectly via client states
    directly via regime-changes
    This will end as Arabs develop rational political culture along the lines suggested by Weber. (The the US does not need to recruit or subvert Norway.) Until that day, I am afraid that History will continue apace in the Gulf.
    It is a remarkable fact about the democratic Left that it wishes to stymie the first real attempt to achieve Open Society style (Bush/Wolfowitz) reforms in Saudi and Iraqi states. The democratic Left appears to:
    non-cognitive of the Gulf strategic problem
    non-cooperative of the US’s political solution

  20. Quite aside from the variety of conspiricies aired so far in response to John’s original post, does anybody remember a letter published in the Bulletin magazine earlier this year (can’t remember the date) which suggested that the most likely reason for the Iraq invasion was to head off the likely export of Iraqi oil through European purchasers who would pay in Euros, not US dollars. The writer suggested that the likely effect of this on the US dollar would be so horrific that any action to prevent it would be justified.

  21. Jack, you keep missing the point here. The only way military force can be used to stop Saudi money funding terrorists is to invade Saudi Arabia. Occupying Iraq makes this harder not easier.

    The whole point of the original post was to debunk the idea that “building up an alternative Gulf cheap sweet crude oil supplier” was a rational activity, given that it would be far cheaper in economic and geopolitical terms to reduce domestic demand. You haven’t answered the post, but you keep repeating the argument it refutes.

  22. Pr Q and Jack S. area at least now seeing eye to eye on the Saudi conundrum. (Note that Jack S. has been saying this loud and clear for over a year, finally pundits are “getting it”.) But Pr Q poses a false alternative:

    The only way military force can be used to stop Saudi money funding terrorists is to invade Saudi Arabia.

    Pr Q’s plan – reducing US/RoW demand for oil – is a reasonable idea. But it does not refute my defence of the fundamentalist-disabling implications of GW II. He ignores the fact that any kind of fundamentalist/fascist control of the Prize is a permament temptation to terrorism/militarism. GW II is about diffusing concentrated & politicised Gulf oil supply power, which is far more effective as a way of inhibiting terrorist financing than reducing global demand for oil – which will just be picked up by modernisation India and China in any case.

    Pr Q is correct to state that invading SA is one way to reduce the power of the Saudi terrorist-enablers. The success of operation Iraqi Freedom sees US troops now situated in a pincer formation around SA, in both Sudan and Iraq, ready for just such an eventuality. But this would be undesirable security plan, for obvious reasons.

    There is a third way to reduce the power of Saudi terrorist enablers. The “balance of power” demonstration effect of regime change of Iraq has had the effect of increasing US power in the Gulf, at the expense of Islamacist trouble makers.
    It has also opened the door for the slow process of internal civil reform, both both within & without the Gulf:
    SA: the Saudi Royal family has to develop non-traditional/fundamentalist forms of state legitimacy.
    US: the Carlyle Group/Saudi Royal family oil/arm/funds nexus is being exposed and may be broken.

    The preliminary success of GW II aids the internal reform process in both SA and US:
    the US pull out of troops from SA increases the breathing space for the Saudis to conduct some forms of civil reform.
    the SA pullout of funds from the US reduces the financial clout of the Carlyle Group-type and it’s associated “Wahhabi lobby”.

    The Bush admin censorship of the “hot parts” of the Congressional 911 report is not encouraging.

    US-Subjugation of the Gulf and Green-Conservation in the US are not viable long term option security options for the US-Gulf system.
    The basic long term choices in reducing the Gulf security problem are for these states to either:
    Emulation of the US: internally-generated civil reform by the Gulf Arabs, in the direction of the Open Society.
    Anihilation by the US: US massive retaliation on the Gulf in reaction to the inevitable attack by unreconstructed Islamacists.

    GW II has increased the chances of the former, and hence reduced the chances of the latter.

  23. John, I think you can convincingly show that the oil motive is stupid. Yet, does not that still leave an open question as to the extent and to what configuration it may have been a real motive, regardless.

    This goes to a basic problem with the multi-levelled story that floats around in all sorts of real and quasi officialese to explain the war. The credibility problems at the top end leave a gap, after which everyone, including Jack and your good self and yours truly are guessing. Which also means I suppose, that I also sort of agree with Jack … not necessarily his story, but the possibility of there being a story. Note to self: this is the second time in a little over a week I’ve sort of agreed with Jack: warning!

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