Oil, what's it good for? War!

There are a lot of people blogging about current events in the Gulf region of the Middle East so I thought I would add my view. Thinking over it, my perspective now seems pretty old fashioned, probably back to the late 1910s, though surfing around it seems that in the age of globalisation, such ideas are coming back in fashion.

So, here is my take on why the USA invaded Iraq in 2003 was not for defeating terrorism (more on how and how not to respond to terrorism in later postings) nor to overthrow a dictator (the USA has put in place and sustained so many dictators it seems perverse to pick one to remove, or maybe like Noriega in the 1980s he just came up in this decade's 'who shall we depose' lucky dip at the White House), but to get control of the 5th largest oil reserves in the world. US interest in the Gulf region goes back to before the First World War, when battleships moved from being coal to oil powered, but US policy only really began to be directed that way (a few decades after the British) with the Eisenhower Doctrine of 1957. That was in the context of the Cold War and it was supposedly about defending the Middle East from Communist intervention, this was not simply about ideology, it was about a time when the USA's own oil was becoming expensive to extract and drying up and yet US fuel consumption was rocketing in the prosperous 1950s. Whilst the doctrine's aggressive approach was shelved in 1959 recently it seems to have been dusted off. To some extent the increase in Venezuelan oil which is short haul to the USA made it unnecessary. Venezuela under dictator Juan Vincente Gomez and later the pact between the AD and COPEI parties from 1958 onwards which meant a safe supply of oil for the USA.

The big shock to the western world over oil came in 1973 when Middle Eastern oil producers quadrupled prices as a way to put pressure on the USA and certain European countries not to back Israel, which despite expectations was proving hard to rub out. The price rise ended the post-war economic boom and led to the inflation and unemployment of the 1970s. The fear was that most of the oil came from 'unstable' states in the Middle East and Africa (notably Nigeria which had suffered a bitter civil war). Fortunately for the Americans they got on well with the owners of the largest reserves, Saudi Arabia and stability was soon returned to the region. They supported what was basically a monarchical state medieval in outlook, as they and the British do today. Though the vast oil company profits were reduced a little and more money went to the Saudis and other Middle Eastern leaders, the oil companies remained richer than many countries in the world.

Why then in the 2000s was all of this insufficient? Well, instability from the US perspective is spreading. In 1979 they lost the pro-western Shah's government in Iran. Iraq remained an ally during the Cold War, but when that ended it was no longer necessary; in addition it has three as yet untapped oil fields. Saudi Arabia What has changed in particular in the last decade is the increased demand, especially from China which has a population four times larger than the USA and its demand for fuel is rising. China has been making investments in raw materials across the world from Australia, Indonesia (also a big oil producer), Canada (also has certain oil reserves) and into Africa, buying influence and the fuel it needs.

Another US policy doctrine was the Monroe Doctrine of 1823 which said that Central and South America was out of bounds for any other Power, bar the USA and over the years the Americans have contested intervention there, especially from the USSR. Since the start of the Cold War the policy has been focused on keeping out 'outside' ideologies as well as other countries, notably Socialism and Communism or even local nationalist flavoured populism which seems to offer the people a little something and can be tarred with the Communist brush. Now, Hugo Chavez came to power in Venezuela in 1998 he began moving the country down a left-wing path. In the past as in Guatemala 1953-4 and in Chile 1973 the US government and US corporations such as United Fruit and ITT has intervened in Latin American countries to head off nationalisation of their assets through staging coups. Chavez has faced general strikes an approach tried in Chile to oust Allende in 1973, in that case they were successful and led to Allende's death and a period of dicatorship under General Pinochet. Experts behind US interventions in Honduras, El Salvador and Nicaragua in the 1980s had been advising those who tried to pull off a failed coup in Venezuela in 2002. Anyway, with a left-wing government in Venezuela which is unsurprisingly unsympathetic to the USA, the Americans are concerned that another prime oil supply is going to be limited or cut off for them.

President George W. Bush effectively admitted this need for oil in April 2005. The USA still has domestic fuel prices lower than much of the world (half what we pay in the UK) and yet huge vehicles are increasing and demanding more. A rise in fuel would shoot inflation up very rapidly and there is the spectre of a depression hanging over Bush's shoulder, especially given its budget deficit, so as in the 1920s a depression or fuel price rise affecting the rest of the world will also come to haunt the USA even if it avoids a local depression.

At the top I said these ideas date to the 1910s and this is because of Vladimir Lenin's book of 1916 'Imperialism: the Highest Stage of Capitalism' though the man who lay down the foundations was J.A. Hobson in 'Imperialism, a Study' (1902) though he tends to get forgotten. Anyway, the argument was at the start of the 20th century there were very few countries outside Europe which were not ruled either formally or informally by one of the European powers, the USA or Japan. Even supposedly independent states like Argentina, had their economies run by other states, in this case, the UK. So the portrayal of the world was that there would be completing blocs of power across the world with developed nations taking raw materials from their imperial territories and selling manufactured items back to them. Of course the blocs would shift over time and in the 1900s it was the USA, Germany and Japan who were rising in power to challenge the more established British, French and Russians. The argument is 100 years on little has changed. The Cold War provided an interlude when military power over-ruled economic power, but things are now back to the early 20th century system with economic penetration the key weapon. Germany, Britain and France are all part of the EU itself a bloc, the USA, Japan and to a lesser extent Russia are still there. China is shaking off its status as a territory for colonial penetration and becoming an economic power to match the military power it built up during the Cold War. So, the war in Iraq is rather like a move on a game of 'Risk' done simply to secure resources (and markets too, as many US companies are making millions rebuilding Iraq too). The tragedy is that it is not plastic pieces or a computer graphic eliminated in the 'play' rather people's lives and futures as they are used like atoms on the pawns that are their countries.