Listener 19 October 2002.
Keywords: Globalisation & Trade; Political Economy & History;
It is easy to argue that US policy on Iraq is driven by its oil interests, especially since its president is from a Texan oil family who has surrounded himself with Texan oilmen. Thus the clever email about how the ‘Seven Sisters’ – the world’s great oil companies – are determining US policy which accompanies this column. If only it were so simple.
Undoubtedly the US is a deeply involved in the Middle East because of its oil (although there is also its loyalty to Israel). America produces 21.5 percent of the world’s output of goods and service, while consuming 22.7 percent of its total primary energy. However it produces only 16.5 of the world’s energy, the rest coming from (mainly) oil imports. So although it is the world’s second biggest oil producer (Saudi Arabia is bigger) – currently the US produces 9.9 percent of the total – it imports 25.2 of all internationally traded oil. Moreover the US has only 11 years of oil reserves. In contrast, the five biggest holders of reserves – all in the Middle East – have over a hundred years of supply at their present rate of production. (These figures are from the International Energy Association, for the 2000 year. Perhaps the US has only 9 years left.)
So the US – and the Seven Sisters – would like to get their hands on Iraqi oil. Not only do they have the second largest reserves in the world, but their fields are underperforming. A major investment will substantially increase the cheap supply. But would that be the outcome from an invasion?
Were it just a matter of overthrowing the Iraqi regime, war might make oil-sense. At worse there would be a prolonged loss of around 5 percent of the World’s traded oil supply. The price of oil would rise – it has been inching its way up and by September it was close to $US30 a barrel in contrast to the $US19 at the beginning of the year. The Seven Sisters would be more profitable, and might even invest in some of the high-cost untapped oil fields (weakening the Middle East dominance of supply).
But an invasion of Iraq would precipitate chain reactions, as other Middle East oil regimes react. While most are dictatorships of one sort and another, even dictators have to manage their public. And, as in the case of Saudi Arabia, the ruling elite may be divided. Its 81 year old King Fahd is failing and while in principle the successor is to his half-brother 79 year old Crown Prince Abdullah, the third-in-line, 78 year old Prince Sultan with a different mother again, must be impatient..
If it were simply a matter of personalities, the issue might be just intriguing to outsiders. But Abdullah and Sultan are on opposite sides of the modernisation/liberalisation versus traditionalism/feudal control spectrum (discussed in The Gulf Between East and West). That generates deep religious tensions in the Islamic world, compounded by a high proportion of the population who are young, restless, often unemployed, and have been brought up to believe the West is the ‘Great Satan’. (Sometimes our behaviour seems to confirm their prejudices.)
An invasion of Iraq could destabilise Saudi Arabia, and other more-pro-Western regimes. The religious fundamentalists who may follow them, could be much less co-operative about supplying oil to the rest of the world. Being of a frugal disposition, they do not have the same demand for international currency, and they certainly have no commitment to following the (Great Satan’s path of) liberalisation and modernisation that the Abdullahs of the Middle East cautiously pursue.
There are so many scenarios, so many possible outcomes, with consequences that are so varied that prediction is nigh on impossible. Meanwhile, each of the Sisters must fear that in the instability they could lose out, even if the Western oil companies win in total. While they may seem a cartel, they are happy to cut each other’s throat. Thus the geo-oil-logic does not seem to favour an invasion, although it would certainly like to settle with Hussein and open up Iraq.
We might even feel safer if US policy towards Iraq was driven by the logic of oil and the demands of the Seven Sisters. For sometimes it hard to hear any rationality in the US rhetoric. Perhaps we are not meant to be listening. Perhaps it is all for an American public whose international instincts are visceral and ill-informed rather than rational and knowledgeable. Of course there are some very capable foreign policy thinkers in the US. But the country is running up to its mid-term elections (November 5th) with a weakening domestic economy and the scandals of corporate corruption. The counsels of the wise and of the Sisters are hard to hear above the clamorous patriotism of scoundrels and bullies.
Listener Columns on Saudi Arabia I and Saudi Arabia II