Pipelinestan

Tomdispatch has the first of a series of articles by Pepe Escobar - "Postcards from Pipelinestan" - on oil and the machinations surrounding it. As Tom puts it:

At one point last week, the price of a barrel of crude oil -- which had risen as high as $147 last July and, with the global economic meltdown, hit a low of $32 in 2009 -- rebounded above $51. Prices at the local gas pump are expected to rise as well in the coming weeks. However, given a worldwide falloff in oil use, these price jumps may not hold for long. Still, cheap or not, oil and natural gas (as well as coal) are what drives global civilization, and that's clearly not going to change any time soon.

As an added bonus, following is an extract from a chapter of my thesis on US policy in the ME, this covers a little of the history of efforts to control oil. Given the topic it necessarily from a US perspective:

Early in the 20th Century oil was raised to the status of a vital military and strategic asset and a primary source of energy that would power economic growth. Navies began to convert from coal as the fuel for their vessels and the internal combustion engine led to the increasing development and use of powered military vehicles, such as trucks, armoured cars, aircraft and tanks. Such was the extent of these new uses of oil during World War I that a severe shortage of oil developed in 1917/18.

Britain had gained control of Persia’s oil reserves prior to the war and had made gaining control of other fields, even those as yet unproven such as in Mesopotamia, an aim of the Middle East campaign. The campaign continued through diplomatic, political and commercial methods after the war with France joining Britain in the quest for oil. Immediately after the war, the United States, as producer of 64% of the world’s oil and with access to Mexican reserves was not immediately interested in Middle East oil. However, by 1920 an awareness grew that growing domestic consumption would begin to deplete its existing sources and that major sources outside North America would soon be tied up by foreign interests. This was exampled by the comment of British oilman Sir Edward Mackay Edgar who commented in 1919 “All the known fields, all the likely or probable fields outside of the United States itself, are in British hands or under British management or control, or financed by British capital”. The US became involved in Middle East oil to protect its strategic interests and future industrial growth.

The basis for relations between the major powers in the division of Middle East oil reserves up to the outbreak of World War II was established by the Red Line accord of 1928. Despite protestations to the contrary, the interests of the local peoples do not seem to have been a primary concern, the well-being of the oil companies and the home economies taking priority. Also there were suspicions of the motivations between the participants, the British believed that given the possessive way in which the US treated its dominance of the Americas, that US claims to be promoting the principles of free and open trade were somewhat hypocritical. Likewise, the US believed that through the mandate system and thence in relations with the newly created states Britain was trying to perpetuate a quasi-colonial suzerainty. Given the circumstances of the contemporary situation in the Middle East, at least some of these claims are still being made.

In the post-World War II period a number of factors would cause the process of acquiring Middle East oil to become much more volatile and complex. Amongst these factors were the onset of the Cold War where denying the USSR. access to, much less control of, the oil reserves become a major concern for the West, the changing balance of power between the US and Britain, and the ever-expanding need for oil for military and non-military uses in the post-war economic boom. In the case of the US, the war generated massive expansion of its economy and the depletion of its own reserve made an imperative of gaining access to other sources of oil above and beyond the desires for commercial gain by US oil companies. The aspirations of the oil producing states for greater control of and benefit from their oil reserves, both as a result of natural aspirations and in light of the United Nations principles of self-determination, led to growing tensions between the oil companies and their home states and the oil producers. A major example of these tensions was the case of Iran where political manoeuvring between the concerned parties led in 1953 to the British and US backed coup which replaced the elected leader, Mossadegh, with the returning Shah. Iran became for twenty-six years a major US strategic partner in the region, propped up by US aid and support, including the training of Savak, the Shah’s brutal secret police. The decades of suppression of Iranian independence led to an extreme reaction in 1979 when a fundamentalist Islamic regime replaced the monarchy. This caused a major shift in the balance of power in the region which had serious ongoing consequences for the US and other foreign states.

Iraq had been receiving royalties of just 5% from its oil reserves and in response to a growing dissatisfaction and sense of injustice, nationalised its oil in 1972. Unlike some of its neighbours, and despite some of the less savoury aspects of the governing Ba’ath party, the wealth was shared relatively equally amongst its citizens and public infrastructure was amongst the most advanced in the region.

One of the developments amongst a number of oil producing states was the establishment of OPEC - Organization of Petroleum Exporting Countries, which was designed to dominate the international oil market and thus price levels. Price increases could be made not only for the benefit of its members financially, but also as a political weapon. OPEC oil price increases in 1973 and 1979 caused great consternation in developed economies and made governments aware of the importance of oil to their economies and the dangers of price fluctuations and the future depletion of reserves. There were efforts made to economise on oil consumption as well as to find alternative energy sources. The seriousness of these efforts depended upon the political colour of parties and the nature of their electoral support.

The importance of OPEC has decreased since the oil shocks due to increased oil supplies from non-OPEC countries, such as Russia and in west Africa. Nevertheless, the onset of oil depletion is a matter of great importance and complexity. The complexity comes from factors such as determining what oil reserves remain, the ability to extract them in terms of projected economic or environmental cost and the likely amount of undiscovered reserves. An exposition of these factors can be found in Campbell and Laherre. They explain one factor that is a determinant on the viability of oil fields and the calculations of oil reserves, that is, the Hubbert curve. This postulates that once more than half a region’s crude had been extracted production would decrease. M. King Hubbert used this theory in 1956 to correctly predict that oil from the lower forty-eight US states would peak in 1969. By this method Campbell and Laherrere predict a permanent decline in the world’s oil production within the next ten years. Another proponent of this prediction is Gerald Leach who sets the date of declining production as 2010.

Of particular pertinence to this paper is that the world’s largest known reserves of oil are in the Middle East with Saudi Arabia having approximately 25% of known reserves and Iraq 11%. Iraq has many unexplored fields which could hold much larger reserves possibly matching or even exceeding those of Saudi Arabia. Iraq’s oil production has been limited by damage to its wells suffered in the 1991 Gulf War as well as by the restrictions imposed under the sanctions regime. The US, after deposing the Hussein regime, has proposed an end to the sanctions against Iraq to enable the oil revenues to be used to finance the reconstruction of Iraq. Saudi Arabia is the only other source of oil with spare capacity. Saudi Arabia is seen by many analysts as the key to world oil production, not only due to having the largest proven reserves but also due to having excess production capacity. With the onset of depletion these two states will become increasingly important for the continued access to oil, most particularly from the major oil consumer, the United States.

The United States formalised relations with Saudi Arabia in 1945 when President Franklin D. Roosevelt met King Abd al-Aziz Ibn Saud. Although the details of this meeting have been kept secret it is believed that Roosevelt promised the King protection in exchange for privileged access to Saudi oil. Although Saudi light crude is valued in the US due to its suitability for sophisticated applications such as aircraft fuel, there are other benefits from access to Saudi and other Gulf States oil reserves. One is the continued access to reasonably priced oil for US trading partners such as Japan and Europe and thus the continued well-being of the triad underpinning the international economy, particularly as viewed from a US perspective. A further benefit is that much of the revenue received by the Gulf states returns to the US and other western states in the form of investment and, in particular for the US, Saudi arms purchases. This last item has had mixed results in that extravagant Saudi arms acquisition has caused an imbalance and growing debt in their economy. The US has “propped up” unrepresentative regimes in the Gulf, to the extent of leading the coalition that prosecuted the 1991 Gulf War to expel Iraqi forces from Kuwait and protect Saudi Arabia’s oil fields from possible capture by Iraq. Concern for the loss of influence and access to oil should the Islamic Revolution in Iran spread across the region had previously led the US to support Iraq against Iran in their long and bloody war from 1980-88, to the extent of allowing US companies to supply Iraq with technologies, agents and components for nuclear, biological and chemical weapons. The export of such items by the US and other western states has been the subject of much media attention as well as a Congressional inquiry in 1994. Continued US involvement and interference in the politics of the Gulf can have deleterious effects as outlined by Mamoud Fandy, long before September 11 :
Uncritical U.S. support for autocratic Gulf monarchies and their human rights abuses have weakened both U.S. policy and the oil regimes. It undermines U.S. policy by demonstrating the hypocrisy in American rhetoric about democracy and human rights and weakens the regimes by creating the perception among Gulf subjects that their countries are being ruled in the interests of an outside power.

There is another reason some assert for US interest in influencing at least, if not dominating , access to Middle East and other oil reserves, that is the denial of oil to its perceived enemies. Declassified documents reveal a policy of denial of oil to the Soviet Union in the early Cold War years. In 1949 the US developed plans to destroy Middle East oil fields if there was a threat that the Soviet Union would capture them. Radiological weapons were considered and rejected as explained in NSC 26/3, dated June 29, 1950:

'Denial of the wells by radiological means can be accomplished to prevent an enemy from utilizing the oil fields, but could not prevent him from forcing “expendable” Arabs to enter contaminated areas to open well heads and deplete the reservoirs. Therefore, aside from other effects on the Arab population, it is not considered that radiological means are practicable as a conservation measure.'

Bizarre as this scenario might seem it illustrates the lengths to which the US has contemplated going to protect its strategic interests as embodied in the continued access to oil at economically sustainable prices for itself and its allies and trading partners and the denial of oil to its perceived enemies. Energy security continues to be a basic element of US policy as detailed in the so-called Bush Doctrine. The depletion of the world’s oil reserves only adds urgency and emphasis on this aspect of US strategic policy.

The Great Game continues, as Pepe writes:

What happens on the immense battlefield for the control of Eurasia will provide the ultimate plot line in the tumultuous rush towards a new, polycentric world order, also known as the New Great Game.

Our good ol' friend the nonsensical "Global War on Terror," which the Pentagon has slyly rebranded "the Long War," sports a far more important, if half-hidden, twin -- a global energy war. I like to think of it as the Liquid War, because its bloodstream is the pipelines that crisscross the potential imperial battlefields of the planet. Put another way, if its crucial embattled frontier these days is the Caspian Basin, the whole of Eurasia is its chessboard. Think of it, geographically, as Pipelineistan.

Further instalments as they appear. As well as other relevant material.