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An oil-addicted ex-superpower
By Michael T Klare
http://www.atimes.com/atimes/Global_Economy/JE10Dj05.html
Nineteen years ago, the fall of the Berlin Wall effectively
eliminated the Soviet Union as the world's other superpower.
Yes, the USSR as a political entity stumbled on for another two
years, but it was clearly an ex-superpower from the moment it
lost control over its satellites in Eastern Europe.
Less than a month ago, the United States similarly lost its
claim to superpower status when a barrel of crude oil roared
past US$110 on the international market, gasoline prices crossed
the $3.50 threshold at American pumps, and diesel fuel topped
$4. As was true of the USSR following the dismantling of the
Berlin Wall, the US will no doubt continue to stumble on like
the superpower it once was; but as the nation's economy continues
to be eviscerated to pay for its daily oil fix, it, too, will
be seen by increasing numbers of savvy observers as an ex-superpower-in-the-making.
That the fall of the Berlin Wall spelled the erasure of the
Soviet Union's superpower status was obvious to international
observers at the time. After all, the USSR visibly ceased to
exercise dominion over an empire (and an associated military-industrial
complex) encompassing nearly half of Europe and much of Central
Asia. The relationship between rising oil prices and the obliteration
of America's superpower status is, however, hardly as self-evident.
So let's consider the connection.
Dry hole superpower
The fact is, America's wealth and power has long rested on the
abundance of cheap petroleum. The United States was, for a long
time, the world's leading producer of oil, supplying its own
needs while generating a healthy surplus for export.
Oil was the basis for the rise of the first giant multinational
corporations in the US, notably John D Rockefeller's Standard
Oil Company (now reconstituted as Exxon Mobil, the world's wealthiest
publicly traded corporation). Abundant, exceedingly affordable
petroleum was also responsible for the emergence of the American
automotive and trucking industries, the flourishing of the domestic
airline industry, the development of the petrochemical and plastics
industries, the suburbanization of America, and the mechanization
of its agriculture. Without cheap and abundant oil, the United
States would never have experienced the historic economic expansion
of the post-World War II era.
No less important was the role of abundant petroleum in fueling
the global reach of US military power. For all the talk of America's
growing reliance on computers, advanced sensors, and stealth
technology to prevail in warfare, it has been oil above all that
gave the US military its capacity to "project power"
onto distant battlefields like Iraq and Afghanistan. Every Humvee,
tank, helicopter, and jet fighter requires its daily ration of
petroleum, without which America's technology-driven military
would be forced to abandon the battlefield. No surprise, then,
that the US Department of Defense is the world's single-biggest
consumer of petroleum, using more of it every day than the entire
nation of Sweden.
From the end of World War II through the height of the Cold
War, the US claim to superpower status rested on a vast sea of
oil. As long as most of our oil came from domestic sources and
the price remained reasonably low, the American economy thrived
and the annual cost of deploying vast armies abroad was relatively
manageable. But that sea has been shrinking since the 1950s.
Domestic oil production reached a peak in 1970 and has been in
decline ever since - with a growing dependency on imported oil
as the result. When it came to reliance on imports, the United
States crossed the 50% threshold in 1998 and now has passed 65%.
Though few fully realized it, this represented a significant
erosion of sovereign independence even before the price of a
barrel of crude soared above $110. By now, we are transferring
such staggering sums yearly to foreign oil producers, who are
using it to gobble up valuable American assets, that, whether
we know it or not, we have essentially abandoned our claim to
superpowerdom.
According to the latest data from the US Department of Energy,
the United States is importing 12-14 million barrels of oil per
day. At a current price of about $115 per barrel, that's $1.5
billion per day, or $548 billion per year. This represents the
single largest contribution to America's balance-of-payments
deficit, and is a leading cause for the dollar's ongoing drop
in value. If oil prices rise any higher - in response, perhaps,
to a new crisis in the Middle East (as might be occasioned by
US air strikes on Iran) - our annual import bill could quickly
approach three-quarters of a trillion dollars or more per year.
While our economy is being depleted of these funds, at a moment
when credit is scarce and economic growth has screeched to a
halt, the oil regimes on which we depend for our daily fix are
depositing their mountains of accumulating petrodollars in "sovereign
wealth funds" (SWFs) - state-controlled investment accounts
that buy up prized foreign assets in order to secure non-oil-dependent
sources of wealth. At present, these funds are already believed
to hold in excess of several trillion dollars; the richest, the
Abu Dhabi Investment Authority (ADIA), alone holds $875 billion.
The ADIA first made headlines in November 2007 when it acquired
a $7.5 billion stake in Citigroup, America's largest bank holding
company. The fund has also made substantial investments in Advanced
Micro Systems, a major chip maker, and the Carlyle Group, the
private equity giant. Another big SWF, the Kuwait Investment
Authority, also acquired a multibillion-dollar stake in Citigroup,
along with a $6.6 billion chunk of Merrill Lynch. And these are
but the first of a series of major SWF moves that will be aimed
at acquiring stakes in top American banks and corporations.
The managers of these funds naturally insist that they have
no intention of using their ownership of prime American properties
to influence US policy. In time, however, a transfer of economic
power of this magnitude cannot help but translate into a transfer
of political power as well. Indeed, this prospect has already
stirred deep misgivings in Congress. "In the short run,
that they [the Middle Eastern SWFs] are investing here is good,"
Senator Evan Bayh (D-Indiana) recently observed. "But in
the long run it is unsustainable. Our power and authority is
eroding because of the amounts we are sending abroad for energy
..."
No summer tax holiday for the Pentagon
Foreign ownership of key nodes of our economy is only one sign
of fading American superpower status. Oil's impact on the military
is another.
Every day, the average GI in Iraq uses approximately 27 gallons
of petroleum-based fuels. With some 160,000 American troops in
Iraq, that amounts to 4.37 million gallons in daily oil usage,
including gasoline for vans and light vehicles, diesel for trucks
and armored vehicles, and aviation fuel for helicopters, drones,
and fixed-wing aircraft. With US forces paying, as of late April,
an average of $3.23 per gallon for these fuels, the Pentagon
is already spending approximately $14 million per day on oil
($98 million per week, $5.1 billion per year) to stay in Iraq.
Meanwhile, our Iraqi allies, who are expected to receive a windfall
of $70 billion this year from the rising price of their oil exports,
charge their citizens $1.36 per gallon for gasoline.
When questioned about why Iraqis are paying almost a third less
for oil than American forces in their country, senior Iraqi government
officials scoff at any suggestion of impropriety. "America
has hardly even begun to repay its debt to Iraq," said Abdul
Basit, the head of Iraq's Supreme Board of Audit, an independent
body that oversees Iraqi governmental expenditures. "This
is an immoral request because we didn't ask them to come to Iraq,
and before they came in 2003 we didn't have all these needs."
Needless to say, this is not exactly the way grateful clients
are supposed to address superpower patrons. "It's totally
unacceptable to me that we are spending tens of billions of dollars
on rebuilding Iraq while they are putting tens of billions of
dollars in banks around the world from oil revenues," said
Senator Carl Levin (D-Michigan), chairman of the Armed Services
Committee. "It doesn't compute as far as I'm concerned."
Certainly, however, our allies in the region, especially the
Sunni kingdoms of Kuwait, Saudi Arabia, and the United Arab Emirates
(UAE) that presumably look to Washington to stabilize Iraq and
curb the growing power of Shi'ite Iran, are willing to help the
Pentagon out by supplying US troops with free or deeply-discounted
petroleum. No such luck. Except for some partially subsidized
oil supplied by Kuwait, all oil-producing US allies in the region
charge us the market rate for petroleum. Take that as a striking
reflection of how little credence even countries whose ruling
elites have traditionally looked to the US for protection now
attach to our supposed superpower status.
Think of this as a strikingly clear-eyed assessment of American
power. As far as they're concerned, we're now just another of
those hopeless oil addicts driving a monster gas-guzzler up to
the pump - and they're perfectly happy to collect our cash which
they can then use to cherry-pick our prime assets. So expect
no summer tax holidays for the Pentagon, not in the Middle East,
anyway.
Worse yet, the US military will need even more oil for the future
wars on which the Pentagon is now doing the planning. In this
way, the US experience in Iraq has especially worrisome implications.
Under the military "transformation" initiated by Secretary
of Defense Donald Rumsfeld in 2001, the future US war machine
will rely less on "boots on the ground" and ever more
on technology.
But technology entails an ever-greater requirement for oil,
as the newer weapons sought by Rumsfeld (and now Secretary of
Defense Robert Gates) all consume many times more fuel than those
they will replace. To put this in perspective: The average GI
in Iraq now uses about seven times as much oil per day as GIs
did in the first Gulf War less than two decades ago. And every
sign indicates that the same ratio of increase will apply to
coming conflicts; that the daily cost of fighting will skyrocket;
and that the Pentagon's capacity to shoulder multiple foreign
military burdens will unravel. Thus are superpowers undone.
Russia's gusher
If anything demonstrates the critical role of oil in determining
the fate of superpowers in the current milieu, it is the spectacular
reemergence of Russia as a Great Power on the basis of its superior
energy balance. Once derided as the humiliated, enfeebled loser
in the US-Soviet rivalry, Russia is again a force to be reckoned
with in world affairs. It possesses the fastest-growing economy
among the G-8 group of major industrial powers, is the world's
second leading producer of oil (after Saudi Arabia), and is its
top producer of natural gas. Because it produces far more energy
than it consumes, Russia exports a substantial portion of its
oil and gas to neighboring countries, making it the only Great
Power not dependent on other states for its energy needs.
As Russia has become an energy-exporting state, it has moved
from the list of has-beens to the front rank of major players.
When President Bush first occupied the White House, in February
2001, one of his highest priorities was to downgrade US ties
with Russia and annul the various arms-control agreements that
had been forged between the two countries by his predecessors,
agreements that explicitly conferred equal status on the US and
the USSR.
As an indication of how contemptuously the Bush team viewed
Russia at that time, Condoleezza Rice, while still an adviser
to the Bush presidential campaign, wrote, in the January/February
2000 issue of the influential Foreign Affairs, "US policy
... must recognize that American security is threatened less
by Russia's strength than by its weakness and incoherence."
Under such circumstances, she continued, there was no need to
preserve obsolete relics of the dual superpower past such as
the Anti-Ballistic Missile (ABM) Treaty; rather, the focus of
US efforts should be on preventing the further erosion of Russian
nuclear safeguards and the potential escape of nuclear materials.
In line with this outlook, President Bush believed that he could
convert an impoverished and compliant Russia into a major source
of oil and natural gas for the United States - with American
energy companies running the show. This was the evident aim of
the US-Russian "energy dialogue" announced by Bush
and Russian President Vladimir Putin in May 2002. But if Bush
thought Russia was prepared to turn into a northern version of
Kuwait, Saudi Arabia, or Venezuela prior to the arrival of Hugo
Chavez, he was to be sorely disappointed.
Putin never permitted American firms to acquire substantial
energy assets in Russia. Instead, he presided over a major recentralization
of state control when it came to the country's most valuable
oil and gas reserves, putting most of them in the hands of Gazprom,
the state-controlled natural gas behemoth.
Once in control of these assets, moreover, Putin has used his
renascent energy power to exert influence over states that were
once part of the former Soviet Union, as well as those in Western
Europe that rely on Russian oil and gas for a substantial share
of their energy needs. In the most extreme case, Moscow turned
off the flow of natural gas to Ukraine on January 1, 2006, in
the midst of an especially cold winter, in what was said to be
a dispute over pricing but was widely viewed as punishment for
Ukraine's political drift westwards. (The gas was turned back
on four days later when Ukraine agreed to pay a higher price
and offered other concessions.)
Gazprom has threatened similar action in disputes with Armenia,
Belarus, and Georgia - in each case forcing those former Soviet
SSRs to back down.
When it comes to the US-Russian relationship, just how much
the balance of power has shifted was evident at the NATO summit
at Bucharest in early April. There, President Bush asked that
Georgia and Ukraine both be approved for eventual membership
in the alliance, only to find top US allies (and Russian energy
users) France and Germany blocking the measure out of concern
of straining ties with Russia. "It was a remarkable rejection
of American policy in an alliance normally dominated by Washington,"
Steven Erlanger and Steven Lee Myers of the New York Times reported,
"and it sent a confusing signal to Russia, one that some
countries considered close to appeasement of Moscow."
For Russian officials, however, the restoration of their country's
great power status is not the product of deceit or bullying,
but a natural consequence of being the world's leading energy
provider. No one is more aware of this than Dmitri Medvedev,
the former chairman of Gazprom and new Russian president. "The
attitude toward Russia in the world is different now," he
declared on December 11, 2007. "We are not being lectured
like schoolchildren; we are respected and we are deferred to.
Russia has reclaimed its proper place in the world community.
Russia has become a different country, stronger and more prosperous."
The reverse, of course, can be said about the United States.
As a result of our addiction to increasingly costly imported
oil, we have become a different country, weaker and less prosperous.
Whether we know it or not, the energy Berlin Wall has already
fallen and the United States is an ex-superpower-in-the-making.
Michael Klare is a professor of peace and world security studies
at Hampshire College and author of the just-released Rising Powers,
Shrinking Planet: The New Geopolitics of Energy (Metropolitan
Books). A documentary film based on his previous book, Blood
and Oil, is available from the Media Education Foundation and
can be ordered at bloodandoilmovie.com. |