For many intelligent and well-informed people I know the answer to this question is an obvious "yes." However, I beg to differ. Certainly oil has been important. At a very high level the answer is "yes," to the extent the Iraq war has been the extension/sequel of the (first) Persian Gulf War. That was clearly all about oil, propaganda to the contrary. If Kuwait did not have the Burgan pool, then the world's second largest, with Saddam's conquest of Kuwait setting him up for an easy run to Saudi Arabia's al Ghawar, the world's largest pool of oil, George H.W. Bush would not have given a hoot about him invading Kuwait. So, if this war is finishing the business of that one, it's ultimate cause is all about oil and keeping it from falling under the control of perceived enemies, although of course after the first war, Saddam was in his box and not going to get those fields. I would also accept that Cheney seems to have long been heavily motivated by the oil factor, even if it is just as petty as feathering his own nest at Halliburton or for cronies like the Hunt brothers, with Bush having some of this from his own past as a Texas oil man, as well as his dad's old interests. And we know that Cheney was in on that report from the late 1990s going on about Iraq as the major possible source of new supply that could be tapped in the 21st century. So, Cheney clearly has been the major voice of the oil interest in all this, despite him also being a front for the broader military-industrial complex, and also having pet peeves about Saddam shooting at the US planes that flew over the no-fly zone, as reported in one of the Woodward books.
However, I see at least three other things going on in terms of actually initiating the war. One was the faction of Likud-oriented neocons, Wolfowitz, Feith, and Abrams being probably the most important in the making of the war. Their interest was securing Israel from Saddam making nukes or funding Palestinian parents of suicide bombers. Those who claim that the US backing Israel is somehow linked to the US wanting to control oil in the Persian Gulf are out of touch with history and the long struggle in the State Department between the pro-Israeli faction and the old oil-oriented "Arabists." Of course this group of neocons clearly made an alliance of convenience with the Cheney oil faction, but their interests were not fundamentally identical, except in both supporting war in Iraq. Then there is the faction that wanted a nice excuse for big funding for the military-industrial complex. Rumsfeld was a leader of this group. Then we get to arguments more tied to Bush himself, the crucial "Decider" here after all, despite all of Cheney's influence and machinations. One motive for him was political. Having a war in Iraq after the escape of bin Laden at Tora Bora allowed for distracting from disagreements over domestic policy and provided a way for demonizing the Dems, which worked in the 2002 elections and even again in 2004 (as long as a majority of the US population continued to believe the lie that Saddam was linked to 9/11), although this game finally fell apart in 2006. And finally there was all that psychological garbage with his dad, showing he was the real man who could "finish the job" and all that, and wanting to "get" Saddam after he tried to assassinate the old man, although clearly Cheney played to that particular aspect.
There is one other element of this that is rarely addressed by those who say "it is all about oil." That is, what were they going to do with the oil if they got it (which, of course, the war has failed to do so far anyway, even if the Oil Ministry building in Baghdad was secured right away)? Now if it was crude money in Cheney's pockets through Halliburtoon, that is one thing. But from Bush's perspective it is more difficult. His motive presumably was to get re-elected more than just making money from the oil industry. For that he needed presumably to increase oil production from the Gulf, thereby keeping oil prices down and pleasing the SUV-driving voters. However, the oil companies presumably preferred reduced prodcution, which increases their profits (and is what has happened, although I do not think that is what Bush either planned or hoped for). There was always this contradiction that is never resolved or explained in this explanation: would control lead to more or less production? So, bottom line: oil was important, but it was not everything in the war in Iraq.
Imagine a large Mafia organization. It controls large territory, has many different interests, sometimes contradictory. The main goal is to control as much business as possible.
ReplyDeleteNow suppose one of the lieutenants in a very profitable (like Vegas, for example) city starts acting in a more independent (aka disrespectful) way. Now you have to 'restore your credibility', as they say; you have to clip him, whack him, or others will start misbehaving too.
That's all there is to it, I think.
Or Cheney needs to restore the imperial presidency, (briefly seen with Nixon) an office that is not constrained by Congress or the Senate...and this excursion into Iraq can be narrated as War Time with special war time measures to initiate this power grab...that lasts indefinitely.
ReplyDeleteYeah, but why would he want 'imperial presidency'? Imperial presidency sounds like something that's merely a tool, means to an end, rather than the end itself.
ReplyDeleteBarkley, I like this post very much. "Control of oil" is a fuzzy phrase that's hard to make operational. What exactly would be controlled, and how, in the context of a global oil market where flows are fungible?
ReplyDeleteI would add one more factor. From a certain point of view (give it whatever label you want), after the fall of communism the only "troublesome" part of the world was the middle east, where regimes were just not getting with the program. There is massive dirigisme, illiberalism, hostility to the US (and Israel). This should not be tolerated. The US, as the sole superpower, should have the ability to impose order on this recalcitrant region. Indeed, by using force, it would have that much more force to exert (via the demonstration effect). If you think that an American expeditionary force could quickly be withdrawn as power is handed over to Chalabi & Co., you could believe all this.
I just saw the film "Endless War" last night. It centers on interviews with the "good" imperialists, who tried to do the right thing after the invasion but were blocked by the arrogant, bumbling Bushies. I'm sure there's some truth to this. But you could also say that many knowledgeable people thought it would be possible, with the right occupation policies, to bequeath a liberal Iraq.
In general, while I am all for ferreting out corruption and even conspiracies where they exist, in the end I think most explanations for what the powerful do stick fairly closely to what they say they are trying to do -- but in the context of their larger ideological framework, of course.
I think this is a good post, too, though the supposedly non-oil reasons all seem to track back to oil to one extent or another. Would Israel be as threatened without oil-rich antagonist states in the region? Do big-military-industrial-complex conservatives need a war to plump up defense spending? Can GWB's daddy issues be disentangled from Gulf War I and the role of U.S. petro-strategery in region in the lead-up to 9/11? Don't we handle "dirigisme, illiberalism, and hostility to the US" using far less extreme means (up to and including basically ignoring 'em) in areas of the world that are perceived as less vital to US interests (Africa, parts of Latin America)?
ReplyDeleteThat said, the "what do you do with the oil" questions are good ones. Though it's not at all inconceivable to me that putting the Iraqi oil industry in friendlier hands was viewed as a plus for/payoff to the administration's oil buddies generally, and given the general level of care with which the endeavor was planned, the rest is just unintended consequences.
The post has some value in that is enumerates the variety of reasons that underlile the Iraqi experience. However, considering that the war was begun based on none of the likely reasons that are listed and that very unlikely, ie bogus, reasons were given to the publlic and the Congress for starting said war, it seems to me that we're dealling with a major criminal conspiracy. That being the case what difference what the individual conspirators may have held as rationales for their criminal behavior. Everyone involved lied through their teeth. The media has been using the term "faulty" intelligence. More like fawlty towers, I'd say. There was nothing fualty about the data. It was cooked to boil. It was intentional woven into cloth and sold to us as a reality. When the intelligence communnity would not at first produce the kind of evidence requested, what they did produced was lied, dyed and refried. Remember Rumsfeld's Office of Special somethjing or other, under the astute leadership of Feif and Wolfowitz?
ReplyDeleteWe need not percolate our thoughts regarding who did what for what purpose. Such refinement of purpose only provides yet further distraction from the core issue. We don't belong in the freekin place to begin with. Our soldiers are shedding their blood and losing their limbs and lives for a group of miscreants, who as a group have added no value to this country in the seven and more years that they have been involved in government at various levels. For pity sake, Abrams was a convicted felon. Cheney nearly bankrupted Hallilburton. Rumsfeld made his bones as a business exec opening manufacturiing plants in Mexico and exploiting that labor pool at the expense of American workers. A real nice group with only the best intentions for America, and we need to discuss fine poinits of why they've done it. I don't think so.
This war is about oil in the same way that the Civil War was about slavery: it's simpler and easier for everyone to pretend that it's all about one issue. We Americans like everything neat and tidy like that.
ReplyDeleteAnd, of course, it's never been about democracy (if that were the case, we'd have invaded Saudi Arabia first).
It wasn't until I watched "Why We Fight" and actually spoke with Karen Kwiatowski about the buildup to the war that the so-called "military industrial complex" entered the equation in my mind. The thesis of that documentary is that many of US-owned military contractors stand to benefit greatly from war. Some have parts manufactured for one product in all 50 states. Iraq was a convenient target.
Well it is a good post. But casting this as a marriage of convenience between Likudniks, Oil Controllers, Military Industrialists and straght out Imperialists is plausible but if true needs to be back dated. Because everyone was already on board back in 1997 with the Project for a New American Century; Statement of Principles. (Note they even had a Bush on board already. But JEB hit a speed bump and they had to go to the Bush Bench.)
ReplyDeleteElliott Abrams Gary Bauer William J. Bennett Jeb Bush
Dick Cheney Eliot A. Cohen Midge Decter Paula Dobriansky Steve Forbes
Aaron Friedberg Francis Fukuyama Frank Gaffney Fred C. Ikle
Donald Kagan Zalmay Khalilzad I. Lewis Libby Norman Podhoretz
Dan Quayle Peter W. Rodman Stephen P. Rosen Henry S. Rowen
Donald Rumsfeld Vin Weber George Weigel Paul Wolfowitz
I had never heard of the various Kagan's, or Podhoretz, or Libby at the time. I had read one of Fukuyama's books. But everyone is here. Well not everyone, because if you go to the PNAC letter to Clinton urging an attack on Iraq you pick up some more names.
Eliminating duplicates you get:
Richard L. Armitage Jeffrey Bergner John Bolton
Robert Kagan William Kristol Richard Perle William Schneider, Jr. R. James Woolsey Robert B. Zoellick
Actually I could have bolded even more. You don't have to be a paranoid to understand that for these guys 9/11 didn't change anything, they had a plan, a plan they published openly and signed their names to. And in reading through the statement of principles I see nothing about control of oil and everything about straight out Empire.
abb1,
ReplyDeleteWas Saddam a "lieutenant"? The Iraqi oil industry had been nationalized for decades, just like that of virtually every Persian Gulf country, including US allies like Saudi Arabia and the UAE. And before their industry was nationalized, it was Brit companies that had been in there, BP and Shell, not US ones, with this dating back to the 1928 Red Line Agreement. I do not exactly see Saddam as ever having been a "lieutenant" of US oil interests in the P.G.
Now we tended to back him against the Iranians after he invaded them during their war with each other, despite the occasional Iran-contra slip to the other side. This is partly what led to the slipup when he met with April Glaspie before he invaded Kuwait. She did not quite give the signal strongly enough that we did not approve of that. So, maybe it was the invasion of Kuwait where he was naughty. But after that he was in a box. Just what was it he was doing for which he needed to be "clipped," and in this case it was not just getting clipped, but hanged and beheaded?
anonymous,
Clearly Cheney has had a fixation with restoring the imperial presidency, although what his ultimate motive is remains somewhat murky, especially given how shadowy he is. I do not think that all he thinks about is power and money for the oil industry, although helping them appears to be pretty high in his utility function.
One piece of evidence that oil was never the top priority is the simple fact that if it was, Bremer would have imposed an oil law while he ran the shop, the way we were trying to impose privatization throughout their economy (not a leading motive for the war), and Exxon Mobil would be pumping oil from its new fields and exporting it out right now.
Peter,
This whole business about the "good imperialists" is a bit tricky. I just heard this morning that there is a book club at the Pentagon of people reading books about the US being an "empire" and how it should be run and kept going. Clearly there were some disastrous botches, notably the disbanding of the Iraqi military and the de-Baathification, not to mention the failure to hold a loya jirga and put in a local government right away rather than the Bremer viceroyship. Certainly things would have gone better than they have, but it remains unclear that they could have ever gone all that well. We were not on top of things from the minute the looting in Baghdad began right after our troops arrived, and only a quick withdrawal of our troops would have kept them from becoming viewed as imperial occupiers, and this latter was simply not in the works even in the books of the "good imperialists."
Tom Bozzo,
Actually, none of the states most dangerous to the existence of Israel has been a rich oil power. The countries that have invaded Israel are Egypt, Syria, Jordan, and to some extent, Lebanon, or parts of it, plus the Palestinians, sort of. None of these are oil powers. Pro-US Saudi Arabia and others may have funded them or provided arms, but otherwise have sat on the sides cheering (or criticizing).
The military-industrial complex wanted and needed something, but it did not have to be Iraq, and there is reason to believe that crucial parts of it would have preferred something else, like the anti-China bit that the Bushies came in with. After all, although Rumsfeld did early on bring up Iraq with Bush after 9/11, many suggest that was at the suggestion and urging of Wolfowitz, who clearly was fixated on Iraq for Israeli reasons. Woodward reported in one of his books that initially at least, Rumsfeld was one of the less enthusiastic about Iraq of the Bush inner circle, although he got on board pretty quickly as Cheney and Wolfie and Bush himself were clearly into it. But then, it arguably messed up what had been his main plan and fixation (and that of the mil-ind complex, or part of it), the drive to replace the Army with all kinds of high-tech (and expensive as hell) gadgetry. That whole move to streamline "revolutionarily" the Pentagon that he came in on went pretty much down the toilet as the war in Iraq went on and on, and became an Army affair, the branch he wanted to downsize big time. Of course, once the war whooping got going seriously, Rummie took charge and turned it into his personal baby, to disastrous consequences.
And as for Bush's daddy and their issues, I think they transcended oil, but did come to a head over the First Gulf war, which clearly did involve oil deeply. I do believe that if there were no oil in the Persian Gulf, we would not be in Iraq now, but that ultimate cause does go back to this bit of Bush showing up his daddy over the first war, with me being personally convinced that this psycho daddy shit is the real bottom line with W.
Jack,
I agree that there has been massive lying and fraud, and that a whole bunch of these people should be sent to Guantanamo. However, there was at least one aspect of it that apparently they, and all the other intel agencies in the world willing to say anything publicly, believed. They all thought that Saddam had chemical weapons. Heck, I thought he did before we invaded. He had had them and had used them on the Iranians and the Kurds. It was very believable that he still had some hidden away somewhere, especially given his reluctance to let in UN inspectors, although once they got in, of course they could not find anything (and there had been some reports out of Iraq that all the "WMD" were indeed gone, although these got dismissed).
Even though I thought he had chemical weapons, I did not think that was an excuse to invade. He had no delivery systems to get at the US, indeed to anybody but immediate neighbors or his own citizens, and chem weapons are not really "weapons of mass destruction" anyway. Only nukes are, and about those the administration clearly lied.
finnegan,
The funny thing about the democracy excuse is that I think at least Wolfowitz really believed it. I posted on him and this back on maxspeak. The guy believed his own delusions.
Speaking of maxspeak, I note that econospeak is now getting listed on Aaron Schiff's econ blog ranking schemes. We have an exact measure of the marginal value of Max. At its last ranking, maxspeak was at 13th. Econospeak is now at 96th. Guess we have our work cut out for us to replace Max.
From the Statement of Principles.
ReplyDeleteNote the italics (which are mine, along with the bolding). The commercial is explicitly taking a back seat.
STARTQUOTE We aim to change this. We aim to make the case and rally support for American global leadership.
As the 20th century draws to a close, the United States stands as the world's preeminent power. Having led the West to victory in the Cold War, America faces an opportunity and a challenge: Does the United States have the vision to build upon the achievements of past decades? Does the United States have the resolve to shape a new century favorable to American principles and interests?
We are in danger of squandering the opportunity and failing the challenge. We are living off the capital -- both the military investments and the foreign policy achievements -- built up by past administrations. Cuts in foreign affairs and defense spending, inattention to the tools of statecraft, and inconstant leadership are making it increasingly difficult to sustain American influence around the world. And the promise of short-term commercial benefits threatens to override strategic considerations. As a consequence, we are jeopardizing the nation's ability to meet present threats and to deal with potentially greater challenges that lie ahead.
We seem to have forgotten the essential elements of the Reagan Administration's success: a military that is strong and ready to meet both present and future challenges; a foreign policy that boldly and purposefully promotes American principles abroad; and national leadership that accepts the United States' global responsibilities.
Of course, the United States must be prudent in how it exercises its power. But we cannot safely avoid the responsibilities of global leadership or the costs that are associated with its exercise. America has a vital role in maintaining peace and security in Europe, Asia, and the Middle East. If we shirk our responsibilities, we invite challenges to our fundamental interests. The history of the 20th century should have taught us that it is important to shape circumstances before crises emerge, and to meet threats before they become dire. The history of this century should have taught us to embrace the cause of American leadership.ENDQUOTE
Now depending on how you define "interests" this doesn't sound to me like a 'make Dick rich' scheme. This is more along the lines of "They trod the Earth like Gods"
Bruce,
ReplyDeleteSome others that could be highlighted in that group would be Elliott Abrams and Paula Dobriansky.
Well, the supporters of the oil-uber-alles idea would respond with "what was all this empire for?" Of course, as already noted, this group, the alliance of convenience, had its factions with their own interests: oil, Israeli security, money for the mil-ind complex, etc.
The smoking gun on Cheney's own fixations goes back to his Energy Task Force at the beginning of the administration, which produced a document "Foreign Suitors for Iraqi Oil Contracts as of March 5, 2001." This went on about how US oil companies could get in and make money, while increasing production, which would keep the price of oil down (although in general the companies make money when the price goes up, as already stated). A source on this is an article from 7/21/07 at American Free Press net by Richard Walker, "The Bush-Cheney Oil War," available at http://www.americanfreepress.nte/htm/bush-cheney_oil.htm, although it has some problems. After reporting on how Allawi was eager to privatize Iraqi oil and hand it over to the companies, we never get why neither he nor Bremer (who supposedly was also) just never quite pulled it off. Not that much of a priority after all...
Barkley
Economists will always tend to "cherchez le dollar".
ReplyDeleteMe by training I am a medieval historian and focused on the centuries between the Fall of Rome and the 12th century. While at no time was Europe entirely demonitized and while some sort of long distance trade continued throughout it would be hard to argue convincingly that empire was fundamentally an economic exercise, there simply was no efficient way to extract the surplus from distant regions. Yet kings and princes devoted substantial resources towards empire building. That is the question of what an empire is 'for' may have mystified Genghis Khan. Europe and Egypt offered little to the Mongols, yet they tried conquest anyway.
People can and do try to explain the Carolingian Empire, or the Crusades in economic terms but it is far from clear to me that Charlemagne invaded Spain or Richard the Lion Hearted went on Crusade for any economic motives at all.
For some people Empire is an end in itself and doesn't lend itself to other rationalization. I would put Cheney and Kristol in this category and maybe throw in Podhoretz. They seem to want to conquer simply because they can.
As for the oil companies, last week I heard John Mearsheimer and Stephen Walt speak at a (massively attended) book event for The Israel Lobby. To the oil question, they argued that oil companies lobby on regulations, taxes, and drilling rights, but not foreign policy. The closest exception would be lobbying against sanctions. I recall a piece (perhaps by Robert Dreyfuss) at the war's beginning arguing that the oil companies were not pushing the war. In part, a major geopolitical concern for them is stability, which is part of why they would cut deals with the Taliban. They profit through cronyism, but that alone does not make cronyism the cause of the war. Maggots can gorge themselves on a corpse, but that doesn't mean maggots were cause of death.
ReplyDeleteJohn Mearsheimer and Stephen Walt cite the neoconservatives as the primary constituency, with the Israel lobby second, who pushed the war. I think Peter Dorman has the right question, "What exactly would be controlled, and how, in the context of a global oil market where flows are fungible?"
Also, Peter says:
"I just saw the film 'Endless War' last night. It centers on interviews with the 'good' imperialists, who tried to do the right thing after the invasion but were blocked by the arrogant, bumbling Bushies. I'm sure there's some truth to this. But you could also say that many knowledgeable people thought it would be possible, with the right occupation policies, to bequeath a liberal Iraq."
Did you mean No End In Sight? I ask because what you describe sounds like that documentary. The Wilsonian conceits seem to have given the broader traction it needed to pull off the war.
Sorry -- it was No End in Sight; I confused it with the Petraeus testimony I was listening to on the way home....
ReplyDeleteI should also clarify: I personally have little sympathy for the "good" imperialists (ironic quotes) I cited. I only thought that they were an important part of the war coalition at the beginning, and it is reasonable to take them at their word -- as long as we keep in mind the larger context of the global system whose beneficence (ironic without quotes) is obstructed by the "misbehavior" (those quotes again) of middle eastern states.
It is a difficult position to argue, to be sure. I suppose I share their disgust at much of the illiberalism of the oil autocracies, not to mention outright kleptocracy in many cases, but I don't think the alternative is liberalism in a Washington Consensus frame either.
Peter Dale Scott says, on the subject:
ReplyDelete"I have looked at these recurring overlapping patterns of drugs, oil, and war, in a book of the same name. It is a tribute to force of psychological denial that, even having written about them previously, I so long repressed their relevance to the subject now being discussed: why certain events in the assassination of John F. Kennedy replicated themselves in the events of 9/11..."
“Did successive crises in the illicit drug traffic induce some drug-trafficking U.S. interest groups and allies to press successfully for U.S. involvement in an Asian war?”
http://www.911truth.org/article.php?story=20070813214130200
Saddam was a lieutenant before 1991. He was whacked in 1991, but not credibly enough. 1991 was the first year of the new world order where "what we say goes", yet the whack Saddam got was pathetic and The New American Century people got mad.
ReplyDeleteAnd then there was Sept 11. They saw it as a confirmation of the idea that signs of disrespect can't be tolerated or punished lightly.
i think Bruce has it basically right. There is a lot of the "irrational" or at least not well thought out in human motivation. And a lot of motives would add up together in each person and in any group of persons to become a "reason" for conquest.
ReplyDeleteBut the urge to conquer, to impose a view, to protect from even an imaginary enemy... these are always with us.
Still, oil has to be a big part of the reason why Iraq was on their mind more than, say, Cuba or even Afghanistan.
"Empire" is just the long understood idea that it is better to be in charge, or in a position to project power than to let someone else be in that position.
And I am not so sure that April Glaspie did not know exactly what she was doing. I don't think I am especially paranoid, but I don't think the people making the basic decisions in our empire evern feel the need to share with us the real truth. I can imagine that Saddam was perceived to be getting close to a Bomb of his own, and the Empire needed a reason to clip his wings. So they suckered him into giving them a reason to go to war the first time.
And here, I have to consult my own irrationalities. Being a premature anti Saddamist I "went along" with the Kuwait war despite the lies (babies torn from incubators) thinking it would end the career of an evil man. When I saw how that war actually worked out, I realized that not all the evil in the world was in "them." Still not too smart, I let myself believe the Wolfowitz idea about creating an ethical government in Iraq. I didn't believe it much, maybe no more than Cheney did, but I can understand how those who really wanted to go "kick ass" could persuade themselves they were doing the Lord's work.
The latest evidence for the oil-uber-alles folks is that Paul Krugman has just reported on Economists View that Ray L. Hunt of Hunt Oil of Dallas, and an old Bush-Cheney crony, is a member of the Foreign Intelligence Advisory Board. Krugman interprets this not as some plot by Bush and Cheney, but evidence that he is "betting against the unity of Iraq," based on his access to inside information, in short, going against Bush and Cheney optimism.
ReplyDeleteKeep in mind, folks, the contract between the Kurdish Regional Government (KRG) and Hunt Oil, signed on Sept. 8, has been declared "illegal" by the Iraqi Oil Minister, Hussein al-Shahristani, leading the the KRG president, Massoud Barzani, to demand the resignation of Shahristani. Hunt is clearly betting that the KRG has more staying power than does the Iraqi central government.
Barkley
or he's hedging his bets.
ReplyDeletei don't think bushcheney are running on optimism. i think they are playing out their hand hoping something turns up.
meanwhile they are looting the country.
Setting aside political questions, the oil price rise might be seen as part of the global reflation process required by that 'hardly noticed' recession of a few years ago.
ReplyDeleteOil exporting nations have experienced a tremendous rise in revenues and surplus, to the extent that in 2005 and 2006 these nations' collective external surplus was larger than China's, and will be close this year.
How large is 'tremendous'? Well, 2002-06, Gulf States alone, around $550 billion of outflow which, with Russia and others appears to be in excess of $1 trillion.* Of course, not all of this mass of petrodollars cycled to the U.S. but no doubt a large portion did where, as investment in U.S. Treasury paper and Agency debt, it has had interest rate effects, helping with a low rate environment and even the house price bubble. Oh, and the dollar decline may have been more severe otherwise.
This August 2 '07 Financial News chart and article provides some idea of Gulf States outflow quantities and destinations:
http://www.financialnews-us.com/?page=ushome&contentid=2348431254#2348465137
What we're talking about, imo, is a worldwide energy tax to the benefit of means of destruction and finance, or a type of unequal exchange.
Adding the political, we are also, as Michael Hudson has explained, talking about U.S. imperialism and its financing. Attached below is a short clip from a April 23, 2003 CounterPunch interview.**
*(Brad Setser provides much more detailed info in his blog at RGE Monitor)
**Standard Shaefer: Do you believe the neo-conservatives advising Bush at the moment are more aware of "benefits" of this balance of payments issue, what you call the US treasury standard?
Michael Hudson: They know it's a rip off, yes. And they absolutely want it to continue. Being Chicago School monetarists, they think that America's financial free ride should be built into the world economy as if it were perfectly natural for the rest of the world to adjust its economies to help the U.S. economy. But among sovereign regional blocs this kind of subservience can only be transitory.
SS: What is the role of militarism at this stage? Can perpetual war be seen as a sort of imperial Works Progress Administration that jumpstarts the domestic economy? At what point does the cycle collapse and can it do so internally_or as you've suggested, does it only stop when Asia, Europe, and the East finally refuse to buy US treasuries?
MH: The US Treasury-bill standard finances the military, but doesn't need imperial war to succeed. So far it's being accepted voluntarily, as other countries have not yet figured out how to extricate themselves from a system that is bleeding them more and more.
control of oil, control of oil, control of oil.
ReplyDeletewe get most of our oil from the atlantic basin, this is europe/china's oil, and we now have significant control over the area. This is very useful in dealing with the competition in "the greatest game"
andrew,
ReplyDeleteThat is irrelevant. Oil is a global market with a global price, and has been for a very long time, with some minor local wrinkles over transportation costs or refinery issues, or other weird baloney.
We're back to the essential problem that the Bush-Cheney oil crowd really does not and did not know what they want. So, Cheney convened his little Energy Task Force. Big whoop. So, they decided they wanted to take over Iraqi oil, which they have failed to do, except for Hunt in Kurdistan very recently (and illegally in the eyes of the government Bush-Cheney are supposedly supporting), increasing production presumably under their control and making profits, even while the price of oil would go down to guarantee re-election of Bush et al. Except that increased production would go against profits for the industry, and the industry has made out like bandits without taking over Iraqi oil, as the price has soared.
Barkley
Yet another supporter of the war all about oil argument, or at least "mostly about oil," is the new book by Greenspan coming out Monday. Story on it on front page of WaPo this morning (Saturday, Sept. 15), mostly about him criticizing Bush and praising Clinton. However, near the end of the story is this: "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil."
ReplyDeleteAgain, of course, if one looks at the ultimate causes rather than the proximate ones, I would agree.
Hi Barkley,
ReplyDeleteOn the subject of Greenspan's book, this clip from today's (Sept, 15) WSJ review is, how to say it, something like interesting in its attempt to evade any responsibility:
"He attributes the housing boom to the end of communism, which he says unleashed hundreds of millions of workers on global markets, putting downward pressure on wages and prices, and thus on long-term interest rates."
http://online.wsj.com/article/SB118978549183327730.html?mod=hpp_us_whats_news
sorry, really poor phrasing, as wsj is not attempting to evade responsibility for housing bubble and bust but greenspan clearly is.
ReplyDeleteBarkley, the petrodollar economy theory seems to be consistent with all three major elements of the Bush administration. The folks from 'Project for the New American Century', the energy CEOs and the same financial people who supported the 'strong dollar' policy/Washington Consensus (passed on from the Clinton administration).
ReplyDeleteThe ABC of capitalism today: Fiat money, oil, the military. (A strongly supportive and dominant media also being an essential ingredient).
From the economic history I'm compiling: 1972 – 1974 – the US-Saudi Arabian Joint Economic Commission. A series of agreements that resulted in the petrodollar becoming the essential basis for US economic hegemony in the 1970s.
An excerpt from The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets, David E. Spiro, Ithaca: Cornell UP, 1999, p. 121 :
“..Petrodollar became the essential basis for the US economic hegemony in the 1970s.// A petrodollar is a dollar earned by a country through the sale of oil. In 1972-74 the US government concluded a series of agreements with Saudi Arabia, known as the U.S.-Saudi Arabian Joint Economic Commission, to provide technical support and military assistance to the power of the House of Saud in exchange for accepting only US dollars for its oil. This understanding, much of it never publicised and little understood by public, provided Saudi ruling family the security it craved in a dangerous neighbourhood while assuring the US a reliable and very important ally in OPEC. Saudi Arabia has been the largest oil producer and the leader of OPEC. It is also the only member of the cartel that does not have an allotted production quota. It is the 'swing producer', meaning that it can increase or decrease oil production to bring oil draught or glut in the world market. As a result of this situation, Saudi Arabia practically determines oil prices. Soon after the agreement with Saudi government, an OPEC agreement accepted this, and since then all oil has been traded in US dollars. Hence the oil standard became the dollar standard.// Now why would this matter so much?//
Oil is not just the most important commodity traded internationally. It is the key industrial mineral, without which no modern economy works. If you don't have oil, you have to buy it, and if you want to buy it on the world markets, you commonly have to purchase it with dollars. Other countries buy and hold dollars like they buy and hold gold because they cannot purchase oil without dollars. In 2002, a former US ambassador to Saudi Arabia told a committee of the US Congress: 'One of the major things the Saudis have historically done, in part out of friendship with the US, is to insist that oil continues to be priced in dollars. Therefore the US Treasury can print money and buy oil, which is an advantage no other country has.' //This system of the US dollar acting as global reserve currency in oil trade keeps the demand for the dollar 'artificial' high. This enables the US to carry out printing dollars at the price of next to nothing to fund increased military spending and consumer spending on imports. There is no theoretical limit to the amount of dollars that can be printed. As long as the US has no serious challengers and the other states have confidence in the US dollar the system functions.// This has been the situation and the essential basis for the US economic hegemony since the 1970s. Needless to say, this system enables the US administration to effectively control the world oil market.// The petrodollar is one of the key foundations of the modern world economy that inescapably filters through geopolitics. While this has produced undeniable benefits for the US political and economic elites, it has left the US economy intimately tied to the dollar's role as global reserve currency.// In this situation, dollars rapidly accumulated in foreign banks, particularly those serving petroleum-exporting countries. These petrodollars created an additional financial issue, because unlike Western Europe and Japan most of the oil-exporting countries had limited possibilities for domestic development and consumption. The Nixon administration responded by coaxing these countries into buying up US Treasury bills and bonds, which has since that time been the primary strategy for the US administration to deal with its colossal trade deficits. For the oil exporters investing these petrodollars straight back into the US economy has been possible at zero currency risk. "So long as OPEC oil was priced in U.S. dollars, and so long as OPEC invested the dollars in U.S. government instruments, the U.S. government enjoyed a double loan. The first part of the loan was for oil. The government could print dollars to pay for oil, and the American economy did not have to produce goods and services in exchange for the oil until OPEC used the dollars for goods and services. Obviously, the strategy could not work if dollars were not a means of exchange for oil. The second part of the loan was from all other economies that had to pay dollars for oil but could not print currency. Those economies had to trade their goods and services for dollars in order to pay OPEC". (David E. Spiro, The Hidden Hand of American Hegemony: Petrodollar Recycling and International Markets, Ithaca: Cornell UP, 1999, p. 121)
For a long time everything worked smoothly. But the end of the Soviet bloc and the emergence of a new single Europe and the European Monetary Union in the early 1990s began to present a completely new challenge to the global position of the US power. Especially with the creation of the euro in late 1999, an entirely novel element was added to the global financial system. 'The introduction of the euro is the most important event for the global financial markets since the United States abandoned the gold backing for the dollar in 1971'. In just a few years after this, the euro has emerged as a real alternative, establishing itself as the second most important currency in the world's financial markets.
If a significant part of petroleum trade were to use euros instead of dollars, many more countries would have to keep a greater part of their currency reserves in euros. According to a June 2003 HSBC report, even a modest shift away from dollars, or a change in the flow, would create significant changes. The dollar would then have to directly compete with the euro for global capital. Not only would Europe not need dollars anymore, but also Japan, which imports more than 80 percent of its oil from the Middle East, would have to convert most of its dollar assets to euros. The US, too, being the world's largest oil importer, would have to hold a significant amount of euro reserves. This would be disastrous for American attempts at monetary management: the US administration will be compelled to significantly change its current tax, debt and trade policies, all of which are severely unstable…”
''yet the whack Saddam got was pathetic and The New American Century people got mad.''
ReplyDeletePathetic? Really? First of all a significant chunk of the Iraqi military was smashed, with the sanctions making sure that there would be no replacement for the hardware lost. Further, a lot of the Iraqi infrastructure was bombed, and, again, the sanctions made it hard to replace this. I would say that Iraq after 1991 was a much weaker country, and the sanctions made it very difficult to recoup. The easy victory the US achieved in 2003 should make this clear.
Brenda,
ReplyDeleteThe fly in the ointment here is the conflict that I have pointed out between the pro-Likud part of the neocon faction against the oil guys. Indeed, the more I think about it, the more I think that this is the explanation for why the oil guys did not get the deal they wanted early on back when Bremer was running the show in Iraq and could have imposed something. The people who held him back were Wolfowitz and company, who had this vision of a democracy in Iraq becoming this model that would sweep the Middle East and save Israel from its enemies (not realizing that democratic elections in some places, like Palestine, might bring to power even more anti-Isreali parties or groups). I remember well that there was all this opposition to imposing an oil law because that would "undermine our goal of a democracy" and "just prove that the critics who said it was all about oil were right."
So, the oil guys got blocked by the Wolfowitz gang, who had other goals and interests, again, a replay of the old struggle in the State Department between the supporters of Israel, who ultimately do not give a rat's ass about oil, and the "Arabists" who want to please the oil-exporting Arab states, particularly Saudi Arabia.
Barkley said: "So, the oil guys got blocked by the Wolfowitz gang, who had other goals and interests.."
ReplyDeleteBarkley, this view of Wolfowitz (as having other goals and interests that overwhelm the 'oil' one for him in Iraq) doesn't seem to be emerging in the public statements he made that are now on the internet.
Admittedly the authors on the various websites are likely to be engaged in actively selecting the right quotes from Wolfowitz. Nevertheless it appears to be clear that Wolfowitz, being a key member of Government, was obliged at all times to engage in efforts to protect US access to and interests in oil; before during and after the invasion of Iraq.
Wolfowitz, [when] asked why a nuclear power such as North Korea was being treated differently from Iraq, where hardly any weapons of mass destruction had been found, the deputy defence minister said: "Let's look at it simply. The most important difference between North Korea and Iraq is that economically, we just had no choice in Iraq. The country swims on a sea of oil."
http://www.truthout.org/docs_03/060503A.shtml
"..economically, we just had no choice.."
Whilst Wolfowitz was ambassador to Indonesia he wrote: "“In the Middle East and Southwest Asia , our overall objective is to remain the predominant outside power in the region and preserve U.S. and Western access to the region's oil.”
http://www.ips-dc.org/wolfowitz/tl_intro.htm
...all a significant chunk of the Iraqi military was smashed, with the sanctions making sure that there would be no replacement for the hardware lost
ReplyDeleteYes, but it's the mob, they take it personally. The want to kill the guy who betrayed the family. Because if Saddam kept on living - sure, without the military or hardware, but still enjoying himself - that's a terrible example for all the other lieutenants out there, you see.
You could rewrite the history of WWII in terms of Japan needing access to the oil of the Dutch East Indies and Germany needing access to the oil fields of Romania and not be wrong, exactly. Because people do. But to imagine that this gets to the roots of what drove Tojo and Hitler is I think misguided. That Wolfowitz, like Tojo, understands that you can't run a modern empire without oil is not the same as concluding "It's all about the oil".
ReplyDeleteIt is the difference between 'means' and 'ends'.
Brenda,
ReplyDeleteYou are right that Wolfie said those things, and I had forgotten about his ambassadorship in Indonesia, which would have heightened his awareness of that matter. However, that is far from the same thing as supporting US oil companies getting special deals to take over running the oil. At some level in regard to Iraq, Wolfie's concern was with Saddam using all that oil money to make nasty weapons that could be used against you know who, not to mention being used to pay families with kids blowing themselves up you know where.
Also, Wolfie was not all that concerned about democracy getting put in place right away. After all, he has long been reported to have been the main supporter of the execrable Ahmed Chalabi, and the chief advocate of putting him in charge right away of an Iraqi government. In that regard, the decision of Rummie (and Cheney-Bush) to put Bremer in as viceroy undid Wolfie's original plan, although he apparently was taken in by the slimey Chalabi, who was bloviating about democracy and being pals with Israel, etc. For a very high IQ guy, Wolfie was amazingly naive.
The height of his naivete was given by the whole business of taking over the Iraqi Oil Ministry right away during the invasion. Now, nobody has mentioned it in this thread, but in the past this fact has often been put forward by the "it is all about oil" crowd as a piece of evidence. However, we now know (indeed it was advertised as the reason at the time) why the Iraqi oil ministry was secured right away, rather than stopping the widespread looting in Baghdad, was that Wolfie in particular, and the US leadership in general, believed that the Iraqis were going to pay for our invasion with their oil revenues, just as the Kuwaitis (with some extra goodies from the Saudis) did for the first Persian Gulf War (which was definitely All About Oil, front and center, as I have already said). This was an extension of that delusion, also spread by Wolfie thanks to the whisperings of Chalabi, that we would be greeted with flowers in the streets and all that nonsense.
Needless to say, the war has not been paid for by Iraqi oil revenues, not one penny thatI am aware of, or at least not to any noticeable degree. Last count I saw was that we are going to hit a trillion dollars in costs for US taxpayers, not counting interest to their Chinese lenders, just as the Brits have apparently recently reported that we are nearing a million extra dead in Iraq since the war, dwarfing that earlier Lancet report of a mere 600,000 plus. Such delusions...
And, again, "maintaining access to oil," is, counterintutively, not really an interest of the US oil companies. They are not the producers of Persian Gulf oil, which is universally under the control of the local governments there and has been since the 1970s. No, as I pointed out in my megacorpstate article, the oil companies make money when the price of oil rises. So, it is no big whoop for them if "access to oil from the Persian Gulf" is reduced. However, it may be of concern to a president who is seeking reelection and does not want a recession on his hands induced by a too-high price of oil. Hence, again, the incoherence and internal contradictions in the politics of this business of controlling oil in Iraq, or anywhere else for that matter, from the perspective of a US political leader with deep ties to the US oil companies, such as we have in power now.
ReplyDeleteThen there was also former Shell CEO Philip Carroll :
ReplyDeletePHILIP CARROLL: I received a call from someone in the Pentagon saying that they were doing some contingency planning in association with the possibility of war in Iraq. They needed some help and assistance from someone who had spent time in that industry.
GREG PALAST: But the oil man refused to carry out the neo-con plan.
PHILIP CARROLL: There were models everywhere from the total privatization to partial privatization, etc., etc. There were all sorts of ideas floated about the economy of Iraq and what ought to be done. I was very clear that there was to be no privatization of Iraqi oil resources or facilities while I was involved. End of statement.
[...]
GREG PALAST: The State Department reluctantly handed us the plan, confidential until now, drafted by Jaffe. There are seven options given to Iraq's future governments, not a single one privatization. The neo-con scheme was dead because taking on OPEC and forcing down the price of petroleum did not suit big oil.
AMY JAFFE: I'm not sure that if I were the chairman of an American company and you put me on a lie detector test that I would say that I thought high oil prices were bad for me or my company.
GREG PALAST: So I asked Shell's former boss if the neo-con's agenda matched that of the oil industry.
PHILIP CARROLL: They're absolutely poles apart. Many neo-conservatives are people who do have certain ideological beliefs about markets, about democracy, about this, that and the other. International oil companies, without exception, are very pragmatic, commercial organizations. They don't have a theology. They don't have a doctrine. They are going to do what is in the best interest of their shareholders.
juan,
ReplyDeleteThanks for the very insightful and informative exchange between Palast and Carroll. Yes, that is exactly where it is at.
Regarding this ideological crusade to privatize everything in the Iraqi economy, this was clearly not a driving force of the invasion, but once the invasion happened, it was way up on the agenda. While the schemes to privatize oil got stillborn right away, lots of state-run industries got shut down, with their workers getting laid off (a nice parallel to shutting down the military and de-Baathifying the government in terms of having lots of unhappy unemployed standing around with nothing to do but join the insurgency), with plans to privatize, few of which have actually panned out. In the last year or so, the military has pushed for reopening some of these state-owned and run firms to reduce the unemployed, but the State Department has continued to support the old, but now dead, plan.
A symbol of this idiocy was the practice during the Bremer viceroyship of bringing in all kinds of totally uninformed 25 year old Republican party hacks to carry out this privatization agenda. They are pretty much all gone home now, but the damage they did lingers on after them. Bah.