Tomgram: Michael Klare's ****trait of an Oil-Addicted Former Superpower
By Tom Engelhardt
Created May 9 2008 - 10:27am
- from TomDispatch [1]
These days, the price of oil seems ever on the rise. A barrel of crude
broke
[2] another barrier Wednesday -- $123 -- on international markets, and the
talk is now of the sort of "superspike" in pricing (only yesterday
unimaginable) that might break the $200 [3] a barrel ceiling "within two
years." And that would be without a full-scale American air assault on
Iran,
after which all bets would be off.
Considering that, in the wake of the September 11, 2001 attacks, oil was
still in the $20 a barrel price range, this is no small measure of what
the
Bush administration years have really accomplished. Today, it's hard even
to
remember not 9/11, but 11/9 -- November 9, 1989 -- the day that the Berlin
Wall fell, signaling that, soon enough, after its seventy-odd year life,
that Reaganesque Evil Empire, the Soviet Union, was heading for the door.
In
1991, it disappeared from the face of the Earth without a whimper. Until
almost the last moment, top officials in Wa****ngton assumed it would go on
forever; and, when it was gone, most of them couldn't, at first, believe
it.
Soon enough, however, the event was hailed as the greatest of American
triumphs -- "victory" not just in the Cold War, but at a level never
before
seen. Finally, for the first time in history, there was but a single
superpower on the planet.
At the dawn of a new century, the administration of George Bush the
younger,
packed with implacable former Cold Warriors, came to power still infused
with that sense of global triumphalism and planning to rollback [4] what
was
left of the old Soviet Union, an impoverished Russia, into an early grave.
Almost seven and a half years later, as Michael Klare so vividly indicates
below, an observer might be pardoned for wondering whether there hadn't
been
two super losers in the Cold War. Had the Soviet Union, the weaker of the
two great powers of the second half of the last century, simply imploded
first, while the U.S., enwreathed in a cloud of self-congratulation, was
almost unbeknownst to itself also slowly making its way toward an exit?
And,
as a final irony, Klare -- author of the not-to-be-missed new book Rising
Powers, Shrinking Planet [5] -- points out, energy has refloated Russia,
even as it's sinking us.
-- Tom
* * *
****trait of an Oil-Addicted Former Superpower: How Rising Oil Prices Are
Obliterating America's Superpower Status
By Michael T. Klare
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 crude oil roared past $110 on the
international market, gasoline prices crossed the $3.50 threshold at
American pumps, and diesel fuel topped $4.00. As was true of the USSR
following the dismantling of the Berlin Wall, the USA 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 relation****p 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 ex****t.
[6]Oil was the basis for the rise of the first giant multinational
cor****ations in the U.S., notably John D. Rockefeller's Standard Oil
Company
(now reconstituted as Exxon Mobil, the world's wealthiest publicly-traded
cor****ation). Abundant, exceedingly affordable petroleum was also
responsible for the emergence of the American automotive and trucking
industries, the flouri****ng 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 im****tant was the role of abundant petroleum in fueling the global
reach of U.S. 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 U.S. 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 U.S.
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 U.S.
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 [7] reached a peak in 1970 and has been in
decline ever since -- with a growing dependency on im****ted oil as the
result. When it came to reliance on im****ts, 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 U.S. Department of Energy [8], the
United States is im****ting 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 U.S. air strikes on Iran) -- our annual im****t 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
ac***ulating petrodollars in "sovereign wealth funds" [9] (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) [10], 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 cor****ations.
The managers of these funds naturally insist that they have no intention
of
using their owner****p of prime American properties to influence U.S.
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 [11]. "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 owner****p 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 G.I. in Iraq uses approximately 27 gallons [12] 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 U.S.
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 [13]
of
$70 billion this year from the rising price of their oil ex****ts, 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 [14], 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 [15] (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 Wa****ngton to stabilize Iraq and curb the growing power of ****ite
Iran, are willing to help the Pentagon out by supplying U.S. troops with
free or deeply-discounted petroleum. No such luck. Except for some
partially
subsidized oil supplied by Kuwait, all oil-producing U.S. allies in the
region charge us the market rate [16] for petroleum. Take that as a
striking
reflection of how little credence even countries whose ruling elites have
traditionally looked to the U.S. for protection now attach to our supposed
superpower status.
Think of this as a strikingly clear-eyed *****sment 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 U.S. military will need even more oil for the future wars
on
which the Pentagon is now doing the planning. In this way, the U.S.
experience in Iraq has especially worrisome implications [17]. Under the
military "transformation" initiated by Secretary of Defense Donald
Rumsfeld
in 2001, the future U.S. 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 G.I in
Iraq
now uses about seven times as much oil per day as G.I.s 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 U.S.-Soviet rivalry,
Russia [18] 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 ex****ts a substantial ****tion 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-ex****ting 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 U.S. 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 USA
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, "U.S. policy. must recognize that American security is
threatened less by Russia's strength than by its weakness and
incoherence."
Under such cir***stances, she continued, there was no need to preserve
obsolete relics of the dual superpower past like the Anti-Ballistic
Missile
(ABM) Treaty; rather, the focus of U.S. 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 U.S.-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 Chávez, 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 [19], 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 U.S.-Russian relation****p, just how much the balance
of
power has ****fted was evident at the NATO summit at Bucharest in early
April. There, President Bush asked that Georgia and Ukraine both be
approved
for eventual member****p in the alliance, only to find top U.S. allies (and
Russian energy users) France and Germany blocking the measure out of
concern
for straining ties with Russia. "It was a remarkable rejection of American
policy in an alliance normally dominated by Wa****ngton," Steven Erlanger
and
Steven Lee Myers of the New York Times re****ted [20], "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 [21], the former Chairman of Gazprom
and
new Russian president. "The attitude toward Russia in the world is
different
now," he declared [22] 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 same, of course, can be said about the United States -- in reverse. As
a
result of our addiction to increasingly costly im****ted 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.
--
NOTICE: This post contains copyrighted material the use of which has not
always been authorized by the copyright owner. I am making such material
available to advance understanding of
political, human rights, democracy, scientific, and social justice issues.
I
believe this constitutes a 'fair use' of such copyrighted material as
provided for in section 107 of the US Copyright
Law. In accordance with Title 17 U.S.C. Section 107
"A little patience and we shall see the reign of witches pass over, their
spells dissolve, and the people recovering their true sight, restore their
government to its true principles. It is true that in the meantime we are
suffering deeply in spirit,
and incurring the horrors of a war and long oppressions of enormous public
debt. But if the game runs sometimes against us at home we must have
patience till luck turns, and then we shall have an op****tunity of winning
back the principles we have lost, for this is a game where principles are
at
stake."
-Thomas Jefferson
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