the oil thingy
Source Ian Murray
Date 03/01/27/14:57

America's crude tactics

Of all the rogue states in the world it is Iraq's oil that makes it
a target

Larry Elliott
Monday January 27, 2003
The Guardian

Let's get one thing straight. George Bush's determination to topple
Saddam Hussein has nothing to do with oil. Iraq may account for 11%
of the world's oil reserves, second only to Saudi Arabia, but the
military build-up in the Gulf is about making the world a safer and
more humane place, not about allowing America's motorists to guzzle
gas to their heart's content. So, lest you should be in any doubt,
let me spell it out one more time. This. Has. Nothing. To. Do. With.
Oil. Got that?

Of course you haven't. Despite what Colin Powell might say, it takes
a trusting, nay naive, soul to imagine that the White House would be
making all this fuss were it not that Iraq has something the US
needs. There are plenty of small, repressive states in the world -
Zimbabwe for one - where the regimes are being allowed to quietly
kill and torture their people. There are plenty of small, repressive
states with weapons of mass destruction - North Korea, for example -
which appear to pose a larger and more immediate threat to
international security. But only with Iraq do you get a small,
repressive country with weapons of mass destruction that also
happens to be floating on oil.

Moreover, the realities of oil dependency are catching up with the
world's biggest economy. The US has long ceased to be
self-sufficient in oil and, as the recent shutdown of Venezuela's
refineries has proved, is therefore vulnerable to its imported
supplies being cut off. The growing imbalance between the global
demand for oil and discoveries of fresh supplies means that the
outlook for the US is even more troubling than it appears. As the
director of ExxonMobil, Harry Longwell, admitted in an article for
World Energy last year, the discovery of oil peaked in the mid-1960s
but demand is expected to continue growing by 2% a year - or the
world is sucking oil out of the ground faster than corporations are
finding it.

Three choices

Bush and his team know all this. They have worked for the oil
industry, been bankrolled by the oil industry, and have spent the
past couple of years listening hard to what the oil industry would
like, then doing it. Faced with the prospect that on current trends
the gap between demand and supply will widen inexorably, Bush has
three choices. Firstly, he could listen to the lobbying of
executives like Longwell, who are convinced that there is still
plenty of oil out there provided the exploration teams are given the
freedom to find. That is why Bush has been prepared to court the
wrath of the environmental lobby in the US to sanction exploration
and extraction in the wilds of Alaska.

The second option is to ensure that the US secures a bigger share of
diminishing stocks, buying time in which consumption can continue at
its present rate. The seizure intact of Iraqi oil fields is a prime
war aim of the US in any conflict, and it is likely that once Saddam
has been toppled and an army of occupation has control of the
country, the big oil companies will be called in to modernise the
country's decrepit oil infrastructure. There have been reports in
the Wall Street Journal, denied by the administration, that Dick
Cheney held discussions last October with ExxonMobil and other firms
about the rehabilitation of Iraq's oil industry. It stretches
credulity somewhat to imagine that the subject has never been

In one sense, such an outcome would be no bad thing. A modernisation
programme that increased the supply of oil through more efficient
production would lead to lower global prices and stronger growth. It
might also be environmentally less damaging. Nor, lest we are
tempted to get too prissy about this, can it be denied that economic
factors have played a big, even crucial role, in determining the
diplomatic and military strategy of European countries down the

But while the Bush strategy has its rationale, it is fraught with
risks. One is that the war will not lead to the collapse in oil
prices that is predicted by the hawks in Washington. Should the
conflict follow the example of 1991, crude could fall quickly to
around $20 a barrel. Or prices could hit $50 a barrel if Saddam
torches the Iraqi fields and manages to land a couple of Scuds on
refineries in Saudi Arabia and Kuwait.

The possibility that an American occupation of the Middle East will
destablise the whole region, putting pressure on the autocratic
rulers of western client states is a second, perhaps greater threat.
It would be a bitter irony if the US found itself in possession of
11% of the world's known reserves only to find that the 25% in Saudi
had been seized by a regime with no love for America. Worryingly for
Bush, there have already been signs that investors in the Gulf
states have been withdrawing their assets from the US, helping to
keep shares on Wall Street depressed and contributing in no small
measure to the dollar's recent fall. This would turn into a rout
should the oil-producing states decide that crude should be
denominated in euros rather than greenbacks, a development that has
already been canvassed publicly by Opec.

Common sense

The third choice for the US and the rest of the developed world is
to tackle the imbalance between demand and supply from the other
end - by limiting demand rather than by increasing supply. Most
governments, including that in Washington, acknowledge the need to
take steps to curb emissions of greenhouse gases, and a blueprint
for this, known as contraction and convergence, is available. It
would involve setting a safe global ceiling on carbon dioxide and
the calculation of the emissions consistent with hitting it;
providing equal shares of the global emissions budget for each
country so that poor countries were not short-changed; and allowing
emissions trading in which countries like the US could pay countries
like Malawi to pay for the right to pollute by more than the share
allocated to the developed world.

The first problem is political will. Britain's forthcoming energy
bill should embrace contraction and convergence, but Whitehall
conservatism means a golden opportunity will be lost without
political backing from the very top. As Alex Evans of the
left-leaning IPPR think tank said last week in a paper on the UK
electricity industry, the government needs to focus less on setting
targets and more on delivery. Evans says that there would be a
dramatic fall in emissions and endless opportunities for business if
the government took steps to increase energy efficiency by 20% and
to commit itself to producing 25% of energy from renewable sources
by 2020.

This will be costly, both in terms of money and effort. But wars,
too, are costly. The real lesson of the struggle against Iraq is
that the depletion of non-renewable energy resources is a problem
that will be persist long after the butcher of Baghdad is dead and

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