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Moves on a Chessboard – Russia and Current World Geo-Politics (Energy Essay #11)
Preface: It is said that hindsight is 20 / 20. Events unfold in complex and confusing ways which can only be truly understood after the fact, when placed into the context of history. Yet care must be taken when consuming the tales of history, for the winning sides have always taken care to ensure that the public account of what happened sheds a favorable light upon their actions. I will give you my interpretation of recent history, and ask that you read it with a critical eye. Do not accept my word as truth; rather, use it as a springboard of exploration from which to investigate the events on your own, until you reach your own personal understanding of what has happened. In this age, information is much more readily available than in years past thanks to the internet. Yet here too, you must use discretion, and cast a critical eye at your sources of information. Do not accept one view or the other blindly; read accounts from all sides of the issue, and form your own synthesized view. The following is my understanding of events.
In the late 1980’s the United States was on an economic tear, thanks to low oil prices. I covered this previously, but it bears repeating here. The earlier oil crises of the 1970’s drove the price of oil up, acting as a wake up call for the non-oil exporting countries. Exploration and subsequent discoveries of new sources of oil not controlled by OPEC was economically feasible. These new sources of oil, combined with the United States economic recovery from a recession, served to drive prices down.
Politically, there were two super powers; the United States and the Union of Soviet Socialist Republics, better known in the west as the Soviet Union. The cold war was still in full force, with both powers possessing massive arsenals of nuclear tipped weapons capable of destroying all life on the planet many times over. Yet the match up was unequal.
The United States was the bastion of democracy and free enterprise, containing the most robust economy in the world. Our manufacturing capabilities were surpassed only by our consumerist mindset, and the standard of living of the average American set a standard to which other countries strived to attain. What we did not make, we bought.
The Soviet Union was the first nation to attempt communism, where the state controlled all aspects of the country in a top down approach, ostensibly for the greater good of all citizens. This top down approach was a study in bureaucracy, prone to inefficiencies and mismanagement. Frequent shortages and disruptions occurred, yet the essentials of food, shelter, clothing and health care were provided for the populace.
The Soviet Union relied on exports of natural resources for needed foreign currency which kept their economy afloat. Their manufactured products were not to the same quality standards of western products, which led to export of manufactured goods only to those nations held in thrall by ideology or fear. The Soviets have large oil resources, and developed it to the best of their abilities to take advantage of the high oil prices in the world. Their products were piped to Europe, resulting in a key source of foreign income.
When the oil prices fell in the mid 1980’s, so too did the Soviet economy. The foreign trade balance went from a $700 million surplus in the first quarter of 1984, to a $1.4 billion deficit in the first quarter of 1985.
In August of 1986, Saudi Arabia attempted to regain a majority of the world oil market by opening up the taps and flooding the market with cheap oil. This was done with full knowledge and support of the United States administration, which encouraged it. Cheap oil meant a robust economy for the U.S. while the Soviet economy spiraled into a deep depression.
Thanks to the healthy economy, the U.S. was able to obtain the capital needed to outspend the rest of the world, most especially the Soviets, in upkeep of its military while keeping its military spending as a percentage of the gross national product low. When the Soviets attempted to match the United States military buildup to ensure the military status quo, they essentially spent themselves into bankruptcy, causing an economic crisis that ultimately resulted in the fall of communism in the Soviet Union and Warsaw Pact nations.
This economic and military strife had a negative impact on the development and production levels of the Soviet controlled oil fields. Production levels fell dramatically, not regaining any semblance of their former levels until after political stability was regained many years later. By that point, much of the equipment was out of date, with a good deal of it broken due to years of neglect and deferred maintenance.
In recent years, the Russians and former Soviet states with oil have repeatedly claimed that they would be able to resume the high production levels they previously obtained. Yet their claims have been hollow, and new supposedly giant fields have consistently under produced, with what oil has been extracted being high in sulfur content, which is more expensive to refine.
During the oil crises of the 1970’s, senior officials in the American government went on the record as willing to use force to protect oil supplies for the first time. Due to the oil shock resulting from the militant Islamic forces deposing the Shah of Iran in 1979, President Carter in an address to a joint session of Congress said “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, [and] will be repelled by any means necessary, including military force.” This statement has come to be known as the “Carter Doctrine”. Since this statement was made, the U.S. has maintained a military presence in the Persian Gulf, ostensibly to protect the economy of the industrialized world.
In 1980, Iraqi dictator Saddam Hussein attempted to gain control of a major Iranian oil field just inside the Iranian border, in an attempt to increase his nation’s oil reserves. This war stretched on for 8 years until 1988, when Hussein finally admitted defeat and pulled back his forces. During this war, Iran stepped up attacks on oil shipments in the gulf, presumably to punish the Saudis and Kuwaitis for their supposed support of Iraq. Citing the Carter Doctrine, President Reagan agreed to re-flag Kuwaiti oil tankers as U.S. ships and provide them with a naval escort, ensuring the supply of oil to America remained unimpeded.
In August of 1990, Saddam Hussein sent Iraqi forces into Kuwait claiming that they were stealing oil from Iraq by drilling under the border. The Iraqi forces quickly took the nation, and arrayed themselves along the border with Saudi Arabia, in an apparent prelude to invasion of the northern Saudi oil fields. President George H.W. Bush quickly dispatched American troops to Saudi Arabia, and explained to the nation in a presidential address on August 7th, “Our country now imports nearly half the oil it consumes and could face a major threat to its economic independence. [Therefore] the sovereign independence of Saudi Arabia is of vital interest to the United States.” Bush did not cite the Carter Doctrine, yet he was clearly following its precepts to the letter. After securing widespread international approval, Bush ordered the troops now arrayed along the Saudi Arabian border to liberate Kuwait and destroy the capabilities of the Iraqi forces. The U.S. forces, being the best financed and most technologically advanced military in the world, led a coalition of international troops across the border, and achieved the stated military goals in 100 days.
Prior to the first Gulf War, American military presence in the gulf region was limited to mostly naval power. In the aftermath of the war, the U.S. took advantage of the thankfulness of the Saudis and Kuwaitis to establish a small permanent ground force in the area, and pre-stage equipment in case of future strife. This upgraded U.S. military presence was not perceived in a favorable light by the more militant and fundamentalist Islamic peoples of the area.
Saudi Arabia has always used its profits from its oil exports to keep its populace in check and the House of Saud in power. It exported its trouble makers to other countries, fostering the creation of militant Islamic schools in poorer nations such as Afghanistan, which began churning out new soldiers for the fundamentalist mullahs to use as troops. This kept the strife down at home, yet did nothing for the ultimate security of the nation and the world.
Another means used to keep the population mollified was the creation of a vast welfare state, in which the number one employer was the government. This too has backfired, as the burgeoning population has resulted in the dilution of oil profits, such that per capita income has fallen dramatically, from a 1981 level of $28,600 to $6,800 in 2001. This has led to further unrest among the populace, with the more vocal ones encouraged to go abroad for their schooling.
These vocal dispossessed blame the excesses of the House of Saud for the precipitous drop in income, seeing the corruption of the ruling class as an infection caught from the Americans. They claim that the ruling House of Saud are American lackeys, helping the Americans rape the oil wealth of the nation. The increasing unrest has also led to Saudi Arabia spending more per capita on defense than any other country in the world, which the royal family believes is justified and necessary for its personal protection.
It should come as no surprise then, that the militant Islamic factions view America as public enemy number one, and that the majority of the “shock” troops are of Saudi descent. They saw the permanent basing of American troops as a threat to their ideals, increasing the unrest in the region even though the forces were there ostensibly to police the actions of Saddam Hussein, and ensure that he obeyed the sanctions levied upon him as retaliation for his invasion.
This unrest festered, ultimately culminating in a plot which was carried out to strike terror into the hearts of Americans, the strike against the World Trade Center and the Pentagon on September 11th, 2001. Osama Bin Laden is from Saudi Arabia, and his Al-Qaeda organization gained a majority of its funding and recruits from Saudi Arabia and Iraq.
The resultant War on Terrorism launched by George W. Bush saw troops deployed to Afghanistan as well as other nations in the region, including the former Soviet nations of Uzbekistan and Turkmenistan, both of which just happen to have oil. Afghanistan was not known to have any oil reserves, however in the last few weeks; discoveries have been announced in the northern part of the nation.
Shortly after this, G.W. Bush launched the second Gulf War, presumably due to the threat of Hussein having “Weapons of Mass Destruction”. This was a transparent ploy which was fed to an accepting public back home, yet interestingly enough, did not result in nearly the same level of broad international approval as the first Gulf War. In the intervening three years, the administration has changed its story on why it invaded, finally admitting that the WMD threat was fabricated.
Recent theories have surfaced that the Saudis condoned and privately supported the war as they knew that the war would help to ensure high oil prices, which would prop up their welfare state economy, and serve to increase the per capita income. Whether or not this is true I can not say, yet the $60 a barrel oil has caused Saudi oil income to increase by 48 percent, rising to a level of $157 billion, the Saudis announced a 15 percent raise for all government employees in August of 2005, and the per capita gross domestic product grew from $7,437 in 1998 to $11,052 in 2004, and was estimated in September of 2005 to reach $13,603 for 2005.
Iran has been anti-American since the Ayatollahs took over in 1979. They have consistently viewed the increasing American military presence in the gulf region as a bad thing. Recently, relations with the U.S. have deteriorated even more, as Iran is moving forward with developing its nuclear industry, in an announced attempt to provide for the power needs of its people. The issue is that the Iranians wish to enrich their own nuclear fuel for their plants, rather than relying on foreign sources. This enrichment process has an additional use in that it can also be used to enrich material for nuclear bombs.
The U.S. has ratcheted up the rhetoric against this, claiming that the ultimate goal is not for peaceful purposes, but rather for generating nuclear weapon capacity. The resultant escalation of hostilities has resulted in Iran being referred to the United Nations Security Council, with Iran threatening to use oil as a weapon.
Geographically, they sit along the eastern shore of the Persian Gulf, and control one side of the Strait of Hormuz at the mouth of the gulf. They have threatened to withhold their oil from the west which would take 3.55 million barrels a day off the world market.
More disturbing is their threat to respond to a military attack against their nation or their nuclear facilities by sinking oil tankers as they pass through the Strait, effectively choking the flow of oil from the gulf. This would take not only the Iranian oil off the market, but also take Kuwaiti, Iraqi, and the majority of Saudi oil off as well.
Yet the Persian Gulf is not the only place where oil is causing unrest. Nigeria in Africa has become a major player in oil, being the eighth largest oil exporter in the world at 2.5 Million Barrels a day. Its oil fields are in the delta region of the Niger River, and the multi-national oil firms have had a field day attempting to extract every drop they can. They are aided by a corrupt national government which has turned a blind eye to the environmental degradation, and resorts to excessive force in support of the oil industry, while pocketing monies earned from oil. The government forces regularly act as shock troops oppressing the local inhabitants of the delta region, where 70 percent of the inhabitants live on less that $1 a day.
In response to this, the locals have begun to take up arms against the oil operations in the region. 10 years ago, it was peaceful resistance; which ultimately resulted in leading activists being executed. Now, the youth of the region have taken up arms with a goal of localizing control of the Niger Delta’s oil wealth and gaining compensation for communities devastated by environmental problems due to oil. They are calling their organization The Movement for the Emancipation of the Niger Delta (MEND).
MEND has resorted to kidnapping of foreign workers, bombing of pipelines, pumping stations, and loading platforms, resulting in the shutting down of nearly one fifth of the country’s oil production, and a published aim of shutting it completely down.
Venezuela has recently become increasing viewed as an unreliable source of oil for the U.S. as President Chavez has followed through on his campaign promises to retain more of the oil profits in the country through nationalization for the purpose of bettering the lives of the citizens. He has managed to attain an amazing approval rating of over %70, because the citizens are seeing the improvements in their lives. This has come at the expense of the multi-national oil firms, who have used their influence in Washington to persuade the U.S. to bring pressure to bear to restore their previous situation.
Chavez has refused, and in response has been actively developing a policy that places America at the bottom of the supply queue. Increasing rhetoric from the U.S. administration has resulted in Venezuela actively courting alternate markets for its oil, which is helping drive the high approval ratings for Chavez, as Venezuelans perceive his refusal to bow down to the Americans as a good thing. It is seen as a way to strike back at the multi-national corporations which for years exploited the country returning next to nothing to the Venezuelan people.
Oil diplomacy at its finest, all of it affecting the North American market.
In the late 1980’s the United States was on an economic tear, thanks to low oil prices. I covered this previously, but it bears repeating here. The earlier oil crises of the 1970’s drove the price of oil up, acting as a wake up call for the non-oil exporting countries. Exploration and subsequent discoveries of new sources of oil not controlled by OPEC was economically feasible. These new sources of oil, combined with the United States economic recovery from a recession, served to drive prices down.
Politically, there were two super powers; the United States and the Union of Soviet Socialist Republics, better known in the west as the Soviet Union. The cold war was still in full force, with both powers possessing massive arsenals of nuclear tipped weapons capable of destroying all life on the planet many times over. Yet the match up was unequal.
The United States was the bastion of democracy and free enterprise, containing the most robust economy in the world. Our manufacturing capabilities were surpassed only by our consumerist mindset, and the standard of living of the average American set a standard to which other countries strived to attain. What we did not make, we bought.
The Soviet Union was the first nation to attempt communism, where the state controlled all aspects of the country in a top down approach, ostensibly for the greater good of all citizens. This top down approach was a study in bureaucracy, prone to inefficiencies and mismanagement. Frequent shortages and disruptions occurred, yet the essentials of food, shelter, clothing and health care were provided for the populace.
The Soviet Union relied on exports of natural resources for needed foreign currency which kept their economy afloat. Their manufactured products were not to the same quality standards of western products, which led to export of manufactured goods only to those nations held in thrall by ideology or fear. The Soviets have large oil resources, and developed it to the best of their abilities to take advantage of the high oil prices in the world. Their products were piped to Europe, resulting in a key source of foreign income.
When the oil prices fell in the mid 1980’s, so too did the Soviet economy. The foreign trade balance went from a $700 million surplus in the first quarter of 1984, to a $1.4 billion deficit in the first quarter of 1985.
In August of 1986, Saudi Arabia attempted to regain a majority of the world oil market by opening up the taps and flooding the market with cheap oil. This was done with full knowledge and support of the United States administration, which encouraged it. Cheap oil meant a robust economy for the U.S. while the Soviet economy spiraled into a deep depression.
Thanks to the healthy economy, the U.S. was able to obtain the capital needed to outspend the rest of the world, most especially the Soviets, in upkeep of its military while keeping its military spending as a percentage of the gross national product low. When the Soviets attempted to match the United States military buildup to ensure the military status quo, they essentially spent themselves into bankruptcy, causing an economic crisis that ultimately resulted in the fall of communism in the Soviet Union and Warsaw Pact nations.
This economic and military strife had a negative impact on the development and production levels of the Soviet controlled oil fields. Production levels fell dramatically, not regaining any semblance of their former levels until after political stability was regained many years later. By that point, much of the equipment was out of date, with a good deal of it broken due to years of neglect and deferred maintenance.
In recent years, the Russians and former Soviet states with oil have repeatedly claimed that they would be able to resume the high production levels they previously obtained. Yet their claims have been hollow, and new supposedly giant fields have consistently under produced, with what oil has been extracted being high in sulfur content, which is more expensive to refine.
During the oil crises of the 1970’s, senior officials in the American government went on the record as willing to use force to protect oil supplies for the first time. Due to the oil shock resulting from the militant Islamic forces deposing the Shah of Iran in 1979, President Carter in an address to a joint session of Congress said “An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, [and] will be repelled by any means necessary, including military force.” This statement has come to be known as the “Carter Doctrine”. Since this statement was made, the U.S. has maintained a military presence in the Persian Gulf, ostensibly to protect the economy of the industrialized world.
In 1980, Iraqi dictator Saddam Hussein attempted to gain control of a major Iranian oil field just inside the Iranian border, in an attempt to increase his nation’s oil reserves. This war stretched on for 8 years until 1988, when Hussein finally admitted defeat and pulled back his forces. During this war, Iran stepped up attacks on oil shipments in the gulf, presumably to punish the Saudis and Kuwaitis for their supposed support of Iraq. Citing the Carter Doctrine, President Reagan agreed to re-flag Kuwaiti oil tankers as U.S. ships and provide them with a naval escort, ensuring the supply of oil to America remained unimpeded.
In August of 1990, Saddam Hussein sent Iraqi forces into Kuwait claiming that they were stealing oil from Iraq by drilling under the border. The Iraqi forces quickly took the nation, and arrayed themselves along the border with Saudi Arabia, in an apparent prelude to invasion of the northern Saudi oil fields. President George H.W. Bush quickly dispatched American troops to Saudi Arabia, and explained to the nation in a presidential address on August 7th, “Our country now imports nearly half the oil it consumes and could face a major threat to its economic independence. [Therefore] the sovereign independence of Saudi Arabia is of vital interest to the United States.” Bush did not cite the Carter Doctrine, yet he was clearly following its precepts to the letter. After securing widespread international approval, Bush ordered the troops now arrayed along the Saudi Arabian border to liberate Kuwait and destroy the capabilities of the Iraqi forces. The U.S. forces, being the best financed and most technologically advanced military in the world, led a coalition of international troops across the border, and achieved the stated military goals in 100 days.
Prior to the first Gulf War, American military presence in the gulf region was limited to mostly naval power. In the aftermath of the war, the U.S. took advantage of the thankfulness of the Saudis and Kuwaitis to establish a small permanent ground force in the area, and pre-stage equipment in case of future strife. This upgraded U.S. military presence was not perceived in a favorable light by the more militant and fundamentalist Islamic peoples of the area.
Saudi Arabia has always used its profits from its oil exports to keep its populace in check and the House of Saud in power. It exported its trouble makers to other countries, fostering the creation of militant Islamic schools in poorer nations such as Afghanistan, which began churning out new soldiers for the fundamentalist mullahs to use as troops. This kept the strife down at home, yet did nothing for the ultimate security of the nation and the world.
Another means used to keep the population mollified was the creation of a vast welfare state, in which the number one employer was the government. This too has backfired, as the burgeoning population has resulted in the dilution of oil profits, such that per capita income has fallen dramatically, from a 1981 level of $28,600 to $6,800 in 2001. This has led to further unrest among the populace, with the more vocal ones encouraged to go abroad for their schooling.
These vocal dispossessed blame the excesses of the House of Saud for the precipitous drop in income, seeing the corruption of the ruling class as an infection caught from the Americans. They claim that the ruling House of Saud are American lackeys, helping the Americans rape the oil wealth of the nation. The increasing unrest has also led to Saudi Arabia spending more per capita on defense than any other country in the world, which the royal family believes is justified and necessary for its personal protection.
It should come as no surprise then, that the militant Islamic factions view America as public enemy number one, and that the majority of the “shock” troops are of Saudi descent. They saw the permanent basing of American troops as a threat to their ideals, increasing the unrest in the region even though the forces were there ostensibly to police the actions of Saddam Hussein, and ensure that he obeyed the sanctions levied upon him as retaliation for his invasion.
This unrest festered, ultimately culminating in a plot which was carried out to strike terror into the hearts of Americans, the strike against the World Trade Center and the Pentagon on September 11th, 2001. Osama Bin Laden is from Saudi Arabia, and his Al-Qaeda organization gained a majority of its funding and recruits from Saudi Arabia and Iraq.
The resultant War on Terrorism launched by George W. Bush saw troops deployed to Afghanistan as well as other nations in the region, including the former Soviet nations of Uzbekistan and Turkmenistan, both of which just happen to have oil. Afghanistan was not known to have any oil reserves, however in the last few weeks; discoveries have been announced in the northern part of the nation.
Shortly after this, G.W. Bush launched the second Gulf War, presumably due to the threat of Hussein having “Weapons of Mass Destruction”. This was a transparent ploy which was fed to an accepting public back home, yet interestingly enough, did not result in nearly the same level of broad international approval as the first Gulf War. In the intervening three years, the administration has changed its story on why it invaded, finally admitting that the WMD threat was fabricated.
Recent theories have surfaced that the Saudis condoned and privately supported the war as they knew that the war would help to ensure high oil prices, which would prop up their welfare state economy, and serve to increase the per capita income. Whether or not this is true I can not say, yet the $60 a barrel oil has caused Saudi oil income to increase by 48 percent, rising to a level of $157 billion, the Saudis announced a 15 percent raise for all government employees in August of 2005, and the per capita gross domestic product grew from $7,437 in 1998 to $11,052 in 2004, and was estimated in September of 2005 to reach $13,603 for 2005.
Iran has been anti-American since the Ayatollahs took over in 1979. They have consistently viewed the increasing American military presence in the gulf region as a bad thing. Recently, relations with the U.S. have deteriorated even more, as Iran is moving forward with developing its nuclear industry, in an announced attempt to provide for the power needs of its people. The issue is that the Iranians wish to enrich their own nuclear fuel for their plants, rather than relying on foreign sources. This enrichment process has an additional use in that it can also be used to enrich material for nuclear bombs.
The U.S. has ratcheted up the rhetoric against this, claiming that the ultimate goal is not for peaceful purposes, but rather for generating nuclear weapon capacity. The resultant escalation of hostilities has resulted in Iran being referred to the United Nations Security Council, with Iran threatening to use oil as a weapon.
Geographically, they sit along the eastern shore of the Persian Gulf, and control one side of the Strait of Hormuz at the mouth of the gulf. They have threatened to withhold their oil from the west which would take 3.55 million barrels a day off the world market.
More disturbing is their threat to respond to a military attack against their nation or their nuclear facilities by sinking oil tankers as they pass through the Strait, effectively choking the flow of oil from the gulf. This would take not only the Iranian oil off the market, but also take Kuwaiti, Iraqi, and the majority of Saudi oil off as well.
Yet the Persian Gulf is not the only place where oil is causing unrest. Nigeria in Africa has become a major player in oil, being the eighth largest oil exporter in the world at 2.5 Million Barrels a day. Its oil fields are in the delta region of the Niger River, and the multi-national oil firms have had a field day attempting to extract every drop they can. They are aided by a corrupt national government which has turned a blind eye to the environmental degradation, and resorts to excessive force in support of the oil industry, while pocketing monies earned from oil. The government forces regularly act as shock troops oppressing the local inhabitants of the delta region, where 70 percent of the inhabitants live on less that $1 a day.
In response to this, the locals have begun to take up arms against the oil operations in the region. 10 years ago, it was peaceful resistance; which ultimately resulted in leading activists being executed. Now, the youth of the region have taken up arms with a goal of localizing control of the Niger Delta’s oil wealth and gaining compensation for communities devastated by environmental problems due to oil. They are calling their organization The Movement for the Emancipation of the Niger Delta (MEND).
MEND has resorted to kidnapping of foreign workers, bombing of pipelines, pumping stations, and loading platforms, resulting in the shutting down of nearly one fifth of the country’s oil production, and a published aim of shutting it completely down.
Venezuela has recently become increasing viewed as an unreliable source of oil for the U.S. as President Chavez has followed through on his campaign promises to retain more of the oil profits in the country through nationalization for the purpose of bettering the lives of the citizens. He has managed to attain an amazing approval rating of over %70, because the citizens are seeing the improvements in their lives. This has come at the expense of the multi-national oil firms, who have used their influence in Washington to persuade the U.S. to bring pressure to bear to restore their previous situation.
Chavez has refused, and in response has been actively developing a policy that places America at the bottom of the supply queue. Increasing rhetoric from the U.S. administration has resulted in Venezuela actively courting alternate markets for its oil, which is helping drive the high approval ratings for Chavez, as Venezuelans perceive his refusal to bow down to the Americans as a good thing. It is seen as a way to strike back at the multi-national corporations which for years exploited the country returning next to nothing to the Venezuelan people.
Oil diplomacy at its finest, all of it affecting the North American market.