Oil's not right with the World

The British, French and Russians, played their Great Game in the 19th century in the playing fields of the Middle East and Central Asia. Britain’s Indian possessions were the coveted prize. Today the three players are the Americans, Russians and Chinese; the main playing fields are the energy rich but trouble-prone West Asian and Caspian lands. India, whose USP is its growing market, is peripheral.

Post Second World War, it was clear that the American way of life, based on cheap and abundant availability of oil, had to be preserved. As domestic supplies declined, dependency on imports from conflict zones increased. From being domestically self-sufficient, the US has moved to becoming the world’s biggest importer of oil and by 2025 it would need to import 70% of its requirements

Successive post-war American Presidents enunciated doctrines for guaranteed supplies of oil from the Gulf. President Carter declared in 1980 that access to Persian Gulf oil was a vital national interest and that the US would be prepared to use military forceto protect its interests. Carter’s Rapid Deployment Joint Task Force eventually blossomed into CENTCOM with an area of responsibility coinciding with the energy rich West and Central Asian and Caspian Sea regions.

Strategists of the Republican Right began planning for the future in the post Cold War phase. In 1992, the neo-con policy paper, Defence Planning Guidance, talked of permanent military superiority and world dominance and of the need to prevent emergence of a new rival. There was need to remain the predominant outside power in the Middle East and South West Asia to preserve US and Western access to the region’s oil.

In September 2000, the Project for the New American Century spoke of America’s grand strategy to preserve and extend its advantages in the absence of any rival power and recommended massive power projection capability globally. Translated it meant stepped up pressure on ‘rogue’ states like Iraq and Iran, and “take actions regarding the capture of new and existing oil and gas fields.”

President George W. Bush’s new energy policy enunciated by the National Energy Policy Development Group in May 2001 recommended that ties with oil rich countries should be bolstered and US presence in these countries expanded. The 2001 Quadrennial Defence Review spoke of the need for the US to retain the ability to send forces to critical points around the globe and explicitly identified overseas oil producing regions as critical points. Preemptive intervention became the Bush doctrine of 2002. This was a clear indication that private oil interests and US strategic interests now coincided.

Even as conflict and instability in the oil producing regions remain a real problem for the foreseeable future, two other crises loom. There is this phenomenon of peak oil. Experts differ about when the supplies will dwindle but all agree that this decline is inevitable and it will become increasingly difficult to extract more oil. The bigger countries – the US, Russia and China -- have responded to scarcity by securitising the energy supply dimension and strengthening military alliances in the Gulf.

The other worry for the US was the rise of the Euro. Over half of the total crude oil produced in the Middle East was bought by the EU in 2004 who could legitimately insist on paying in Euros. The dollar’s supremacy and its status as the world’s reserve currency were under threat. Oil was denominated in dollars and the strength of the US dollar had propelled the US economy to new heights and military supremacy. In effect, the US with its more than 6 trillion dollar debt in a 9 trillion dollar economy was not really paying for any oil.

Saddam Hussein’s effrontery was not that he was making WMDs and harbouring Al Qaeda. It was that Saddam had dumped the dollar and switched his UN ‘oil for food’ fund of US $ 10 billion to the euro in October 2000. The fear was that if OPEC also made a sudden switch to the euro, the US economy would collapse. Other countries could follow OPEC and some of them had begun to keep a part of their holdings in euros. Saddam had committed blasphemy and had to be punished.

Iran had also transferred a majority of its reserves into Euros in 2002 and contemplated a Euro-based oil bourse by March 2006. Some European analysts describe the effect of this changeover as worse than a nuclear attack on the US. Iran had qualified to be a member of the Axis of Evil. But post-Iraq, with credibility low, even the UK balking at any talk of attacking Iran, the USA has limited choices. A full-scale invasion seems to be out; attacks from the air would be the other option. Clandestine covert operations through the Baloch areas of Pakistan and partly through Afghanistan could be a possibility. Somehow Iran has to be disciplined -- and soon

Ideally the US would like to access Iran’s hydrocarbon reserves for US companies, restructure OPEC and keep out competition. Unfortunately, the US Executive Order of 1995, renewed by President Bush in 2004, prohibits American companies from working in Iran. This order will not be revoked so long as Iran does not have a regime change and refuses to give up the nuclear option.

Russia may no longer be a Super Power, militarily or economically but it is still the world’s second largest oil exporter and the largest outside OPEC. It remains a major player in the energy market outside total US control and has continued interests in Iran and the Gulf. Russia and China have been investing in military sales to the Middle East.

Russia remains an important player in Central Asia while the EU and NATO along with China are the other big players. After initial flirtation with the US, the Uzbeks once again talk of the reliability of Russians. The US Senate vote to delay payment to Uzbekistan for the use of an air base undoubtedly angered the Uzbeks. The EU decision to impose sanctions would be another factor. Russia is to build a military airbase in Tajikistan, apart from retaining the one it has in Kyrghystan where the Americans also have a base at Manas. The Tajiks have so far resisted having an American airbase but might change their minds depending perhaps on what is on offer. Condoleezza Rice was on a visit to Kyrgystan, Kazakhstan and Tajikistan in October trying to shore up US position in these former Soviet Republics after the loss of influence in Uzbekistan that could have some bearing on US which could have a partial bearing on its operations in Afghanistan and the rest of Central Asia.

China has been concentrating on oil and gas rich Kazakhstan. This makes economic and strategic sense for it could provide the much needed energy, close political ties would help keep the East Turkestan movement active in Chinese Xinjiang province at bay and hopefully keep the Americans at arm’s length. The Chinese have remained extremely busy planning gas pipelines from Kazakhstan to Xinjiang. The Chinese have a 962-kilometre oil pipeline deal with the Kazakhs to be completed by 2015 and want the Russians to build a pipeline from Siberia to China. The Russians are similarly interested in the oil fields in Kazakhstan. Earlier this month, the Chinese announced plans to spend about 180 billion dollars in the next 15 years to increase use of renewable energy to 15% up from the present 7% and to replace ten million tons of petroleum with renewable energy as well as increase use of solar energy to replace 40 million tons of standard coal each year.

While NATO has offered Kazakhstan military assistance, the Chinese and the Russians have been having joint exercises in the Pacific and Russia has sold state of the art military equipment to China. While the US has used the war against terror to move into the energy rich areas with bases and forces to guard the pipelines and installations, the other two have been militarising their friendships and alliances in the region as well. US presence in the region naturally heightens Chinese fears of encirclement and Russian fears about their near abroad. It is not difficult to see a triangular struggle in the future.

Nearly 200 years ago, William Moorcroft of the British East India Company made desperate attempts to attract his employers’ attention to events in Central Asia and of the advance of the Russian Empire but they would not pay any attention to him. Today, when we want to pay attention to this area we are hemmed in by disadvantaged relations in our neighbourhood, even though to us Russia is far from an Evil Empire. Maybe we can breakthrough this geopolitical logjam. We should make use of the invitation to the SCO and maybe we should think like Moorcroft did, of accessing the Central Asia through Yarkand and Kashgar.

The game remains what it was -a game for the dominion of the world. This would be a test of our diplomacy and long-term strategic thinking, of thinking out of the box. The British Imperial policy was to keep the two – Russia and China – away from India. Maybe today we need to move closer to these two massive landmasses. Maybe this is only a dream but then unless you dream how do you seek fulfillment.

Source : Hindustan Times 5th oct 2005