Date: Thu, 9 Oct 2014 23:59:00 +0200
Obama's New Oil Wars
Washington Takes on ISIS, Iran, and Russia
By <http://www.tomdispatch.com/authors/michaelklare> Michael T. Klare
9.10.2014
It was heinous. It was underhanded. It was beyond the bounds of
international morality. It was an attack on the American way of life. It
was what you might expect from unscrupulous Arabs. It was "the oil weapon"
-- and back in 1973, it was directed at the United States. Skip ahead four
decades and it's smart, it's effective, and it's the American way. The
Obama administration has appropriated it as a major tool of foreign policy,
a new way to go to war with nations it considers hostile without relying on
planes, missiles, and troops. It is, of course, that very same oil weapon.
Until recently, the use of the term "
<http://www.ogj.com/articles/print/volume-103/issue-17/general-interest/the-
oil-weapon-past-present-and-future.html> the oil weapon" has largely been
identified with the efforts of Arab producers to dissuade the United States
from supporting Israel by cutting off the flow of petroleum. The most
memorable example of its use was the
<http://en.wikipedia.org/wiki/1973_oil_crisis> embargo imposed by Arab
members of the Organization of the Petroleum Exporting Countries (OPEC) on
oil exports to the United States during the Arab-Israeli war of 1973,
causing scarcity in the U.S., long lines at American filling stations, and a
global economic recession.
After suffering enormously from that embargo, Washington took a number of
steps to disarm the oil weapon and prevent its reuse. These included an
increased emphasis on domestic oil production and the establishment of a
mutual aid arrangement overseen by the <http://www.iea.org/> International
Energy Agency (IEA) that obliged participating nations to share their oil
with any member state subjected to an embargo.
So consider it a surprising reversal that, having tested out the oil weapon
against Saddam Hussein's Iraq with
<http://www.lrb.co.uk/v32/n14/andrew-cockburn/worth-it> devastating effect
back in the 1990s, Washington is now the key country brandishing that same
weapon, using trade sanctions and other means to curb the exports of
energy-producing states it categorizes as hostile. The Obama administration
has taken this aggressive path even at the risk of curtailing global energy
supplies.
When first employed, the oil weapon was intended to exploit the industrial
world's heavy dependence on petroleum imports from the Middle East. Over
time, however, those producing countries became ever more dependent on oil
revenues to finance their governments and enrich their citizens. Washington
now seeks to exploit this by selectively denying access to world oil
markets, whether through sanctions or the use of force, and so depriving
hostile producing powers of operating revenues.
The most dramatic instance of this came on September 23rd, when American
aircraft
<http://www.nytimes.com/2014/09/23/world/middleeast/us-and-allies-hit-isis-t
argets-in-syria.html> bombed refineries and other oil installations in areas
of Syria controlled by the Islamic State of Iraq and Syria (ISIS, also known
as ISIL or IS). An extremist insurgent movement that has declared a new
"caliphate," ISIS is not, of course, a major oil producer, but it has taken
control of oil fields and refineries that once were operated by the regime
of Bashar al-Assad in eastern Syria. The revenue generated by these fields,
reportedly
<http://www.ft.com/intl/cms/s/2/34e874ac-3dad-11e4-b782-00144feabdc0.html#ax
zz3Ei81A7ij> $1 to $2 million daily, is being used by ISIS to generate a
significant share of its operating expenses. This has given that movement
the wherewithal to
<http://www.nytimes.com/2014/09/16/world/europe/turkey-is-a-steady-source-of
-isis-recruits.html> finance the further recruitment and support of
thousands of foreign fighters, even as it sustains a high tempo of combat
operations.
Black-market dealers in Iran, Iraq, Syria, and Turkey have evidently been
<http://edition.cnn.com/2014/08/18/business/al-khatteeb-isis-oil-iraq/>
assisting ISIS in this effort, purchasing the crude at a discount and
selling at global market rates, now hovering at about $90 per barrel.
Ironically, this clandestine export network was initially established in the
1990s by Saddam Hussein's regime to evade U.S. sanctions on Iraq.
The Islamic State has proven
<http://edition.cnn.com/2014/08/18/business/al-khatteeb-isis-oil-iraq/>
adept indeed at exploiting the fields under its control, even selling the
oil to agents of opposing forces,
<http://www.nytimes.com/2014/01/29/world/middleeast/rebels-in-syria-claim-co
ntrol-of-resources.html> including the Assad regime. To stop this flow,
Washington launched what is planned to be a
<http://edition.cnn.com/2014/09/24/world/meast/us-airstrikes/index.html>
long-term air campaign against those fields and their associated
infrastructure. By bombing them, President Obama evidently hopes to curtail
the movement's export earnings and thereby diminish its combat capabilities.
These strikes, he
<http://www.whitehouse.gov/blog/2014/09/23/president-obama-delivers-statemen
t-airstrikes-syria> declared in announcing the bombing campaign, are
intended to "take out terrorist targets" and "cut off ISIL's financing."
<http://www.amazon.com/dp/1250023971/ref=nosim/?tag=tomdispatch-20>
<http://www.amazon.com/dp/1250023971/ref=nosim/?tag=tomdispatch-20>
http://www.tomdispatch.com/images/managed/klarepbk2012.jpeg
<http://www.amazon.com/dp/1250023971/ref=nosim/?tag=tomdispatch-20> It is
too early to assess the impact of the air strikes on ISIS's capacity to pump
and sell oil. However, since the movement has been producing only
<http://www.ft.com/intl/cms/s/2/34e874ac-3dad-11e4-b782-00144feabdc0.html#ax
zz3Ei81A7ij> about 80,000 barrels per day (roughly 1/1,000th of worldwide
oil consumption), the attacks, if successful, are not expected to have any
significant impact on a global market already increasingly glutted, in part
because of an
<http://www.tomdispatch.com/post/175889/michael_klare_oil_is_back> explosion
of drilling in that "new Saudi Arabia," the United States.
As it happens, though, the Obama administration is also wielding the oil
weapon against two of the world's leading producers, Iran and Russia. These
efforts, which include embargoes and trade sanctions, are likely to have a
far greater impact on world output, reflecting White House confidence that,
in the pursuit of U.S. strategic interests, anything goes.
Fighting the Iranians
In the case of Iran, Washington has moved aggressively to curtail Tehran's
ability to finance its extensive nuclear program both by blocking its access
to Western oil-drilling technology and by curbing its export sales. Under
the <http://fas.org/news/iran/1996/31623339-31627980.htm> Iran Sanctions
Act, foreign firms that invest in the Iranian oil industry are barred from
access to U.S. financial markets and subject to other penalties. In
addition, the Obama administration has put
<http://www.nytimes.com/2012/01/18/world/asia/us-presses-south-korea-to-redu
ce-oil-imports-from-iran.html> immense pressure on major oil-importing
countries, including China, India, South Korea, and the European powers, to
reduce or eliminate their purchases from Iran.
These <http://en.wikipedia.org/wiki/Sanctions_against_Iran> measures, which
involve tough restrictions on financial transactions related to Iranian oil
exports, have had a significant impact on that country's oil output. By some
estimates, those exports have
<http://www.eia.gov/countries/cab.cfm?fips=IR> fallen by one million barrels
per day, which also represents a significant contraction in global supplies.
As a result, Iran's income from oil exports is estimated to have fallen from
$118 billion in 2011-2012 to $56 billion in 2013-2014, while pinching
ordinary Iranians in a multitude of ways.
In earlier times, when global oil supplies were tight, a daily loss of one
million barrels would have meant widespread scarcity and a possible global
recession. The Obama administration, however, assumes that only Iran is
likely to suffer in the present situation. Credit this mainly to the recent
upsurge in North American energy production (largely achieved through the
use of hydro-fracking to extract oil and natural gas from buried shale
deposits) and the increased availability of crude from other non-OPEC
sources. According to the most recent data from the Department of Energy
(DoE), U.S. crude output <http://www.eia.gov/forecasts/aeo/> rose from 5.7
million barrels per day in 2011 to 8.4 million barrels in the second quarter
of 2014, a remarkable 47% gain. And this is to be no flash in the pan. The
DoE predicts that domestic output will rise to some 9.6 million barrels per
day in 2020, putting the U.S. back in the top league of global producers.
For the Obama administration, the results of this are clear. Not only will
American reliance on imported oil be significantly reduced, but with the
U.S. absorbing ever less of the non-domestic supply, import-dependent
countries like India, Japan, China, and South Korea should be able to
satisfy their needs even if Iranian energy production keeps falling. As a
result, Washington has been able to secure
<http://www.washingtontimes.com/news/2012/jan/12/japan-reduce-iran-oil-impor
ts-supporting-us/> greater cooperation from such countries in observing the
Iranian sanctions -- something they would no doubt have been reluctant to do
if global supplies were less abundant.
There is another factor, no less crucial, in the aggressive use of the oil
weapon as an essential element of foreign policy. The increase in domestic
crude output has imbued American leaders with a new sense of energy
omnipotence, allowing them to contemplate the decline in Iranian exports
without trepidation. In an April 2013
<http://www.whitehouse.gov/the-press-office/2013/04/24/remarks-tom-donilon-n
ational-security-advisor-president-launch-columbia-> speech at Columbia
University, Tom Donilon, then Obama's national security adviser, publicly
expressed this outlook with particular force. "America's new energy posture
allows us to engage from a position of greater strength," he avowed.
"Increasing U.S. energy supplies act as a cushion that helps reduce our
vulnerability to global supply disruptions and price shocks. It also affords
us a stronger hand in pursuing and implementing our international security
goals."
This "stronger hand," he made clear, was reflected in U.S. dealings with
Iran. To put pressure on Tehran, he noted, "The United States engaged in
tireless diplomacy to persuade consuming nations to end or significantly
reduce their consumption of Iranian oil." At the same time, "the substantial
increase in oil production in the United States and elsewhere meant that
international sanctions and U.S. and allied efforts could remove over 1
million barrels per day of Iranian oil while minimizing the burdens on the
rest of the world." It was this happy circumstance, he suggested, that had
forced Iran to the negotiating table.
Fighting Vladimir Putin
The same outlook apparently governs U.S. policy toward Russia.
Prior to Russia's seizure of Crimea and its covert intervention in eastern
Ukraine, major Western oil companies, including BP, Chevron, ExxonMobil, and
Total of France, were pursuing
<http://www.nytimes.com/2014/06/10/business/international/for-western-oil-co
mpanies-expanding-in-russia-is-a-dance-around-sanctions.html> elaborate
plans to begin production in Russian-controlled sectors of the Black Sea and
the Arctic Ocean, mainly in collaboration with state-owned or
state-controlled firms like Gazprom and Rosneft. There were, for instance, a
number of expansive
<http://www.nytimes.com/2011/08/31/business/global/exxon-and-rosneft-partner
-in-russian-oil-deal.html> joint ventures between Exxon and Rosneft to drill
in those energy-rich waters.
"These agreements," Rex Tillerson, the CEO of Exxon,
<http://www.rosneft.com/news/pressrelease/30082011.html> said proudly in
2012 on inking the deal, "are important milestones in this strategic
relationship... Our focus now will move to technical planning and execution
of safe and environmentally responsible exploration activities with the goal
of developing significant new energy supplies to meet growing global
demand." Seen as a boon for American energy corporations and the
oil-dependent global economy, these and similar endeavors were largely
welcomed by U.S. officials.
Such collaborations between U.S. companies and Russian state enterprises
were then viewed as conferring significant
<http://www.nytimes.com/2014/03/28/business/energy-environment/potential-cra
ckdown-on-russia-risks-also-punishing-western-oil-companies.html> benefits
on both sides. Exxon and other Western companies were being given access to
vast new reserves -- a powerful lure at a time when many of their existing
fields in other parts of the world were in decline. For the Russians, who
were also <http://www.eia.gov/countries/cab.cfm?fips=RS> facing significant
declines in their existing fields, access to advanced Western drilling
technology offered the promise of exploiting otherwise difficult-to-reach
areas in the Arctic and
<http://www.tomdispatch.com/post/174829/michael_klare_tough_oil_on_tap>
"tough" drilling environments elsewhere.
Not surprisingly, key figures on both sides have
<http://www.ibtimes.com/european-companies-strike-out-against-tougher-russia
n-sanctions-1573266> sought to insulate these arrangements from the new
sanctions being imposed on Russia in response to its incursions in Ukraine.
Tillerson, in particular, has sought to persuade U.S. leaders to exempt its
deals with Rosneft from any such measures. "Our views are being heard at the
highest levels," he
<http://www.nytimes.com/2014/06/10/business/international/for-western-oil-co
mpanies-expanding-in-russia-is-a-dance-around-sanctions.html> indicated in
June.
As a result of such pressures, Russian energy companies were not covered in
the
<http://www.washingtonpost.com/world/europe/obama-orders-freeze-on-assets-of
-people-who-impeded-democracy-in-ukraine/2014/03/06/5ae8f68e-a534-11e3-8466-
d34c451760b9_story.html> first round of U.S. sanctions imposed on various
firms and individuals. After Russia intervened in eastern Ukraine, however,
the White House moved on to
<http://www.usatoday.com/story/news/politics/2014/09/11/new-russia-sanctions
-obama-ukraine/15449511/> tougher sanctions, including measures aimed at the
energy sector. On September 12th, the Treasury Department announced that it
was imposing strict constraints on the transfer of U.S. technology to
Rosneft, Gazprom, and other Russian firms for the purpose of drilling in the
Arctic. These measures, the department
<http://time.com/3340324/obama-russia-putin-ukraine-sanctions/> noted, "will
impede Russia's ability to develop so-called frontier or unconventional oil
resources, areas in which Russian firms are heavily dependent on U.S. and
western technology."
The impact of these new measures cannot yet be assessed. Russian officials
<http://www.bne.eu/content/story/rosneft-claims-new-oilfield-victory-despite
-us-sanctions> scoffed at them, insisting that their companies will proceed
in the Arctic anyway. Nevertheless, Obama's decision to target their
drilling efforts represents a dramatic turn in U.S. policy, risking a future
contraction in global oil supplies if Russian companies prove unable to
offset declines at their existing fields.
The New Weapon of Choice
As these recent developments indicate, the Obama administration has come to
view the oil weapon as a valuable tool of power and influence. It appears,
in fact, that Washington may be in the process of replacing the threat of
invasion or, as with the Soviet Union in the Cold War era, nuclear attack,
as its favored response to what it views as overseas provocation. (Not
surprisingly, the Russians
<http://www.thenation.com/article/181399/patriotic-heresy-vs-new-cold-war>
look on the Ukrainian crisis, which is taking place on their border, in
quite a different light.) Whereas full-scale U.S. military action -- that
is, anything beyond air strikes, drone attacks, and the sending in of
special ops forces -- seems unlikely in the current political environment,
top officials in the Obama administration clearly believe that oil combat is
an effective and acceptable means of coercion -- so long, of course, as it
remains in American hands.
That Washington is prepared to move in this direction reflects not only the
recent surge in U.S. crude oil output, but also a sense that energy, in this
time of globalization, constitutes a strategic asset of unparalleled
importance. To control oil flows across the planet and deny market access to
recalcitrant producers is increasingly a major objective of American foreign
policy.
Yet, given Washington's
<http://www.tomdispatch.com/post/175854/tomgram%3A_engelhardt,_a_record_of_u
nparalleled_failure/> lack of success when using direct military force in
these last years, it remains an open question whether the oil weapon will,
in the end, prove any more satisfactory in offering strategic advantage to
the United States. The Iranians, for instance, have indeed come to the
negotiating table, but a favorable outcome on the nuclear talks there
appears increasingly remote; with or without oil, ISIS continues to score
battlefield victories; and Moscow displays no inclination to end its
involvement in Ukraine. Nonetheless, in the absence of other credible
options, President Obama and his key officials seem determined to wield the
oil weapon.
As with any application of force, however, use of the oil weapon entails
substantial risk. For one thing, despite the rise in domestic crude
production, the U.S. will remain dependent on oil imports for the
foreseeable future and so could still suffer if other countries were to deny
it exports. More significant is the possibility that this new version of the
oil wars Washington has been fighting since the 1990s could someday result
in a genuine contraction in global supplies, driving prices skyward and so
threatening the health of the U.S. economy. And who's to say that, seeing
Washington's growing reliance on aggressive oil tactics to impose its sway,
other countries won't find their own innovative ways to wield the oil weapon
to their advantage and to Washington's ultimate detriment?
As with the introduction of drones, the United States now enjoys a temporary
advantage in energy warfare. By unleashing such weapons on the world,
however, it only ensures that others will seek to match our advantage and
turn it against us.
Michael T. Klare, a
<http://www.tomdispatch.com/post/175889/michael_klare_oil_is_back>
TomDispatch regular, is a professor of peace and world security studies at
Hampshire College and the author, most recently, of
<http://www.amazon.com/dp/1250023971/ref=nosim/?tag=tomdispatch-20> The Race
for What's Left. A documentary movie version of his book Blood and Oil is
available from
<http://www.mediaed.org/cgi-bin/commerce.cgi?preadd=action&key=124> the
Media Education Foundation.
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