Wednesday, January 12, 2005

Oil: The Dividing Line Of The New Cold War: "The US today spends about as much on its national defence as the next 20 countries combined. In fact, America is now spending as much on defense as it did during the height of the Cold War. Yet, in spite of this fact, many of the country’s military leaders tell us they don't have enough money and that the Pentagon needs to buy more modern and expensive weapons to assure the country’s national security and, of equal importance, safeguard a steady stream of oil supplies. A military coming up against the constraints of a “mere” $500bn budget is occurring against a backdrop of mounting military activity in the Middle East and substantially higher oil prices. Even more alarming from America’s perspective, the country’s vaunted military strength has little control over the latter."

"Virtually all of the recent political machinations in the [Gulf] region, including, not only the Iraq war, but also developments in Iran, and the Ukraine’s recently disputed Presidential election, can be best understood through the prism of oil pipeline politics.... Even short of a formal new energy alliance, the main outlines of a China-Russia-Iran axis can be discerned in their mutual threat perception."

"In its own version of pipeline politics, Mr Putin’s riposte to the Americans has been to ally the Russian and Iranian oil industries, and open up the shortest, cheapest and most lucrative oil route of all, southwards out of the Caspian to Iran. China has become another component of this strategy. Indeed, China's recent deals with both Kazakhstan (pertaining to Caspian energy) and Iran (pertaining to Persian Gulf resources) signify that the pundits have gotten it wrong until now: the purview of the new great game is not limited to the Central Asia-Caspian Sea basin, but rather has a broader, more integrated, purview increasingly enveloping even the Persian Gulf. Increasingly, the image of the Islamic Republic of Iran as a sort of frontline state in a post-Cold War global lineup against US hegemony is becoming prevalent among Chinese and Russian foreign-policy thinkers."

"Under the guise of “economic reform”, Russia had experienced an economic and social slump far worse than the Great Depression, and things were to get worse for another two years, until after the financial collapse in August 1998. The West vehemently backed Boris Yeltsin, supporting him even as stupendous amounts of money were stolen from an increasingly impoverished population. They cheered him on when he shelled the Russian parliament in 1993 (hundreds died in the subsequent fighting), and visited a campaign of hideous destruction on Chechnya. In the dying days of the Yeltsin regime, the US-controlled IMF poured a further $4 billion into Russia, most of which, it is now accepted, was simply stolen and put into private bank accounts.

"The Putin Presidency has put an end to that. Although his campaign against Yukos has been widely condemned in the western press as “an assault on free enterprise”, his actions appear less arbitrary when viewed in the context of what went on during the previous administration. The country’s oil barons, including the Yukos chairman, Mikhail Khodorkovsky, and the now exiled Boris Berezovsky, were key figures in the Yeltsin regime, and specifically in its strategy of creating a class of so-called oligarchs who, having stolen massive amounts from the Russian state which they controlled, then supported Yeltsin in return. Under the guise of “reform” actively supported by the Clinton administration and IMF, the most profitable parts of the Russian economy were sold to “kleptocrats” at ridiculously low prices in rigged auctions, those Russian robber barons often even using cheap loans from the Central Bank for the purpose.

"Only after this mass larceny was achieved did these same figures make grand noises about the need to establish a proper “rule of law” in Russia, a self-serving strategy designed to safeguard their ill-gotten gains. The west’s own complicity in this shameful episode has seldom been commented on, even though it is crucial to understanding President Putin’s “inexplicably” harder line against Yukos, the west generally and America more specifically.

"As the oil price has strengthened, Russia’s balance of payments surplus has exploded as have its foreign exchange reserves. Its growing strength is a mirror image of America’s increasing economic weakness. At the same time, President Bush is proving that he cannot lift Iraqi oil, and America has become increasingly bogged down in a 4th Generation type of guerilla war, which has further exacerbated the country's ongoing economic (and military) weaknesses. Consequently, Mr Putin is beginning to play the oil card more aggressively."

"Capitulating to dollar hegemony effectively perpetuates a monetary system which clearly serves Washington’s interest. But does it serve the interests of Russia, Euroland, OPEC, or the largest foreign holders of US dollar assets in Asia? Were more commerce to be priced in euros, more reserves held in Eurobonds, this would go some ways toward strengthening the euro’s long term foundations as a viable reserve currency alternative, whilst undercutting the pre-eminence of the dollar reserve currency system. As a key marginal producer of both oil and natural gas, Russia is now in an enviable position to catalyse this development."

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