Nineteen years ago, the fall of the
Berlin Wall effectively eliminated the Soviet
Union as the world's other superpower. Yes, the
USSR as a political entity stumbled on for another
two years, but it was clearly an ex-superpower
from the moment it lost control over its
satellites in Eastern Europe.
Less than a
month ago, the United States similarly lost its
claim to superpower status when a barrel of crude
oil roared past US$110 on the international
market, gasoline prices crossed the $3.50
threshold at American pumps, and diesel fuel
topped $4. As was true of the USSR following the
dismantling of the Berlin Wall, the US will no
doubt continue to stumble on like the superpower
it once was; but as the nation's economy continues
to be eviscerated to pay
for its daily oil fix, it, too, will be seen by
increasing numbers of savvy observers as an
ex-superpower-in-the-making.
That the fall
of the Berlin Wall spelled the erasure of the
Soviet Union's superpower status was obvious to
international observers at the time. After all,
the USSR visibly ceased to exercise dominion over
an empire (and an associated military-industrial
complex) encompassing nearly half of Europe and
much of Central Asia. The relationship between
rising oil prices and the obliteration of
America's superpower status is, however, hardly as
self-evident. So let's consider the connection.
Dry hole superpower The fact is,
America's wealth and power has long rested on the
abundance of cheap petroleum. The United States
was, for a long time, the world's leading producer
of oil, supplying its own needs while generating a
healthy surplus for export.
Oil was the
basis for the rise of the first giant
multinational corporations in the US, notably John
D Rockefeller's Standard Oil Company (now
reconstituted as Exxon Mobil, the world's
wealthiest publicly traded corporation). Abundant,
exceedingly affordable petroleum was also
responsible for the emergence of the American
automotive and trucking industries, the
flourishing of the domestic airline industry, the
development of the petrochemical and plastics
industries, the suburbanization of America, and
the mechanization of its agriculture. Without
cheap and abundant oil, the United States would
never have experienced the historic economic
expansion of the post-World War II era.
No
less important was the role of abundant petroleum
in fueling the global reach of US military power.
For all the talk of America's growing reliance on
computers, advanced sensors, and stealth
technology to prevail in warfare, it has been oil
above all that gave the US military its capacity
to "project power" onto distant battlefields like
Iraq and Afghanistan. Every Humvee, tank,
helicopter, and jet fighter requires its daily
ration of petroleum, without which America's
technology-driven military would be forced to
abandon the battlefield. No surprise, then, that
the US Department of Defense is the world's
single-biggest consumer of petroleum, using more
of it every day than the entire nation of Sweden.
From the end of World War II through the
height of the Cold War, the US claim to superpower
status rested on a vast sea of oil. As long as
most of our oil came from domestic sources and the
price remained reasonably low, the American
economy thrived and the annual cost of deploying
vast armies abroad was relatively manageable. But
that sea has been shrinking since the 1950s.
Domestic oil production reached a peak in 1970 and
has been in decline ever since - with a growing
dependency on imported oil as the result. When it
came to reliance on imports, the United States
crossed the 50% threshold in 1998 and now has
passed 65%.
Though few fully realized it,
this represented a significant erosion of
sovereign independence even before the price of a
barrel of crude soared above $110. By now, we are
transferring such staggering sums yearly to
foreign oil producers, who are using it to gobble
up valuable American assets, that, whether we know
it or not, we have essentially abandoned our claim
to superpowerdom.
According to the latest
data from the US Department of Energy, the United
States is importing 12-14 million barrels of oil
per day. At a current price of about $115 per
barrel, that's $1.5 billion per day, or $548
billion per year. This represents the single
largest contribution to America's
balance-of-payments deficit, and is a leading
cause for the dollar's ongoing drop in value. If
oil prices rise any higher - in response, perhaps,
to a new crisis in the Middle East (as might be
occasioned by US air strikes on Iran) - our annual
import bill could quickly approach three-quarters
of a trillion dollars or more per year.
While our economy is being depleted of
these funds, at a moment when credit is scarce and
economic growth has screeched to a halt, the oil
regimes on which we depend for our daily fix are
depositing their mountains of accumulating
petrodollars in "sovereign wealth funds" (SWFs) -
state-controlled investment accounts that buy up
prized foreign assets in order to secure
non-oil-dependent sources of wealth. At present,
these funds are already believed to hold in excess
of several trillion dollars; the richest, the Abu
Dhabi Investment Authority (ADIA), alone holds
$875 billion.
The ADIA first made
headlines in November 2007 when it acquired a $7.5
billion stake in Citigroup, America's largest bank
holding company. The fund has also made
substantial investments in Advanced Micro Systems,
a major chip maker, and the Carlyle Group, the
private equity giant. Another big SWF, the Kuwait
Investment Authority, also acquired a
multibillion-dollar stake in Citigroup, along with
a $6.6 billion chunk of Merrill Lynch. And these
are but the first of a series of major SWF moves
that will be aimed at acquiring stakes in top
American banks and corporations.
The
managers of these funds naturally insist that they
have no intention of using their ownership of
prime American properties to influence US policy.
In time, however, a transfer of economic power of
this magnitude cannot help but translate into a
transfer of political power as well. Indeed, this
prospect has already stirred deep misgivings in
Congress. "In the short run, that they [the Middle
Eastern SWFs] are investing here is good," Senator
Evan Bayh (D-Indiana) recently observed. "But in
the long run it is unsustainable. Our power and
authority is eroding because of the amounts we are
sending abroad for energy ..."
No
summer tax holiday for the Pentagon Foreign
ownership of key nodes of our economy is only one
sign of fading American superpower status. Oil's
impact on the military is another.
Every
day, the average GI in Iraq uses approximately 27
gallons of petroleum-based fuels. With some
160,000 American troops in Iraq, that amounts to
4.37 million gallons in daily oil usage, including
gasoline for vans and light vehicles, diesel for
trucks and armored vehicles, and aviation fuel for
helicopters, drones, and fixed-wing aircraft. With
US forces paying, as of late April, an average of
$3.23 per gallon for these fuels, the Pentagon is
already spending approximately $14 million per day
on oil ($98 million per week, $5.1 billion per
year) to stay in Iraq. Meanwhile, our Iraqi
allies, who are expected to receive a windfall of
$70 billion this year from the rising price of
their oil exports, charge their citizens $1.36 per
gallon for gasoline.
When questioned about
why Iraqis are paying almost a third less for oil
than American forces in their country, senior
Iraqi government officials scoff at any suggestion
of impropriety. "America has hardly even begun to
repay its debt to Iraq," said Abdul Basit, the
head of Iraq's Supreme Board of Audit, an
independent body that oversees Iraqi governmental
expenditures. "This is an immoral request because
we didn't ask them to come to Iraq, and before
they came in 2003 we didn't have all these needs."
Needless to say, this is not exactly the
way grateful clients are supposed to address
superpower patrons. "It's totally unacceptable to
me that we are spending tens of billions of
dollars on rebuilding Iraq while they are putting
tens of billions of dollars in banks around the
world from oil revenues," said Senator Carl Levin
(D-Michigan), chairman of the Armed Services
Committee. "It doesn't compute as far as I'm
concerned."
Certainly, however, our allies
in the region, especially the Sunni kingdoms of
Kuwait, Saudi Arabia, and the United Arab Emirates
(UAE) that presumably look to Washington to
stabilize Iraq and curb the growing power of
Shi'ite Iran, are willing to help the Pentagon out
by supplying US troops with free or
deeply-discounted petroleum. No such luck. Except
for some partially subsidized oil supplied by
Kuwait, all oil-producing US allies in the region
charge us the market rate for petroleum. Take that
as a striking reflection of how little credence
even countries whose ruling elites have
traditionally looked to the US for protection now
attach to our supposed superpower status.
Think of this as a strikingly clear-eyed
assessment of American power. As far as they're
concerned, we're now just another of those
hopeless oil addicts driving a monster gas-guzzler
up to the pump - and they're perfectly happy to
collect our cash which they can then use to
cherry-pick our prime assets. So expect no summer
tax holidays for the Pentagon, not in the Middle
East, anyway.
Worse yet, the US military
will need even more oil for the future wars on
which the Pentagon is now doing the planning. In
this way, the US experience in Iraq has especially
worrisome implications. Under the military
"transformation" initiated by Secretary of Defense
Donald Rumsfeld in 2001, the future US war machine
will rely less on "boots on the ground" and ever
more on technology.
But technology entails
an ever-greater requirement for oil, as the newer
weapons sought by Rumsfeld (and now Secretary of
Defense Robert Gates) all consume many times more
fuel than those they will replace. To put this in
perspective: The average GI in Iraq now uses about
seven times as much oil per day as GIs did in the
first Gulf War less than two decades ago. And
every sign indicates that the same ratio of
increase will apply to coming conflicts; that the
daily cost of fighting will skyrocket; and that
the Pentagon's capacity to shoulder multiple
foreign military burdens will unravel. Thus are
superpowers undone.
Russia's
gusher If anything demonstrates the
critical role of oil in determining the fate of
superpowers in the current milieu, it is the
spectacular reemergence of Russia as a Great Power
on the basis of its superior energy balance. Once
derided as the humiliated, enfeebled loser in the
US-Soviet rivalry, Russia is again a force to be
reckoned with in world affairs. It possesses the
fastest-growing economy among the G-8 group of
major industrial powers, is the world's second
leading producer of oil (after Saudi Arabia), and
is its top producer of natural gas. Because it
produces far more energy than it consumes, Russia
exports a substantial portion of its oil and gas
to neighboring countries, making it the only Great
Power not dependent on other states for its energy
needs.
As Russia has become an
energy-exporting state, it has moved from the list
of has-beens to the front rank of major players.
When President Bush first occupied the White
House, in February 2001, one of his highest
priorities was to downgrade US ties with Russia
and annul the various arms-control agreements that
had been forged between the two countries by his
predecessors, agreements that explicitly conferred
equal status on the US and the USSR.
As an
indication of how contemptuously the Bush team
viewed Russia at that time, Condoleezza Rice,
while still an adviser to the Bush presidential
campaign, wrote, in the January/February 2000
issue of the influential Foreign Affairs, "US
policy ... must recognize that American security
is threatened less by Russia's strength than by
its weakness and incoherence." Under such
circumstances, she continued, there was no need to
preserve obsolete relics of the dual superpower
past such as the Anti-Ballistic Missile (ABM)
Treaty; rather, the focus of US efforts should be
on preventing the further erosion of Russian
nuclear safeguards and the potential escape of
nuclear materials.
In line with this
outlook, President Bush believed that he could
convert an impoverished and compliant Russia into
a major source of oil and natural gas for the
United States - with American energy companies
running the show. This was the evident aim of the
US-Russian "energy dialogue" announced by Bush and
Russian President Vladimir Putin in May 2002. But
if Bush thought Russia was prepared to turn into a
northern version of Kuwait, Saudi Arabia, or
Venezuela prior to the arrival of Hugo Chavez, he
was to be sorely disappointed.
Putin never
permitted American firms to acquire substantial
energy assets in Russia. Instead, he presided over
a major recentralization of state control when it
came to the country's most valuable oil and gas
reserves, putting most of them in the hands of
Gazprom, the state-controlled natural gas
behemoth.
Once in control of these assets,
moreover, Putin has used his renascent energy
power to exert influence over states that were
once part of the former Soviet Union, as well as
those in Western Europe that rely on Russian oil
and gas for a substantial share of their energy
needs. In the most extreme case, Moscow turned off
the flow of natural gas to Ukraine on January 1,
2006, in the midst of an especially cold winter,
in what was said to be a dispute over pricing but
was widely viewed as punishment for Ukraine's
political drift westwards. (The gas was turned
back on four days later when Ukraine agreed to pay
a higher price and offered other concessions.)
Gazprom has threatened similar action in
disputes with Armenia, Belarus, and Georgia - in
each case forcing those former Soviet SSRs to back
down.
When it comes to the US-Russian
relationship, just how much the balance of power
has shifted was evident at the NATO summit at
Bucharest in early April. There, President Bush
asked that Georgia and Ukraine both be approved
for eventual membership in the alliance, only to
find top US allies (and Russian energy users)
France and Germany blocking the measure out of
concern of straining ties with Russia. "It was a
remarkable rejection of American policy in an
alliance normally dominated by Washington," Steven
Erlanger and Steven Lee Myers of the New York
Times reported, "and it sent a confusing signal to
Russia, one that some countries considered close
to appeasement of Moscow."
For Russian
officials, however, the restoration of their
country's great power status is not the product of
deceit or bullying, but a natural consequence of
being the world's leading energy provider. No one
is more aware of this than Dmitri Medvedev, the
former chairman of Gazprom and new Russian
president. "The attitude toward Russia in the
world is different now," he declared on December
11, 2007. "We are not being lectured like
schoolchildren; we are respected and we are
deferred to. Russia has reclaimed its proper place
in the world community. Russia has become a
different country, stronger and more prosperous."
The reverse, of course, can be said about
the United States. As a result of our addiction to
increasingly costly imported oil, we have become a
different country, weaker and less prosperous.
Whether we know it or not, the energy Berlin Wall
has already fallen and the United States is an
ex-superpower-in-the-making.
Michael
Klare is a professor of peace and world
security studies at Hampshire College and author
of the just-released Rising Powers, Shrinking
Planet: The New Geopolitics of Energy
(Metropolitan Books). A documentary film based on
his previous book, Blood and Oil, is
available from the Media Education Foundation and
can be ordered at bloodandoilmovie.com.
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