SRA Commentary: How to Control People

“The international oil system started out as a setup to control a commodity, oil. Over the years, and most recently under the direction of the United States, that has metamorphosed into a form of people control.”
- Stephen Pelletiere, Iraq and the International Oil System, Praeger 2001. pp. 223-4

“The United States is a very special country in that when we maintain this position of military strength that we have now, we do it in support of a balance of power that favours freedom.”
- US National Security Advisor Condoleezza Rice in interview on News Hour with Jim Lehrer

“A coup consists of the infiltration of a small but critical segment of the state apparatus, which is then used to displace the government from its control of the remainder.”
- Edward Luttwak, Coup d’État, A Practical Handbook, Harvard University Press, 1979 p.27

Rule Number 1: Be economical with the truth

Last Wednesday Her Majesty’s government finally released its long ballyhooed and much awaited report on Iraqi weapons of mass destruction. Helpfully entitled Iraq’s Weapons of Mass Destruction its PDF version came with two title pages just in case we missed the first one. Actually, on reading the document, one rather thinks this just another example of the careless, slipshod, and at times downright mendacious character of the rest of the document. There is no smoking gun and no evidence that the Iraqi government has or plans to use so-called weapons of mass destruction. What one does find is a repetitive catalogue of over fifty pages of charges and assertions designed to frighten and dissimulate. It succeeded in scaring me out of my wits. If this is the best that the British and American governments can do to justify escalating the existing state of war against Iraq to an outright invasion, then God help us.

Striking in the discussion of the Anglo-Israeli-American assault on Iraq is the absence of historical context. Apparently, the only context necessary is the sort of glib and meaningless chatter offered up by president Bush’s advisors such as Condi Rice. In fairness to Rice, however, opposition to the war can be similarly glib and blinkered. Although much opposition to an invasion of Iraq centres on the oil question, this itself is curiously devoid of context. America, on this line of reasoning, intends to invade Iraq simply to enrich the oil barons of Texas. Superficially plausible, this is, at best, only partly true. It makes even less sense when one considers that the US already had access to Iraqi production. It is the biggest customer for Iraqi “oil for aid” crude.

Rule Number 2: Rig the market

The oil market has always operated as a cartel. The specifics vary from country to country, but the nature of oil as a physical commodity has always meant that long-term profitability depends on regularity of supply and output. John D. Rockefeller’s Standard Oil was the first of the cartels, built upon the insight that refining and marketing control was essential to regulate output and to keep prices stable. The extremely high capital costs of transportation and refining infrastructure need to be depreciated over long periods. This in turn means that cash flow needs to be stable.

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If the United States has its way with Iraq, as seems likely, “regime change” is in store, and that will mean a change in Iraq’s relationship with the rest of OPEC. Iraq currently exports some 1 million barrels a day. That could well go to 5 million barrels a day if US oil companies get into the Iraqi fields and gear them up. That sort of potential swing in production suggests that oil prices will be headed a lot lower after the end of this year, possibly to stay low until the US presidential elections in 2004. This could well fuel a significant bear market rally in stocks, and spell the end of the bubble in bonds. It would be very damaging for independent producers, and shift industry power in the industry towards the low cost, American-occupied Persian Gulf . It would mean some short-term price relief for the US balance of payments. All this presupposes an attack on Iraq before the end of this year, which ends fairly quickly in a US and “allied” occupation of the strategic centres of the country. Note too talk of an exile for Saddam. Could this be a way out of the political dead end into which Washington has talked itself?

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Without this control, the industry would stagger from boom to bust and the needed investment in infrastructure could not take place.

As the world approaches the point at which half of the total endowment of extractable oil has been consumed, the point is also approaching at which the OPEC 5 countries of the Persian Gulf littoral will produce more than half of total world production. It is inconceivable in the real world that the world’s major power would view this with detachment given that it is also the world’s most profligate user of oil. The obsession of the Americans and the British with Saddam Hussein has perhaps more to do with the fact that he is a nationalist than it does with their ability to purchase his oil After all, he does need to sell it. If this were simply a matter of getting oil, the market would do the job. What is intolerable is that a significant pool of petroleum is under the control of what amounts to an independent producer with a political agenda of his own. That threatens volatility, and volatility threatens profits. But even more important, every major power today with the exception of Russia is a net importer of oil. Control of the Middle Eastern fields and access to and from them confers an advantage far more important than the profits of Halliburton or Exxon. It means control of the world.

Rule Number 3: Rewrite history; failing that, forget it

The history of modern Iraq is basically the history of the relationship between the inhabitants of that’s country and the oil industry. Iraq has never enjoyed the stability of the industry’s long-term relationship with the ruling Al- Saud in Saudi Arabia. It has consequently, not enjoyed investment in the extraction, transport and refining infrastructure that Saudi Arabia has. Nor has it enjoyed the relative political stability of Saudi Arabia. The British maintained control of their Iraqi creation during the mandate period by installing a puppet ruler and then supporting the numerous tribal groups in the country against him. Today we have come full circle. It was the British in Iraq who pioneered the use of airpower to chastise the remote and the recalcitrant. Seventy years on, British and American bombers are at it again.

It is not merely a coincidence, I think, that British interest in the Persian Gulf and Iraq dates from the early twentieth century when two things happened: commercially exploitable quantities of oil were discovered there and the British navy made the decision to convert its warships from coal to oil. Nor is it a coincidence that the British decision to support a homeland for Jews in Palestine also dates from the same period. Situated on the Eastern Littoral of the Mediterranean, Palestine flanks the approaches to the Suez Canal, and offers access from the hinterland to the sea through the port of Haifa.

The role of oil in the First World War is an arcane but important subject. It wasn’t until Germany was completely cut off from access to petroleum that it capitulated. In 1916, with the war raging, Britain and France signed the Sykes-Picot Agreement dividing the Middle East into zones of direct control and zones of influence.

Source: http://www.passia.org/palestine_facts/MAPS/Sykes_Picot_agreement_1916.htm

A glance at the map is revealing. Their respective zones of influence divided the oil rich northern sector of modern Iraq around Mosul and Kirkuk. Following the war, the San Remo agreement ratified French control of Lebanon and Syria, effectively shutting France out of the biggest oil producing regions. Britain was granted Palestine as a mandate, and established puppet regimes in Baghdad and Amman, redrawing the map of the area to suit itself. With her army based in Egypt and Palestine, access to India via the Suez Canal was guaranteed. The oil to fuel her navy, whose job it was to protect those sea-lanes, was assured by her control of the Persian Gulf.

Rule Number 4: When you can, let others fight; in fact, encourage it

Politically, direct control over such a vast area by a country the size of Britain was impossible. Indirect control, however, was feasible using client regimes. Destabilisation of local political society ensured that the locals were too busy with other problems to have the time to mobilise against the British. In this context British sponsorship of Zionist immigration to Palestine is easy to understand. Britain deliberately encouraged the establishment of colonies of European settlers dependent on her whose presence and growing numbers undermined the nascent Palestinian nationalist movement. Zionist settlement proved to be a mixed blessing for the British. While certainly successful in diverting local attention, it has also proved to be a spur to local nationalism. And it is also true that one has to get one’s oil to the market. When for example, plans were made to transport oil from Abqaiq in Saudi Arabia to the Mediterranean, it was envisioned that the port of Haifa in mandate Palestine would serve as the Western terminus. Israeli independence in 1948 changed that. Instead the Tapline, as it came to be called, transited Jordan and Syria across the Golan Heights to end at Sidon in southern Lebanon. By this time of course, America had supplanted Britain as the region’s premier power, inheriting control of the oil, but also the problem of Palestine. At about the same time that the Israelis cut the Tapline by occupying the Golan in 1967, Britain completed her withdrawal from the world beyond Suez and left her last Middle Eastern base in Aden.

Rule Number 5: Always carry a big stick

If the United States is so special, as Rice and others in Washington seem to think, it is more because of its similarity to the late British Empire than endowment uniquely American. But the megalomania of those such as Rice, Cheney and Rumsfeld is informed by the knowledge that they outspend the next twenty nations combined on arms and are well ahead in the race to put surface targetable weapons into the “high ground” of space. In conventional military terms, this will be analogous to being the only air power. Historically, it is eerily reminiscent of the naval arms race set off a century ago by Britain’s fleet conversion to oil.

But Britain also emerged from two World Wars burdened with foreign debt, especially from India and Egypt. It had a globally deployed military with commensurate commitments. The British had tried to insulate themselves from the inevitable consequences of this by the creation of a sterling zone that forced creditors to accept sterling in settlement of debts. This invites comparison to modern America. The United States may have been the victor of the Cold War, but was forced to go deeply into debt to win. That is has been able to finance this has been thanks to her ability to mobilise her own and foreign capital, and this in turn has depended on the cooperation of her allies, much the same as Egypt and India cooperated with Britain. The result has been the creation of an international monetary regime analogous to the British Sterling Area. Unlike the Sterling Area, however, no one is outside the dollar system. Thus the US has achieved what Keynes and the British could only dream of in the 30s and the 40s: a global closed international monetary system in which all debts are settled in the currency of the debtor.

The political logic of this seems plain enough: in order to build overwhelming military power, one has to borrow. In order to carry that debt, one has to have overwhelming military power, else one’s creditors ask for their money back. In this connection, Rice continued:

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“…if it comes to allowing another adversary to reach military parity with us in the way that the Soviet Union did, no, the United States does not intend to allow that to happen…because when that happens, there will not be a balance of power that favours freedom…there will be a balance of power that keeps part of the world in tyranny the way the Soviet Union did.”

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Such self-referential and tautological reasoning ironically evokes what else, but tyranny?

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