No subject

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 fifty percent 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 twelve to fourteen 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 (Democrat, 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 (Democrat, 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 Shiite 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 USA 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 like 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 Chávez, 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 01 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 for 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 same, of course, can be said about the United States - in reverse.
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. A brief video of Klare discussing key subjects in
his new book can be viewed by clicking here:
http://www.tomdispatch.com/p/tdvideo/klare04152008

Copyright 2008 Michael T Klare

Article printed from www.CommonDreams.org

http://www.commondreams.org/archive/2008/05/09/8832/


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