The imperial scramble for oil is heating up, and with it the risks of war that (as has been the case of recent imperialist wars) may have unforeseeable consequences. But that is not all. As part of this imperial strategy there is a manipulation of the oil markets by transnational oil companies and financial interests, and this in the context of an economic and financial crisis that affects the industrialized countries of the west.
The World Bank foresees a recession in the European Union (EU), as a regime of severe austerity demanded by financial speculators and their servants, the IMF and the European Central Bank who control global finances, is applied in the euro zone (EZ). The 17 countries of the EZ will move in 2012 from an estimated growth of 1.8 per cent in the GDP to a contraction of 0.3 per cent. The World Bank anticipates a shock equivalent to the Great Recession of 2008. The less developed countries (LDCs) will see a growth of 1.4 per cent of their GDP, 1.3 per cent lower than anticipated.
This recession in the EZ and the low growth rates of the industrialized countries is due to the fall in aggregate demand, in other words, to the fall in income of the majority of consumers due to high unemployment, unstable jobs, the increase in taxes for working people and the accelerated fall in salaries and pensions in general. In this context the recent rise in oil prices, which are reaching the high levels of 2008, will accentuate even more the economic contraction in those countries which are already in recession and will aggravate the situation in those countries that suffer from a lower rate of economic growth, all of which will contribute to reducing growth in those areas that are in a process of development.
The impact of the costs of oil in the Euro Zone should not be underestimated. An analysis of the Bank of America Merril Lynch cited in FT Alphaville reveals the impact of changes in oil prices in the current account balances of countries in the EZ. In that zone the level of energy costs is reaching the levels of 2008, which aggravates the trade and current account deficits in the context of a serious crisis of public finances.
The foreseen interruption of oil imports from Iran in countries such as Greece, Italy and Spain, according to FT Alphaville, will not only lead to problems of supply but also to higher current account deficits. In short, the high oil prices together with the US-imposed embargo on oil imports from Iran will deepen the recession in Europe.
The price of oil and its derivatives is going up even as gasoline consumption in the US market, which is an essential reference for the price of crude oil, fell in the first week of January resulting in the lowest demand of the past seven years. This is on top of the fact that there are no noted problems of low inventories, according to a report of the Bloomberg Agency dated Thursday January 19.
In France and in other countries of the EU affected by slow economic growth and a fall in consumer demand there are record level increases in the price of gasoline and diesel fuel, and according to the "analysts" of the commercial press this is due to a fall in the valuation of the Euro, to tension in Iran and to strikes in Nigeria.
But for Chris Cook - former director of market surveillance of the London-based International Petroleum Exchange and one of the experts who anticipates the fall of the prices in the oil market in 2008 - “we also see Petroplus, a major independent Swiss refiner (and one of the last refiners in France), crippled by inflated crude oil prices, and shutting down three refineries (one of them in France) because demand for its products has disappeared, and it can no longer finance crude oil purchases now that banks have pulled its credit lines. In my world, refineries closed due to reduced demand for their products imply a reduction in demand for crude oil: but not, apparently, on the Planet Hype of investment banks with funds (in petroleum futures) to sell” (1)
Because of these factors Cook said that “all is not as it appears in the global oil markets, which in my view have become entirely dysfunctional and no longer fit for its purpose. I believe that the market price is about to collapse as it did in 2008 and that this will mark the end of an era in which the market has been run by and on behalf of trading and financial intermediaries”.
Because “the oil market price is – by definition – the price at which title to dollars is exchanged for title to crude oil”, Cook reminds us that “with interest rates at zero per cent, and with the Federal Reserve Bank printing dollars through QE, a tidal wave of money flowed into equity and commodity markets purely as an alternative to the dollar, and they did so through a proliferation of funds set up by banks.
The risk of conflict over oil
Although Cook is of the opinion that there is little or no possibility of military action against Iran, the facts appear to demonstrate the contrary, in the short run, because of the dynamics unleashed by sanctions and the covert war by Israel and the US against the Teheran government, and in the long run when one considers that the control and access to energy resources are the principal interest for economic, financial and military reasons, of US imperialism and their allies, and in particular Great Britain and France.
According to Alexander Cockburn, editor and columnist of “counterpunch.org”, the strategy of President Barack Obama is “to force Iran into a corner, methodically demolishing its economy by embargoes and sanctions so that in the end a desperate Iran strikes back”.
And with this policy of sanctions and embargoes, Cockburn said in an article entitled “War on Iran: It’s Not a Matter of ‘If”, “Obama is most certainly doing the oil industry a big favor. There have been industry-wide fears of recession-fueled falling demand and collapse of oil prices. That has led to industry-wide enthusiasm (aided by heavy pressure from the majors) for strongly cutting total world oil production (and enjoying the bonuses flowing from the subsequent world price rise), with all the cuts to be taken out of the hide of the Iranians. The Financial Times made clear the need to shrink world production in the following key paragraph in a report last week: 'Oil prices have risen above $110 a barrel since Iran threatened to shut down the Strait of Hormuz, the world’s most important oil chokepoint, accounting for about a third of all seaborne traded oil. Oil fell to a low of $99 in October amid global economic growth worries.'”
And he said that Pierre Sprey –formerly employed by the Defence Department and currently a consultant – said to him :“Note also that this is one of those rare but dangerous moments in history when Big Oil and the Israelis are pushing the White House in the same direction. The last such moment was quickly followed by Dubya’s invasion of Iraq.”
In an article titled "Danger Waters, the Three Spots of Potential Conflict in the Geo-Energy Era", the US professor and analyst Michael T. Klare, a recognized expert in strategic affairs involving petroleum, writes that we are already in “an edgy world where a single incident at an energy “chokepoint” could set a region aflame, provoking bloody encounters, boosting oil prices, and putting the global economy at risk”.
With energy demand on the rise and sources of supply dwindling, we are entering a new epoch that professor Klare calls “the Geo-Energy Era, in which disputes over vital resources will dominate world affairs. In 2012 and beyond, energy and conflict will be bound ever more tightly together, lending increasing importance to the key geographical flashpoints in our resource-constrained world”.
One of flashpoints is the Straits of Hormuz, but – according to Michael T. Klare - we have to include as well “the East and South China Seas, the Caspian Sea basin, and an energy-rich Arctic that is losing its sea ice. In all of these places, countries are disputing control over the production and transportation of energy, and arguing about national boundaries and/or rights of passage”, and remember that “American leaders have long viewed the Strait (of Hormuz) as a strategic fixture in their global plans that must be defended at any cost. It was an outlook first voiced by President Jimmy Carter in January 1980, on the heels of the Soviet invasion and occupation of Afghanistan which had, he told Congress, “brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Strait of Hormuz, a waterway through which most of the world’s oil must flow.”
This situation is further complicated in the South China Sea because, as professor Klare said “with the discovery of oil and gas deposits, the South China Sea has been transformed into a cockpit of international friction. At least some islands in this energy-rich area are claimed by every one of the surrounding countries, including China -- which claims them all, and has demonstrated a willingness to use military force to assert dominance in the region. Not surprisingly, this has put it in conflict with the other claimants, including several with close military ties to the United States. As a result, what started out as a regional matter, involving China and various members of the Association of Southeast Asian Nations (ASEAN), has become a prospective tussle between the world’s two leading powers”.
“To press their claims, Brunei, Malaysia, Vietnam, and the Philippines have all sought to work collectively through ASEAN, believing a multilateral approach will give them greater negotiating clout than one-on-one dealings with China. For their part, the Chinese have insisted that all disputes must be resolved bilaterally, a situation in which they can more easily bring their economic and military power to bear. Previously preoccupied with Iraq and Afghanistan, the United States has now entered the fray, offering full-throated support to the ASEAN countries in their efforts to negotiate en masse with Beijing”.
This creates tension between Beijing and Washington, and “the United States has conducted a series of conspicuous military exercises in the South China Sea, including some joint maneuvers with ships from Vietnam and the Philippines. Not to be outdone, China responded with naval maneuvers of its own. It’s a perfect formula for future “incidents” at sea”.
For Klare it is worth noting that last November President Barack Obama, during his visit to Australia, announced with remarkable bluntness, a new U.S. strategy aimed at confronting Chinese power in Asia and the Pacific. “As we plan and budget for the future,” he told members of the Australian Parliament in Canberra, “we will allocate the resources necessary to maintain our strong military presence in this region.” A key feature of this effort would be to ensure “maritime security” in the South China Sea”.
Professor Klare signals in addition the importance of the Caspian basin --
shared by Russia, Iran and three former Soviet republics that are now independent countries, Azerbaijan, Kasakstan and Turkestan -- as another
region with large hydrocarbon reserves: “Given the magnitude of the Caspian’s oil and gas reserves, many energy firms are planning new production operations in the region, along with the pipelines needed to bring the oil and gas to market. The European Union, for example, hopes to build a new natural gas pipeline called Nabucco from Azerbaijan through Turkey to Austria. Russia has proposed a competing conduit called South Stream. All of these efforts involve the geopolitical interests of major powers, ensuring that the Caspian region will remain a potential source of international crisis and conflict”.
Other “potential energy flashpoints”, according to Klare, “are the waters surrounding the Falkland Islands (Malvinas), where both Britain and Argentina hold claims to undersea oil reserves, as will be the globally warming Arctic whose resources are claimed by many countries. One thing is certain: wherever the sparks may fly, there’s oil in the water and danger at hand in 2012”.
To confirm what professor Klare has said, that jurisdiction over the undersea of the Malvinas is one of the touchy places to watch, the past Wednesday Prime Minister David Cameron commemorated the thirtieth anniversary of the “Falkland war” reiterating the colonial policy of Great Britain: "The key point is we support the Falkland Islanders' right to self-determination, and what the Argentinians have been saying recently, I would argue is actually far more like colonialism because these people want to remain British and the Argentinians want them to do something else," he said at Prime Minister's Questions in the Commons.
I'm determined we should make sure that our defences and everything else is in order, which is why the National Security Council discussed this issue yesterday, said Cameron, and he added that “the absolutely vital point is that we are clear that the future of the Falkland Islands is a matter for the people themselves, and as long as they want to remain part of the United Kingdom and be British they should be able to do so."
What is behind this aggressive manifestation of long-established colonialism? The response was seen immediately, when the companies that are searching for oil in the undersea platform of the Falklands (Malvinas) -- that is part of the Argentinian continental shelf -- announced in Great Britain that they “are targeting 8.3 billion barrels in the waters around the islands this year, three times the U.K.’s reserves. Borders & Southern Petroleum Plc (BOR) will drill the Stebbing prospect next month, one of three Falkland wells that Morgan Stanley ranks among the world’s top 15 offshore prospects this year. Meanwhile, Rockhopper Exploration Plc (RKH) is seeking $2 billion from a larger oil company to develop the Sea Lion field, the islands’ first economically viable oil find” (Bloomberg News).
“The area is underexplored and highly prospective,” said New York-based Morgan Stanley analyst Evan Calio. Together, the four wells planned for the Falklands this year are searching for about 8.3 billion barrels of oil. The Jubilee field, which was discovered in 2007, propelled Ghana into one of the world’s top 50 oil states. Brazil’s Lula field, drilled in 2006, holds an estimated 6.5 billion barrels of oil equivalent, according to the investment bank Morgan Stanley.
(Translation by Jordan Bishop and the author.)
- Alberto Rabilotta es periodista argentino - canadiense.
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