“He who has oil has empire.” –Advisor of French Prime Minister Georges Clemenceau, December 1919
Oil has been called the lifeblood of the world economy. Whoever controls more energy resources has – pardon the pun – more power.
As worldwide oil consumption has grown exponentially during the past decades – from almost 60 million barrels per day in 1980 to nearly 91 million barrels per day in 2013 – countries that export oil have experienced strong economic gains. Oil profits are often linked to an increase in defense spending, with oil-exporting countries better able to acquire advanced weapons systems or build their internal security capabilities.
But do improvements in military preparedness necessarily equate to saber-rattling? When rising oil prices enrich the war chests of oil-exporting nations, do their neighbors need to worry more about their own safety? In the case of certain major oil-producing countries, history would suggest that at least some concern is warranted. And the US has become something of a neighborhood watch – but on a global scale.
Flexing “Petroconfident” Muscles
Russian President Vladimir Putin likes to peel off his shirt and show off his pumped-up pecs, apparently to prove he’s been hitting the gym. But what’s behind his military muscle-flexing? Between 2005 and 2006, Russia went on a homeland security spending spree, purchasing more than a dozen intercontinental ballistic missiles, two strategic bombers, 15 fighters, 15 satellites, 48 T-90 tanks, more than 250 armored personnel carriers, and 7,500 military vehicles.
It appears it was fueled by oil.
Russia’s economy largely depends on energy exports. With oil prices rising from $17.37 a barrel in December 2001 to $73.88 a barrel in September 2007, the nation’s wealth soared. And so did its military budget, increasing during that same period by 400%, from $7.3 billion to $31 billion.
In order to prove their theory that higher oil revenues bankrolled Putin’s drive for greater domestic power, analysts at the American Enterprise Institute (AEI) created an “aggression index” that looked for correlation between rising oil prices and more aggressive foreign policy. The AEI assigned values to 86 Russian foreign policy events that occurred between January 2000 and September 2007, roughly the same period when oil prices took off. Acts such as import bans and diplomatic expulsions earned a relatively low value of 1 or 2. Acts that were clearly more threatening in nature – think: arms sales to terror-sponsoring states and interrupting energy supplies to neighbors – received higher values. In order to eliminate bias, aggression ratings were assigned before oil price data were examined.
The result: oil prices and military expenditures do, indeed, seem to go hand-in-hand. The AEI analysts found that, during the years when oil fortunes increased, Russia’s aggression index rose from 17 to 55:
Russia’s “aggression index” links to oil prices.
Oil revenues had both indirect and direct effects on Russia’s defense and foreign policy activities. Because the nation was able to erase its $16.9 billion debt to the International Monetary Fund (IMF), the country no longer needed Western cash (or Western friendships) to keep its economy going. And because Russia was also less dependent on neighboring trading partners, it could turn its back on countries that had offended the Kremlin by their own pro-Western foreign policy leanings. During a two-year time frame in the mid-2000s, for instance, Russia banned imports of Polish meat, cut off imports of Ukrainian meat and dairy, and blockaded Georgia’s economy almost entirely.
Granted, a milk or meat boycott might not have the same deadly consequences as an armed confrontation. But the effects can be devastating economically. And in light of the ambitious military buildup through 2015 that Russia launched around that time – a program that would include 60 Iskander missiles, more than 1,000 new and modernized aircraft, five nuclear-powered submarines, and 69 SS-27 strategic nuclear missiles – it’s easy to see how the world might have gotten a little nervous by the scope of their plans. In an example of “petroconfidence,” Russian Foreign Minister Sergei Lavrov said, “it would be right to say that we view our role in global energy supply as a means for ensuring our foreign policy independence.”
And Russia’s latest hit – the Ukraine – fits this bombastic military maneuvering to a “T.” Read our post “Ukrainian Oil & Gas Wars: A History of Corruption, a Future of Doubts” for much more on the Ukrainian situation.
Training on Iraqi Oil
Infrastructure Russia didn’t make the list of countries that the Global Policy Forum’s Executive Director James A. Paul named when he described the relationship between petroleum and war as “close.” But nearly a dozen more came to mind for this policy watchdog that follows the United Nations, suggesting that “almost all of the world’s oil-producing countries have suffered abusive, corrupt and undemocratic governments and an absence of durable development.” He decried their “sad record, which includes dictatorships …, bloody coups…, militarization of government and intolerant right-wing nationalism.” Key offenders? Libya, Angola, Algeria, Colombia, Venezuela, Mexico, Indonesia, Saudi Arabia, Kuwait, Iran, and Iraq.
So let’s consider Iraq.
Oil is Iraq’s most important asset, accounting for 90% of the government’s revenue and 58% of the country’s GDP. Iraq has the third-largest oil reserves in the Middle East, surpassed only by Saudi Arabia and Iran. Not only is the Middle East resource-rich, they’re big spenders when it comes to arming themselves – ostensibly to protect their oil assets. In fact, defense spending in the countries of the Middle East generally represents between 10% and 20% of total state expenditure annually:
Middle East military spending represents up to 20% of government expenses.
War motivated by the quest for oil has been part of Iraq’s modern history all the way back to World War I, when Britain conquered the area known as Mesopotamia. Although Britain granted nominal independence to Iraq in 1932, it kept large military forces in the country. In 1941, when it seemed likely that Germany would try to capture the Iraqi oilfields, the British again seized direct political power through military force. This also blocked US attempts to gain access to Iraqi oil.
During the protracted Iran-Iraq war during the 1980s, Iran’s oil storage and exports capacity were an early target of Iraqi aggression. In 1990, in a move that would draw the US to the battlefield, Iraq invaded Kuwait in an effort to control more of the region’s oil. It’s interesting to note that, when Kuwait began providing economic assistance to then-Iraqi leader Saddam Hussein during his country’s earlier battles with Iran, Iran responded by attacking Kuwait’s oil tankers.
Tellingly, when the US became embroiled in the Iraq War in 2003, the first combat operation included Navy commandos storming an offshore oil-loading platform. Iraq waged a two-front war: the battles for control over its cities and the constant struggle to protect its far-flung petroleum infrastructure against sabotage and attack. Because it was felt that Iraq’s oil infrastructure provided the economic framework for the stable Iraqi government of the future, it’s no wonder that a significant number of US soldiers were assigned to oil-security functions. As US senior officer told the New York Times, “There may be no other place where our armed forces are deployed that has a greater strategic importance.”
US Muscles in to Secure Resources in the Middle East
At least in the Persian Gulf region, providing oil security has been a staple of the US foreign policy agenda since 1936, when Standard Oil discovered massive oil deposits in Saudi Arabia. This ties into American economic interests, particularly in assuring our access to Middle Eastern oil. The US spent $7.3 trillion defending the Persian Gulf from 1976 to 2007 and now spends $50 billion a year securing access to Middle Eastern oil, according to a 2010 Milken Institute study. The 1973-1974 OPEC oil embargo and the 1990 invasion of Kuwait are both dramatic examples of how regional forces have challenged US access to fuel.
In fact, analysts at the global think tank RAND Corporation said there are three primary reasons why the US is involved in the Persian Gulf:
- Ensuring access to oil supplies
- Preserving regional stability
- Preventing the emergence of regional hegemonic, i.e., disproportionately influential, powers.
Although the Middle East accounts for about 30% of the world’s oil supply, the bulk of its production goes to Europe and Japan, not the US. However, our role as a global superpower means protecting international trade and economy. The US has dominated Gulf security since the 1970s, after Britain pulled its resident military from the region.
One way we do this in the Middle East is as the primary defender of the sea lanes along which oil is transported, from the Strait of Hormuz through the Indian Ocean into the Pacific.
US military presence in the Strait of Hormuz keeps sea lanes open.
About 20% of the Middle Eastern oil supply passes through the Strait for delivery to India, Japan, China, and South Korea. Even though these countries import anywhere from 40% to nearly 80% of their individual total oil supply through this route, they pay exactly nothing to secure the flow. At the same time, the US spends billions of dollars each year to police chokepoints along the way and ensure that oil flows around the globe. Although the physical oil needs of the US economy can be met closer to home – from Canada, Mexico, South America, the North Sea, and, of course, increasingly from domestic shale development – we recognize that a massive shortfall of oil in the Middle East not only affects the price of oil everywhere, but can have stunning ramifications on the worldwide economic system.
US Shows Its Brawn as Global Police
Lest you think that the US limits its oil “security guard” functions to the Middle East, consider our enforcement presence in many other petroleum-rich regions around the world to keep the oil flowing freely.
For one, the US assumed significant responsibility for protecting the Baku-Tbilisi-Ceyhan (BTC) pipeline. This 1099-mile crude oil pipeline runs a perilous route from Baku, Azerbaijan, to the Mediterranean port city of Ceyhan, Turkey. Owned by a consortium of 11 energy companies from the US, Europe, and Asia, this pipeline first pumped oil in 2005.
Or take embattled Colombia, where left-wing guerrillas have repeatedly tried to sabotage that country’s vulnerable oil pipelines that run from fields in the interior to ports on the Caribbean coast. Washington has spent hundreds of millions of dollars to enhance oil infrastructure security, and US Army Special Forces personnel trained and equipped Colombian forces to guard the 480-mile pipeline.
Although African oil imports to the US have fallen off since the rise of domestic shale, US military involvement in that region increased during the period from the late 1990s to the mid-2000s, when we were more dependent upon Nigerian sweet, light crude in particular. The Africa Crisis Response Initiative (ACRI), established by President Bill Clinton in 1997, was designed to increase the amount of US security assistance to African regimes. The effort was expanded and renamed the African Contingency Operations Training and Assistance (ACOTA) program in 2004. Its goal: to protect US access to oil resources because “disruption of supply from Nigeria would represent a major blow to the oil security strategy of the US.”
A New American Workout Regimen?
The rise in US shale production and relatively flat domestic oil consumption is, of course, making the nation far less dependent upon imports from the Middle East and other countries. In fact, China has surpassed us in terms of OPEC-oil imports:
China overtakes the US in OPEC oil imports.
This change is problematic for both China and the US. The Chinese economy depends in part on oil from a region dominated by the US military. After all, when tankers leave Persian Gulf terminals headed for China, it’s the US Fifth Fleet that’s securing the area. At the same time, the US is spending military dollars to help a country that has formed partnerships with nations who aren’t necessarily on our side, such as Iran. Over the past several years, China has become Iran’s biggest oil customer. And in addition to purchasing Iranian oil and natural gas, in 2011 China signed a $20 billion agreement to boost bilateral cooperation in Iran’s industrial and mining sectors. Both moves could ultimately offset some of the US power in the Middle East.
But even if China weren’t becoming more important in the Middle East, US influence there might shift anyway as we become more self-reliance for our energy needs. At least that’s the view of Anders Aslund, senior fellow at The Peterson Institute for International Economics. He argues that US energy self-sufficiency means America will be less tied to the global market and, therefore, less likely to intervene in Middle East affairs.
Retired Marine Major General A.L. Jackson has a slightly different view. He says that less reliance on other countries for oil should help the US take “a more balanced look at our foreign policy.” We’d still be heavily involved in the Middle East, he says, but the focus could be more diplomatic and less militaristic.
In other words, as the US builds our own oil empire, we’ll use less muscle on others.
