Is It about the Oil?

“No War for Oil” is one of the most popular slogans in the many emergency demonstrations sprouting up around the world in response to the criminal kidnapping of Nicolas Maduro and Cilia Flores from their residence in Caracas, Venezuela and their forced removal to detention in the US.

For many outraged by the naked military aggression on Venezuelan sovereignty, the abduction is an escalated step toward the capture of Venezuelan energy resources by the US government, given that Venezuela has the largest proven petroleum reserves of any country at this moment. 

The argument goes that-- when you pull the curtain back-- the ultimate goal of US imperialist designs is the control over and possible exploitation of Venezuela’s most important resource.

Having argued frequently that oil-imperialism or energy-imperialism is often an important-- if not decisive-- factor in capitalist foreign policy, this claim is appealing. Since the time when Britain in the early twentieth century turned from coal-burning naval ships to oil, petroleum has become more and more essential for the functioning, growth, and protection of capitalist economies. Consequently, intense competition for a rapidly diminishing, increasingly hard to discover, and growing-costly-to-exploit resource dictates the actions of great power rivals.

History gives us important examples of resource-scarcity spurring devastating imperialist aggression by capitalist powers. Nazi Germany’s Lebensraum program had at its core the necessity of acquiring energy resources to propel its imperialist designs-- a program that led to world war. Similarly, Hirohito’s Japan-- a resource-poor island nation-- launched its Pacific offensive largely to acquire the oil to continue its war against China in the face of a US embargo.

The US embargo to deny oil to Republican Spain was, conversely, an aggressive act in oil imperialism, as is today’s blockade of Cuba. The war in Ukraine is indirectly a war over energy resources, since US resolve was stoked by the opportunity to win the vast EU market from Russia-- a convenient, inexpensive, and formerly reliable supplier.

Less well known, the major oil and gas suppliers are constantly influencing global politics through manipulating production and prices. The most well-known example is the 1970’s OPEC oil strike against Israel’s Western supporters (an act that the Arab countries have lost the stomach for in recent times).

As a wise friend speculated once: “Why do you think the US never occupied Somalia after the Battle of Mogadishu in 1993 left 92 US casualties? Because there was no oil!”

Yet many believe that the attack on Venezuelan sovereignty was not about the oil… even with the President of the aggressor state saying that it was! 

Instead, they believe it was about Western values, the rule of law, democracy, petty grievances, hubris, or even drug smuggling. Those in the loyal opposition-- Democratic Party leaders-- share many of these same explanations, but fault the Trump administration for its procedural or legalistic errors.

The center-left, the bogus-left, and the anti-Communist left deny that oil could be the motive because they imagine that it might bolster the case for an explanation based upon classical Leninist imperialism-- that the invasion of Venezuela was motivated by corporate interests, by exploitation of resource-rich countries.

Thus,  widely-followed liberal economist Paul Krugman scoffs at the idea that Venezuela was invaded for oil: “... whatever it is we’re doing in Venezuela isn’t really a war for oil. It is, instead, a war for oil fantasies. The vast wealth Trump imagines is waiting there to be taken doesn’t exist.”

Krugman collects and endorses the most popular arguments against the “war for oil” viewpoint:

1. Venezuela reserves are a lie.

2. Venezuela's heavy crude oil is uneconomic, undesirable, and unwanted.

3. The Venezuelan industry is so decrepit that it is beyond rescue.

4. The US has so much sweet, light crude oil available at low cost that no one would want Venezuelan oil.

The Nobel prize award-winner’s dismissal could easily be dismissed by simply asking why-- if acquiring Venezuelan oil is so pointless-- did Chevron ship 1.68 million barrels of Venezuelan crude oil in the first week of January, according to Bloomberg?

And then there is the ever-voracious, parasitic Haliburton-- the consummate insider corporation-- that announced that it's ready to go into Venezuela within months!

It is worth looking a little deeper into the reasons that Venezuela’s oil is a possible target of imperialist design.

If Venezuela’s oil reserves are even one-third of what OPEC, The US Energy Information Administration, or The Energy Institute concede, their reserves would still be double those of the US. 

While Venezuela's heavy, sour crude is costlier to extract and refine, it remains as a legacy with many refineries in the US that were established before the shale boom. Naked Capitalism concedes that “[i]t is true that the US has motive, in that our refineries are tuned so that 70% of the oil they process is heavier grades, despite the US producing light sweet crudes.” It further quotes The American Fuel and Petroleum Manufacturer's website:

Long before the U.S. shale boom, when global production of light sweet crude oil was declining, we made significant investments in our refineries to process heavier, high-sulfur crude oils that were more widely available in the global market. These investments were made to ensure U.S. refineries would have access to the feedstocks needed to produce gasoline, diesel and jet fuel. Heavier crude is now an essential feedstock for many U.S. refineries. Substituting it for U.S. light sweet crude oil would make these facilities less efficient and competitive, leading to a decline in fuel production and higher costs for consumers.

Currently, Canada exports 90% of its very heavy, sour oil to the US, accounting for approximately a quarter of its total exports to the US. Oil from the Alberta oil sands is also expensive to extract and refine, but nonetheless amounts to 4 to 4.5 million barrels per day exported to the US. It must be acknowledged that future Venezuelan oil counts as powerful leverage in the recent and continuing political and economic friction between the US and Canada, especially as Canada is defying the US by building “a new strategic partnership” with China.

Much has been made of the state of the Venezuelan oil industry, today producing around a million barrels a day, down from its peak at over 3.5 million barrels per day decades ago. Indeed, the US blockade has stifled investments, shuttered export markets, and denied technological advances. Nonetheless, Venezuela has produced as much as 2 million barrels a day as recently as 2017. Admittedly, it would take significant investment to return to the 2017 level and vast investment to restore the level of the 1970s. 

Many commentators are “shocked” by the enormous capital required to upgrade the Venezuelan oil industry. They forget earlier “shocking” assessments of the fracking revolution: “The U.S. shale oil industry hailed as a “revolution” has burned through a quarter trillion dollars more than it has brought in over the last decade. It has been a money-losing endeavor of epic proportions.” 

Still, the Trump administration's gambit has many competitors concerned that US control over Venezuela’s oil “would reshape the global oil map--putting the US in charge of the output of one of the founding members of the Organization of the Petroleum Exporting Countries and, along with America’s own prodigious production, give it a potentially disruptive role in a market already struggling with oversupply.” According to The Wall Street Journal, US oil production, US political and corporate domination of Guyana’s emerging energy sector, and now Venezuela’s reserves, may place the US in a position to unbalance the market, particularly at the expense of the OPEC alliance, a move of enormous political consequence.

The critics of oil-imperialism fail to understand all of its dimensions. They crudely simplify the politics of oil to the immediacy of extraction and its costs of the moment, ignoring indirect impacts, the wider prospects, and the longer term.  

Nor do they grasp the issues that are facing the US domestic oil industry. While fracking has allowed the industry to return to being the largest crude oil producer in the world, the industry faces the perennial question of peak production for a given technology-- the ever-present problem of rising costs of discovery and extraction. Further, the exalted Permian Basin is “becoming a pressure cooker”, pressing upon both costs and public acceptance. “Swaths of the Permian appear to be on the verge of geological malfunction. Pressure in the injection reservoirs in a prime portion of the basin runs as high as 0.7 pound per square inch per foot, according to a Wall Street Journal analysis of data from researchers at the University of Texas at Austin’s Bureau of Economic Geology.” As The Wall Street Journal also reports: “A buildup in pressure across the region is propelling wastewater up ancient wellbores, birthing geysers that can cost millions of dollars to clean up. Companies are wrestling with drilling hazards that make it costlier to operate and complaining that the marinade is creeping into their oil-and-gas reservoirs. Communities friendly to oil and gas are growing worried about injection.”

Because of the current glut of oil (likely retaliation by OPEC+ producers seeking to drive down US production below its cost of production and recover market share) the number of operating rigs is down 14% in the Permian. Oil markets are volatile, competitive, and transient. Where Venezuelan crude will fit into these equations remains an open question.

And then there is the Essequibo, a region currently within the borders of Guyana, but disputed by Venezuela. Recent discoveries in the area promise a potential of over 11 billion barrels of oil, with Exxon estimating a production of 1.7 million barrels per day by 2030. This economic plum is now off the table in the conflict between the Maduro government and Guyana and Exxon. As OILPRICE.com puts it succinctly: Trump’s Venezuela Takeover Will Make Guyana Oil Safer… for the US and Exxon. 

Let us not forget China. The People’s Republic of China has granted around $106 billion in loans to Venezuela since 2000. Daniel Chavez, writing in TNI, notes that those loans place “it fourth among recipients of Chinese official credit globally.” Estimates vary, but the PRC imports between 400,000 and 600,000 barrels per day from Venezuela, at least doubling since 2020. While it is less than 5% of PRC usage, it is not inconsequential. And it represents a serious penetration of capital and trade in the Western hemisphere-- the US sphere of interest.

It underscores the reality that oil-politics is not merely about the immediacy of reserves, extraction, costs, and price, but also about competition and rivalry within the imperialist system. The competition and conflict between the US, Venezuela, Guyana, Canada, PRC, OPEC, and other oil-producing countries is intrinsic to a system that lives and breathes thanks to its exploitation of energy resources. In that regard, it is still most clearly viewed through the prism of Lenin’s theory of advanced capitalism devised over a hundred years ago. 

I give the last word to the informed and serious student of the oil industry, Antonia Juhasz:

If the greatest lie the devil ever told was to convince us that he wasn’t real, the greatest lie the oil industry ever told us is to convince us that they don’t want oil. Where do we even begin to think about that as possible? They want to control when they produce it and how, and under what terms. They need to show a growing amount of oil that they can count as their reserves.

There are very few big pots of oil left sitting around anywhere unclaimed. The only way to get that is to increase technology, go into very expensive, technologically complex modes of production that face a lot of resistance. Venezuela is a country that [the big oil companies] were producing in not that long ago and making money in not that long ago and have wanted to get back into but on their own terms.

So I think when they protest publicly, one, it’s to distance themselves from Trump’s extremism, but two, it’s a great public negotiating tactic. They’re basically saying publicly, and the media is repeating it, “We wouldn’t want to operate in Venezuela. Oh, my God, it’s expensive, it’s technologically complex.” I actually think those are ridiculous things if you look where else they operate.

Greg Godels

zzsblogml@gmail.com

Venezuela: Where Next?

We must speak the truth: therein lies our strength, and the masses, the people, the multitude will decide in actual practice, after the struggle, whether we have strength. VI Lenin, 1905

Hugo Chavez will live on as one of the most outstanding foes of US imperialism in our time. His defiance of successive US governments was truly remarkable. Situated in the US backyard, Venezuela-- under Chavez’s leadership-- brought joy and admiration to millions throughout the world and inspired others in Central and South America to mount their own response to US domination. Faced with foreign intervention, coup attempts, and a vicious domestic opposition, Chavismo will be honored for rebelling against US arrogance and aggression long after his death.

However, Chavismo was not socialism, nor did it construct a path to socialism. Chavez brought a Christian love and respect to the poor and disadvantaged and offered a dash of utopian “socialism” gleaned from Western leftist “advisors.” The movement was multiclass, with the working class playing no special role. The transformation of the state into a peoples’ democracy was never projected. In short, a radical transformation was not and is not secured against the maneuvers of the domestic bourgeoisie and foreign intervention.

Consequently, Venezuela’s path is very susceptible to detours, reversals, and backsliding, especially in the face of potent domestic reaction and foreign intervention. History has shown that mobilization and empowering of the working class is the most important barrier that a government can erect against the machinations of hostile class forces. The ready cooperation of the parties of the most militant workers-- the Communists-- is essential to this effort.

Yet, the Maduro government not only rejected the collaboration of the Communist Party of Venezuela (PCV), but effectively banned the PCV and obstructed its electoral participation. This unprincipled attack on the PCV is well documented; no one among the international solidarity community has disputed its veracity. 

Yet those who know of the complicity of the Venezuelan Supreme Court in enforcing the ban choose to ignore the Court’s failure. They choose to look away from the denial of any hint of due process or transparency in the Court’s slavish toadying to the Maduro government. 

It speaks poorly of a left that indignantly rallies against comparable politically tainted decisions of the highest courts in their own lands.

The recent Venezuelan election is the object of intense contention. Ultimately, the Venezuelan people will resolve the question of its legitimacy, as they, and they alone, must do. 

Does it help Venezuelans find the truth for some to pretend that the most recent electoral process measured up to the past practices applauded by a number of recognized international observers? One prominent left commentator appealed to the Venezuelan Constitution to sheepishly note that the Constitution did not mandate that the electoral council respect those past practices-- hardly, a ringing defense of the results that he, and many others, stoutly maintain.

Of course, it is scandalous that the Maduro government marked “Paid” on the election results through the same compromised Supreme Court that attempted to arbitrarily shape the outcome beforehand by denying ballot status to some parties, including to the Communist Party.

To be sure, the Venezuelan people will overcome this blemish on the legacy of Hugo Chavez and return to a political process that will welcome the most ardent champions of working people, the Communists.

Greg Godels

zzsblogml@gmail.com

 

The Ugly Face of Anti-Communism

Since the Russian revolution, the founding of the Communist International, and the organization of a revolutionary party “of a new type” in nearly every country, Communist and Workers Parties have been in the sights of every country’s bourgeoisie. In nearly all countries, the bourgeoisie, its political parties, its media, and its other henchmen have sought to thwart, even destroy the revolutionary vanguard of the workers. Thus, the existence of maneuvers or actions to suppress or repress Communist Parties comes as no surprise.

Throughout the last one hundred six years, a Communist Party’s size or influence has been reflected in the force or violence to which they are met. That, too, comes as no surprise.

Of course Communists resist the repression that inevitably ensues from capitalism’s defenders. In some cases and on some rare occasions, a deeply embedded sense of fair play or principled belief in liberal values among the masses ensures that Communists enjoy a modicum of permitted activity in spite of the ruling bourgeoisie’s wishes.

So it should come as no surprise that the bourgeoisie in Venezuela would like to bury the Communist Party, consigning it to the political margins or worse. Over the course of the Venezuelan Communist Party’s long and determined history of the defense of Venezuela’s workers, it has been attacked, repressed, and banned by bourgeois politicians or the military. In fact, since its birth in 1931 until 1969, the Party has known little more than five years of legality. 

It should come as no surprise, either, when a popular movement wins electoral victories against the established bourgeois parties, promising to defend Venezuela’s independence and to implement a people’s program, that Venezuela’s Communist Party would enthusiastically offer conditional support. With its own program based on revolutionary Marxism-Leninism, the vigorous support the Communists offered to the government of Hugo Chavez was necessarily conditional, though supportive.

The Chavez program was vaguely socialist-- drawing on Christian ethics, utopian socialism, and a motley assembly of enthusiastic volunteer academic advisors from around the world. Nonetheless, it drew the enmity of US imperialism and its allies for its foreign policy and resource independence. While it defied the influence of the domestic bourgeoisie, the Chavez government did not establish workers’ power or eliminate the bourgeoisie’s economic base.

Despite these weaknesses, the Communist Party of Venezuela (PCV) continued to defend the government and support it against US intervention and counter-revolutionary intrigue. The PCV continued its conditional support in the post-Chavez era-- with Maduro’s election-- but with emerging differences over domestic policy, especially with regards to the working class and corruption.

Over the last decade, the differences grew sharper. In the eyes of the PCV and in its own words: “It is on the reality of total rupture with the Unitary Framework Agreement [an agreement proposed before the 2018 election] and with the programmatic bases of the Bolivarian process initiated by Hugo Chavez that the PCV distanced itself from the Maduro government.”

Of course the distancing does not mean abandoning joint patriotic resistance to US and other foreign intervention.

In the wake of these political differences-- a common enough feature of center-left and left electoral formations-- the Venezuelan Supreme Court of Justice imposed a new leadership on the PCV on August 11, a wildly arbitrary and unjust move with no possible motivation other than to weaken and disable the PCV. Venezuela’s highest court summarily ruled that a new leadership-- composed of renegades, dissidents, and non-members-- should constitute a new leading body, negating the democratically elected leadership of the PCV from its last Congress in November of last year.

Venezuelan Communists were denied serious participation, due process, and the right to appeal this attempt to disable a historical instrument of the Venezuelan working class.

Some might dismiss this as a rogue court attacking the PCV, but the fact that the Venezuelan government had sought to deny electoral participation by the PCV earlier and that a prominent leader of the leading political party had mounted a campaign against the PCV, demonstrate that Maduro’s party was complicit in the court’s maneuvers. 

Certainly the government, Maduro, and Maduro’s party have had every opportunity to denounce or resist the blatant attempt to disarm the working class’s most dedicated advocates, the Venezuelan Communists. They have not.

Clearly, this is an instance of raw anti-Communism, updated to the twenty-first century. Others can probe the reasons that Maduro and his party have succumbed to anti-Communism, but succumb they have. If they believe that creating a bogus Communist Party will deflect criticism or improve their electoral opportunities, it will not be the first time that fear of Communism leads to the suppression of political choices and dishonors the perpetrators.

But the PCV will endure. Its cadre will find their way through this thicket of distraction and continue to fight for working people.

Many Communist and Workers’ Parties have rallied-- along with many other honest people-- in defense of the PCV and the cause of Venezuelan workers. They understand the cost of anti-Communism on the fate of working people.

But many on the left have failed this moment. Their reasons constitute a basket of opportunism. They stare at their shoe tops, equivocate, plead ignorance, or soil the banner of solidarity. History will judge.

Greg Godels

zzsblogml@gmail.com

    

Solidarity with the People of Venezuela!

This coming September will mark 45 years since the US helped engineer a bloody coup against the Chilean government, a government seeking to break the chains of imperial dominance and capitalist enslavement. Today the US government is at it again, engaging its enormous power to destroy a liberating project of the Venezuelan people. In the interim, US dirty hands have been present in thwarting the self-determination of peoples throughout the world, in some cases multiple times. Afghanistan, El Salvador, Nicaragua, tiny Grenada, Panama-- the list of the violated goes on and on-- extending to more recently, Libya, Syria, Ukraine, Honduras, and, at the moment, Venezuela.

It doesn’t matter whether the US is ruled by Republicans or Democrats. When the first whiff of national independence is detected by the global watch dogs, the alarm sounds and the political “leaders” fall in line.

Surely only the willfully blind fail to see a pattern. You don’t have to be a Marxist to grasp that the US is systematically and unilaterally reining in countries deemed by its corporate interests to be renegades. Nor do you have to study Lenin to see that this is the behavior that history associates with empires. Thus, the word “imperialism” should come easily to even those who have little or no knowledge of the scientific precision of the term.

And it is US imperialism that now holds Venezuela in a death grip.

Unlike with Chile, the facts are readily before us. In the midst of the Cold War, the US went to great lengths to disguise its intervention behind the cloak of the covert services. In the intense competition with the socialist countries, the US fought hard to appear on the world stage as a champion of democracy. US aggression hid behind the doctrine of “plausible deniability.”

But today, in the attempted subversion of Venezuelan self-determination, there are no masks, no cloaks, no double talk. The plan is out in the open. We can find public records of the millions of dollars allocated for phony human rights groups, for subversive NGOs, for opposition parties, and even for purveyors of violence. We can trace the escalation of sanctions through three administrations, sanctions designed to disrupt, cripple, and dismantle Venezuela’s economy and finances. Ironically, the Venezuelan people's US CITGO operation once offered free home heating oil to the US needy. Today, the US government is attempting to steal CITGO from the Venezuelan people.

Oppositional electoral tactics, assassination attempts, and street violence failed to provoke the Venezuelan people into rejecting the Bolivarian process. The failures, the corruption, the leadership strife, and the foreign dependency of the opposition instead led directly to the sweeping electoral victory by President Maduro in the 2018 election.

In response to the divided and demoralized opposition, the US government rallied Maduro’s enemies behind a naked plan-- a plan both desperate and extremely audacious-- to depose the legitimate government with a virtual unknown, notable for his penchant for extremism and his malleability before his US masters. Urged on by notorious gusanos-- Republican Senator Marco Rubio and Democratic Senator Robert Menendez-- US operatives met with the opposition in late December/early January, according to The Wall Street Journal, and began to concretely develop the plans for a coup based upon a parallel government. An administration official reported to the WSJ that “The opposition at this point believed, and told US officials, that they needed the international community’s backing to affect the political dynamic inside Venezuela.”

The plan went forward and weeks later Vice President Pence called the dutiful puppet and told him to proceed. The next day, the young graduate of George Washington University, Juan Guaidó, stood with a gaggle of his supporters and announced that he was, in fact, the President of Venezuela. This must have come as a shock to most Venezuelans who did not recall his name on the previous May’s Presidential ballot. Yet like abject toadies, government ministers in Latin America, Canada, and the EU immediately made anti-Maduro noises, called for new elections, or even threatened to recognize the unelected President. That is the reality of Jack-in-the-Box imperialism.

The US media, willing collaborators with the coup plotters, have for years deemed Maduro a dictator, a tyrant, a murderer, and worse. They eagerly returned to those themes with horror stories and accounts of deprivation and economic duress without a mention of the draconian sanctions that bleed the Venezuelan economy. After the call for January 30 demonstrations, NPR, a particularly vicious journalistic beast (“Stop the Maduro Genocide”), reported “Protesters filled streets across Venezuela on Wednesday in a show of strength for Juan Guaidó….” Accompanying the article is a picture of a handful of demonstrators, reminiscent of the infamous toppling of the Saddam statue in Baghdad.

The Wall Street Journal similarly recorded the Wednesday demonstrations (see below) with the apologetic caption: “Venezuelans opposed to Nicolas Maduro protested in Caracas on Wednesday. Larger antigovernment protests are expected Saturday.”

Quite a “show of strength”!

Similarly, Sunday morning’s CBS News website coverage of the opposition’s Saturday demonstration carried an impressive picture of a massive march. But curiously, the marchers constituted a sea of red, the colors worn by the Chavistas. By Sunday evening, the picture was gone.

The videos of the well-to-do marchers and the pot-bangers will bring back to many of us memories of the strident, orchestrated Chilean momias who served imperialism well with overwrought drama prior to the 1973 coup.

Showing their customary spinelessness, Democrats ignored, equivocated, or hailed the coup attempt. Illinois Senator Durbin was absolutely ecstatic. The so-called progressive wing was little better. Only Tulsi Gabbard courageously and emphatically spoke against the coup, despite the fact that her Presidential campaign has come in for brutal, unprincipled attack by the media. For a sampling of shameful vulgarity by most politicians, watch Max Blumenthal’s interviews of legislators commenting on the coup attempt.

This is the moment that requires unwavering, unqualified solidarity with the Venezuelan people and their elected government. If human rights mean anything, they must be universal; they must extend to everyone regardless of whether we share their beliefs or their politics. And at the top of the rights hierarchy, as its exponents agree, is the right of self-determination, the right to find your own way, even to make your own mistakes. If all of the loud, insistent Western human rights movements are to be more than cover for Western imperialism, if they are to be more than a bludgeon to thrash societies struggling to overcome the legacies of backwardness, disunity, and instability imposed by colonial and imperial domination, then they must stand against US intervention in Venezuelan affairs. They must demand that the US remove all sanctions, cease funding factions, and recognize the Maduro government.

Isn’t it odd that a liberal intelligentsia that can understand and vigorously condemn juvenile bullying cannot grasp that the most powerful country in the world by far is bullying a small country of 32 million mainly poor people?

It is not acceptable for self-described “progressive” Democrats to give a pass to US intervention by damning the Maduro government (or any other government out of favor with the US ruling class). Opining on Venezuelan politics by those who can’t name three Venezuelan cities may make for an entertaining parlor game, but it has no bearing on the question of US intervention. US intervention is immoral, illegal, and ill-advised, whether in Venezuela, Syria, or anywhere else.

Nor is it helpful for “leftists” to use this moment to lecture their friends and foes on the true revolutionary path while giving short shrift to solidarity.

One such pundit recently conceded that: “Leftist opinion on the crisis in Venezuela tends correctly to blame American meddling and the local bourgeoisie for trying to make the people ‘cry uncle’ as Reagan infamously described his intervention in Nicaragua.” But then he went on to devote thousands of words to his own pet theory of revolutionary change. His grudging statement of solidarity was lost in his windy exercise in self-indulgence.

Our left should do better.

It’s quite simple: Hands off Venezuela.

Greg Godels

zzsblogml@gmail.com

Stirring the Energy Pot

Since February of 2017, I have written frequently about changes in the global political economy of energy and the effects of those changes on imperialist rivalries and accompanying political trends: New Developments in Political Economy: The Politics of Oil (2-6-17), US Imperialism: Changing Direction (6-25-17), More on Energy Imperialism (7-26-17), Economic Nationalism: What It Means (12-28-17).

The broad gist of these articles was that (1) the era of global economic integration was severely challenged by the 2007-2008 shock; (2) a technological revolution in energy extraction moved the US-- the leading imperialist power-- towards energy independence; (3) the failure of OPEC and others to rein in US energy production and the continuing sluggishness of growth and trade prodded the US towards a further goal of energy dominance through competition in energy markets; (4) without the burden of dependence on stable, secure international energy sources, US imperialism stepped back from its role as the primary promoter and guarantor of global integration and stability; (5) intensifying competition in the context of stagnant growth fostered the politics of economic nationalism and the promotion of national self-interest in contrast to the politics of globalism.

Since the British navy and other navies converted from coal to oil-burning vessels in the early 1900s and with the burgeoning dependence of modern militaries on oil, securing energy sources has been a strategic centerpiece of imperialist strategy.

It is not too great of an exaggeration to see German expansion in World War II as accelerated by a thirst for reliable energy supplies (Romania, Soviet Union). And the denial of energy resources to the Japanese militarists similarly prodded aggression in Southeast Asia.

For the US, declining domestic production and increasing reliance on foreign oil, particularly from the Middle East, led to greater attention to security and stability in the Middle East. The US established a powerful gendarmerie to police the region: the Shah’s Iran, Israel, and the Arabian petrostates. Billions of dollars of military hardware bolstered these watchdogs at various times in an effort to guarantee stable supplies of oil. US security services worked overtime to install stable regimes in all of the petrostates and their neighbors. US dominance was sealed with the establishment of the dollar as the petroleum-trading currency. The dominance was so complete that the US was able to use low petroleum prices as a weapon against the Soviets during the Cold War.

But matters have changed radically with the technology-enabled explosion of oil and natural gas production in the US.

The New

Writing in The Washington Post (The US is about to be the world’s top crude oil producer. Guess who didn’t see it coming, 3-7-18), Charles Lane reminds us of how matters were before: “During his 2006 ‘addicted to oil’ State of the Union address, President George W. Bush bemoaned imports from unstable parts of the world and called for replacing 75% of Middle East oil imports by 2025.” Bush, like his father, spent great efforts-- lives and wealth-- policing and bullying those “unstable” oil producers.  

Energy writer James Blas explains in Bloomberg Businessweek (The New World Order of Energy Will Be American, 1-29-18) how matters are now, how the US no longer has to “tiptoe around oil supplying nations” whether they are “friends” (Saudi Arabia) or “adversaries” (Venezuela). Instead, “energy dominance” is on the agenda.

Blas notes that the US won the battle for dominance started by Saudi Arabia in 2014 when the Saudis drove the price of West Texas crude oil down to as low as $26 a barrel through massive overproduction, expecting to cripple US shale production. Thanks to huge investments, the shale oil companies survived the attack, cut costs, and roared back. Today growth is faster than pre-2014 when prices for oil were actually much higher. And imports are now below 2.5 million barrels a day, the lowest level since record-keeping began in 1973 (imports were 12 million barrels per day in 2008).

Thanks to geo-political “flare-ups” (generally US-instigated instability), US exports at one point in 2017 hit 2 million barrels a day, mainly to Canada and the People's Republic of China (PRC). Exports are fully expected to grow even more in the future.

Venezuela is Illustrative of the US’s growing interest in disrupting oil markets to its advantage. Through disinvestment and sanctions, Venezuelan oil production dropped nearly 30% last year. Similarly, the US-NATO destruction of Libya has succeeded in disabling its oil industry. The wreckage of the Libyan energy industry means that oil prices would have to reach $78.10 per barrel for the industry to break even. With prices trending well below that number, there clearly is little chance for the Libyan industry to recover, invest, or add to the country’s sovereign wealth.

With massive corruption and an expensive war to finance, Saudi Arabia now needs $70 a barrel to merely break even. Hoping to escape from dependency on an oil regimen, the Saudis had planned a public offering (a sell-off to private interests) of its national oil company, ARAMCO. In the current unfavorable competitive environment, that move has been postponed time and time again.

Formerly a price dove-- the world’s advocate for low oil prices-- the Saudis are now desperate to achieve higher prices. Their escape plan from their losing hand in oil competition-- Vision 2030-- is endangered by modest prices. To reduce supply and increase both demand and prices, the Saudis are a strong advocate for sanctions against Iran, as are powerful energy interests within the US ruling class.

The new, competitive environment has brought forth new, unexpected alliances. Russia-- a frequent foe of Saudi foreign policy-- has recently signed a comprehensive energy agreement with Saudi Arabia. For its part, Russia is offering to take a substantial position in any future IPO of ARAMCO, boosting its prospects (along with a similar offer from the PRC). Saudi Arabia, in return has agreed to invest in Russian LNG projects and Eurasian drilling. It appears that Russia and the PRC are looking to guarantee security, stability, and cooperation among the energy-producing states, a role that the US has now abandoned with its pursuit of energy dominance and a role that is a necessary condition for peace in the region.

Because emerging US oil dominance (and sanctions: war by other means) threatens to disrupt the reliability and stability of existing petro-suppliers, the PRC has begun to negotiate crude-oil futures contracts in renminbis rather than petro-dollars.

Natural Gas

Much of the growing US animosity that is so apparent in US-Russia-PRC relations revolves around competition in the natural gas market. Through political fantasies, sanctions, threats, saber-rattling, and contrived affronts, the US has made every effort to wean Europe away from Russian natural gas, especially the expansion of pipelines to Europe promising consistent supply and favorable prices.

Some Eastern European countries, mired in historic anti-Russia enmity, have welcomed US liquefied natural gas (LNG) shipments, constructing new receiving facilities. They accept inconvenience, inefficiency, and higher prices as the cost of the politically motivated anti-Russia campaign. The US is trying to browbeat the rest of Europe into giving preference to US LNG.

But the big prize is the PRC, the fastest growing natural gas market in the world. Both Russia and the US are fighting to supply natural gas: Russia has a pipeline project (GAZPROM) sales agreement to supply 1.3 trillion cubic feet a year, while the US (Cheniere Energy) has contracts to supply 1.2 million tons of LNG per year.

The recently announced selective, very selective US tariffs-- apparently really only against PRC-- likely have a covert motive. US Secretary of Commerce Wilbur Ross suggested that increased Chinese purchases of LNG might have a happy consequence for tariffs by reducing the US-PRC trade deficit-- another shot fired in the energy wars.

Trade Tariffs

The sharpest edge of US economic nationalism is the emerging establishment and threats of trade tariffs. Short of embargo or out-and-out war, establishing disruptive trade barriers is the most hostile posture towards other nations. In the case of a powerful country like the US, tariffs constitute unabashed arrogance. As perceptive left commentators have noted, the US has always pressed its problems unto its weaker “friends,” but not with this hubris.

Lest anyone think this is a ‘Trump’ problem and not shared by fellow Republicans and Democrats, attention should be paid to what others are saying. When Trump announced the first round of tariffs directed at the PRC, Democratic Senate leader Chuck Schumer was quoted in The Wall Street Journal: “I don’t agree with President Trump on a whole lot, but today I want to give him a big pat on the back.”

And Reuters reported on April 1 that Democratic Senator Elizabeth Warren, speaking in Beijing:

The Massachusetts Democrat and Trump foe, who has been touted as a potential 2020 presidential candidate despite rejecting such speculation, has said U.S. trade policy needs a rethink and that she is not afraid of tariffs.

After years of mistakenly assuming economic engagement would lead to a more open China, the U.S. government was waking up to Chinese demands for U.S. companies to give up their know-how in exchange for access to its market, Warren said.

“The whole policy was misdirected. We told ourselves a happy-face story that never fit with the facts,” Warren told reporters on Saturday, during a three-day visit to China that began on Friday.

Clearly, broad sections of the US ruling class have joined the trend towards economic nationalism.

The implications for peace or war are stark.

Greg Godels

zzsblogml@gmail.com