Professor Paul Rogers of Bradford University and Professor Mary Kaldor of the  LSE explore the current status of the military dimension of Britain's oil security strategy, and look at ways in which the UK can work to avoid future involvement in oil-related conflict

  

Paul Rogers: First question: August 1990, the Iraqis under Saddam Hussain overran Kuwait very quickly.  Within about four or five weeks a very large coalition, which you may recall included eventually an Egyptian and a Syrian division, was being established to evict the Iraqis from Kuwait.

In mid-October 1990, after something like 300,000 troops and 500 aircraft were being assembled in the region, there was a visit from the then-Chief of Staff of the U S Armed Forces Colin Powell with the then-Defence Secretary, to the Gulf and they decided that before they would evict the Iraqis they would double their forces.

As a matter of interest, I believe it is true that when Lady Thatcher resigned in November of 1990, the cabinet which took her resignation only made two decisions: one was to take her resignation and the second was to double the British forces going to the Gulf to 45,000.

So, by January 1991 at the actual start of that Gulf war there were 600,000 troops and 1,000 aircraft in and around Saudi Arabia, mostly in Saudi Arabia.

A very interesting question: how on earth could that be done? How could you actually move those immense modern forces, with all their tanks, into Saudi Arabia without spending two or three years to prepare the way?

One of the interesting things is the way it had already been prepared. And that essentially is what I want to talk about.

If you go right back to the 1880s and 1890s, in very broad terms, oil exploration and development was primarily in very few locations: in the Caucasus, eventually the Dutch East Indies as it became, hence Royal Dutch Shell; Pennsylvania in Ohio, and, when the internal combustion engine came in and you had the real expansion of demand for oil, then in the United States it moved down to Oklahoma, Texas and California, and oil was developed as reserves in other parts of the world.

Essentially, you go right through until the early post-second world war period, 1945, before there was any clear connection between issues of oil supplies and security.

And in many ways, the first administration to be concerned with that was actually the Rosevelt administration, in 1944/45 because, from an American perspective, the sheer rate at which oil was being used by the US armed forces towards the end of the second world war meant that even though the United States had immense domestic supplies there was a risk they might not be adequate. In fact the first real American security interest in the Persian Gulf came in the late 1940s, curiously enough. For the next 25 years I would say, right through to the end of the 1960s, it really went back much more to commercial interests and essentially the rise of the United States oil companies in the Gulf; Aramco in Saudi Arabia; the Iranian consortium  in the old Iran; these were much more commercially orientated and essentially there was not a great concern about oil security.

You can date the change in that to one single day quite easily and that day was 17 October 1973. That was day eleven of the Yom Kippur-Ramadan War. And if you recall that was the war in which Syria and Egypt tried to turn around the gains that Israel had made in the Six-Day War in 1967 by attacking Israel, largely by surprise. The Syrians over the Golan Heights and the Egyptians across the [unintelligible] Line, the Suez Canal and into Sinai. With massive aid from the United States and extraordinary airlifts, the Israelis, within about eight or nine days, had turned back the assaults and in fact were starting to threaten the Egyptian Third Army, just to the west of the Suez Canal.

The end result of that was huge concern, not in OPEC as a whole, but in the Arab members of OPEC, that inner group, OAPEC (the Organisation of Arab Petroleum Exporting Countries). They met in Kuwait on 16 and 17 October 1973 and decided, remarkably, on a very strong course of political action.

They did three things. The first was that they put the price of oil up by 72%, 72% in one fell swoop. It was already a very strong bull market. The second thing was to announce they were going to cut back all their production by an average of 15%, to make sure the new price stuck; and the third thing was that they were going to embargo all oil supplies to the United States and to the Netherlands.

The United States because the US was particularly strong in support for Israel, and the whole purpose was to put pressure on Israel to get an early ceasefire, to avoid the defeat of the Egyptian army. Why the Netherlands? The Dutch, to put it politely, were pretty fed up with this. Of course the reason [for this] was that Rotterdam was Europe’s key oil port and if you can actually embargo oil supplies to the Netherlands, that blocks supplies to Germany and some other countries. What was obviously very significant was that this oil price rise held. In fact, in a further series of rises, by May 1974 the overall price rise had been 450%. There was then a slow drop in oil prices and then another surge after the Iranian revolution in 1979/80. But it was at this point that the US military got far more interested. In a series of primarily classified studies done immediately after ‘74/’75 they sought to determine if the crisis had got even more severe and oil supplies had essentially been cut from the Persian Gulf, whether the US military could have intervened. And the result, very clearly, from one key, non-classified study, was that they couldn’t.

A key Congressional research service report, carried out for one of the Senate sub-committees, looked at the security of oil supplies from an American perspective’ at a time in 1973/74, when in fact the US was only modestly dependent on imports (about 15% of its oil came from overseas). But the concern was the damage to the world economy if the oil tap was actually turned off.

The end result of this was that eventually, by a lot of banging of heads together, the Carter administration managed to get the rapid deployment force established in 1979.  The full title is Joint Rapid Deployment Task Force. It was very difficult because it meant the air force, the navy, the marines and the army all had to act together to have forces available for very rapid deployment. Officially, this was anywhere in the world. Unofficially, it was all about the Persian Gulf. That was almost as far as it had gone until the end of the 70s, with the new oil price hike in the middle East, mainly as a result of the Iranian revolution; and the Reagan administration coming to power were hugely concerned now that almost a bulwark of the western defence system in the Persian Gulf was lost because of the Iranian revolution.

The point here is that the concern about Persian Gulf oil supplies was not so much about any internal crisis but about Soviet intervention. These are the Cold War years, don’t forget. And one of the most extraordinary documents in a very long sequence in the United States (I still have a copy) was the military [unintelligible] statement for fiscal year 1982. That was the first [unintelligible] statements for the Reagan administration. Now many of us will remember those days. I mean, Mary was incredibly prominent in European nuclear disarmament and many of us expected with that new [unintelligible] statement, it would be all about the Soviet nuclear threat. In fact, it was dominated by the threat to America’s resources; and page after page was about the importance of the Persian Gulf oil supplies and what the Soviets might do if there was a major crisis and they moved in there. Of course with the Iranians having gone through a revolution, you really had [a lot of] paranoia.

It was because of that, that the rapid deployment force was expanded to US central command in 1984. The end result of that was a singular programme not to base big forces in the area. That was not generally allowed, certainly by the Saudis, but to build facilities for very rapid deployment. So the big air bases that were built in Saudi Arabia in the mid-1980s were all four to six times bigger than the Royal Saudi Air Force needed and the end result of all of this [was] the very large wharfing facilities built at Al Jabile on the Red Sea. All these were available if there ever was any crisis involving a Soviet attempt to actually take major control of the Persian Gulf oil supplies.

One of the people who was very prominent, one of the key American analysts pushing the idea of expanding the rapid deployment force to the central command level, a much bigger level, was a guy called Jeffrey Record, well-known analyst of Middle East affairs. He wrote a fascinating pamphlet in 1980, advocating the expansion of the rapid deployment force and he said: OK your main reason [for this] would be the possibility of Soviet intervention but another possibility, for example, would be the Iraqis invading Kuwait. And that was published 10 years to the month before it actually happened.

So essentially, you get an idea of this very key importance.  And of course when you did get the invasion of Kuwait in 1990, it was Norman Schwarzkopf who was the Commander in Chief in central command, who led the operation to evict them. A very big coalition.

Let me just continue, I’m two thirds of the way through and I just want a few more minutes to bring you up to date.

One side-effect, in fact in many ways in the current context not a side-effect, of the results of that Gulf War was that the United States did indeed maintain its troops in Saudi Arabia from 1991 onwards. You have the huge airbase at Dhahran and many other facilities. And that in turn was one of the key motivations in the development of the al-Qaeda movement. You have the movement which had its origins in the mujahideen in Afghanistan against the Soviets and from their perspective they had pushed the Soviets out of Afghanistan, indeed had crippled a superpower. From their point of view, you now had ‘crusader forces’ in not just Afghanistan but the kingdom of the two holy places.

And if you see the pattern of the development of al-Qaeda in the 1990s, it flowed very much from that US decision, leading on eventually to things like the Kobal Towers bomb towards the end of the 1990s, and all that has followed since.  So there is a connection there.

Let me finish though by just putting the current and possible future situations in context. The best way to do it is if you can imagine a rectangle of 1,000 miles north to south and 400 miles east to west. Imagine it’s put down over the North Sea, from the Dutch coast right through to north of Shetland. Under that imaginary rectangle you had, at the peak 15 years ago, about 3.5% of all the world’s oil supply. Quite a decent puddle by most standards and it kept Britain going for a while. It made Thatcherism survive, you might say; the Norwegians are still doing pretty well out of it. But imagine if you could take that imaginary rectangle and put it over the Persian Gulf, it would stretch from the Emirates in the south, it would take in the Saudi fields, the offshore fields, the west Iranian fields, all of the Kuwaiti fields, the huge Rumaila oil field and all the Iraqi fields right up to the [unintelligible] axis.

Under that rectangle you have about 62% of all the world’s oil. 62%. And of course it is high quality, easily exploitable oil. The only reason that the Iraqis, when they were retreating from Kuwait in March 1991, could set fire and burn the Kuwaiti oil fields was because they [the oil was] were coming out under natural pressure. They didn’t even have to pump the stuff out. It actually came out under its own gas pressure. So, essentially, this is pretty high quality oil and most of the world’s oil is there.

I’m not arguing that the United States went in to terminate the Saddam Hussein regime five years ago simply because of Iraq’s oil. It’s true that Iraq has four times the reserves of the US but there were a complex set of motives. What I am saying is if you have an immense concentration, you add to that the changes in oil use. Now almost of all of western Europe is a very strong oil importer, as is Japan, as is South Korea.

The United States is rather different. As I said, until the early 1970s the United States did not import much oil. It’s now almost up to the 60% level and will rise to over 70% by 2020, and that’s even allowing for the large reserves in north-east Alaska. 

The interesting one though is China. In 1993, as recently as that, just 15 years ago, China was entirely self-sufficient in oil. In two years’ time it will be importing half of all the oil it requires. And this does much to explain the very large agreement the Chinese have signed with the Ahmadinejad regime in Tehran over the last two or three years. Some of the biggest single oil export and production deals that we’ve seen anywhere in the world.

So the trend very much is in a sense for the Persian Gulf to become more and more important in terms of oil strategy. Our dear friends in the Ministry of Defence are not very keen to say that the reason we’re going to construct the largest warships ever in the Royal Navy, the two big super-carriers, is because we will then have a capacity for worldwide expeditionary warfare, which currently is really only held by the United States. Those are the only size of carriers that could match the [unintelligible] super carriers of the United States. So Britain certainly will have that capability, and has not had anything equivalent for about 35 years, to actually be involved in major conflicts, specifically I think in the Middle East.

So I think where we are now is clearly a very important point in that the security of the Persian Gulf, from an oil perspective is extremely high - one takes the point that you have the Orinoco heavy oil deposits, you have the Canadian Tar Sands. But one must also remember that  when I say 62% of the oil’s in the Gulf, most of the rest, another 18%, is in  Russia, Khazakstan [and] Venezuela. And so when you put that all together you see this extraordinary preponderance. That doesn’t mean necessarily that you have enduring wars in the Persian Gulf but it’s absolutely critical to factor this in among all the other factors involved.

What I would say is that there are far different, much more powerful arguments for moving away as fast as one can from oil addiction and those relate very much to climate change. But the key thing is, if you do actually diminish the dependency on oil for a country such as the United States, then in fact not only do you make a contribution to climate change control but also you reduce your reliance on a key strategic part of the world.

One of the most fascinating papers I’ve seen in the last few years came from The Committee on the Present Danger, a very ‘hawkish’ group in the United States historically; and this was on oil security. When I saw it and printed it off, I looked at the heading and thought this is going to be all about bulking up the American forces in the Gulf but it was the complete opposite. What it said was that the dependence on Gulf oil, as it developed, and that’s quite apart from all the African and Latin American issues, as it developed, was actually a vulnerability to the United States. And this was The Committee on the Present Danger saying the US had to embark on a rapid programme to go into alternatives to oil.

So it’s interesting where that thinking comes from at this present time.

Mary Kaldor: The question we were asked was, ‘How to avoid future oil wars’. And I have two answers; one which is the same as Paul’s and one which is a bit different, but they both apply.

My first answer is the need for a co-operative global approach to energy-saving and diversification of energy sources.

And my second answer is that we need transparency of oil revenues and involvement of civil society in monitoring and debating how oil revenues are spent.

What I’m going to do is to talk very briefly about the first, partly because Paul has already talked about it; and I’m going to speak much more at length about the second because I think it’s an aspect of the whole issue that’s rather neglected.

So, very briefly, on the first point, I think what’s very interesting about the subject of energy security is that it’s often discussed in very traditional geo-political ways, and that’s exactly what Paul has described.

Going back to the first and second world wars, there’s always a notion that we need oil for national security and therefore controlling territories where oil is based, or controlling transportation routes, is absolutely key to our national security. You hear terms like ‘The Great Game’ or ‘the scramble for Africa’ [when?] the concern is with western energy security.

When we talk about climate change, we suddenly switch to a much more holistic, global approach. We worry about the planet as a whole, and not just us in the West. Actually, as Paul has just said, the solution, both to energy security and to climate change is the same and if indeed we were to deplete our oil resources, as my colleague Nick Stern says, we would actually kill the planet. I know you’re going to talk a lot about peak oil and the [unintelligible] curve. So probably what we need to do, both for energy security and for climate change is to start thinking seriously about co-operative, global approaches, energy security for people in Africa as well as us; in energy saving and alternative energy sources. That’s my first point.

The second point is more important. I think oil wars are about much more than geo-political competition. They’re about, what’s known in the literature, as the resource curve or the petro-state. I’ll explain what I mean by that.

If the US did really go to war in Iraq for oil, and it certainly was part of its justification for war, then this was actually a very stupid thing to do because it led to huge instability in Iraq, and the level of oil production now is actually lower that it was before the war. If the US was really concerned about securing energy supplies from Iraq, the easiest thing would have been to make a deal with Saddam Hussain, as indeed France and Russia did. I’m not disputing that maybe it did go to war for oil reasons but what I’m saying is this is an irrational policy. What the US found itself in the middle of was an oil war but an oil war of a different kind, one that results from the character of Iraq as a petro-state, and that’s what I want to say something about.

What do I mean by a petro-state? Many of you will have heard of the resource curve. The resource curve is usually described in economic terms. What it’s supposed to mean is that in countries which are heavily dependent on oil rent, on the production of oil and the export of oil, the exchange rate appreciates, with the result that the non-oil sector declines and that creates economic problems, especially when the price of oil declines and the price of oil is actually very volatile. In fact, economists have all sorts of methods for dealing with this. The best method is, like Norway, to create an off-budget oil fund. But many petro-states don’t do that. They spend all their oil money, and the question is why?

Well, I think the answer to that is something political. The resource curve is not only economic, it’s political and that’s where the theory of the petro-state comes in.  Essentially, states are very much shaped by the sort of revenue they depend on. So, typically, in a democratic society, the state depends on taxation and the economy is relatively independent from the state.  So that requires a kind of social contract between citizens and the state, if citizens are going to pay taxes, and that’s really what the democratic process is all about.

In traditional Communist states, for example, which weren’t democratic, money was forcibly extracted from citizens either through repression or through a powerful ideology. In petro-states, the revenue of the state depends on oil rents, the revenue from oil. States don’t need a social contract with their citizens and they can maintain their power through a mixture of repression and patronage. Oil states are typically patronage states. There are layer upon layer of networks through which the oil money is given out. Venezuela is just as much a patronage state as Saudi Arabia but luckily it patronises the poor rather more than Saudi Arabia does.

The problem with patronage states is that the politics are of a very different kind. People compete for access to power because they want access to patronage and the oil rents. They compete to be the people who hand out power rather than competing for different types of policies. Indeed in countries like Azerbaijan you pay huge sums for a position in government. It’s a kind of investment.

I think the problem in oil states is that when there’s not enough money for repression and not enough money for patronage, this competition for access to the state becomes more and more intense and can often degenerate into violence. When it degenerates into violence, it can actually then become predatory. You soon get the situation where non-state actors start getting direct access to the oil revenue through a range of methods, whether it’s blowing up oil wells, taking oil workers hostage, and so on and so forth.

I think what you see with all oil states is a kind of cycle. In a sense what I’m describing is rent seeking at three levels: the geo-political level, the US competing for the Persian Gulf; the national level, people competing for positions in power; and the local level, with non-state actors competing for little bits of territory. And what you see is a kind of cycle that you pass through.

In the early part of [the last] century, the competition was mainly geo-political and what happened was that the great powers established states which would establish the kind of law and order which was necessary to maintain the supply of oil. They depended on authoritarian states, like Saudi Arabia or Iran, to extract oil. Then gradually, these states got a life of their own and they started nationalising the oil companies and demanding a greater share of the revenue and this was often the state-building phase. You see that [happening] in Iraq in the 60s and 70s. And then the oil price falls or more and more people want access and you gradually degenerate. Actually, in Iraq oil revenues had declined because of the war with Iran and because of sanctions, so it was on the verge of state failure when the United States invaded in 2003.  What we have now is typically what I would call an oil war, which is a war that survives on access to oil rents.

When we did this study, we were absolutely amazed at the number of wars we studied that were like this. Take the case of Chechnya, which I’d never thought of as an oil war. Actually what happened in Chechnya was this: oil is very near the surface in Chechnya, rather like Paul described. The warlords had backyard oil wells. The Russians did not get enough money from the ministry of defence to cover their military budgets, so they sold the oil that was supplied by the Russian ministry of defence on the Moscow market and, in exchange, they bought cheaper Chechen oil, thereby making a

profit to pay the wages of the soldiers. And thereby keeping the whole thing going for a long time, on the basis of oil revenues.

Colombia is another fascinating case, where each of the actors had different methods. So the FLN (?) would blow up oil wells, sell the oil and use the money to give to the poor, which gave them this ‘Robin Hood’ image. The FARC would control local municipalities in oil producing areas and would extract the rents that way; and the right-wing para-militaries got money through protecting BP. So you had everybody having their own mechanism for fighting these wars.

As I said, Iraq is an absolute case study if you want to know how the insurgency is financed, the pipelines are being blown up, oil is being smuggled in the Persian Gulf, oil workers are being taken hostage for ransom, you name it, they’re doing it in Iraq.

So what’s the solution? Well, I think the first thing I want to say is that oil can have a mitigating effect because there’s a certain point where, if the violence gets too great, you can no longer extract the oil. I think that sort of happened in Chechnya and I think it may be beginning to happen in Iraq. I think what you need in order to establish some kind of peace in this context, is a co-operative approach at all levels.

You need it at the geo-political level, you need the outsiders to come together and have a common policy. You need to think of energy security as a general, common problem for all and not just for the west or for Russia, which is what happens in the Caucases and the Persian Gulf. You need what I would call a human security approach to energy, [to ensure] that every single individual has enough energy.

You need to think about it at the national level.  And key to thinking about it at the national level is transparency and accountability. Where do the revenues come from? How are the revenues spent?

There have been some useful initiatives like The Extractive Industries Transparency Initiative, and there’s the Revenue Watch Institute and

various groups that are trying to get oil companies to say exactly how much they’re paying. You may have heard about the ‘publish as you pay’ campaign.

But you also need civil society monitoring and you need civil society campaigns. I think BP, Shell and Exxon all suffered a lot both from their involvement with these para-military groups. BP got its fingers burned in Columbia; Shell in Nigeria in the Niger Delta area; and Exxon Mobil in Aceh.

Then you need a strategy at the national level that involves thinking about [unintelligible] so everybody knows where the oil revenues are, where they go and how they’re spent.

And then you need a strategy at the local level, where the oil is extracted, which involves a co-operative community approach to oil. Actually, one of the authors of the chapters in our book, Jenny Pearce from Bradford (one of Paul’s colleagues), called hers ‘Beyond the Perimeter Fence’.  She was talking about BP in Columbia and her point was that the traditional way oil companies extracted oil was in enclaves. They tried to protect their enclaves, just as the west was protecting itself in a global sense.

Her argument was that nowadays [with the] spread of weapons and the ease with which [one] can act in this way, the only way to extract oil is not by protecting your enclave but by having a co-operative approach with locals. BP, to do it credit, took a very, very interesting approach in [unintelligible] in Colombia, which Jenny described, where they really tried to change their oil policies in Colombia. It’s one example, and they haven’t done so well in the Caucasus, but it’s an interesting example.

What I’m saying is really that if we want to avoid future oil wars, we have to think about all these levels. One idea which we might think about is some kind of international energy regime which not only deals with the problems of climate change and alternative sources of energy but also deals with the problem of how to deal with oil rents.

Just to go back one step to when I was talking about the petro-state and the authoritarian state. If you look around the world today at authoritarian states: Russia, Burma, Iran, Saudi Arabia, Venezuela, and their regimes, at the moment they have enough money for both repression and largesse. But if we actually are reducing our dependence on oil, then there’s going to be a huge problem of a transition, not just a transition from an oil-centred economy to a less oil-centred economy but a transition from dependence on oil rents to diversification of the economy. And that’s going to be a huge problem in political terms.

We face dangerous transitions in all of these countries and so I think there needs to be much more attention paid to this particular problem if what we want to do is avoid oil wars.

I think these are the real oil wars rather than the competition: the ‘Great Game’ competition, or the ‘scramble for Africa’.

Transcript (by Sheila Fairbairn) of a meeting held by the All Party Parliamentary Group on Conflict Issues and the All Party Parliamentary Group on Peak Oil and Gas (APPGOPO), Westminster, 27 February 2008.