Nos. 33 & 34, December 2002
Real Reasons for the US Invasion:
Indeed the US has taken the contrary course. It plans to reverse the various trends mentioned above by seizing the worlds richest oil-producing regions. This it deems necessary for three related reasons.
1. Securing US supplies: First, the US itself is increasingly dependent on oil importsalready a little over half its daily consumption of 20 million barrels is imported. It imports its oil from a variety of sourcesCanada, Venezuela, Nigeria, Saudi Arabia, even Iraq. But its own production is falling, and will continue to fall steadily, even as its consumption continues to grow. In future, inevitably, it will become increasingly dependent on oil from west Asia-north Africaa region where the masses of ordinary people despise the US, where three of the leading oil producers (Iraq, Iran and Libya) are professedly anti-American, and the others (Saudi Arabia, Kuwait, the United Arab Emirates) are in danger of being toppled by anti-American forces. The US of course doing its best to tie up or seize supplies from other regionswest Africa, northern Latin America, the Caspian region. And yet the US cannot escape the simple arithmetic:
Given its growing dependence on oil imports, the US cannot afford to allow the oil producing regions to be under the influence of any other power, or independent.1
2. Maintaining dollar hegemony: Secondly, if other imperialist powers were able to displace US dominance in the region, the dollar would be dealt a severe blow. The pressure for switching to the euro would become irresistible and would ring the death knell of dollar supremacy. On the other hand, complete US control of oil would preserve the rule of the dollar (not only would oil producers continue to use the dollar for their international trade, but the dollars international standing would rise) and hurt the credibility of the euro.
In the 1990s the major OPEC countries, after two decades of discouraging or prohibiting foreign investment in oil and gas fields, raced to invite foreign investment again to carry out massive new developments. In the late 1990s Venezuela, Iran, and Iraq struck massive deals with foreign firms for major fields. Even Saudi Arabia invited proposals for development of its untapped natural gas reserves, a move that oil giants responded to with alacrity in the hope the countrys mammoth oil fields too would later be opened to foreign investment. However, American firms were shut out of Iran and Iraq by their own governments sanctions; French, Russian and Chinese firms got the contracts instead. Chavezs increasing assertiveness threatens to shut American firms out of Venezuela as well. The Saudi dealwhich the American firms were to leadstands cancelled, apparently because of the Saudi governments fear of public resentment. Thus, if it does not invade the west Asian region, the US stands to lose dollar hegemony by losing control of the major oil field development projects in the next decade.
3. Oil as a weapon: Thirdly, direct American control of oil would render potential challengers for world or regional supremacy (Europes imperialist powers, Japan and China) dependent on the US. It is clear the US is following this policy:
The thrust is clear: Once it has seized the oil wells of west Asia, the US will determine not only which firms would bag the deals, not only the currency in which oil trade would be denominated, not only the price of oil on the international market, but even the destination of the oil.
In the short term
While the oil price hike would have an impact on all
countries, the US assesses that it would be in a better position to take
the immediate impact of higher oil prices than other countries:
Secondly, compared to other imperialist countries the US imports a smaller share of its energy needs. (It also has a strategic petroleum reserve of 580 million barrels - or almost two months imports.) Moreover, the US economy depends less on heavy industry than either the third world or other imperialist countries do, and therefore takes less of a hit when fuel prices rise.
Thirdly, and crucially, at times of international crisis capital docks at safe harbours. The US anticipates that as it demonstrates its might before the rest of the world, and the worlds oil supplies fall into its hands, investors would put their money on the dollar. If the dollar appreciates against other currencies, the US would feel the impact of the oil price hike less than other countries.(see The Profits and Pitfalls of War in Iraq, Strategic Forecasting, www.stratfor.com)
Such a strategy, however, would have a perverse effect even if it succeeds. As the dollars value rises, American goods would be displaced at home by the then even cheaper imports. US business investment, which has already fallen virtually to the capital replacement level, would fall even further, shrinking the manufacturing base.3 The trade deficitthe difference between exports and importswould widen even further, but the US would pay for it with inflows of foreign capital seeking security in the powerful dollar. As the values of other currencies fell against the dollar, other economies would be less able to absorb American imports, deepening the manufacturing recession in the US and the US trade deficit even further. The picture is one of consumption without production, dependent on inflows of borrowed foreign capital, which inflows are in turn dependent on American military supremacy. (see The Unbearable Costs of Empire, James K. Galbraith, The American Prospect, 18/11/02)
Expansion on a weakening base
There are huge economic costs to a strategy of imperialist expansion on a weakening productive base. Even without a war US military spending swallows four per cent of the GDP: the US military budget this year is $379 billion, $48 billion over the previous year. By comparison, US military spending during the Cold War (when the US faced a formidable, nuclear-armed adversary) averaged $347 billion in 2002 dollars (see statistics compiled by Defense and the National Interest online magazine, www.d-n-i.net)
The cost of an invasion of Iraq is hard to estimate. Estimates put out by the US Congress range from $44 billion to $60 billion. These seem underestimates of even the direct costs. The 1991 assault on Iraq cost $61 billion, of which $48 billion was paid for by the USs allies. Assuming the impending invasion would cost the same, the bill would come to $80 billion in todays dollars. Moreover, the Congressional Budget Office estimates the costs of military occupation of Iraq at $17 to $45 billion a year, based on the low end of costs of the Kosovo occupation. Further, the US anticipates invading other states in the region, such as Iran or Saudi Arabia. That would make the war bill an annually recurring feature. Thus direct military spending would rise by around $100 to $200 billionor another one or two percent of US GDP.
The required funds would have to be borrowed. This at a time when the US recession is pushing up the US budget deficit. Between the spring of 2001 and the autumn of 2002 the annual federal budget deteriorated by $360 billion.
As a well-known American economist, William D. Nordhaus,
points out, the broader costs to the US are much greater: higher oil prices
for the period in which supply is disrupted (particularly serious if oil
wells are damaged), as well as the psychological effect of uncertainty,
which would in turn trigger recession of the order of two to five per
cent of GDP. Totalling the direct and indirect costs, Nordhaus arrives
at a figure of $120 billion over 10 years in a completely favourable case.
But he shows that if things go wrong for the US, the total direct and
indirect costs could come to $1.6 trillion over 10 years. (Iraq:
The Economic Consequences of War, New York Review of Books,
The 1991 assault on Iraq helped bring about the US bases in Saudi Arabia; its intervention in Bosnia, and later its assault on Yugoslavia, brought it bases on the rim of Europe in case Europe should secede from the US-dominated NATO.
Since the invasion of Afghanistan, the picture has changed dramatically. US basesat first temporary but soon permanentsprang up in Uzbekistan, Tajikistan, Kyrgyzstan, Afghanistan and Pakistan, and US military advisors are stationed in Georgia. (See map.) American naval vessels now regularly visit Indian ports, and a naval base in northern Sri Lanka appears in the offing with the US intervening in the Tamil national struggle there. Overall, the American military global presence is more pervasive today than at any point in American history, says John Pike, a military analyst in Washington. (US Expands Military Ties Worldwide, Sally Buzbee, Associated Press, 15/1/02)
But bases are not enough. The US needs to suppress
the mass and political forces that are struggling against it in
these diverse regions. To meet this need there is a massive hike in US
spending to train foreign militarieswhich had already risen steeply
during the 1990s (by 1999 US Special Operations Forces were carrying out
joint exercises with 152 countries). Its like the counter-insurgency
era all over again, a US Congressional aide is quoted as saying,
referring to the Vietnam war era. Only this time were going
to be fighting terrorism instead of communism.
(Alarm bells ring over US overseas military spending, Jim
Lobe, Asia Times, 9/2/02) On any given day before September 11,
according to the Defence Department, more than 60,000 [US] military personnel
were conducting temporary operations and exercises in about 100 countries.
(Los Angeles Times, 6/1/02, quoted in US Military Bases and
In South Korea, where the US is struggling to retain its bases (that today house 37,000 troops) for targeting China at short notice, an extraordinary mass movement is raging at present calling for US withdrawal from the country. Witness the recent rally of 300,000 in the capital, as well as smaller rallies in other cities.
In the Philippines, the US bases were ousted in the early nineties through a sustained mass struggle. The fresh efforts to install US forces is already confronting mass protests from a people who were Americas first overseas colony.
In Pakistan, the only parliamentary platform campaigning for the removal of American bases made dramatic gains in Musharrafs carefully managed elections. The New York Times reports that US plans for a war on Iraq are fuelling hatred of the US in Pakistan. It cites a recent worldwide opinion poll by the Pew Research Center: 69 percent of Pakistanis held an unfavorable view of the United States and only 10 percent expressed a favorable one. Of the 44 countries surveyed, Pakistan tied with Egypt for the most negative perception of the United States. (Anti-American Feeling Rises in Pakistan as U.S. Confronts Iraq, David Rohde, 22/12/02)
Even in Kuwait, as American troops prepare for the invasion of Iraq, they are facing repeated attacks from the population whom they supposedly saved in 1991. A Kuwait official is quoted as saying The Americans have told us to downplay these incidents for fear of creating the sort of climate in which further attacks can happen. (US covers up killings of its troops in Kuwait, Jack Fairweather, The Daily Telegraph, 22/12/02)
In Palestine, Israelthe most powerful military power in west Asiawas completely unprepared for the resistance it met in the refugee camp of Jenin. It had to despatch 10,000 troops and 200 tanks, change commanders five times, and struggle for 16 days to put down the poorly armed Palestinian defenders. The Palestinians paid homage to their fighters by referring to the town as Jeningradrecalling the heroic battle of Stalingrad that marked the turning point of World War II. Jenin has been turned into rubble, and unknown numbers of Palestinians have been slaughtered; yet there is a seemingly endless stream of Palestinian youth ready to take the place of their dead fellow fighters.
And most striking of all, in Venezuela, it is a month since the pro-US forces have launched their second coup attempt, attempting to prevent the functioning of the oil industry and to paralyse the functioning of the government. They have been answered with a great wave of mass mobilisationcompletely unreported by the worlds giant media corporationsin favour of the Chavez government, indeed in favour of their sovereignty and dignity.
The US defence secretary has announced that the US is ready and willing to fight more than one major theatre conflict at a time. As the US military offensive unfolds in Iraq, in the rest of west Asia, in Colombia, in Venezuela, and in so many other lands, that claim will be put to the test.
The US military juggernaut is still geared to knocking down targets that stand in place, but has a poor record against guerrilla resistance or mass upsurges. As the US forces get bogged down in struggles with no clear conclusion or exit, the calculations of the USs present offensive drive may get unhinged.
For one, the other imperialist powers, now spectators on the sidelines, may take advantage of the USs difficulties to obtain footholds in the very regions for which the US is contending. Already the European Union (pressed by France, whose TotalFinaElf is one of the worlds five largest oil corporations) has advanced a proposal regarding the Palestinian question that is distinct from the US plan, much to the irritation of the US. Such intervention may grow as the turmoil intensifies. While these rival powers are out to advance their own imperialist interests, the sharpening of their tussles with the US will help those facing the immediate brunt of the US attack.
As the US military machine gets tied up in the unending tasks of an occupying power in the third world, the costsfinancial and politicalwould mount. The US economy, already in recession, may not be in a position to take such weight. US budgetary and trade deficits may veer out of control. Depressed demand conditions in the rest of the world as a result of US policy would boomerang on the US, as it faces less demand for its exports and sharper competition at home for its imports. The USs hope that international uncertainty will boost the dollar is only one of two possibilities. It is equally possible that, under the weight of investors fears that the US would not be able to service its mounting obligations, a dollar slide might take place.
The political costs of a deeper recession are not to be forgotten. Indeed, the entire build-up of a vast domestic machinery of repressionunder the name of the Office of Homeland Security and the USA PATRIOT Actand the whipping up of chauvinism, xenophobia, racism and fascistic sentiments are in preparation for the possible resistance at home.
A worldwide anti-war movement has already begun. On 28 September London witnessed its largest rally since the 1930s, encompassing the entire range of society. The attendance of over four hundred thousand (four lakh) calling for Freedom for Palestine and Hands off Iraq constituted a sharp political challenge to the British rulers, junior partners in the US offensive. On the same day, a hundred thousand rallied in Rome; on the next day, 50,000 in Madrid. The culmination of the protests in Europe, and the largest anti-war rally there, took place on November 8 in Florence. Many from other parts of Europe joined, as the working people and their unions, political parties, teenagers, students, the elderly, campaigners for the cancellation of third world debt, anti-capitalism activists, artists, intellectuals, and other common people came carrying their banners, placards and effigies, raising the slogans No War on Iraq, No to World War, and Bush, Blair and Berlusconi (the Italian prime minister) are murderers.
On October 26 Washington, San Francisco, and other American cities witnessed the biggest anti-war rallies since the days of the Vietnam war, armed with slogans such as Dump Bush not Bombs and No Blood for Oil, under the banner Act Now to Stop War and End Racism (ANSWER). Apart from the numbersan estimated two hundred thousand in Washington alonethree points are worth noting about this protest. First, that it came as part of a whole series of protest actions throughout the country (including a massive April 20 march in Washington in support of the Palestinian people and a very large October 6 antiwar rally in New York Citys Central Park). Second, that a large section of the participants were ordinary people who were not part of any organisation and may not see themselves as political. Third, that whereas in the 1960s such large protests were only possible three or four years after the US sent its troops to Vietnam, they are now being organised before the war has started. The anti-war movement is picking up with unanticipated speed.
The exact shape of things to come is hard to predict.
Yet it is clear that it is not the sophisticated military technology of
the US, but the response of people worldwide that will play the
crucial role in determining that shape.
2. At any rate in the US there is at present no threat of inflation (as in the rest of the developed world too); rather, the threat is of deflation, i.e. falling prices, which deters investment. (back)
3. No doubt arms manufacturers would get an instant boost. Already in the first half of 2002 the earnings of Northrop Grumman, General Dynamics, and Lockheed Martin had improved. Most American arms firms are now able to raise funds easily from the capital market, which anticipates a big boost to sales and profits by 2004.US defence sector cashes in on Bushs war on terrorism, Financial Times, 19/7/02. Demand from this sector will mitigate the recessionary trends somewhat. (back)
All material © copyright 2003 by Research Unit for Political Economy