Oil for the Lamps of China.

Half of the world’s easily available oil is in Iran, Iraq, and Saudi Arabia. That oil powered the great Western economic surge since the Second World War. In 1973 and 1979 “oil shocks”—sudden rises in the price of oil and restrictions in supply—badly damaged the world’s economy in multiple ways. In 1979 the Soviet Union invaded Afghanistan, on the border with Iran when it was caught up in the turmoil of the Iranian Revolution. Visions of Red Army tanks reaching the northern shores of the Persian Gulf danced through the heads of many people. In 1980 President Jimmy Carter announced that “Any attempt by an outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States.”

Actually, the American concern went beyond combatting an “outside force [seeking] to gain control.” The American concern encompassed any Middle Eastern state seeking to dominate so much of the region’s oil production that it could move the world market price for oil. What the Americans wanted was a stable world market in oil. President George H. W. Bush showed just how seriously the United States took both Carter’s declaration and the larger interest in price stability when he gathered a broad international coalition to cream Iraq in 1990-1991 after it occupied Kuwait.[1]

The spread of the Industrial Revolution into Asia has created a vastly more complicated situation. The collapse of the Communist experiment in the Soviet Union led the Peoples’ Republic of China (PRC) and then other one-time believers in a planned economy to turn toward a market economy. A head-long rush to industrialization in the non-Western world followed. Oil became in ever-greater demand. Thus, no sooner had Saddam Hussein’s invasion of Kuwait been defeated than the PRC entered international oil markets. By 2003 China had passed Japan as the world’s second largest economy and the second largest oil consumer.

The Chinese strategy began with two components. First, China re-cycles part of the profits from exporting low-cost manufactured goods to the West into buying up oil and gas drilling rights in developing countries. These export earnings leave China with deep pockets, so the Chinese often just out-bid their Western competitors. More than thirty countries have received Chinese investments in oil production. They include Algeria, Libya, Egypt, Sudan, Chad, Nigeria, Iran, and Indonesia. All Persian Gulf countries sell oil to China.

Second, China went where Western countries would not go. In particular, China began to court Sudan and Iran. By 2005, China had invested $15 billion in Sudan’s oil drilling and production. China chose to ignore the outcry in the West over the government of Sudan’s brutal war against its own people in the western and southern parts of the country. In Iran, China began trading modern weapons for oil to a state under a Western arms embargo. Cash investments soon followed. People in rich countries often forget that a delicate conscience is a luxury.

The Chinese demand for oil destabilizes the world oil market. Fighting China won’t be like fighting Iraq. So, perhaps people will strike a deal?

On all aspects of energy: http://www.eia.gov/countries/index.cfm?view=consumption

Matthew Yeoman, The World in Numbers: Crude Politics,” Atlantic, April 2005, pp. 48-49.

[1] The Great Depression of the 1930s had brought Hitler to power in Germany and had paralyzed the Western democracies. Reasoning backward from their own youthful experiences, many people in the West thought that if you hadn’t liked the Second World War and the Holocaust, then you should try to avoid a new world economic crisis. So, regardless of what Western liberals and Middle Eastern conspiracy theorists believe, “war for oil” isn’t the same thing as “war for oil companies.” It’s the same thing as “war for peace and prosperity.”


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