"Whenever the U.S. says things that make a military conflict with Iran seem more likely, the price of oil rises, strengthening Iran's regime rather than weakening it," writes James Surowiecki in the February 19-26 issue of The New Yorker magazine.
For example, during the second half of last year, the price of oil plunged nearly 30 per cent, "a disaster for an economy as dependent on oil revenue as Iran's," Surowiecki observed, noting Iran pumps almost 4-billion barrels daily and sells half of it abroad.
But when Bush dispatched a second aircraft-carrier group to the Persian Gulf and declared U.S. troops will detain or kill any Iranians found helping Iraq's insurgents, "oil prices started to rise, jumping 20 percent in just two weeks," Surowiecki said, putting an extra $20-million a day in Iranian President Mahmoud Ahmadinejad's pocket.
The recent oil price surge is driven by a jump in what oil traders call the "risk premium," a costly add-on buyers are willing to pay if they think oil fields might be shut down in the future, say, owing to conflict. They're willing to pay more for oil now to guarantee they'll have oil when they need it. "That's why, in the run-up to the Iraq war, oil prices jumped more than 50 per cent," Surowiecki recalled.
(According to the Associated Press, a barrel of light, sweet crude for April delivery on the New York Mercantile Exchange February 21st was pegged at $58.58. This translates into about $2.50 for a gallon of gas in Florida.)
Over the past several years, though, due largely to the turmoil in the Middle East, the risk premium "has accounted for somewhere between ten and twenty dollars on each barrel of oil," Surowiecki reported.
Last year, Qatar's oil minister said, "If you can stop the politicians from making negative statements, I am sure you will see almost $15 disappear from the price."
Indeed. Ten months ago, when Iran threatened to attack Israel if the U.S. attacked Iran, oil zoomed to $75 a barrel. "The economic consequences of this are not trivial; in the past few years, the inflated risk premium has given Iran tens of billions of dollars that it would otherwise not have had," Surowiecki pointed out.
"The persistence of the risk premium means that Ahmadinejad, whatever his religious or nationalist inspiration, has an economic incentive to say confrontational things that spook the oil market," The New Yorker continued. "What really keeps the risk premium high is the American penchant for public responses to Iran's provocations. So cooling down the martial rhetoric --- even if we plan to take military action eventually--- would likely bring oil prices down for a time."
Surowiecki concluded, "Talking tough may look like a good way of demonstrating U.S. resolve, but when tough talk makes our opponent richer and stronger we may accomplish more by saying less."
"Talking tough" is also playing into the hands of the giant oil firms. AP reported February 1 ExxonMobil profits of $39.5-billion for last year, the largest of any corporation ever, topped the company's previous $36.1-billion record profit set in 2005.
As President Bush's aggressive wars in the Middle East and blustering talk have roiled the oil market, the oil firms that contributed so handsomely to his election campaigns have never done better. Public Citizen reported just from the time Bush took office in 2001 through the first quarter of 2006 the top five U.S. oil companies enjoyed record profits of $324.4-billion.
PC gave these profit figures in billions: ExxonMobil, $118.2; Shell, $82.3; BP, $67.8; ChevronTexaco, $43.1; ConocoPhillips, $31.1.
It's been suggested the U.S. invasion of Afghanistan was launched not to capture Osama bin Laden but to oust a Taliban regime that opposed the desires of U.S. oil companies to lay a pipeline across its territory. Months before 9/11, in July, 2001, Pakistani insiders detailed a U.S. plan to launch military strikes against the Taliban from Uzbekistan and Tajikistan by mid-October, according to Chalmers Johnson, author of "The Sorrows of Empire"(Henry Holt and Co.).
The true motives for Bush's two wars may be inseparable from the interests of the oil majors to suck up the hydrocarbon riches of central Asia and Middle East. "Prior to the American attack on Afghanistan, the big American petroleum companies active in the area --- Chevron (now ChevronTexaco), Union Oil Co. of California(Unocal), Amoco (now British Petroleum-Amoco), Exxon (now ExxonMobil) and a few others -- had all tried to get concessions from and strike pipeline deals with Azerbaijan, Kazakhstan, and Turkmenistan with little success," Johnson wrote.
"Only after the Americans started to build a complex of military bases in at least four different countries --- Afghanistan, Kyrgyzstan, Pakistan, and Uzbekistan---did the situation begin to improve for these companies."
Johnson wrote the list of people who backed the Kazakhstan pipeline to exploit the Tengiz oil field "reads like a who's who of Republican oil politicians." Chevron's chief adviser was Condoleezza Rice, a Chevron board member who pocketed a retainer of $35,000 a year plus generous stock options and who gave up that spot to become President Bush Junior's national security adviser.
Also, according to Johnson:
# Dick Cheney, between office as Bush Senior's secretary of defense and Bush Junior's vice president helped broker the pipeline deal as a member of Kazakhstan's Oil Advisory Board.
# James Baker III, a senior partner in the Washington law firm of Baker Botts, also had a hand in the negotiations. According to Johnson, Baker was a member of the U.S.-Azerbaijan Chamber of Commerce's advisory council, as was Cheney. Coincidentally, Richard Armitage, the undersecretary of state, was then co-chairman of that council.
# Brent Scowcroft, Rice's boss when he was Bush Senior's national security adviser, was a member of the board of Pennzoil, an active investor in the Caspian Sea oil consortia.
# Other U.S. public figures active in behalf of oil interests prior to the U.S. attack on Afghanistan included former Secretary of State Henry Kissinger, a consultant for Unocal; Zbigniew Brzezinski, President Clinton's national security adviser, a consultant to Amoco; and Robert Oakley, a former U.S. State department coordinator, a consultant to Unocal.
The architects of the Middle East oil wars have cashed in handsomely in other ways as well. That Vice President Cheney's former employer Halliburton is raking in a fortune from controversial no-bid contracts from the Iraq war is well known. Less well known is the Pentagon gave Halliburton's Kellogg Brown & Root subdivision an open-ended logistics contract for the Khanabad air base in Uzbekistan, established to strengthen the U.S. military presence in Asia.
Congress needs to enact legislation requiring government officials such as Cheney and Rice who advocate war against a foreign state to disclose to the public their past financial connections to those who might profit from such an attack.
While U.S. troops die by the thousands in the Middle East, and Iraqis die by the hundreds of thousands, and soaring gas prices sock motorists' and homeowners' budgets, the oil industry has never had it so good. And do you suppose blabbermouth Bush, the former oil company executive, doesn't realize every time he threatens Iran, rising oil prices squeeze motorists and homeowners even more? Those who claim George W. Bush is stupid are mistaken. He's not. And he knows what he's doing, even if the public doesn't.
(Sherwood Ross is an American columnist. Reach him at firstname.lastname@example.org)