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Obama’s New Oil Wars
Washington Takes on ISIS, Iran, and Russia
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It was heinous. It was underhanded. It was beyond the bounds of international morality. It was an attack on the American way of life. It was what you might expect from unscrupulous Arabs. It was “the oil weapon” — and back in 1973, it was directed at the United States. Skip ahead four decades and it’s smart, it’s effective, and it’s the American way. The Obama administration has appropriated it as a major tool of foreign policy, a new way to go to war with nations it considers hostile without relying on planes, missiles, and troops. It is, of course, that very same oil weapon.

Until recently, the use of the term “the oil weapon” has largely been identified with the efforts of Arab producers to dissuade the United States from supporting Israel by cutting off the flow of petroleum. The most memorable example of its use was the embargo imposed by Arab members of the Organization of the Petroleum Exporting Countries (OPEC) on oil exports to the United States during the Arab-Israeli war of 1973, causing scarcity in the U.S., long lines at American filling stations, and a global economic recession.

After suffering enormously from that embargo, Washington took a number of steps to disarm the oil weapon and prevent its reuse. These included an increased emphasis on domestic oil production and the establishment of a mutual aid arrangement overseen by the International Energy Agency (IEA) that obliged participating nations to share their oil with any member state subjected to an embargo.

So consider it a surprising reversal that, having tested out the oil weapon against Saddam Hussein’s Iraq with devastating effect back in the 1990s, Washington is now the key country brandishing that same weapon, using trade sanctions and other means to curb the exports of energy-producing states it categorizes as hostile. The Obama administration has taken this aggressive path even at the risk of curtailing global energy supplies.

When first employed, the oil weapon was intended to exploit the industrial world’s heavy dependence on petroleum imports from the Middle East. Over time, however, those producing countries became ever more dependent on oil revenues to finance their governments and enrich their citizens. Washington now seeks to exploit this by selectively denying access to world oil markets, whether through sanctions or the use of force, and so depriving hostile producing powers of operating revenues.

The most dramatic instance of this came on September 23rd, when American aircraft bombed refineries and other oil installations in areas of Syria controlled by the Islamic State of Iraq and Syria (ISIS, also known as ISIL or IS). An extremist insurgent movement that has declared a new “caliphate,” ISIS is not, of course, a major oil producer, but it has taken control of oil fields and refineries that once were operated by the regime of Bashar al-Assad in eastern Syria. The revenue generated by these fields, reportedly $1 to $2 million daily, is being used by ISIS to generate a significant share of its operating expenses. This has given that movement the wherewithal to finance the further recruitment and support of thousands of foreign fighters, even as it sustains a high tempo of combat operations.

Black-market dealers in Iran, Iraq, Syria, and Turkey have evidently been assisting ISIS in this effort, purchasing the crude at a discount and selling at global market rates, now hovering at about $90 per barrel. Ironically, this clandestine export network was initially established in the 1990s by Saddam Hussein’s regime to evade U.S. sanctions on Iraq.

The Islamic State has proven adept indeed at exploiting the fields under its control, even selling the oil to agents of opposing forces, including the Assad regime. To stop this flow, Washington launched what is planned to be a long-term air campaign against those fields and their associated infrastructure. By bombing them, President Obama evidently hopes to curtail the movement’s export earnings and thereby diminish its combat capabilities. These strikes, he declared in announcing the bombing campaign, are intended to “take out terrorist targets” and “cut off ISIL’s financing.”

It is too early to assess the impact of the air strikes on ISIS’s capacity to pump and sell oil. However, since the movement has been producing only about 80,000 barrels per day (roughly 1/1,000th of worldwide oil consumption), the attacks, if successful, are not expected to have any significant impact on a global market already increasingly glutted, in part because of an explosion of drilling in that “new Saudi Arabia,” the United States.

As it happens, though, the Obama administration is also wielding the oil weapon against two of the world’s leading producers, Iran and Russia. These efforts, which include embargoes and trade sanctions, are likely to have a far greater impact on world output, reflecting White House confidence that, in the pursuit of U.S. strategic interests, anything goes.

Fighting the Iranians

In the case of Iran, Washington has moved aggressively to curtail Tehran’s ability to finance its extensive nuclear program both by blocking its access to Western oil-drilling technology and by curbing its export sales. Under the Iran Sanctions Act, foreign firms that invest in the Iranian oil industry are barred from access to U.S. financial markets and subject to other penalties. In addition, the Obama administration has put immense pressure on major oil-importing countries, including China, India, South Korea, and the European powers, to reduce or eliminate their purchases from Iran.

These measures, which involve tough restrictions on financial transactions related to Iranian oil exports, have had a significant impact on that country’s oil output. By some estimates, those exports have fallen by one million barrels per day, which also represents a significant contraction in global supplies. As a result, Iran’s income from oil exports is estimated to have fallen from $118 billion in 2011-2012 to $56 billion in 2013-2014, while pinching ordinary Iranians in a multitude of ways.

In earlier times, when global oil supplies were tight, a daily loss of one million barrels would have meant widespread scarcity and a possible global recession. The Obama administration, however, assumes that only Iran is likely to suffer in the present situation. Credit this mainly to the recent upsurge in North American energy production (largely achieved through the use of hydro-fracking to extract oil and natural gas from buried shale deposits) and the increased availability of crude from other non-OPEC sources. According to the most recent data from the Department of Energy (DoE), U.S. crude output rose from 5.7 million barrels per day in 2011 to 8.4 million barrels in the second quarter of 2014, a remarkable 47% gain. And this is to be no flash in the pan. The DoE predicts that domestic output will rise to some 9.6 million barrels per day in 2020, putting the U.S. back in the top league of global producers.

For the Obama administration, the results of this are clear. Not only will American reliance on imported oil be significantly reduced, but with the U.S. absorbing ever less of the non-domestic supply, import-dependent countries like India, Japan, China, and South Korea should be able to satisfy their needs even if Iranian energy production keeps falling. As a result, Washington has been able to secure greater cooperation from such countries in observing the Iranian sanctions — something they would no doubt have been reluctant to do if global supplies were less abundant.

There is another factor, no less crucial, in the aggressive use of the oil weapon as an essential element of foreign policy. The increase in domestic crude output has imbued American leaders with a new sense of energy omnipotence, allowing them to contemplate the decline in Iranian exports without trepidation. In an April 2013 speech at Columbia University, Tom Donilon, then Obama’s national security adviser, publicly expressed this outlook with particular force. “America’s new energy posture allows us to engage from a position of greater strength,” he avowed. “Increasing U.S. energy supplies act as a cushion that helps reduce our vulnerability to global supply disruptions and price shocks. It also affords us a stronger hand in pursuing and implementing our international security goals.”

This “stronger hand,” he made clear, was reflected in U.S. dealings with Iran. To put pressure on Tehran, he noted, “The United States engaged in tireless diplomacy to persuade consuming nations to end or significantly reduce their consumption of Iranian oil.” At the same time, “the substantial increase in oil production in the United States and elsewhere meant that international sanctions and U.S. and allied efforts could remove over 1 million barrels per day of Iranian oil while minimizing the burdens on the rest of the world.” It was this happy circumstance, he suggested, that had forced Iran to the negotiating table.

Fighting Vladimir Putin

The same outlook apparently governs U.S. policy toward Russia.

Prior to Russia’s seizure of Crimea and its covert intervention in eastern Ukraine, major Western oil companies, including BP, Chevron, ExxonMobil, and Total of France, were pursuing elaborate plans to begin production in Russian-controlled sectors of the Black Sea and the Arctic Ocean, mainly in collaboration with state-owned or state-controlled firms like Gazprom and Rosneft. There were, for instance, a number of expansive joint ventures between Exxon and Rosneft to drill in those energy-rich waters.

“These agreements,” Rex Tillerson, the CEO of Exxon, said proudly in 2012 on inking the deal, “are important milestones in this strategic relationship… Our focus now will move to technical planning and execution of safe and environmentally responsible exploration activities with the goal of developing significant new energy supplies to meet growing global demand.” Seen as a boon for American energy corporations and the oil-dependent global economy, these and similar endeavors were largely welcomed by U.S. officials.

Such collaborations between U.S. companies and Russian state enterprises were then viewed as conferring significant benefits on both sides. Exxon and other Western companies were being given access to vast new reserves — a powerful lure at a time when many of their existing fields in other parts of the world were in decline. For the Russians, who were also facing significant declines in their existing fields, access to advanced Western drilling technology offered the promise of exploiting otherwise difficult-to-reach areas in the Arctic and “tough” drilling environments elsewhere.

Not surprisingly, key figures on both sides have sought to insulate these arrangements from the new sanctions being imposed on Russia in response to its incursions in Ukraine. Tillerson, in particular, has sought to persuade U.S. leaders to exempt its deals with Rosneft from any such measures. “Our views are being heard at the highest levels,” he indicated in June.

As a result of such pressures, Russian energy companies were not covered in the first round of U.S. sanctions imposed on various firms and individuals. After Russia intervened in eastern Ukraine, however, the White House moved on to tougher sanctions, including measures aimed at the energy sector. On September 12th, the Treasury Department announced that it was imposing strict constraints on the transfer of U.S. technology to Rosneft, Gazprom, and other Russian firms for the purpose of drilling in the Arctic. These measures, the department noted, “will impede Russia’s ability to develop so-called frontier or unconventional oil resources, areas in which Russian firms are heavily dependent on U.S. and western technology.”

The impact of these new measures cannot yet be assessed. Russian officials scoffed at them, insisting that their companies will proceed in the Arctic anyway. Nevertheless, Obama’s decision to target their drilling efforts represents a dramatic turn in U.S. policy, risking a future contraction in global oil supplies if Russian companies prove unable to offset declines at their existing fields.

The New Weapon of Choice

As these recent developments indicate, the Obama administration has come to view the oil weapon as a valuable tool of power and influence. It appears, in fact, that Washington may be in the process of replacing the threat of invasion or, as with the Soviet Union in the Cold War era, nuclear attack, as its favored response to what it views as overseas provocation. (Not surprisingly, the Russians look on the Ukrainian crisis, which is taking place on their border, in quite a different light.) Whereas full-scale U.S. military action — that is, anything beyond air strikes, drone attacks, and the sending in of special ops forces — seems unlikely in the current political environment, top officials in the Obama administration clearly believe that oil combat is an effective and acceptable means of coercion — so long, of course, as it remains in American hands.

That Washington is prepared to move in this direction reflects not only the recent surge in U.S. crude oil output, but also a sense that energy, in this time of globalization, constitutes a strategic asset of unparalleled importance. To control oil flows across the planet and deny market access to recalcitrant producers is increasingly a major objective of American foreign policy.

Yet, given Washington’s lack of success when using direct military force in these last years, it remains an open question whether the oil weapon will, in the end, prove any more satisfactory in offering strategic advantage to the United States. The Iranians, for instance, have indeed come to the negotiating table, but a favorable outcome on the nuclear talks there appears increasingly remote; with or without oil, ISIS continues to score battlefield victories; and Moscow displays no inclination to end its involvement in Ukraine. Nonetheless, in the absence of other credible options, President Obama and his key officials seem determined to wield the oil weapon.

As with any application of force, however, use of the oil weapon entails substantial risk. For one thing, despite the rise in domestic crude production, the U.S. will remain dependent on oil imports for the foreseeable future and so could still suffer if other countries were to deny it exports. More significant is the possibility that this new version of the oil wars Washington has been fighting since the 1990s could someday result in a genuine contraction in global supplies, driving prices skyward and so threatening the health of the U.S. economy. And who’s to say that, seeing Washington’s growing reliance on aggressive oil tactics to impose its sway, other countries won’t find their own innovative ways to wield the oil weapon to their advantage and to Washington’s ultimate detriment?

As with the introduction of drones, the United States now enjoys a temporary advantage in energy warfare. By unleashing such weapons on the world, however, it only ensures that others will seek to match our advantage and turn it against us.

Michael T. Klare, a TomDispatch regular, is a professor of peace and world security studies at Hampshire College and the author, most recently, of The Race for What’s Left. A documentary movie version of his book Blood and Oil is available from the Media Education Foundation.

(Republished from TomDispatch by permission of author or representative)
• Category: Foreign Policy • Tags: Iran, ISIS, Oil Industry, Russia 
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  1. TomB says:

    Ought to be required reading for those who still believe—or still want others to believe—that the major reason for our continued incarceration in the ME’s hellholes is to get ahold of their oil.

    Gotta look elsewhere for that explanation folks. (See, e.g., Phil Zelikow.)

    • Replies: @Mark Green
  2. Escher says:

    Hope and change indeed. The crony capitalist takeover of society seems to be complete – they have taken over the discourse as well. Thank god for sites like this one.

  3. Anonymous • Disclaimer says:

    {Black-market dealers in Iran, Iraq, Syria, and Turkey have evidently been assisting ISIS in this effort, purchasing the crude at a discount and selling at global market rates..}

    This is nonesense. This kind of analysis usully is made by the western intelligence services and their agents.

  4. PeterB says:

    Our use of oil as a weapon goes back even further to 1941 when we and the British cut off the main Japanese oil supply. The result is history.

  5. Mr. Klare does not go far enough with his analysis. It would be fairer to say that since the fall of the Berlin Wall, the United States has worked consistently to keep some Middle Eastern oil off the market to drive up the per barrel cost, and to drive up the cost of gasoline in the United States. Remember back to the early 1990s? You could still purchase gasoline for $1/gallon. Through the 1990s, the US worked aggressively to keep Iraqi oil off the market. Since 9/11, the US has worked variously to limit Iranian oil sales, Iraqi sales, Russian sales, and of late Libyan sales. Libyan oil production has collapsed since Khadaffi was killed. With the creation of new “risks” like Boko Harem and Ebola, look for Nigerian oil production to be the next volume lost to the world market.

    Who wins? Saudi wins because it can pump more oil at higher prices. US, British, French, and other European oil companies win with higher prices. US and Canadian owners of land that holds shale deposits win. Fracking is not economical at 1980s or 1990s oil price levels.

    Traditionally the US oil industry was highly cyclical, boom and bust. Since the middle 1990s, it has been all boom.

    For folks taking the long view, the Obama pivot to Asia might be viewed with an eye toward oil. Asian producers should wonder what will shut down their production. You should also expect to see more offshore “accidents” in the Brazilian oil industry.

  6. Leave us not forget our BFF Israel and the oil & gas it claims/lusts for —

    Nor should we neglect to mention the Israel- Texas nexus, Noble Energy.

    There’s a reason so many evangelical crazies — Cruz, Perry — hail from Texas: it’s the oil money, honey; danged if Moses didn’t done hid it in the Bible.

  7. @TomB

    The ‘oil weapon’ is a mere tool. Decades ago, this tool was used against Washington. The 1973 ‘oil embargo’ used oil as a weapon against America because Zionized Washington helped Israel defeat the Arabs in the Yom Kippur War.

    Had Washington remained neutral in that local war, there would never have been an embargo directed towards the American people and the American economy. The Arab oil embargo was retaliation for US interference and US favoritism. To this day, the vast majority of Americans don’t even know this simple fact. This level of ignorance does not happen by accident.

    More recently, Washington has used its military and political power to undermine the independence, the security, and to do damage to the economic standing of numerous Mid East countries who would otherwise have no reason to resent America or its way of life. US power is routinely harnessed by Israel to enhance its regional security by inflicting enormous damage to its local rivals. Among these local rivals are Iraq, Syria, Iran, Palestine and Lebanon.

    Now Russia is being targeted by Washington in no small part because of its key alliance with Iran and Syria (two foes of Israel’s). The closer one looks, the more evident it is that Israeli interests remain at the very center of all US policy-making in the Middle East and beyond. Most Americans however have no comprehension of this.

    Many millions of people have been harmed or damaged by Washington’s trigger-happy, ‘Zionist friendly’ policies. This is one major reason why the US is so widely despised throughout the world. Washington routinely wages war or creates havoc in the Middle East for the benefit of one small country. But millions of people are paying a very heavy price for Washington’s lethal and unconditional favoritism. Few Americans understand this phenomena.

    Indeed, to this day, millions of Americans still think the serial war-making that spills out of Washington is about ‘protecting democracy’ or ‘securing oil’ or stopping ISIS. Nope. These unnecessary wars are largely designed to shore up Israeli supremacy by weakening Israel’s numerous enemies or threats.

    The ‘oil weapon’ is a tool. It is a weapon used by many players. But it is also an indicator of a far bigger problem that we in America must face. It is Washington’s permanent and unconditional support of a militant, nuclear, racist, and expanding Israel.

    • Replies: @Realist
  8. Realist says:

    Oil….another tool for U. S. hegemony.

  9. Realist says:
    @Mark Green

    Many American ‘thumpers’ are killed and maimed for the benefit of Israel. I would guess that the majority of young military personnel (non officer) are from the ‘Bible Belt’.

  10. KA says:

    The only weapon on oil used by US is the dollarization of oil. It is dollar . To get that dollar, other countries have to sell their labor,products,services,and open the internal market to US military,Pharma,intelligence,and US made laws. Otherwise no dollar. No connection to international system of finances,no bartering even,no spare parts,no medicine,no contacts or presence in international gatherings or forum.
    So America reserves the right of printing dollar and sells to other who have to do real work to get that dollar . The dollar then buys them oil and oil producing countries take that dollar to buy everyting from condom to cancer drugs ,pornography to Porsche ,safety pin to smart bombs . The countries selling those other items take the dollars to buy oil and to buy American services.
    It is a nice ponzi scheme . America prints. No war for oil. Its war to keep Dollar as the currency of the Ponzi scheme . Israel uses this Achilles heels in the system to get US into war .it uses other means also.
    Saddam was eager to sell oil to US . Zio stopped that . Saddam in 2000 gave up and started considering to sell in Euro. Iran s ready to do business in dollars. Zio don’t want . That seals the fate . So Iran has been bartering . Recent deal between China and Russia stems from the same problem Russia was facing .
    Libya Ghaddafi lost his life partly from same mistake . He was planning to undermine the dollar ,

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