LONDON, 5 January 2004 — Both Western and non-Western critics against the war in Iraq in April 2003 stressed that US intentions in the region were primarily to do with securing oil supplies and nothing to do with WMDs (Weapons of Mass Destruction), which have yet to be found following the ousting of Saddam Hussein.
In fact, the Neo-Conservative Agenda for the New American Century, which sees US hegemony in political, economic, and cultural values wherever US interests may lie, especially in the Middle East, is not a new phenomenon. It roots lie in the historical pseudo-ideological difference broadly between the Republicans and the Democrats over the role of America in the world, and therefore inevitably the direction of American foreign policy. Crudely speaking, should it be internationalist as the Democrats tend to agree; or more unilateralist and hegemonous to suit US interests of the day as the Republicans tend to want.
How does all fit in with oil? The Republican party has traditionally always had strong roots with the oil industry, which have funded Republican political campaigns to the tune of billions of dollars over the last century. Both Geroge Bush senior and junior have made their fortunes in oil and still have strong links with the industry. US Vice-President Dick Cheney was Bush senior’s defense secretary, and until his current position, was head of Halliburton, the company dominating Iraqi oil field contracts.
These two have been the prime movers behind the administration’s efforts to diversify dependence away from Gulf oil, especially Saudi, Kuwaiti and UAE oil, which together account for a staggering 46 percent of world proven oil reserves. That is why President Bush is staking so much in developing the Caspian Sea oil basin as an alternative source of oil for the US. He has even appointed a full-time special envoy to oversee the development of the Baku-Tiblisi-Ceyhan oil pipeline currently being constructed by BP (which is majority owned by US interests). Kazakhstan and Turkmenistan similarly blessed with huge oil and gas reserves, and because of their strategic location between the Middle East and Afghanistan, also enjoy tremendous US support.
The Gulf states, however, retain a major trump card. The Kingdom is by far the single largest oil producer both in OPEC and in the world. In 2002, for instance, it accounted for 12.25 percent of world oil production.
With OECD oil stocks at their lowest levels in years and high winter demand especially in the Northern Hemisphere, oil prices and revenues are enjoying a flourish which is projected to continue throughout 2004. OPEC cut production by 900,000 barrels per day (bpd) in September 2003 partly to sustain prices between $22 to $28 per barrel, but this has brought the total level back to the pre-Iraq War levels of 24.5 million bpd.
Oil price forecasts for first quarter 2004 range between $22.5 per barrel to $26.5 per barrel, and for the whole year from $22 per barrels to US$ 24.5 per barrel. Saudi Arabia’s latest OPEC production quota from November 2003 is 7.963 million bpd, compared with a record high of 9.465 million bpd in April 2003 at the time of the Iraq War. The Saudi oil sector, in fact, grew by 2.5 percent in 2002 due mainly to favorable oil prices, and is projected to grow even further in 2003 “because of the stability of oil prices at favorable levels for both producers and consumers,” according to Governor Hamad Al-Sayyari of SAMA.
The Gulf states also offer lucrative carrots in the oil and gas sector, which US oil firms cannot ignore. Saudi Aramco, for instance, has spent a staggering $34 billion in capital expenditures in the last decade. Over the next five years, it plans to spend some $39.8 billion in the expansion of the oil and gas sector. This compared with $77 billion for the whole GCC. One way the Gulf states can secure their oil assets against the possibility of outside intervention is to strategically globalize or partly privatize these assets.