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We're NOT in Iraq for OIL

We're NOT in Iraq for Oil, I repeat NOT for Oil.
Iraq oil - the target for years

The country's oil reserves stand at about 115 billion barrels

US policy towards Iraq has always been shaped by the country's rich oil resources, its strategic location on the Gulf and its regional weight.
Iraq ranks only second to Saudi Arabia for its oil resources, and was the world's second largest oil exporter before the Iraq-Iran war broke out in 1980.

The US has always been a key importer of Iraqi oil. Even under the UN sanctions, US companies imported some 750,000 barrels per day (bpd) from Iraq until the end of 2002.

Based on current estimates, Iraq's oil reserves stand at about 115 billion barrels, equivalent to the total oil reserves of the US, Canada, Mexico, Western Europe, Australia, New Zealand, China and the whole of Asia.

Now that the US has succeeded in ousting President Saddam Hussein, Iraqi oil is set to start flowing once again.

US occupation administration hopes that Iraq would soon be able to export about 600-700,000 barrels a day, mostly to the US, in addition to 300-400,000 barrels produced for domestic consumption.

Exports could be back to the pre-war level of 2.5 million barrels a day, say US occupation officials.

According to plans designed by the occupying powers, Iraqi oil revenues will be channeled into a trust fund controlled by the US and the UK.

Roots of ambitions

The roots of US ambitions in Iraq go back to the aftermath of World War I (WWI) which put an end to Turkish presence in the region. Then the Sykes-Picot agreement, signed by the British and the French, re-carved the Middle East creating new entities ruled either directly by the colonialist powers or by puppet regimes.

Despite the underlying differences, Britain and France agreed to divide the Fertile Crescent encompassing Iraq, Syria, Palestine, Lebanon and Jordan, between them as areas of influence.

France got Lebanon and Syria, while Palestine, Jordan, and the two southern provinces of Iraq-Baghdad and al-Basra went to Britain.

However, the status of the province of Mosul, an integral part of Iraq for thousands of years, remained unresolved.

Though it was part of the French sphere of influence, as agreed, the British were determined to keep Mosul within their new Iraq colony.

Immediately after Turkey was defeated, the British army occupied Mosul and the imperialist struggle between Britain and France over Mosul heralded the beginnings of US ambitions in Iraq.

The apparent cause of rivalry between Britain and France, and at a later stage the US, over Mosul was its known but largely undeveloped oil resources.

Though its effort in WWI was very limited, the US, emerging as a super power, was keen to ensure that its economic and political interests were taken into account in the post-war world of the Middle East, as it came to be called by the imperialist powers.

Oil was at the top of these concerns as the importance of the Gulf Region was mounting in view of its huge oil reserves.

Open-door policy

Faced with the British and French domination over the region's huge resources, the US at first demanded an "open door" policy allowing US companies to freely negotiate oil contracts with the puppet monarchy of King Faisal whom the British had installed in Iraq.

In 1927, major oil explorations were undertaken and huge oil deposits were discovered in the Mosul province, which fuelled the rivalry among competing colonialist oil companies even further.

However, a settlement was arranged and Iraqi oil was divided up into five portions, 23.75% for each of several companies from Britain, France, Holland and the United States.

The Iraqi people were left with virtually nothing of their oil wealth, and this unfair situation continued until 1958 when the Hashemite monarchy was toppled in a military coup.

The Iraqi petroleum company, shared by British Petroleum, Shell, Mobil and Standard Oil of New Jersey (Exxon) was established. Within a few years, this company had a total monopoly of Iraqi oil production.

Yet, the US oil companies and their government in Washington, were not satisfied since their target was to achieve complete control of the Middle East oil by displacing the British.

Growing US role

Following the end of WWI, the British Empire was greatly weakened by the war in which it lost key colonies in Asia. On the other hand, the US grew increasingly powerful throughout the world.

The administrations of Presidents Franklin Roosevelt and Harry Truman dominated by big banking, oil and other corporate interests, were determined to restructure the post-war world to ensure US domination.

Thus, one of the key elements of the US domination strategy was aimed at controlling global resources, particularly oil.

Within this context, the US threw its full weight behind the Shah of Iran who was one of its closest allies in the region.

By mid 1950, US influence in Iraq was almost as powerful as that of Britain which was the actual colonising force on the ground.

In 1955, the Baghdad Pact , including in addition to Iraq Turkey, Pakistan, Iran and the UK was set up to counter the rise of Arab and other liberation movements in the Middle East and Asia.

The 1958 revolution

By July 1958, a military coup overthrew the Iraqi monarchy, a development that the US regarded as detrimental to its vital interests and immediately landed 20,000 marines in Lebanon in the context of what was known as the "Eisenhower doctrine."

In accordance with that doctrine, the US would intervene directly and even go to war to protect its interests in the Middle East.

The Eisenhower administration then considered the idea of invading Iraq, to overturn the new regime and to install a new puppet government in Iraq.

But the US was forced to abandon that plan due to several regional and international factors including the support given by China and the Soviet Union to the revolutionary government in Iraq.

The US however, never stopped targeting Iraq as one of its adversaries in the region and rendered unlimited support to the rebel right-wing Kurdish insurgency in the north of the country.

In the eighties when the US lost its main ally in Iran, its relations with the Saddam regime in Baghdad thawed to a considerable extent and it even supported Iraq in its war with Iran.

However that honeymoon ended when Iraq invaded Kuwait in 1990 and the US hurried to protect and preserve its interests in the oil-rich region.
see also-- 04.Nov.2003 17:09


Hubbert Peak of Oil Production
Named after the late Dr. M. King Hubbert, Geophysicist, this website provides data, analysis and recommendations regarding the upcoming peak in the rate of global oil extraction.

Running On Empty
oil production is in terminal decline. It has peaked in 2000 and is now set to decrease by 3% a year.

Die Off
Petroleum geologists have known for 50 years that global oil production would "peak" and begin its inevitable decline within a decade of the year 2000. Moreover, no renewable energy systems have the potential to generate more than a tiny fraction of the power now being generated by fossil fuels.

Documents on the International Energy System
[IMPORTANT comprehensive page with dozens of links + research documents]

Measures of US oil import dependence

Oil Market Disruptions & Vulnerability
[IMPORTANT--has many sublinks and references]

Eyeballing the Strategic Petroleum Reserve

Guzzling the Caspian

Colin Campbell on Oil
Perhaps the World's Foremost Expert on Oil and the Oil Business Confirms the Ever More Apparent Reality of the Post-9-11 World

Saudi Petroleum Imports [PDF file]

Central Asia oil and gas pipelines

A Brief History Of Major Oil Companies In The Gulf Region

Iraq oil: one big sticky mess

US reliance on Iraqi oil grows despite ''evil'' tag

US buys up Iraqi oil to stave off crisis

Crude Vision: How Oil Interests Obscured US Government Focus On Chemical Weapons Use by Saddam Hussein

Glittering prizes in giant oilfields of Iraq

Post-Saddam Iraq:
Linchpin of a New Oil Order
By Michael Renner, Worldwatch Institute
[MUST READ article]


Dollars, Euros, and Oil

Excellent article by Cóilín Nunan: "Oil, Currency and the War on Iraq".  http://www.feasta.org/documents/papers/oil1.htm Fascinating explanation of some major economic mechanisms involving dollars and euros and oil. A very big reason that the United States is such an economically and militarily dominating country is apparently that U.S. dollar is the de facto world reserve currency. Lots of things are counted in dollars and some goods are only sold for dolars. That means that foreign governments and corporations and banks are keeping large dollar reserves. That essentially amounts to a huge loan the rest of the world is giving to the United States, which will subsidize the U.S. economy. In order to acquire those dollars, the rest of the world has to provide goods and services for those dollars. That allows the U.S. to have a huge import/export imbalance. Last November, 48% more imports than exports. It would be untennable for any other country to run such a deficit.

Next major point is that one of the reasons everybody has to have dollars is that the OPEC oil producting countries only accept dollars for oil. Well, not all of them. The only one that does something different is Iraq, which only accepts Euros for their oil, since 2000. And Iran is considering it as well. And the thing is that it might just as well be Euros that everybody used as a reserve currency. It would apparently be a better choice in many ways, because the European economies are more balanced, and the OPEC countries would end up getting more value for their oil. So, now, what would happen if Euros became the only choice for buying oil? Most likely the U.S. economy would plunge, because it would no longer be subsidized in that manner. And EU would probably be quite happy being subsidized in its place. Anybody thinks all this might have something to do with the great urgency to take over Iraq? And why would Britain support it?

When will we buy oil in Euros?
When it comes to the global oil trade, the dollar reigns supreme. But it has a challenger

* * * * * Behind the Invasion of Iraq * * * * *



Table of Contents:

Why this Special Issue: India as a Pillar of US Hegemony

Behind the Invasion of Iraq (a summary)

Western Imperialism and Iraq

I. From Colony to Semi-Colony
II. Towards Nationalisation
III. The Iran-Iraq War: Serving American Interests
IV. The Torment of Iraq
V. Return of Imperialist Occupation

The Real Reasons for the Invasion of Iraq—and Beyond

I. The Current Strategic Agenda of the United States
II. Home Front in Shambles
III. Military Solution to an Economic Crisis

Rehabilitating Colonialism


I. US Declares India a Strategic Pillar
II. The Pages Ripped out by the US from the Weapons Report


II. Home Front in Shambles

Even as the US prepares to launch an invasion of Iraq (and perhaps of other countries as well), its economy is trapped in a recession with no clear prospect of recovery. True to their character, the world's giant media corporations have not seen it fit to explore the causal connection between these two outstanding facts.

. . .

Crisis of overproduction in full bloom
It is in times of economic setback that the press returns to earth. The Chicago Tribune recently published a series of articles on the current crisis, drawing on a wide range of interviews with employers, employees and economic analysts. The first piece in the series is titled: "The Economics of Glut. Bloated industries put the economy in a bind. Glut is making it harder to shake off the recession." (William Neikirk, 15-18/12/02) The article begins: "The world's auto industry can now produce 20 million more cars than consumers can buy." Citing instances also from telecommunications and dot-coms, the Tribune discovers that "economists call the phenomenon overcapacity.... businesses can produce far more than we need. Supply has simply outstripped demand. When that happens, production slows, equipment sits idle, costs go up, workers are laid off and investments are postponed. The capacity glut exists on a scale that this country and many others haven't seen for decades, and it at least partially explains why it is so difficult for the American economy to shake off a recession that by all measures seemed mild."

The Tribune sees a swamp of excess capacity in airline, auto, machine tool, steel, textile, and high-tech industries, even commercial space and hotel rooms. According to the Federal Reserve, manufacturers are using only 73.5 per cent of capacity, far below the 80.9 per cent average of 1967-2001, and 3.5 percentage points below the level during the 1990-91 recession. In an effort to attract customers, airlines have slashed their fares to five-year lows; United Airlines, the second largest in the country, has filed for bankruptcy; and Boeing says its deliveries of aeroplanes will be down 28 per cent this year.

. . .

Investment now not responding to stimuli
When the authorities conceded in late 2001 that recession had already set in, they ascribed it partly to the September 11 attacks and exuded confidence that it would be brief. The necessary measures were in fact already in motion: Lower interest rates and tax cuts were meant to induce businesses and consumers to spend more, and so boost demand for firms' products and services, in turn giving a fillip to investment. However, despite the passage of a 10-year tax reduction package of $1.35 trillion, and the Federal Reserve's slashing interest rates 12 times over 13 months, the 'recovery' is pallid.

"Even more unsettling", says the Tribune, "is the fact that falling prices—or deflation—have taken hold in the manufacturing sector. Prices of goods have been dropping as a global excess capacity has developed. There are some indications that deflation is beginning to spill over into the services sector, in areas like retail trade, which is indirectly related to manufacturing. The U.S. hasn't had a generalized deflation since the Great Depression in the 1930s. In a deflationary environment, people postpone purchases in anticipation that prices could be lower in the future. Demand drops. Profits spiral downward. Jobs are lost. Retrenchment sets in."

. . .

Endemic to capitalism
How do such overcapacities develop? Capitalists invest in order to earn a profit, and how much they invest, in which industries, using which technologies, and so on are determined by the prospect for profits. In the course of competing with one another to grab market shares and to maximis their profits, capitalists must continuously expand their productive capacity. The purpose of production under capitalism is to accumulate more capital.

However, in this process the growth of productive capacity soon outstrips demand. (Seriously redistributing income throughout society would no doubt increase demand, but it would take away profits from capitalists, going against the very reason for existence of investment under capitalism.) As demand weakens, the profitability of investment declines; capitalists therefore cut back on investment; demand for investment goods suffers, and, as workers get retrenched, demand for consumer goods further weakens. This is how recessions come about.

. . .

The biggest bubble in America's history
Under capitalism, as we mentioned above, profitability ultimately determines investment, but under monopoly capital the day of reckoning can be put off for some time with the help of state intervention (physical, fiscal and financial). US corporate profitability, it now emerges, turned dramatically downward in 1997 in the face of worldwide overcapacity. Brenner points out that "Between 1997 and 2000, at the very same time as the much-vaunted US economic expansion was reaching its peak, corporate profits in absolute terms and the rate of return on capital stock (plant, equipment, and software) in the non-financial corporate economy were falling sharply—as recently revised figures show, by 15-20 per cent in both cases!"

Despite this share prices soared, fuelled by cheaper and cheaper funds as the Federal Reserve repeatedly loosened interest rates. What took place was the biggest credit boom in US history. The wealthy, finding the prices of their shares soaring, consumed more. Corporations borrowed and bought back their shares, pushing up their share prices further and thus getting access to cheap funds. With these funds they made massive new investments. No doubt, profitability kept plummeting, but unscrupulous auditors were hired to dress the books. Among the 27 major corporations so far found guilty of such practices are such stars as AOL Time Warner, Enron, Worldcom, and Xerox. The two top US banks, Citigroup and J.P. Morgan Chase, as well as Merrill Lynch, and the country's top auditing firm, Arthur Andersen, are also deeply implicated.

In the words of the Economist (28/9/02),

"This is no normal business cycle, but the bursting of the biggest bubble in America's history. Never before have shares become so overvalued. Never before have so many people owned shares. And never before has every part of the economy invested (indeed, overinvested) in a new technology with such gusto. All this makes it likely that the hangover from the binge will last longer and be more widespread than is generally expected....

"The most recent bubble was not confined to the stockmarket: instead, the whole economy became distorted. Firms overborrowed and overinvested on unrealistic expectations about future profits and the belief that the business cycle was dead. Consumers ran up huge debts and saved too little, believing that an ever rising stockmarket would boost their wealth. The boom became self-reinforcing as rising profit expectations pushed up share prices, which increased investment and consumer spending. Higher investment and a strong dollar helped to hold down inflation and hence interest rates, fuelling faster growth and higher share prices...."

The outcome has been catastrophic:

"Since March 2000 the S&P 500 index [an index of share prices] has fallen by more than 40 per cent. Some $ seven trillion has been wiped off the value of American shares, equivalent to two-thirds of annual GDP. And yet share prices still look expensive [i.e. they will fall more]....."

Yet to hit bottom

. . .

It is worth summing up the points made above:

The US, and indeed the world economy, is suffering from a crisis of overproduction.

In order to stave off recession, the US central bank has been boosting demand by pumping in unprecedented amounts of credit.

The US has the funds to do this because foreigners put their savings in US dollar assets.

The US's overall global supremacy and in particular its control over oil have sustained its status as the safest harbour for international capital.

However, the US's ability to soak up the world's savings is a double-edged sword. If foreigners, who hold half or more of all the US currency, should decide to dump the dollar, its value would plummet, leading to yet more capital flying from the country.

In order to prevent that happening, and to get foreign capital to return, the US would have to raise its interest rates steeply.

But if that were to be done, given the vast addition to US debt since 1980, this time round a steep US interest rate hike could cause a crash heard round the world. This would happen because debt-laden American corporations and consumers would be unable to service their debts, so their assets would flood the market; asset prices would collapse, and banks—swamped with worthless assets instead of income—would in turn collapse. In short, there is a threat of a new Great Depression.

Implications of the euro
In the 1970s, there was no alternative to the dollar. On January 1, 1999, an alternative arose in the form of the euro, the new currency of the European Union (EU). Of course, investors did not immediately flock to the euro. The euro stuttered at birth, falling 30 per cent against the dollar by the end of 2000. In the last year, however, it has picked up sharply, and in recent months has remained at parity with the dollar (ie about one euro per dollar).

The euro has become attractive for three reasons.

First, since the EU is a large imperialist economy, about the same size as the US, it is an attractive and stable investment for foreign investors.

Secondly, since foreign investors' holdings are overwhelmingly in dollars, they wish to diversify and thus reduce the risk of losses in case of a dollar decline: they are increasingly nervous at the size of the US debt mountain and the failure of the US government to tackle this problem.

Thirdly, certain countries smarting under American military domination sense that the rule of the dollar is now vulnerable, and see the switch to the euro as a way to hit back.


III. Military Solution to an Economic Crisis

Indeed the US has taken the contrary course. It plans to reverse the various trends mentioned above by seizing the world's 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 imports—already a little over half its daily consumption of 20 million barrels is imported. It imports its oil from a variety of sources—Canada, 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 Africa—a 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 regions—west Africa, northern Latin America, the Caspian region. And yet the US cannot escape the simple arithmetic:

"The US Department of Energy and the International Energy Agency both project that global oil demand could grow from the current 77 million barrels a day (mbd) to 120 mbd in 20 years, driven by the US and the emerging markets of south and east Asia. The agencies assume that most of the supply required to meet this demand must come from OPEC, whose production is expected to jump from 28 mbd in 1998 to 60 mbd in 2020. Virtually all of this increase would come from the Middle East, especially Saudi Arabia.

"A simple fact explains this conclusion: 63 per cent of the world's proven oil reserves are in the Middle East, 25 per cent (or 261 billion barrels) in Saudi Arabia alone...

"Although Asian demand for oil is expected to grow dramatically in coming decades, no other economy rivals that of the United States for the growth of its oil imports. Over the past decade, the increase in the US share of the oil market, in terms of trade, was higher than the total oil consumption in any other country, save Japan and China. The US increase in imports accounts for more than a third of the total increase in oil trade and more than half of the total increase in OPEC's production during the 1990s. This fact, together with the fall in US oil production, means that the US will remain the single most important force in the oil market." ("The Battle for Energy Dominance", Edward L. Morse and James Richard, Foreign Affairs, March-April 2002; emphases added)

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 dollar's 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 country's mammoth oil fields too would later be opened to foreign investment. However, American firms were shut out of Iran and Iraq by their own government's sanctions; French, Russian and Chinese firms got the contracts instead. Chavez's increasing assertiveness threatens to shut American firms out of Venezuela as well. The Saudi deal—which the American firms were to lead—stands cancelled, apparently because of the Saudi government's 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 (Europe's imperialist powers, Japan and China) dependent on the US. It is clear the US is following this policy:

As mentioned above, French, Russian and Chinese firms will get evicted from Iran and Iraq once the US troops enter.

The US has gone to great lengths to frustrate alternatives to its Baku-Ceyhan pipeline (which is to run from the Caspian through Turkey to the Mediterranean). With the US invasion of Afghanistan, the US has set up a chain of military bases in Central and South Asia—Pakistan, Afghanistan, Kyrgystan, Tajikistan, and Uzbekistan, with military advisers in Georgia as well.

The US is about to send two battalions of Marines to help suppress the insurgency in Colombia; it is training a new brigade to protect Occidental Petroleum's pipeline in that country. At the same time it is actively organising the overthrow of the elected Chavez government in Venezuela.

The Institute for Advanced Strategic and Political Studies, an Israeli lobby group that met President Obasanjo of Nigeria in July 2002, claims the US is on the verge of a "historic, strategic alignment" with west Africa and that the region is "receptive to American presence". The institute has advocated the setting up of a US Gulf of Guinea military command: the island of Sao Tome, south of Nigeria and a possible site for a naval base, hosted a visit from a US general in the same month. The activity comes while the Nigerian government is considering leaving OPEC, and developing its oil trading relationship with the US instead. The region already provides 15 per cent of US oil imports, and these are set to rise to 25 per cent by 2015 ("US takes good look at west African oil", Michael Peel, Financial Times, 25/7/02)

A look at the relative dependence of various imperialist powers on oil imports is revealing. The UK is a net oil exporter, thanks to the North Sea. The US imported, in 2000, 9.8 million barrels a day of its 19.5 million barrel requirement—that is, about half. By contrast, Japan imported 5.5 out of 5.6 million barrels; Germany 2.7 out of 2.8; France 2.0 out of 2.1; Italy 1.8 out of 2.0; and Spain 1.5 out of 1.5. ("Top Petroleum Net Importers, 2000", US Energy Information Administration, www.eia.doe.gov) In other words, these countries imported 90 to 100 per cent of their oil requirements. They would therefore be very vulnerable to blackmail by a power which is able to dictate the destination of oil.

The current US policy is not entirely novel. In the aftermath of World War II, the US had invested large sums in rehabilitating the devastated economies of Europe—what was known as the 'Marshall Plan'. However, it used the Plan in order to dictate changes in European economies that made them switch from using their own coal to using oil which American oil majors in west Asia were in the best position to supply.

A major consideration in the US's great oil grab is its desire to check China. In coming years, China, like the US, will become a major importer of oil and gas: it is projected to import 10 million barrels a day by 2030—more than eight per cent of world oil demand. (The US currently imports a little over 10 million barrels of its daily requirement of 20 million barrels.) As China attempts to arrange its future oil supplies, it finds itself checked at each point by the US:
i) Since the mid-1990s, China has been pressing for a gas pipeline from the Caspian region to China. With a view to building a security-cum-economic organisation for the proposed pipeline, China took the initiative to form a group called the "Shanghai Five" (later six) consisting of China, Russia, and the relevant central Asian states (Kazakhstan, Kyrgyzstan, Tajikistan, and later Uzbekistan). The declared basis for the group was to control fundamentalism and terrorism in the region (stretching to China's westernmost Xinjiang province). However, with the US's invasion of Afghanistan, and the installation of its forces in the very countries who were to be in the Shanghai grouping, China's initiative was sabotaged. On a visit to Iran, Chinese president Jiang Zemin declared that "'Beijing's policy is against strategies of force and the U.S. military presence in Central Asia and the Middle East region'.... Beijing would work together with developing nations to counter American 'hegemonism.'" ("China opposes U.S. presence in Central Asia", Willly Wo-Lap Lam, CNN, 22/4/02)

ii) In 2002, Chinese firms have bought two Indonesian fields for $585 million and $262 million, respectively. Indonesian president Megawati Sukarnoputri has visited China twice since becoming president in 2001, hoping to bag a $9 billion contract to supply liquid natural gas to power industries in southern China. ("China Races to Replace US as Economic Power in Asia") No surprise that the US has stepped up its activities in the vicinity of Indonesia—forcing the Philippines to accept its "help" in hunting fundamentalists, patrolling the Malacca straits in tandem with the Indian navy, and pressing Indonesia to accept US `cooperation' in suppressing Al Qaeda elements in Indonesia itself. A December 2001 RAND Corporation presentation to a US Congress committee on "threats to the security and stability of Southeast Asia and to US security interests in the region" said that the "primary area of concern is China's emergence as a major regional power.... China's assertiveness will increase as its power grows". It speculated that "conflict could be triggered by energy exploration or exploitation activities", and recommended the creation of a "comprehensive security network in the Asia-Pacific region." Discarding the then US cover that it was hunting for a handful of Abu Sayyaf guerrillas in the Philippines, RAND Corporation says that "the US should provide urgently needed air defence and naval patrol assets to the Philippines to help Manila re-establish deterrence vis-a-vis China and give a further impetus to the revitalization of the United States-Philippine defence relationship.... the US should expand and diversify its access and support arrangements in Southeast Asia to be able to effectively respond in a timely way to unexpected contingencies. After all, six months ago, who would have thought that US armed forces would be confronted with the need to plan and execute a military campaign in Afghanistan?" The Bali terrorist blast may prove a happy entry point for the US into Indonesia.

iii) Finally, like the US, China cannot avoid reliance on west Asian oil. China has struck oil field development deals with the very countries in west Asia hit by US sanctions—Iraq, Iran, Libya and Sudan. With this entire region now to be targeted in the impending invasion, China's deals are sure to meet the same fate as its central Asian pipeline. Hardly surprising, then, that "Chinese leaders believe that the US seeks to contain China and [the US] is therefore a major threat to its [China's] energy security", as the US-China Security Review Commission's report points out. ("China digs for Middle East oil, US gets fired up", Reuters, 24/9/02)

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.