1990s >> 1999 >> no-1133-january-1999

World View: * Going for Oil * Contradictions in Euroland

Going for Oil

The US State Department once described oil as “the greatest material prize in world history”. Considering its value to present-day society and the lengths the US has gone in order to control an ever-greater share of the world supply of black gold, this would seem a fair description.

Just as its acrid smell has carried US profit-mongers, and indeed their war machine, over the entire globe, siding with all manner of tyrants, engaging in who knows how many atrocities in the process, so too is it now luring the US to a region of the world bedevilled by unrest manifesting itself in ethnic rivalry and border disputes and ruled by power-hungry and corrupt governments—The Caspian.

Long ago, the black sticky stuff that bubbled to the surface to be poured into leather bags and sold by camel trains throughout the Caspian region aroused no great interest. Now, a new type of entrepreneur is on the scene—the world’s oil companies, perhaps the most unscrupulous of capitalists.

Eighty of the world’s biggest oil companies have been wheeling and dealing in Baku and other Caspian cities since the collapse of Soviet state capitalism in 1989. No-one knows for sure just how much oil awaits them. Proven resources, according to BP’s Statistical Review of World Energy, are 17 billion barrels and that yet to be found ranges from 20 billion bbls (International Institute for Strategic Studies) to a 1996 estimate of 178 billion bbls—the latter perhaps making the Caspian one of the most important oil-producing regions in the world. However, a generally accepted figure is that of 50 billion bbls and worth some $4 trillion at today’s prices—a sum that hints instantly at trouble.

US oil companies have long since sweetened the former Soviet republics of Azerbaijan, Kazakhstan and Turkmenistan with $2 billions-worth of investment, reviving to an extent their collapsed economies—or rather making them ripe for milking—and at the same time making them less dependent on Russia. Moreover, US oil giants have lobbied on behalf of Caspian governments in Washington, extolling the virtues of their political causes.

Already this is bearing fruit, with Azerbaijan and Kazakhstan signing deals worth £40 billion with the West. Azerbaijan has signed deals with 10 consortia so far, the biggest shareholder being BP and Amoco.

While the former Soviet republics are adamant they should be free to exploit their own wealth, Russia and Iran, the two remaining countries whose shores are lapped by the Caspian, have other thoughts. Both are major oil producers themselves and have genuine fears of what a Caspian oil boom could mean to their own interests. When we consider that oil is pumped out of Kazakhstan, for instance, three times cheaper than out of Siberia, it is understandable that Russian capitalists fear a tremendous fall in their profits as oil begins to pour out of their former states through more efficient outlets.

Both Russia and Iran insist on a fair share of the development of the Caspian oil fields and argue strenuously that pipelines should be allowed to pass through their own territory. Russia has suggested that countries bordering the Caspian should each carry out offshore production inside a 72 kilometre zone and that the waters should be shared. And both Russia and Iran have backed their claim to shared waters by pointing to their naval forces (Russia has 90 naval craft in the Caspian).

Like Russia, Iran is also wary of US interest in the region, believing the Clinton administration is trying to marginalise Teheran’s role in the Caspian and, like Russia, argues for “fairness”, Teheran insisting that negotiations on who drills where on the Caspian seabed be carried out by all concerned, with Iran maintaining the right to veto any decision it construes as being detrimental to its own interests.

Teheran is also rumoured to be contemplating ways to upset US plans to take Iran out of the Caspian equation, one being to offer a better price for oil that could be won in Europe.

For their part, the US claim they want the oil to flow out through numerous pipelines, thus allowing no country to monopolise it. In June, Clinton was heard singing the praises of Iran as it moved towards “democracy”. He spoke of how Iran was “changing in a positive way” and how the US was seeking a “genuine reconciliation” with Iran. And just as the US dismiss trying to undermine Iran’s interests in the Caspian, they similarly claim no opposition to oil pipelines running through Russia, so long as Russia does not control the valves.

The biggest argument at present seems to be over which direction the oil should flow out of the Caspian. It is a debate that can only intensify the longer it rages. The arrival of the US (mainly since 1995) and the preparedness of the former soviet republics to foster a strong relationship with Washington suggests trouble ahead.

As the International Herald Tribune recently reported:

“The drive by US companies to exploit these resources already has produced a political realignment of historical dimensions including an unprecedented American presence in a region that has been under continuous Russian control since the mid 18th Century” (5 October 1998).

With the demand for oil expected to increase by 30 percent in the next 20 years, we have every reason for keeping a close eye on developments in the Caspian. At the moment, the region is relatively stable, but history teaches us troops could be mobilised overnight when profits are threatened and that deals are only as strong as the paper they are written on when “the greatest material prize in world history” is at stake.


Contradictions in Euroland

Only a few weeks before the launch of the single currency in Europe and just when things should have been coming together, a public row broke out between the monetarist European central bankers of Frankfurt and the French and German governments.

Put simply, the politicians (especially the new German government under Gerhard Schröder and his Finance Minister Oscar Lafontaine, the Sun’s latest bugbear) are talking of reflating Euroland—the 11 member states who adopted the euro as their common currency on 1 January—with extra government borrowing and spending in order to deal with structural unemployment. Of course, this attempt to revive discredited Keynesianism has not gone down well with the “orthodox” central bankers who think this will threaten the strength and stability of the euro. Such a clash of opinions is highly significant, with Wim Duisenberg, the President of the new European Central Bank (ECB), publicly condemning such economic “recklessness”.

Indeed, for those who remember the Maastricht “convergence criteria” and the Amsterdam “stability pact”, the politicians would seem to be wanting a major U-turn, but a closer inspection reveals the “Euro-fudge” which has always been there.

The process of closer integration in Europe has been driven in recent years by the Franco-German axis. In monetary terms this has been characterised by the “franc fort” (strong franc) policy whereby France pegged the franc to the German mark and its satellite currencies. France has always wanted Germany to cede more on the politics of economic and monetary union and not least on the idea of an “economic government” for Europe.

Germany used to favour a “strong” euro to replace the mark. France has been less orthodox and sought to weaken monetary policy with references to growth and employment targets. With the coming to power in Bonn of the new Red-Green coalition, it would appear that Germany is coming round to the French view.

Such a policy mess does not bode well for Euroland. There is also the plan to expand the EU eastwards, which must mean structural adjustments to the Common Agricultural Policy and fiscal transfers from the richer and “Club Med” states to the new entrants. Quite how such a plan is designed to sit with the single currency is anybody’s guess.

Further, the EU and the US have locked into yet another trade row, this time about banana imports which some commentators see as one of the first moves towards protectionism as the world economy faces recession. Indeed, this is the real context—the world crisis of capitalism. Faced with ever-increasing concentration of capital, the EU plan is to forge together in order to take on the big boys, the US and Japan.

Where does this leave Blair? After nailing his colours to the European mast is it any wonder he is so worried about the new direction for Europe proposed by Lafontaine and the others? It is, after all, a bit Old Labour and Mr Murdoch will be even less pleased with New Labour for getting caught up with such corporatism.


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