World economy: The geopolitics of oil

Capitalism’s ruthless struggle for oil and gas

Ever since oil became a crucial resource at the beginning of the 20th century, fuel for motor vehicles and modern warships, it has been at the heart of geopolitical struggle. Today gas, used to fuel electric power generation, industrial processes and domestic heating, is just as important.

’Geopolitics’ means the struggle between rival powers for control over territory, natural resources (oil and gas, minerals, food products, water, etc), vital geographic features (strategic harbours and military base locations, rivers and canals, trade routes, etc), and other sources of economic and military advantage.

Capitalism created a world market, but at the same time is based on ruthless competition between rival national capitalist states. This struggle, in turn, has always been dominated by successive superpowers, the imperialist powers of the day.

Before the first world war (1914-18), British imperialism intervened in the Middle East to secure control of countries with big oil reserves, like Persia (now Iran), Iraq and Saudi Arabia. Winston Churchill recognised the strategic importance of oil as fuel for modern warships. Together with France, Britain took control of the Suez canal and sponsored puppet regimes in many of the strategically placed Gulf states.

The United States emerged from the second world war (1939-45) as the predominant western superpower. No longer self-sufficient in oil as it had been in the 19th century, US imperialism also followed a policy of strategic control of oil reserves and supply routes. US president, Franklin D Roosevelt (FDR), proclaimed: "I hereby find that the defence of Saudi Arabia [with, at that time, the world’s biggest oil reserves] is vital to the defence of the United States."


In 1945, FDR met the king of Saudi Arabia aboard a US warship. In effect, a pact was made: the US would guarantee the survival of the reactionary Arabian monarchy, providing the Saudi ruling class guaranteed oil supplies to the US.

During the cold war period of rivalry with the Soviet Union, the US relied on a network of alliances with the rulers of oil states and key regional regimes. In many cases, these regimes were little more than puppets propped up by US economic and military aid.

The US also maintained a network of military bases, and was prepared to intervene in the event of crisis. For imperialism, control of oil supply has always been linked to the preservation of strategic power and prestige.

Time and time again US imperialism intervened in the Middle East, either covertly or through military intervention. For instance, the US Central Intelligence Agency, assisted by British intelligence, organised a coup to overthrow the nationalist Iranian regime of Mohammed Mossadeq, who tried to nationalise the Anglo-Persian oil company in 1953.

The overthrow of Mossadeq allowed the Shah of Iran to consolidate his brutal military dictatorship. This rebounded on the US big time. The revolutionary overthrow of the Shah in 1979 brought the Khomeini regime to power, producing a regime that has been in conflict with the US ever since.

The US also gave massive economic and military aid to the state of Israel, which it saw as a bridgehead for intervention in the region. In 1958, US forces landed in Lebanon, to prop up a pro-western government. Many more examples could be given.

In 1980, president Jimmy Carter, a Democrat, restated the Roosevelt doctrine: "Let our position be absolutely clear. An attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States." "Outside force" primarily referred to the ruling bureaucracy of the Soviet Union, which was increasingly trying to build up influence in the Middle East. However, it also referred to any regime that might challenge US domination of the region.

In 1990, Saddam Hussein, previously armed and backed by the US and Britain against the Iranian regime under Khomeini, invaded Kuwait, another major oil producer. The US saw this as a threat, not only to Kuwait but also to Saudi Arabia.

Bush senior, the 41st US president, launched a massive military assault on Saddam’s regime, forcing him to retreat from Kuwait. But Bush senior wisely stopped short of occupying Baghdad, and opted for a policy of containment of Saddam rather than regime change.

Meanwhile, US dependence on imported oil has steadily grown. The US consumes about 25% of world energy while possessing only about 5% of energy resources. US oil production peaked in 1970-71, yet the appetite for petrol began to grow even faster.

Of the world’s 520 million automobiles, about 200 million are driven in the US, and the US car population is growing five times faster than the human population.

The policy of US imperialism changed dramatically when George W Bush became president in 2001. The Stalinist system in the Soviet Union and Eastern Europe had collapsed and was no longer an obstacle to US imperialism. America was now the world’s unchallengeable superpower. Bush believed that the US should use its superior military might to enforce its interests globally, if necessary by military intervention and pre-emptive strikes against potential enemies. The right-wing faction around Bush in the Republican Party was closely connected with Big Oil, the handful of big oil and gas corporations that dominate the industry.

The attacks on the twin towers and the Pentagon on 11 September 2001 provided the Bush regime with the political pretext it needed to implement its policy of pre-emptive intervention. The neo-conservative hawks saw the invasion of Afghanistan to overthrow the Taliban regime as the first step of a series of regime changes throughout the region.

First, Saddam would be smashed, and then US forces would move on to Iran, Syria, Saudi Arabia and perhaps other states. This was justified as a campaign to introduce western-style democracy throughout the region. The real aim was to install pro-US puppet regimes throughout the region, to safeguard US and western oil interests and the strategic control of the region by US imperialism.

The invasion of Iraq, however, has become a catastrophe for the US. US forces are bogged down in an unwinnable war. According to a secret US National Intelligence Estimate, the occupation of Iraq "has helped spawn a new generation of Islamic radicalism and… the overall terrorist threat has grown since the September 11 attacks". (New York Times, 24 September) The escalating sectarian civil war in Iraq threatens the break-up of the country, with unpredictable fallout in the region.

Moreover, Iraq is currently producing less oil than it did before the US invasion in 2003. This decline has been one of the factors in the recent shortage in world oil supplies.

Threat against Iran

Recently, the Bush regime has threatened the Iranian regime of Ahmadinejad. Behind the US’s demand for Iran to cease processing nuclear fuel on pain of economic sanctions, is the much more serious, scarcely veiled threat of US military strikes against Iran.

The US-Iranian confrontation, however, is not really about the bomb. According to the US’s own National Intelligence Estimate, Iran is a decade away from producing a viable nuclear weapon. In reality, the conflict is driven by the geopolitics of oil.

As far as oil and gas are concerned, Iran is a key country. It is thought to have one-tenth of the world’s petrol reserves and a sixth of its natural gas reserves. Geographically, it occupies a strategic position in the Middle East. Iran potentially controls vital oil routes, the Persian Gulf (including the Strait of Hormuz).

Through its influence among Shia Arabs, the regime has a powerful influence in Iraq, Saudi Arabia and other Gulf states. To the north, Iran borders the unstable states of Central Asia, from the Caucasus to the Caspian Sea, many of which have massive oil and gas reserves.

Some of the neo-conservative hawks in the Bush administration have undoubtedly been pushing for stronger US action against Iran, starting with economic sanctions but not ruling out military attack. Some of them seem quite mad. A former CIA officer, Reuel Marc Gerecht, now a fellow at the right-wing American Enterprise Institute, says: "I don’t disagree [about] the convulsive effects that a strike would have. I actually think that it would be in the end a healthy thing for Iran internally."

A US invasion of Iran is ruled out. If the superpower cannot hold onto its position in Iraq, it certainly does not have the forces available to occupy a much bigger country. US invasion, moreover, would provoke a massive national resistance. Even a military strike now appears to be unlikely. It would have convulsive effects throughout the region and rebound on US imperialism.

While threatening sanctions through the UN, the Bush administration has been stepping up its propaganda efforts against the Iranian regime and is working to build alliances with dubious exile groups.

Elizabeth Cheney, daughter of the vice-president and a senior State Department official, has been put in charge of a government-funded programme to spend $85 million on support for dissidents in Iran. This is reminiscent of US support for unsavoury characters like Chalabi in Iraq before the US invasion.

The US has tried to isolate Iran. But its threats against the Ahmadinejad regime, together with its growing hostility towards both Russia and China, have pushed Russia, China and Iran closer together. There is the beginnings of a triangular alliance based on oil and strategic cooperation.

Both China and Russia have a big interest in Iranian oil and gas reserves, and have developed extensive trade links to the country. Not surprisingly, they are strongly opposed to economic sanctions against Iran, which if implemented would cut across their own interests.

 China needs a huge supply of oil and gas to fuel the breakneck growth of its industry and infrastructure. Chinese demand has been one of the main factors in pushing up the prices of oil and gas over the last three years. The Chinese regime has been securing deals in Africa (Sudan) and Latin America (Venezuela) in order to guarantee the fuel it needs. However, Iran and the surrounding region are vital to China’s economic growth.

The Chinese state-owned energy company, Sinopec, has made a series of mega-deals with Iran, including a 25-year contract worth around $100 billion.

China also has important deals with Russia’s oil industry, now the world’s biggest oil exporter (overtaking Saudi Arabia in August). China is also cooperating with some Central Asian oil exporters to construct a network of gas and oil pipelines throughout the region.

President Putin of Russia and president Hu Jintao of China have recently made a series of agreements. Russian and Chinese state-owned oil conglomerates are planning for Russia to supply about 10% of China’s oil. Gazprom, the leading Russian gas company, is building two huge pipelines to supply China.

Both Russia and China have become increasingly alarmed at US imperialism’s aggressive push into the Middle East and Central Asia. Despite the mutual economic dependency between the US and China, the Bush regime has publicly identified China as its main strategic rival on the world arena.

At the same time, the Bush administration has become increasingly hostile to the Putin regime in Russia. Washington has been alarmed that the Russian government, buoyed up by surging oil revenue, has become  more assertive throughout the Eurasian region. Putin also appears to be increasingly blocking the growth of western oil interests in the Russian oil and gas industry.

As a result of these pressures, Russia, China and four Central Asian countries – Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan – have formed the Shanghai Cooperation Organisation, a regional security alliance designed to act as a counterweight to US influence in the region. Last year, SCO demanded the withdrawal of US troops from Central Asia. Uzbekistan has kicked the US out of its Karshi-Khanabad airbase, and Kyrgyzstan may evict the US from its Manas airbase. These are serious setbacks to US policy in the region, as Washington has prioritised the establishment of a network of military bases.

There are now talks within SCO, moreover, on offering membership to Iran. If carried through, such a step would undoubtedly sharpen the tensions between the US superpower, on the one side, and its two main international rivals, Russia and China, as well as with Iran.

Competition for access to oil and gas has sharpened the competitive struggle between rival powers, making international relations much more volatile. High energy prices have strengthened Putin’s regime, as well as Chávez in Venezuela and Morales in Bolivia (where the government recently declared the nationalisation of the gas industry). They have been able to cock a snook at US imperialism, tied down in Iraq and increasingly dependent on imported energy.

Now, however, oil and gas prices are falling, and may fall further with a slowing down of the US and the world economy.

A sharp fall in energy prices, where there has been massive speculative activity, may provoke turmoil in world financial markets. Recently, a hedge fund, Amaranth Advisers, lost up to $6 billion as a result of speculating on gas contracts. Lower prices will create serious problems for Putin and Chávez, as well as for the rotten regimes in Saudi Arabia and other Gulf states. Reduced government revenues are likely to spell growing social instability.

High or low energy prices, the anarchy of the world capitalist market, dominated by profit-driven corporations, mean inequality and insecurity, poverty and unemployment, for many millions of working people.

The world is crying out for a fundamental social transformation, with worldwide economic planning and genuine democracy based on the workers and peasants who produce society’s wealth.

The power play of capitalist geopolitics would be replaced by international cooperation to develop natural resources and technology in the interest of all humankind.

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