June 4, 2008

June 4, 2008 | Commentary on Russia, Middle East

Big Money, Big Oil, Big Risk

Azerbaijan benefits greatly from the rising oil prices so far. Oil at over 125 dollars a barrel brings windfall profits to the country and allows social and economic development unlike anything people remember in the recent decades.

The prosperity and fast pace of growth is comparable only with the Caspian oil rush of the late 19th and early 20th century, when Azerbaijani and foreign tycoons developed the leading oil industry in the world and built impressive mansions in downtown Baku.

Yet, there is a downside to the skyrocketing oil prices, which hurts Azerbaijan's ally, the United States, Western Europe, China, Japan, and other countries without energy resources.

From Russia to Iran to Venezuela, America's and the West's adversaries are splurging on oil windfalls, while programs directed against Uncle Sam and his allies are funded by petroleum revenues. Big bucks are allowing the oil sultans and dictators to intimidate US allies, buy politicians and academics, and purchase election outcomes.

Oil prices are going up partly because of supply and speculation. Part of the reason they can do this is that governments of the Oil Producing and Exporting Countries (OPEC) cartel, and the non-cartel producers like Russia, make sure that international oil companies do not own reserves in the ground.

Exxon, for instance, spent only 4 percent of its exploration budget in the Middle East last year - local governments do not allow Western companies to take control of their own destiny.

Thus, the global oil production is at the mercy of opaque and corrupt national oil companies, while the governments that own them enjoy skyrocketing oil prices and the growing, mind-boggling wealth.

The revenues of the major oil producing countries have quadrupled in three years. Since 9/11, oil prices have more than quintupled: from $20/barrel to $125/barrel. This year Europe and the US will spend approximately $2 trillion on imported oil, while the world will spend close to $3 trillion.

This money recycles back to the US and the West, often in the most legitimate ways. Sovereign Investment Funds have acquired large chunks of America's financial flagships: Citigroup, Merrill Lynch, Morgan Stanley, Blackstone and the Carlyle Group.

A foreign government acquiring a serious stake in US corporate gems can influence US policies in the Middle East and elsewhere. The oil sheikhs can "tweak" attitudes towards extremism and terrorism, and buy access to politicians through lobbying and campaign contributions. In the future, these funds may acquire defense and technology flagships: Boeing, General Electric, Lockheed Martin and others, or go after primary media assets, from CNN to FOX.

However, oil revenues may be used in much more sinister ways. Money can buy nuclear weapons programs, ballistic missile arsenals, and other arms. It can also pay for terrorist armies.

Today's attempt to overthrow the democratically elected government in Lebanon is bankrolled by Iran. Hezbollah is a wholly-owned Iranian subsidiary. Its chief has the official title of the "representative of Iran's Supreme Leader" in Lebanon. Iran paid for the 27,000 rockets Hezbollah has aimed at Israel.

Iranalso buys Hamas weapons and popularity in Gaza. In a recent children's TV broadcast by Hamas' Al Aqsa TV, a "Hamasnik" boy is shown assassinating President George W. Bush in the Oval Office and declaring that the White House will be turned into a mosque. Money may not buy you love, but it sure pays for propaganda.

Al Jazeera, the Qatari Arabic and English language TV is a propaganda arm with global reach. At times viciously anti-American, it talks to tens of millions of Arabic speaking Muslims worldwide, as well as audiences in Pakistan, India, London and Detroit.

Saudi Arabia, the cradle of Salafi-Jihadi ideology known as Wahhabism, is financing hundreds of religious seminaries (madrassahs), educating generations of US-hating and anti-Semitic Muslim extremists from Michigan to Manila. Some of them will pick up arms to fight the US and its allies in Iraq and Afghanistan.

Wahhabis deny other religions the right to exist in dignity, as a recent religious ruling (fatwa) in Saudi Arabia demonstrated. Two journalists who argued for tolerance were sentenced to death. A professor "caught" talking with his female graduate student without a male escort, will receive a corporal punishment of 150 lashes.

In the US a majority of mosques partake of Saudi and Gulf largesse. The Saudis often provide religious leaders (imams), textbooks and curricula, to Muslim communities and schools. There is little to no control as far as the content of the teachings or school books, but a Freedom House study found that these are anti-Christian, anti-Jewish, anti-Shi'a, anti-American and anti-Israel.

Despite trips by President George Bush and Vice President Cheney, Saudi Arabia refuses to increase output - and why would they? They can use it as leverage to get their way, particularly in Israel.

Riyyadh also employs an army of lobbyists and other "influencers" in Washington, London, Brussels and elsewhere around the world. These shadow mercenaries promote a benign image for the Kingdom.

They appear on TV, write newspaper and journal articles, direct university programs on Islamic or Middle Eastern studies. Saudi princes have poured tens of millions into prestigious universities, from Georgetown and Harvard to Cambridge and Edinburgh.

Former senior government officials and ambassadors are on the royal payroll influencing their colleagues in the diplomatic service. This is how the Saudi "peace plan" calling for undermining Israel through a massive influx of Palestinian "refugees" received US support at the highest levels.

This is how the Carter Center in Atlanta ended up taking millions in Gulf oil money. This is why Jimmy Carter looks like he's shilling for the Iranian-Saudi client, Hamas.

If all this were not enough, Hugo Chavez, the socialist-fascist ruler of Venezuela, is spending billions in dollar oil subsidies to assemble an empire of dependencies in Latin America. According to evidence on a laptop taken from a dead guerilla leader in the neighboring Ecuador, Chavez supports the FARC narco-guerillas who are attempting to overthrow the democratically-elected government of President Alvaro Uribe of Colombia.

Chavez, an ally of Iranian president Mahmoud Ahmadinejad, provides cheap oil and loans to Daniel Ortega and his wife, the Sandinista rulers of Nicaragua. Chavez also supports leftist leaders and forces in Cuba, Ecuador, Bolivia and Paraguay. Their intent is to deny the US influence and allies in South America, and ease the way for an Iranian-Hezbollah penetration of the Southern Cone.

Russian leaders, more anti-American today than ever, have written the book on using money and energy muscle to buy friends and influence neighbors. They made an example out of Ukraine, by cutting gas supply to it on New Year's Day for four days.

They also intimidated France and Germany into bucking the US at the Bucharest NATO summit and objecting to Georgia and Ukraine being issued a North Atlantic Treaty Association membership plan.

Russia's Gazprom has hired former German Chancellor Gerhardt Schroeder as the Chairman of a pipeline consortium, and made a similar offer to former Italian Prime Minister and the top Eurocrat Romano Prodi. Vladimir Putin does brisk energy business with Silvio Berlusconi, and with the French President Nicolas Sarcozy, though both are considered pro-American. German businessmen enthusiastically lobby Chancellor Angela Merkel on the Kremlin's behalf. Russia, some argue, has more clout today in Europe than Washington.

Finally, Iran, Russia, Venezuela, and even US friend Kuwait are dumping the greenback in favor of the Euro in energy transactions. This is likely to decrease demand and increase the supply of dollars, sending the US currency into a tailspin. Weaker dollars and higher inflation may add insult to injury in the prolonged process of America's economic deterioration.

To stave it off and to combat its oil-rich adversaries, the US needs, in the short term, to expand its domestic energy sector. Increasing oil and gas production in the West, along the Pacific and Atlantic continental shelf, and in Alaska will help, and so will a coal and nuclear power build-up. US should emphasize ties with friendly oil suppliers, such as Azerbaijan, Angola, Canada, Nigeria, Norway, Equatorial Guniea, etc.

The US Congress should also abolish corn ethanol subsidy and lift tariffs on the really competitive ethanol made from sugar cane. Brazil and Africa can produce more ethanol than Iowa and Nebraska. However, in the long term, more advanced technological solutions are vital to stem the global wealth redistribution to OPEC potentates and other America-haters.

World powers have risen and fallen over major economic factors. This should never be the case of the US. The oil potentates should know that the US will not be intimidated - or bankrupted out of existence. And US allies, from the Caspian to the Middle East, from the Pacific to Atlantic, should know that US is a true and trusted friend.

Ariel Cohen, Ph.D., is senior research fellow in international energy security and Russian and Eurasian Studies at The Heritage Foundation.

About the Author

Ariel Cohen, Ph.D. Visiting Fellow in Russian and Eurasian Studies and International Energy Policy in the Douglas and Sarah Allison Center for Foreign and National Security Policy, a division of the Kathryn and Shelby Cullom Davis Institute for International Studies, at The Heritage Foundation
Douglas and Sarah Allison Center for Foreign and National Security Policy

First Appeared in news.trendaz.com