Is the Iraq War for Oil? -dont read of you hate iraqwar discussions

But the war (which hasn't happened yet, as it happens) is not about oil.

As for why we're going to war now I think two other reasons which haven't been mentioned. Unease at the way that Saudi Arabia is turning more fundamentalist (and anti-US), which will dry up a supply from there. Also the feeling that Dubya's Dad didn't finish the job in 91 and son's going to finish it for him.

did you get a word wrong in this sentence then? or am i v.dim this morning?

If oil is no longer denominated in Dollars then the US will be in trouble.

Yes I did just read it in the observer today, but I have quite close ties to the oil industry and this has be bubbling under for a while.

and this could be the actual reason why germany and france oppose the war (rather than that they are actually listening to ppl).

http://www.observer.co.uk/iraq/story/0,12239,901115,00.html

It says the Project for the New American Century a think tank of Bush advisors including Cheney, Wolfowitz and 'another old friend, former Pentagon Under-Secretary for Policy under Reagan, Richard Perle' (who appeared on C4's 'America On Trial' last night for the defence, and lost the case with the studio audience) published a document in early 2001 which 'pondered that what was needed to assure US global power was 'some catastrophic and catalysing event, like a new Pearl Harbor''

Their policy on the middle east is that Islam 'was one of the world's great empires' which had 'never reconciled... to the loss of power and dominion'. In response, Karl Rove said, 'the United States should recognise that, although it cannot expect to be loved, it can enforce respect'.

i wd assume his answer - in his mind if not publicly - has to date been that he is politically and tactically clever enough, not to say morally correct enough, to sway the bush administration away from the more dodgy and dangerous perceptions of their backroom ideologues, so as to accede to his perceptions (which are rooted in a very difft attitude to the UN and the norms of international law) in the name of shoring up the widest support

but forcing him to comment on this specific aspect out loud wd be interesting — my intuition is that he has a very low opinion of bushco, which he keeps to himself bcz coming clean wd of course totally put the cat among the pigeons, diplomacy-wise

(one of the reasons i dislike the "bush's poodle" trope is that — much as blair may inwardly seethe at this — it actually gives him useful rhetorical space: i wd far rather he were routinely pressed on the fairly obvious but still mainly implied differences between him and bush)

http://www.feasta.org/documents/papers/oil1.htm

Also, the US is now considering military intervention in Colombia to rescue the two CIA agents captured by FARC. Yet more war...

"Does anyone really believe that ordinary Iraqis gain or have gained for decades, any benefits from that country's oil? The evidence of Saddam's ransacking of his country's oil resources is available for anyone with the inclination to discover it. He has not agonised about moral dilemmas while he and his cronies have bled the Iraqi people white in the systematic plunder of their oil resources.
The circumvention of the UN sanctions on oil sales outside the terms of the1991 ceasefire agreement and the 1996 UN Food for Oil agreement have become legion- and the main beneficiaries are Saddam, his Ba'athist clique and its cronies. In this week's New York Times an Iraqi functionary described it (privately of course) as "gangster business, pure and simple".
But the breach of these recent post-Kuwait agreements represents nothing more than business as usual for Saddam. According to forensic accountants Kroll & Associates, since 1981 Saddam is estimated to have diverted about $US1 billion from oil revenues for his personal use. Even if this estimate is a gross exaggeration, it places the 'blood for oil' argument in perspective.
Compared to Saddam, if the whole of the Iraqi oil industry was operated by Texaco, the average Iraqi's life would be incomparably improved. Indeed, if the former executives of Enron were given the task, their rapaciousness would seem touchingly amateurish when compared with the Corleone style of Saddam.
The present state of the Iraqi oil industry is far more complex than the 'blood for oil' crowd admit. An investment of $30-40 billion is necessary in order to rehabilitate existing wells and develop new oil fields. The international community should insist on Saddam's departure as a condition of implementing any plan to bring these resources to the point where they can deliver real benefits to all Iraqis.
It should be clear to all by now that the continued existence of the Saddam regime and the delivery of benefits derived from its oil resources to Iraqis are mutually incompatible."
~ Jim Nolan

No one here is arguing this. Its not merely an oil grab - it is part of a strategy to break OPEC and forstall the economic collapse of the US. When we control Iraq's oil, we control its rate of production. If OPEC falls out of line and does something the US doesn't like, such as switching to euros, the US can boost production in Iraq and flood the market with cheep oil. This is the true value of Iraq's reserves - it is a tool to control ALL the world's oil production.

In the first gulf war, the US made damn sure that other countries paid for it. Mostly the countries of the Arabian peninsula but also Japan if I remember correctly. That also meant that the US government had to follow the priorities of those countries. The Saudi government didn't want to see the overthrow of Saddam Hussein so the war had to be stopped after driving the Iraqi army out of Kuwait. The US encouraged an uprising in the south of Iraq but then failed to provide the people with promised support. No Middle Eastern government is supporting, let alone funding, this new war so where's the money for it going to come from if not from the spoils of war?

I also find it very absurd to issue an ultimatum to the Iraqis: GIVE UP YOUR WEAPONS OF MASS DESTRUCTION OR WE'LL BOMB YOU WITH OUR WEAPONS OF MASS DESTRUCTION. Which country would give up their weapons when faced with imminent invasion?

*runs away*

The tabloids here ran lots of silly stories about what Saddam could get up to if he did land on our emerald shores.

The bidding starts at 20 quid...

Because controlling the oil reserves will come at a great cost to the US. Empire is expensive. We would have to maintain a puppet government in Iraq, which would make the people of Iraq, and consquently the entire middle-east, hate us, moreso than they already do. The rest of the industrialized world will hate us, because we will make them buy oil with worthless amercian dollars at the price we set. We will be alone in the world. Furthmore, we will ignore the fundamental weakness of the US economy. Remember, we are a debtor nation. If our creditors ever decided to call in their loans, we are fucked, which is why its just not smart to antagonize the whole world.

>This war for oil argument is a nonesense but it seems like it's the only foothold the chattering-classes Left who have taken to desperately
>looking for any excuse to oppose a liberation that any self-respecting liberal person should be clamouring for.

If the US is to control Iraqi oil production, then the Iraqi government would have to therefore be a puppet regime, therefore its hardly a "liberation".

>This is the state the modern Left finds itself in, opposing the
> overthrowing of the brutal, anti-freedom, anti-culture regimes of
> Milosovic, the Taliban and Saddam Hussain. What an absolute fucking
> disgrace.

I think its perfectly hilarious that the Right sneered at "nation-building" Clinton and now think there is some sort of divine calling for them to get rid of every dictator in the world. I don't support most interventions in other countries governments, because historically it usually led to something worse.

Yes, it will since we will undoubtedly be the ones who have to pay to protect them. But it is pretty much official policy now that the US will ask the UN to set up a government in Iraq.

>>worthless American dollars

They're so worthless that the dollar is virtually the world's standard of measurement.

>>Furthmore, we will ignore the fundamental weakness of the US economy. Remember, we are a debtor nation. If our creditors ever decided to call in their loans, we are fucked>>

This statement is absurd and void of factual support. Our debt load is tiny (only 8% of our federal budget, a negligible percentage of the GDP) and is completely inconsequential in global economic affairs. If our creditors called in our loans--whoa, most of our "loans" are with OUR OWN BANK--the FEDERAL RESERVE. NOT other countries. True, the US has a trade deficit with other countries, but it's not the same as an IOU. It just means that (simplistically speaking) we import more than we export.

Really, there are better ways to debate the consequences of war other than making a a bunch of baseless comments.

Protect them? No, I mean the cost of protecting US from THEM.

>They're so worthless that the dollar is virtually the world's standard of measurement.

Yes, the dollar has been the gold standard, so to speak, of currency since WWII. Do you think that it is eternally ordained by God to be so? No, in fact now there is a serious rival to the dollar, the euro. And the euro is looking better and better. Read the article i referenced earlier:
http://www.feasta.org/documents/papers/oil1.htm
which explains why the dollar is on shakey ground. So perhaps I exaggerated with "worthless", but the dollar is seriously overvalued.

>This statement is absurd and void of factual support.

"On latest estimates, its [the US's] net liabilities to the rest the world are more than $2.7 trillion, nearly 30 per cent of GDP, a scale of indebtedness associated with basket-case economies in Latin America. "

http://www.observer.co.uk/Print/0,3858,4591686,00.html

All the nonsense about helping the people of Iraq, stopping terrorism and WMD, is nothing but pretext. Its a war fought by people too scared to face new economic realities, and instead to keep things how they are with violence.

I find this hilarious.

"We will browbeat you and browbeat you and BROWBEAT YOU to pass the resolution! Oh, and help us set up a new government afterwards, please?"

The euro is actually a stronger currency right now than the dollar. I'm aware of that--it passed the dollar in June of 2002 I think. Your boy Nunan is just one of many who has speculated (hoped?) that in the near future more OPEC countries will switch to it on the strength of its current exchange rate.

But hanging the hopes of the Euro outlasting the dollar in OPEC and overtaking it elsewhere will require something other than a disaster in the oil economy. It will also require economic growth by the EU--something that is projected to be lower than that of the US again this year by the IMF and others. And with the main economic drivers of the EU like Germany and France faring poorly against competitors like the US and India, the euro's currently favorable trading status may be short lived. Indeed, if the EU does not show growth this year it is almost certain that the dollar will in fact rebound against the euro.

Unlike Will Hutton, I wouldn't be running around bragging how much the US needs Europe--at least until I at least casually considered the other side of his argument, which unsurprisingly he didn't spend any time on.

That being, while Europe can crow about how it enjoyed an increase in the favorable trading account with the United States last year, it didn't translate to improving economic growth or higher living standards. At all. In fact, despite the US trade gap growing, we grew our economy both externally and internally. You may not think that a 3.3% increase in growth was anything to write home about in the US, but it's 3 times higher than the EU "enjoyed." What's more, owing to the way these things are calculated, imports subtract from GDP growth while exports add to it. So without Americans buying Philips plasma TVs and BMWs, American growth would be higher and European growth nonexistent or negative. In other words, America's "unsustainable" demand for foreign products is the only thing sustaining Europe's lackluster economy. The same thing can be said about the Japanese economy.

People like Nunan and Hutton claim that "financing" the U.S. current account deficit requires that foreigners purchase some $1.5 billion in U.S. assets a day, and warn darkly of the time when that need cannot be met. But the current account deficit is by definition the inverse of net capital inflow. So it can very easily be argued that U.S. assets are in such demand, even with Treasury yields at historic lows and after three down years in the U.S. stock market, that Americans have to find $1.5 billion a day worth of foreign goods just to spend all the money that's coming in.

Finally, as for this statement:
>>In latest estimates, its [the US's] net liabilities to the rest the world are more than $2.7 trillion, nearly 30 per cent of GDP, a scale of indebtedness associated with basket-case economies in Latin America>>

It's totally misleading, which is why it is absurd. That statement doesn't consider, for example, the net liabilities that the rest of the world has to the US (which are above a trillion dollars.) It doesn't mention that our service to our debt is less than 5% of our GDP. It's just the net liabilities, as if the net assets don't even matter. But Hutton wasn't concerned with context--he was only trying to find a way to criticize the US economy so he played fast and loose with the facts. You cannot find one credible economist in the world who would say that the debt of the US is anything at all similar or as limiting as what is found in some third world countries.

In other words, America's "unsustainable" demand for foreign products is the only thing sustaining Europe's lackluster economy. The same thing can be said about the Japanese economy.

For fuck's sake. America's import of foriegn goods is a sign of weakness because it represents total outflow of currency which would otherwise be invested in American capital and instead finds its way into foriegn capital. i.e. Japan/Europe make profit from selling goods to the U.S., and this "sustains" their economies in the sense that they're effectively outcompeting U.S. companies (i.e. their better efficiency etc. sustains their economies by enabling them to poach u.s. markets).

it can very easily be argued that U.S. assets are in such demand, even with Treasury yields at historic lows and after three down years in the U.S. stock market, that Americans have to find $1.5 billion a day worth of foreign goods just to spend all the money that's coming in.

Money isn't coming in for crying out loud, or at least capital isn't. Currency and consumer goods are coming in, which is something else entirely.

The eurozation of oil argument is very interesting, however. It seems, as in most arguments, each side hyperbolizes to make the point, and insodoing backs into an unsupportable corner. Certainly what could be disastrous to the US economy is a sudden shift to Petro-euros, with consequent freeing of uncountable dollars on the world economy. Competition between the euro and the dollar will probably benefit both currencies/related economies. Competition always does.

Assuming some kind of smooth transition, cheaper dollars combined with the far more productive US economy would probably hurt Europe greatly.

As for a reason for going to war, it just sounds too complex for people like Geo. W. But there must be some reason? Or maybe not when you have a cabinet full of people who want a war, it's probably not hard to justify one.

Here are the facts:

Take the War on Iraq IQ Test:

1. Q: What percentage of the world's population does the U.S. have? A: 6%

2. Q: What percentage of the world's wealth does the U.S. have? A: 50%

3. Q: Which country has the largest oil reserves? A: Saudi Arabia

4. Q: Which country has the second largest oil reserves? A: Iraq

5. Q: How much is spent on military budgets a year worldwide? A: $900+ billion

6. Q: How much of this is spent by the U.S.? A:50%

7. Q: What percent of US military spending would ensure the essentials of life to everyone in the world, according the the UN? A: 10% (that's about $40 billion, the amount of funding initially requested to fund our retaliatory attack on Afghanistan).

8. Q: How many people have died in wars since World War II? A: 86 million

9. Q: How long has Iraq had chemical and biological weapons? A: Since the early 1980's.

10. Q: Did Iraq develop these chemical and biological weapons on their own? A: No, the materials and technology were supplied by the US government, along with Britain and private corporations.

11. Q: Did the US government condemn the Iraqi use of gas warfare against Iran? A: No

12. Q: How many people did Saddam Hussein kill using gas in the Kurdish town of Halabja in 1988? A: 5,000

13. Q: How many western countries condemned this action at the time? A:0

14. Q: How many gallons of Agent Orange did America use in Vietnam? A: 17 million.

Now you should know the Answer

Most countries are energy importers so they need dollars. So they have to sell things to the US (or get loans from the IMF/World Bank). Becuase the demand for dollars in the world is so high this keeps the price of dollars in goods relatively high which allows the US to import a great deal at advantageous prices and to 'print' dollars because they are in demand. If oil was denominated in euros then the demand for euros would be higher than for dollars so dollars would buy less and so to sustain the import levels in the US there would have to be inflation ('printing' more dollars) or a large increase in economic output.

Because Europe at the moment does not have the luxury of a high demand for Euros fiscal policy is a great deal tighter which is why growth is lower. Europe has an advantage because of this. Since the euro is weaker its purchasing power is less so europe has to rely more on goods produced within its borders, which is why the EU and the Euro were set up in the first place.

Anyway what I am saying is that Euroisation of oil would hurt the US a great deal.

Also, you can't attribute growth being lower in Euro entirely to the tighter supply of the currency; the tighter supply has kept it trading higher than the dollar for the past eight months, which has attracted significant foreign investment into the EU, which bolstered the economy. Foreign security investment has dropped in the US over the past couple of years, which was a key reason the economy here was flat.

And for fuck's sake Sterling, the US trade deficit (and its positives/negatives) is much more complicated than you (or I, actually) describe in this setting, as is the discussion of economics in general. You can barely get two economists to agree on anything, and my entire point is that pundits like Nunan and Hutton only elaborate on one aspect of the discussion in order to sell their opinion. Which is fine, that's what we all do. But from the beginning it seems like people came into the war "discussion" with their minds made up. The War Side is kill happy and the Peace Side is dove happy, with no middle ground.

Bush is cutting taxes at the wrong time. As the US economy weakens he should be increasing government spending to stimulate the economy. OK so he's stimulating the arms industry but it has to be wider than that. This is just the time to be spending on infrastructure and the like.

Bush may be cutting taxes at the wrong time, but in fact he has proposed more government spending (including defense, obviously.) But removing the tax on dividends is also likely to stimulate the economy in the short run, so that isn't necessarily a bad idea.

But the entire argt. is that the current strength of the dollar is balanced angainst a weakening US economy. Furthermore, trade-deficit is not directly correlated to strength of the dollar.

Also, cheaper dollars combined with more productive US economy = someone's got to bear the cost and as Bush's tax cut shows it won't be the rich.

Mainly the point of the article as I take it is one I agree with -- that monetary policy quirks can produce odd circumstances but will tend to normalize, and that the U.S. economy still has a bubble effect from these quirks which means it stands to normalize further downwards in the coming period.

& Don I find this fairly incidental to any discussion of war with Iraq to be honest, but more important in understanding what's generally going on with the U.S. and world economy right now.

(i tht of that a coupla days ago) (but have had no time to think abt it very much: opium was a commodity the chinese authorities were clamping down on, despite small but intense underground demand, a loss to emeregent brit markets => the aggressive de-islamicisation of the middle east wd expand the market for US cultural product, currently resisted socially, despite small but intense underground demand)

this may not fly, but i'm interested in what ppl think

Oh, except for the Iraqis/Columbians/Vietnamese/Guatamalans/Panamanians or whoever gets to see the rockets red glare personally. It's terrible for them.

Yes it is. For example, in the mid to late 1990s (notably when Japan was really in the tank) the appreciated dollar stimulated U.S. import demand further and curbed its exports. The strength or weakness of the dollar has a direct bearing on the trade deficit for the US.

And tax decreases do not necessarily equal lower government expenditures (there are many examples of this throughout the past 40 years.) The federal government (in the US) can stimulate the economy in several ways: a) release money from the Fed (i.e. lower interest rates), increase government expenditures, lower taxes, or a combination of any and all. The Fed is so paranoid of deflation right now (and some economists like Paul Krugman argue that we're already in a period of deflation) that the first choice is not an option unless things get a lot worse. The second and third choices are being pursued.

As for monetary policy vs. the bubble and any current lingering effects, the jury is still out on that one. You can find economists who will argue it either way. Several that I am most familiar with claim that the pending nature of a war over the last 18 months has had more of an effect than anything else on the global economy. Thus, I really don't see how you can see any war activity (whether it's talking about it or gearing up for it or actually doing it) as incidental to discussions of the economy. Or vice versa. Furthermore, all of the primary players on the world's stage will be affected if the United States/UK invade Iraq, so it seems further relevant to discuss each country's financial interest in the war or not the war.

And Skottie, I think you would have a hard time arguing that defense spending by the federal government (at least in the US) is immoral. It's one of the few explicit spending directives in the Constitution.

Looking at this in terms of markets rather than capital expenditure makes things really impressionistic.

Also of course the anticipated war affects the economy but my gripe is if we look for simple economic explanations for the war.

My only point about the war affecting the economy is that as of right now the only consensus (if there is one) is that just anticipating it is affecting things like capital expenditure a great deal and dragging down the US economy. As for the actual war, no one can say whether or not it will be good or bad for the economy because no one knows and historical data is not very reliably comparable.

We don't need to look for simple economic explanations for the war ("Is It For Oil") but it is the subject of this thread.

Much better to spend money on improving a country, on infrastructure on improving the facilities for doing business.

I reckon this war will not be short and that oil prices will skyrocket, which is good for the UK but bad for the US.

But I do agree with you that this war will probably be much longer than we think, complete with a bunch of terrorist type activities after we think it's over. Oil prices are already climbing in anticipation of the fun & games.

(nb: I am not advocating any particular fiscal policy here, just acting as a doomsayer and arguing that fiscal policy can't do very much in this circumstance, regardless)

I'm still a little unclear about what you're trying to say about the expansion/investment of capital. Cheapening money most certainly affects decision making--if you did any business circa the mid-70s you know all about expensive money. In fact, the cost of money (i.e. capital) in this discussion is implicit in figuring the margin of return whether you are investing or loaning. Investment is nothing more than a hedge that your assets will be better someplace than they currently are.

first: cheapening of money keeps poorly-performing businesses able to sustain themselves longer coz they can get better loans. but they'll still die eventually, just more painfully. essentially it dilutes the value of well-performing business to prop up the less well performing ones, from a strict price/earnings standpoint. if the money isn't going to go into new capital investment (which it won't in this period) its throwing good money after bad. the only difference between expanding money through cutting taxes or social welfare spending or cutting rates or etc. is that the former means the rich foax get the first cut off the top, thus increasing the wealth gap (while in defense spending a vast portion goes into a wealth sink of useless [from a human-need standpoint] military hardware).

second: the whole trade issue. i think i wasn't clear here. of course a changed money supply changes balance of trade -- the problem is i thought the converse was being argued above.

This is certainly not always the case, especially in an expanding economy (which we have been in for over a year now.) To wit, all companies die eventually. Cheap money may in fact allow some companies to wither on the vine further but it also sustains some non-established companies to weather out initial start-up periods, for example. And maybe IBM has been slowly dying for the last 20 years, but not many people would say that cheap money gives companies time to adapt to changing markets and economies, to acquire and sell units of business that may evolve the core interest. Your post sort of asserts that a P/E perspective only sees loans as a source of operating revenue, which I don't agree with. I'm not sure if that's what you were trying to say or not.

But as I've said, one of the main reasons capital investment is down in the US is because it has been going to Europe and Asia where the return has been better; funds have shifted to international securities because the US economy has been stagnant. True, the fed has loosened the money supply to combat the negative effect this has had on the US economy, but the influence on the war has deterred capital spending despite the cheap money supply.

giving money to the rich and hoping they will invest or spend in the right places is just dumb.

Of course I'd much rather coperations went coop or at least part owned by workers but then I'm just a socialist ranter.

Holding equities in effect can easily equate to capital investment; if equity is being held it most certainly is probably being used for capital investment, if not for use by the corporation then by the holding company for use to fund more enterprise. Buying and selling equities is speculative towards more earnings.

Where does this assumption come from that the rich will not invest their money properly? If they didn't inherit their wealth, then the logical assumption is that a rich person invested wisely and it grew. If they inherited wealth, it is perfectly logical that they will invest wisely--certainly if for no other reason than the fact that wealthy people typically can afford good accountants or financial advisors.

If you read "The Millionaire Next Door," what you will find is that the primary reason there are millionaires in this country is precisely because those people tend to NOT squander their resources. Large net wealth nearly always equates to prudent investing. The rich keep getting richer because the rich keep doing what they did to get rich, or if they flat out inherited riches they didn't squander it (like most lottery winners typically do.)

I agree that coop is nice but it sure as shit isn't helping me out with my company stocks.