Terrorism and the race for resources

By Heiko Flottau in Cairo for ISN Security Watch (27/04/06)

The US Department of Energy (DoE) predicted in 2004 that world oil demand would rise from 77 million barrels per day (mbd) in 2001 to 121 mbd in 2025 - an in-crease of 57 per cent.

According to the DoE, this increase in demand would be met by Saudi Arabia, the states neighboring the Caspian Sea, Iran, Iraq, Kuwait, and Nigeria.

The DoE foresaw a gradual increase of Saudi production up to 120 per cent - from 10.2 to 22.5 mbd, an increase of the Caspian Sea producers of 8.5 mbd, a combined increase of Iran, Iraq, and Kuwait of 7.6 mbd, and an increase of Nigerian output of 1.6 mbd.

But last year, Houston-based banker, oil investor, and oil analyst Matthew Sim-mons published a book, “Twilight in the Desert”, arguing that Saudi reserves had been largely overestimated.

Simmons said the eight large Saudi oilfields might be not as prolific as expected because they had been in production for several decades. In addition, Simmons argued that despite large-scale exploration, no major oil discoveries had been made in the king-dom for several decades.

The Simmons report was met with protest in Saudi Arabia. Oil minister Ibrahim al-Naimi maintained several times that the kingdom would have no difficulties meeting the growing demands of the market.

However, in 2005, the DoE modified its forecast of Saudi Arabia’s potential to in-crease production, reducing its estimate of a gradual Saudi production increase of 12 mbd until 2025 to 6.1 mbd.

In March this year, Michael T. Klare, director of the “Five College Program in Peace and World Security” at Amherst/Massachusetts and author of “Oil and Blood” and “Resource Wars”, resumed the debate about the Simmons thesis in the French monthly Le Monde Diplomatique.

The title of his essay: “Oil Fields Won't Satisfy World Demand - Saudi Arabia: The Sands Run Out”.

Klare told ISN Security Watch: “I have read Matthew Simmons' book carefully and his argument is very persuasive”, although, he added, “I am not in a position to confirm or refute Simmons' argument.”

According to Simmons, Klare added, “the Saudis lack confidence in their ability to find and develop new fields and this lack of confidence is reflected in the fact that they have not invested large sums in exploration and in the development of new fields but have invested very large sums in trying to keep their existing fields at a high level of output, mainly through costly and dangerous reliance on water injection.”

Other experts, such as Friedemann Mueller of the German Institute for International and Security Affairs in Berlin, disagree with Simmons' findings.

Mueller told ISN Security Watch that although the Saudis were reluctant to disclose the extent of their reserves to the outside world, “all indicators point out that the Saudis are right in claiming that there are still large reserves to be found”.

Mueller added that today’s technological progress would enable experts to fully exploit even old fields and explore remotely located new ones.

However, he agrees that the Saudis are reluctant or even unable to invest large sums of money into the exploration of new fields.

Mueller argues that Saudi Aramco, the largest oil company in the world, is almost the only tax earner in the kingdom.

With the Aramco revenue, he says, the kingdom has to maintain a huge infrastruc-ture and an extensive welfare program for a fast growing population.

Mueller added that another reason for the inability or reluctance of the Saudis to invest into the exploration of new fields was the policy of not allowing foreign invest-ment in the Saudi oil industry.

For all these reasons, most experts agree that Saudi Arabia may be able to gradually increase production from today’s ten mbd to 12, maybe 15 mbd by 2025, but never to the 22.5 mbd predicted by the US Department of Energy in its first projection.

Professor Klare told ISN Security Watch there was a “contradiction between the best interest of Saudi Arabia and the best interest of the United States”. The Saudis, he said, “would like to stretch production of their oil for as long as possible … so as to insure that the oil revenue keeps coming into the kingdom”.

However, the US, Klare continued, “is desperate for more oil to support its ex-travagantly wasteful, automobile-centered way of life and so wants Saudi Arabia to increase its output as much as possible now, even if this means it cannot be sustained for 50 years as desired by the Saudis”.

“It may very well be that the Saudis are capable of increasing their output but are reluctant to do so for fear of sacrificing long-term economic benefits for short-term gain,” Klare concluded.

This is where, according to some analysts, Iran comes into the energy equa-tion.

Mueller says the Iranian oil- and gas reserves are third only to the reserves of Saudi Arabia and Russia.

According to the “Oil and Gas Journal”, Iran has 125.8 billion barrels of untapped oil, while its gas reserves (940 trillion cubic feet) equal another 155 billion barrels of oil.

Some analysts say that Iran's vast energy reserves are driving many states to com-pete for political and economic influence in Tehran - to the dismay of the US.

Iran, Pakistan, and India, for instance, are discussing the construction of a natural gas pipeline from Iran via Pakistan to India. The US opposes the plan because it would decisively increase the economic and political potential of Iran. US Secretary of State Condoleezza Rice conveyed these “concerns”, as she put it, in mid-March this year to the Indian government.

Mueller told ISN Security Watch that another important state courting Iran was China. “It is worthwhile to note how China tries to establish good relations with Iran,” he said.

One indicator, he said, was China's behavior at the UN Security Council in connec-tion with the sanction issue against Iran. “For China, energy is more important than Iran’s nuclear program,” Mueller said.

Even a long-term US ally Japan has become a matter of concern in Washington. According to Klare, Tokyo has “broken ranks with Washington on the issue of energy ties with Iran”.

In “TomDispatch.com”, an internet letter published by the New York-based Nation Institute, Klare noted in 2005 the fact that three Japanese companies had bought a 20 per cent stake in the development of the Soroush-Nowruz offshore field in the Persian Gulf.

“That the Bush administration seeks to foster regime change in Iran is not in any doubt," Klare concluded.

Klare said Iran’s nuclear ambitions “posed a future peril ... but at this moment Iran does not possess nuclear weapons and is many years from being able to do so”.

“Having said all this”, Klare concluded, “I still believe that the Bush administration seeks to promote regime change in Iran in part to permit the re-entry of US oil compa-nies in Iran.”

But Iran, experts argue, is only one, if important part of a wider picture.

In his book, “Resource Wars”, Klare argues that “unlike the wars of the past, which have been dominated by political and ideological considerations, the wars of the future will largely be fought over the possession and control of vital economic goods - espe-cially resources needed for the functioning modern industrial societies.”

Klare maintains, as he wrote in TomDispatch.com , that the US military was slowly being transformed into a “global oil protection force” - guarding pipelines, controlling oil wells, trying to dominate oil rich states, intervening with military power in unstable regions, and guarding oil shipments.

Experts like Mueller see the reason for this development in a political and eco-nomical “imbalance” that is creating tensions which could result in resource bat-tles.

According to some analysts, it is no coincidence that the “war on terror” has merged “with the US effort to safeguard access to oil, especially in the Persian Gulf and in the Caspian Sea basin”, as Klare put it even before the 11 September 2001 attacks on the US in an essay for Le Monde Diplomatique.

Some experts argue that the stationing of US forces in Central Asia, in the Persian Gulf region, in the Caucasus, and in Iraq is often justified by the US administration as a means of protecting oil installations against “terrorist threats”.

For instance, when the US was planning to send a military force to Kazakhstan in 2004, the State Department argued that the troops were needed to “enhance Kazakh-stan's capability to respond to major terrorists threats to oil platforms”.

That is why experts like Klare see a “new landscape of global conflict”, where “anti-terrorism and the protection of oil supplies are closely connected”.

Heiko Flottau is ISN Security Watch`s senior correspondent in Egypt. He wrote for many years for Sueddeutsche Zeitung in Belgrade, Warsaw and Cairo. He is author of the book “From the Nile to the Hindukush – The Middle East and the New World Order” (Ger-man 2004, Arabic 2006)