#11
Date: Mon, 19 Nov 2001
From: Mark Jones <mark.jones@tiscali.co.uk>
Subject: STAND-OFF BETWEEN OPEC AND RUSSIA
Events of world-historical importance are unfolding in the Middle East and Central and South Asia, but this is only the epicentre of a crisis shaping up with dramatic speed and power. At stake is the global architecture of world capitalism in this century and the fate of US hegemony.
The Afghan war, which many rightly identify as a battle fought in a larger war for resources and power in Central Asia, has triggered a cascade of change elsewhere including the restructuring of the terms of US hegemony and its relations with Russia in particular. As this global reordering evolves, huge changes in will be triggered in US relations with Europe, Japan and China. If the emerging US-Russian strategy succeeds, then the balkanisation of the Middle East can only accelerate. The West will reassert its control over the social and political destiny of the Islamic world. Other potential rivals may fare no better; China, in particular, will face a grim future. A geopolitical realignment which leaves China effectively encircled by Russo-American power, means that the 21st century will not, after all, be one of Asian renewal, as many had speculated.
Right now the Russians are making their play but how serious is current Russian talk about replacing Opec as the west's principal energy supplier?
You have to have spent time with Russian oilmen, the so-called 'generali', in order to understand how seemingly normal people can be blinded by avarice. These 'oil generals' sold out the Soviet Union in the name of greed and personal ambition. Men like Viktor Chernomyrdin, the former Prime Minister and currently Ambassador to Ukraine, and Rem Vyakhirev, his successor as Chairman of the Gazprom Board, or Vagit Alekperov the Chairman of the giant LUKoil petroleum company, helped wreck the great Siberian oil reservoirs and ruined the Siberian and Arctic ecology to boot. After the Soviet collapse they continued for example to sponsor crazed plans for pumping so much gas from the Yamal peninsula that even by Gazprom's own calculations the entire peninsula will sink beneath the Barents Sea. Latterly, they have even begun to celebrate the 'positive benefits' of global warming, which by melting off the ice cap has opened a new polar route for tankering out the oil extracted from beneath the Arctic ice shelf.
The 'oil generals' are now plotting how to excavate methane hydrates from the seabed, a procedure known to involve the risk of runaway global warming which will turn the earth's atmosphere into that of Venus. For the Russian 'oil generals', the idea that Russia can replace Opec as the main western oil supplier, unlikely though it may seem to the rest of us, is just small potatoes. For their backers, oligarchs like Mikhail Khordokovsky (Putin's favourite 'oilman', who rose to prominence by plundering state assets in the Yeltsin years), this scenario offers new ways to win acceptance.
As Gunder Frank has been pointing out, Russian oil has risen again to around 7m/bbls and is second only to Saudi oil. BUT this does not alter the fact that Russian oil is well past its peak; in Hubbert Curve terms it is in irreversible decline, and this is notwithstanding the alleged Caspian oil bonanza.
At its 1987 peak the USSR produced ~13m/bbls a day. As with North Sea oil, the Hubbert Curve contains within it a succession of minor peaks and troughs; N Sea oil also 'peaked' twice before entering its present and seemingly terminal decline. The same with Russian and ex-Soviet oil; even with the most optimistic expectations of Caspian output that are publicly available, total ex-SU production will never again exceed the 1987 level. Therefore this is a declining reserve, and we should bear in mind the implication: because the Russians are trying to elbow Opec aside even though Opec production is still a decade or more away from peaking.
A huge power-politics is in play and this is the real score of the Putin-Bush love-fest. The bottom line is this: world oil production is peaking, and the relative significance of Opec is therefore on the up once more. The US and its allies are determined to break Opec power. To give Opec a stranglehold on world oil is to breathe new life into the corpse of pan-Arab nationalism, and ultimately to empower the disfranchised Arab masses. This has to be avoided at all costs; it strikes at the keystone in the arch of US imperialism. Revolution in the Middle East would release the genie from the bottle in many other places. This danger must be avoided at any price. But it is indicative of the profound impasse now faced by US hegemony, and the terrible dangers now faced by the whole imperialist system, that the necessary political reconstruction now ongoing in the mid-East must *in any case* be accompanied by a huge transfer of net resources from the West to the oil-producing states. Even if the price is to prolong the recession in the West, oil prices cannot be allowed to slip below $25-28/bbl because a price collapse immediately endangers the political security of client states like Saudi Arabia.
Social stability in many Gulf states is already jeopardized. Political unrest is inevitable if oil revenues cannot be sustained. Therefore, US imperialism is caught between a rock and a hard place. It cannot escape its gross over-dependence on imported oil; imperialism has not been able to outgrow the petroleum economy. Imperialism therefore cannot escape the long term consequences of the *decline of world oil*, and it is this accelerating decline which makes the mid-East so important. The decline of oil production in the North Sea, Alaska, Texas, Mexico, Nigeria and also in Russia, makes Saudi and Iraqi oil uniquely significant.
After the 1973 oil shock which first brought Opec to prominence, new oil from Mexico, the N Sea and elsewhere later pushed Opec back into the background. But all those reserves are now in sharp decline and this has produced the need for new non-Opec sources. Putin has made his choice, and has pushed Russia into the camp of the West and against what might seem to be Russia's natural allies, the other oil giants which are mostly in Opec. This cynical ploy is covered by a heap of fig-leaves: 'civilisation v. barbarism', the 'war on terrorism' and the mystical values of Russian Orthodoxy.
Why has Russia jumped this way? Russia, like any Opec producer, depends on a high oil price. Bulk Urals and Siberian crude (like Caspian crude!) cannot be profitably sold on the world for less than $15/bbl; and the Russian economy faces a repeat of earlier collapses (the most recent in 1998) if the oil price is below $22-25/bbl. Russia and Saudi Arabia are therefore *not* competing on price, even though that is how the press is mostly reporting the issue, ie as a price war between Russia and Opec. In fact, there is a competition, but it is for investment capital, not about price.
What Russia wants above all is *investment*. For that to happen, prices must be high. Putin is not selling cheap energy to the hungry markets of 21st century capitalism. What he's selling is energy security.
Houston oil banker Matt Simmons has talked of the need for a 'Marshall Plan' for world energy, if what Simmons calls a 'perfect energy storm' is to be avoided. Simmons speaks of the need to invest upwards of a trillion dollars in securing energy supplies, above all, oil and gas but also nuclear (Simmons does not have much faith in renewables, like most who make a study of energy economics). Simmons has noted the need to spend upwards of $500bn on uprating Saudi oilfields and infrastructure alone. You could spend the same in Iraq and not have much change left. But you could also spend this money in Russia, and in Russian-dominated Central Asia, and the pool of available capital is limited.
Putin's emerging vision of the 21st century world order is of a Russian-US condominium. This prospect is especially sweet for those in the Russian ruling elite, including Putin himself, who hanker for past glories and who have grown to resent constant disparagement by the West. Russian political and business leaders do not like to be reminded of their own past or of their state's economic weakness and abysmal human rights record. Russians have been made to feel like second-class citizens and they resent it. This is a powerful motivational factor behind the current drive by the Kremlin for respectability, a place at the high table, and above all for recognition of Russia's rebirth as a superpower and a pillar of the safety and stability of the world capitalist system. This hunger for membership of the club is what drove Yeltsin in his day to seek membership of the G-7 and for the oligarchs to parade at Davos arm in arm with western counterparts. This continuing sense of Russian exceptionalism, of a special destiny, makes it easy for Putin to make extravagant gestures such as abandoning Russian espionage facilities in Cuba or the fabled Cam Ranh base in Vietnam, whose special significance in Russian eyes was that this facility was earlier abandoned by the US army which built it. This was the highwater mark in the Soviet struggle against the West. But it is not a sense of Russian weakness or of dependence on American goodwill which makes Russia give up these assets today. On the contrary, it is because Putin senses growing American weakness that he can afford these gestures.
Putin is prepared to let US forces base themselves in once-sacrosanct Central Asia, because he has convinced himself that underlying American weakness now makes Russia indispensable to the West: 21st century capitalism cannot survive without full-hearted Russian support and involvement. Who, in the circumstances, is to say this calculation is mistaken? Putin's vision is both simple and clear: future western prosperity is anchored on Russia. There must be a strong Russian state, a vibrant Russian capitalist economy, and a flourishing and well-capitalised Russian resource and energy sector. This new Russia must take its place at the top table along with the other great capitalist powers in Europe, America and Japan. Russia must be a fully-authenticated member of the club, and the Russian people must not fare less well, on average, than those of other developed capitalist states. Russia is not and can never be merely a 'raw materials appendage' of the west. It cannot be a Mexico or a Brasil. It cannot be a third-ranking power.
Putin's vision, informed by hisKGB training in Marxism-Leninism, is not much different from the traditional Soviet interpretation of history. The trappings of obsolete ideology have been stripped away, and everything else in this primitive intellectual universe has been 'normalised', above all the social position of the nomenclatura and its legal right to own property. But the great power chauvinism of the true 'Sovok' remains intact.
Unlike many western commentators Putin does not see the Russian state as just another branch of Russian robber-capitalism (the branch that takes care of protection). For him, as for any apparatchik trained in Brezhnev's Soviet Union, the state is a special domain unrelated to and above all others. The state is the determining last instance of Russian society, the guarantor of social and property rights and the inheritor of the special mission of the Russian people in history. What Putin now offers is a new social compact between the state, the elites and the masses, one they will all find hard to resist. It includes restoration of great power status and Russia's place as dominant Eurasian power, a social amnesty to the criminal/comprador class of gangster-capitalists who gained power and wealth under Yeltsin; dignity, social peace and improved living standards to the masses, and above all the chance to draw a line under the past. The Soviet era now takes its place as a distinctive, but nonetheless intelligible and even pointful, episode within a broader Russian history: the Soviet state was the rational continuer of a long tradition of reformist strong states which succeeded both in defending the country against aggression and in modernising its institutions and productive assets. The new Russia is the legitimate and rational inheritor of this Soviet legacy and there is no logical or emotional contradiction between Soviet socialism (appropriate in its day) and modern Russian capitalism, which can now be seen as a higher and more progressive historical stage (a notion intuitively appealing to any Sovok).
Russia can now join Nato. As the guarantor of stability not only in Central Asia but also in the Arabian Peninsula, Russia will obviously be a dominant member of Nato, second only to the US. Russian industry, especially the extractive and above all the oil and gas industries, can now expect a biblical torrent of investment capital from Europe and America. The rebirth of Russian industry and the vertical ascent of the Russian state to renewed global power and reach ought to set in concrete the 21st century capitalist order.
What combination of other powers could possibly resist this American-European-Russian monolith? What possible chance do the broken states of the Middle East have of competing? This grand plan for global reaction will surely snuff out any possibility of social progress, democratic renewal or mass liberation, throughout North Africa and the Middle East. It will guarantee forever the availability of Iraqi and Gulf crude, on Americo-Russian terms.
Above all, this grand plan, if it happens, will also ensure that Europe never again challenges US global hegemony, which in a compliant Russia has perhaps found its ultimate guarantor.
However, this grand plan for global capitalist renewal is born of adversity, not of opportunity. It is the product of a great and growing world energy crisis. It has arrived together with synchronised recession and the possibility of economic slump. This energy crisis already destroyed the Soviet economy, which collapsed in the early 1990s when Soviet oil production peaked and fell by nearly half in the space of five years, at the end of the 1980s.
Since the crisis of 1998, which was followed the devaluation of the rouble, and by higher oil prices in the world market, there has been a partial revival of the Russian economy, with billions of dollars of investment in the oil sector. Nevertheless, oil production in the ex-USSR remains far below its peak. In fact Russian oil is available on the world market today only because of the collapse of industry throughout the Soviet bloc in the 1990s. Russian oil is in longterm decline, and it is not cheap to produce.
In short, Russia cannot replace Opec. Gulf oil in huge and reliable volumes remains essential to any future global economic recovery. Moreover Putin's policy contains the seeds of its own downfall. Stabilising the world economy may not make more capital flow into the Russian oil patch. Capital follows profit, not sentiment. If Putin's grand plan succeeds, then the majority of future investment will still flow into the Middle East, above all to Iraq and Saudi Arabia, and not into Russia's decayed and declining oil sector. Central Asia and the Caspian are also too uneconomic and too small in reserves to ever replace Gulf crude. Therefore, the underlying logic of decline and crisis remains in place. Putin's plan is not destined to save capitalism. All it can do is to buy time: in other words, it is an attempt to *manage decline* during the next decade, while hoping that something else turns up meantime. It is not a basis for relaunching world capitalism into a new great upwave of accumulation.
Inevitably, therefore, the most pronounced aspects of any new Russo-American realignment will not be any inherent capacity for renewed growth and progress, but on the contrary will be intensified repression, obscurantism and black reaction. It is a recipe for the further militarisation of imperialism, for the shrinking of civil society, for creating societies of total surveillance and lockdown, for intensified racism and social intolerance. This is the era of Exterminism, the highest stage of imperialism. It is also the age of Panopticon. Here too, Afghanistan is a foretaste of the future.
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