Envy and Oil

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We live in
an age of political envy. This is not the same thing as political
jealousy. Jealousy is manifested in this statement:

You have
what I want. I want to take it from you. I will be better off
after I take it from you.

Political
jealousy then concludes: "Let’s make a deal. I won’t attempt
to take everything you own if you will buy me off in advance."

Political
envy is very different. Envy is manifested in this statement:

You have
what I want. I know there is nothing I can do to get what you
have. So, I will destroy what you have. This way, what you have
will no longer bother me.

This is the
outlook of the ugly person who throws acid in the face of the
good-looking person. The acid-thrower is no better looking, but
he has pulled the good-looking person down to his level.

It has taken
two thousand years of preaching against envy to restrict its influence
in the Christian West. But, as Christianity waned in the 20th
century, we began to see the rise of envy.

The politician
who calls for extortionate taxes on the rich or on corporations,
even though he knows that the wealth of the rich is re-invested
to provide jobs and tools to the less rich, is an example of the
politics of envy. The politician would rather that the economy
have low growth or no growth rather than allow the rich person
to retain most of the income that is produced by his capital.

We are told
— correctly, I think — that the typical Muslim in the Middle East
resents the wealth of the West. He is therefore willing to support
a movement that will get even with the West, even though the act
of getting even will make everyone poorer, including the Middle
East.

This is envy,
not jealously. Jealousy was manifested three decades ago when
the heads of state in the OPEC countries of Arabia confiscated
the capital of the West’s oil companies by nationalizing the facilities
that the companies had paid for. They broke their contracts in
the name of the people. They confiscated the lion’s share of the
oil revenue. They did not want to bankrupt the companies. They
wanted a bigger piece of the action.

In my view,
the war in Iraq is an attempt by the oil companies to get back
some of that lost percentage, and to influence the marginal price
of oil by controlling the output at the wellhead in the country
with the second-largest known oil reserves. Western oil companies
are not interested in destroying the nation of Iraq. They just
want a larger piece of the action. They will soon get American
taxpayers to foot the bill for their economic strategy.

THE ENVY
FACTOR

The most
important single economic question over the next two weeks, as
distinguished from the far more important moral and judicial questions,
is this: Will Saddam blow up the oil fields?

If he is
envy-driven, he will. He sees that the United States will replace
him. He is wanted, dead or alive. He is now defined as a terrorist,
and President Bush used this phrase in his post-9/11 speech regarding
terrorists.

If I were
Saddam, I know what I would do. Sometime between now and March
17, I would get into my SUV or the equivalent and head for the
Jordanian border. I would then go to Syria. I would have no doubt
that I could live a comfortable life in Syria. This assumes that
I had squirreled as lot of money away in my Swiss bank accounts
— a safe assumption, I think.

By doing
this, I would thereby call President Bush’s bluff. Without me
in power, there would be no legitimacy for a pre-emptory strike
against Iraq by the United States. By leaving, I would save the
lives of tens of thousands of my people, plus the infrastructure
of the country. When it’s a matter of flight vs. fight, and the
army on the other side of the border is the U.S. Army, I would
pack my bags.

But I am
not Saddam Hussein. He gives the impression of being willing to
die with his boots on. He seems willing to go down shooting. He
may think that he will attain some sort of glory in doing so.
If he dies with his boots on, he is probably correct: he will
gain enormous glory throughout the region. "Saddam lives!"
will become for disaffected Islamic radical youths what "Che
lives" was for New Left college students a generation ago.
But the Muslims will be far more fanatical about their slogan.
They will not wind up selling corporate bonds, the way Jerry Rubin
did before dying in a freak accident. Saddam will be seen as a
martyr.

He won’t
give Bush the satisfaction of running him out of power on the
cheap. This is why I think he will order the destruction of the
oil fields. A man looking to save his own skin would get out now.
But he is sitting right where he is. If he is willing to do this
in the name of retaining power long enough to get shot by some
Special Forces team, then I don’t think he will hesitate to take
the economic future of Iraq with him. I don’t think the survival
of the oil fields for the sake of the post-Saddam regime is part
of his overall strategy.

I could be
wrong. Maybe he is willing to die with his boots on, but not set
the oil fields on fire. Maybe he sees honor as dying as a sacrifice
for his people. I hope this is his attitude: the attitude of a
warrior. But what I have seen so far is not a warrior but a tyrant.
I think he is more motivated by sticking Bush (American voters)
with a large bill for the privilege of conquering Iraq.

If he is
driven by envy, he will order the destruction of the oil wells.

BATTLEFIELD
TACTICS

If this war
is really over oil, then the tactics of the American military
must be to capture the oil wells before any other objective. American
troops will be parachuted into the fields, well by well, with
the objective of capturing the fields before they can be blown
up.

Whether the
fields are captured by American troops or blown up by Saddam,
this will leave Baghdad without a source of income. At that point,
the US military could starve Iraq into submission. But the escalating
political outcry would be loud and clear from all over the world:
get out now. So, I don’t expect a strategy based on mass starvation.
The siege is no longer the popular military tactic that it was
in the days before gunpowder. Even the Bible has a section on
the rules of siege warfare (Deuteronomy 20). But not these days.

I do not
know enough about desert military tactics to know whether northern
Iraq must first be secured by American forces stationed in Turkey.
All I can say is that this battlefield advantage was supposedly
worth $26 billion of American taxpayers’ money. Whether Turkey’s
newly elected head of state will call for another vote on this
issue before March 17, as the Administration has requested, is
unknown to me. My bet is that the new premier will take his time.

Whether Turkey’s
refusal to let our troops in will force a delay of a week or two
is problematical. My sense of the President’s rhetoric is that
the war will not be delayed for anything short of authorization
of deployment inside Turkey. If Turkey votes by March 17 to let
us in, then the invasion could be delayed for another week. If
Turkey again votes no, or refuses to vote, then I think the war
will begin on schedule. The generals will deploy the ground troops
by some other method than invasion through Northern Iraq.

In my Remnant
Review for February, I speculated that the war would begin
sometime around March 15. Recently, the March 17 deadline has
been floated by Washington. Supposedly, this date has something
to do with weather in Iraq. A March 17 invasion would reduce the
effects of spring’s sand storms.

This deadline
tells me that the generals’ strategy does not assume a victory
in a week or two of fighting. It tells me that the generals have
built in enough time for a more drawn-out ground war than Gulf
I required. They want more time, so they scheduled a mid-March
invasion.

A $50
BILLION OIL FIELD PRICE TAG

I have seen
various estimates of what it will cost Western oil companies to
re-build the decayed infrastructure of the Iraqi oil industry.
An estimate of more than $50 billion is common. Anglo-American
oil companies have said they are ready to make the investment.

Understand
what this means. They will not subject themselves to another Ghadaffi-like
confiscation of their property. Once bitten, twice shy. When he
nationalized British Petroleum and Bunker Hunt’s holdings in 1971—73,
which was followed by similar actions by Arabia’s OPEC nations
in 1973, the West’s oil companies got the message: contracts mean
nothing to Islamic politicians.

This time,
there is only one way that the West’s companies will make the
financial commitment to rebuild, with or without fires: the presence
of U.S. troops to enforce the new agreements, which will be signed
in the presence of an occupying military force.

This is the
politics of jealousy, not envy. "We want what Saddam has.
What he has used to be ours. We are going to get it back. We will
keep a bigger slice of the pie." The politics of jealousy
is now about to meet the politics of envy in a head-on collision.

I think Iraq’s
production will be taken off-line, beginning in one week. As to
how long it will remain off-line depends on the outcome of rival
military tactics. Fires will stall production for months.

OPEC’S
MOMENT OF TRUTH

Throughout
oil company boardrooms, senior executives are mentally telling
the Administration, "Send them a message!" When 250,000
US troops are stationed in Iraq, the message will get through:
"No more Mr. Nice Guy." OPEC will know that there are
limits to oil prices that are acceptable to the West.

I don’t think
$10 is in anyone’s agenda. But $70 oil would cause a worldwide
recession. So, I think the Powers That Be have decided that oil
in the $20 to $30 range is acceptable to the American public.
Above this range, it gets risky. Like any oligopoly, the oil industry
wants high prices sufficient to line the pockets of the industry,
but not so high that the consumers revolt, either economically
(less driving) or politically (more voting).

The Middle
East’s oil nations can see what is coming. The United States is
not going to pull out of Iraq. Our troops will have to remain
there in order to assure the oil companies that their investments
are safe.

The presence
of permanent US troops in Iraq will create a nightmare for the
existing oligarchs: the Great Satan is now a permanent resident
of the region. They will be caught between the US and al Qaeda,
the crusaders and the Assassins.

I am not
optimistic. But I am not sufficiently well-versed in regional
politics to say anything definitive. So, I will rely on a recent
statement by an old acquaintance of mine, Prof. Ibrahim Oweiss.
Three decades ago, he and I would chat at meetings of the Committee
on Monetary Research & Education. He was then a professor
of economics at Georgetown University.

Prof. Oweiss
always impressed me as a scholar. He did not make outlandish statements,
which was rare back in the early OPEC years. So, when I recently
read the following, I was taken aback. He opposes the war in Iraq.
He sees
disastrous effects.

"The
doors of hell would be open. . . . The repercussions could include
sabotage and revolutions in the streets," said Ibrahim
Oweiss, a former professor at Georgetown University in Washington.

"Many
regimes could possibly be affected. It is a ticket for instability
in the entire region and no one can predict what that instability
would lead to," he added.

"The
anguish could lead to the creation of many (Osama) bin Ladens
and this is going to be a very serious matter. This is an invitation
to creating terrorism," he said.

CONCLUSION

I don’t expect
this war to be settled so rapidly as the Gulf War was in 1991.
The problem of sabotage in the oil fields is very great. Armed
resistance by civilians is likely. The political fall-out regionally
to systematic bombing of Baghdad will be much worse than the last
time, when the Arab states were officially on-board. They are
all opposed today.

There was
no al Qaeda in 1991. Osama bin Laden was being funded indirectly
by the CIA by way of Pakistan. American troops were in Saudi Arabia,
but it was not clear then that this was going to be permanent.

I don’t think
this war is going to be a stimulus to the American economy. It
is going to be a drain. The economic uncertainty imposed by war
preparations will not be reduced in the dramatic fashion that
Gulf War I was.

Fires in
the oil fields will send a message: no easy or rapid resolution
of the production system. I am convinced that Saddam will order
this sabotage. Therefore, a US blitzkrieg is tactically necessary
to avoid this: almost instantaneous occupation of the oil fields.
If this is not accomplished, then the other OPEC nations had better
agree to make up the shortfall. But what’s in it for them to do
this? The West will be paying top dollar. The goal of an oligopoly
is to maximize net revenue. A high oil price, which can be blamed
on the United States, is just what the regional oiligarchs want.

I recommend
that you don’t count on a sustained recovery of the U.S. stock
market in the second half of this year.

March
13, 2003

Gary
North is the author of Mises
on Money
. Visit http://www.freebooks.com.
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