Envy and Oil

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. For a free subscription to Gary North’s twice-weekly economics newsletter, click here.

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