Saturday, November 10, 2007

Hubbert's Peak, the New Economy and Coming Oil Wars

M. King Hubbert was a geologist specializing in global oil resources. He worked for Shell Oil in Houston and in the fifties began formulating a mathematical formula for the prediction of oil resources and the impact of production upon these resources. Initially, his work was met with skepticism. Hubbert's "curve" (a bell shaped curve tracking the world's oil production) was sort of a "black box." Few in the industry understood the math and formula behind it, adding to the initial skepticism. In the sixties, Hubbert elaborated and refined the curve, predicting that "peak" oil production would occur around the year 2000 and thereafter begin to decline.

While I don't pretend to understand the mathematical assumptions behind the curve, I may imagine that it is based essentially on the best historical production figures Hubbert could obtain, combined with a healthy margin of error regarding potential new discoveries, coupled to an understanding of supply and demand. Essentially, Hubbert forecast that "peak" oil production would occur at a point in time at which the world's oil resources would be generally known and its complete depletion could be reasonably forecast. At that point, in defiance of the normal law of supply and demand, wherein supply always rises to meet demand, production would instead begin to drop in anticipation of the end of the era of oil and the resultant rise in prices.

Hubbert's 2000 production peak wasn't exactly on target, but close enough to emphasis the obvious: oil is a depletable resource and the industrial age has depleted it much faster than it can be replaced. One, of his followers, Kenneth S. Deffeyes, a retired professor of geology from Princeton, in a book entitled "Beyond Oil," published in 2005 and updated in 2006, estimates that we hit peak oil production in December of 2005. Today, most geologists believe that we have either already hit peak production or will shortly (within the next ten years).

What this basically means is that the world, at some point within this century, will lose the cheap energy source that fueled the industrial revolution and most of the material conveniences we enjoy today. Worse, this is occuring at a time when political and technological changes are "promising" to bring those same material conveniences to approximately half of the world's population that had been denied to them under communism.

In theory, eventually, the price of oil will rise until a less expensive alternative energy source is found, so that, in the long run, the transition to a new renewable and inexpensive energy source will be but a blip in human progress. But, the key concern today is, as is the case in globalization, the degree of disruption occuring in the transition.

To minimize this disruption a key element of U.S. foreign policy must be to ensure the more or less uninterupted flow of oil, at more or less free market prices, from the Persian Gulf. Basically, four countries: Saudi Arabia, Iran, Iraq and the UAE hold two-thirds of the world's oil reserves. The continued participation of these countries within the global free market system, even though they may not be democratic, is essential to global economic stability for at least the next fifty years.

Although no longer the strong industrial power we once were, the U.S. remains the world's largest single user of oil. With it, we heat our homes and offices, fuel our transportation system, etc. Indeed, much of our entire "new economy" has been built around the premise of cheap energy: suburbs, shopping centers, highway systems, drive-through everythings, etc. As a result, hegemony, if not outright occupation, in the Middle East is of prime importance to U.S. economic national security, which in turn, is directly linked to our status as the world's remaining superpower. Indirectly, it is also linked to our rather tenuous relationship with the world's new and growing industrial base, the southeast asian "tigers," India and China.

The United States retains its superpower status primarily due to three factors: consumption - i.e. what we import (increasingly based on credit), a safe harbor for investment and stable currency - i.e. Wall Street and the dollar, and military force - i.e. the ability to "project" control abroad. [Agriculture exports might constitute a fourth]. All three of these factors are reaching their limits and the limits are becoming increasingly visable to the rest of the world. And, as this visibility becomes clearer, our superpower status becomes increasingly in doubt.

Throughout the Clinton years we managed to sustain the fiction by means of selling much of the world with the idea of a "new economy" and the coming of a post-industrial age, in which the United States continued to dominate through cutting edge information technology. Unfortunantely, the nature of the technology we touted undercut the rationale of a U.S. advantage. To maintain an industrial advantage, requires hardware - i.e. the physical infrastructure of factories, equipment and cheap labor. To maintain a "new economy" advantage requires a "license" - i.e. a piece of paper that promises to respect intellectual property rights.

In a sense, we leapt ahead of much of the world's political development and "bet" our economic future on the global acceptance of democratic principals, the rule of law, and universal property rights. We believed our own hype, in a post Cold War world.

Two events caused the world to "reevaluate" our worth. One was the dot.com bubble burst. Any new technological innovation that comes hard and fast tends to be over-valued in a free market economy. It has happened periodically throughout the history of capitalism and, I should think, pretty much confirms human nature and Adam Smith's "invisible hand" of free and rationale choice in the market. But this time, it happened on a global basis and the result was a reappraisal of the U.S. advantage in a "new global economy."

The second shoe dropped on 9/11. Our attackers flew airplanes (taken over with box cutters) not into the National Cathederal or Riverside Church, or the George Washington Monument but into the World Trade Towers and the Pentagon. In other words, they selected their targets as those representative of the foundations of our superpower status, instead of targets representative of our religious beliefs or our democratic values.

Our response has been consistent with our own self-image, in turn distorted by a failure to appreciate the genuine causes contributing to the end of the Cold War and the failure to come to grips with the substantial changes in the global situation wrought by that end. And, if left unevaluated and unchallenged, these false assumptions leave us on a path toward a future of on-going "oil wars" and the continuing decline of American society. In sum, unless we are now ready to institute serious political and economic reforms and face the serious errors made in our post Cold War history, things just "ain't goin to get better."

[More to come]

Sunday, November 04, 2007

Iraq (Continued)

With approximately 4,000 dead American soldiers and approximately one trillion dollars spent, we now may be facing a revitalized, democratic Iraq aligned to Iran.

The administration's reaction to 9/11 was initially "an emotion seeking a policy." They had been caught off guard by a relatively simplistic plot that had worked with unbelievable effectiveness and one that undermined many of the assumptions of globalization. The natural response to the attack, locking down the country, cancelling the tax cuts, mobilizing the country, ran contrary to many of these assumptions. The answer to the response problem was to, rather than retreat behind our own borders, strike outwardly and the neo-conservatives were right there, in DoD and CHeney's office, to assist them in this thinking.

The foreign policy element of this thinking had a long history within the Republican Party going back to John Foster Dulles and the concept of "roll-back" following WWII (many would trace it back further to Teddy Roosevelt or even the concept of manifest destiny in the 1840s, interrupted by the Civil War and continued in the late 1880s, calling for an expansion of American power).
Basically, roll-back following WWII called for a more aggressive American posture versus communism and the Soviet Union. Roll-back advocates called for things like the invasion of Cuba, direct military support for the Hungarian Revolution of 1956, support of revolutions from the right and, where necessary the pragmatic support of anti-communist dictatorships. One of their favorite witchhunts during this period was: Who Lost China? Although roll-back never achieved its goals and the official U.S. foreign policy of the Cold War became, in face of Soviet nuclear weapons, "containment," the wishful thinking of its supporters never completely went away.

This was also the hey day of the newly formed CIA and one of its great "successes" lay in the Iranian coup that ousted a communist leaning, but more or less democratically elected government and placed the Shah in power. This was a major cause of the subsequent Iranian Revolution which deposed the Shah and led to the seizing of our Tehran embassy, for which in turn, we've never forgiven the Iranians. [Note: if one is looking for a new start in U.S.-Iranian relations, we might start by "calling ourselves even" and each acknowledging our own errors].

So, following a relatively easy victory in Afghanistan, the administration having taken the first bite of the apple of regime change and nation building turned toward the "axis of evil." As part of the axis, North Korea was sort of a "no-brainer." An oppressive state, run by a deranged person, North Korea was on every body's list of rogue states. Another, on our list, if not the rest of the world's, was Iraq.

Iraq was from the Administration's viewpoint a "win-win" situation. Hussein wasn't exactly a poster boy for good deeds and had defied us in the first Gulf War and whenever thereafter he had an opportunity. Although an on-going nuisance of the first rank few other than ourselves (and subsequently Tony Blair in Britain and the others who joined the "Coalition of the Willing") considered Hussein an imminent threat to anyone other than the Iranian Kurds in northern Iraq and southern Iranian Shias.

There are only two strategic interests of the United States in the mid-east: Israel and Oil. It would be nice if the entire region was dominated by freely elected governments, respecting minority rights, women's rights, etc. It would also be nice if the same goals were achieved throughout Africa and elsewhere...but achievement of these goals (until the Bush Doctrine) is not essential to the national security of the United States. The security of Israel is essential if for no other reason than the Israel Lobby in the United States, a legitimate and important part of our own political system. The security of the Persian Gulf region is essential to the free flow of oil and its impact on the world economy. Other than that and despite a long history of missionary work and limited trade, its pretty much a large sand box inhabited by curious and quarrelsome people, who in the annuals of human civilization have seen better days (and hopefully will see better days again, although not at our expense).

For a long time following our invasion of Iraq I assumed that the "win-win" scenario within American politics consisted of pro-Israeli liberal Democrats and oil focused right wing Republicans. However, following a read of a controversial new book, "The Israel Lobby and U.S. Foreign Policy," I have revised my opinion.

I now believe that Israel did not initially want a U.S. invasion of Iraq and considered it likely to de-stabilize a region in which stability was a major component of their own national security, barring a real threat of nuclear proliferation in the region. Indeed, Sharon's initial advice seems to have been, "oh no, don't go there." I also believe that the Mossad (Israeli intelligence) to be among the most informed services on earth and that they did not buy into Hussein's possession of WMD. Rather, I now think that prominent American Jewish neo-cons more or less hijacked the U.S. Israel Lobby, along with key policy makers within the Administration. Right wing pressures in Israel, plus the shift of the U.S. lobby drove Sharon to ultimately agree with and support the invasion.

There is no evidence that anyone at the time was seriously worried about relating 9/11, Saddam Hussein and the flow of oil through the Persian Gulf to a need for a quick invasion. Without imminent threat, the Administration had to build a case for invasion based on weak linkages of Hussein to 9/11, old WMD activities (which Hussein actually encouraged) and the general proposition that he was a very bad guy who killed his own people by the thousands. Indeed, thanks to the sanctions and the corrupt U.N. oil for food program, more Iraqi oil was folowing through the Gulf than we wanted.

In fact, other than the neo-con loony Weltanschauung, I see only one authentic national interest in the invasion (discounting for the moment the personal and political reasons of the President and assuming he hadn't been hoodwinked by the neo-cons around him), namely something called "Hubbert's Peak."

[one more to come]

Iraq (Continued)

Bremer found the vast majority of pre-invasion assumptions regarding Iraq to be incorrect. People were not greeting us in the streets with flowers. The years of sanctions against the Hussein regime had virtually destroyed the country's vital infrastructure, ranging from electricity, to water, to oil. What middle class was left was fleeing, basically leaving middle (and upper) class Iraqi ex-patriots quarreling with Kurds who were playing for independence, Sunnis, divided between secularism and Baathists and a fractured Shia community, at least half of whom were motivated by little more than revenge.

Post World War II Germany and Japan, Korea, Vietnam, etc. all paled in comparison to the complexity of post invasion Iraq. Kurds who advocated a unified, but federalized Iraq, fought Kurds who favored independence. Secular Sunnis fought Baathists and Sunnis Al Qaeda. Iranian leaning Shias fought Iraq Shias. And, on and on. On top of all of this, key policy makers in Washington still fought for Plan A and the transfer of Iraqi sovereignty as quickly as possible to the now present former Iraqi exiles. The military seemed undecided in what its next role would be. In Plan A they were to be gone in a few months. The "coalition of the willing," aside from the Brits, in the south, was virtually worthless in the new situation, although through no particular fault of their own. Most had entered the coalition with only token forces and expected to be little more than a symbolic presence. Separate Rules of Engagement meant very little integration into the overall coalition structure and American military leadership found themselves dealing with political issues they were unprepared for and far fewer resources than they needed to deal with the military ones. And, the Iraqi Army had simply dissolved, complicated by a Plan A de-Baathification policy.

Perhaps, no other American diplomat in history faced as complex a situation as Bremer. That he physically survived was no mean feat. That he accomplished what he had been sent to do was nothing short of a miracle.

He did not do it alone. His first "Ally" came from a curious source, the Grand Ayatollah Sayyid Ali al-Sistani.

Sistani was the chief Shia cleric in Iraq and his religious authority in the country was un-questioned among Iraqis Shias. Bremer, a Catholic, compared him to the Pope, but that would be (as I am sure Bremer would admit) an oversimplification that failed to describe the complex relationship of state to religion within the Muslim world. I have tried to explain this relationship in earlier posts and won't dwell on it here. Suffice to say that as Sistani went, so would go Iraq and Sistani grasped the fundamental tenant of democracy...majority rule...and, of course, as the senior religious leader of Iraqis Shias, he spoke for that majority.

Although he and Bremer never met (Sistani refused to meet with any of the coalition), together and subtly through back channels, they prevented the Plan A transfer of power from occupation forces to the former Iraqi exiles, by simply and effectively demanding a democratic Iraq. Sistani accomplished this by insisting that the new democratic Iraqi Constitution could only be written by freely elected Iraqis, not by any coalition appointed Iraqis. The effect was that in an Iraq composed of 60% Shia, the Shia would rule. Minority rights, the extent of religious influence, women's rights, Kurdish autonomy, de-Baathification, etc. were all important issues to be debated and decided, but Sistani never waivered from the basic democratic principle of majority rule. He had caught and stimied the Bush neo-cons and Iraqis ex-patriots with their own words.

Bremer, in his book and in practice, never waivered from his own loyalty to President Bush and Bush's stated intentions in Iraq. But, he effectively destroyed Plan A (which was in reality dead on arrival) and in many ways came closer to Sistani's position than the positions being proposed by Washington.

To deal with Washington, Bremer turned to Rice and by highlighting the failures of the American military in the post-invasion milieu, finally managed to essentially transfer Washington decision-making from DoD to Rice and the NSC and away from Rumsfeld and the generals, who were sort of bumbling around without a Plan B.

There were unfortunate casualties along the way, both among the Iraqi ex-patriots and the American military. Among the latter was General Paul Abizaid, who was damned if he did and damned if he didn't. Abizaid, who had been Frank's second in command and promoted with Frank's retirement, was exceptionally well qualified but like Bremer, caught between the rock and the hard place. With a Plan A force structure and an American presidential election in the offing (2004) he was effectively prevented from any increase in that structure. Caught between a seriously changed situation on the ground and a Pentagon reluctant to pull the plug on Plan A, he was virtually doomed to failure. But, as a scapegoat, he played a part in Bremer's success in transferring decision-making from the Pentagon to Rice.

The United States military remains mired in Iraq. Perhaps, with a bit of luck, Petraeus, like Bremer, can pull it off. Increased U.S. forces (but not by much) coupled with the apparent growing exhaustion of the various insurgents may lead to some temporary stability, sufficient for us to declare "victory" and get out. However, similar to our backing elections and democracy in Palestian, the long term result in Iraq may be a quasi-democratic/religious state, allied more closely to Iran than the United States. A free and democratic Iraq may be in the interests of the Iraqi people, but not in the "real" interests of American national security. And, if as the President insists, we stay until victory...whose victory? Our victory may not be the same as that perceived by the democratically elected majority of Iraqis. If we stay longer than the Iraqis want, the policy of the neo-conservativism evolves into a policy of neo-colonialism.

In my next and last post on this subject, I'll try and tie things together with a bit of repetition regarding what I've said in earlier posts on why our intervention in Iraq was wrong and the changes I believe necessary in American foreign policy to bring about global stability and U.S. security.

Iraq (Coninued)

Paul Bremer apparently arrived in Iraq caught between "the rock and the hard place." As a professional diplomat, in all probability, he had a far better comprehension of the challenges he and the United States faced in post-invasion Iraq than did the policy makers in Washington who had sent him there.

The emerging picture of what our policy makers "thought they knew" about Iraq and how things would go following liberation is now reasonably clear. In a great sense, Iraq, as Afghanistan, as the U.S. post 9/11 economic recovery, etc., etc. would be "business as usual" and a cake walk. Based on information being fed policy makers in the Vice President's Office and DoD from Iraqi exiles (namely Ahmad Chalabi and the ex-patriot INC), Iraq was a reasonably prosperous middle class country (relatively speaking) waiting to be freed. This conception "fit" what the Administration wanted to hear, although it contradicted much of what the State Department, the CIA and the professional military believed.

Much of this willingness of the key policy makers to accept this misconception uncritically went to the neo-conservatives in the Vice President's Office and among DoD civilians. However, I would suggest that of almost equal weight in this fundamental error was the Bush decision-making process itself. Unlike democratic political processes, business hierarchies are not in essence "consensual." Politics is the art of the possible and with the exception of periodic elections not a "zero-sum game." As a result, in politics, there is a constant and on-going adjustment of strategy based on tactical capability. In business, it is much the reverse. The "Chief Decider" (CEO or President) approves the strategy and appoints subordinates to implement and carry out the tactics necessary to achieve the strategic goals. In politics, tactics are almost always "second guessed." In business, tactics are delegated and seldom second guessed in the absence of catastrophic failure.

"Loyality" in politics, is often talked about and seldom practiced. In business, it is seldom talked about, but always expected. If the American people come to understand this difference, Bush will be our first and last Harvard MBA President.

Having bought into a post 9/11 foreign policy strategy that required a forceful U.S. message to the world based on the proposition that a strong offense is better than a weak defense and to the "idea" of an "axis of evil" which included Iraq, the Chief Decider left the tactics to subordinates, namely the Secretary of Defense and the Vice President. And, most of the others (Powell, Tenant, Rice et al) jumped in line. When that occured, the decision making process bowed to "group think" along hierachical lines.

Bush's failure to seriously question tactical decisions made by subordinates, in the name of loyalty and delegation of authority led to an atmosphere wherein conflicting intelligence was not questioned. The plan then formed to take Baghdad as quickly as possible, with as few forces as possible and turn the government over to the Iraqi exiles, again, namely Chalabi. Forces needed to protect long communication lines weren't necessary because of the smooth transition anticipated. Troops to protect Iraqi borders weren't necessary, because it was originally intended to simply replace the Iraqi military top leadership and to continue with an Iraqi Army in place.

Small tactical changes, such as the Turks refusal to allow U.S. forces entry through Turkey, or the failure to achieve a "coalition of the willing" of any sizable scale, did not provide a reconsideration of the overall strategic objective. Nor did the initial opening of the invasion provide for a reassessment. Baghdad was taken; regime change occurred. And, then, around the time of Bremer's arrival, things began to fall apart.

"Falling apart" was incremental, thus adding to the fog of war. General Franks, who had achieved his portion of the plan (getting to Baghdad), was basically waiting for retirement. The State Department, which perhaps logically should have taken the lead at this point, was less than inspired, partially due to substantial opposition within the Department to preemptive war and partially due to the decision to have DoD lead the occupation. In sum, Plan A failed and there was no Plan B.

With the U.S. government now in an essentially "reactive mode" and reluctant to admit Plan A failure, Bremer's opening days as head of the CPA were spent picking up the pieces of a failed policy.

[continued in next post]

Saturday, November 03, 2007

Positive News From Iraq

Within the last week, positive news has been emerging from Iraq. Casualties appear down significantly (both Coalition Forces and Iraqi) and Baghdad residents who had fled in fear of the insurgency are returning. It's an old clique from Vietnam, but there may be "light at the end of the tunnel."

Of course, it is a different story regarding whether or not stability in Iraq will ultimately lead to accomplishment of our professed goal...namely, the formation of a stable, democratic Arab state in the region and, in turn, whether or not the benefits of such a state really apply to American national security. Yet, for now, we should applaud the present progress if for no other reason than the safety and security of the Iraqi people themselves.

I've just completed two books: "The Occupation of Iraq: Winning the War and Losing the Peace," by Ali A. Allawi and "My Year in Iraq: The Struggle to Build a Future of Hope," by L. Paul Bremer. Allawi, related to the first post invasion Prime Minister, and former Minister of Defense and later Finance, is sort of the inside story of Iraq from the perspective of an Iraqi. Bremer, of course, was the head of the Coalition Provisional Authority (CPA) and led the Coalition's post invasion administration of Iraq from roughly April 2003 until June 2004.

The books agree to a remarkable extent. If one puts aside the argument over whether or not the invasion should have taken place at all, there seems to be common consensus that the two significant errors were: 1) insufficient Coalition troop commitment and 2) insufficient planning and/or erroneous assumptions about a post-invasion Iraq.

It is difficult to see how Bremer may now be blamed for either error. His book is both a textbook and warning for future "nation building." It was exhausting to read the book, much less to have lived it. In fact, on what I believe still to be only a slight chance, should Iraq turn out to be a "success," Paul Bremer may have two distinctions as a father of modern Iraq and as the spoiler of a misguided neo-conservative American foreign policy.

When evaluating Paul Bremer, one must keep in mind that while consistently pushing for the idealism of President Bush, he always kept one foot in the realist school of foreign policy thinking, ala Henry Kissinger. While his book is (as most biographies are) in places self-serving, it is largely the modern day story of a "founding father." The record is replete with those who backed democracy in Iraq for their own purposes, but Bremer appears to be a figure that took it all quite seriously and literally. In reading Bremer's book, I was constantly reminded of Madison's "Notes" on the Constitutional Convention.

It becomes more and more apparent that the reasons we entered Iraq understaffed and with poor planning may be attributed to those within the Vice President's office and Defense Department civilians who essentially accepted Iraqi exile's tactical interpretations of the Iraq milieu, while in pursuit of a larger, more theoretical construct for American foreign policy in the post 9/11 world, within the zeitgeist of globalization, otherwise known as the "neo-conservatives." Without trying to elaborate on neo-conservative principles, I'll contrast them with "realists" as those in pursuit of a defined ideology and who believe the United States has both a right and duty to actively shape the global political stage. Realists, on the other hand, believe that the pursuit of American national interests involves taking the world and dealing with it as it is given, without the "shaping" portion.

In large measure, the differences between the two are ones of degree and timing. Kissinger and Nixon "opened" China by dealing with the Chinese as they were and not on the basis of "as we wish they were." They sold this approach to the Republican Right with the logic that the recognition of China and improved relations would "eventually" lead China toward moderation and democratization. They sold the same approach to the Republican business interests with the promise of trade and the rest of us (loosely grouped as the American Consumer) on the basis of cheap goods at Wal Mart.

Neo-conservatism would presumably take a similar position vis a vie China, but with a somewhat more aggressive stance, insisting on faster and more significant Chinese internal reforms, coupled with the "always on the table" position of preemptive war, if necessary. No one minds the U.S. pressing for the former, but the latter scares the hell out of most of the world community. Yesterday it was Iraq; today, it's Iran; tomorrow it may be China.

Unfortunately, fear is seldom a good motivation for long-term cooperation. People or nations may temporarily acquiesce in being forced to "obey," but will simultaneously interpret their acquiescence as necessary to their survival in the face of evil (e.g. neo-colonialism, Zionism, Western dominance, etc.) - i.e. they'll wait for a time to get even.

So, I suspect much of the world views the present Bush Doctrine as little more than a means by which the United States continues its post World War II super power status and dominance within a New World Order, brought on by the end of communism and globalization, as opposed to a more desirable outcome of the increasing diffusion of power and equality among nations, large or small. Again, the differences between neo-conservatives and realists may lie not so much in end goals, as in the means to achieve them. Sort of the difference between say a Tip O'Neil and Tom DeLay...the difference between "do it this way because..." versus "do it my way or else..."

To return to Bremer, et al and post invasion Iraq, Bremer tried whenever possible to diplomatically guide the Iraqi people via a "do it this way because." In this, he had help from two significant individuals: the Grand Ayatollah Sayyid Ali al-Sistani and Condi Rice.

[continued in next post]