Global Energy, Economic Interdependence, Iraq, and the Gulf
September 21, 2007
Alan Greenspan has triggered yet another wave of global suspicion that the US went to war to steal Iraq's oil for itself. This was not the thrust of his book, or his later remarks, but the net impact has been to focus the world's attention on the issue.
The attached briefing puts the reality in perspective. The US cannot steal Iraq's oil in any meaningful way. Iraq almost certainly has far more than the 112 billion barrels of proven reserves it is credited with in most sources. These figures come from obsolete methods of seismic testing, cover only part of the country and are often over 20 years old. But, it takes years to get large amounts of oil out of the ground, and decades to deplete even part of Iraq's reserves. Moreover, Iraq now has a total production capacity of around 3 million barrels a day and actually exports around 1.6 million barrels a day.
The US has actually spent massive amounts of aid money to sustain this level of production and exports, which is significantly lower than at the time of its invasion. The US has spent well over $700 billion on the war. All of Iraq's oil exports are sold by the Iraqi government and by Iraq's national oil companies at global market prices to all nations at the same price. The oil law the US is pushing hard to have passed to achieve Iraqi political accommodation may have flaws, but it gives Iraq total control over its oil, calls for Iraq to open up any foreign investment to all nations equally and only if it wants such investment, and would again sell all exports to the world at the same market price.
The real issue is not taking oil for the US; it is securing oil for the global economy. The US depends on that economy for its growth and at least indirectly for part of every job in the US. It not only needs direct imports, it needs oil to flow from Gulf to all of its major trading partners: Europe, China, Japan, South Korea, and all of the other powers that trade and invest with the US. If they cannot buy oil reliably at market prices, the world economy will weaken and the US economy with it.
As at the attached briefing show, the stability and security of the Gulf is absolutely critical to the world and will be for decades to come. That security also is not a matter of Iraq's oil or Iran's. It is the security of all Gulf oil and especially southern Gulf states like Saudi Arabia, Kuwait, Qatar, and the UAE. If the US goes to war with a nation like Iraq, it is because of the strategic importance of the region, and the broader threat it poses, not because of the size of oil reserves that the US could only exploit profitably if it totally controlled Iraqi oil for decades.
Nothing about these strategic realities is altruistic. The US does focus on critical strategic concerns. These concerns, however, are global and focus on far broader considerations that benefit the entire global economy. Moreover, the regional security of the Gulf is equally critical to all of the peaceful oil exporting nations in the region, which cannot then be intimidated, blackmailed, or have their export earnings and economies threatened by a local power.