July 31, 2007

The Great Game : 21st Century Version

The rules of the game

The current century began in an intensely violent manner and there are no signs of a let up. Two and a half deadly wars are being fought in our neighbourhood and threaten to spread further and may even affect India in the years ahead.

These are the results of great power politics, ambitions and economic needs. It is therefore interesting to go through some of the statements by Western strategists and political analysts from time to time. There is a common thread running through them – that seeks total dominance over the rest of the world.


Quotes

‘Old Europe will have to lean on our shoulders, and to hobble along by our side, under the monkish trammels of priests and kings, as she can. What a colossus shall we be.’Thomas Jefferson 1816

NEARLY ONE HUNDRED AND FIFTY YEARS LATER‘We have 50% of the world’s wealth but only 6.3% of its population. In this situation, our real job in the coming period … is to maintain this position of disparity. To do so, we have to dispense with all sentimentality … we should cease thinking about human rights, the raising of living standards and democratisation.’
George Kennan, US strategic planner, 1948

ANOTHER FIFTY -FIVE YEARS LATER

‘We’re an empire now, and when we act, we create our own reality. And while you are studying this reality… we’ll act again, creating new realities….’
Unnamed Bush adviser talking to Ron Suskind, 2004

This is the global US view but before this we had the British giving their view of how things would be played out.

‘Turkestan, Afghanistan, Transcaspia, Persia—to many these names breath only a sense of utter remoteness … but to me, I confess they are pieces on a chessboard upon which is played out a game for the dominion of the world.’
Lord Curzon, 1898

TWENTY THREE YEARS LATER

‘Who rules East Europe commands the Heartland:
Who rules the heartland commands the World-Island:
Who rules the World-Island commands the World.’
Halford Mackinder, 1921

Reverting to American interests, expressed a hundred years after Curzon’s prediction:
‘I cannot think of a time when we had a region emerge as suddenly to become strategically more significant as the Caspian Sea.’
Dick Cheney, CEO Halliburton 1998


THE PLAYING FIELD

In today’s terminology, he who controls the energy belt in West Asia and the Caspian region controls the world. The Persian Gulf and the Caspian Sea region -- Eurasia – remains the most vital region today for powers seeking dominance or economic growth or both.

It is necessary to recapitulate a few facts to capture the importance of the region. The US imports about 30% of its requirements from the region, 40% of the world’s energy requirements pass through the Persian Gulf, and in the years to come India will need to import 90% of its requirements.

Under the previous order of world affairs, private multinational oil companies controlled a large percentage of the resources of energy and their development.

The current trend is towards ownership of assets by national oil companies.

Oil is no longer just traded on the spot market in New York or London, but countries like China and India with their rapidly growing economies are now buying assets in the country of origin in long term bilateral or trilateral arrangements.

Iran is now selling 70% of its oil and gas in euros; it has also sold oil to China in yuan. It has constructed a brand new oil bourse on the Kish island in the Persian Gulf and is expected to trade in Euros. Europeans are buying Iranian gas and there are possibilities of a three-way agreement between the Iranians, Gazprom of Russia and the Austrians.

This is also done to replace the old system of production sharing arrangements where the investing company had the upper hand in acquiring the profits.


MAIN PLAYERS AND THEIR ASSETS

Today there are five major oil giants


Exxonmobil (US)
Royal Dutch (Anglo Dutch)
BP (British)
Total (French)
Chevron (US)

Even though they control only 9% of the fields, companies like Exxonmobil had a turnover of 450 billion dollars in 2006.

Many have a size that is more than the GDP of 180 of the 195 members of the UN

OPEC

Of the 12 OPEC countries 10 have leading State oil companies. Nine are Muslim majority countries i.e. Algeria, Indonesia, Iran, Iraq, Saudi Arabia, Kuwait, Libya, Qatar, and UAE.

OTHER NOCs

China National Petroleum Corporation, ONGC Petrobras and Statoil Norway control 16% of the reserves. Fastest growing are the Chinese companies like Sinopec and CNOOC operated in six countries in 1999 and today in 40.

Since the beginning of oil age, the world has consumed 950 bbl of oil, 30 % of this in the last ten years.

Petroleum consumption was 10 mbd in 1950, 50 in 1970, 76 in 2000, and will be 120 in 2025.


THE MAIN NARRATIVE

Oil and gas in the vast Eurasian region are mostly to be found in areas inhabited by Muslims and ruled either by monarchical or dictatorial regimes, sometimes obscurantist as well. In addition, they are politically unstable and even violent, which could easily mean interrupted and uncertain supplies. In most of these countries, including the new countries after the break up of the Soviet Union, there is American troop presence, in varying degrees. In addition us forces are in Afghanistan and Pakistan, especially in areas facing Iran. The only hold out so far is Iran but the noose is tightening and the campaign is getting more vociferous.

But there have been challenges to US control and supremacy in the region. These have emanated from a resurgent Russia and a rising China, principally. It is a reaction also to what the Americans have tried to do in the Russia’s and China’s neighbourhood.

Iraq was never about WMDs, Al Qaeda or democracy. It was about oil, the best of its kind in the world, and because Saddam had tried to kill Papa Bush. Iran had spoiled the US game of containing the Soviet Union by going radically Islamic, held Americans hostage for 444 days and both Iran and Iraq had toyed with the idea of keeping their reserves in Euros. The switch to the Euro would have been devastating for the US economy and many experts compare this to a nuclear attack. There are indications that Iran has gone ahead and shifted a part of its petro-holdings into Euros. Afghanistan was a cold war outcome fought by the superpowers with their proxies and surrogates in the 80s.

Wars in Afghanistan and Iraq were not prompted by terrorist attacks in New York and Washington, nor waged to spread democracy in West Asia or enhance security at home. Instead, they were conceived and planned in secret long before September 11, 2001 and were undertaken to control petroleum reserves. US State Department official Christina Rocca told the Taliban in August 2001, during the infructuous pipeline negotiations, to “accept our offer of a carpet of gold or we bury you under a carpet of bombs.” And so it came to pass.

Planning for Iraq began in 2001. While the world may look at the mayhem and the tragedies in Iraq, in reality this has been a victory for the major oil companies. The new Iraqi law that has been introduced gives the major MNCs ‘unprecedented sweet heart deals’ that allow them to have production sharing agreements. These deals will permit some semblance of Iraqi ownership of assets but the oil companies will rake in at least 75 per cent of the profits indefinitely or until such time as they feel that they have made good their infrastructure costs and investment.

Successive American Presidents have enunciated doctrines for guaranteed supplies of abundant and cheap oil from the gulf. President carter declared in 1980 that access to Persian Gulf oil was a vital national interest and that the US would be prepared to use military force to protect its interests. Carter’s rapid deployment joint task force grew to become the powerful Centcom, with an area of responsibility that coincided with the energy-rich West and Central Asian and Caspian Sea regions.

The Republican Right began planning for the future in the post-Cold War phase. In 1992, the neo con policy paper, Defence Planning Guidance, talked of permanent military superiority and world dominance. It also talked of the need to prevent emergence of a new rival. It was important to remain the predominant outside power in West Asia and Southwest Asia to preserve US and Western access to the region’s oil.

In September 2000, the project for the New American Century, the Washington based think tank, recommended massive power projection capability globally. Translated, this meant stepped-up pressure on ‘rogue’ states like Iraq and Iran, and taking “actions regarding the capture of new and existing oil and gas fields”.

In May 2001, President George W. Bush’s New Energy Policy recommended that ties with oil-rich countries should be bolstered and US presence expanded. The 2001 Quadrennial Defence Review spoke of the need for the US to retain ability to send forces to critical points around the globe. It identified overseas oil-producing regions as critical points. Preemptive intervention became the Bush Doctrine—clear indication that private oil interests and US strategic interests now coincided.

Even as conflict and instability in the oil-producing regions remain a real problem for the foreseeable future, two other crises loom. There is the phenomenon of peak oil. Experts differ about when the supplies will dwindle but all agree that this decline is inevitable and it will become increasingly difficult to extract more oil. The bigger countries—the US, Russia and China—have responded to scarcity by securitising the energy supply dimension and strengthening military alliances in the Gulf.

The other worry for the US was the rise of the Euro. The EU bought over half of the total crude oil produced in West Asia in 2004, which could legitimately insist on paying in Euros. The dollar’s supremacy and its status as the world’s reserve currency were under threat. Oil was denominated in dollars and the strength of the US dollar had propelled the US economy to new heights and military supremacy. In effect, the US, with its more than $ 6 trillion debt in a $ 9 trillion economy, was not really paying for any oil.

Iran had also transferred a majority of its reserves into Euros in 2002 and contemplated a Euro-based oil bourse by March 2006. Some European analysts describe the effect of this changeover as worse than a nuclear attack on the US. Iran had qualified to be a member of the axis of evil. Despite all the calls to battle, the US has limited choices. A full-scale invasion seems to be out; aerial attacks would be the other option. Clandestine covert operations through the Baloch areas of Pakistan and partly through Afghanistan are now a reality. Somehow, Iran has to be disciplined—and soon.

Political interests apart from economic interests are an important factor for the US. Supplies from the Caspian region must not go through either Russia to Europe or through Iran to the Persian Gulf, which is the cheapest and the fastest route. The Americans want the oil to flow from Kazakhstan and Azerbaijan through the turbulent Caucasus and end up at Ceyhan on the Mediterranean coast of Turkey, both expensive and long. The gas from Turkmenistan should flow through Afghanistan to Pakistan, similarly expensive and long and charted through politically volatile territories of Afghanistan and Balochistan.

The new US foreign policy of “transformational diplomacy” is not just about just reporting the world as it is but about replicating nation-states into US clones. Post conflict multinational reconstruction and stability teams consisting of lawyers, engineers, economists will be deployed. It is more about access diplomacy. Arab analysts point out that US embassy officials began to tour the corridors of government buildings in the countries to which they were posted on grounds to monitor the progress of irrigation, healthcare and other development projects sponsored and funded by US aid agencies. Soon there were whispers that American directives to local government agencies on purely sovereign concerns were being received.

America’s neo-cons have consistently professed that America had a global mission that military power was the indispensable foundation of American foreign policy, and stressed the importance of the use of military superiority to help introduce democracy. The debate in the last two decades of the 20th century provided the real foundation of the Bush Doctrine of pre-emptive action which means an America driven forward by unrivalled military power aided by religion and the growing profits of the world’s largest multinational corporations. Iraq may have been an unmitigated disaster according to most but for US oil corporations it has been a glorious war. Exxon, Chevron and Conocophilips earned US $ 64 billion between them in 2005.

The US may today have a bureau of deconstruction in the Department of Defence that would deconstruct 26 regimes and a Bureau of Reconstruction in the State Department that would reconstruct these countries into democratic American clones. Others like Seymour Hersh have talked of ten countries that are up for facelifts while Ralph Peters has redesigned maps of the region. The global war on terror is not about defeating terrorism, but is a handy means for re-ordering the world and retaining US pre-eminence.

It is, however, becoming increasingly costly and difficult to retain this position. It is axiomatic that without access to assured cheap and abundant energy supplies, the US cannot maintain its way of life and its full spectrum global dominance. A Russia that was supposed to have been finally defeated after the Afghan jehad and the fall of the Berlin Wall is resurgent under President Putin. The rise of China, as a global power, is another phenomenon that Washington must deal with. There is competition for resources and markets; Putin has used energy as a weapon of influence. Neither threatens the US militarily but its economic interests and those of its allies as well as political influence are being challenged. Equally, without access to similar energy resources China will not be able sustain its scorching rate of growth required to keep its economy growing and prevent an internal political upheaval.

As a vital supplier of gas and oil to Europe and Japan, Russia exhibited its newfound strength in early 2006. When it shut off gas supplied to Ukraine as part of a bargain for a higher price. Possibly, the Russian president had learnt these tactics of using energy reserves for geo-strategic advantage at the St Petersburg mining institute where he did a dissertation on “toward a Russian transnational energy company” soon after making a career change post-KGB. Russia-China relations have been on the upswing with mutually beneficial military and technology deals. They are also working some deals with Saudi Arabia. Russia may have lost the cold war but is not going to lose the energy war.

Elsewhere, the Shanghai Co-operation Organisation comprising China, Russia, Kazakhstan, Kyrgystan, Tajikistan and Uzbekistan, has enrolled Iran as a member. These could be early signs of moving towards a Central Asian version of OPEC or NATO. The prospects of a triangular relationship that has Russia, China and Iran as the three sides with the energy rich Central Asia boxed in, is fast becoming America’s geo-strategic nightmare especially after its colossal failures in West Asia. Iran has 11% of the world’ oil and 16% the world’s gas. Although Saudi Arabia has more oil and Russia has more gas, no other country has more of both of these resources combined. Iran is geo-strategically located as the only country that has borders with the vital Persian Gulf and the Caspian Sea. This, rather than the nuclear issue, is the real reason for US anxiety about the way Iran will turn. Iran is the only country that has gained from the failed US campaign in Iraq. No wonder, less than spontaneous anti-Tehran demonstrations seem to be taking place in Iran’s Azerbaijan province and in Khuzestan bordering Iraq while there have been intrusions from Balochistan into Iran by the Sunni outfit Al Qaeda associated group Jundullah.

In the last seven years, Putin has brought Russia back into international reckoning. Today, the Russians feel sufficiently confident to be able to cancel their production sharing agreement with Royal Dutch Shell in Sakhalin-2 and, Gazprom, the Russian energy giant has taken over. There is steely determination in approach, bordering on ruthlessness at times. Chechnya and the Dubrovka Theatre hostage episode are indications of the latter; the manner in which the vast energy resources have been used as a strategic and tactical weapon is a sign of a single-minded desire — to protect Russia’s national interests.

Forty-five per cent of Russian arms sales have been to China, at the rate of $ 2 billion annually. The first-ever joint military exercise of the Collective Security Treaty Organisation (Russia, Belarus, Armenia, Kazakhstan, Kyrgyzstan and Tajikistan) and the SCO will be held this year in Russia’s Volga-Urals area. There has been a coming together of Russia and China in other ways as well and the recent visit of President Hu to Russia where the two leaders referred to India as the third side of a possible triangle was interesting. Hu followed this up with a visit to Japan. Quite apparently, the Chinese are preparing themselves for stronger competition with the US, if not confrontation in the years ahead. Left to themselves they would not want to provoke the US into any pre-emptive action against them but the attempt is to assure uninterrupted supplies of energy and a base rate of growth of about 10% annually.

Meanwhile, the Chinese too have been active in Kazakhstan having purchased a second oil field since 2005. The Russian state-owned company, Rosneft, plans to enter the Chinese market for retail in petrol and petroleum products. Pipelines into China would be built by Russians and not by Western companies. The Russians have become more active in Turkmenistan and seem to be beating off competition from the US, the EU, China and Iran as the new regime seeks to strengthen its ties with Gazprom.

A smaller but equally important game is being played in our neighbourhood. Pakistan has now begun to claim that Gilgit and Baltistan are not part of the state of J&K. All along it has tried to depict these as Northern Areas of Pakistan. China too would be interested that Pakistan has total control over Gilgit and Baltistan. Otherwise the 298-million dollar investment in the development of Gwadar is a financial or strategic waste. Xinjiang is only 2500 kms away from the Arabian seaport of Gwadar. On the other hand, it is 4500 kms away from the Chinese east coast. A fully developed port at Gwadar would help in the economic development of Xinjiang. Gas and oil pipelines from Gwadar to Xinjiang and Tibet would enable China to overcome the uncertainty of sea-lanes from the Persian Gulf through the Malacca Straits patrolled by the US.

The Chinese will be building the Gwadar Dalbandin rail network into Xinjiang as an extension of the development of Gwadar port which will have an exclusive SEZ for the Chinese. China has set aside US $ 150 million to upgrade the Karakorum Highway and widen it from 10 metres to 30 metres for heavy vehicles in all weather conditions. A rail link is also planned in the region with technical advice from an Austrian firm to connect Pakistan and China. This link will be connected further south into the main Pakistani rail grid. Fibre optic cables are being laid. An Islamabad-Kashgar bus service will start from August 1.

Both China and Pakistan are getting ready for an economic boom that will include transit trade to Central Asia. The Pakistan Army’s National Logistics Cell, which has a near monopoly, will handle this freight traffic all the way up to Kazakhstan and Xinjiang. There is money to be made. Thus development of both Gwadar and control of Gilgit and Baltistan are interlinked and the Pak Army will gain financially from both. In fact, it is going to be a financial bonanza for the already huge corporate interests of the Pak Army.

The Chinese are also going to construct 12 new highways into Russia, Kazakhstan, Tajikistan, Uzbekistan and Pakistan as part of their plans to extend eastwards along the old Silk Route into Europe and access to warm waters. The longest one will stretch 1,680 kilometers from Urumqi, capital of the autonomous region, to Tashkent, capital of Uzbekistan, Iran’s Mashhad, Turkey’s Istanbul and finally reach Europe. The road will be completed before 2010.

There is a problem though that is more intrinsic to the Central Asian republics are constructed than to any external factors. It is the problem of abundance in the three oil and gas producing countries—Turkmenistan, Uzbekistan and Kazakhstan accompanied by distorted and uneven growth as well as unstable undiversified economies leading to corruption and wasteful/fanciful schemes that are counterproductive. Political instability is inbuilt in autocratic systems. Despite these problems the Europeans and the Chinese have been looking at Central Asia for their energy requirements. Oil flows to China are still dependent on Russia and there is not enough gas potentially available in Central Asia that would change European dependence on Russia.

The fear in the West also is that long-term bilateral arrangements would knock out the spot market mechanism at the New York and London stock exchanges, while also undermining the production sharing arrangements that had benefited western oil conglomerates. The Russians are back in business and US advances have been halted. Putin gets no popularity points in Washington for this but he does in Moscow, which is important.

The new version of the Great Game includes trying to ratchet the fear of a rising Shia Iran among Sunni Arabs to create a Shia-Sunni schism. The danger is that this will merely succeed in generating anger in West Asia that will give birth to more Al Qaeda and its variants. Vali Nasr, a professor at the US Naval Postgraduate School in Monterey California, says that violent anti-Shiism was the domain of radical pro Al-Qaeda clerics, websites and armed groups in the Arab world and Pakistan. Sectarianism — especially among Sunnis — was a driver for radical jehadi ideology.

Former American National Security Advisor Zbigniew Brzezinski has warned that if the US remains bogged down in Iraq it would inevitably lead to a conflict with Iran and the rest of the Islamic world. Unless the Americans and the Iranians engage in dialogue, there is a very real danger that we are marching towards an unimaginable disaster fought with tactical nuclear weapons. There is already speculation about the likely date of attack but when US Air Force tankers move to remote air bases to refuel B-2 bombers then it will be time for the world to take cover.

Although the US is still the primary global economic, military and technological power, American actions have given room for others to walk into the space being yielded. Obviously, us ability, or perhaps willingness to reconstruct as it did immediately after world war ii, no longer matches its ability to deconstruct. The second is the rise of Russia — Vladimir Putin’s speech at the last Munich security conference was like a punch in the Western solar plexus where he spoke of “one single centre of power, one single centre of force and one single master” and the dangers of this situation. This was evidence of an angered Russia on the rebound. Not for nothing does Putin have a 70-80 per cent approval rating in his own country. His speech was not in isolation but comes after the Russian economy with its vast energy resources has shown signs of revival.

Putin followed this with a visit to Saudi Arabia that has the potential to be as epochal as Nixon’s visit to China in 1972. Not many years ago, the Saudis had been enthusiastic members of an alliance that sponsored and financed a jehad against the god-less Soviets. During his recent visit to Saudi Arabia, Jordan and Qatar, Putin spoke of a ‘GAS OPEC’, offered military assistance to Saudi Arabia as well as nuclear technology to Saudi Arabia and Jordan. A GAS OPEC may still be some years away and is only a concept but the very thought of such a cartel has sent shivers down the Western spine as this would leave the producers of gas as the controllers of prices and production and not the consumers.

The third is the continued strong showing of China as an economic and military power on the rise. Russia and China have been moving closer to each other in the last two years as relations between the US and Russia began to sour. The border issue between China and Russia having been settled; there have been military exercises and increased Russian arms and energy sale commitments. China has made important gains in Africa, where it is likely to be in contention with the US just as it may be partly in cooperation and partly in competition with Russia in the energy rich Eurasian and West Asian regions. Meanwhile, China seeks to strengthen its position in Asia seeking but not admitting to eventually wanting to replace the US as the primary power in the continent.

Ironically, the American decline began, unnoticed, soon after the end of the cold war. It seems that the American military-industrial complex, dependent on the profits of war and insecurity, was horrified that peace seemed to have broken out. Most of the American establishment went hunting for new enemies and they thought it best to go for the Russian jugular. Thus, instead of helping the Russians to recover from years of communism, the opposite happened. This only proved the prediction that Washington and Moscow would always have competed for global dominance regardless of ideology.

After the Warsaw Pact was beguiled into disbanding, NATO quickly moved into Poland and the three Baltic republics. Ukraine and Georgia were sought to be brought under US influence through sponsored multi-coloured democracy revolutions. When the US wanted temporary bases in Central Asia to fight the war on terror in Afghanistan, Putin agreed only to find that these were becoming permanent US facilities in Russia’s own backyard. Anti-missile defence systems are now located in Poland and the Czech republic and new US air bases in Bulgaria and Romania. The Western oil conglomerates encouraged Russian oil and gas to break free of Russian government control. But under Putin this has been largely reversed and the Russians are using energy as a strategic weapon to reposition themselves much in the same way that the west has used largesse, sanctions and technology alternatively to extract concessions or force a favourable decision. Today we see a resurgent Russia challenging the US.

In the context of dwindling fossil fuel supplies and rising demands, he who controls not just the production but also the supply and has discovered substitutes, will rule the world. India, whose buoyant economy has a 70 per cent dependency on imported fossil fuels and weaponry for its security, is disadvantaged as it has neither the deep pockets of the Chinese and the Americans, the military power of the Russians and the Americans and nor the single-mindedness of the Chinese or the Russians. The jostling for vantage positions to control energy resources in the years ahead is going to be ruthless and urgent. This will largely determine each country’s future in this century.

As the Great Game intensifies, there is need to reposition and reorient our strategies. There has to be an Indian version of the CNN-BBC-AL JAZEERA kind of voice in India’s extended neighbourhood.


There is need to find alternative sources of energy, to utilize renewable resources and to conserve what we have. There is enough wind and solar resource available in India that would allow for fuller, determined and systematic use of this natural and replaceable resource. None of this will reduce our dependence on imports from a volatile and unstable region.
There is need, also, to capitalise on the soft power of our IT industry, the talent of our young population and the ability of our engineers to handle infrastructure and petro-chemical projects. India must seek to have a higher profile in the West Asia-Eurasia region.

Nevertheless, no country can have pretensions to being a major power if it is so completely dependent on external sources for energy to run its industry and turn its wheels, or imported weaponry and armament to defend itself.

Self reliance is not only required it is the difference between survival at low levels and success at high levels.

Source : Indian Defence review , Jul-Sep 2007, Vol 22(3)

1 comment:

captainjohann said...

What is India's role in this? How important India is to USA? Our technical man power is the real key especially technicallly qualified Muslim man power which is being covetted by Saudi arabia,UAE as they are not only highly skilled but also moderate and donot pose threat to local regimes unlike Pakistanies who used to be the favourites.Now Alqueada is also competing for this manpower as the terrorist war becomes highly technical.The recent disappearence of 50 odd students from Bangalore technical schools(from Bangladesh,Iran,Iraq,Palestine) after the arrest of Dr.Haneef is rather omnious. INDIA must play this great energygame with self confidence without bothering about USA or SCO like Myanmar,Venezula,Africa etc.