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Perdana Global Peace Forum William Clark, USA December 16, 2005 Part I: Energy and War “If you know the history of oil during the 20 th century, then you know 90% of the history.” War and Peace in the 20 th century Contemporary Warfare has traditionally involved two elements:

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perdana global peace forum

Perdana Global Peace Forum

William Clark, USA

December 16, 2005

part i energy and war

Part I: Energy and War

“If you know the history of oil during the 20th century, then you know 90% of the history.”

war and peace in the 20 th century
War and Peace in the 20th century
  • Contemporary Warfare has traditionally involved two elements:
      • Access to Natural Resources
      • Economics
  • Oil, War, and Power: 90 years of conflict
      • 1914 – 1918 WWI
      • 1939 – 1945 WWII
      • 1991 Gulf War
      • 9/11/2001 - Afghanistan
      • 2003 Invasion of Iraq

The Prize, A Century of War,

by Daniel Yergin by William Engdahl

the defining issue
The defining issue

“Energy will be one of the defining issues of this century. One thing is clear: the era of easy oil is over. What we do next will determine how well we meet the energy needs of the entire world in this century and beyond…We can wait until a crisis forces us to do something. Or we can commit to working together, and start by asking tough questions…”

- Dave O’Reilly, CEO of Chevron, July 2005

energy insecurity geopolitical instability
Energy Insecurity = Geopolitical Instability

The peak

in global

oil discovery

occurred

in 1964.

The peak

In global oil

production

is imminent.

defining the problem global oil production is now flat out
Defining the problem: Global oil production is now “flat out”
  • Light crude oil peaked between 2000-2004
      • OPEC newsletter, August 2005
  • The 2nd and 3rd largest oil fields in the world went into decline during 2005
      • Burgan (Kuwait) and Cantarell (Mexico)

“The whole world right now is producing petroleum at their maximum capacity. …We're at the doorway of a major energy crisis worldwide…We'll have to develop other resources such as wind, solar and nuclear energy — naturally for peaceful purposes.”

- Venezuela President Hugo Chavez, Oct. 2005

oil imperialism transitioning from covert operations to overt warfare
Oil Imperialism: Transitioning from covert operations to overt warfare
  • Vice President Cheney’s 2001 Energy Plan calls for the US to find an additional 7.5 mb/d of oil supply by 2020 to meet projected demand.
    • Sources include ME, Russia, Caspian states, & West Africa
  • Technical data on global oil discovery and oil production indicates that 7.5 mb/d of additional oil supply may only be possible under one ominous scenario — by strategically using the US military to divert oil exports from the Middle East, Caspian region, West Africa, and Latin America from going into China, India, and the European Union (EU).
the thrust is clear
“The thrust is clear”

“Bush and Blair have been making plans for the day when oil production peaks, by seeking to secure the reserves of other nations.”

- George Monbiot, “Bottom of the Barrel,” Guardian, 2003

“The thrust is clear: Once it has seized the oil wells of west Asia, the US will determine not only which firms would bag the deals, not only the currency in which oil trade would be denominated, not only the price of oil on the international market, but even the destination of the oil.”

– “Behind the Invasion of Iraq,” Aspects of India’s Economy, 2002

part ii petrodollar warfare

Part II: Petrodollar Warfare

The unspoken oil currency war between the dollar and the euro

overview of the global economy
Overview of the Global Economy
  • US enjoyed dollar supremacy post-WWII
    • Bretton Woods Agreement: 1944 – 1971
      • IMF & World Bank founded, dollar as “good as gold”
    • Petrodollar Recycling: 1974 to present day
      • Dollar transitioned to as “good as black gold”
  • US structural imbalances
    • Trade Account deficit 2004: $665 Billion
    • Budget Deficit 2004: $412 Billion
  • Global economy has become unbalanced
    • “State of Extreme Disequilibrium”

– Richard Duncan, author of The Dollar Crisis

petrodollar recycling
Petrodollar Recycling
  • After the collapse of Bretton Woods in 1971, the US had to use state coercion to ensure that oil remained priced in dollars only and that petrodollars were recycled back to the Federal Reserve in accordance with US objectives in the 1970s and 80s.
  • Petrodollar recycling drives international demand/liquidity value of the dollar, allows the Federal Reserve to effortlessly create credit, and underpins the dollar’s status as the World Reserve Currency.
an unfriendly act
“an unfriendly act”

‘A switch away from the oil-dollar nexus would be (of) major strategic and political significance,’ said a senior official with an international economic agency who declined to be identified.…(the senior official said) ‘This would be considered by the U.S. as an unfriendly act.’

— “OPEC Boost Euro Deposits Over Dollars,” Washington Times, December 8, 2004

growing petrocurrency conflict
Growing petrocurrency conflict

1999: Euro is launched

2000: Iraq moves to petroeuros

2001: EU calls on OPEC & non-OPEC to “prepare the way for payment for oil in euros”

2003: Post-Invasion Iraq reconverted back to petrodollars (UN Resolution 1483)

2003: Iran moved to petroeuro payments

2003: Russia publicly discusses petroeuros

2002-2004: OPEC sharply reduced dollar holdings (75% to 61.5%)

2006: Iranian Oil Bourse (IOB) to open utilizing euro-denominated pricing

the real clash of civilizations is over global currency supremacy
The real “clash of civilizations” is over global currency supremacy
  • Until the advent of the euro in 1999, there was simply no potential challenge to dollar hegemony in world trade.
  • Maintaining this is a strategic imperative if America seeks global dominance.
  • Dollar hegemony is in many respects more important than US military superiority.
  • Petrodollar recycling is now under threat from the euro, peak oil is approaching, and Iraq was the first proxy war in this high-stakes game of geopolitical power.
war or peace
War or Peace?

“If you want to rule the world, you need to control oil. All the oil. Anywhere.”

- Michel Collon, Monopoly (2000)

“The conclusion is clear: if we do not immediately plan to make the switch to renewable energy — faster, and backed by far greater investment than currently envisaged — then civilisation faces the sharpest and perhaps most violent dislocation in recent history.”

– Michael Meacher, former member of British Parliament, UK Environment Minister, 1997 to 2003

multilateral accords to promote peace in the 21 st century
Multilateral Accords to promote peace in the 21st century
  • Global Monetary Reform
    • Multiple oil-transaction currencies:
      • “basket of currencies” - dollar, euro, yen, and ultimately renminbi (or “yenminbi”?)
  • Global Energy Reform
    • Oil Depletion Protocol (ASPO)
      • International Consortium of G8 + China + India to develop alternative transport fuels
  • Peak Oil Peace Party?
      • Demand side strategies: advocate of more localized trade, & localized food production
slide18
“The significant problems we face can not be solved at the same level of thinking we were at when we created them.”– Albert Einstein

Thank You