The Battle Between US/EU and China/India for World Energy Resources

Mondoweiss

The brinkmanship between the West and Iran over Tehran’s nuclear program has escalated one more step in the last week. First came the European Union’s announcement of a ban on the import of Iranian oil from July 2012. It was the last straw and prompted Tehran to announce that the Iranian Majlis (parliament) was about to pass a law banning oil exports to the EU immediately (Iran’s Press TV).

“Speaking to reporters after a cabinet meeting in the capital Tehran on Sunday, [Rostam] Qasemi said less than 20 percent of Iran’s crude oil is currently being exported to Europe and that Iran has no problem in selling its oil to a market other than the EU.

“Managing Director of the National Iranian Oil Company (NIOC) Ahmad Qalebani said Sunday crude oil prices could reach USD150 a barrel in the aftermath of the EU sanctions on Iran’s oil exports.

“He said global economic and business blocs will experience tremendous shocks because of the embargo on Tehran and the West will suffer the most from the measure.

“Meanwhile, Majlis is due to debate a bill this week that would cut off oil supplies to the EU in a matter of days, in response to the 27-member bloc’s decision to stop importing crude oil from Iran as of July.”

The EU embargo was in line with a law which President Obama signed last month. The fact that, using US domestic law, the measure threatens punitive sanctions against any country doing business with Iran was too much for China and India, a long-time ally of Washington. Iranian oil is crucial for the Indian economy. India’s frustration at the Western moves to control its foreign and domestic economic policy exploded into the open. Indian officials pointedly refused to deny a report by DEBKAfile, Israel’s intelligence news service, that India would pay for Iranian oil in gold. And India’s Finance Minister Pranab Mukherjee said bluntly (The Hindu) –

“We (India) import 110 million tonnes of crude per year. We will not decrease imports from Iran. Iran is an important country for India despite U.S. and European sanctions on Iran.”

Earlier, the US Treasury Secretary Timothy Geithner had failed in his mission to persuade Beijing to cut oil supplies from Iran. Geithner was told in Beijing that China was opposed to sanctions beyond those imposed by the United Nations (Al Jazeera).

“Iran is an extremely big oil supplier to China, and we hope that China’s oil imports won’t be affected, because this is needed for our development,” Zhai Jun, China’s vice foreign minister, told a news conference.

“We oppose applying pressure and sanctions, because these approaches won’t solve the problems. They never have. We hope that these unilateral sanctions will not affect China’s interests.”

The reaction of China and India has had a sobering effect on Europe. As the Iranian parliament debates the bill on banning oil exports to the European Union, Germany has now urged Tehran to “exercise restraint.”

The escalation of sanctions by the United States and the European Union outside the United Nations system, and attempts to force others to toe the line, amount to an open act of war. China, India and others will see them as illegal and a clear violation of their sovereign right to formulate their own policies.

Once fertile landscape of capitalism, the United States and Europe, lies barren. The race for control of energy resources has become increasingly desperate, affecting foes and friends alike. And the new cold war, involving military buildup, around Iran and the Persian Gulf has escalated to a point where China, India and Russia, three main Eastern powers, are drawn into open confrontation with America and the European Union.

The world’s only superpower is no longer credible if it cannot force others to follow its writ. But that scenario is before us. The West has become irrational in its policy and expectations. It is looking to transfer the cost of securing its own geopolitical agenda to others, who are not prepared to pay the price. We have gold and oil  prices on the rise and the risk of greater economic and military catastrophe shows little sign of receding.

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On Capitalism and Responsibility

Journal of Foreign Relations

A few days before the annual gathering of business and political elites at the World Economic Forum at Davos, the British prime minister David Cameron set out his vision of capitalism that is popular and responsible. At a time of acute crisis, Cameron put up a staunch defense of capitalism. He asserted his belief that open markets and free enterprise were the best imaginable force for improving human wealth and happiness. He described them as the engine of progress to lift people out of poverty and give them opportunity. “When open markets work properly,” he said, “they create morality, because there is something for something.”

Can today’s capitalism be responsible? Can it be popular in the sense that people in great numbers embrace it and benefit in a fair way? Distinguished British Marxist historian Eric Hobsbawm does not think so. In a sharp critique, Hobsbawm made the point that capitalism as practiced in the last 40 years was all about growth and profit and not much else.

The “trickle-down theory” associated with free enterprise and open markets has failed. We have again entered an era of mass unemployment, poverty, malnutrition and disease, and wars. The root cause of inequalities lies in the fact that the powerful in society have engineered systems that suck most of the wealth up rather than allow it to trickle down. Capitalism has become a distorted and twisted version of Adam Smith’s original idea.

Technological advances, particularly since the 1970s, have massively and rapidly altered the capitalist system in one crucial respect. As Hobsbawm suggested, computers and robots have created a large surplus of people around the globe. And capitalism, which is about growth, profit and speed of production, is unable and unwilling to deal with the surplus of humans.

Agriculture, automobile and shipbuilding industries once employed workers in their millions or more. Today, they employ a tiny proportion of the population. Feudalism, which preceded modern capitalism, and communism, which competed with it, engaged many more people. Communism failed because, despite all its idealism, it was conservative, nationalistic and coercive. The capitalist system suffers from the same type of orthodoxy today. It is polluted by narrow individualism and nationalism.

In Britain, with business closures and job cuts in the private and public sectors, three million unemployed and many more under-employed or simply staying home, Prime Minister David Cameron’s message to people is, “Don’t complain about welfare cuts, go and find work.”

Profit-driven manufacturing practices and outsourcing have brought about a collapse of the job market. To tell vulnerable people to “go and find work” is a contradiction in itself. It is a serious dereliction of responsibility by politicians who are viewed by many to have contributed to the present crisis.

Once fertile landscape of capitalism, the United States and Europe, is barren. The race for control of energy resources is increasingly desperate, affecting foes and friends alike. The new cold war around Iran and the Persian Gulf has escalated to a point where China, India and Russia, three main Eastern powers, are drawn into open confrontation with America and the European Union.

The Eastern powers are refusing to obey the Western sanctions regime against Iran, driven by U.S. law and outside the United Nations. Washington’s offer to compensate the Iranian supplies lost with extra crude from Saudi Arabia and other U.S. allies will inevitably give the United States more leverage on energy supplies to China and India. These countries find it unacceptable.

The world’s only superpower is no longer credible if it cannot force others to follow its writ. But that scenario is before us, because capitalism has become irrational and sick. It is looking to transfer the cost of securing its own interests to others who are not prepared to accept that cost. In a candid admission, the Chinese ambassador in Britain, Liu Xiaoming, said that his government had to think of nearly half of China’s 1.3 billion population living in the countryside, and more than 150 million people earning as little as a dollar a day.

Like China’s overall growth in percentage terms, India’s growth, too, is impressive. The proportion of Indians living below the poverty line has dropped from about 60 to 40 percent in two decades. But the story it tells is partial. The latest available World Bank data shows nearly half a billion Indians living below the international poverty line of 1.25 dollars per day, and their number is not falling. Half of the children are underweight and 45 percent under the age of three suffer from malnutrition.

Inequalities have worsened alarmingly while corporate predators like Wal-Mart make an aggressive push into China and India. The gap between India’s richest and poorest states is nearly three-and-a-half times. As a result of government policies, there have been dramatic rises in the prices of hybrid seeds and fertilizers. In a country where 60 percent of the population is directly or indirectly dependent on agriculture, more than 200000 farmers in debt have committed suicide in the last 15 years. And the number continues to rise.

The India government’s recent move that would have given unprecedented access to mega retail houses like Wal-Mart to the middle-class market, amid widely feared consequences for small farmers and merchants, had to be put off, at least temporarily, following a huge national outcry.

In their anxiety to move India from the Soviet-style economic model to the U.S. model, and haste to transform the country into a superpower, successive governments in Delhi have been tempted to go to very significant lengths. But the capitalist model has become distorted and twisted. Having wreaked havoc at home, free-market capitalism seeks to penetrate societies where many more vulnerable people need greater protection. Only governments acting responsibly can provide that safeguard.

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On Exceptionalism and Deviance

The Wall Street Journal recently carried a speculative article by Ian Tally suggesting a link between the International Monetary Fund’s bailout loans to the European Union’s worst hit economies and sanctions against Iran. In essence, the article said that the Obama administration would likely support bailout loans to Greece, Italy and Spain in exchange for the EU agreeing to an embargo on Iran’s oil.

The source of the WSJ article was Jacob Kirkegaard of the Peterson Institute for International Economics in Washington. Kirkegaard speculated that the timing of the European Union’s “newly-proposed ban on Iranian oil imports” was too fortuitous to be purely coincidental. Greece, Spain and Italy are all heavily dependent on Iranian oil and therefore most resistant to an embargo. According to the WSJ, they are no longer resisting a ban. Italy says that it would support the measure “in principle” while Greece and Spain have indicated that they would not veto the idea.

What has changed? First of all, both Italy and Greece have new prime ministers, installed as part of an understanding with external rescuers, notably Germany and the IMF. The new prime ministers are not politicians, but technocrats, who took office within a week of each other in November 2011. Mario Monti of Italy, a former EU commissioner, became the prime minister, as well as the minister for economy and finance, replacing the colorful and highly controversial Silvio Berlusconi. The new prime minister of Greece, Lucas Papademos, was formerly the vice president of the European Central Bank.

These events were the most obvious evidence of an extraordinary shift in power from elected politicians to supranational institutions. There was also a change of government in Spain last November, when the center-right Popular Party came to power, defeating the governing Socialist Party. These changes were a political earthquake in the midst of an economic crisis. It struck in defiance of the popular mood on the streets.

The disconnect between the rulers, including and backed by wealthy corporate interests, and the subjects has consequences for domestic as well as foreign policies of the countries concerned. The mood in the main street everywhere is anti-war. But such sentiment cannot control governments’ propensity to fight foreign wars while corporations are given freedom to operate in an environment with minimal regulation. While the state withdraws from policy making and essential service provision, private corporations are allowed practices which determine employment, wages, and consequently money circulation. The accumulation of wealth by one percent greatly reduces the purchasing power of the 99 percent. High unemployment and depressed economy result in lower interest rates. If banks are threatened with failure, the tax payer is there as the rescuer of last resort.

What does it have to do with sanctions and the current talk of military action against Iran in Western capitals? The economic crisis has made all but the wealthiest countries susceptible to supranational powers. It enables the IMF, and the United States, to exercise control over countries in need, in both domestic and foreign policies.

The Wall Street Journal referred to one issue, that of an embargo on Iranian oil sales. There are other examples where pressure tactics have been used against foreign governments to tow the American line. The increasingly aggressive U.S. campaign against Iran ranges from the European Union to countries in Asia, including India, China, Japan and South Korea to name a few.

The veto powers of China and Russia rule out further sanctions on Iran with the UN Security Council’s approval. So the Obama administration and Congress have adopted the tactic of forcing other countries to obey American law and go along with sanctions imposed by Washington. The temptation to look and act tough from Obama to Republican presidential aspirants, Congressmen and Senators is irresistible as the November 2012 elections approach. American policy of making the world obey U.S. domestic law is blatant and bizarre.

It makes a mockery of other nation-states’ independence and sovereignty and their right to formulate and pursue their own policies. The United Nations is rendered irrelevant while the United States goes Rambo on the international stage. That such behavior is causing widespread alienation among other countries, and ultimately threatens America’s own interests, is a message lost in Washington.

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