Petroleum Murder:

Peak Oil, Militarisation, and America’s Proxy War in Somalia

By Tristen Taylor

August 2007

“We’ve embarked on the last days of the age of oil.”

-- Mike Bowlin, CEO of the US oil company ARCO (1999)

Something unheard of in human history is occurring – the global scarcity of a number of key material resources. The word in financial quarters is that it is impossible to buy zinc futures as the price is escalating too fast for the market to keep up. Essentially, the global demand for resources is beginning to outstrip production abilities, and financial markets have entered a long and very profitable commodity boom. Mining, oil, drilling and associated retail companies are making money as fast as stockbrokers can cash in.

In this general climate of increasing resource scarcity, one resource towers above all others - petroleum. Oil, fondly referred to as black gold, is the basis of the global economy. Everything around us owes its production and distribution to oil. Food is grown using machines burning diesel, transported in trucks and packaged in plastics that use petroleum as a feedstock. Our current method of civilisation is utterly dependent on oil and if the oil supply were to dry up tomorrow, the vast majority of us would starve to death in a matter of weeks. At best, survivors would be scratching out a Dark Age existence amidst the ruins of rusting BMWs and everlasting plastic Coca-Cola bottles, making snares for rats out of computer mouse cords.

The petroleum industry is vital to the life of every human being in the modern economy, yet it is a tightly controlled industry with only a handful of key players (see table next page), divided amongst state and private control. Of the ten biggest corporations in the world (as ranked by Fortune 500), five are oil and gas companies with a combined annual revenue of US$1,271,058,300,000.00, or 1.271 trillion dollars.¹ By way of comparison, South Africa’s Gross Domestic Product is US$215,511,134,393.14, or 215.5 billion dollars.²

Not a great deal has changed in the petroleum market since 1900 when Standard Oil controlled 50% of global sales.

Top 15 Oil Companies, December 2006³

Rank	Company	Country	Level of State Ownership (%)
1	Saudi Aramco	Saudi Arabia	100
2	Exxon Mobil	US
3	NIOC	Iran	100
4	PDV	Venezuela	100
5	BP	UK
6	Royal Dutch Shell	UK/Netherlands
7	PetroChina	China	90
8	Chevron	US
9	TOTAL	France
10	Pemex	Mexico	100
11	ConocoPhillips	US
12	Sonatrach	Algeria	100
13	KPC	Kuwait	100
14	Petrobras	Brazil	32
15	Gazprom	Russia	50.002

Further, control over petroleum resources is vital not only for what is often termed the “national interest” (which actually means the interests of a thin elite class controlling any particular country) but also for the economic wellbeing of a country. Anyone who thinks that America’s current military operations in the Middle East have nothing to with securing America’s long-term supply of petroleum is insane. A recent article in the Independent on a proposed law to allow multinational companies to drill for Iraqi oil states:

The US government has been involved in drawing up the law, a draft of which has been seen by The Independent on Sunday. It would give big oil companies such as BP, Shell and Exxon 30-year contracts to extract Iraqi crude and allow the first large-scale operation of foreign oil interests in the country since the industry was nationalised in 1972.⁴

Yet, despite this total economic addiction to petroleum, oil is a finite resource and one that is running out. According to the BP Statistical Review of World Energy (June 2005), the world currently has 1200.7 billion barrels of proven oil reserves.⁵ If this figure is divided by the current rate of production (85 million barrels a day), the world has only 40.6 years of proven reserves left, with the vast majority of those reserves located in the Middle East.⁶

Unless major new oilfields on the order of current Saudi and Iraqi fields are discovered, or global consumption of petroleum decreases, the world will soon exhaust its oil reserves. Given the intense exploration efforts of the last fifty years and the booming economies of China and India, neither new discoveries nor lessening demand are set to intervene in oil’s swan song.

The Peak Oil theory states that the global oil production will peak at some point in time and thereafter enter into a period of terminal decline. This means that, while oil production still occurs, the amount that can be pumped out on a annual basis reduces; after the Peak, less and less oil will come out of the ground. This has already happened in several oil producing nations; in particular, the USA and Russia (see graph on page 4).

Projections of Global Peak Oil

Supporting the above chart is the historical price of oil (see the chart below) which records the price of a barrel from 1861 to 2006. If market prices are a reliable indicator of quantity of supply in relation to demand, then it seems that increasing oil prices tell their own story.

Price of Oil since 1861

On a national level, Peak Oil has already occurred in several countries, most importantly in the USA. In 1970, US oil production peaked and has been in terminal decline ever since.⁷ Furthermore, the US has gone from a net exporter of oil to a net importer of oil, and is currently the largest consumer of oil in the world (24.6% of global consumption with only 8% of global production⁸).

US Oil Peak plus declining Production⁹

Compounding problems regarding access to supply, the US faces competition from other nations for access to oil; for example, China’s energy resource use is rising beyond the supplies available within its borders:

“In 2003 alone, [Chinese] power demand jumped 15 percent, and oil consumption increased more than 10 percent. A decade ago, it was a net exporter of oil; in 2003, due primarily to a dramatic rise in private car ownership, China passed Japan to become the second largest consumer after the United States. Long a major exporter of coal, China could become a major importer within four years.”¹⁰

Both countries are involved in sourcing and maintaining supplies of oil outside their borders. While China relies on state-owned oil companies¹¹, the USA relies upon private oil companies to find, extract and supply its national needs. However, the dividing line between private enterprise within the oil sector and US foreign policy is so blurred that it is virtually non-existent; an ex-oilman is the current US president, and Condoleezza Rice has an oil tanker named after her. To all intents and purposes, US and multinational oil companies operate as an arm of the US state in terms of oil supply. As will be shown later in this paper, the interests of these oil companies (which closely align to the interests of America) are often backed up by either direct or proxy US military power.

Given these facts, several important geopolitical observations can be made:

1. Without affordable access to petroleum no modern economy can survive, for all modern economies are dependent on petroleum at the structural level. Furthermore, due to the huge economic, social and political costs entailed, no country is seriously considering a transition away from a petroleum economy.

2. Global oil production is set to enter into terminal decline in the next couple of years. At the same time, consumption and the price of oil are set to rise.

3. The world’s biggest and most powerful economies do not have sufficient petroleum reserves within their borders.

4. The foreign policy of nations will be dominated increasingly by achieving and maintaining access to petroleum. The costs that countries will be willing to bear in order to acquire petroleum supply will be high.

These four observations can be used to explain current events and, in particular, the invasion of Iraq. While not the topic of this paper and adequately covered by a variety of different authors, it is worth noting that the Iraq invasion is a prime example of using military power to control precious resources, and there is nothing new in this. One of the main reasons for Hitler’s 1941 invasion of Russia was to control the oilfields in Azerbaijan (which produced 25.4 million tons of oil in 1939), for without access to oil the Nazi state could not survive. Hitler himself said, “Unless we get the Baku oil, the war is lost.”¹²

The other combantants in WWII, the United States and the Soviet Union, had adequate internal supplies of oil. These internal supplies of oil enabled both the Americans and the Red Army to run the machinery of industrialised warfare, while the Germans and Japanese ran out of oil to supply their navies and ground forces. This ground their armies to a halt, and both countries sacrificed hundreds of thousands of men in failed bids to control and access oil fields. Nothing much has changed in warfare since - armies still require huge amounts of oil. What has changed is that the major military powers are running out of domestic oil supplies and are, in order to maintain military dominance, forced to secure oil supplies external to their borders. It is no wonder then that events in the Middle East dominate world headlines.

In a report supported by the James A. Baker III Institute (yes, that James A. Baker, Bush family consigliore and oil hitman extraordinaire) and the Council for Foreign Relations, America’s position regarding oil is stated simply and with brutal honesty:

“Strong economic growth across the globe and new global demands for more energy have meant the end of sustained surplus capacity in hydrocarbon fuels and the beginning of capacity limitations. In fact, the world is currently precariously close to utilizing all of its available global oil production capacity, raising the chances of an oil-supply crisis with more substantial consequences than seen in three decades. These limits mean that America can no longer assume that oil-producing states will provide more oil.”¹³

While resource scarcity helps to explain why the US has invaded Iraq, there is another story that must be told with regard to militarisation and oil usage - that of weapons sales. When countries like the US become net importers rather than net exporters of oil (especially at a large scale), huge amounts of domestic currency leave those countries. In turn, this creates a balance of payments problem that has to be addressed for macro-economic reasons.

The Western powers have resolved this problem by means of a particularly intelligent but devious method. The money that goes to oil producing nations is often returned to oil consuming nations through construction and service contracts and military sales; the Middle East, for example, is a major purchasor of US goods, services and military hardware:

“Oil profits are also behind some of the orders. Saudi Arabia said in July that it planned to spend $5.8 billion on American weapons to modernize its National Guard and will also put in more than $3 billion in orders for Black Hawk helicopters, Abrams and Bradley armored land vehicles, new radio systems and other weapons.

“In the gulf region, Bahrain, Jordan and the United Arab Emirates have filed plans to buy Black Hawk helicopters — for a total of $1 billion. Oman plans to buy a $48 million anti-tank missile system. The Emirates plans to buy rocket artillery equipment and military trucks for $752 million and Bahrain will purchase Javelin missiles for $42 million. Bahrain alone has accounted for $1 billion in foreign military sales in the five years since 9/11.

“The rise in oil prices has allowed countries like Saudi Arabia and the United Arab Emirates to increase their arms purchases dramatically,’ said William Hartung, director of the arms trade project at the World Policy Institute.”¹⁴

US arms sales, then, serve a variety of purposes: One, they help to “return” dollars spent on foreign oil purchases back to the US domestic economy. Two, they provide a further source of revenue in maintenance contracts (F-18 fighter jets require a great deal of specialised technical support). Three, they serve as an effective subsidy to US arms manufacturers and thus a method of continuing to pay for the vast and bloated US military, upon which American access to foreign oil ultimately depends.

This process has been going on for quite some time, leading to some historical irony. The West armed Saddam Hussein in exchange for oil for decades. Even the Brazilians were in on the act, as Kenneth Timmerman states:

“But to prevent a huge trade deficit with Iraq, Petrobras [Brazilian oil company] had to offset its oil purchases with sales of Brazilian manufactured goods and services … Saddam agreed to a trial purchase of some 150 Engesa-9 Cascavels in 1976, as part of a $836 million deal with Petrobras. Also included were 150 Urutu scout cars and 2,000 military trucks. Deliveries began at the rate of ten vehicles per month. It was the start of a long and mutually beneficial relationship that would have a dramatic impact on world peace.”¹⁵

China also faces a similar problem in regard to paying for oil. The Chinese current strategy is to work in countries where Western powers have withdrawn due to domestic pressure, such as in Angola and Sudan. Seemingly unfettered by genocide, the Chinese are currently importing oil from Sudan, and, in return, are simultaneously blocking UN peacekeeping missions and selling arms to Sudan.¹⁶ China also gave military arms and support to another African oil-producing nation, Equatorial Guinea, which may have more oil per capita than Saudi Arabia.¹⁷

Essentially, the selling of weapons by oil importing countries to oil exporting countries is a deviation from the standard loan/debt scam of international finance, i.e. where a loan or development aid is given to a country on condition that services and goods purchased via that loan come from the lending country. The Chinese have used a variant of this tactic in Angola with a US$2 billion infrastructure loan, to be paid back in crude, plus 70% of all construction work must go to Chinese firms.¹⁸

In terms of global oil supply and geopolitics, African oil is highly prized. While pumping African oil is more expensive than Middle Eastern oil — Middle East oil is incredibly cheap to pump, costing somewhere between US$1 and US$1.50 and no other region on the planet can compete — it does have a low sulphur content and can be processed easily by Chinese refineries. Furthermore, outside possible Antarctic reserves and offshore reserves currently under northern polar ice sheets, Africa has more potential for new discoveries, with fat profits for multinationals.¹⁹ And, Africa is not (yet) beset with the political, military, ideological and religious conflicts of the Middle East, which have a distinctly anti-US flavour.

Already, African oil exports account for a great deal of US and Chinese total oil imports — 22% and 40% respectively — and are expected to rise. With two oil-hungry nations scouring the globe, in a situation of increasing oil scarcity and rising price, it would be foolhardy not to anticipate competition for resources — and an increasingly militarised competition. As global consumption increases and global production declines (the back side of the peak in oil production), smaller oilfields, such as those in Africa, will take on increasing strategic importance.

Signs of this strategic importance and competition are already all around us. The US in particular is increasingly turning its attention towards Africa as a strategic resource. The US military divides the world into administrative commands and has recently decided to create a separate command (AFRICOM) that will, according to the official website:

“U.S. Africa Command will better enable the Department of Defense and other elements of the U.S. Government to work in concert and with partners to achieve a more stable environment in which 1) political and economic growth can take place, and 2) humanitarian and development assistance can be supported more effectively. U.S. Africa Command will consolidate the efforts of three commands into one focused solely on Africa and help coordinate US Government contributions on the continent.”²⁰

While AFRICOM flatly denies that its existence is to combat Chinese efforts to gain African resources, that kind of statement seems to belong in the same category as Saddam-has-weapons-of-mass-destruction-and-is-set-to-hand-them-over-to-al-Qaeda. Michele Ruiters, a senior researcher at the Institute for Global Affairs, gives an alternative view:

“US oil interests and the “war on terror” lie behind the most recent plans, as Africom in Ethiopia would provide the US with a launch pad into the Middle East and the volatile Horn, also marked as a haven for “terrorists”. Africom’s presence in Ethiopia would raise that country’s profile internationally but at the same time jeopardise its relations with its immediate neighbours and the rest of the continent.”²¹

This alternative view seems to hold more promise and truth than AFRICOM’s bland statements. If we are entering into a period of oil scarcity (especially when consumption is beginning to outstrip supply), then US attempts to secure its oil supplies become a matter of critical importance. Further, African supplies offer a chance for US oil interests to make money through upstream production (i.e. drilling and pumping wells, compared to downstream activities like refining, transport and retail), in particular in the Horn of Africa. Somalia has long been suspected of having significant oil reserves, especially in the north (one source has projected up to 300,000 barrels per day, greater that the fields in Yemen²²). Somaliland is also suspected of having oil reserves.

Prior to 1991 and the January overthrow of President Mohamed Siad Barre, two-thirds of Somalia was allocated to Conoco, Amoco, Chevron and Phillips, all US oil companies. Civil war and the collapse of centralised government halted efforts at oil exploration and uncertainty arose regarding the value of oil contracts. While US Government officials lived and worked in Conoco’s Mogadishu office in 1991, guarded by Conoco’s private security, a plan was hatched to bring law and order back to Somalia and repave the way for US oil exploration.²³

This was Operation Restore Hope. It started with marines on beaches stumbling into the glare of CNN camera lights and ended with some downed helicopters, flag-draped coffins, the complete disintegration of social infrastructure within Somalia, and hundreds of thousands of refugees and disease. All in all, Operation Restore Hope was a disaster, based on the faulty idea that, as George Monbiot states, “… you can bomb a nation into peace and prosperity.”²⁴

And, the US didn’t even get the oil.

Still, try and try again seems to be the Bush family motto. In 2006, Ethiopian troops invaded Somalia, with both the blessing and support of Washington.²⁵ The public pretext of invasion was that the Union of Islamic Courts or UIC (which had brought a semblance of peace to Somalia) was protecting al-Qaeda and other such Islamic terrorists. Essentially, this is war by proxy, and a war to install a regime in Somalia that will be friendly towards US oil interests. The War on Terror provided a convenient cover story, and, anyway, if the UIC was harbouring al-Qaeda and did believe in a caliphate across the Muslim world, there was every chance that US oil interests would be excluded. Either way, in a world of declining oil supply, access to oil is of paramount importance.

This one dynamic, access to oil supply, will come to dominate the next fifty years of geopolitical thinking and relationships. Every country will seek to ensure supply at the lowest possible cost (although the price of oil is going only one way), and a variety of different means will be employed. For example, South Africa not only relies heavily on oil-to-coal technology (SASOL) but is also looking at offshore oil exploration. A minor border dispute with Namibia lingers on, due in part to suspected offshore oil reserves.

Yet it is the largest consumers of oil who happen to be the most militarised and willing to use military power. Both the US and China have embarked on a scramble to source non-Middle Eastern oil and, especially, oil reserves with upstream production potential. In the course of this scramble all tactics, both fair and foul, will be used. For poor, often weak and corrupt African countries there is very little they can do except play these two powers off against each other, tipping their hats to Cold War-style political games. But stand in the way? Not a chance.

This current situation poses obvious problems for peace organisations. Quite often the link between conflict and arms proliferation and resource extraction has been made through the lens of Cold War politics (e.g. Angola), and, furthermore, the resources extracted haven’t been terribly vital to the global economy. Countries can do without diamonds and timber, hence the theoretical viability of boycott campaigns. However, as stated above, petroleum is in a different category of resources; civil society organisations cannot boycott petroleum.

Given the already intense competition for petroleum resources, it is highly unlikely that current trends will reverse. In fact, much the opposite is likely to happen - America’s proxy invasion of Somalia, Chinese credit for crude, and weapons sales to bring return petrodollars back “home”.

Structural issues need re-examination by traditional civil society organisations and there needs to be advocacy for change at that level. Unless the nexus of oil and arms is broken at the structural level, which will require the transition to a non-petroleum and non-fossil fuel economy, with great social and economic structural upheaval, wars will be fought over oil and no amount of policy, UN agreements, trade restrictions or sanctions will disarm the human race and bring us the peace we desperately crave.

How should these structural issues be addressed? One way is to highlight issues such as the war in Somalia, the link to oil, and the plight of Somali refugees. These issues must be brought to the forefront of public debate and, in the process, expand the debate to examine the structural flaws of the economy. In campaigning terminology, this would be a “wedge issue”.

Wedge issues are relatively small points that touch a nerve in the public debate and provide an opportunity to break open the debate to allow progressive discourse. As the general debate has moved very far to the right (who talks of workers owning the means of production anymore?), wedge issues are vital for getting progressive ideas into the public consciousness. One of the most successful uses of wedge issues (although from an extremely regressive perspective) has been their use by the Republican Party in the USA since the early nineties. The Republican economic agenda is not only anti-poor but also anti-middle class (the continuing distortion of the US economy with rising inequality, loss of union labour, and economic meltdown in the heartland), and yet, millions of poor and working class Americans have consistently voted for the Republican Party – i.e. ordinary Americans have been voting against their class interest. Either ordinary Americans are incredibly stupid or something else is afoot. The Republican Party has used wedge issues - such as abortion, school prayer, drugs and affirmative action (the American version of swart gevaar), terrorism, and “East Coast Liberalism vs. traditional values”²⁶ - not only to attract the masses but also to force sane economic analysis out of the public arena. Karl Rove is an intelligent man with an intelligent (albeit evil) plan.

To end, a warning to groups campaigning on these issues; every attempt will be made to co-opt you. Funding, corporate and government donors, and logframe analyses are all methods of limiting your freedom. And the freedom to state the truth is the first and most important requirement in order to affect structural change. As Aziz Choudry states:

“In the face of rising global resistance against the operations of oil and gas corporations, war and the military-industrial complex, these companies now employ public relations (PR) firms to craft illusions that they are environmentally- and socially-conscious corporate citizens. Look at the websites of the top ten defence contractors in the US and you will find heart-warming stories about how these corporate killers `help' the poor and disadvantaged, how employees take care of the environment through voluntary work, or corporate contributions to various NGOs and foundations. Lockheed Martin and Raytheon propaganda tries to sell weapons production as a contribution to peacemaking, while Shell, BP, Chevron Texaco and Statoil join corporate NGOs like Conservation International and the Nature Conservancy in the Energy and Biodiversity Initiative which aims to integrate biodiversity conservation into upstream oil and gas development. Last month the Guardian reported that Exxon Mobil has been holding a series of secret meetings with selected environmental and human rights NGOs in attempt to change its negative public image. Such PR spin reinvents Shell and Exxon as champions of human rights and defenders of the environment and the world's biggest defence contractors as peace activists. NGOs which collude with such corporations should be exposed and denounced.

“In our struggles to confront war and neoliberal globalisation and for social and economic and environmental justice we must be clear that neither can be humanised nor reformed. We need to vigorously oppose both the economic warfare waged by the TNCs [Transnational Corporations] and the Bretton Woods institutions and the militarisation of the planet and continually expose the interconnections between the hidden hand of the market and the not-so-hidden fist.”²⁷