Monday, July 04, 2005

Two articles: oil & nukes

These pretty much speak for themselves. Two long-running global situations that could very easily combine to create huge problems in the not too distant future...

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When the oil wars blow
The more China flexes its economic muscle, the more American
politicians are crying foul


Will Hutton
Sunday July 3, 2005

The Observer/Guardian Unlimited

Occasionally, there are tipping-point moments and we are witnessing one at the moment. Seismic change is afoot. As oil prices breach $60 a barrel and pessimists warn that the world could be as little as 10 years away from a first-order resources crisis, China's largest oil company, CNOOC, has launched a £10 billion bid for one of the US's juiciest medium-sized oil companies, Unocal.

The world's two biggest continental economies are suddenly head to head over who controls increasingly scarce oil. The stuff of pulp novels at airport bookstalls is a reality.

The reaction in the US has been immediate, aggressive and hypocritical. Much Congressional sound and fury has been vented on Russia for not opening up more to US oil companies which want to buy strategic reserves. Now that the boot is on the other foot - China buying an American oil company and its reserves - US congressmen and senators are deploying President Putin's arguments as their own. America's oil, jobs and national security are at issue, they blaze, and an investigation is already
under way to see whether China's bid should be blocked on national security grounds. It is rigged to take months.

The Chinese, for their part, implausibly plead innocence. Assuming the improbable rhetoric of a Wall Street investment banker, the chairman of CNOOC, 71 per cent owned by the communist People's Republic of China, says that the bid will be good for shareholders on both sides of the Pacific.

It certainly offers Unocal shareholders more cash than rival American oil company Chevron was offering, but only because the Chinese government has lent CNOOC a $2.5bn interest-free loan to support the loan and subsidised billions more. This is hardly fair play but Unocal shareholders aren't complaining.

Nor will CNOOC sack any Unocal workers in America as Chevron plans, it says, and promises not to export any oil and gas from the US to China. It portrays itself as a benevolent, wronged and misunderstood good fairy.

What it wants, and is paying well over the odds for, is Unocal's oil reserves. It plainly calculates that today's $60 a barrel oil price is just the beginning of a sustained rise in oil prices that will make Unocal, even at £10bn, a snip. China's interest is obvious. After the US, it is now the world's largest oil importer and acquiring some strategic reserves is vital.

CNOOC's full name is telling; the China National Offshore Oil Company - an organisation committed to offshore exploration. China is the world leader in developing robotic underwater exploration submersibles; in 1994, it built a robot capable of working at depths of 3,000 feet. Now, according to the People's Daily, it has one that can work at up to 20,000 feet. The Chinese want oil very badly.

And they want it to be imported into China by oil pipeline and not by tankers from the Middle East under the watchful eye of the US navy. The US controls the sea lanes and thus the viability of China's economy, as it regularly lets the Chinese know by shadowing Chinese oil tankers.

The US has pre-empted China's attempts to build oil pipelines from the Caspian into China. Unocal's attraction is that its oil reserves are all in central and southeast Asia, and once owned by China can be moved into China overland.

This is a new great geopolitical game and neither the Chinese nor American military are impressed by arguments that the market must rule and that great powers in today's globalised world no longer need strategic oil reserves. The US keeps six nuclear battle fleets permanently at sea supported by an unparalleled network of global bases not because of irrational chauvinism or the needs of the military-industrial complex, but because of the pressure they place on upstart countries like China.

Japan's decision this year to abandon its effort to build its own oil company and attempted strategic reserve was an overt acceptance of its dependent position. China is not ready to make the same admission of defeat.

No country has offered such a comparable challenge to the world order since Germany's rise at the end of the 19th century. Like China today, it wanted markets and raw materials; like China today, it confronted a world ordered around the needs of the existing powers; like China today, its gigantic size and explosive growth could not be ignored. Germany built fleets and scrambled for colonies in Africa. Today, China builds fleets and scrambles for oil reserves. The open question is whether it will end in another 1914.

The optimistic reply is that China is being much cleverer than the Kaiser's Germany. It has expanded by opening up to the world, so giving its great power rivals a stake in its growth; 400 of the US's top 500 companies manufacture in China. Wal-Mart, the US's largest retailer, is founded on cheap Chinese imports. China may have built up immense foreign currency reserves, but it judiciously lends them to the US, so financing the US's trade deficit.

Although oil prices are troublingly high, some experts like Erasmus University's Professor Peter Odell believe that, far from oil reserves running out, the earliest world production might peak is well after 2050, and that takes no account of more efficient energy use. Today's upward oil price spike won't last long. There is more than enough oil for China.

The pessimistic reply is that's not how it feels or how the game is currently being played. Even if there is enough oil, it is in parts of the world that are endemically volatile. As Paul Roberts points out in The End of Oil, the geological formations that create oil have already been identified and the easily exploitable reserves are rapidly depleting.

There is a Panglossian tendency to overstate oil reserves by oil-producing countries and oil companies alike, as we have learned from Shell. Oil production is set to peak much earlier.

In any case, what matters is less reality than perceptions of reality; the European powers didn't need colonies in Africa to ensure their prosperity, they just believed they did, as China believes it needs oil reserves in Asia today. And there are the third, fifth and seventh US fleets as a constant reinforcer of its instincts.

Nobody knows how this drama will play out. The optimists could be right. But judge the vitriolic tone of the letter from 40 congressmen to President Bush complaining about CNOOC's bid; look at the disposition of US naval power; recognise the force of China's conviction that it must never again be humiliated as it was in the 19th century and its will to catch up with the West; and plot the growth of China's oil demand as its economy doubles again.

The best way of avoiding war is not to dismiss its possibility as outlandish; it is to recognise how easily it could happen and vigilantly guard against the risk. Too few in Washington or Beijing are currently doing that.

Guardian Unlimited © Guardian Newspapers Limited 2005

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Coming to grips with doomsday

Tom Plate / Syndicated columnist

Seattle Times, Thursday, June 30, 2005 - 12:00 AM

LOS ANGELES — The policy of the United States, at the moment the world's only superpower, lacks an overall sense of urgency about the spread and possible use of nuclear weapons. In all probability, this lapse will someday lead to immense tragedy.

The world has been sitting on a ticking time-bomb for six decades. It is an inexplicable miracle rather than superior national-security policy or international-control management that a nuclear weapon hasn't exploded on one or more population centers.

Don't, of course, run this superficial observation by the Japanese, who still have the painful memory of Hiroshima and Nagasaki. It is not for nothing that this technologically brilliant but overpopulated nation remains, despite recent militant uptick emotions, on the whole anti-nuclear and pacifist.

But Japan someday will go nuclear if North Korea establishes itself as a palpable nuke power, as with Pakistan and India, a pair of competing nuclear powers. Russia still has piles of nukes; the British and the French have not relinquished their stockpiles; Israel denies — unconvincingly to many — that it has the bomb; Iran denies — equally unconvincingly to many — any intention of developing a nuclear capability. And so it goes.

The U.S. takes the prize, though. It maintains (on 24-hour alert, hair-trigger status, no less) more than 10 times (at least) as many nuclear warheads as there are nations in the world. This absurd and risky overreadiness has drawn new fire here from warriors old and new.

The late President Ronald Reagan, though anything but a dove while in office, appears to have been a passionate nuclear abolitionist both behind the scenes and deep in his heart, in the view of author and academic Paul Lettow. His "Ronald Reagan and His Quest to Abolish Nuclear Weapons" has been raising major eyebrows in circles liberal as well as conservative and has been helping generate a sense of national unease about the defects of our non-proliferation policy and the lack of a serious nuclear-reduction/disarmament policy.

The newly aroused anti-nuclear campaign in America has been joined with octogenarian vehemence by Robert McNamara, now 89 no less. The former defense secretary in the Kennedy and Johnson administrations, has in newspaper interviews and op-ed essays been a one-man band warning of the inherent (or, as he puts it, "insane") dangers of so many ready-to-blow nukes in so many countries. His regrets about the Vietnam War and his unmistakable intellect have added a touch of establishment credibility to the abolitionist position.

This has enhanced the credibility of enduring firebrands like Helen Caldicott, the near-legendary Australian physician who has all but dedicated her life to the anti-nuclear campaign. Take a look, for illustration, at the astoundingly energetic Website of the Nuclear Age Peace Foundation, with whom Caldicott and many others are allied.

There's a feeling in the air that the anti-nuclear movement is gaining traction. The war in Iraq is obviously going badly and the hawks and neo-cons in Washington, if not exactly in retreat, seem not to be pounding their chests with such prideful arrogance these days. The recent endless United Nations summit-retreat on advancing the venerable Non-Proliferation Treaty was a colossal and embarrassing failure. The United States — which has brutally tabled the Comprehensive Test Ban Treaty and even raised the probability of funding further nuclear-weapons research — refuses to conform to the NPT's call for drawing down existing nuclear arsenals.

As Alyn Ware of the Lawyers Committee on Nuclear Policy has put it, "... It is impossible to prevent nuclear proliferation while the nuclear-weapons states insist on maintaining large stockpiles of weapons themselves. It's like a parent telling a child to not smoke while smoking a pack of cigarettes in their face. It's not going to work. ... "

The smoking gun is North Korea. We have invaded a country that possessed no weapons of mass destruction at the cost of more than 1,700 U.S. lives, unknown U.S. treasure and countless Iraqi lives, while fumbling big-time as Pyongyang played hardball on the nuclear issue. We have obviously got our national security-policy priorities upside down.

Thus we desperately need those fearless non-governmental organizations like the Nuclear Age Peace Foundation — not to mention old warriors like McNamara and Caldicott — to continue to campaign tirelessly if we are not to realize the kind of nuclear calamity that, present trends unchecked, seems increasingly predictable.

UCLA professor Tom Plate, a member of the Pacific Council on International Policy, is founder and director of UCLA's Media Center.

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2 Comments:

Blogger MichaelBains said...

As frightening as the possible consequences may be, I am thoroughly cheering on China's purchase of UNOCAL. I haven't seen that it has been approved yet; either by the shareholders or the FTC. It only seems rational for them to allow such both for the locale of the resource and the reasonableness of the chinese offer.

Growth and Change are inevitable. The Chinese Civilization has existed for 3000 years and has developed a type of Liberty for its people that, while fundamentally different from that in the West, is still of a type which allows men, and more so in recent decades than even before though still quite differently, women to thrive and express themselves freely.

This growth will not engender another Great War as China never has, and I gladly speculate, never will seek a grand expansion of the kinds sought by Western leaders from Alexander on.

7/05/2005 5:26 AM  
Blogger Jay Denari said...

Hi, Michael,

I don't think I agree with most of what you said here, for a few reasons. 1. I think the shareholders or FTC had already approved a prior, smaller bid, and think reneging on that would essentially be a contract violation, wouldn't it?

2. Historically, China has indeed practiced its fair share of imperialism -- ask the Tibetans or Muslim Uigher people or Taiwanese or Vietnamese if THEY much trust Beijing's intentions. China didn't come to be as big as it is by being friendly to its historical neighbors. If desperate for resources, they could indeed become expansionist again.

3. Likewise, I don't think I'd say they allow men and women "to thrive and express themselves freely." Sure, they can make money (if lucky; a huge percentage are still in rural poverty), but they cannot challenge their government, are censored on the Web, prohibit alternative political parties, etc.

7/06/2005 2:11 PM  

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