Friday, September 05, 2014

Why ISIS Might Destroy the Middle East Oil Fields

The Mad Hatter

It is not that ISIS has made any secret of their short term goals - to rule over all Muslim countries and for everyone not to their liking - Shias, Christians, Jews, Yazidis, Alawites - to be dead or enslaved.

Their longer term goals are usually ignored as just vague propaganda - a world Islamic state.  The risk is not that they might achieve it, but the steps they might take in trying to achieve it.

One is that they could take Baghdad.  The majority-Shi'ite majority Iraqi army showed no stomach for fighting and ran away leaving Mosul undefended.  It was hoped that getting rid of Prime Minister al-Maliki and his narrow Shi'ite sectarian government might improve things but the new prime minister seems little better.  If the Shi'ite - Sunni polarization continues, the Sunni tribes will be un-mollified and will either passively or actively support ISIS.   It is perfectly foreseeable that the Iraqi army would be no more successful in defending Baghdad than it was in defending Mosul.

If Baghdad were to fall, the civil war in Iraq would effectively be over.  ISIS would control the country except perhaps Kurdistan.  That would be a bad outcome but not one to make Americans put down the remote during football season.

What comes next however might.  Southernmost Iraq reaches the Persian Gulf, along the shores of which more than a third of the world's petroleum and gas are pumped and shipped.  Were ISIS able to advance against the small countries along the southern, Arab, coast of the Gulf, they could menace the oil fields from Kuwait to Oman.  This has been done before, by Saddam Hussein when he seized and annexed Kuwait.  Saddam's theory was that Kuwait was a province of Iraq and had to be reunited with the rest of the country.  That is what the First Gulf War, Desert Storm, the liberation of Kuwait, was about.  Had Saddam not been driven out, his army would have over-awed Saudi Arabia and the other Arab states on the Gulf, making them in effect Iraqi protectorates.

ISIS' pretensions are far grander.  Their claim is to all Sunni countries everywhere, starting with those closest to hand, those on the Gulf.  Clearly Saddam's plans were to control the export of oil from the Gulf to manipulate Western powers by controlling their energy supply.  And to enrich himself and Iraq with the proceeds of controlling those exports.  Saddam's objectives were the banal and familiar ones of wealth and power for himself and his country.

ISIS sees itself as a religious revival, a restoration of the greatness of the early Arab caliphate, and along with it, the destruction or at least humbling of the Infidel powers who have over-shadowed and oppressed the Muslim countries and Islam in general.

What they see as the sickness of Westernization - materialism, technology, consumerism, Western culture - can not be driven out by accumulating more wealth and with it more import of the trappings, culture, and thinking of Western society.   What religious puritans like ISIS want is not wealth but the austerity and virtue of the early Muslim conquerors of the 8th Century.

They want not to milk Western society of money with which to buy trinkets like Mercedes cars and private jets and MacBooks and iPhones but to rid Muslim society of such things entirely.   They can see as clearly as anyone that the reason Middle Eastern societies are awash in such things is precisely because they have the oil money to buy them.  One way to get rid of them is to get rid of the oil and thus of the money by destroying the oil fields.

They have not destroyed the few small oil fields they have captured thus far because they want oil revenues to buy arms and pay military salaries.  But it does not follow from that that when the scale changes to the vast oil resources of the Persian Gulf that their strategy will not change.  We see what use they have been able to make of looting a bank in Mosul.  Imagine them looting all the banks in Kuwait, Dubai, and the UAE.  Their military needs having been covered, their attitude toward accumulating oil revenues might become quite different than they have shown heretofore.

The other objective they have is not just to manipulate and humiliate the Western countries but to defeat them economically.  The same blow which would purify Muslim societies would also cripple Western ones.

There were temporary and partial restrictions of oil supply from the Persian Gulf in the 1970's after the Arab surprise attack on the Jewish holiday of Yom Kippur in 1973.  Israel defeated the combined Arab armies in spite of having been taken by surprise on their holiest holiday.  Arab impotence was followed by Arab petulance.  Having been being defeated in spite of their treachery, the Arabs vented their pique with the oil embargo of 1974.   Fluctuating high oil prices led to economic instability in the Arab countries and to inflation in the Western ones throughout the remainder of the 1970's.

That was when the Saudi Arabia, both the largest oil producer-exporter and the most politically fragile one, figured out that it was in their dynastic interests to keep production and prices stable.  Which matched Western interests.  So the Saudis came to be seen as allies and puppets of the West, particularly of the United States.  There have been no oil embargoes since.

The destruction of the Gulf oil fields would not just causes high oil prices, it would cause simultaneously high prices and outright lack of supply.  The world economy in the past few years showed its vulnerability to no worse a disaster than the floating of fraudulent mortgage-backed-securities on Wall Street.

The Persian Gulf countries, Iran, Kuwait, Saudi Arabia, Qatar, the UAE, and Oman, have 40% of the world's oil production capacity and 55% of all proven reserves.  The abrupt removal of that much capacity and reserves from the world market would make the economic disruptions of 2008-2009 look small.  One could use the word "collapse" to describe the effect on the world economy, particularly on world trade.  The certainty that the removal would be permanent would compound the seriousness of the collapse.

Everywhere governments would be forced to institute systems of rationing.  Air travel both domestic and internationally would be severely curtailed by fuel prices and availability.  Commuting would wither and with it the prosperous suburbs surrounding every major city.  Trucking would become prohibitively expensive or impossible.  Goods would travel by ship and by rail.  Power plants that could would switch from oil to coal.  Those that couldn't would close, causing widespread and permanent power outages among peoples for whom, for generations, power outages have been momentary inconveniences, not permanent.  Large areas of the developed world would go off the grid.  People in once-rich Western countries would be reduced to kerosene lamps for lighting, and even kerosene would be expensive and hard to get.  Televisions, refrigerators, computers, and indeed all appliances, would become inert relics of another time.   So would private automobiles.

Deprived both of petroleum-based fertilizers and fuel for farm equipment, agricultural production would plummet.  Hunger would stalk once-rich lands.  The GDP of big Western countries could be cut by half or more.  The fact of the shortages being known to be permanent would mean that there would be no new investment in plant or equipment to help economies recover.  After the initial crashes would come not recovery but continued economic shrinkage as both supply and demand for goods and services continued to diminish as purchasing power shriveled everywhere.  

Unemployment, already stubbornly high in many Western countries, would rise to Third World levels and stay there or continue to rise.  There would be rioting and political instability even in Western countries with long histories of democracy.  In other countries things would be still worse.

That is what happened in the 1930's.  The Great Depression illustrated the fragility of the world economic system.  That collapse came about through internal instabilities in the capitalist system, without any external cause at all.  The downward spiral lasted three years.  In 1932 the cumulative value of the corporations on the New York Stock Exchange was 6% (not a typo - six percent) of what it had been at its peak in 1929.  Recovery was tepid and slow.

In the oil-exporting countries outside the Gulf:  Russia, Indonesia, 
Venezuela, Norway, Mexico, Nigeria, Angola, Brunei, there would be floods of wealth.  It would come both from the sale of petroleum to a world market starving for it and from the economic effects of breakneck development of new oil production.

Economic contraction in the West would be compounded by persistent waves of terrorist attacks against urban subway systems, power grid infrastructure, bridges and tunnels, airports, airplanes, freeway overpasses, ports, ships, and political institutions.

Governments would begin to print money to cover shrinking revenues and growing deficits.  They would call it "expanding the money supply".  Inflation and falling stock prices would destroy the value of savings and nest eggs.   Interest rates would rise to two and three digits figures as lenders moved to ever-more secure and ever-less productive places to put money.

Western governments would find their war potential curtailed.  Russia would continue to find excuses to annex one after another of the former Soviet republics.  NATO would become impotent to do anything about it.  As the Russian sphere-of-influence expanded into eastern Europe and the Balkans, into Turkey, and Central Asia, Putin's vision of a Eurasian union would begin to hove into view.  The only sand in Moscow's gears would be escalating terrorist attacks within Russia from its own large Muslim minorities.

The United States would, both from necessity and inclination, begin to turn toward a Tea Party-led soft isolationism.  American influence throughout the world would become as quaint a memory as the British Empire is today.

The Saudi regime and the other oil-supported monarchies of the Gulf would collapse quickly without oil revenues to smooth over and bribe away opposition.

The Islamic State, un-menaced by the US or other Western countries, would expand effortlessly throughout the Middle East as morally bankrupt regimes from Morocco to Oman, now also financially bankrupt, toppled one after another.  Israel would be besieged.  After repeated mob attacks and rioting, Muslim quarters in European cities would become something like fortified.  Within their closed ghettos, sharia would become the norm without much protest from distracted European governments.

That scenario, the purification of Muslim societies of paid-for Western influences, and inflicting catastrophe on the Western and world economies, is why ISIS might destroy the Persian Gulf oil fields if they get them.

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