By Gideon Rachman
Published: September 7 2009 19:32
“Follow the money” is the advice routinely offered to detectives in low-budget thrillers. For anyone attempting to understand the ebbs and flows of international politics, I offer a variant of that old line: “Follow the oil”.
Any suggestion that the search for energy is fundamental to the foreign policy of Britain and the US is often treated as faintly indecent. In Britain, the government is currently angrily brushing off suggestions that the decision to release Adbelbaset Ali Mohmed al-Megrahi, the Libyan convicted of the Lockerbie bombing, had anything to do with Libya’s oil and gas. Jack Straw, the UK justice secretary, has released letters in which he spoke of considering prisoner transfers to Libya, in the context of “wider negotiations” and the “overwhelming interests” of the UK. He did not use the word “oil”; but, under mounting pressure, he has since admitted that trade and oil interests were “a very big part” of Britain’s desire to bring Libya “back into the fold”.
It is true that oil is not the only interest Britain has at stake in Libya. But the search for more secure and diverse energy supplies is increasingly important to UK foreign policy. Britain’s North Sea reserves are running down and the country is worrying about a looming energy crisis. Libya looks like a promising possible supplier of both oil and natural gas that is unusually open to foreign oil companies. BP and Royal Dutch Shell are the second and third biggest companies on the London stock exchange, and they have both signed exploration deals in Libya.
The relationship between Britain and Libya is just a minor example of a much broader phenomenon. Energy is at the heart of many of the biggest issues in international politics. That is because none of the world’s major economic powers – the US, China, Japan or the European Union – is close to self-sufficient in oil and gas. Global demand for energy is rising steadily and the major powers are jostling to secure supplies. In his recent book, Rising Powers, Shrinking Planet, Michael Klare, an American academic, argues that “a world of rising powers and shrinking resources is destined to produce intense competition among an expanding group of energy-consuming nations”. The book’s cover carries a warm endorsement from Dennis Blair, the US director of national intelligence.
There are many examples of how this “intense competition” for energy is already shaping the foreign policies of the world’s major powers. The tense relationship between Russia and the EU is defined by the fact that the EU is increasingly dependent on Russian energy supplies. When war briefly broke out between Russia and Georgia last year, western concern was heightened because Georgia offers the only plausible route for a gas pipeline from central Asia to the EU that bypasses Russia.
Later this month, western powers are likely to try to tighten sanctions on Iran because of its nuclear programme. But China and India are both wary of more sanctions because Iran is a key supplier of their energy needs. The Indians want to build a gas pipeline to bring Iranian gas to their domestic market. Iran is China’s third biggest oil supplier.
The Chinese are eager to tie up energy deals wherever they can – hence the country’s expanding interest in Africa. Angola is China’s second biggest supplier after Saudi Arabia. Indeed, Angola is an increasingly popular destination for world leaders. Hillary Clinton, the US secretary of state, visited last month. Dmitry Medvedev, the Russian president, was there in June. The Brazilians are also increasingly popular after their discovery of a large new offshore oil field. China recently agreed to lend $10bn (£6bn, €7bn) to Petrobras, Brazil’s state-controlled oil company, in return for a guaranteed supply of oil.
Then, of course, there is the continuing puzzle over why the US invaded Iraq. There were doubtless many reasons why. But Alan Greenspan, the recently retired head of the US Federal Reserve, lamented in his memoirs that “it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil”.
Whether or not Mr Greenspan is right about Iraq, it is certainly true that America’s leaders worry a great deal about the availability and price of oil. You cannot blame them. The two oil shocks of the 1970s drove the economic “stagflation” that plagued Europe and America during that decade. By contrast, the long booms during the Reagan and Clinton years were underpinned by low oil prices. The fall in the oil price in the 1980s did a lot to bankrupt the Soviet Union. The rise in the oil price over the past decade has led to a richer and more assertive Russia.
As Daniel Yergin, a leading historian of the oil industry, puts it: “It is oil that makes possible where we live, how we live, how we commute to work . . . Oil and gas are the essential components in the fertilizer on which world agriculture depends; oil makes it possible to transport food for the totally non-self-sufficient megacities of the world.”
Politicians know all this. They know that voters will punish them if fuel prices soar, or if there are electricity shortages. But they also know that if they openly put the search for oil at the heart of their foreign policies, they are liable to be denounced as cynical and immoral. When it comes to energy security, western politicians treat their voters like children – and behave like adults in private.
Copyright The Financial Times Limited 2009
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