[OPE-L:7945] Re: Iraqi oil

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Wed Nov 06 2002 - 21:36:45 EST

I sent this reply to Fred's 7801 offlist a couple of weeks ago. 
Perhaps someone may want to comment? So far the only serious 
discussion we have had of Cyrus Bina's work which I think Anwar 
Shaikh has called somewhere the most essential work on global oil put 
forth in the last twenty years was commenced by Patrick Mason who 
quite unfortunately quit OPE-L.

   In the putatively leaked Cheney report which in fact reads to me as 
war propaganda, one is led to infer that  Cheney, et al. wants to 
topple Saddam in order to control the supply of oil, that is, ensure 
that Iraqi oil is both not used as a weapon towards political ends, 
viz., Palestinian rights, and positively used to break the power of a 
Sa'udi-led OPEC as a price fixing cartel. Of course OPEC is not a 
price fixing cartel led by the Sa'udis or anyone else.  As Cyrus long 
ago argued, posted OPEC prices follow  spot and future prices. A new 
pricing system dominated by future markets has emerged. Under this 
system, traders set up key futures prices based mainly on 
expectations of market conditions. Transaction prices have become 
closely linked to prices established in the organized trading 
markets. The large influence and the functioning of futures trading 
have resulted in more transparency in the petroleum market, enabling 
not only consumers but also speculators to react to shifts in supply 
or demand more rapidly, as Kunibert Raffer and Hans Singer have also 
come to recognize.   'Control' of Saudi or Iraqi oil does not or 
would not yield power over price. Or in other words even if Saddam or 
Bush controlled Iraq and Sa'udi Arabia, neither would not have power 
over price.

Moreover, the Cheney report is wrong to imply that Saddam is in a 
position to embargo oil for any significant period and do without 
revenue. US foreign policy is not in fact comprehensible as an effort 
to maintain, stabilize or increase the supply of oil to the world 
market--the oilism thesis. This thesis implies that US foreign policy 
is a benevolent effort to ensure that the world is not blackmailed by 
sheiks, shahs and  dictators as long as it remains dependent on 
Middle Eastern oil, yet the world remains on the whole opposed to the 
benevolent US' war mongering; the oilism thesis not so subtly has 
become an apologia of US imperialism.  In terms of its external 
objectives, US foreign policy remains best understood as an attempt 
to divert oil rent towards its own ends--the petrodollarism thesis. 
And of course the US and Israel both have an interest in preventing 
the Ba'ath Party from using future, post-sanctions revenue to build 
up any kind of regional military power which could conceivably 
challenge an expansionist Israel in possession of scores of weapons 
of mass destruction (see the excellentand prescient  Perry Anderson 
piece on Palestine-Israel conflict in OPE-L 7154, May 2002).  Which 
is not to say that the ends to which rentier states would otherwise 
put oil rent are in any way progressive (see recent piece by Cyrus on 
Iran as rentier state).

All the best, Rakesh

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