[OPE-L:6022] rentier state

From: Rakesh Bhandari (rakeshb@stanford.edu)
Date: Sat Sep 29 2001 - 03:29:52 EDT

Jerry and others,

Cyrus Bina argues here that it is America's aged oil fields, not coal, that 
determines energy prices. Like David Spiro in the Hidden Hand of American 
Hegemony (has anybody else read this?), Bina himself underlines that US has had 
the power to channel massive Saudi revenues to America's own objectives. there 
is also the question of the power US capital derives from the continued pricing 
of oil in dollars.  

It seems that Osama bin Laden has not forgiven the US for pressuring the Saudis 
to contribute billions to the financing of the Afghan War only to then force 
the Saudis in effect to pay for the occupation of their own land and to concede 
to the appropriation of monopoly profits by American companies.  Osama Bin 
Laden seemingly would like to put in place a more region based landlord state 
legitimated by another form of reactionary theocratic ideology. He has sought 
allies from Egypt to Pakistan.   

In this battle between imperial state terrorism and network terrorism, the 
working class can only be stepped on until it asserts itself. Some of the 
suicide bombers seem to have been jehadis from Egypt. The WSJ reported that the 
Egyptian jehadi had been revived in the 1970s to suppress socialists and labor 
activists. So when it comes to the suppression of the working class, the 
terrorist combatants seem to be able to find common ground. 

By the way, I don't agree with Bina  that US is giving way to Japan in terms of 
global hegemony. However, the US ability to channel massive Saudi revenues may  
weaken...which would probably strengthen the tendency towards breakdown in 
American capitalism. It is hard to imagine what the US govt would not do to 
maintain a favorable regimes in the Gulf...Wolfowitz's rantings should not be 


ps I am interested in why there has been so little discussion on this list; are 
list members posting on other lists? posting about other things?  

                             Bina, Cyrus  Oil, Japan, and globalization. 
(Industry Overview) Challenge v37, n3 (May-June, 1994):41 (8

Today, contrary to previous historical stages, oil pricing is the outcome of 
global competition among  the existing oil regions of the world. These oil 
regions exhibit cost structures of varying magnitudes; however, in competition, 
the leaseholders must obtain an average rate of profit in the long run in order 
to stay in business. Given the persistence of differential costs (turning to 
differential productivity) among the regions,any low-cost oil region would 
ordinarily show profit rates that are above the industry's average. In other 
words, the low-cost oil regions, in addition to average profit rate, would show 
additional profits that are commensurate with their own differential cost 
               These excess profits belong to the distinct category of oil 
rent; as such, they can be appropriated by the lessor, the  owner of oil-in-
place. The size of the oil rents, therefore, is simply dependent upon the 
magnitude of differential productivity (by implication, differential 
profitability) of all competing oil regions globally. Hence, differential 
profits turn into differential oil rents; and all differential oil rents are 
price-determined. This universal rule applies equally to both OPEC and non-OPEC 
countries. This explains, for instance, why OPEC posted prices no longer remain 
insulated from the determining (and at times, undermining) impact of spot 
prices in the global oil market. 
                     The development of global spot (and futures) markets in 
the oil industry is indeed the consequence of: (1) the extent of globalization 
of the oil industry and, in turn, the profundity of the integration of the oil-
producing nation-states  within the global economy; (2) the critical importance 
of U.S. oil cost structure in setting the price of oil worldwide;
(3) the tendential unification of existing oil regions under a unique pricing 
rule;(4) the replacement of the cartelized arrangements and administrative 
pricing by the inherently unsettled forces within the global oil market; and, 
byimplication, (5) the development of OPEC as a rent-collecting association, 
with no apparent immunity from the influence of market forces and constraining 
oil market fundamentals.             
         The onset of the above post-cartelization obtained its origin from the 
oil crisis of the early 1970s, which, in turn,initiated the global 
restructuring of the entire oil industry. The consequence of all this was the 
emergence of worldwide competitive prices based on the costliest oil region 
(namely, U.S. domestic oil) and the formation of worldwide differential oil 
rents for the more productive oil regions of the world. Thus, contrary to the 
popular belief, it is not OPEC, but U.S. domestic oil which is critical in the 
pricing of oil worldwide. In the absence of the old cartelized arrangements, 
neither OPEC nor its undeclared "new member"--the United States behind Saudi 
Arabia--can any
longer be effective by holding to the physical control of oil alone. The oil 
scenario is only the reminder of the golden age--a nostalgic plea that 
interjects the past into the uncertain future. The real U.S. incentive, 
however, can be explained in terms of the channeling of massive Saudi oil 
revenues toward the U.S. regional (Middle East) as well as global strategic 

          The U.S.-Saudi relationship has long been following the course of 
NATO-in-reverse. In the case of NATO, the United States paid for the 
containment of the Soviets. Here, the U.S. containment of the Middle East (and 
has been shouldered by, among others, the late Shah of Iran in the 1970s and, 
invariably, by Saudi Arabia since the 1970s. Thanks to the oil money, the costs 
to the Saudi government amounted to well over $200 billion in the 1980s          
alone. The money has been spent on numerous U.S. global adventures, in Africa, 
Afghanistan, Nicaragua, etc. Given the globalization of the oil industry, the 
reference to the "necessity" of direct access to Middle East oil cannot be               
substantiated by the economics of oil production. The real issue is simply 
access to money, that is at the disposal of the client regimes...

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