RESOURCE WAR OF THE TITANS

————————————— 1 RESOURCE WAR OF THE TITANS Andrew McKillop What is the nature of the current crisis, where is it heading, what are the possible outcomes? The postwar geopolitical and economic system, which survived the break-up of the Soviet Union and until about 1995-2005 was holistic and in many ways hyper-centralized was above all extremely predictable and fixed in how it behaved. This has dramatically changed. It is now composed of discrete elements with fast-growing and unpredictable breakaway power. Different regions are now subject to totally different dynamics: some show massive growth, others are in terminal decline. The internal dynamics of the dominant geopolitical power, the USA, its new rivals China and India, and the regional bloc of Europe, all show sharp breaks and discontinuities from previously predictable or fixed trends and a change in the role, type and weight of the factors that maintain and balance global economic and geopolitical power. What can be called Resource War-1 or an outlyer of the “USA versus the World” mindset among leading US geopolitical strategists culminated in the Vietnam war defeat of 1975 and the Iranian revolution of 1979. Can we be sure any real lesson has been learned by the USA ? At the time, this early meltdown of the would-be hyper-power took place in a geopolitical context in which the Soviet Union played a major role, but we now have a new, more threatening nexus of powerful forces, in which downsized Russia may only plot and intrigue on the sidelines, in the same way as modern Iran, which will never again possess a Persian Empire. ENERGY, FOOD AND VITAL SPACE The maintenance and survival of any empire or geopolitical power bloc, in all historic time, required both a structured and organized Homeland, and an economically viable Empire operating in an assured economic and geopolitical space. Today’s context does not allow that in any case – even for China and India. In all cases there are missing vital components. Certainly Europe, and probably China face internal political conflict and disaggregation. India’s hoped-for superpower status, always unsure and hypothetical can quickly return to virtual status. ————————————— 2 All today’s major power blocs face an unsure economic future – in the US and European cases including sure and certain decline, but with no certain and assured “Asian takeover”. Oil is still a main target for dominance and driver of change, generating sure, certain and ongoing rivalry between what is called the Anglosaxon hegemon or power bloc – basically the US and Europe with an uncertain and weak Asian ally, Japan – pitted against the new would-be superpowers. These are primarily the new, but very old rivals of the Asian heartland, China and India. The Middle East and North African Arab world is the natural focus of this rivalry for energy supply, but itself is in accelerated breakdown and change. Fundamentally split by its Muslim dominant religion into sunnite and shia’s communities, powers, and geopolitical chess ploys and lunges, the MENA Arab region now faces accelerated political conflict and disaggregation. This nexus is in quite large part due to external power blocs, seeking reliable oil supplies, and choosing the fast track of establishing, protecting or supporting dictatorships and autocracies to ensure this single goal, but finding too late that this is a zero sum, sure and certain loss strategy, in a region that now has a totally different dynamic. While the combined oil consumption of China and India was low, and their oil import demand was tiny as recently as 1995 we find this situation has been transformed in 15 years. Today, the world’s four- largest oil importers by rank are the USA, China, Japan and India with a combined import demand nearing 26 million barrels a day (Mbd), almost equal to the total net export supply of all OPEC suppliers, which is not much above 29 Mbd, and will decline. Like Japan in the 1960s or the USA of the 1930s and postwar, both China and India have massively growing car fleets and huge growth potential for their car industries, able to quite rapidly achieve a combined annual production capacity of 20 million cars, each consuming an average of about 9 barrels of oil a year. More basic, world food and farming systems are totally dependent on oil. Food supplies, like world oil supply, also show critical weaknesses. A single figure shows this clearly: world resources of arable land are fixed, neither growing or shrinking due to land improvement and land losses being about the same, and stand at about 1.4 billion hectares. This is an average 0.2 hectares per person, worldwide. Like oil supply, the needed and sought-after, major and reliable year-on-year increase of world food production is not available. World food output growth has stalled or slowed since around 1995, due to multiple factors slowing or reversing output growth. Both the USA and the European Union, which are still major food exporter blocs and treat food export status as a major arm in their struggle for global power, have slowing growth of production and export capacities. In ————————————— 3 particular, this results from rising internal demand and slowed growth of production. Both the USA and Europe increasingly depend on massive financial subsidies to maintain food export status and capability, especially Europe. With regard to food commerce – the balance on food trade – the USA may become a net importer of food by 2017. Once subsidies are stripped away, the European Union has been in commercial deficit on food, with a large net deficit on imports/exports, for decades. Neither China nor India have food security, defined as ongoing and sustainable food surpluses, and both have large or sometimes extreme difficulties for raising food production, particularly of food types required by urban consumers. This is in major part due to their “copybook” economic growth featuring fast urban growth and industrialisation, causing loss of farming land and pollution and dictating heavy and permanent government intervention and subsidy payments in their agriculture and food production systems. Growing budget deficits then result, necessitating increased recourse to borrowing. The ‘traditional’ vital space of interest to the Anglosaxon hegemon during the early 20th century – Latin America – has itself become an Agro Power bastion, and no longer offers major potentials for conquest, occupation or extraction of natural resources for value-add after export to the homeland of the dominating power. Latin America is the home to emerging and serious future rivals, especially Brazil, Argentina and Mexico. This explains the new scramble for Africa. For the old and new hegemons, Africa is now the largest target continent for rivalry, but the continent – already the focus for 19th century European great power rivalry – presents challenges across the spectrum. These include resource, demographic, political, cultural, environmental and other challenges which in sum will surely disappoint and limit the aspirations of all and any external players, whether the USA, Europe, Japan and South Korea, or China and India. INTERNAL DYNAMICS The speed and extent of change in global and regional dynamics, relative to the period of “stability and predictability” terminating around 1995-2005 is dramatically shown by the “Arab spring” phenomenon. Since the start of 2011 a growing number of Arab countries have been effectively wiped off the map. ————————————— 4 More dramatically still, this loss of existence and identity may be long term or permanent. Today, a growing number of Arab states have transient and temporary, transitional governments at best, and civil war at worst. In some cases, especially Egypt and Yemen, and potentially Algeria, Saudi Arabia, Jordan, and several other Arab countries, their total dependence on food imports for fast growing cities and growing populations may spell disaster, if internal dissent and revolt against autocratic and dictatorial regimes results in paralysis or long-term damage of their economies. In terms of world wheat import dependence, the world’s three largest wheat importing nations are Egypt, Algeria and Saudi Arabia. Grafted on to the now fixed internal dynamic of rapid change in the Arab world, we have Syria edging to full scale and massively damaging civil war, and we also find the example of Libya. Here, the internal dynamic of change has been leapfrogged by the Anglosaxon hegemon’s need for oil, and intention to prevent Chinese or Indian “usurpers” accessing this resource. Again however there is no sure and certain outcome, and among the possibles we have the so-called Somali option, by which Libya ceases to exist as a modern or “traditional” nation state and its inhabitants return to clan-based fighting and rivalry for resource control. Other oil exporter countries of the MENA region, and especially Saudi Arabia may under crisis conditions operate attempts at divide-and-rule playing of the old hegemon, the US-Europe axis, against the Chinese or Indian emerging hegemons. This highly unpredictable strategy would likely be further complicated by a real-world military and political dynamic arbitrated, to its own advantage, by re- emerging but downsized Russia and its unsure Iranian ally. In the first instance and following collapse for any reason of the Wahabite monarchy in Saudi Arabia, the old hegemon would have little option but invade and occupy, but Russian and Iranian blocking action may be powerful. Their action might notably play on existing shi’a community demographic strength in the Kingdom’s eastern provinces, where the large majority of oil resources exist. Inaction and standoff by and between all the hegemons, facing the Syrian crisis, as in 1982, has firstly created the perfect vacuum, but may be followed by the perfect storm of multi-layer war and conflict able to spread across the MENA region, with possible partial or total loss of oil export capacity of the region for considerable periods of time. The 1982 atrocities of father al Assad, in the father-and-son Syrian ruling pair, were at the time completely swept aside or under the carpet due to geopolitical stand- ————————————— 5 off in the region, between Soviet-backed Syria and US-backed Israel. Today, it is firstly unsure the Syrian regime can prevent news of its atrocities circulating in world media, and secondly it is sure that internal and spontaneous resistance will continue against a vicious regime with no serious allies. This new phenomenon of popular and spontaneous mass protest is surely attributed, by some, to a “new virtual empire” of the Internet. Real world on-the-ground economic, social and cultural conditions provide a better explanation, following some 25 – 30 years of No Alternative economics, featuring increased inequality and injustice, mass poverty and unemployment. The so-called no alternative choice of export platform models and types of development has now fully run its course in the MENA region and met defeat, but this productivity-based and industrial concept of “wealth” continues to run its course in the old Hegemons – and in particular in Emerging Asia. TRADE AND MERCANTILE CONFLICT The most vital space is commercial space, which in previous eras and their geopolitical dominance models included colonization of, and inward migration to resource-rich territories. Diametrically opposed to liberalism and the reduction of tariff barriers, mercantilism is the real strategy of imperial dominance, and features permanent trade surpluses and the amassing of large gold reserves. Today, even trade officials most hermetically sealed in the forced-optimism of supposed No Alternative economics, are coming to accept that the so-called .Doha round. of trade negotiations, further liberalizing trade but more importantly creating permanent advantages for major transnational corporations in all domains – from health and safety to environmental regulations – will likely never be approved and sealed. Abandonment is entirely possible. New Delhi and Beijing have shown they are perfectly willing to collapse the Doha talks rather than accede to demands from Washington, which also has considerable real conflicts of interest and differences of strategy with both the Europeans and Japanese. All focus the vital space of markets, seeking assured trade surpluses – or for the USA and Europe, reduced trade deficits. More important in the present, China has repulsed most US attempts to force Beijing to liberalise its currency, shorthand for radically raising the value of its currency relative to the US dollar. This has the extreme short-term and self-defeating goal for the USA of cutting its enormous trade deficit with China ————————————— 6 and stemming the growth of China’s massive foreign exchange reserves through forced reduction of purchases by US consumers of Chinese and Indian goods, by radically raising the price of these goods inside the USA. Any success of this policy would surely and firstly result in further and extreme deepening of the already-massive US trade deficit with China, and possible collapse of the global economy. Assuming that Christine Lagarde, the French finance minister, takes over as chief of the International Monetary Fund, and despite the IMF’s real goal being to maintain the extreme and unreal exchange value of both the euro and the dollar, she will inherit a process of monetary change, set by the G20, to supposedly “rebalance” the global economy, and further depreciate or devalue the dollar. This includes revaluation of the Chinese yuan and possibly the Indian rupee, whether overtly or covertly. The role of national and official gold holdings, important in the early postwar period and until the 1970s, has in reality collapsed or disappeared but is still regarded by geopolitical strategists as vital. While official or fiduciary (money-related) holdings are still concentrated in the US, Europe and Japan the claimed largest single central bank holdings, of the USA, claimed to be close to 9 000 tons, can be compared with estimates for total gold holdings in the form of jewelry, in India: about 18 000 tons. Due however to massive issuance and growth of money in circulation in all blocs, with Chinese M1 growth probably at 25 percent in 2011, the possible role of gold for backing a new Super Money able to dominant all other fiat currencies is very low. To create this Super Money backed with gold and make it viable would require at least a 95 to 98 percent reduction of current global money supply. FINAL CONFLICT Probably the greatest danger of the apparently inert, apparently frozen global dynamic is that it operates, by default, in a context of runaway and uncontrolled change in the Arab world, uncontrollable growth of debt in the USA, Europe and Japan, sharply declining food supply growth, energy shortage and supply limits on most other key industrial resources. The count-down is engaged, but predicting where and how massive or final conflict will result, and what form it will take before shifting to classic or semi-classic war, is difficult. At present, new geopolitical power thrusts by the old hegemon are strictly limited to very small-scale thrusts in Africa (Libya, Ivory Coast), but come on the back of the Afghan and Iraqi “theatres” or wars. Coming and larger conflict more directly pitting old rivals and new rivals may be concentrated in the ————————————— 7 trade, finance and monetary domain, before breaking out to on-the-ground military conflict. Current civil war in the Arab world, notably Syria and Yemen, may force the hand of either or both old and new hegemons, and surely if there is spillover of the local conflicts to Saudi Arabia. Perhaps unknown to, or unappreciated by military strategists of all hegemonic rivals in play, but as dramatically shown by the Fukushima disaster, the mere existence of civil nuclear power has totally changed the real scope and potential of conventional war, invasion, and occupation of defeated countries and territories. It has also changed the potential for long civil wars – which may now be almost instantly ended through deliberate sabotage and destruction of large nuclear power plants and installations. Also, world food production and supply systems are now fragile, easy to destroy or heavily damage, and difficult to restore and recover, making food sabotage at least as deadly as other potential and often discussed New Weapons, such as genetically modified virus weapons, nerve gases and neurotoxins, weather and climate modification or computer hacking. Due to the existence of so many rational threats, and ironically, fantasy threat scenarios remain heavily in vogue, for example the now declining and disaggregating “Al Qaeda menace”. The disappearance of this 10-year fantasy threat, which likely required as much as $ 2 trillion in direct and indirect funding and economic loss due to its false flag operations, is in all probability a key sign of deck-clearing. The next and sharper stage of hegemonic rivalry between all players is probably now starting, in this summer of 2011. ***** Copyright Andrew McKillop 2011*****