The New Republic has an excellent piece this week (that, most likely, is behind the subscription wall) on the potential emerging threat of alliances of authoritarian, resource-rich nations that oppose the United States. Author Joshua Kurlantzick writes that important resources, and primarily oil, are increasingly held by unfriendly non-democracies like Russia, Venezuela, and Iran, and those nations are increasingly able to turn to China as a customer for those resources, enabling them to use oil as a weapon aginst the United States. Kurlantzick connects this trend to the non-ideological, nationalistic alliances of the 1930s and 40s, and notes that devasting USÂ resource shortages–or future conflict–might be inevitable if we allow ourselves to let these nations achieve the control that they’d like to.
It’s a thought provoking piece, but while I think it getsÂ many things right, it also ignores a few important points. First, however, the most right things. Kurlantzick is correct in pointing out how these emerging alliances and the vulnerability of our diplomatic position are damning indictments of Bush administration foreign policy. It’s frustrating enough that Bush seems unable to fight terror effectively, but it’s perhaps more troubling to note that his administration’s reliance on the War on Terror as a political tool has prevented him from addressing many other serious concerns throughout the world. We have been looking at every diplomatic exchange through the prism of Islamic terrorism, and as a result, we have allowed many of our key relationships to deteriorate. In effect, we have sacrificed diplomatic position after diplomatic position for a conflict whose danger has been constantly and grossly exaggerated because of its political appeal. If Kurlantzick is even close to right about half the things he suggests, history will take a much darker view of Bush than even Democrats are apt to suggest.
Second, the piece is very right in noting the immense oil fortunes that are accruing to these anti-American regimes. This, in my opinion, is the most dangerous part ofÂ the currentÂ geopolitical condition. These governments are now in charge of untold billions, and it seems likely that most of those oil monies won’t go toward new investment in public services. Instead, it seems probable that these regimes will plow that money back into defense spending and infrastructure, as well as aid to other sympathetic, and perhaps more nefarious, national and quasi-national actors. At the moment, this is the most dire threat emanating from oil states; incredible amounts of money are available for some awful technologies that will make their way to areas where American assets and the assets of our allies are extremely vulnerable. Which is bad news.
But I’m not sure that I agree with much of the rest of Kurlantzick’s predicted fallout. For one thing, I don’t think America is as vulnerable to an oil embargo as people think. The piece mentions that a Venezuelan embargo could shave $23 billion off our GDP (note: less than two-tenths of a percent of the total), but that’s mistaken in lots of ways. First, an embargo on the part of one country would be meaningless, because there’s a world market for oil, and we could just go elsewhere for our needs, with no change in price. For another, we’ve reduced our own domestic production of oil, in many cases, because of the expense of extracting it from our reservoirs. But the more expensive oil gets, the more it becomes economically feasible to use our supply (and the supply of our allies) more intensely.Â The main thing is, however, I think that the US economy is a lot more flexible than people seem to believe. In the very short term, weeks or months, a serious oil embargo would hurt, but within a year the US would adopt the many conservation and alternative technologies that are available, but which we don’t use because we don’t have to, and they’re not quite economical given the still relatively low cost of oil. We would cut out unnecessary trips and we’d carpool and take the bus, and we’d turn lights out instead of leaving them on, and companies would mass produce the appliances that they currently only sell in California, and we’d rapidly shift oil out of the economy where possible.
A second important point is this: oil strength is misleading strength. Right now, the oil nations look ready to control world geopolitics, but that is, in many ways, an illusion. Oil strength is fleeting, because countries can and will substitute away from it if it becomes too expensive or too variable in cost. Oil strength is alsoÂ bad, in many ways, for an oil producers’ economy. Here’s why: at the moment, oil producers are selling massive amounts of expensive oil, which means they’re absorbing massive amounts of foreign exchange from the US, Europe, and Asia. This alters the terms of trade for oil producers and makes the goods that they produce more expensive to the rest of the world. In other words, a booming oil industry can completely hollow out a nation’s productive and/orÂ manufacturing economy. So while Russia and Venezuela are currently flush with cash, they aren’t building long-term sustainable productive economies. And when the tap shuts off, the whole structure is likely to collapse.
This is why I don’t see the threat from China that Kurlantzick does, at least not the way he sees it. ChinaÂ IS a productive economy, and the security of the government is based not on a continued flow of petrodollars but on the continued creation of jobs. This places China’s interests fundamentally at odds with the oil authoritarians. I think China is prepared to take advantage of US weakness to boost its diplomatic and economic position, but in the end, we have much more common ground with China than China has with Russia and Iran, and China has much more to lose from an endangered America than it has from an endangered, say, Iran.
Based on all of that, here’s what I think the most dangerous thing about these resource politics might be: by failing to address these changing dynamics diplomatically now, we lose the opportunity to lay the groundwork for institutions that would help guide the world through increased resource scarcity later. What I mean is this: the oil nations’ threats are fleeting, for the above reasons and because the pipelines will eventually run dry. What, however, will happen when wells start to dry up, and China and India begin to grow desperately short of oil (this could happen for water, too, or for lots of other resources)? The threat, in other words, is not what will happen when Venezuela gets irked at us and decides to cut off our oil, the threat is what happens when world reserves of key resourcesÂ start to fail. Faced with severe shortages of water, oil, lumber, and other industrial inputs, what does China do? What if China begins to take Central Asian territory to secure resource wealth? How would India respond? How would Russia respond?
In other words, the most dangerous threat is not everyone against us. It’s the producers against the extractors and against each other over the extractors. Sadly, the way to circumvent that difficulty is by strengthening international agreements and institutions on the use and conservation of key resources, but when we’re not busy weakening those institutions directly, we’re busy dismantling a diplomatic system that might help later administrations bang out important agreements.
It might be amusing if it weren’t so sad. We look back now on the follies of the leaders of 1914 and 1939, wondering how they let things progress as they did. How foolish will we look in twenty years’ time?