Stand-off between Opec and Russia?

[Mark Jones]

Events of world-historical importance are unfolding in the Middle East and 
Central and South Asia, but this is only the epicentre of a crisis shaping 
up with dramatic speed and power. At stake is the global architecture of 
world capitalism in this century and the fate of US hegemony.
The Afghan war, which many rightly identify as a battle fought in a larger 
war for resources and power in Central Asia, has triggered a cascade of 
change elsewhere including the restructuring of the terms of US hegemony 
and its relations with Russia in particular. As this global reordering 
evolves, huge changes will be triggered in US relations with Europe, Japan 
and China. If the emerging US-Russian strategy succeeds, then the 
balkanisation of the Middle East can only accelerate. The West will 
reassert its control over the social and political destiny of the Islamic 
world. Other potential rivals may fare no better; China, in particular, 
will face a grim future. A geopolitical realignment which leaves China 
effectively encircled by Russo-American power, means that the 21st century 
will not, after all, be one of Asian renewal, as many had speculated.
Right now the Russians are making their play but how serious is current 
Russian talk about replacing Opec as the west's principal energy supplier?
You have to have spent time with Russian oilmen, the so-called 'generali', 
in order to understand how seemingly normal people can be blinded by 
avarice. These 'oil generals' sold out the Soviet Union in the name of 
greed and personal ambition. Men like Viktor Chernomyrdin, the former Prime 
Minister and currently Ambassador to Ukraine, and Rem Vyakhirev, his 
successor as Chairman of the Gazprom Board, or Vagit Alekperov the Chairman 
of the giant LUKoil petroleum company, helped wreck the great Siberian oil 
reservoirs and ruined the Siberian and Arctic ecology to boot. After the 
Soviet collapse they continued for example to sponsor crazed plans for 
pumping so much gas from the Yamal peninsula that even by Gazprom's own 
calculations the entire peninsula will sink beneath the Barents Sea. 
Latterly, they have even begun to celebrate the 'positive benefits' of 
global warming, which by melting off the ice cap has opened a new polar 
route for tankering out the oil extracted from beneath the Arctic ice shelf.
The 'oil generals' are now plotting how to excavate methane hydrates from 
the seabed, a procedure known to involve the risk of runaway global warming 
which will turn the earth's atmosphere into that of Venus. For the Russian 
'oil generals', the idea that Russia can replace Opec as the main western 
oil supplier, unlikely though it may seem to the rest of us, is just small 
potatoes. For their backers, oligarchs like Mikhail Khordokovsky (Putin's 
favourite 'oilman', who rose to prominence by plundering state assets in 
the Yeltsin years), this scenario offers new ways to win acceptance.
As Gunder Frank has been pointing out, Russian oil has risen again to 
around 7m/bbls and is second only to Saudi oil. BUT this does not alter the 
fact that Russian oil is well past its peak; in Hubbert Curve terms it is 
in irreversible decline, and this is notwithstanding the alleged Caspian 
oil bonanza.
At its 1987 peak the USSR produced ~13m/bbls a day. As with North Sea oil, 
the Hubbert Curve contains within it a succession of minor peaks and 
troughs; N Sea oil also 'peaked' twice before entering its present and 
seemingly terminal decline. The same with Russian and ex-Soviet oil; even 
with the most optimistic expectations of Caspian output that are publicly 
available, total ex-SU production will never again exceed the 1987 level. 
Therefore this is a declining reserve, and we should bear in mind the 
implication: because the Russians are trying to elbow Opec aside even 
though Opec production is still a decade or more away from peaking.
A huge power-politics is in play and this is the real score of the 
Putin-Bush love-fest. The bottom line is this: world oil production is 
peaking, and the relative significance of Opec is therefore on the up once 
more. The US and its allies are determined to break Opec power. To give 
Opec a stranglehold on world oil is to breathe new life into the corpse of 
pan-Arab nationalism, and ultimately to empower the disfranchised Arab 
masses. This has to be avoided at all costs; it strikes at the keystone in 
the arch of US imperialism. Revolution in the Middle East would release the 
genie from the bottle in many other places. This danger must be avoided at 
any price. But it is indicative of the profound impasse now faced by US 
hegemony, and the terrible dangers now faced by the whole imperialist 
system, that the necessary political reconstruction now ongoing in the 
mid-East must *in any case* be accompanied by a huge transfer of net 
resources from the West to the oil-producing states. Even if the price is 
to prolong the recession in the West, oil prices cannot be allowed to slip 
below $25-28/bbl because a price collapse immediately endangers the 
political security of client states like Saudi Arabia.
Social stability in many Gulf states is already jeopardized. Political 
unrest is inevitable if oil revenues cannot be sustained. Therefore, US 
imperialism is caught between a rock and a hard place. It cannot escape its 
gross over-dependence on imported oil; imperialism has not been able to 
outgrow the petroleum economy. Imperialism therefore cannot escape the long 
term consequences of the *decline of world oil*, and it is this 
accelerating decline which makes the mid-East so important. The decline of 
oil production in the North Sea, Alaska, Texas, Mexico, Nigeria and also in 
Russia, makes Saudi and Iraqi oil uniquely significant.
After the 1973 oil shock which first brought Opec to prominence, new oil 
from Mexico, the N Sea and elsewhere later pushed Opec back into the 
background. But all those reserves are now in sharp decline and this has 
produced the need for new non-Opec sources. Putin has made his choice, and 
has pushed Russia into the camp of the West and against what might seem to 
be Russia's natural allies, the other oil giants which are mostly in Opec. 
This cynical ploy is covered by a heap of fig-leaves: 'civilisation v. 
barbarism', the 'war on terrorism' and the mystical values of Russian 
Orthodoxy.
Why has Russia jumped this way? Russia, like any Opec producer, depends on 
a high oil price. Bulk Urals and Siberian crude (like Caspian crude!) 
cannot be profitably sold on the world for less than $15/bbl; and the 
Russian economy faces a repeat of earlier collapses (the most recent in 
1998) if the oil price is below $22-25/bbl. Russia and Saudi Arabia are 
therefore *not* competing on price, even though that is how the press is 
mostly reporting the issue, ie as a price war between Russia and Opec. In 
fact, there is a competition, but it is for investment capital, not about 
price.
What Russia wants above all is *investment*. For that to happen, prices 
must be high. Putin is not selling cheap energy to the hungry markets of 
21st century capitalism. What he's selling is energy security.
Houston oil banker Matt Simmons has talked of the need for a 'Marshall 
Plan' for world energy, if what Simmons calls a 'perfect energy storm' is 
to be avoided. Simmons speaks of the need to invest upwards of a trillion 
dollars in securing energy supplies, above all, oil and gas but also 
nuclear (Simmons does not have much faith in renewables, like most who make 
a study of energy economics). Simmons has noted the need to spend upwards 
of $500bn on uprating Saudi oilfields and infrastructure alone. You could 
spend the same in Iraq and not have much change left. But you could also 
spend this money in Russia, and in Russian-dominated Central Asia, and the 
pool of available capital is limited.
Putin's emerging vision of the 21st century world order is of a Russian-US 
condominium. This prospect is especially sweet for those in the Russian 
ruling elite, including Putin himself, who hanker for past glories and who 
have grown to resent constant disparagement by the West. Russian political 
and business leaders do not like to be reminded of their own past or of 
their state's economic weakness and abysmal human rights record. Russians 
have been made to feel like second-class citizens and they resent it. This 
is a powerful motivational factor behind the current drive by the Kremlin 
for respectability, a place at the high table, and above all for 
recognition of Russia's rebirth as a superpower and a pillar of the safety 
and stability of the world capitalist system. This hunger for membership of 
the club is what drove Yeltsin in his day to seek membership of the G-7 and 
for the oligarchs to parade at Davos arm in arm with western counterparts. 
This continuing sense of Russian exceptionalism, of a special destiny, 
makes it easy for Putin to make extravagant gestures such as abandoning 
Russian espionage facilities in Cuba or the fabled Cam Ranh base in 
Vietnam, whose special significance in Russian eyes was that this facility 
was earlier abandoned by the US army which built it. This was the highwater 
mark in the Soviet struggle against the West. But it is not a sense of 
Russian weakness or of dependence on American goodwill which makes Russia 
give up these assets today. On the contrary, it is because Putin senses 
growing American weakness that he can afford these gestures.
Putin is prepared to let US forces base themselves in once-sacrosanct 
Central Asia, because he has convinced himself that underlying American 
weakness now makes Russia indispensable to the West: 21st century 
capitalism cannot survive without full-hearted Russian support and 
involvement. Who, in the circumstances, is to say this calculation is 
mistaken? Putin's vision is both simple and clear: future western 
prosperity is anchored on Russia. There must be a strong Russian state, a 
vibrant Russian capitalist economy, and a flourishing and well-capitalised 
Russian resource and energy sector. This new Russia must take its place at 
the top table along with the other great capitalist powers in Europe, 
America and Japan. Russia must be a fully-authenticated member of the club, 
and the Russian people must not fare less well, on average, than those of 
other developed capitalist states. Russia is not and can never be merely a 
'raw materials appendage' of the west. It cannot be a Mexico or a Brasil. 
It cannot be a third-ranking power.
Putin's vision, informed by hisKGB training in Marxism-Leninism, is not 
much different from the traditional Soviet interpretation of history. The 
trappings of obsolete ideology have been stripped away, and everything else 
in this primitive intellectual universe has been 'normalised', above all 
the social position of the nomenclatura and its legal right to own 
property. But the great power chauvinism of the true 'Sovok' remains intact.
Unlike many western commentators Putin does not see the Russian state as 
just another branch of Russian robber-capitalism (the branch that takes 
care of protection). For him, as for any apparatchik trained in Brezhnev's 
Soviet Union, the state is a special domain unrelated to and above all 
others. The state is the determining last instance of Russian society, the 
guarantor of social and property rights and the inheritor of the special 
mission of the Russian people in history. What Putin now offers is a new 
social compact between the state, the elites and the masses, one they will 
all find hard to resist. It includes restoration of great power status and 
Russia's place as dominant Eurasian power, a social amnesty to the 
criminal/comprador class of gangster-capitalists who gained power and 
wealth under Yeltsin; dignity, social peace and improved living standards 
to the masses, and above all the chance to draw a line under the past. The 
Soviet era now takes its place as a distinctive, but nonetheless 
intelligible and even pointful, episode within a broader Russian history: 
the Soviet state was the rational continuer of a long tradition of 
reformist strong states which succeeded both in defending the country 
against aggression and in modernising its institutions and productive 
assets. The new Russia is the legitimate and rational inheritor of this 
Soviet legacy and there is no logical or emotional contradiction between 
Soviet socialism (appropriate in its day) and modern Russian capitalism, 
which can now be seen as a higher and more progressive historical stage (a 
notion intuitively appealing to any Sovok).
Russia can now join Nato. As the guarantor of stability not only in Central 
Asia but also in the Arabian Peninsula, Russia will obviously be a dominant 
member of Nato, second only to the US. Russian industry, especially the 
extractive and above all the oil and gas industries, can now expect a 
biblical torrent of investment capital from Europe and America. The rebirth 
of Russian industry and the vertical ascent of the Russian state to renewed 
global power and reach ought to set in concrete the 21st century capitalist 
order.
What combination of other powers could possibly resist this 
American-European-Russian monolith? What possible chance do the broken 
states of the Middle East have of competing? This grand plan for global 
reaction will surely snuff out any possibility of social progress, 
democratic renewal or mass liberation, throughout North Africa and the 
Middle East. It will guarantee forever the availability of Iraqi and Gulf 
crude, on Americo-Russian terms.
Above all, this grand plan, if it happens, will also ensure that Europe 
never again challenges US global hegemony, which in a compliant Russia has 
perhaps found its ultimate guarantor.
However, this grand plan for global capitalist renewal is born of 
adversity, not of opportunity. It is the product of a great and growing 
world energy crisis. It has arrived together with synchronised recession 
and the possibility of economic slump. This energy crisis already destroyed 
the Soviet economy, which collapsed in the early 1990s when Soviet oil 
production peaked and fell by nearly half in the space of five years, at 
the end of the 1980s.
Since the crisis of 1998, which was followed the devaluation of the rouble, 
and by higher oil prices in the world market, there has been a partial 
revival of the Russian economy, with billions of dollars of investment in 
the oil sector. Nevertheless, oil production in the ex-USSR remains far 
below its peak. In fact Russian oil is available on the world market today 
only because of the collapse of industry throughout the Soviet bloc in the 
1990s. Russian oil is in longterm decline, and it is not cheap to produce.
In short, Russia cannot replace Opec. Gulf oil in huge and reliable volumes 
remains essential to any future global economic recovery. Moreover Putin's 
policy contains the seeds of its own downfall. Stabilising the world 
economy may not make more capital flow into the Russian oil patch. Capital 
follows profit, not sentiment. If Putin's grand plan succeeds, then the 
majority of future investment will still flow into the Middle East, above 
all to Iraq and Saudi Arabia, and not into Russia's decayed and declining 
oil sector. Central Asia and the Caspian are also too uneconomic and too 
small in reserves to ever replace Gulf crude. Therefore, the underlying 
logic of decline and crisis remains in place. Putin's plan is not destined 
to save capitalism. All it can do is to buy time: in other words, it is an 
attempt to *manage decline* during the next decade, while hoping that 
something else turns up meantime. It is not a basis for relaunching world 
capitalism into a new great upwave of accumulation.
Inevitably, therefore, the most pronounced aspects of any new 
Russo-American realignment will not be any inherent capacity for renewed 
growth and progress, but on the contrary will be intensified repression, 
obscurantism and black reaction. It is a recipe for the further 
militarisation of imperialism, for the shrinking of civil society, for 
creating societies of total surveillance and lockdown, for intensified 
racism and social intolerance. This is the era of Exterminism, the highest 
stage of imperialism. It is also the age of Panopticon. Here too, 
Afghanistan is a foretaste of the future.

Mark Jones