Chasing Portugal or Following Venezuela?
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Tuesday, January 14, 2003
By Pyotr Aven and Christopher Weafer
This year will be one of the most decisive years in Russia's relatively short and turbulent economic history. If the government's objectives are achieved, then at the end of the next 12 months the economy will finally start to develop away from crisis recovery and toward sustainable growth.
Superficially, 2003 looks set to be a relatively uneventful year for the economy, with modest macroeconomic targets written into the budget that should be achieved even with wide fluctuations in the oil price. However, 2003 is much more important, and therefore potentially much more hazardous, than these modest budget targets suggest: This year should be the last year of transition from the old economic structure to a new one that will see increased foreign direct investment, faster sustainable growth and diversification of the economy away from its dependence on commodities. If, by the end of 2003, we do not see a basic financial infrastructure in place, then the investment case for Russia will be thrown into serious doubt, if not lost.
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Email the Opinion Page EditorWhen the current government took office in May 2000, it set two main economic objectives, one medium-term and the other long-term. The medium-term objective was to reduce the economy's exposure to world oil prices and to use the period of resulting relative stability to push through changes seen as a necessary precondition for sustainable high rates of growth.
This reduction in exposure was achieved by encouraging oil companies to increase production and exports, so that while the federal budget's dependence on oil revenues persists, a much lower average oil price is needed to balance the budget than was the case in 1998. In 1998, an average price of $26.50 per barrel (Urals) would have been necessary to balance the budget -- instead it was a little more than $11 per barrel. In 2003, the key macroeconomic targets will be achieved as long as the average oil price remains at or above $16 per barrel.
Many changes have occurred in the past three years, and attitudes now are certainly much more positive vis-a-vis future growth. Yet, much of the relative prosperity that has been achieved can be linked, directly or indirectly, to the flow of petrodollars into the economy. Even in the gray economy, which accounts for a significant share of GDP, much of the money can be traced back to oil.
For the economy to grow at 6 percent plus per year -- the target set by President Vladimir Putin in his state of the nation address last April -- and to achieve greater diversification, Russia will have to attract significantly larger capital inflows, either in the form of repatriated Russian capital or FDI. This is the government's long-term economic objective, and if it is not realized by 2004, rather than catching up with Portugal, Russia will be keeping company with Venezuela and Nigeria, experiencing boom-and-bust oil cycles.
Achieving this long-term objective will require putting into place the financial infrastructure for facilitating capital inflows and enabling their deployment in the economy. Despite a significantly improved image, Russia is still struggling with the same issues of credibility that have dogged it for the past decade. Investors are still convinced that one of the biggest risks they face in Russia is the expropriation of their assets by business partners or government agencies. To overcome this, the government will have to push ahead with structural reforms. Put simply, investors will have to be convinced that they can make money in Russia and that their investments are safe from expropriation.
In particular, this means that by the end of 2003 or beginning of 2004 we will have to see the following reforms:
Bank reform. This is essential to building the financial infrastructure. There should be fewer, but better regulated and capitalized banks in order to help build confidence in the system. The proposed deposit insurance scheme, put forward by the government, will have to be passed by the State Duma and signed into law.
Pension reform. This is necessary in order to make a domestic source of investment capital available, which is important for stable investment growth. We will need to see all the relevant legislation in place, including regulations governing the award of management mandates and supervision of the industry.
Judicial reform. Investors will have to see improvement in legal protection and a transparent system for handling commercial disputes. What constitutes adequate protection is difficult to define precisely. At this stage, it is important that we see progress on new shareholder protection legislation and an end to the abuse of minority shareholders.
Other reforms. Natural monopoly reforms, etc. will continue through 2003, but the main efforts to conclude these will not come until after the election period is over, i.e. after March 2004. The fact that the government will then be faced with several major reform issues, all of which will encounter active opposition from lobbying groups -- including negotiating WTO entry and tackling Russia's vast bureaucracy -- makes it all the more important that financial infrastructure reforms are concluded satisfactorily by early 2004. Otherwise, the necessary investment flows will fail to materialize and the investment case for Russia will at best be delayed and perhaps even lost.
While these basic reforms are a precondition for FDI flows into sectors apart from energy and commodities, the other important trends to watch for this year are:
Monetary policy. The ruble exchange rate needs to remain virtually unchanged in real terms or see a real depreciation. The strong ruble in 2001 and 2002 has gone some way toward reversing the economic benefits of the 1998 devaluation and is hurting the development of the manufacturing sector. This means that by the end of 2003 the exchange rate should be between 35 and 36 rubles to the dollar (although the manufacturing sector would probably prefer to see it closer to 40 rubles to the dollar).
Inflation. The real cost of doing business in Russia is higher than even the high inflation figures show. In 2002, real wage growth was more than 15 percent, and combined with other cost increases this represents a considerable narrowing of margins and loss of competitiveness.
Trade balance. The current year trade balance has remained positive only because of the recovery of the oil price and growth in export volumes. Imports, particularly of consumer and manufactured goods, are rising fast. Imported consumer goods are again taking market share away from domestic producers, when the trend clearly should be the other way around.
Industrial growth. Without growth outside of the energy and commodities sectors, the economy will remain particularly exposed to the world oil market.
Consumers. This year, we are looking for evidence of the breadth and depth of consumption in Russia. There is plenty of visible evidence of consumption in large cities, but a packed IKEA and a multitude of expensive stores in Moscow does not constitute a sustainable pattern of consumption. This may well be merely a byproduct of circulating commodity cash. This year, analysts will need to scrutinize all consumer-related numbers to find evidence one way or the other.
2003 can be regarded as a "safe" year in terms of budget objectives (all else being equal vis-a-vis external factors), and we can be reasonably certain of an "adequate" return on debt instruments and equities over the next 12 months. However, the really crucial issue is preparation for the inward investment flows that are a necessary pre-condition for high rates of growth. This involves ensuring that financial infrastructure reforms are in place and that the basis for future growth is not destroyed or severely delayed because of a failure to maintain the basic integrity of the economy.
In many ways, this is the critical transition year for Russia after more than 70 years of communism and a decade of restructuring and confusion. While this coming year may look somewhat bland, the objectives that need to be achieved over the next 12 months are absolutely critical for Russia's investment case in 2004 and beyond.
Pyotr Aven, president of Alfa Bank, and Christopher Weafer, chief strategist of Alfa Bank, contributed this comment to The Moscow Times.
Counterspin: Pro-war mythology
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By Scott Burchill, lecturer in international relations at the School of Social & International Studies, Deakin University
January 14 2003
Perhaps the most remarkable feature of this pre-war period is that despite intelligence dossiers, parliamentary speeches and months of disingenuous government propaganda portraying Saddam Hussein as an imminent threat to life on earth, only 37% of Australians support an illegal, unilateral strike by Washington against Baghdad.
We can be confident the Australian Government is concerned by this figure when the Prime Minister starts conjuring implausible and hysterical "what if in 5 years time..." scenarios to bolster his case for war (The Australian, 1 January, 2003). It's not easy making the current peace "seem unacceptably dangerous" (Mearsheimer & Walt 2002).
Spin doctors and PR consultants will therefore be working hard over the next two months in an effort to close the gap between public opposition to a war against Iraq and government enthusiasm thinly disguised as a commitment to the The United Nations Monitoring, Verification and Inspection Commission (UNMOVIC) process.
Their work will be made considerably easier by the support of loyal servants of state power within the fourth estate who will be reliable conduits for opinion management by governments in Canberra, London and Washington.
Amongst the agitprop, disinformation and outright fabrications by commissars and politicians, the following questions and themes will be prominent in future weeks. Each of them deserves careful analysis.
Is Saddam Hussein likely to use weapons of mass destruction (WMD) against the US and its allies?
First, many states, including the US, the UK and Israel, acquire these weapons for deterrence against external attack. You've got to admire Prime Minister Howard and the pro-war lobby for pretending not to understand the lesson that Iraq-North Korea are now teaching the world: If you want to deter the war addicts in Washington, you'd better have weapons of mass destruction and resources of terror. Nothing else will work.
Why wouldn't Iraq develop WMD for deterrence purposes given threats by Washington and London? We are discouraged from seeing things from Iraq's point of view, but in many ways WMD make sense for vulnerable states. As the realist theorist Kenneth Waltz argues, "North Korea, Iraq, Iran and others know that the United States can be held at bay only by deterrence. Weapons of mass destruction are the only means by which they can hope to deter the United States. They cannot hope to do so by relying on conventional weapons."
As with every country, Iraq's weapons inventory and systems tell us precisely nothing about its strategic intentions.
Secondly, Iraq had chemical and biological weapons during the Gulf War in 1991 and chose not to use them. Why would Saddam Hussein be more inclined to use them now knowing the horrendous consequences (as they were explained to him by Brent Scowcroft in 1991), unless his personal survival was at stake and he had nothing left to lose? AS CIA head George Tenet reminded President George W. Bush, Saddam was unlikely to launch WMD against the US unless the survival of his regime was threatened.
As Mearsheimer and Walt argue, "the threat of Iraqi nuclear blackmail is not credible. Not surprisingly, hawks do not explain how Saddam could blackmail the United States and its allies when a rival superpower like the Soviet Union [with 40,000 nuclear weapons] never seriously attempted to blackmail Washington, much less did it."
Saddam Hussein has form: He has used WMD before
It is true that Saddam Hussein has used these weapons before, against those who couldn't respond in kind - Iranian soldiers and perhaps most infamously on 17 March 1988 against "his own people" in the Kurdish city of Halabja. Within half an hour of this attack over 5000 men, women and children were dead from chemical weapons containing a range of pathogens which were dropped on them.
If Washington and London are genuinely concerned about Iraq's WMD, why did they continue to supply him with the means to acquire them for 18 months after the attack on Halabja?
Initially, the US blamed Iran for the Halabja attack, a particularly cynical ploy given Saddam had also used chemical weapons against Teheran's forces during their nine-year conflict in the 1980s. In fact Washington continued to treat Saddam as a favoured ally and trading partner long after the attack on Halabja was exposed as his handiwork.
At the time, the Reagan Administration tried to prevent criticism of Saddam's chemical attack on the Kurds in the Congress and in December 1989, George Bush's father authorised new loans to Saddam in order to achieve the "goal of increasing US exports and put us in a better position to deal with Iraq regarding its human rights record ". Surprisingly, the goal was never reached. In February 1989, eleven months after Halabja, John Kelly, US Assistant Secretary of State, flew to Baghdad to tell Saddam Hussein that "you are a source for moderation in the region, and the United States wants to broaden her relationship with Iraq".
According to the reports of a Senate Banking Committee, the United States provided the government of Iraq with 'dual-use' licensed materials which assisted in the development of Iraqi chemical, biological and missile-system programs. According to the report, this assistance included "chemical warfare-agent precursors; chemical warfare-agent production facility plans and technical drawings; chemical warfare-filling equipment; biological warfare-related materials; missile fabrication equipment and missile system guidance equipment". These technologies were sent to Iraq until December 1989, 20 months after Halabja.
According to William Blum a "veritable witch's brew of biological materials were exported to Iraq by private American suppliers," including Bacillus Anthracis (cause of anthrax), Clostridium Botulinum (a source of botulinum toxin), Histoplasma Capsulatam (causes disease which attacks lungs, brain, spinal chord and heart), Brucella Melitensis (bacteria which attacks vital organs) and other toxic agents. The US Senate Committee said "these biological materials were not attenuated or weakened and were capable of reproduction," and it was later discovered that "these microorganisms exported by the United States were identical to those the United Nations inspectors found and removed from the Iraqi biological warfare program".
After the recent leaking in Germany of Iraq's 12,000 page declaration of its weapons program, it is now known that at least 150 companies, mostly in Europe, the United States and Japan, provided components and know-how needed by Saddam Hussein to build atomic bombs, chemical and biological weapons. Unsurprisingly, the US was keen to excise these details from Iraq's report before its wider dissemination to non-permanent members of the Security Council (Newsday (US), 13 December, 2002; The Independent (UK), 18 & 19 December, 2002; Scotland on Sunday (UK), 22 December, 2002).
Historian Gabriel Kolko claims that "the United Stares supplied Iraq with intelligence throughout the war [with Iran] and provided it with more than $US5 billion in food credits, technology, and industrial products, most coming after it began to use mustard, cyanide, and nerve gases against both Iranians and dissident Iraqi Kurds".
If the US is genuinely concerned by Saddam's WMD, why did Donald Rumsfeld (then a presidential envoy for President Reagan, currently President George W. Bush's Defence Secretary) fly to Baghdad in December 1983 to meet Saddam and normalise the US-Iraq relationship, at a time when Washington new Iraq was using chemical weapons on an "almost daily" basis against Iran (Washington Post, 30 December, 2002)? Why were no concerns about the use of these weapons raised with Baghdad?
Saddam has been successfully deterred from using WMD against other states with WMD. There is no reason to believe this situation has changed or will.
Saddam Hussein has invaded his neighbours twice
True, but this can hardly be a source of outrage for Western governments or a pretext for his removal from power given they actively supported his invasion of Iran in the 1980s with intelligence (eg satellite imagery of Iranian troop positions) and weaponry and, in the case of Washington, told Saddam it was agnostic about his border dispute with Kuwait just prior to Iraq's invasion in August 1990 (US Ambassador April Glaspie told Saddam in 1990 that "We have no opinion on the Arab-Arab conflicts, like your border disagreement with Kuwait." The U.S. State Department reinforced this message by declaring that Washington had "no special defense or security commitments to Kuwait".) This is mock outrage at best.
Saddam's behaviour is no worse than several of his neighbours. As Mearsheimer and Walt remind us, "Saddam's past behavior is no worse than that of several other states in the Middle East, and it may even be marginally better".
"Egypt fought six wars between 1948 and 1973 (five against Israel, plus the civil war in Yemen), and played a key role in starting four of them. Israel initiated wars on three occasions (the Suez War in 1956, the Six Day War in 1967, and the 1982 invasion of Lebanon), and has conducted innumerable air strikes and commando raids against its various Arab adversaries."
Saddam Hussein is a monster who runs a violent, oppressive regime
True again, though this didn't prevent him from being a favoured ally and trading partner of the West at the peak of his crimes in the 1980s. As Mark Thomas notes, the conspicuous aspect of British Labour's attitude to Iraq has been the failure of Blair, Straw, Prescott, Blunkett, Cook or Hoon to register any concerns about Iraq's human rights record whenever the opportunities arose in the British Parliament during the 1980s and 1990s (New Statesman, 9 December, 2002).
Washington, London and Canberra never had reservations about General Suharto's brutal rule in Indonesia, to take on one example of relations between the West and autocratic regimes around the world, and were in fact overjoyed when he came to power over the bodies of hundreds of thousands of his fellow citizens in 1965.
Only the threat of force by the US has forced Iraq to accept weapons inspectors
Possibly true, although this ignores the fact that the last time force was used against Iraq on a significant scale because of its non-compliance with UN Security Resolutions, the opposite effect was produced.
After the Clinton Administration and Blair Government attacked Iraq from 16-19 December, 1998, the result was the collapse of Richard Butler's UNSCOM and the absence of weapons inspectors from Iraq for the next four years. Hardly a testament to the use of force, to say nothing of the precedent this kind of behaviour sets. The Prime Minister's claim that "Hussein effectively expelled weapons inspectors during 1998" is untrue and he knows it (The Australian, 1 January, 2003). Richard Butler withdrew his weapons inspectors on Washington's advice only hours before the Anglo-American attacks in December 1998.
Why wasn't the threat of force an appropriate strategy for the West in response to Indonesia's brutal 24-year occupation of East Timor? Or South Africa's occupation of Namibia? Or Turkey's occupation of northern Cyprus? Or Israel's occupation of Palestine? Etc, etc,.
Has the threat posed by Saddam Hussein increased recently?
The West, particularly London and Washington, was solidly supporting Saddam when he committed the worst of his crimes at the zenith of his power and influence in the 1980s.
In terms of international support - especially Western and Soviet backing, the strength of his armed forces and the state of his industry and equipment, Saddam was considerably more dangerous then than he is now under harsh UN sanctions, (illegal) no-fly zones in the north (since 1991) and south (since 1993) of the country, political isolation and a degraded civilian infrastructure. Why are Saddam's attempts to develop WMD a concern now if they weren't when he actually used them?
Saddam Hussein will pass WMD on to terrorist groups such as Al Qaeda
Despite forensic efforts by Washington to produce a pretext for war, no credible evidence for this claim has been found. All we are left with is unsubstantiated assertions by Bush Administration officials such as Richard Armitage that he has no doubts Iraq would pass WMD on to terrorists (though he doesn't explain how an obvious return address resulting in reciprocal annihilation could be concealed).
This may be enough for compliant power-magnets in the Australian media, but it cannot withstand even a cursory examination. Where is the evidence for such a claim? Osama bin Laden offered the Saudi Government the resources of his organisation to remove Iraqi forces from Kuwait in 1990 instead of Riyadh relying on the US, such is the animosity between Islamic fundamentalists and secular nationalists in the Arab world. Saddam has responded by repressing fundamentalist groups within Iraq.
Would Saddam be likely to hand over to Al Qaeda nuclear weapons so painstakingly built when he, himself might be their first victim? Remarkably, the pro-war lobby reads this history as evidence of likely future co-operation between Baghdad and Al Qaeda.
Much of this is a smokescreen designed to conceal who the real proliferators of WMD are. Which states, for example assisted Israel to develop nuclear weapons - France and the US? What role did Pakistan and China play in helping North Korea build its nuclear stockpile? Why can't we read the list of European, Asian and US companies which proliferated WMD technologies to Iraq? Instead of imaginary scenarios asking 'what if Iraq acquires nuclear weapons in five years and what if it passes them on to terrorist organisations?, why not more sensible questions about which rogue states (most of whom are members of the so called 'war against terrorism') are already responsible for the proliferation of WMD?
The US wants to democratise Iraq
There is no serious US interest in a democratic transition in Iraq, because this could ultimately encourage the Shi'ite majority in the country to pursue a closer relationship with Shi'ite Iran - a nightmare scenario for Washington. It's more likely that a dissident former General, possibly involved in war crimes against Iraq's Kurdish or Shi'ite communities, will be returned from exile and presented as the "democratic opposition" to Saddam Hussein.
The US is interested in compliance and obedience rather than democracy. It has rarely, if ever, expressed an interest in democracy in the Middle East. Ideally, a pro-Western, anti-Iranian, secular "iron fist" would do. The recently rehabilitated Iraqi opposition in exile (with whom until recently the US refused to deal) has no democratic credibility and is largely unknown inside Iraq.
What is the status of pre-emptive strikes in international law?
A number of points can be made about Canberra's interest in retrospectively amending international law to legitimise a shift of strategic doctrine from deterrence to pre-emption. It would establish a precedent that others (Pakistan, India; North and South Korea) might be encouraged to follow; it would have a destabilising effect on international order; the difficulty (impossibility) of getting changes through the UN Security Council; the heightened sense of vulnerability for smaller states and for states in the region, etc, etc,. It would open up a can of worms.
Significantly, there is currently only one country which could seriously consider exercising a right to anticipatory self-defence under existing international law - Iraq. It has been directly threatened with attack by both the US and UK. There has been no reciprocal threat from Iraq.
The term 'pre-emptive war' isn't strictly accurate. As Steven Miller explains:
"Though Bush's approach has been almost universally described, in the media and elsewhere, as a doctrine of preemption, this is incorrect. Preemption refers to a military strike provoked by indications that an opponent is preparing to attack. The logic is: better to strike than be struck. But no one is suggesting that Saddam is preparing to strike the United States. There are no indications that this is the case. Bush is instead making the case for preventive war, for removing today a threat that may be more menacing and difficult in the future. The administration may prefer to label its policy preemption because that is an easier case to make. But it is not an accurate use of the term as traditionally defined."
According to international law specialist Michael Byers, "there is almost no support for a right of anticipatory self-defence as such in present-day customary international law". To the extent that pre-emptive action is permissible under Article 51 of the UN Charter, it requires very strong evidence and there is a heavy burden of justification. The United States, for example, would have to be facing a specific, grave and imminent threat from Iraq which could only be averted by the use of force. According to the test established in the mid-nineteenth century by US Secretary of State Daniel Webster - criteria applied in 1945 at Nuremberg - the need for pre-emptive action must be "instant, overwhelming, leaving no choice of means, and no moment for deliberation".
Otherwise a unilateral strike not authorised by the UN Security Council would be an act of aggression and a breach of international law. As claimed earlier, Iraq has a stronger case at this point in time (given US troop and equipment movements in Qatar, to say nothing of Bush's stated threats).
Christine Gray, author of a seminal modern text on the use of force under international law, argues that the reluctance of states "to invoke anticipatory self-defence is in itself a clear indication of the doubtful status of this jurisdiction for the use of force". According to Gray, in cases where Israel (Beirut 1968, Tunis 1985) and the US (Libya 1986, Iraq 1993, Sudan & Afghanistan 1998) have invoked anticipatory self-defence under Article 51 to justify attacks on their enemies, "the actions look more like reprisals, because they were punitive rather than defensive". The problem for the US and Israel, she argues, "is that all states agree that in principle forcible reprisals are unlawful".
By definition, pre-emptive strikes depend on conclusive intelligence. If the intelligence is wrong, as it was on 20 August 1998 when the Clinton Administration attacked the El Shifa pharmaceutical plant in Khartoum, Sudan, mistakenly believing it was an Al Qaeda chemical weapons factory, the results can be catastrophic for the innocent - self-defence becomes aggression.
Interestingly, the US has not always supported the 'doctrine' of anticipatory self-defence, even when its closest allies invoked it. On 7 June 1981 unmarked American-built F-16 aircraft of the Israeli airforce attacked and destroyed a nuclear reactor at Osirak in Iraq. The raid was authorised by Prime Minister Menachem Begin, but had been internally opposed by Yitzhak Hofi, the director of Mossad, and Major-General Yehoshua Saguy, chief of military intelligence, because there was no evidence that Iraq was capable of building a nuclear bomb. This was also the view of the International Atomic Energy Authority. At the time of the attack, Israel itself had been developing and accumulating nuclear weapons for thirteen years, primarily at its nuclear facility at Dimona.
In response to Israel's unprovoked pre-emptive strike, US Vice President George Bush Snr argued that sanctions had to be imposed on Israel. The US State Department condemned the bombing for its destabilising impact "which cannot but seriously add to the already tense situation in the area". The basis of Washington's concern, it must be said, was not its opposition to anticipatory self-defence per se but that Israel had violated the UN Charter by not exhausting all peaceful means for the resolution of the conflict - in truth no peaceful resolution had been sought. A few days after the raid, Ronald Reagan's White House announced that the planned delivery of four additional F-16s to Israel would be suspended in protest against the attack. The suspension was discretely lifted soon after.
In the current climate when pre-emptive attacks are being invoked as just responses to terrorism, it is worth recalling Princeton University historian Arno Mayer comments in Le Monde shortly after the 9/11 attacks:
"...since 1947 America has been the chief and pioneering perpetrator of "pre-emptive" state terror, exclusively in the Third World and therefore widely dissembled. Besides the unexceptional subversion and overthrow of governments in competition with the Soviet Union during the Cold War, Washington has resorted to political assassinations, surrogate death squads, and unseemly freedom fighters (eg, bin Laden). It masterminded the killing of Lumumba and Allende; and it unsuccessfully tried to put to death Castro, Khadafi, and Saddam Hussein... and vetoed all efforts to rein in not only Israel's violation of international agreements and UN resolutions but also its practice of pre-emptive state terror."
The question of oil: Access or control?
From the middle of last century Washington's foreign policy priority in the Middle East was to establish US control over what the State Department described as "a stupendous source of strategic power and one of the great material prizes in world history", namely the region's vast reserves of crude oil. Middle Eastern oil was regarded in Washington as "probably the richest economic prize in the world in the field of foreign investment", in what President Eisenhower described as the most "strategically important area in the world".
Control could be most easily maintained via a number of despotic feudal oligarchies in the Gulf which ensured the extraordinary wealth of region would be shared between a small number of ruling families and US oil companies, rather than European commercial competitors or the population of these states. Until recently the US has not required the oil for itself though it needed to ensure that the oil price stayed within a desirable range or band - not too low for profit making or too high to discourage consumption and induce inflation. A side benefit of this control over such a vital industrial resource is the influence it gives the US over economic development in rival countries such as Japan.
The greatest threat to this control has always been independent economic nationalism, especially nationalist politicians within the oil-producing region who, unlike the feudal oligarchies of the Gulf states, would channel wealth into endogenous development priorities rather than to US transnationals.
The US wants to secure reliable access to the world's second largest oil reserves, 112 billion barrels already known with possibly double that figure still to be mapped and claimed, thus depriving France and Russia of commercial advantages they have developed in Iraq over the last decade when US companies have been excluded. Just as importantly, access to Iraqi oil would also make the US less reliant upon - and therefore less supportive of - the regime in Saudi Arabia. The geo-political dynamics of the Middle East would be transformed.
If Russia and France maintain their inside track on Iraqi oil, then US corporations will be partially shut out from an enormous resource prize. No US administration is likely to accept that scenario. Meanwhile, Iraqi dissidents close to Washington have promised to cancel all existing oil contracts awarded to firms which do not assist the US to remove Saddam Hussein from power. Regime change in Baghdad could therefore be a bonanza for US oil companies and a disaster for Russian and French companies which have painstakingly built up their relations with the Iraqi dictator since the Gulf war. When Iraq's oil comes fully back on stream, as many as 5 million barrels of oil (or 6.5%) could be added to the world's daily supply. The implications of this for existing suppliers, the global spot price, economic growth, OPEC and the world's consumers are enormous.
This is not an issue of access, it is primarily about control. The US was just as concerned to control Middle East oil producing regions when it didn't depend on them at all. Until about 30 years ago, North America was the largest producer and the US scarcely used Middle East oil at all. Since then Venezuela has normally been the largest oil exporter to the United States. US intelligence projections suggest that in coming years the US will rely primarily on Western Hemisphere resources: primarily the Atlantic basin - Venezuela, Mexico, Brazil, probably Colombia, but also possibly Canada, which has huge potential reserves if they become economically competitive. Imported supplies accounted for 50% of US oil consumption in 2000 and by 2020 the figure is expected to rise to 66%.
Control over the world's greatest concentration of energy resources has two goals: (1) economic: huge profits for energy corporations, construction firms, arms producers, as well as petrodollars recycled to US treasury, etc; and (2) it's a lever of global geo-political control. For those trying to understand the motives behind US behaviour towards Iraq, it is impossible to underestimate the importance which oil has in the minds of Washington's strategic planners.
Attempts to discredit arguments about US access to Iraqi oil by claiming that it if it is interested in access to supplies it could more easily strike a deal with Saddam to satisfy its "thirst for oil" rather than overthrow him, entirely miss the crucial issue - control (The Australian, 2 January, 2003).
The credibility of the UN and Canberra
In September 2002, the Iraq issue in Australia suddenly centred on the honour and integrity of the UN, a subject not previously thought to have concerned the Howard Government. The international community "can't afford" to have its authority "brushed aside," argued foreign minister Alexander Downer, otherwise it will "look meaningless and weak, completely ineffectual". According to the Prime Minister, "if the United Nations Security Council doesn't rise to its responsibilities on this occasion it will badly weaken its credibility".
Former chief weapons inspector and Australian Ambassador to the UN, Richard Butler, argued that the Security Council faces the "challenge of its life" and its future would be "terminal" if it didn't hold Iraq to account this time. His predecessor at the UN, Michael Costello, agrees. "If the UN Security Council won't enforce its own resolutions against Iraq, the whole UN collective security system will be badly wounded, perhaps fatally."
One might have thought that the credibility of the UN Security Council had been badly weakened before now, say in Bosnia in 1993, Rwanda in 1994 or in East Timor in 1999 to cite only three recent cases when it failed to protect defenceless civilians from slaughter. Palestinians might wonder why the organisation's authority hasn't been "brushed aside" by Israel's consistent non-compliance with numerous Security Council resolutions calling for it's withdrawal from occupied territories, from resolution 242 in 1967 to resolution 1402 in March 2002.
Washington clearly has an idiosyncratic view about states complying with UN Security Council resolutions. If the US objects to non-compliance, the country is attacked. If the US favors non-compliance it either vetoes the resolution or disregards it, in which case it is as good as vetoed. Since the early 1970s, for example, the US has vetoed 22 draft Security Council resolutions on Palestine alone - this figure doesn't include 7 vetoes relating to Israel's invasion of Lebanon in the 1980s.
At the National Press Club and later on commercial talkback radio, Mr Howard seemed to think that because Israel was a democracy it shouldn't be judged by the same standards as Iraq. The future of the UN Security Council is not apparently terminal when its resolutions regarding Palestine and Israel are flouted. He should be reminded that democracies are just as obliged to observe international law as authoritarian dictatorships - there is no exemption. In fact we should expect a higher commitment to the rule of law from countries which pronounce their democratic credentials. Later, the argument shifted slightly. Israel wasn't obliged to observe UN Security Council Resolutions because they are only invoked under Chapter 6 of the UN Charter, rather than Chapter 7. This is a novel interpretation of international law, to put it kindly.
Despite rhetoric which portrays the UN as a foreign body at its moment of truth, it is nothing more than the states which comprise it - including Australia and the US. If it has become dysfunctional, it is those member states which manipulate it for their own individual purposes which are to blame. Those who think the credibility of the UN is suddenly at risk over the question of Iraq might like to explain why non-compliance now is suddenly a pretext for an imminent attack on Iraq when Baghdad has been in violation of UN Security Council resolutions for four years.
The Prime Minister asks if Iraq has "nothing to hide and nothing to conceal from the world community, why has it repeatedly refused to comply with the resolutions of the United Nations Security Council"?
Perhaps it's for the same reason that he restricts the UN from entering Australia's refugee detention centres? Or for the same reason Israel would not allow the UN to inspect its research institute at Nes Ziona near Tel Aviv which produces chemical and biological weapons, a stockpile of chemical agents Mr Howard claims he is "not aware" of.
If he had bothered to inquire, Mr Howard would have found that "there is hardly a single known or unknown form of chemical or biological weaponswhich is not manufactured at the institute", according to a biologist who held a senior post in Israeli intelligence. Nes Ziona does not work on defensive and protective devices, but only biological weapons for attack, claims the British Foreign Report.
The Prime Minister believes that Iraq's "aspiration to develop a nuclear capacity" might be a sufficient pretext for war. He has repeatedly claimed that "there is already a mountain of evidence in the public domain," though he didn't say what any of it actually proved beyond the existing public record, or how it established that the United States faces a specific, grave and imminent threat from Iraq which can only be averted by the use of force.
According to the Prime Minister, the mountain of evidence includes an IISS report which actually found Saddam was much less dangerous now than in the past when he was backed by the West. Scott Ritter, a former UN weapons inspector in Iraq, described the IISS report as little more than conjecture. "It's absurd. It has zero factual basis. It's all rhetoric...speculative and meaningless." There was a similar response to President Bush's speech to the United Nations General Assembly on 12 September, which outlined Iraq's breaches of international law. According to conservative Middle East expert Anthony Cordesman, Bush's speech was "clumsy and shallow" and little more than "a glorified press release." It offered little, if anything, that wasn't already on the public record. More a trough than a mountain.
At the UN on 13 September, Foreign Minister Downer claimed that "Iraq's flagrant and persistent defiance is a direct challenge to the United Nations, to the authority of the Security Council, to international law, and to the will of the international community".
Not so fast on Iraq, Mr Bush
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straitstimes.asia1.com.sg
By Leon Hadar
WASHINGTON - While the buildup of American forces in the Persian Gulf may bolster reports of an attack on Iraq by the middle of next month, the Bush administration is finding that recent developments in Asia, Europe and South America are beginning to hamper its ambitions for war.
First, North Korea's decision to withdraw from the Nuclear Non-Proliferation Treaty (NPT) and rising tensions with the United States over moves to revive its stalled nuclear programme have ignited an international crisis in North-east Asia.
President George W. Bush and his aides have refrained from describing the tensions between Washington and Pyongyang as a 'crisis' and have insisted it could be resolved through peaceful diplomatic efforts, involving US allies in North-east Asia, South Korea and Japan, as well as two of North Korea's partners, China and Russia.
In fact, under pressure from South Korea and Japan, the Bush administration agreed last week that it was ready to negotiate with North Korea regarding its nuclear weapons programme.
'President Bush has apparently decided to go to war against Iraqi President Saddam Hussein and negotiate with North Korean leader Kim Jong Il, although it's clear that the North Koreans have taken bolder steps than Iraq to challenge US nuclear non-proliferation policy,' notes Professor Ian Lustick, a foreign policy specialist at the University of Pennsylvania.
Indeed, North Korea has not only withdrawn from the NPT, but has also expelled all international weapons monitors from its territory. Most experts have concluded that Pyongyang has enough plutonium for one or two nuclear bombs and would be able to build them within a year.
Iraq, in contrast, has provided full access to United Nations weapons inspectors, and is probably not in a position to develop nuclear weapons any time soon. Chief UN inspector Hans Blix said last week that his weapons teams had not found any 'smoking gun' during their search for dangerous weapons.
'The message from the Bush administration is that the US doctrine of pre-emption doesn't apply to those governments that have already pre-empted us,' Prof Lustick says, referring to the new doctrine empowering Washington to launch attacks against hostile nations suspected of acquiring or developing mass-destruction weapons.
This new 'pre-emption' strategy could lose credibility if Washington does not apply it in a consistent manner - for example, by negotiating with North Korea, a country flagrantly flaunting its nuclear capability, while threatening to attack the seemingly less bellicose Iraq.
Bush officials respond to this criticism by arguing that it is necessary to invade Iraq, precisely to prevent it from arriving at North Korea's position, when its nuclear capacity has progressed to such a stage that deterrence becomes difficult, if not impossible.
The crisis in North-east Asia complicates the planned Iraq attack by raising major doubts about the coherence of the administration's strategy. The possibility that the crisis on the Korean peninsula could escalate into a full-blown war also poses obvious logistical problems.
While US Secretary of Defence Donald Rumsfeld has stressed that US troops could fight, if necessary, on two fronts, conventional wisdom in Washington does not accept this as a realistic option.
Mr Bush also faces other obstacles to ousting Mr Saddam. Over the past week, key US allies, including Britain, have urged the US to give UN weapons inspectors more time to complete their work, even if it means postponing the attack on Iraq for several months.
According to several news reports, British Prime Minister Tony Blair, Mr Bush's most loyal international ally, has argued against setting a firm deadline for Mr Saddam to give up his weapons.
Senior Bush officials also told the New York Times last week that Turkey, a key US ally in the Middle East, seems reluctant to allow US the use of its territorial bases from which to attack Iraq.
The Turks are concerned that a US invasion of Iraq could have disastrous effects on its security and economic interests, especially if the collapse of the central government in Baghdad led to the creation of a separate Kurdish state in the north which ended up providing aid to Kurdish secessionist groups inside Turkey. The US military would like to use Turkey to open a northern front as a staging area for a land offensive against Iraq. But the newly-elected Islamist government in Ankara has resisted American pressure and is lobbying other Middle East governments to press Washington not to attack Iraq.
There are also indications that the political crisis in Venezuela, including a strike in its oil sector, may also be complicating Washington's plan to attack Iraq. The crisis, which shut down Venezuela's oil industry, the fifth largest in the world, is creating energy shortages and pushing international oil prices upwards, according to chief economist Fareed Mohamedi at the Petroleum Finance Company.
The North Korean crisis, pressure from US allies, Turkish reluctance, and the Venezuelan oil strike are grist to the mill of those in the Bush administration who want to slow the inexorable roll towards war. But the final decision still lies with Mr Bush, whose rhetoric on Iraq continues to be as tough as ever.