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The Thirty-Year Itch

Three decades ago, in the throes of the energy crisis, Washington's hawks conceived of a strategy for US control of the Persian Gulf's oil. Now, with the same strategists firmly in control of the White House, the Bush administration is playing out their script for global dominance.

LAST SUMMER, Perle provided a brief glimpse into his circle's thinking when he invited rand Corporation strategist Laurent Murawiec to make a presentation to his Defense Policy Board, a committee of former senior officials and generals that advises the Pentagon on big-picture policy ideas. Murawiec's closed-door briefing provoked a storm of criticism when it was leaked to the media; he described Saudi Arabia as the "kernel of evil," suggested that the Saudi royal family should be replaced or overthrown, and raised the idea of a U.S. occupation of Saudi oil fields. He ultimately lost his job when rand decided he was too controversial.

Murawiec is part of a Washington school of thought that views virtually all of the nations in the Gulf as unstable "failed states" and maintains that only the United States has the power to forcibly reorganize and rebuild them. In this view, the arms systems and bases that were put in place to defend the region also provide a ready-made infrastructure for taking over countries and their oil fields in the event of a crisis.

The Defense Department likely has contingency plans to occupy Saudi Arabia, says Robert E. Ebel, director of the energy program at the Center for Strategic and International Studies (CSIS), a Washington think tank whose advisers include Kissinger; former Defense Secretary and CIA director James Schlesinger; and Zbigniew Brzezinski, Carter's national security adviser. "If something happens in Saudi Arabia," Ebel says, "if the ruling family is ousted, if they decide to shut off the oil supply, we have to go in."

Two years ago, Ebel, a former mid-level CIA official, oversaw a CSIS task force that included several members of Congress as well as representatives from industry including ExxonMobil, Arco, BP, Shell, Texaco, and the American Petroleum Institute. Its report, "The Geopolitics of Energy Into the 21st Century," concluded that the world will find itself dependent for many years on unstable oil-producing nations, around which conflicts and wars are bound to swirl. "Oil is high-profile stuff," Ebel says. "Oil fuels military power, national treasuries, and international politics. It is no longer a commodity to be bought and sold within the confines of traditional energy supply and demand balances. Rather, it has been transformed into a determinant of well-being, of national security, and of international power."

As vital as the Persian Gulf is now, its strategic importance is likely to grow exponentially in the next 20 years. Nearly one out of every three barrels of oil reserves in the world lie under just two countries: Saudi Arabia (with 259 billion barrels of proven reserves) and Iraq (112 billion). Those figures may understate Iraq's largely unexplored reserves, which according to U.S. government estimates may hold as many as 432 billion barrels.

With supplies in many other regions, especially the United States and the North Sea, nearly exhausted, oil from Saudi Arabia and Iraq is becoming ever more critical -- a fact duly noted in the administration's National Energy Policy, released in 2001 by a White House task force. By 2020, the Gulf will supply between 54 percent and 67 percent of the world's crude, the document said, making the region "vital to U.S. interests." According to G. Daniel Butler, an oil-markets analyst at the U.S. Energy Information Administration (EIA), Saudi Arabia's production capacity will rise from its current 9.4 million barrels a day to 22.1 million over the next 17 years. Iraq, which in 2002 produced a mere 2 million barrels a day, "could easily be a double-digit producer by 2020," says Butler.

U.S. strategists aren't worried primarily about America's own oil supplies; for decades, the United States has worked to diversify its sources of oil, with Venezuela, Nigeria, Mexico, and other countries growing in importance. But for Western Europe and Japan, as well as the developing industrial powers of eastern Asia, the Gulf is all-important. Whoever controls it will maintain crucial global leverage for decades to come.

Today, notes the EIA's Butler, two-thirds of Gulf oil goes to Western industrial nations. By 2015, according to a study by the CIA's National Intelligence Council, three-quarters of the Gulf's oil will go to Asia, chiefly to China. China's growing dependence on the Gulf could cause it to develop closer military and political ties with countries such as Iran and Iraq, according to the report produced by Ebel's CSIS task force. "They have different political interests in the Gulf than we do," Ebel says. "Is it to our advantage to have another competitor for oil in the Persian Gulf?"

David Long, who served as a U.S. diplomat in Saudi Arabia and as chief of the Near East division in the State Department's Bureau of Intelligence and Research during the Reagan administration, likens the Bush administration's approach to the philosophy of Admiral Mahan, the 19th-century military strategist who advocated the use of naval power to create a global American empire. "They want to be the world's enforcer," he says. "It's a worldview, a geopolitical position. They say, 'We need hegemony in the region.'"

UNTIL THE 1970s, the face of American power in the Gulf was the U.S. oil industry, led by Exxon, Mobil, Chevron, Texaco, and Gulf, all of whom competed fiercely with Britain's BP and Anglo-Dutch Shell. But in the early '70s, Iraq, Saudi Arabia, and the other Gulf states nationalized their oil industries, setting up state-run companies to run wells, pipelines, and production facilities. Not only did that enhance the power of opec, enabling that organization to force a series of sharp price increases, but it alarmed U.S. policymakers.

Today, a growing number of Washington strategists are advocating a direct U.S. challenge to state-owned petroleum industries in oil-producing countries, especially the Persian Gulf. Think tanks such as the American Enterprise Institute, the Heritage Foundation, and CSIS are conducting discussions about privatizing Iraq's oil industry. Some of them have put forward detailed plans outlining how Iraq, Saudi Arabia, and other nations could be forced to open up their oil and gas industries to foreign investment. The Bush administration itself has been careful not to say much about what might happen to Iraq's oil. But State Department officials have had preliminary talks about the oil industry with Iraqi exiles, and there have been reports that the U.S. military wants to use at least part of the country's oil revenue to pay for the cost of military occupation.

"One of the major problems with the Persian Gulf is that the means of production are in the hands of the state," Rob Sobhani, an oil-industry consultant, told an American Enterprise Institute conference last fall in Washington. Already, he noted, several U.S. oil companies are studying the possibility of privatization in the Gulf. Dismantling government-owned oil companies, Sobhani argued, could also force political changes in the region. "The beginning of liberal democracy can be achieved if you take the means of production out of the hands of the state," he said, acknowledging that Arabs would resist that idea. "It's going to take a lot of selling, a lot of marketing," he concluded.

Just which companies would get to claim Iraq's oil has been a subject of much debate. After a war, the contracts that Iraq's state-owned oil company has signed with European, Russian, and Chinese oil firms might well be abrogated, leaving the field to U.S. oil companies. "What they have in mind is denationalization, and then parceling Iraqi oil out to American oil companies," says Akins. "The American oil companies are going to be the main beneficiaries of this war."

The would-be rulers of a post-Saddam Iraq have been thinking along the same lines. "American oil companies will have a big shot at Iraqi oil," says Ahmad Chalabi, leader of the Iraqi National Congress, a group of aristocrats and wealthy Iraqis who fled the country when its repressive monarchy was overthrown in 1958. During a visit to Washington last fall, Chalabi held meetings with at least three major U.S. oil companies, trying to enlist their support. Similar meetings between Iraqi exiles and U.S. companies have also been taking place in Europe.

"Iraqi exiles have approached us, saying, 'You can have our oil if we can get back in there,'" says R. Gerald Bailey, who headed Exxon's Middle East operations until 1997. "All the major American companies have met with them in Paris, London, Brussels, all over. They're all jockeying for position. You can't ignore it, but you've got to do it on the QT. And you can't wait till it gets too far along."

But the companies are also anxious about the consequences of war, according to many experts, oil-company executives, and former State Department officials. "The oil companies are caught in the middle," says Bailey. Executives fear that war could create havoc in the region, turning Arab states against the United States and Western oil companies. On the other hand, should a U.S. invasion of Iraq be successful, they want to be there when the oil is divvied up. Says David Long, the former U.S. diplomat, "It's greed versus fear."

Ibrahim Oweiss, a Middle East specialist at Georgetown University who coined the term "petrodollar" and has also been a consultant to Occidental and BP, has been closely watching the cautious maneuvering by the companies. "I know that the oil companies are scared about the outcome of this," he says. "They are not at all sure this is in the best interests of the oil industry."

Anne Joyce, an editor at the Washington-based Middle East Policy Council who has spoken privately to top Exxon officials, says it's clear that most oil-industry executives "are afraid" of what a war in the Persian Gulf could mean in the long term -- especially if tensions in the region spiral out of control. "They see it as much too risky, and they are risk averse," she says. "They think it has 'fiasco' written all over it."

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