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Table of Contents
Editorial
*Iraq: The New War - The New York Review of Books
*The fight for oil pipelines in Iraq - Sifi - India
*IEA warns low oil inventory levels pose high risks to world economy - Arab Times - Kuwait
*Gulf economic reforms struggle despite oil bonanza - Reuters - Forbes
*As oil cash fades, Libya opens up - Christian Science Monitor
*Chinese goods and crude oil swell U.S. trade deficit - International Herald Tribune
*Big Bush's Visit Fuels Talk of Big Deals - The Moscow Times

 
David Seaton's Energy Links® Editorial

There is a moment known as the "tipping point", a moment like twilight when day becomes night, a moment like autumn when hot turns to cold. This moment has come to the US occupation in Iraq and in turn to the Bush administration in Washington. The moment has come when victory becomes defeat and triumph morphs into disaster.

This moment is dangerous, horribly dangerous. Dangerous first, of course, for the men and women and children on the ground in Iraq, Iraqi and American, but dangerous too for the Bush presidency and depending what Bush does, dangerous for all the men, women and children of the world.

Bush's speech a week ago demanding that the world cough up soldiers and cash to help with the heavy lifting in Iraq was an official admission of defeat. The president has until November of 2004 to change the impression of failure and win re-election.

Foreign affairs was supposed to take the voters attention form the economy. With the economy not producing jobs, talk of an economic "recovery" is politically irrelevant... The loss of jobs means the loss of votes. The fear of losing jobs means loss of votes. The productivity gains that sweeten corporations' quarterly reports are often achieved nowadays by exporting middle class clerical jobs. That may encourage analysts and brokers but it is political hara-kiri. This is a recovery then that will exist strictly on the financial pages. It is as improbable that the economy will come to Bush's rescue, as improbable as the situation in Iraq evolving into something that reflects favorably on the administration.

During the Clinton years a film with Robert De Niro and Dustin Hoffman, "Wag the Dog" gave its name to the method of starting a war to "change the subject" of public discourse in the midst of scandals and failed policies. "Wagging the dog" in the midst of the ongoing "war on terrorism" and the "Bush Doctrine" of pre-emptive attack is now certain to be the easiest and most favored option for much of the White House policy elite.

What are the most likely choices? North Korea and Iran must surely top the list, perhaps Syria is also a candidate.

What are the "pros and cons"?

  • North Korea: North Korea already has the atomic bomb and a superb army with massive artillery capabilities that could turn Seoul and all its inhabitants into a pile of glowing ashes in the space of a few hours without having to use the atomic bomb on the 35,000 American soldiers in South Korea or use its "export class" missiles that could reach Japan. Although it represents a "real" problem, North Korea's real military power puts attacking it out of the class of operation which Emmanuel Todd classes as "micro militarisme théâtral". This is the attacking of relatively helpless countries such as Grenada, Panama, Serbia or Iraq in order to impress the image of America's uncontestable military superiority on the minds of doubters. Korea then is a deserving, but unlikely candidate for the "Wag the Dog" process.
  • Iran: has certainly backed groups that the USA considers terrorist organizations, it is perhaps the most dangerous enemy Israel has and Sharon would love for Bush to attack the Ayatollahs. They also appear to be making serious progress in developing an atomic bomb and the United State now has an army on their doorstep. However, the size of Iran's population, its traditional patriotism, the mountainous terrain and the historic fierceness of the people of Persia take invading Iran out of the micro militarisme théâtral class. Last but not least, Russia might not tolerate the removal of what they have considered, since the days of the czars, an essential buffer zone. Not a very appetizing "Wag the Dog" scenario.
  • Syria: A dictatorship that sponsors many organizations considered terrorist by the USA, it has a porous frontier with Iraq through which many jihadhists make their way to attack American soldiers. Of Phoenician descent like the Lebanese, the Syrians don't have a great reputation as fighters and their military equipment is out of date. Syria, then, is by far the most attractive of the trio for a "Wag the Dog" adventure.
The probabilities of something like this happening cannot be exaggerated. If the "international community" takes over the patrolling and funding of the Iraq fiasco and thus frees US armed forces for further action they will have removed the only serious obstacle to Bush saving his presidency with another demonstration of micro militarisme théâtral. This should be seriously considered before sending even one Euro or one soldier to Iraq. David Seaton

David Seaton's Energy Links®
 
Iraq: The New War - The New York Review of Books
As the war's ending and, increasingly, its beginning grow more cloudy, Americans are confronted on their television screens with a violent present that day by day becomes more difficult to comprehend. That the attacks on American soldiers in Iraq "do not pose a strategic threat to the mission," in the words of the American proconsul L. Paul Bremer, is true but meaningless. The war in Iraq—in the streets of Baghdad no less than in the halls of Congress or in the stump speeches of the campaign trail—is in its essence political, not military. Like the terrorists who hijacked American airliners and flew them into American buildings, the fighters daily ambushing American troops are attacking not American military power but American will. And thanks to the way President Bush and his colleagues chose to build the case for war, and the errors they have made in prosecuting it, American will is an increasingly vulnerable target. In the end defeat or victory in Iraq will be judged not by who controls Baghdad but by whether the war has left Americans more secure than they were before it was undertaken. All the ringing presidential pronouncements of "Mission Accomplished!" will not change the reality: America could still lose this war.
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The fight for oil pipelines in Iraq - Sifi - India
One week the US army was paying the sheikh to help protect oil pipelines, the next they arrested him on suspicion of aiding anti-coalition attackers. It's all part of building the new Iraq, explained the somewhat bewildered American colonel. "He negotiated a deal that let him take a part of the pipeline that he didn't have before," said Colonel Bill Mayville, who is in charge of the 173rd Airborne Division in the northern oil center of Kirkuk. That three-month contract, which began on July 17, promised Sheikh Hatem al-Assy al-Obeidi more than 6,000 dollars for the protection of a stretch of pipelines and power cables running through his tribal lands in the desert near Kirkuk. The sheikh, one of the leaders of a powerful and wealthy Sunni Muslim tribe, had provided protection for infrastructure during Saddam Hussein's reign. The Americans, grappling with a spate of attacks on the oil and electricity grid, decided it was better to turn to the tribes for help than go it alone. The move also fitted nicely with the nationwide coalition push to hand security matters back to the Iraqis. But soon after the deal was signed, "a lot of stuff started happening -- rocket-propelled grenade attacks, improvised explosive devices," said Colonel Mayville. When US troops went two weeks ago to Sheikh al-Obeidi's al-Ramal village to investigate, they discovered what appeared to be bomb-making equipment and a considerable amount of small arms. "Were we hoodwinked by (sheikh) Hatem?" asked Mayville. "What was all this stuff we found?" Until he gets the answers the skeikh will remain in "detention," said Mayville, pointedly noting that he has not been "arrested." The whole affair, which might seem irregular to outsiders, was probably standard practice, conceded the colonel. 
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IEA warns low oil inventory levels pose high risks to world economy - Arab Times - Kuwait
Oil stocks in industrialised countries are dangerously low, putting the world economy at high risk by pressuring prices and making markets volatile, the International Energy Agency warned in a monthly report on Wednesday. "In a period of increased import dependency and geopolitical uncertainty, reduced inventory levels expose the global economy to elevated risks associated with factors such as weather and even small supply disruptions," the Paris-based agency said. Industry oil stocks in the 30 members of the Organisation for Economic development and Cooperation were bumping along at the bottom of the range seen over the last five years as northern hemisphere heads into the winter season, when oil consumption tends to rise for heating purposes, the IEA said. The situation was made worse by the current low level of spare production capacity estimated at one million barrels per day (bpd). The IEA said that although technological improvements in logistics and storage helped the oil industry keep pumping with lower levels of oil stocks on hand, consumers would nevertheless feel the pinch of strained inventories. "Lower industry stocks contribute to higher average oil prices and increased market volatility: someone benefits and someone pays," it said. In the United States, the biggest energy consuming country in the world, low inventories and refinery problems have recently resulted in record gasoline prices for US motorists. The IEA also said that the resumption of oil production by Iraq was slower than expected.
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Gulf economic reforms struggle despite oil bonanza - Reuters - Forbes
The coffers of Gulf Arab states brim with petrodollars, but policymakers seem unable to take the political risk of bold reform to shake up their ailing economies. Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Oman and Bahrain, which straddle nearly half the world's oil reserves, have been talking for years about overhauling their crude-dependent economies and boosting private sector growth. Reforms often discussed include offloading state stakes in firms to boost the private sector, diversifying sources of income by levying income tax -- now limited to a small religious tax -- and slashing subsidies. Cutting red tape and legal reforms are also needed to encourage investment. Yet analysts said what little progress made was inadequate as officials shy away from tough choices on the economy and attempt to shore up support in the political arena. Half-hearted reform measures make it hard for conservative governments to deliver on promises of attracting foreign funds and creating jobs for increasingly frustrated young populations. "If people in the Arab world don't develop expectations of improving their lot in life and of better chances in the future, it can lead to anything from lack of incentive to work to corruption to terrorism," said a Gulf-based economist who asked not to be named. The social and political pressure is strongest in regional U.S. allies Saudi Arabia and Kuwait, whose citizens are used to cradle-to-grave welfare systems and cushy government jobs. But the bloated public sector can no longer absorb them. "Job creation is their biggest challenge and to achieve this they need economic reform," said Chief Economist Randa Azar-Khoury of National Bank of Kuwait.
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As oil cash fades, Libya opens up - Christian Science Monitor
(...)after more than a decade in international isolation, the man Ronald Reagan called a "mad dog" is preparing for a revolution of a different kind. Winning back international respectability and getting the United Nations to end sanctions - which could come Friday after several false starts - are not isolated goals. They are the key steps in a wider Libyan strategy to modernize and diversify the economy - now dependent on a faltering oil sector - and reintegrate it into the global market. Central to the plan is the privatization of government-owned institutions. It is a groundbreaking step for Libya's leader. His Green Book - the slender volume on which the country's government is based - advocates a mixture of socialist principles and Arab nationalism. But in a speech to mark Revolution Day, Qaddafi spoke of "a new page" in Libya's relations with the west. Miloud El Mehadbi, a professor of international relations at the World Center for the Study and Research of the Green Book in Tripoli, sums up the new direction: "We have dropped the dogma and embraced pragmatism," he says.(...)To achieve its goals, Libya needs more Western investment. Although it has traded with most of the world freely since 1999, the lifting of sanctions will remove an important psychological barrier. "We could never be sure if sanctions would be reimposed, and that made us think twice about how much we invested," says a foreign oil worker who asked for anonymity. Ending UN sanctions may increase pressure on the US to end its own embargo. With European oil companies lining up to do business, there is not much time: US leases on Libyan oil fields expire in 2005. A Western diplomat says, "The UK is going full steam ahead on Libya and the plane came down on their territory," he says. "I can't see the US holding out for too long."
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Chinese goods and crude oil swell U.S. trade deficit - International Herald Tribune
The U.S. trade deficit expanded in July to $40.3 billion, the Commerce Department reported Thursday, as imported goods from China and the quantity of overseas crude oil sold to the United States each hit record highs. The latest snapshot of the United States' trade activity showed that the trade gap grew by 0.7 percent in July from a $40 billion imbalance in June, the Commerce Department said. July's trade deficit was slightly smaller than the $40.5 billion shortfall economists were predicting. Imports and exports each posted gains in July; but the dollar amount of imports was larger than the value of exports, thus widening the trade gap. In a second report, new claims for unemployment insurance filed last week rose by a seasonally adjusted 3,000, to 422,000, a two-month high, the Labor Department said. The report disappointed economists who were calling for a decline in claims and suggested that cautious companies want to keep their work forces lean - discouraging news for jobseekers. On the trade front, imports came to $126.5 billion in July, the second-highest level on record, and represented a 1.6 percent increase from June. As the U.S. economy strengthens, so has Americans' appetite for foreign-made goods. Exports, meanwhile, totaled $86.1 billion in July, the strongest showing since May 2001, and a 2 percent increase from June. That offered a hopeful sign that other countries' economies, hurt by a worldwide economic slump, might be on the mend. The Bush administration believes the way to deal with rising trade deficits is for other countries to remove trade barriers. That would allow U.S. companies to more freely do business in overseas markets, thus increasing America's global competitiveness, the administration says. Critics say growing deficits are proof that the administration's free-trade policies are not working. U.S. companies have moved operations overseas and imports are flooding into the United States, a situation that has resulted in hefty losses of American manufacturing jobs. That - along with a bout of economic hard times at home and abroad - also has hurt the U.S. manufacturing sector. Manufacturing has lost nearly 16 percent of its work force, or 2.7 million jobs, in a record 37 straight months. Another 44,000 jobs were lost last month. The U.S. trade deficit with China widened by 13.5 percent from June to July to a record $11.3 billion. Imports from China in July totaled $13.4 billion, a monthly high. In a visit to China last week, Treasury Secretary John Snow pressed the administration's case that China's fixed exchange rate is protectionist. 
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Big Bush's Visit Fuels Talk of Big Deals - The Moscow Times
He may be retired from public life but George Bush seems to cause a stir every time he comes to Russia. You name it and market players were buzzing Thursday about the real reasons behind the former American leader's visit -- an $18 billion play by U.S. oil giant ChevronTexaco for a blocking stake in the new Yukos-Sibneft combo? The launch of a $500 million private tie-up between Alfa Group and Pentagon-connected Carlyle Group? Divvying up the hydrocarbon resources of postwar Iraq? Late Wednesday, before Bush Sr. had even left, traders in New York had already heard word that he was heading to Russia to help clear the way for the sale of a strategic stake in YukosSibneft to ChevronTexaco, which named one of its tankers after Condoleezza Rice, a former board member who is now his son's national security adviser. But it didn't stop there. The buzz continued Thursday as news spread that Bush was also here to help finalize the creation of a $500 million private equity fund between Russian oil-to-telecoms giant Alfa and one of his present employers, the Carlyle Group, a defense industry insider that counts former U.S. Secretary of State James Baker and former British Prime Minister John Major among its advisers. 
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