Black Oil: The New Political Currency

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RefineryIn one of his stand-ups, Jay Leno made a hilarious statement: “War continues in Iraq. They’re calling it Operation Iraqi Freedom. They were going to call it Operation Iraqi Liberation until they realized that spells ‘OIL’.”


Over the past few years, the importance of oil has increased tremendously. With that, the power of oil producing nations in the international arena has risen. In the beginning of the twentieth century, the “Oil Arena” was a monopoly of the western countries. The days of John D. Rockerfeller are long gone. The game now includes many non-western countries. They have realized the importance of this useful commodity, and are exploiting its full potential. Developing nations that are oil-rich, have discovered a newfound power, with oil politics often taking priority over democracy or human rights.


When the controversial, yet popular, Hugo Chávez was elected in 1998, Venezuela “re-nationalized” the state oil company. He has managed to establish himself as a major political figure, drawing support from millions of poor who didn’t get the benefits of the “oil boom”. Venezuela has invested heavily in social programs, due to an increase in its oil income. Increased oil revenues have allowed Chavez to invest in social programs outside Venezuela’s borders, an integral part of President Hugo Chavez’s “social revolution”. Efforts are being made for an economic and political integration of Latin America, a stand against the traditional domination of America in this region. For a long time, Cuba was the only country that provided free health care to its citizens. So Cuba, rich in health care, and Venezuela, rich in oil, arranged a barter deal. In exchange for 15,000 Cuban doctors working in poor areas in Venezuela, Cuba gets lots of cheap Venezuelan oil.


Chavez’s going influence in this region, thanks to oil revenue, is a major source of concern for the US. This has managed to create a block of Leftist-run, anti-American states across Central and South America. With the help of oil money, Chavez has bought advanced Russian fighter planes and helicopters, this way increasing the size of his armed forces exponentially. He also rolled out the red carpet for Iranian president Mahmoud Ahmadinejad, a long-term friend and ally. When the 35-nation board of the International Atomic Energy Agency in Vienna voted to refer Iran’s energy case to the United Nations Security Council earlier this month, there were three notable “no” votes. One was from Syria. The other two were from Cuba and Venezuela, two leftist and anti-American regimes. Both countries have also negotiated various trade and economic agreements.


When considering Iran‘s role in the global energy equation, we should also look at the geopolitical aspects. There are apprehensions that Iran might stir up trouble in West Asia if it manages to become a wealthier and more influential regional power. Further, Iran is sought as a strategic partner by Russia, China, and many powerful European nations for economic and political reasons. Iran has leverage over the International community and this has helped in preventing coalitions from forming against it. However, nuclear weapons will be strategically important for Iran and will provide a balance in the Middle East, which is heavily tilted in Israel’s favor due to their own covert nuclear weapons program.


Iran and Venezuela aren’t the only countries whose political fortunes have improved due to high oil prices. Russia’s vast oil resources have given it the capacity to dictate terms to the rest of Europe. In one power play, the Russians briefly blocked gas last winter to Ukraine, leaving millions freezing. In December, Putin threatened to do the same to Belarus, unless it began paying Western-level gas prices. Belarus agreed. Governments are less inclined to criticize Kremlins role in Chechnya as their dependency on oil increases. Russian President Vladimir Putin doesn’t hide his ultimate goal. Russia “must aspire to claim world leadership in the realm of energy,” Putin’s main message seems to be “Russia is back”. Russia assumed a less important role in world affairs after the break up of USSR. Under Putin has sought to develop a foreign policy that seeks to re-establish it as a major political force.


Putin has given back Russians their self-esteem. Russia‘s vast mineral wealth has created a crop of new millionaires. Moscow continues to rank as one of the most expensive cities to live in. However, Russia is no Utopia with no poor people. There is a wide rich-poor divide as wealth has failed to trickle down. The 2004 “Forbes” survey showed that Moscow is home to more billionaires than any other city in the world. Thirty-three billionaires live in the Russian city. A report says the richest 10 percent of Russia‘s population makes 14.9 times more than the poorest 10 percent. Many of the poor people long for the Soviet era, when pensions were small, but equal. Now they have nothing except inflation. This is in sharp contrast to what’s been happening under Chavez. Though he has been mired in controversy due to his public outbursts, to his people – he is nothing short of a messiah. His supporters say no president in Venezuela‘s modern history has given so much to the poor.


With the help of oil, even the poorest countries can wield political power. Oil keeps our modern lives afloat. In the coming years, the world will become very polarized. Groups of countries will flock together based on oil and gas sources. Economic growth and inflation will depend upon oil resource.


Superpowers will be judged by their ability to supply cheap and reliable energy.


Pratiksha Khanduri

[image courtesy:]

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