Book Review: No War for Oil – US Dependency and the Middle East

This book portrays oil from of the perspective of Austrian economics, a sub-school of economics to the right of mainstream orthodoxy, known as libertarian or laissez-faire economics. Laissez-faire is “a doctrine opposing governmental interference in economic affairs beyond the minimum necessary for the maintenance of peace and property rights” according to Merriam-Webster Dictionary. Accordingly, the order of the argument proposed in this volume is (1) “[l]et the market provide the U.S. economy with all the oil it needs at the lowest price [and] free commerce will follow”; (2) “[i]f the market could provide oil even during a crisis, the United States could withdraw all ground and air force units, pre-positioned supplies on land and sea, [and even abandon all bases in the region]”; (3) “[a] retraction of U.S. military presence from the Persian Gulf would not only save taxpayer dollars in a time of severe economic crisis, but would actually make America and its homeland more secure”; (4) “[t]o complete the sea change in U.S. policy, the United States might want to withdraw from other Islamic nations too”; (5) “if U.S. policy makers cannot be introspective enough to … fully abandon [this] foreign policy in the Persian Gulf …, maybe they can at least go halfway” (187-189). At the outset and as an upfront leftist, my hat is off to these premises, which, with a slight difference, have already been verified in my own work based on Marxian theory.

Ivan Eland seized upon the notion of “blood for oil” in its literal sense, i.e. on its face value, hence the title of his opening chapter. He presented eleven “popular myths” about oil (3-7, elaborated in part II of the book and enumerated below) that often delude the public perception and confuse policy makers, and thus sway the latter to invoke unjustifiably “imperialism and mercantilism to secure oil” (8). The lack of necessity for “imperialism” (correctly, in this reviewer’s assessment) thus compels the author to question the necessity for “energy security” through coercion as follows.

If U.S. politicians, however, abandon their popular pledge to achieve “energy security” and independence from foreign oil—which has never come remotely close to being fulfilled since Richard Nixon first enunciated it in the 1970s—and adopt the [sic] more feasible, desirable, and honest policy of simply relying on the efficient global oil market to provide petroleum, a new question may arise. People might ask, “If the nation’s policy is to rely on the world market to bring us shipments of oil from foreign suppliers, don’t we need the U.S. military in the Persian Gulf even more than ever to safeguard those supplies?” (151)

Eland spelled out the answer in part II (consisting of short chapters for each), where he presents his eleven popular “myths” about oil and the oil market (in an axiomatic style) as follows:

Without a doubt there is a great deal of truism in identification of these propositions as a myth, at least since the 1973-74 oil crisis that brought the dominion of the International Petroleum Cartel to a close. Yet, this volume is attentively rooted in laissez-faire and methodological individualism, an approach particular to Austrian economics. After all, this book is largely but independently written for policy makers.

Eland refers to some essential facts, but facts are often inadequate without a sound and well-defined methodological context. Consequently, while one should appreciate, even cherish, the noticeable facts proffered in Eland’s discourse, one also should be mindful of the inadequacy of references to the “free market,” without identification of the institutions associated with each period in oil’s historical transformation. Eland indicates that, “in June of 1914, Churchill obtained his goal of majority government ownership of a private company, Anglo-Persian—an act that meets the textbook definition of socialism” (14); or “[b]y the early 1930s, the Seven Sisters had control of Middle Eastern oil. Like the later OPEC [the author continues,] the Seven Sisters tried to divide up markets, agree on production quotas, and set a uniform world price” (18, emphasis is mine). He then juxtaposes these assertions, as if being cause-and-effect, and concludes: “Fearing a bad socialist precedent that would adversely affect their global operations, the companies tried to organize embargoes on Mexican oil worldwide, arguing that such exports were stolen goods” (19). Hence anything that has no resemblance to the atomistic markets (or seems lumpy, governmental, or administrative) – cartel-like or not – smacks of “socialism” in Eland’s lexicon.

The theme in this book is so stunningly built on the abstract notion of “free market.” The distinction between the period under the International Petroleum Cartel (1928-1972)—an outright monopoly, a blatant antithesis of free market—and the era of decartelization and competitive globalization of oil (and thus cutting off U.S. foreign policy from cartelized oil) is poorly understood. The author sets these incongruent and incompatible periods of petroleum history on the same footing. Simply put, there is no periodization and thus no measure of qualitative and dynamic transformation of oil.

For rightwing Austrian economics, the Organization of Petroleum Exporting Countries (OPEC) is but a monopoly, particularly when it represents a dozen governments and has deep involvement in public ownership of oil deposits. Eland has little clue as to the oil rent (a sui generis category) side-by-side with competitive profits across the board, and OPEC is not seen as a corollary of this. The reader should know that the concept of rent (particularly as it relates to ownership of the sub-soil by the public) – a classical economic category – is not an “imperfection” (except when viewed by the orthodoxy), and thus it may not be an obstruction to formation of competitive profit. But libertarian economics is much closer on this issue to mainstream orthodoxy. As for OPEC and its connection with oil, it is deemed as a “cartel” by mainstream neoclassical economics, and “socialism” by its Austrian counterpart (see Bina’s notion of “synthetic competition” in Moudud, Bina, Mason 2013). Competition, according to the rightwing Austrian school (as opposed to leftwing Schumpeterian) originates in the sphere of exchange rather than the incessant battles of capital upon capital in the process of production.

Eland is quite right though on issues surrounding U.S. military intervention in the Middle East and elsewhere when he states that “going to war for oil is unnecessary, expensive in blood and treasure, and dangerous for U.S. security” (192).

Today, the United States seems to be imitating Imperial Japan by using armed forces to ensure supply of oil. In fact, the United States may be going beyond the Japanese desire to acquire to run the military. Other nations get more oil from the Persian Gulf than does the United States. … Yet the Gulf contains more than 50 percent of the world’s known oil reserves, and making this area an American lake using U.S. military force allows the American government to have its thumb on the oil supplies and supply lines of many nations—both friend and foe alike. … In the end, the resources used to militarily safeguard oil would be better channeled into the U.S. economy, thus enhancing—instead of dissipating—future U.S. power and prosperity that primarily underlies it. (158-159, emphasis in original)

Hardly anyone who may have a modicum of sagacity can argue with this logic. But the appearance of Middle East oil and the presence of U.S. military intervention, in such spurious order of causation, is misleading (see Bina 2012). To appreciate why the reference to oil is skin-deep and instead the U.S. reaction to its historic global decline as a hegemonic power is the real culprit, one needs to penetrate below the surface of appearances and dig further into the breakdown of the postwar Pax Americana (1945-1979) as the springboard of analysis. In same decade, following the collapse of the postwar international monetary system, Bretton Woods (1971), disintegration of IPC (1972: preamble to the oil crisis), and the complete undoing of the client-state segment of the Pax Americana in Iran and Nicaragua (1979)—to recall a few significant events—the U.S. hegemonic system plunged into its resting place. This is the key context that is missing from this book, and its absence, among others, is equivalent to lack of distinction between cartelized oil and (competitively) globalized oil with or without OPEC. This sea change then was a preamble to the end of American hegemony at the end of the same decade. And it was due to this very historical end, not Fukuyama’s rendition of “the end of history,” that also President Jimmy Carter (a U.S. president presiding over the hegemonic Pax Americana) obtains the status of the “last man” (contrary to Fukuyama’s drama and delirium) in 1979; it was this history that was ended, not so much with a bang (Bina 2013: ch. 7).

Eland notwithstanding appreciates that it is more than oil in all this, and that indeed “a deliberate imperial policy is more likely.”

Thus, one would have to suspect that this expensive U.S. imperial policy is undertaken deliberately—not to guard oil supplies for the United States, which will probably flow anyway, but to have the U.S. finger on the oil supplies of both allied (Europe, Japan, South Korea, India, and so on) and potentially rival (Russia and China) nations. (186)

He then concludes with a number of recommendations, including “let markets provide the U.S. economy with all the oil needs”; retract U.S. military presence from the Persian Gulf and “withdraw from other Islamic nations”; create “carrots and sticks to get the Pakistani government to apprehend or kill the remaining leadership of al Qaeda”; rely more on “offshore military power” to “intimidate OPEC to keep prices slightly below what they would have been without any U.S. or allied presence in the Gulf” (187-190).

As can be seen, there is a double flaw in this seemingly benevolent rightwing Austrian worldview: (1) the impulsive impression of “free market” has no way of reconciling the presence of OPEC and the existence of oil rents vis-à-vis competitive profits, and (2) the alleged non-interventionist posture, demonstrated in this book, falls flat on its face: “intimidate OPEC to keep” oil prices down? Not only does the allusion to the projection of power beyond U.S. national boundaries and thus the residue of support for the old order, but also the rhetoric of allies-and-adversaries—embedded in imperial character and the conduct of the United States—all spring from Eland’s intellectual vision and reasoning (for the hawkish side of the foreign policy spectrum on this see Anderson 2013). This by itself is a volume revealing a torn picture from the author, someone who has no stomach for the international conflict yet continues to fall back on the idealized version of the good old days under the Pax Americana.

This book, however, is a valuable source for economists and international relations specialists, particularly scholars on the left, to realize how “free market” libertarians fare, where the specter of Pax Americana is still wreaking havoc with supposed non-interventionist fancies, whilst the ghost of cartelized oil in OPEC’s rendering appears now and then to interrupt their notion of “free-market capitalism.” I strongly recommend this book to leftist scholars who, on the contrary, emphasize the “blood for oil” scenario and yet subliminally share the gist of intangible parallels raised by Eland.