Peak Oil and the Political Economy of Terrorism

The Baltimore Chronicle

By Mathew Maavak
April 24, 2006

Wars are dictated by the primacy of economics, while ideologies serve to rouse the masses.

Crude oil has breached the $70 psychological barrier again. This time, however, it will not be a one-day seduction by the stormy Katrina.

The causative culprits are aplenty.

Terrorists have taken out 25 per cent of Nigeria's sweet crude since late February, and the daily joust between Washington and Tehran is providing splendid returns to those who had invested in oil stocks. For these savvy investors, there will be enough gas in the tank during the peak summer driving season.

Then there is that 10.2 per cent growth registered by China, announced very conveniently before President Hu Jintao's scheduled meeting with his US counterpart George W. Bush. China's booming growth can only be greased by a harder-to-pump oil. The alternatives are stark. If the Chinese bubble gets pricked, the global economy suffers, US corporations may need higher tax cuts—or even subsidies—and Americans will finally need to trim their bellies.

That would be Hu's sales pitch but Bush may opt for a more risky oil prospecting venture. This time, the failed former Texan oilman may succeed, and ignite enough fires in an energy-strained world.

It is high noon for those prospecting for maximum oil returns. Even the types not usually associated with Wall Street, rocket science and deficit spending are glued to Bloomberg's running crude oil tickers by the minute.

The objective is the lucky strike. Peak Oil is forming a strategic fit with Peak Terrorism.
For a synoptic glimpse into the future, read this excerpt from New York Times' April 16 article headlined "Blood and Oil":

Just as things seemed to be calming down in the delta region of Nigeria after a spate of kidnappings and insurgent attacks, the militant group calling itself the Movement for the Emancipation of the Niger Delta—MEND—announced last week to all who would listen that it was planning new violence against oil facilities in the region. Apparently unconcerned about tipping its hand to the authorities, MEND even gave a date for the start of its new campaign: April 25.

That date is perfect! These guys are more financially savvy than stuffed suits who have hedged their future in a world where oil never existed. D-Day in the Niger Delta is just 72-odd hours before the UN Security Council meets to unleash a little fission over Iran's nuclear enrichment program.Crude oil at $80 per barrel on April 28? Who knows?

If a rag-tag bunch of militants in Nigeria are accurately reading the tea leaves in an oil-brimmed cup, imagine what Al Qaeda and the pan-global martyrs of terror have in store.

There is a greater lead-filled premium now for oil-related and economic targets. In a business-speak twist, collateral damage can be applied to the unlucky rejects in a fire-sale transaction.
You can bet your every last dime that terrorists are ready to throw their explosive spanners into the machineries of global trade. They know the drill. There is tremendous potential here to cause pandemonium and cross-border tensions. Targeting energy infrastructures will be far more efficacious and less opprobrious than the indiscriminate slaughter of civilians.

Why assassinate politicians or shoot a GI when mobs—deprived of their daily bread—can do more in aggregates and derivatives? In layman's terms, we are talking about riots, sit-downs, union strikes, looted stores and political mayhem. Economic targets offer the best returns with fewer risks. Stock markets will be depressed, inflation will set in, bankruptcies will proliferate, and people will starve.

The concatenation of financially-induced social upheavals has been witnessed before—across continents—during the currency crisis of the late 90s. Unless checked, wars are the inevitable culmination. There are no IMF prescriptions for dwindling oil reserves, busted pipelines and electricity blackouts.

Call this the political economy of terrorism, but apart from Iraq and Palestine, terrorists will increasingly focus on the conveyor belts of finance and trade. There is no shortage of targets for disgruntled elements worldwide. There are Maoist guerillas in Nepal, ethnic insurgents in Burma, Al Qaeda-inspired militants in Islamic nations and assorted purveyors of violence in every nook and corner where there are power plants, ports, retail stores, trading depots, factories, banks and transborder pipelines. Mundane industrial structures—particularly those connected to oil—have attained more value-added targeting than shoppers at a marketplace. A suicide bomber might as well "walk the last walk" into a minor, provincial bank than into a crowded souk. Planting midnight bombs at ATMs in a major city entails little or no bloodshed, though it may douse seasonal fire sales the next morning, not to mention the lack of change for lunch. (Ever noticed the anticipatory or frustrated month-end file of workers at ATM kiosks short on notes?)

A little inconvenience can go a long way in disrupting normal routine, and no nation can provide complete protection for these mundane cogs of human activity.

Terrorists switching to the political economy side of their trade can expect other windfalls. Destroying the perceived icons of (Western) imperialism elicit less disgust—and perhaps sympathy—than the televised butchering of individuals. Suicide bombings that shred innocent limbs at a discotheque and net relayed beheadings of infidels reek of bestiality. Why kill a Daniel Pearl when you can play Che Guevara?

But is this happening?

There were strong hints emerging since February.

The Niger Delta attacks offlined production amounting to 550,000 barrels per day, rendering the affected Royal Dutch Shell installations immobile till today. What was untouched was probably left for April 25. Almost simultaneously, violent protests in the Ecuadorian province of Napo forced state oil firm Petroecuador to halt supplies through its Trans-Ecuadorean pipeline.

Both incidents raised US crude oil futures by $1 overnight. The price has since risen by more than $10 dollars—a safe median figure used by commentators without an MSNBC or Bloomberg ticker on their offline notebooks.

In Iraq, while bombs routinely kill civilians, little has been noted of pipeline sabotages stretching from Kirkuk to Bayji to the Turkish border. Restoring normal output may take up to a year.

And that's a big hypothetical "if" with Iraq in a state of disintegration. Think of the hundreds of thousands of miles of exposed pipelines around the world, and the cumulative number of years needed to repair them. If Iraq's oil and its pipelines can energize the current sectarian war, couldn't that be replicated in places simmering with ethnic and social tensions? Expect authoritarian governments to manufacture terrorism for the perpetuation of power. If you regard the USA PATRIOT Act as draconian, you haven't seen the world yet!

Any bomb anywhere can be pinned on "terrorists" and sifting the real from the manufactured would be next to impossible with censorship laws established to prevent the transmission of coded communications. Sounds familiar?

It would pose no barrier to the Real McCoys, however. Terrorists - separated by ethnic, ideological and religious motivations but united by calculated anarchy - have learnt their economic primers on the go. It is the most potent weapon in this age of Peak Oil.

Neither the brotherhoods of anarchy nor coded messages are needed to set action time. The daily business headlines will do.

In Sync

While oil traders were still risk managing the outage from Ecuador and the Niger Delta, militants in Saudi Arabia attempted to blow up the world's largest oil processing complex in Abqaiq on Feb 24. If they had succeeded, there would have been a double digit increase in the price of crude in 48 hours. It could have also precipitated social anarchy in a land seething with repressed anger against the Al Saud monarchy. Under such a scenario, repair works at Abqaiq would be next to impossible, oil would shoot to above $100 per barrel, and a vortex of violence would spiral to engulf much of the world. Remember, society is only three meals away from anarchy.

As tensions rise by the day over Iran's nuclear enrichment program—and it's not only Iran—pipelines and economic targets are easier pickings vis à vis heavily-guarded political, military and constabulary bastions. Call this risk management on both sides. Governments will prioritize security for the levers of governance and power; terrorists will probe and prioritize valuable, less-guarded targets to trap security apparatuses in a game of musical chairs. This will leave a gap for political targets sooner or later. It's an old trick with new destructive possibilities in a world peaked of oil.

Terrorists can also conflate ideological mileage with financial aggrandizement. This was demonstrated during the days leading up to the Sept 11 attacks. Unusually heavy transactions were noted on airline stocks in the hours and days leading up to the fateful incident. The yet-to-be-proven suspects were Osama bin Laden and Al Qaeda. This gives a new twist to the maligned practice of "insider trading," and it ingeniously raises capital for further terrorist ventures. Non-ideological players like organized criminal gangs and state actors would have taken note. Each day, violent arts permeate our airwaves, are regurgitated on news clips, and are headlined on our dailies. The real dangers of terrorism can be manipulated and faked by the religious devotees of Mammon, and blame can fly in all directions.

Terrorists, after all, are the dernier cri bogeyman of our times. They can—advertently or not—create political and financial capital for powerful entities. The terrorism shill also provides a Trojan Horse for state actors to destabilize a hostile nation. In this high-octane world of dwindling mineral resources, "terrorism" might be the spark—and later a sideshow—for outright inter-state conflict. Wars are dictated by the primacy of economics, while ideologies serve to rouse the masses.

The most tindery powder keg right now is Iran. It's not just hedge fund managers and investment gurus who are bracing for the worst, or the best, depending on one's philosophy. There is money here for Armani-clad entrepreneurs and coups de grace for ski-masked individuals.

If Iran burns, or if neighboring Iraq descends further into anarchy, expect scattered strikes against oil installations, ports and power plants the world over. There will be more trouble in Nigeria and Ecuador. Hotspots will get hotter with conflicts spreading far and wide. With so much happening, renewed conflict in little-known Chad—among the five poorest nations in the world but one with a billion in crude reserves—may not blip on our media radar.

The Ides of March have passed and it has left us with bad omens for the coming months. The game of energy geopolitics is taking new turns and uncertainties, including the option of a tactical nuke attack on Iran's Natanz, Isfahan, and Bushehr complexes. If Iran gets hit, the anti-American Venezuelan President Hugo Chavez may deliberately divert oil supplies to nations like China, depriving the US of 15 per cent of its oil imports.

There are other, albeit highly unlikely, variants to this game.

Al Qaeda may bomb targets within Iran, and blame it on the United States, or it could sink a few tankers in the Straits of Hormuz and blame it on the Persians. Neither the United States nor Iran need to fight in a best-case scenario—if an extraneous culprit can be identified and a standoff reached in time. A Straits of Hormuz blocked by sunken tankers either way will immediately reduce global oil supplies by 20-25 per cent per day. Perhaps more, depending on which estimates you have been reading.

The United States, after all, has the largest strategic petroleum stockpile in the world, and its powers would be aggrandized through this energy buffer. Is that good news? Well, should US soldiers die in a Middle East artificially contrived and subverted by Britain? Cut a deal with Tehran! After all, Iran might have been a US partner today if not for Winston Churchill. The CIA only stepped in later, in 1953. The tussle started over the Anglo-Persian Oil Company, which no longer exists by that name, but the bone of contention has gone on to include tactical nukes.

Like changed names, the United Kingdom's role in global subversion has been well-masked by Uncle Sam's schoolboy misadventures.

Trust the Brits to ramp up their global terror machine again and expect Uncle Sam to receive the annual rogue superpower award. Expect a scramble for oil worldwide, providing targets of opportunities to militants, criminals, and state-sponsored terrorists. When this happens, the current national and international structures would be blown out of shape.

Within this nightmare world, ordinary folks would gladly welcome some order, or a New World Order. That plan was readied long back—lock, stock and barrel. Long before the United States of America came into being!

Welcome to the year when the artifice of civilization begins its slide into a natural state of barbarity.

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