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Oil in the Water; Danger at Hand

Energy Wars, 2012

by MICHAEL T. KLARE

Welcome to an edgy world where a single incident at an energy “chokepoint” could set a region aflame, provoking bloody encounters, boosting oil prices, and putting the global economy at risk.  With energy demand on the rise and sources of supply dwindling, we are, in fact, entering a new epoch — the Geo-Energy Era — in which disputes over vital resources will dominate world affairs.  In 2012 and beyond, energy and conflict will be bound ever more tightly together, lending increasing importance to the key geographical flashpoints in our resource-constrained world.

Take the Strait of Hormuz, already making headlines and shaking energy markets as 2012 begins.  Connecting the Persian Gulf and the Indian Ocean, it lacks imposing geographical features like the Rock of Gibraltar or the Golden Gate Bridge.  In an energy-conscious world, however, it may possess greater strategic significance than any passageway on the planet.  Every day, according to the U.S. Department of Energy, tankers carrying some 17 million barrels of oil — representing 20% of the world’s daily supply — pass through this vital artery.

So last month, when a senior Iranian official threatened to block the strait in response to Washington’s tough new economic sanctions, oil prices instantly soared. While the U.S. military has vowed to keep the strait open, doubts about the safety of future oil shipments and worries about a potentially unending, nerve-jangling crisis involving Washington, Tehran, and Tel Aviv have energy experts predicting high oil prices for months to come, meaning further woes for a slowing global economy.

The Strait of Hormuz is, however, only one of several hot spots where energy, politics, and geography are likely to mix in dangerous ways in 2012 and beyond.  Keep your eye as well on the East and South China Seas, the Caspian Sea basin, and an energy-rich Arctic that is losing its sea ice.  In all of these places, countries are disputing control over the production and transportation of energy, and arguing about national boundaries and/or rights of passage.

In the years to come, the location of energy supplies and of energy supply routes — pipelines, oil ports, and tanker routes — will be pivotal landmarks on the global strategic map.  Key producing areas, like the Persian Gulf, will remain critically important, but so will oil chokepoints like the Strait of Hormuz and the Strait of Malacca (between the Indian Ocean and the South China Sea) and the “sea lines of communication,” or SLOCs (as naval strategists like to call them) connecting producing areas to overseas markets.  More and more, the major powers led by the United States, Russia, and China will restructure their militaries to fight in such locales.

You can already see this in the elaborate Defense Strategic Guidance document, “Sustaining U.S. Global Leadership,” unveiled at the Pentagon on January 5th by President Obama and Secretary of Defense Leon Panetta.  While envisioning a smaller Army and Marine Corps, it calls for increased emphasis on air and naval capabilities, especially those geared to the protection or control of international energy and trade networks.  Though it tepidly reaffirmed historic American ties to Europe and the Middle East, overwhelming emphasis was placed on bolstering U.S. power in “the arc extending from the Western Pacific and East Asia into the Indian Ocean and South Asia.”

In the new Geo-Energy Era, the control of energy and of its transport to market will lie at the heart of recurring global crises.  This year, keep your eyes on three energy hot spots in particular: the Strait of Hormuz, the South China Sea, and the Caspian Sea basin.

The Strait of Hormuz

A narrow stretch of water separating Iran from Oman and the United Arab Emirates (UAE), the strait is the sole maritime link between the oil-rich Persian Gulf region and the rest of the world.  A striking percentage of the oil produced by Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the UAE is carried by tanker through this passageway on a daily basis, making it (in the words of the Department of Energy) “the world’s most important oil chokepoint.”  Some analysts believe that any sustained blockage in the strait could trigger a 50% increase in the price of oil and trigger a full-scale global recession or depression.

American leaders have long viewed the Strait as a strategic fixture in their global plans that must be defended at any cost.  It was an outlook first voiced by President Jimmy Carter in January 1980, on the heels of the Soviet invasion and occupation of Afghanistan which had, he told Congress, “brought Soviet military forces to within 300 miles of the Indian Ocean and close to the Strait of Hormuz, a waterway through which most of the world’s oil must flow.”  The American response, he insisted, must be unequivocal: any attempt by a hostile power to block the waterway would henceforth be viewed as “an assault on the vital interests of the United States of America,” and “repelled by any means necessary, including military force.”

Much has changed in the Gulf region since Carter issued his famous decree, known since as the Carter Doctrine, and established the U.S. Central Command (CENTCOM) to guard the Strait — but not Washington’s determination to ensure the unhindered flow of oil there.  Indeed, President Obama has made it clear that, even if CENTCOM ground forces were to leave Afghanistan, as they have Iraq, there would be no reduction in the command’s air and naval presence in the greater Gulf area.

It is conceivable that the Iranians will put Washington’s capabilities to the test.  On December 27th, Iran’s first vice president Mohammad-Reza Rahimi said, “If [the Americans] impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz.”  Similar statements have since been made by other senior officials (and contradicted as well by yet others).  In addition, the Iranians recently conducted elaborate naval exercisesin the Arabian Sea near the eastern mouth of the strait, and more such maneuvers are said to be forthcoming.  At the same time, the commanding general of Iran’s army suggested that the USS John C. Stennis, an American aircraft carrier just leaving the Gulf, should not return.  “The Islamic Republic of Iran,” he added ominously, “will not repeat its warning.”

Might the Iranians actually block the strait?  Many analysts believe that the statements by Rahimi and his colleagues are bluster and bluff meant to rattle Western leaders, send oil prices higher, and win future concessions if negotiations ever recommence over their country’s nuclear program.  Economic conditions in Iran are, however, becoming more desperate, and it is always possible that the country’s hard-pressed hardline leaders may feel the urge to take some dramatic action, even if it invites a powerful U.S. counterstrike.  Whatever the case, the Strait of Hormuz will remain a focus of international attention in 2012, with global oil prices closely following the rise and fall of tensions there.

The South China Sea

The South China Sea is a semi-enclosed portion of the western Pacific bounded by China to the north, Vietnam to the west, the Philippines to the east, and the island of Borneo (shared by Brunei, Indonesia, and Malaysia) to the south.  The sea also incorporates two largely uninhabited island chains, the Paracels and the Spratlys.  Long an important fishing ground, it has also been a major avenue for commercial shipping between East Asia and Europe, the Middle East, and Africa.  More recently, it acquired significance as a potential source of oil and natural gas, large reserves of which are now believed to lie in subsea areas surrounding the Paracels and Spratlys.

With the discovery of oil and gas deposits, the South China Sea has been transformed into a cockpit of international friction.  At least some islands in this energy-rich area are claimed by every one of the surrounding countries, including China — which claims them all, and has demonstrated a willingness to use military force to assert dominance in the region.  Not surprisingly, this has put it in conflict with the other claimants, including several with close military ties to the United States.  As a result, what started out as a regional matter, involving China and various members of the Association of Southeast Asian Nations (ASEAN), has become a prospective tussle between the world’s two leading powers.

To press their claims, Brunei, Malaysia, Vietnam, and the Philippines have all sought to work collectively through ASEAN, believing a multilateral approach will give them greater negotiating clout than one-on-one dealings with China. For their part, the Chinese have insisted that all disputes must be resolved bilaterally, a situation in which they can more easily bring their economic and military power to bear.  Previously preoccupied with Iraq and Afghanistan, the United States has now entered the fray, offering full-throated support to the ASEAN countries in their efforts to negotiate en masse with Beijing.

Chinese Foreign Minister Yang Jiechi promptly warned the United States not to interfere.  Any such move “will only make matters worse and the resolution more difficult,” he declared.  The result was an instant war of words between Beijing and Washington.  During a visit to the Chinese capital in July 2011, Chairman of the Joint Chiefs of Staff Admiral Mike Mullen delivered a barely concealed threat when it came to possible future military action.  “The worry, among others that I have,” he commented, “is that the ongoing incidents could spark a miscalculation, and an outbreak that no one anticipated.”  To drive the point home, the United States has conducted a series of conspicuous military exercises in the South China Sea, including some joint maneuvers with ships from Vietnam and the Philippines.  Not to be outdone, China responded with naval maneuvers of its own.  It’s a perfect formula for future “incidents” at sea.

The South China Sea has long been on the radar screens of those who follow Asian affairs, but it only attracted global attention when, in November, President Obama traveled to Australia and announced, with remarkable bluntness, a new U.S. strategy aimed at confronting Chinese power in Asia and the Pacific.  “As we plan and budget for the future,” he told members of the Australian Parliament in Canberra, “we will allocate the resources necessary to maintain our strong military presence in this region.”  A key feature of this effort would be to ensure “maritime security” in the South China Sea.

While in Australia, President Obama also announced the establishment of anew U.S. base at Darwin on that country’s northern coast, as well as expanded military ties with Indonesia and the Philippines.  In January, the president similarly placed special emphasis on projecting U.S. power in the region when he went to the Pentagon to discuss changes in the American military posture in the world.

Beijing will undoubtedly take its own set of steps, no less belligerent, to protect its growing interests in the South China Sea.  Where this will lead remains, of course, unknown.  After the Strait of Hormuz, however, the South China Sea may be the global energy chokepoint where small mistakes or provocations could lead to bigger confrontations in 2012 and beyond.

The Caspian Sea Basin

The Caspian Sea is an inland body of water bordered by Russia, Iran, and three former republics of the USSR: Azerbaijan, Kazakhstan, and Turkmenistan.  In the immediate area as well are the former Soviet lands of Armenia, Georgia, Kyrgyzstan, and Tajikistan.  All of these old SSRs are, to one degree or another, attempting to assert their autonomy from Moscow and establish independent ties with the United States, the European Union, Iran, Turkey, and, increasingly, China.  All are wracked by internal schisms and/or involved in border disputes with their neighbors.  The region would be a hotbed of potential conflict even if the Caspian basin did not harbor some of the world’s largest undeveloped reserves of oil and natural gas, which could easily bring it to a boil.

This is not the first time that the Caspian has been viewed as a major source of oil, and so potential conflict.  In the late nineteenth century, the region around the city of Baku — then part of the Russian empire, now in Azerbaijan — was a prolific source of petroleum and so a major strategic prize.  Future Soviet dictator Joseph Stalin first gained notoriety there as a leader of militant oil workers, and Hitler sought to capture it during his ill-fated 1941 invasion of the USSR.  After World War II, however, the region lost its importance as an oil producer when Baku’s onshore fields dried up.  Now, fresh discoveries are being made in offshore areas of the Caspian itself and in previously undeveloped areas of Kazakhstan and Turkmenistan.

According to energy giant BP, the Caspian area harbors as much as 48 billion barrels of oil (mostly buried in Azerbaijan and Kazakhstan) and 449 trillion cubic feet of natural gas (with the largest supply in Turkmenistan).  This puts the region ahead of North and South America in total gas reserves and Asia in oil reserves.  But producing all this energy and delivering it to foreign markets will be a monumental task.  The region’s energy infrastructure is woefully inadequate and the Caspian itself provides no maritime outlet to other seas, so all that oil and gas must travel by pipeline or rail.

Russia, long the dominant power in the region, is pursuing control over the transportation routes by which Caspian oil and gas will reach markets.  It is upgrading Soviet-era pipelines that link the former SSRs to Russia or building new ones and, to achieve a near monopoly over the marketing of all this energy, bringing traditional diplomacy, strong-arm tactics, and outright bribery to bear on regional leaders (many of whom once served in the Soviet bureaucracy) to ship their energy via Russia.  As recounted in my book Rising Powers, Shrinking Planet, Washington sought to thwart these efforts by sponsoring the construction of alternative pipelines that avoid Russian territory, crossing Azerbaijan, Georgia, and Turkey to the Mediterranean (notably the BTC, or Baku-Tbilisi-Ceyhan pipeline), while Beijing is building its own pipelines linking the Caspian area to western China.

All of these pipelines cross through areas of ethnic unrest and pass near various contested regions like rebellious Chechnya and breakaway South Ossetia.  As a result, both China and the U.S. have wedded their pipeline operations to military assistance for countries along the routes.  Fearful of an American presence, military or otherwise, in the former territories of the Soviet Union, Russia has responded with military moves of its own, including its brief August 2008 war with Georgia, which took place along the BTC route.

Given the magnitude of the Caspian’s oil and gas reserves, many energy firms are planning new production operations in the region, along with the pipelinesneeded to bring the oil and gas to market.  The European Union, for example, hopes to build a new natural gas pipeline called Nabucco from Azerbaijan through Turkey to Austria.  Russia has proposed a competing conduit called South Stream.  All of these efforts involve the geopolitical interests of major powers, ensuring that the Caspian region will remain a potential source of international crisis and conflict.

In the new Geo-Energy Era, the Strait of Hormuz, the South China Sea, and the Caspian Basin hardly stand alone as potential energy flashpoints. The East China Sea, where China and Japan are contending for a contested undersea natural gas field, is another, as are the waters surrounding the Falkland Islands, where both Britain and Argentina hold claims to undersea oil reserves, as will be the globally warming Arctic whose resources are claimed by many countries.  One thing is certain: wherever the sparks may fly, there’s oil in the water and danger at hand in 2012.

Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author, most recently, of Rising Powers, Shrinking Planet.

This article originally appeared on TomDispatch.