Exclusive: Russia and Iran – Energy Rules

by KT MCFARLAND August 21, 2008
All of a sudden it’s a dangerous world out there. Russia is reclaiming its former empire and Iran is ramping up its nuclear weapons program and supporting terrorists. At first glance these two seem unrelated, but they’re actually different chapters in the same book, entitled “Energy Rules.”
It’s an epic saga that began decades ago, in the 1970s.
After the 1973 Yom Kippur war, the oil-producing Arab world realized it could band together and use its exports as a weapon to punish the West for supporting Israel. It slowed the oil pumps, constricted supply, drove up the price of oil and thus gasoline, and Americans stood in line at the gas pumps. Suddenly, oil-exporting countries were rich and their ambitions grew.
Iran used its petrodollars to build a formidable military arsenal under the Shah and later, under the Ayatollah, waged a 10-year war with Iraq. Other Gulf countries built their military arsenals, acquired portfolios and their princes lived like playboys.
Although most people aren’t aware of it, the Soviet Union is also a major oil exporter. It used the 1970s oil windfall profits to build up its nuclear and conventional weapons arsenals and conduct an aggressive and expansionist foreign policy. It solidified control of satellite states in Eastern Europe, and became a full-fledged superpower, playing out U.S. –Soviet Cold war competition in the third world.
But oil, like most commodities, is governed by a cyclical wave of price increases and decreases. By the mid 1980s oil prices collapsed, going from a high of nearly $40 a barrel in 1980 to $10 by 1986.
Suddenly, those petro-powers were petro-paupers, especially the Soviet Union. Already overextended from its military buildup, domestic consumer demands and a protracted Afghan war, the Soviet Union nearly collapsed when oil prices plummeted. Ronald Reagan seized the moment to achieve America’s Cold War victory. The lesson? Oil is a weapon – but it is a double-edged sword. An oil exporting country can translate its wealth into political power when oil prices are high; but when prices fall that power evaporates.
Now, with the price of oil bouncing around above $100 a barrel, the petro-powers are once again flush with cash. Iran is reasserting itself in the Gulf, building a nuclear weapons capability and funding Hezbollah and Hamas. Saudi Arabia’s support of madrassas continues and has spawned a generation of Islamic extremists, currently headquartered in the tribal region on the Afghan-Pakistan border but with designs on Pakistan.
The Russians learned the lesson of the 1980s perhaps best of all, and have spent the last decade laying the groundwork for their comeback. They built oil pipelines to carry Russian oil to the Mediterranean for export. They convinced the Europeans that Russian gas was a more reliable energy source than Arab oil and built natural gas pipelines to East and West Europe. They’ve hampered the energy rich nations of Central Asia from competing in Europe by impeding their pipeline efforts. In recent years they’ve built up their financial reserves and their military.
Now, with the price of oil once again at historic highs, and the Europeans dependent on their gas and oil, the Russians are ready to reclaim their Empire. In the winter of 2006 Russia turned off the gas to Ukraine for three days, leaving Ukrainians shivering in the dark, and demonstrating to the rest of Europe that they were just as vulnerable. Last week Russia turned to Georgia - democratic, progressive, and pro-West - as the perfect place to drive the point home. Poised to become the energy corridor from Central Asia to the West, Georgia was hoping for full integration with Europe, including NATO membership.
This was something new Russia could not tolerate. At the first flimsy pretext Soviet tanks rolled into Georgia and no amount of cajoling by the United States is likely to force them out. The Europeans will be loath to object - Russia now has most of them in an energy stranglehold. And as long as Russia can exercise its veto at the Security Council, the United Nations will be unable to act.
The United States and Europe have spent the last 20 years with ours heads in the sand. After the oil crisis of the 1970s, we should have pushed for energy independence, by whatever means. We are now in a position where a major cornerstone of our economy is dictated from abroad. Unless the U.S. and Europe become energy independent, the Russians can convert their energy domination into both wealth and political power.
The last chapter of this book depends on us. Americans are the most entrepreneurial and innovative people the world has ever known. We can create a whole new green energy industry to take the place of foreign oil and break the stranglehold of countries that wish us ill. We should try everything – wind, solar, hydro, geothermal, nuclear, shale oil, off-shore drilling, new refineries, electric hybrid and  flex fuel cars – and without delay.
If America can achieve energy independence, this story will have a happy ending. If not, those who wish us ill – the Russians, the Iranians, the Taliban - will write the last chapter however they choose.
FamilySecurityMatters.org Contributing Editor KT McFarland is a former top Pentagon official in the Reagan Administration and a frequent commentator on national security issues and foreign affairs. Feedback: editorialdirector@familysecuritymatters.org.

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