OIL AND WAR IN LIBYA.
What actually the U.S. economic interests are?

Here’s a paradox for you: why the USA is waging the warfare in the oil-bearing regions of Middle East and Northern Africa if it inevitably causes the high oil prices? We have to keep in mind that North America has tremendous deposits of the so-called «heavy oil» and bearing sands. Their development might be profitable only in case of high oil prices — no less than $100 per barrel.

High oil prices have recently become word of the day. Economists are arguing about how long this trend will last and whether it will cause another world crisis. When the USA along with their NATO allies started the military operation in Libya, numerous observers were perplexed, as long as Americans have already waged two wars (in Iraq and Afghanistan) at the moment. Let me remind you that Barack Obama has won the elections with his promises to renounce bellicose Bushesque policy and withdraw the troops (at least from Iraq). The situation was aggravated by the fact that U.S. debt has already exceeded $14 trillion and it keeps growing. There’s nothing surprising in that — war is a costly leisure.

In fact the situation can be explained quite simply. Instead of cutting their defense budget after the Cold War, the USA has increased in furthermore. Today Americans spend more money for their military industry than the rest of the world combined. And if bombs and missile are produced, they should explode somewhere (otherwise, they will just cram the warehouses). At that, the USA have moved major parts of civilian production capacities to the Asian countries with cheaper labor force (China first of all). This allowed to drastically increase net incomes of share-holders and top managers of American corporations. As a result, we’re having a situation when the military-industrial complex has a major share in American production sector and any attempts to reduce the defense budget face fierce counter-action of lobbyists, frightening authorities with the vanishing jobs. Corporate tycoons are unable to move the manufactures abroad (due to possible leaks of military secrets) and are unwilling to do so — after all, they still have the substantial profits from selling the weapons to the state.

But why the USA is waging the warfare in the oil-bearing regions of Middle East and Northern Africa if it inevitably causes the high oil prices? There are few reasons for that. First of all, power capacity of American GDP is inevitably falling, which is also connected to the transition of industrial manufactures abroad. It is quite clear that exchange traders need less energy than the daily goods production sites. Second of all, high oil prices benefit the companies that produce it in the USA and neighboring Canada. North America has tremendous deposits of the so-called «heavy oil» and bearing sands. Their development might be profitable only in case of high oil prices — no less than $100 per barrel. Third of all, having destabilized the Middle East, America gained a powerful lever of influence over the major oil importers: European Union, China and Japan. From now on energetic security of these countries will depend upon the success of American military. Let us remind you that the USA owes them trillions of dollars.

In the given condition Russia also gains incredible advantages, being one of the few reliable energy carrier suppliers. Yet we have to make a good use of this situation. We can’t just enjoy the favorable state of affairs. We have to exchange the oil and gas contracts for foreign investments into the Russian oil-refining and machining industry. We have to carry out joint projects. For example, we should grant foreign companies rights to develop the deposits of Russian shelf, but in exchange we not only have to get the most advanced technologies, but also an access of Russian companies to the marketing outlets of the final customers.

Thanks to the contracts of oil and gas industry, the upgrade of Russian industry is going under way. Let me remind you that merely 10 years ago Russia was unable to produce the large-diameter pipes (1420 mm) that are used to build the trunk pipelines. Today mostly all of them are made using the Russian pipes. Power and quality of the gas-pumping machinery is also gradually increasing. For example, the 32-megawatt «Ladoga» gas-pumping machines are produces in St. Petersburg now.

We also have to strive to use Russian machinery in the foreign projects that our companies participate in. If we keep selling oil and gas, while using the gained profits to buy the imported goods from abroad, Russian living standards will remain as low as ever, while the modernization scenarios will still be merely paper tigers.

Sergey Pravosudov

About author: Sergey Pravosudov is a general manager of National Energetic Institute.