Forbes – by Gordon G. ChangThe George H. W. Bush and two escorts have just transited the Strait of Hormuz and are in position in the Persian Gulf. The U.S. Navy’s newest aircraft carrier is now “ready for tasking,” as Pentagon spokesman Rear Admiral John Kirby put it.
What tasking does President Obama have in mind? Senator John McCain, among others, has urged him to bomb Sunni militants, who during recent days stormed out of the north of Iraq, captured cities with almost no fighting, and after the stunning collapse of the army now threaten Baghdad. The government of Prime Minister Nuri al-Maliki had in May asked for American airstrikes on the forces fighting under the banner of the Islamic State of Iraq and the Levant. ISIS or ISIL, as the al-Qaeda splinter group is variously known, has achieved remarkable success because it draws strength from Sunnis disenfranchised by the Maliki government.
The U.S. has already provided aid to Maliki. As Secretary of State John Kerry said on Friday, the U.S. has taken “some immediate steps,” including “enhanced aerial surveillance support” and “ramped up shipments of military aid.” U.S. special forces may already be on the ground gathering intelligence, perhaps in preparation for airstrikes from the Bush.
There may be geopolitical reasons to help the unsavory Maliki in what looks less like an Iraqi insurgency and more like a regional Sunni-Shiite conflict, but America has surprisingly little economic interest in taking sides. The big economic issue involves, of course, the availability of energy.
Iraq is OPEC’s second-largest producer of crude, pumping 3.4 million barrels a day last month. So far, oil production and export facilities have almost entirely escaped damage during the recent tumultuous events. Oil prices have risen this month but have not spiked as some feared, largely because about 90% of Iraq’s oil is in the south, far from the current fighting, and much of the rest is in Kurdish areas, also untouched by the militants. Because Shiite Iran borders the southern oil fields and supports Maliki, it’s unlikely ISIS will ever be in a position to shut off production and export.
Suppose, however, that the fighters were able to advance all the way south to the Persian Gulf port of Basra, the big oil terminal. As an initial matter, it looks like their leaders will keep the oil flowing. “The ambition is surprising,” said Quartz’s new managing editor Bobby Ghosh to MSNBC yesterday. “They not only want to kill but they want to take territory and hold it. They want to appoint governors. They want to appoint district officials. They want to rule. That is very different. That is not something that even Osama bin Laden wanted.”
But suppose ISIS, a terrorist group, wants to shake the global energy market instead of acting like a government. ExxonMobil would lose its West Qurna field, but it would still have its agreements with the Kurdish government in the north. Occidental Petroleum would be forced to exit a small field it has in the south of Iraq. Chevron looks like it would be unaffected as it operates only in the Kurdish area. Oilfield service companies, like Schlumberger and Halliburton, would undoubtedly lose business. Yet American companies could make up for losses in southern Iraq by doing more business with the Kurds, who are effectively winning autonomy.
In the event of a catastrophe in Iraq, energy prices in the United States would spike upwards with the rest of the world, and that would not be good for American business or consumers. Yet as a comparative matter, the U.S. economy would gain ground against all or almost all other major economies.
Why? America is now the planet’s largest producer of petroleum and natural gas. The U.S. overtook Russia as the world’s biggest natural gas producer in 2012 and is, after Saudi Arabia and Russia, the third biggest pumper of oil. In the short term—and maybe the long term as well—production of hydrocarbons in the U.S. will undoubtedly rise. Not surprisingly, U.S. energy imports have fallen in the last five years, natural gas by 32% and oil by 15%. So a crisis would put America in an even stronger position in the oil and gas markets.
The Chinese, on the other hand, would have a much harder time if Iraq’s 3.7% of global production suddenly went offline. China, which is increasingly dependent on energy imports, is now that country’s largest foreign customer, taking an average 1.5 million barrels a day, almost half of Iraq’s production. China National Petroleum Corp., a state enterprise, swooped up Iraqi oil after last decade’s war—Beijing, by the way, sold arms that ended up in the hands of insurgents fighting Americans—by accepting Baghdad’s razor-thin margins and onerous conditions.
Then, many said it was China that won the Iraq War because it signed the major oil deals afterwards. As a result, Beijing now has a lot riding on the outcome in Iraq as ISIS takes on the Shiite-dominated ruling group in Baghdad. No wonder the Chinese Foreign Ministry in recent days has been coming out with announcements supporting the Maliki government. Said Ministry spokeswoman Hua Chunying on Friday, “For a long time, China has been giving Iraq a large amount of all types of aid and is willing to give whatever help it is able to.”
Perhaps the U.S. should take her up on the offer and let her country put its navy in harm’s way. After all, China has far more at stake in Iraq than America.
Follow me on Twitter @GordonGChang and on Forbes
http://www.forbes.com/sites/gordonchang/2014/06/15/if-anyone-bombs-iraq-shouldnt-it-be-china/
China is just doing what it does best. Passively sitting on the sidelines and waiting for everyone else to do the dirty work by destroying each other and then claiming the fortunes after it’s all done. It’s called allowing your enemy to do your dirty work for you or as Bruce Lee says, “The Art of Fighting without having to fight”.
Who is it whose motto is “War by Deception”?