Private Empire: ExxonMobil and American Power (32 page)

Although Bush’s national security team generally accepted Feith’s vision of global oil, some of them offered partial dissents. Condoleezza Rice and Colin Powell were each struck by the destructive role of oil wealth in the development of African political economies; they credited aspects of the resource curse thesis. Paul Wolfowitz, the deputy defense secretary, also accepted the resource curse thesis and he expressed interest in the thinking of those such as former director of Central Intelligence James Woolsey and the journalist Thomas Friedman, who argued after the September 11 attacks that, even setting aside the challenge of climate change, America was arming its enemies by failing to wean itself from oil because oil exporters used their easy cash to challenge American interests.
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Oil security, it turned out, like other forms of economic security, lay in the eye of the beholder. One of the problems with Feith’s arguments about seamless global oil pools forever replenishing themselves was that it required other world powers to act as if they shared his understanding.

China, crucially, did not; its leaders remained steeped in the political science model of oil power. Douglas Feith was a man of exceptional belief in himself, however. He was quite certain that his views of markets, history, and global oil security were correct. Feith’s responsibilities included cochairing ongoing bilateral defense talks with Chinese counterparts. Soon after the invasion of Iraq, he decided to try to talk the Chinese government into changing its understanding of the character of the global oil market to conform to his own.

C
hina became a net oil importer in 1993. That followed a much-hyped but failed search, in which Exxon had participated, for oil reserves in China’s northwest Tarim Basin. “It was going to be the new Saudi Arabia and all that kind of thing,” an executive involved recalled. What they found, however, were “basically dry holes.”

By 2003, China had grown into the world’s second-largest oil consumer, after the United States, and its oil imports were skyrocketing. Around 1999, China’s Communist leadership coined a “Go Out” policy to encourage state-owned companies and diplomats to prowl the world for oil supplies that China could secure by long-term contract. Go out they did. Trade between China and Africa doubled between 2002 and 2003 to $18.5 billion; most of that increase described Chinese oil imports. Within a few years, China would invest $44 billion worldwide in oil projects, half in Africa.
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Its methods struck American intelligence analysts as almost neocolonial—the Chinese government seemed to place a premium on physically owning oil supplies, in the belief that ownership would promote the country’s long-term national security.

Stephen Hadley asked the Africa division of the Central Intelligence Agency for an assessment of China’s oil deals in Africa. Were they a threat to U.S. national interests? The division’s view was that “we didn’t actually see them as that much of a threat,” recalled an official involved in the review, “just an economic challenge.” The C.I.A.’s analysts worried that China could displace U.S.-based oil companies from lucrative production deals in some African countries, but that was about the extent of their concern.
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David Gordon served as the Bush administration’s chief national intelligence officer for economics at the time and participated in White House–led policy reviews. In the summer of 2001, Gordon had spent a month in China, steeping himself in the issues emerging from the country’s rapid economic growth, “under the assumption that China was going to be the big economic intelligence story.”

He was struck by China’s “mercantilist approach to energy.” Gordon subscribed, essentially, to Feith’s view that the liquid, integrated nature of the global oil market meant there was no particular advantage for a country to “own” overseas supplies if it was a net importer; it was more efficient, economically, to purchase supplies as needed, unless a remarkably attractive long-term price contract was on offer. Gordon once gave a talk at a Chinese think tank in which he argued that American and Chinese energy interests “basically coincided.” The two countries shared a need to have diverse global supplies, political security in the Middle East, and security on the open seas. The Chinese “sort of took it all down,” but he could see that they did not really think that way.
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At the Pentagon, Feith found himself drawn into the Chinese conundrum. The Bush administration sought to mount pressure on Sudan’s president, Omar Bashir, whose militias were responsible for a humanitarian crisis in Darfur, a separatist-minded province. Sudan financed itself with oil production and sent more than half of its oil output to China. The Bush administration wanted to persuade China to pull back from its Sudan contracts. Feith concluded that talking about a mercantile versus a free-market model of global oil in his bilateral military channel might help.

He commissioned a free-market economist, Benjamin Zycher, to create a presentation entitled “Historical Lessons from the World Oil Market” for a visiting Chinese delegation. Essentially, it was a nineteen-slide PowerPoint presentation summarizing what Feith believed he had learned from his days in oil policy research and in the Reagan administration.

The slides showed that U.S. government forecasts about oil’s future availability had always been much too pessimistic. In 1980, the U.S. Energy Information Administration projected that there were only twenty-eight years’ worth of proved oil reserves in the world remaining. Two decades later, the E.I.A. projected that there were still thirty-seven more years remaining. China did not need to lock up supplies with rogue countries like Sudan, damaging China’s global reputation, Feith told the defense delegation, because there would almost always be oil available. Moreover, China had no reason to fear a supply disruption carried out for political reasons. The “embargo threat is empty,” one of Feith’s slides declared, because any attempt to cut off oil to a particular country would be overtaken by “ordinary reselling” elsewhere in the market, just as the United States had experienced after the Iranian Revolution. As an additional source of reassurance, the United States had urged China to build its own strategic petroleum reserve, so the Chinese Communist government would have at least short-term supply security, and therefore even less reason to feel anxious about the theoretical possibility of a future embargo.

On a slide headlined “Current Chinese Activities in the World Oil Market,” the presentation noted, “It is clear that China views dependence on foreign oil unfavorably.” Past mistakes by the United States, after the 1970s, however, “offer lessons for China today.” The principal lesson, according to Feith, was this: “Dependence on foreign oil does not create vulnerability.”
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His visitors from Beijing were not persuaded; China did not break its oil ties with Sudan. To the contrary, it was clear that China’s leadership
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believe that its dependence on foreign oil created strategic vulnerability, because oil might be a weapon in prospective competition with the United States during the twenty-first century.

The American-led invasion of Iraq, which Feith had also helped to author, hardened the fears of Beijing’s Risk players. “They were very concerned when we went into Iraq,” said Aaron Friedberg, a China scholar at Princeton University who served from 2003 to 2005 as a foreign policy adviser to Vice President Cheney. Right-wing Chinese, outside the government, said of the United States as the invasion unfolded, “They’re putting their hands on the windpipe. They’re occupying a major oil-producing country, solidifying their grip on our supply lines.” Friedberg did not think the predominant view inside the Chinese politburo was quite so alarmist, but he and other Bush administration analysts could see that some patterns of China’s overseas oil purchasing reflected its leaders’ anxiety about the vulnerability of oil transport routes in the future—particularly on the seas.
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The United States Navy ruled the world’s oceans and kept the seas open for all commerce, to support free trade. As a rapidly rising global power, however, did China really want to build an industrial economy dependent on oil supplies shipped from abroad that were vulnerable to interdiction by the U.S. Navy? In the event of a confrontation with the United States over Taiwan, for example, might not the United States use its naval superiority as a lever, threatening to cripple China’s economy by blockading oil supplies? China could construct its own blue-water navy to challenge the United States, but that would take many years, entail great expense, and risk a draining competition with Washington. Some American analysts during the first Bush term asked why China could not just content itself to “free ride” on “the fact that the U.S. Navy is the only game in town,” as Friedberg put it; that is, China could enjoy the economic benefits of secure ocean transport and allow American taxpayers to bear the price. But it was also obvious why this would not necessarily be appealing to the Chinese, looking to their future rise: “Think how we would feel if the situation were reversed.”
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One alternative for the Chinese leadership was to maximize its access to oil and gas supplies that could be transported by land. This insight seemed to explain a thrust of Chinese foreign policy after 2000. There was some thinking among Chinese scholars and strategists that land-based empires seemed to last longer than those that were dependent upon the seas. The potential for land-only routes attracted Chinese strategists to Russian oil supplies—“They would like to stick a straw in Russia,” was the way Friedberg put it—as well as to neighboring Southeast Asia, where China sponsored overland pipeline construction into Burma and Thailand.

At least some strategists in the Bush administration did think of China’s dependency on seaborne oil imports as a source of potential vulnerability in the twenty-first century—just as right-wing Chinese analysts feared. In war game scenario planning involving flashpoints such as Taiwan, U.S. military planners did not always think a coercive oil blockade against China would be wise or necessary, “but they were content to see the Chinese anxious about it, because it might act as a deterrent,” said one Bush administration official.
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Vice President Cheney seemed particularly interested in China’s vulnerability to U.S. naval power. His experience of the global oil market while running Halliburton had left him with a deep understanding of oil’s fungible nature. But his thinking about national security was influenced, too, by historical narratives about the rise and fall of great powers, and particularly the history of control of the seas, which had been critical to Great Britain and the United States, in succession, as a means to ensure the physical supply of commodities necessary for industrialization, including oil. Cheney read and admired
The Tragedy of Great Power Politics
, the 2001 book by the University of Chicago’s John Mearsheimer. Mearsheimer predicted that the competition over security among world powers—which had produced, during the twentieth century, the nine million dead in World War I, the fifty million dead in World War II, and the chronic violence of the cold war’s proxy wars—would extend into the twenty-first century “because the great powers that shape the international system fear each other and compete for power as a result.” The book’s final chapter, entitled “Great Power Politics in the Twenty-first Century,” reviewed the prospects for military and economic competition between the United States and China, including the potential of the U.S. Navy to squeeze China’s oil supplies by controlling the straits around the Persian Gulf. In all, Mearsheimer’s book was deeply pessimistic—a far cry from the free-market optimism of Douglas Feith. Cheney told colleagues that he liked the book until he reached the last chapter, where he thought Mearsheimer was a little too softheaded and hopeful that the Great Power struggles that inevitably lay ahead might be contained and managed so that they produced limited disruptions and damage.
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E
xxonMobil ran its own war game scenarios about oil supply disruptions. The company’s political risk analysts asked themselves what would happen in the most extreme case imaginable—for example, if Iran’s 2.3 million barrels per day of oil exports were removed from world markets because of a war, while turmoil in Venezuela simultaneously removed another million barrels per day. The shock of losing 3.3 million barrels a day of exports would certainly create price spikes, and soaring oil prices could produce economic turmoil in the United States and Europe. Physical delivery of oil, however, did not look like a catastrophic problem, the planners concluded, at least not in a crisis that lasted less than six months. The strategic petroleum reserve would help cushion any disruptions. After a certain number of months, if the reserve ran low, governments might be forced to ration. But the extremity and unlikelihood of the imagined events needed to produce such a physical supply problem suggested to ExxonMobil’s risk analysts that there was “an element of surge capacity in the global system,” as the corporation’s Rex Tillerson put it. The company’s war gaming implied that the global oil markets had become more resilient and flexible than some analysts assumed. At the same time, the threat of disruption to physical supply from rogue states “is not very well understood, in terms of what would really happen,” Tillerson believed.
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“The central reality is this: The global free market for energy provides the most effective means of achieving U.S. energy security,” Tillerson said. “In the global market, the nationality of the resource is of little relevance. . . . Energy made in America is not as important as energy simply made wherever it is most economic.” Punishing sanctions and uneconomic supply lockups such as those sometimes pursued by China did undermine American security, but only because the United States should be “enlarging this global energy pool, not dividing it.”
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