Adam Hochschild: A corporation goes to war

So much that matters in our world and on our planet happens in and remains in the shadows.  This website is dedicated to shining at least a small light into some of those shadows.  Commenting recently on the failure of the U.S. war on terror as well as the war against the Islamic State, Andrew Bacevich wrote: “To label [such a] problem ‘terrorism’ is to privilege convenience over understanding. It’s like calling big-time college football a ‘sport.’  Doing so entails leaving out all the grimy, money-soaked activity that occurs off the gridiron.”  In fact, much of the activity that truly shapes our world happens off that “gridiron” and out of sight.  And what you don’t see (or see reported), you often can’t imagine either.

Sometimes history helps.  Today’s dispatch is an example.  It is adapted from Adam Hochschild’s new book, Spain in Our Hearts: Americans in the Spanish Civil War, 1936-1939, a dramatic account of the thousands of Americans who volunteered to fight the war against fascism before it was faintly fashionable and the correspondents who covered them.  It’s a vivid tale of some very well known people like Ernest Hemingway, Martha Gellhorn, and George Orwell who saw the socialist-led Spanish Republic’s defeat firsthand, but also of quite ordinary Americans who had the urge to stop a terrible force before it could storm the world.  (Unfortunately, in that they failed.)  It also offers an unforgettable picture of a past America under stress and possibly of the last moment before the arrival of Bernie Sanders when “socialism” was not a curse word in this country.

In researching the book, Hochschild came across one of those crucial figures working in the shadows — an unforgettable oilman with a Trumpian personality whose acts in support of Spanish general Francisco Franco and then Adolf Hitler helped ensure that fascism would come to power in Spain and, in the end, that the globe would be bathed in blood.  Somehow, his role was missed by the hundreds of journalists covering the war.  As you read this piece, ask yourself who and what is no one noticing at this very second as our world spins so madly on. Tom Engelhardt

The oilman who loved dictators
Or how Texaco supported fascism
By Adam Hochschild

[This piece has been adapted from Adam Hochschild’s new book, Spain in Our Hearts: Americans in the Spanish Civil War, 1936-1939.]

“Merchants have no country,” wrote Thomas Jefferson in 1814. “The mere spot they stand on does not constitute so strong an attachment as that from which they draw their gains.” The former president was ruing the way New England traders and shipowners, fearing the loss of lucrative transatlantic commerce, failed to rally to their country in the War of 1812.

Today, with the places from which “merchants” draw their gains spread across the planet, corporations are even less likely to feel loyalty to any country in particular. Some of them have found it profitable to reincorporate in tax havens overseas. Giant multinationals, sometimes with annual earnings greater than the combined total gross national products of several dozen of the world’s poorer countries, are often more powerful than national governments, while their CEOs wield the kind of political clout many prime ministers and presidents only dream of.

No corporations have been more aggressive in forging their own foreign policies than the big oil companies. With operations spanning the world, they — and not the governments who weakly try to tax or regulate them — largely decide whom they do business with and how. In its quest for oil in the anarchic Niger Delta, according to journalist Steve Coll, ExxonMobil, for example, gave boats to the Nigerian navy, and recruited and supplied part of the country’s army, while local police sported the company’s red flying horse logo on their uniforms. Jane Mayer’s new book, Dark Money, on how the brothers and oil magnates Charles and David Koch spent hundreds of millions of dollars to buy the Republican Party and America’s democratic politics, offers a vivid account of the way their father Fred launched the energy business they would inherit.  It was a classic case of not letting “attachments” stand in the way of gain.  Fred happily set up oil installations for Soviet dictator Joseph Stalin before the United States recognized the Soviet Union in 1933, and then helped Adolf Hitler build one of Nazi Germany’s largest oil refineries that would later supply fuel to its air force, the Luftwaffe.

[Read more…]

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How Saudi Arabia turned its greatest weapon on itself

Andrew Scott Cooper writes: For the past half-century, the world economy has been held hostage by just one country: the Kingdom of Saudi Arabia. Vast petroleum reserves and untapped production allowed the kingdom to play an outsize role as swing producer, filling or draining the global system at will.

The 1973-74 oil embargo was the first demonstration that the House of Saud was willing to weaponize the oil markets. In October 1973, a coalition of Arab states led by Saudi Arabia abruptly halted oil shipments in retaliation for America’s support of Israel during the Yom Kippur War. The price of a barrel of oil quickly quadrupled; the resulting shock to the oil-dependent economies of the West led to a sharp rise in the cost of living, mass unemployment and growing social discontent.

“If I was the president,” Secretary of State Henry Kissinger fumed to his deputy Brent Scowcroft, “I would tell the Arabs to shove their oil.” But the president, Richard M. Nixon, was in no position to dictate to the Saudis.

In the West, we have largely forgotten the lessons of 1974, partly because our economies have changed and are less vulnerable, but mainly because we are not the Saudis’ principal target. Predictions that global oil production would eventually peak, ensuring prices stayed permanently high, never materialized. Today’s oil crises are determined less by the floating price of crude than by crude regional politics. The oil wars of the 21st century are underway. [Continue reading…]

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If the Kurds go broke, it’s lights out for Obama’s war on ISIS

John Hannah writes: Here’s a worrying bit of news: America’s best ally in the war against the Islamic State, Iraq’s Kurdistan Regional Government (KRG), is nearly broke. That’s a major problem, especially as the U.S.-led coalition gears up for its most difficult battle yet: the effort to liberate Mosul, the heart of the Islamic State’s power in Iraq. With the Kurds slated to play an essential role in that potentially decisive military campaign, now is the time for their capabilities to be reaching their zenith. Instead, they’re under growing threat of catastrophic collapse.

A near-perfect storm of crises has been draining KRG finances. First, there’s the burden of the war. For over 18 months, Kurdish forces have been pushing IS back across a 600-mile front. There’s also the KRG’s chronic dispute with the central government in Baghdad that has denied the region its share of Iraq’s national budget for the better part of two years. That’s billions upon billions of dollars in foregone revenue.

Further exacerbating the situation has been a massive influx of refugees and displaced persons, an estimated 1.8 million men, women, and children, fleeing the Islamic State’s hordes for the relative safety of Kurdistan. That tidal wave of humanity has increased the region’s population by an astounding 30 percent, straining its infrastructure and social services to the breaking point (just think about that: in the United States, that’s the equivalent of trying to take in over 90 million people overnight). Finally, like oil producers everywhere, what earnings the KRG receives from its own energy exports have been decimated by the collapse in world prices.

This can’t end well. The warning signs are everywhere. Up to 70 percent of Kurdistan’s workforce is on the KRG’s payroll. Most have not been paid for months. When back wages finally come through, it’s often at a fraction of what’s owed. Going forward, officials have dangled the threat of draconian salary cuts. Labor strikes are breaking out, involving teachers, medical workers, and even elements of the police. Political tensions are escalating. The broader economy is grinding to a halt. Construction of schools, hospitals, roads, and other critical infrastructure, is stalled. Tourism has dried up. Property values have plummeted. Consumer spending is collapsing.

Even more worrisome is the impact on Kurdistan’s oil sector, overwhelmingly the KRG’s primary source of revenue. The small international firms responsible for most of the region’s exports have received only sporadic payments. Absent these funds, the companies largely lack the necessary cash flow to invest in further developing existing fields. And without sufficient capital expenditures, production at these fields could actually begin to decline. New exploration, meanwhile, is at a virtual standstill, with the region’s rig count down by more than 90 percent, reaching levels not seen since the first production contracts were signed more than a decade ago. [Continue reading…]

Foreign Policy reports: Iraqi Kurds’ dreams of energy-financed political independence are taking a beating — and not just because of low oil prices.

Since the middle of February, Iraqi Kurdistan’s tenuous export link to the outside world has been totally shut down. As recently as January, the Kurds were exporting 600,000 barrels a day in exchange for desperately needed revenue. But the mysterious closure of the pipeline that connects Kurdish refineries to the Turkish coast has brought that number to essentially zero.

Kurdish officials say they don’t know for sure why the pipeline has been shut down; theories range from a terrorist bombing to simple sabotage to a precautionary shutdown by Turkish authorities carrying out big military operations in the area.

What’s crystal clear is that a region dependent on oil export revenues — one that was already struggling mightily to make ends meet during its costly war against the Islamic State — now has its back to the wall. The Kurdish region earned about $630 million a month from direct oil sales in 2015, which still fell short of the $850 million or so it needed every month to pay its soldiers and civil servants, as well as foreign oil companies for the crude they’ve pumped. The two-week pipeline closure has now cost Erbil an additional $200 million — and the Kurdish losses will continue to grow until it comes back online. [Continue reading…]

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Saudi Arabia is reeling from falling oil prices — and it could get much worse

The Washington Post reports: Stung by falling oil prices, Saudi Arabia has cut spending and subsidies as part of harsh austerity measures that threaten the lavish welfare programs underpinning its stability.

The oil-exporting giant’s economy has gone from producing windfalls to deficits, and Saudi rulers increasingly struggle to provide the cushy government jobs, expensive state handouts and tax-free living that have long bought them domestic obedience.

The pivot to austerity — which also has been imposed by neighboring Gulf Arab oil monarchies — risks triggering unrest in a Saudi society that is conservative and particularly resistant to change, analysts and diplomats warn.

The cutbacks are seen as necessary by King Salman’s son, defense minister and head of economic planning, Mohammed bin Salman. The 30-year-old prince has raised eyebrows for overseeing leadership shake-ups at home and two wars abroad. Advisers say he also intends to wean the country off its overwhelming dependence on oil sales and reform a bloated and opaque public sector. [Continue reading…]

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Assad preparing to handover Syria’s energy sector to Russia

The New Arab reports: The regime of Bashar al-Assad is reportedly seeking to rehabilitate and operate oil fields and power plants in areas controlled currently by the rebels and the Islamic State group respectively — areas that the regime forces began recapturing in northern and Western Syria backed by Russian airstrikes.

Measures are already in place by the Syrian regime to hand over the Syrian energy sector to Russian companies, led by a law on partnership between the private sector and foreign companies issued in early 2016.

Last month as well, Russian press reports said Bashar al-Assad, during a recent visit to Moscow, signed an agreement consisting of ten clauses purportedly giving Russia the right to freely operate in Syria, which cannot be revoked except by written agreement.

In the same vein, a recent report published by Russia’s RIA agency said Syria’s ambassador to Moscow, Riad Haddad, had met with the chairman of Russian gas company Gazprom Alexei Miller, and discussed giving Russian energy firms oil and gas concessions in Syria and other forms of cooperation. [Continue reading…]

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Battered by war, Iraq now faces calamity from dropping oil prices

The New York Times reports: Iraqis seeking to withdraw money from banks are told there is not enough cash. Hospitals in Baghdad are falling back to the deprivation of the 1990s sanctions era, resterilizing, over and over, needles and other medical products meant for one-time use.

In the autonomous Kurdish region in the north, the economic crisis is even worse: government workers — and the pesh merga fighters who are battling the Islamic State — have not been paid in months. Already, there have been strikes and protests that have turned violent.

These scenes present a portrait of a country in the midst of an expensive war against the Islamic State that is now facing economic calamity brought on by the collapse in the price of oil, which accounts for more than 90 percent of the Iraqi government’s revenue.

Analysts and officials, though, say much tougher economic times are ahead, even as they insist the war will be largely unaffected because of help from foreign powers determined to defeat the Islamic State. The United States, for instance, recently extended new loans to Iraq to buy weapons, and other countries are stepping up with donations of arms and ammunition. [Continue reading…]

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Iran sanctions: Middle East stock crash wipes £27bn off markets as Tehran enters oil war

oil-industry

The Telegraph reports: Stock markets across the Middle East saw more than £27bn wiped off their value as the lifting of economic sanctions against Iran threatened to unleash a fresh wave of oil onto global markets that are already drowning in excess supply.

All seven stock markets in the Gulf states tumbled as panic gripped traders. London shares are now braced for a second wave of crisis to hit when they open on Monday morning after contagion from China sent the FTSE 100 to its worst start in history last week.

Dubai’s DFM General Index closed down 4.65pc to 2,684.9, while Saudi Arabia’s Tadawul All Share Index, the largest Arab market, collapsed by 7pc intraday, before recovering to end down 5.44pc at 5,520.41, its lowest level in almost five years. [Continue reading…]

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Armed with intel, U.S. strikes curtail ISIS oil sector

Iraq Oil Report reports: An intensifying campaign of U.S. air strikes on the self-proclaimed Islamic State (IS) has nearly shut down its oil operations in Iraq and has hampered its more lucrative business in Syria, eroding the group’s largest source of financing and threatening its ability to govern territory.

Iraq Oil Report has compiled a comprehensive history of the IS oil sector based on the organization’s own records, details of which have just been declassified by the U.S. government and are being published here for the first time. Those accounts have been broadly corroborated by the first-hand testimony of residents and oil workers in IS-occupied territory.

They show that, until recently, nearly 2,000 IS oil workers, many recruited from abroad, were able to outfox early U.S. attempts to derail the group’s oil operations. From the end of 2014 through May 2015, even after being hit by a series of air strikes, the highly bureaucratic and organized operation generated as much as $40 million per month from the sale of crude oil. (The IS organization generated millions more by taxing transportation and refining, though the U.S. officials declined to give more detailed figures.)

“From the documents, we see this: oil has traditionally been approaching 50 percent of their profits. And the other 50 percent was the total of all the other things,” said Amos Hochstein, the State Department’s Special Envoy for International Energy Affairs, who is at the center of the U.S. government’s efforts to identify weaknesses in the IS group’s oil sector. [Continue reading…]

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Chaos in Libya: It’s the oil, stupid

Issandr El Amrani writes: There seems no end to the bad news coming out of Libya.

UN-led negotiations to unite the divided country — it has two parliaments, two governments, two militia coalitions that have been competing for control of a rapidly failing state since summer 2014 — are stalling. Fighting continues apace in Benghazi, the city that was the first to rebel against the rule of Muammar al-Gaddafi in 2011 and is now a byword for extremism. The Islamic State is growing by the day in the Gulf of Sirte in the center of the country, imposing its cruel dictates and making inroads elsewhere in the country. Criminal gangs – often the same militias that have had the run of the country since Gaddafi’s fall – are doing a brisk trade in people smuggling, sending off desperate migrants and refugees on rickety boats across the Mediterranean.

Oh, and by the way, Libya is also going broke.

That last tidbit should be surprising. Libya has Africa’s largest oil reserves and has long been an important supplier of light sweet crude, the kind made into gasoline and kerosene. It also had tons of money in both hoards of cash reserves and investments across the globe.

But the oil, which used to bring in 96 percent of the country’s income, is not flowing anymore. From a high of at least 1.6 million barrels per day at the beginning of 2011, Libya is lucky to export a fourth of that today. Militias have taken control of oil fields, pipelines and export facilities across the country. At first, they sought to extort the central government to keep the oil flowing. But since the country was divided into two rival governments, they are simply fighting to keep oil revenue from each other: you take over my oilfield, I block your pipeline. Since earlier this year, IS has jumped into the fray, simply destroying facilities to keep any government from getting its revenues — although, in the longer term, it may very well want to control the oil itself. [Continue reading…]

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The prize: Fighting for Libya’s oil wealth

International Crisis Group reports: Libya’s economic conditions could turn sharply for the worse, as rival authorities vie to control rapidly shrinking national wealth. The struggle affects oil fields, pipelines and export terminals, as well as the boardrooms of national financial institutions. Combined with runaway spending due to corruption and dwindling revenue because of falling exports and energy prices, the financial situation – and with it citizen welfare – faces collapse in the context of a deep political crisis, militia battles and the spread of radical groups, including the Islamic State (IS). If living conditions plunge and militia members’ government salaries are not paid, the two governments competing for legitimacy will both lose support, and mutiny, mob rule and chaos will take over. Rather than wait for creation of a unity government, political and military actors, backed by internationals supporting a political solution, must urgently tackle economic governance in the UN-led talks.

Since the Qadhafi regime fell in 2011, Libya has been beset by attacks on, labour strikes at and armed takeovers of oil and gas facilities, mostly by militias seeking rents from the fledging central government. Initially brief and usually resolved by government concessions, the incidents gradually took on a life of their own, in an alarming sign of the fragmentation of political, economic and military power. They show the power accrued by militias during and since the 2011 uprising and the failure of efforts to integrate them into the national security sector. The dysfunctional security system for oil and gas infrastructure presents a tempting target for IS militants, as attacks in 2015 have shown.

One aspect of the hydrocarbon dispute is a challenge to the centralised model of political and economic governance developed around oil and gas resources that was crucial to the old regime’s power. But corruption that greased patronage networks was at that model’s centre, and corrupt energy sector practices have increased. A federalist movement some consider secessionist controls a number of the most important crude-oil export terminals. It exploits the situation by pursuing its own sale channels, adding to the centrifugal forces tearing Libya apart. [Continue reading…]

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Taking stock of ISIS oil

Matthew M. Reed writes: The early estimate for ISIS oil revenues was $2-3 million a day. Media coverage ran with that number and so did U.S. officials for a time. However, the price/volume assumptions built into it were never clear. “It’s not an estimate that the U.S. intelligence community or the Pentagon is endorsing or has come up with,” a Pentagon spokesman said in September 2014.

The first official U.S. government estimate for ISIS oil revenue came in October last year. Then-Treasury Undersecretary David Cohen estimated that ISIS probably earned $1 million a day in June—before the anti-ISIS coalition intervened. That estimate held up until February 2015 when Cohen said ISIS revenues had fallen to just $2 million a week (or ~$300,000 a day). At that point, U.S. officials became convinced oil was not the top money maker for ISIS; instead the group relied more on taxation, tolls, ransom and theft. Official estimates came with big caveats but the U.S. government apparently believed it had cut down ISIS oil revenues by two-thirds.

That estimate lasted until July, when Treasury’s Assistant Secretary for Terrorist Financing Daniel Glaser concluded that oil ranked third among ISIS revenue streams, but it was still significant. “Earlier this year ISIL made about $40 million in one month, off of the sale of oil. So if you want to extrapolate that out, you get to about $500 million in the course of a year,” he said. $500 million a year works out to almost $1.4 million a day, which is almost a five-fold increase from the lowball claim made in February. (FT estimates revenue at $1.5 million a day as well.) [Continue reading…]

See also Part Two of this report.

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Saudis risk draining financial assets in 5 years, IMF says

Bloomberg reports: Saudi Arabia may run out of financial assets needed to support spending within five years if the government maintains current policies, the International Monetary Fund said, underscoring the need of measures to shore up public finances amid the drop in oil prices.

The same is true of Bahrain and Oman in the six-member Gulf Cooperation Council, the IMF said in a report on Wednesday. Kuwait, Qatar and the United Arab Emirates have relatively more financial assets that could support them for more than 20 years, the Washington-based lender said.

Saudi authorities are already planning spending cuts as the world’s biggest oil exporter seeks to cut its budget deficit. Officials have repeatedly said that the kingdom’s economy, the Arab world’s biggest, is strong enough to weather the plunge in crude prices as it did in similar crises, when its finances were under more strain. [Continue reading…]

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Saudi Arabia targets Russia in battle for European oil market

Reuters reports: From global majors such as Shell and Total to more modest Polish energy firms, oil refiners in Europe are cutting their longstanding use of Russian crude in favour of Saudi grades as the world’s top exporters fight for market share.

Russia has for years been muscling in on Asian markets where Saudi Arabia was once the unchallenged dominant supplier. But now Riyadh is retaliating in Moscow’s backyard of Europe with aggressive price discounting.

This has nothing to do with Western sanctions imposed on Russia over Ukraine, which apply to energy industry equipment but not to oil or gas itself. Instead it is a commercial battle for customers as both exporters ramp up their output despite weak world oil prices. [Continue reading…]

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Oil nations feel the strain of  OPEC’s continuing price war

The Telegraph reports: Oil is arguably Saudi Arabia’s best weapon against both Russia and Iran. Although the kingdom’s finances are under severe strain from the collapse in export revenues it can still fall back on its $655bn (£423bn) of foreign assets while Russia and Iran will feel the impact of another year of weak oil prices more acutely.

After a year of carnage in the oil industry, it is now clear that it will take more time for Al-Naimi’s strategy of allowing weaker prices to do the job of totally shutting down higher cost producers.

A 60pc slump in oil prices since last November has caused havoc but the main target of Opec ‘s campaign, shale oil in the US, has so far proved to be remarkably resilient.

Hardest hit have been the high cost producers in areas such as the North Sea where prices below $50 per barrel have placed the entire offshore industry at risk.

Energy consultant Wood Mackenzie now fears that 140 fields in the waters off north-east Scotland, where oil has been pumped since the 1970s, could be closed down over the next five years if oil prices remain so low. [Continue reading…]

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Indigenous Canadians take leading role in battle against tar sands pipeline

The Guardian reports: Chief Na’Moks stood in the dark of a small smokehouse nestled in the Coast range of British Columbia. Hanging above him were nearly a thousand fish which glinted over the fire below.

“For us, it’s one of the most highly prized commodities that we have,” he said, pulling one of the glistening candlefish off the rack. “People don’t get why we want to keep what we have. We don’t want anything from anyone. We just want to keep what we have.”

Not so long ago, the chief’s ancestors traded fish oil along the grease trails up and down the coast of British Columbia. Today, however, Chief Na’Moks and many other First Nations leaders are at the forefront of a struggle against a very different kind of oil business: Canada’s largest proposed tar sands pipeline, the Northern Gateway.

It is the country’s environmental battle of the decade, uniting a wide variety of citizens’ groups against the billions of dollars of investment by oil companies and millions in secret funding from the government. First proposed in 2004, the Enbridge Northern Gateway pipeline was planned for a 731-mile (1,177km) stretch from the center of Alberta to the coast of British Columbia. [Continue reading…]

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