Middle East Research and Information Project: Critical Coverage of the Middle East Since 1971

Americans who voted for “compassionate conservatism” in the November 2000 presidential election have been disappointed. George W. Bush has proven to be much more radical than his moderate campaign rhetoric implied. In the area of environmental policy, Bush’s moves to lift regulations on pollutants, promote the use of nuclear power and “clean coal” and encourage oil exploration off the coast of Florida and in the Arctic National Wildlife Refuge have triggered opposition even on the right. Where Ronald Reagan sought to overturn the social policies of Franklin Roosevelt, George W. seems to seek an even wider reversal of the health and labor regulations instituted by Theodore Roosevelt.

The second Bush administration’s foreign policy initiatives have been at least as radical as its environmental program, although they have produced less of a domestic reaction. During his first month in office, George W. and his staff launched four bold ventures that sought to redefine relations with US allies and rivals alike. First they announced their intention to withdraw US support from the Kyoto protocol on global warming. This meant more than just that America would pollute at its leisure: it signaled an intention to drop out of a vast array of multilateral negotiations on issues ranging from money laundering to combating AIDS — even if this withdrawal angered our oldest allies.

Vice President Dick Cheney formed a special task force to devise in camera a new energy policy for the US. The task force’s report raised eyebrows domestically because it neglected conservation and emphasized expanding energy consumption per capita — as always, at the price of fewer protections for the environment. But internationally it provoked a subtler wave of alarm. Saudi Arabia, Kuwait and Washington’s other rentier allies in the Gulf were disturbed by the Cheney plan’s assumption that Middle East oil suppliers were unreliable. At the same time, Canadians, Mexicans and Venezuelans were nonplussed when George W. announced his hope of expanding production in these “domestic” American sources of oil and gas.

Defense Secretary Donald Rumsfeld launched a sweeping quadrennial review of Pentagon policies. Rumsfeld dropped the objective, first elucidated by Cheney in 1990 when he was Defense Secretary, of maintaining forces adequate for fighting two conventional wars simultaneously (presumably one in Korea and another in the Gulf). Instead, he endorsed the idea of reorganizing the military into a series of “Global Joint Response Forces” — multiservice strike groups able to intervene in various trouble spots within 24 hours. Critical to the support of these expanded rapid deployment forces would be an array of long-range missiles, coastal warfare ships and stealthy aircraft that could deliver troops and provide firepower even in areas distant from US bases. [1] At home this proposal has provoked opposition from the armed forces, who resent Rumsfeld’s effort to force them into greater cooperation, sharing not only common weapons but also a single procurement and accounting system. Overseas it also caused worries. The Joint Response Forces are not designed for peacekeeping or “humanitarian” interventions; indeed, Rumsfeld hopes to quickly wrap up US operations in Bosnia, the Sinai and elsewhere. Rather, the underlying rationale for the Rumsfeld plan is to prepare for conflict in the Pacific, where Rumsfeld and his advisers think that China constitutes a steadily rising threat to US influence.

Finally, a slew of Bush officials are rushing to erect a national missile defense (NMD) system, the latest variant of Reagan’s “Star Wars” dream of an interceptor umbrella that would protect the US from nuclear attack. The Bush team does not yet agree about just what such a system would look like — some favor relying on ground-based anti-ballistic missiles, others prefer exotic space-based weapons and still others want to surround potential threats with flotillas of Aegis cruisers equipped to shoot down threatening rockets immediately after launch. Still, without waiting for a resolution of these debates, they hastened to tell their NATO allies, and more importantly the Russians, that the US would soon be abrogating the 1972 treaty that specifically forbade development of NMD systems. The NMD initiative signaled that the US was abandoning the doctrine of “mutually assured destruction” that had kept the Cold War from turning hot. Washington’s European allies expressed their dismay and objections, while Russian President Putin announced he might have to respond by increasing the number of warheads deployed on his rocket forces. In the words of its supporters, NMD was “the end of arms control as we know it.”

America Rules, Thank God

The Bush team’s initiatives rest on a common vision of the US position in the world and embody one style of diplomacy. They assume that the structure of international politics is now “unipolar,” with the US occupying the position of sole “hyperpower.” There may be other powers in the world (Europe, Russia, China, Japan) but none of them can individually resist Washington, much less actually threaten it. Thus, the Bush White House thinks, it makes sense for the US to adopt a “unilateral” diplomatic style. [2] Washington should mobilize the world community when that is amenable to the national interest, and ignore or override world opinion when it is not. Where the US leads, US allies and rivals must follow. George W. and his team view this situation as benign: they believe that America not only has unique powers but that it also possesses the wisdom and charity necessary to exercise them in the global interest. [3] In the words of columnist Charles Krauthammer, a chief flack for unilateralism: “America rules, thank God.”

In part, the Bush administration’s adoption of a unilateralist foreign policy program arises from the common experiences of George W.’s staff in corporate America. Rumsfeld has been CEO everywhere from Sears to General Instruments, Treasury Secretary Paul O’Neill was previously CEO at Alcoa, Commerce Secretary Donald Evans was CEO of the independent oil company Tom Brown, Inc. and Cheney came from the oil services company Halliburton. Rumsfeld’s chief deputies, Air Force Secretary James Roche, Navy Secretary Gordon England and Army Secretary Thomas White, were respectively the executives at Northrup Grumman, General Dynamics and Enron — and were recruited with the explicit objective of bringing modern business practices to the Pentagon. [4] These men share a common world view: “CEOs are used to flying their own planes, seeing only their own subordinates and being accountable to no one. They are profoundly certain of their own value system. They have contempt for the public and the press. They have none of the accountability required of a president of the United States.” [5] Government officials can rarely, of course, put this world view into practice, but such are the illusions of many Bush appointees.

But the urge to unilateralism had even deeper emotional roots. It was consciously portrayed as an antidote to the “multilateralism” of the Clinton administration. Clinton loved negotiations, conferences and buffets; he was happy to conduct US foreign policy as a joint venture with kindred spirits, particularly European leaders such as Tony Blair. In the view of Republicans and the Bush team in particular, this led to a host of errors and fiascoes. It encouraged Washington to squander funds and troops in “misguided” humanitarian ventures, such as the military interventions in Bosnia, Haiti and Kosovo, that involved no vital US interests. It pressured the US to take a more pliant, compromising stance toward old enemies, such as the regimes in Libya and North Korea, where our allies had stronger economic ties or fewer military anxieties than we did. But most importantly, it led to confusion and indecision in Washington itself. In pursuit of multilateralism, Republicans felt, Clinton and his supporters had lost the ability to distinguish between US and global interests. They had severed their links to the American tradition of rugged individualism, and turned into “Euroweenies.” They had lost the will to lead.

Members of the Bush team also tend to be — in terms of international relations theory — “realists.” That is, they believe that people are ruthlessly self-interested, that conflict between states is normal and that the world is a dangerous place. One corollary of such convictions is the dogma that slow-moving multinational negotiations cannot provide anything near the degree of safety that comes with the threat of decisive military action. George W. and his staff are thus convinced that the US must concentrate its finite and expensive security assets on a handful of key issues. Clinton, by engaging in multilateral talks about every conceivable issue, angered them because they thought he spread Washington’s power so broadly and thinly that it actually endangered the country. They swore that, once in power, the Bush team would radically prioritize foreign policy issues and concentrate only on those that constituted vital national interests. [6]

The Decoupling “Strategery”

This effort to prioritize foreign policy concerns has been particularly dramatic in George W.’s stance toward the Middle East. During the 1990s, one of the foundations of US policy in the region was the idea that events in the eastern Mediterranean and the Gulf interacted, to wit, the US could not guarantee the security of Saudi Arabia (thereby ensuring the movement of low-cost oil out of the Gulf ) unless it played an active role in the Arab-Israeli peace process. The Bush team reassessed this claim and reached a different conclusion: Arab-Israeli peace might be desirable, but it was not vital to national security. Iraq, on the other hand, posed an immediate threat to US interests in the Gulf. Thus the two issues — one important and the other not — should be decoupled.

Bush advisers announced that they would assign lower priority to the Palestine conflict even before the failure of the July 2000 Camp David talks. They argued for a cooling-off period, claiming this would pressure the principals to become more serious. They objected to direct presidential involvement, regional missions for the Secretary of State and the existence of a special Middle East negotiator. The second intifada came as a nasty surprise: the Arab-Israeli conflict might have been on the back burner, but its flames were now fierce enough they threatened to boil nearby pots.

Still, the thrust of George W.’s policy has been to contain the conflict rather than to seek its resolution. Israeli premier Ariel Sharon has been warned against escalating the war. CIA director George Tenet, a fairly junior official, has been sent to help negotiate a ceasefire — an objective that may take a long time to realize. A new Middle East special envoy has been appointed, but he is a mid-ranking diplomat with no writ to do more than keep the lines of communication open. In contrast, the Bush team staked out an activist position toward the Gulf and Iraq well before the November 2000 election. All members of the team affirm the objective of “regime change” — toppling Saddam Hussein and establishing a friendlier government in Baghdad.

History is full of accidents, and Bush’s unilateralism is likely to succeed in some areas and fail in others out of serendipity. But history is also built on a broad foundation of evolving structures, and these are likely to be decidedly unkind to Bush’s plans. Unilateralism is, in itself, neither wise nor foolish. It might have worked well in the 1990s, when the US was the sole surviving superpower and the most rapidly growing economy, and all potential rivals were confused. Unilateralism is much less likely to work today, when there is rapid growth of restraints on the autonomy of US foreign policy. Today, whatever the content of one’s policy preferences, multilateralism appears to be almost a structural necessity. [7] The Bush administration will be pressured to make a strategic choice: to revert to multilateralism or to fail outright. The Middle East — and the oil industry that gives the region its strategic importance — gives us an excellent illustration.

Restraints in Washington

As a diplomatic style, unilateralism is more effective for some problems than for others. The US can refuse to meet the Kyoto emissions targets or deploy an NMD system without needing cooperation from anyone else. But many — perhaps most — foreign policy issues require international collaboration. In these cases, unilateralism becomes much more difficult to implement. This is precisely why multilateralism became increasingly popular during the 1990s: it enhances cooperation, and spreads the costs of action. The underlying logic of multilateral agreements is that any country that has a voice in shaping a particular policy is also bound to contribute to the execution of that policy, and share its burdens.

A central dilemma facing the current administration is how to promote international cooperation — how to extract needed funds, troops and legislation from other states — without conceding them too much of a voice in making policy. How can Washington abandon multilateralism without having to shoulder the entire cost of foreign policy by itself? To date, the Bush team has failed to agree upon a strategy for doing this, becoming increasingly polarized into two camps that take very different approaches to the problem. One group, prominently represented by Colin Powell and his staff at the State Department, prefers a form of “soft” unilateralism. They believe that Washington should maintain at least a façade of participation in multilateral talks, international institutions and various regional alliances. It should listen patiently and offer encouragement — but only act when clear US interests are involved. The leadership model for American foreign policy should be the “reluctant sheriff ” of the classic Western: someone who acts only when outrageously provoked, or only after a supporting posse has already assembled itself. [8] An opposing group, which is strongest at the Defense Department but also receives support from Cheney, favors something more like “hard” unilateralism. They contend that the biggest obstacles to international collaboration are indecision, vacillation and petty squabbling. When the US needs international support, it should act assertively — even aggressively — and then the world community will rally around it. Cheney believes the international coalition that opposed Iraq’s 1990 invasion of Kuwait was put together in this way: rather than consulting with US allies, Cheney flew off to Riyadh and simply told the Saudis what the US was going to do, and what the Saudis would do to support it. [9] Like “Chainsaw” Al Dunlap of Sunbeam and the other heroic CEOs who led American business through the painful downsizings of the 1990s, the hard unilateralists believe that action, not consultation, is the key to cooperation.

This split within the Bush team is not some trifling intellectual disagreement. Today the Republicans are far more deeply divided internally over foreign policy than Democrats are. While the latter are overwhelmingly liberal internationalists, the Republican Party combines everything from simple isolationists to crusaders for global democracy. The business wing of the party disagrees with the security hawks about the desirability of trade with China. Paleo-conservatives and neo-conservatives exchange charges of anti-Semitism in their debates about supporting Israel. [10] The Moral Majority and the libertarian right disagree about the wisdom of exporting the US war on drugs to Mexico and Colombia. In this heated atmosphere, the different flavors of unilateralism view each other with distaste. Off the record, Bush appointees at State describe their counterparts at Defense as naïve ideologues who threaten to completely alienate our allies. The senior staff at Defense return the compliment, charging that Powell is a closet multilateralist who is not really a Republican.

“Smart Sanctions”

This debate seems most likely to come to a head on the domain of Iraq policy. Each group of unilateralists believes that the other is dangerous and doomed to fail. Both are likely to be right. Powell has been the leading proponent of “smart sanctions.” [11] Smart sanctions attempt to address the failure of the existing sanctions: they have little effect on Saddam Hussein’s regime (beyond its military capacity), but impose a heavier cost on the Iraqi people than many US allies think humane. The new program sought to relax restrictions on commercial imports, while imposing much tighter controls on weapons and cutting down on the smuggling revenues that directly bankroll the regime. Powell views smart sanctions as a viable means of undermining Saddam that has the added benefit of being widely acceptable to Washington’s allies. The smart sanctions approach has received very active support from Saudi Arabia, which has offered to compensate Syria for terminating its sanctions-busting purchases of Iraqi oil. However, getting all of the key states to end their smuggling ties to Baghdad has been a much harder sell. Turkey, for example, relies heavily upon revenue from this trade, and is unlikely to give it up without first securing promises of much more active US support, particularly in its critical negotiations for a rescue package from the International Monetary Fund.

But the most effective opponent of smart sanctions has been Russia, whose July 2001 threat of a veto in the UN Security Council at least delayed their implementation and perhaps torpedoed them altogether. Moscow opposed the new program partly because Russian economic interests were threatened, [12] but primarily as a way of protesting US unilateralism on other issues (such as George W.’s support for NATO expansion and NMD). Putin walked away from his cordial meetings with Bush intent upon showing Washington — cordially — that Russia might no longer be a superpower but it is not just another Argentina. The US and UK managed to roll over the existing sanctions regime until the winter of 2001, pending further attempts to secure Russian and regional approval for smart sanctions, but the new proposal may be dead.

To Bully or Not To Bully

The impasse over smart sanctions highlights the inherent weakness of soft unilateralism. If participation in international negotiations is just a façade, it may not be enough to persuade other states to cooperate. But if such participation is real and trades concessions for support, it is just multilateralism by another name.

Hard unilateralists dislike the smart sanctions proposal because they suspect it is a form of multilateralism. At most such economic embargoes might weaken Saddam Hussein; they are unlikely to bring about regime change. Many of the hawks in the Bush II team quietly hope that the smart sanctions proposal will fail completely, so that they will be justified in starting a more aggressive campaign to topple Saddam. Exactly how this might be done is far from clear. The ruthless Iraqi security services make the regime virtually coup proof. The pet opposition group of hard-right Republicans, the Iraqi National Congress (INC), appears to have almost no constituency inside government-controlled Iraq. The only groups that pose a revolutionary threat to Ba‘thist rule — the Kurds in the north and the Shi‘a in the south — have already been betrayed by the US at least once, and are not eager to collaborate further.
Still, the hawks believe that more assertive US leadership might galvanize opposition to Saddam. They would certainly like to see a more extensive campaign of air attacks, not just on Iraqi military installations or weapons facilities, but on critical infrastructure such as radar and communications systems. The bombardment might gradually be escalated to include economic targets, such as oil processing facilities and pipelines. Eventually, INC commandos might be able to make midnight raids on Iraqi territory. If Iraq responded to these provocations, perhaps the hawks would find a pretext for their dream scenario: use of US air power to carve out a “liberated zone” where the INC could operate within Iraq.

Of course, Iraq’s neighbors — including Saudi Arabia and Kuwait, which are generally hostile to the Iraqi regime — would find an escalated military option much more objectionable than smart sanctions. In Arab states, US attacks on Iraq routinely trigger street protests and erode the legitimacy of the regimes that stand by Washington. There is also some danger that Iraq would respond to military escalation with a campaign to intimidate its neighbors through troop movements, border raids and sabotage. Finally, if a US campaign were, against all odds, actually to succeed in undercutting the foundations of Saddam Hussein’s regime, it would trigger an Iraqi civil war and threaten the breakup of the entire country. None of Iraq’s neighbors want to wake up to find a Kurdish mini-state or a new Shi‘a Islamic republic on their frontiers.

The hard unilateralists are aware of these trepidations, but believe they can be overridden. They think that, as during the buildup to Operation Desert Storm in 1991, strong US leadership will inspire a following and that Washington’s allies, once they get over their risk aversion, will be pleased by the results of the military campaign. Yet there are reasons to believe that the Desert Storm analogy is overstated. In 1991 Iraq had just invaded Kuwait, setting off alarm bells from Riyadh to London. Today the Iraqi threat is more marginal. There are alternative, less confrontational options, and many members of the Gulf war coalition question the wisdom of continued American hegemony in the region, if only because Washington no longer bothers to use its power to promote the Arab-Israeli peace process. In the current environment, pressing Iraq’s neighbors to support a hard unilateralist campaign may appear as simple bullying.

So a major obstacle to the success of unilateralism lies in the inability of the Bush team to agree upon how such a policy should be executed. If this is not a fatal problem, it constitutes a weakness that the opponents of unilateralism will find easy to exploit. Within the US and abroad, unilateralism has many opponents.

Restraints from Houston

Many observers, from US environmentalists to the Japanese foreign minister, perceive that George W. and his friends wholeheartedly represent the interests of the oil industry. Yet in reality the oil industry, supported by wider elements of the international business community, is not thrilled with Bush’s foreign policy, and is pressing for its modification and moderation.
George W. Bush and his team do have important connections to parts of the oil industry. In addition to the aforementioned links of Cheney, Donald Evans and Thomas White, George W., like his father, started his career as a failed oil independent. Condoleezza Rice, his national security advisor, sits on the board of Chevron, which named a tanker after her in 1993. Enron was one of the top ten contributors to the George W. election campaign. But, with the exception of the Rice connection, these are not really links to the international oil companies (IOCs) that dominate the global energy industry, but to smaller American oil independents (whose overseas assets have steadily diminished), oil services companies (such as Halliburton, which delivers rigs and drills for the IOCs and state-owned firms) and energy traders (such as Enron, which makes its profits in the commodities markets). [13]

The IOCs have interests that set them clearly apart from the smaller energy firms linked to Bush, and these differences are strikingly evident in the Bush-Cheney energy plan. The oil component of that proposal focuses upon creating new opportunities to drill in North America — a very marginal region in the planning of the IOCs. The untapped oil reservoirs of North America constitute tiny and very expensive projects compared to those available in the Middle East and Central Asia, or even offshore West Africa. Moreover, they are political embarrassments. The IOCs, which have worse public relations and a worse history of environmental depredation than almost any other industry, are not eager for the additional bad press they would incur if they began drilling in the caribou mating grounds of Alaska, or if seepage from new exploration wound up on the beaches of west Florida. It is primarily the smaller American firms, less competitive abroad, who want the controversial acreage Cheney is offering them.

Switching to Gas

But the most fundamental gap between the interests of the IOCs and those reflected in the Bush-Cheney plan concerns natural gas. The putative “energy crisis” that was invoked to justify the Cheney task force has little to do with the gasoline that fuels American cars and jets but a great deal to do with the natural gas that powers American factories and electrical utilities. [14] Despite ample evidence that private firms are rushing to build new power plants that will end the blackouts in California, the Bush-Cheney plan calls for a massive effort to promote “alternative” sources of industrial energy, particularly coal and nuclear. The great bulk of the subsidies and opportunities offered in the Bush-Cheney plan are focused on these sources, not oil or natural gas. For the past ten years, the IOCs have become steadily more interested in natural gas, to the point where it sometimes eclipses their interest in oil. (Indeed, properly they should now be called IOGCs, international oil and gas companies.) The Bush-Cheney energy plan leaves the IOGCs feeling distant at best and disturbed at worst.
The IOGCs have moved strongly into gas for two reasons. In certain regions — particularly in China and other emerging markets — energy demand is growing so rapidly it probably cannot be met by oil alone, certainly not without a destabilizing rise of prices. [15] Second, the big markets of the industrialized West are slowly switching from oil to cleaner fuels such as gas. This trend is driven by a steady shift of values toward greater environmental sensitivity, which will continue no matter how the debate about global warming resolves. Switching to gas will be profitable, and it offers a host of fringe benefits for the IOGCs. Large volumes of gas are associated with existing oilfields (in Saudi Arabia and Nigeria, huge volumes are newly discovered), so the IOGCs can exploit their existing assets to the hilt. Switching to gas allows the IOGCs to portray themselves as good corporate citizens, responsive to demands for a cleaner environment. Witness British Petroleum’s recent TV commercials presenting the company as a green enterprise.

Political relations in the producing regions matter much more in the gas industry than in the oil industry, because gas networks are much more vulnerable to political and economic disruptions than oil. The transportation costs of oil are low compared to those of gas. Once you pump oil out of the ground, you can load it onto a boat, truck or pipeline and ship it almost anywhere. Natural gas projects tend to be much more expensive at all stages of production and shipping, particularly if conversion into liquefied natural gas is required. The international market for gas is both narrower and less flexible than the oil market: economics dictates that no one builds a gas pipeline unless there is both a reliable long-term source of supply at one end and a guaranteed market at the other. If guerrillas blow up an oil pipeline, the oil can often be shipped by other means. If an oil-consuming economy goes into depression, the oil can often be sold somewhere else. But if anything interferes with the delivery or consumption of a gas pipeline, the economics of the whole project usually collapse. [16] Gas networks require that the societies they connect become inter-dependent. They pressure all the countries along the transmission route to minimize their political differences and cement their economies together. Once the network is paid for, the benefits of stable gas supplies provide strong incentives for countries to cooperate.

Investment Ironies

To the dismay of the IOGCs, the Bush White House seems oblivious to the political implications of the slow switch to gas. Almost half of the world’s proven gas reserves are in countries with which Washington has tense relations: Russia and Iran. The Bush administration is doing little to improve these relations. The IOGCs would like to see Russia steadily integrated into the gas networks of Europe and the Mediterranean. Instead, the Bush administration continues to push the Baku-Ceyhan pipeline (which will run within artillery range of the contested Nagorno-Karabakh enclave in Azerbaijan) as a way of deliberately excluding the Russians. Despite pre-election statements by Cheney that he favored reducing sanctions on Iran, the Bush administration shied away from trying to ditch the 1996 Iran-Libya Sanctions Act (ILSA), an effort which would have required a major confrontation with Congress. In the eyes of the IOGCs, not only is Washington failing to help create the political conditions that would make an expansion of the gas grid viable, it is actually opposing their development.

Could the energy connections of the Bush administration work the other way? Could they be used to lobby the IOGCs to support Washington’s foreign policy agenda vis- à-vis Moscow and Tehran? Not likely. For one thing, the majority of the biggest IOGCs are no longer American firms. Of the four “supermajors” who have the deep pockets and diversified portfolios necessary to dominate the energy business, only one has an American identity (see below). A second American firm may join the ranks if the planned merger of Chevron and Texaco goes ahead. Even the so-called American firms among the IOGCs increasingly act as true multi-national corporations: their directors subscribe to a globalist ideology that claims profits are the best measure of patriotism. “What’s good for ExxonMobil is good for America” — by definition. [17]

The European IOGCs already undermined the Clinton administration’s attempt to keep them out of Iran. After ILSA was passed, the European companies lobbied the European Union, which sent a clear signal to Washington that this law smacked of extra-territoriality and violated World Trade Organization regulations. The Clinton administration backed off on sanctioning the French company Total when it began investing in Iran’s South Pars gas field, opening up the floodgates for non-US firms investing in Iran. Despite the Bush administration’s renewal of ILSA, it will also leave the European companies alone in their efforts to develop Iran’s oil and gas assets.

Where does that leave the US firms? US firms cannot invest in Iran because of a Clinton-era presidential directive barring US investment in Iran. Their inability to prevent the renewal of ILSA has proven that they have little influence in Washington. Ironically, to repeal the presidential directive, the US IOGCs have to help their foreign competitors by pushing for the lifting of ILSA. The Europeans will not stand for the ban on US firms being lifted before ILSA is revoked. But the greater irony is that the putative oilmen in the White House are actively curtailing the activities of US companies, while leaving foreign oil companies to freely exploit one of the most prolific oil and gas zones in the world.

The Big Oil Blues


Looking forward, these coping strategies are unlikely to be sufficient. The pressures of replacing assets, and staving off competition from non-US oil companies, continue to grow, especially in gas development in the Middle East — where the opportunities are expanding exponentially. Here lies the real long-term problem for the US oil industry. If European oil companies continue to make major discoveries in the Middle East, they will quickly outpace the US companies, possibly coming to dominate the industry entirely. Unlike the current and the Clinton administrations, European governments have greatly assisted European companies’ attempts to access the Middle East — particularly the “rogue states” — using a variety of financial, diplomatic and humanitarian incentives.

There is a basic disconnect between the Bush administration and the true long-term interests of Big Oil in the US. The key powerhouses within the administration are Beltway insiders first and oilmen second. They know that the US oil companies, despite spending large sums on campaign finance, do not have much influence within the Beltway, especially with regard to the Middle East. The Bush team is asking the US oil industry to wait until it is ready to accommodate US IOGC interests.

In the past, Big Oil took comfort in the fact that governments embargoed by the US would reserve space for them in their oil sectors, to encourage the oil companies to pressure Washington. Now, with the European companies moving in, these space reservations are in jeopardy. Europe’s role is being further enhanced with the rise of the “Brussels consensus,” which goes beyond helping oil and gas development to meet the wider economic development needs of the region. By promoting extreme unilateralism in a more competitive world, the Bush administration is not only out of step with the rest of the world, it is not able to support the economic interests of Big Oil, ostensibly its principal supporter.

Restraints from Brussels

For much of the US policy elite, globalization is the final utopia. From Thomas Friedman to Francis Fukuyama, the prophets of globalization have proclaimed that it is remaking the world in America’s image. World culture is supposedly conforming to the individualist and materialist values propagated by Hollywood. The global economy is dominated by New York and its brand of laissez-faire capitalism. All political systems, it is claimed, are converging on Washington’s variety of liberal democracy. In this new world order, the US is both the epitome of development and the hegemonic power.

The reality is much more complex. Globalization, as we have seen, greatly complicates the relationships between states and corporations. It reinforces US power in some ways, and subverts it in others. While the US economy is currently dominant, over the long run it faces some serious rivals: Europe’s social democratic alternative, the Asian way of state-corporate alliance and perhaps even a new Russian form of frontier capitalism. But in the sphere of politics, the challenge to Washington is immediately evident and profound.

There is no real rival to US power today, nor any reason to expect one to emerge soon. But this does not mean that the US can unilaterally dictate to the world. Globalization brings about a diffusion of power which does not create states that can challenge US dominance, but does empower states to shape and restrain Washington’s influence. At least three powers — Russia, China and Japan — are already working to moderate US influence in particular regions. One power is beginning to temper and rechannel US power globally: the European Union.

This is not a totally new development. European states have criticized US excesses ever since the Vietnam War, and during the 1990s it was the Europeans who persuaded a reluctant Washington to join their interventions in Bosnia and Kosovo. But as the European Union progresses, steadily forcing its member states to coordinate their policies and pool their powers, Europe’s ability to influence Washington has grown more potent. The Amsterdam Treaty now gives Europe the institutional foundations for a common foreign policy. Europe is developing its own collective military forces. Despite its slow start, it is clear that the consolidation of the euro will end the epoch of dollar diplomacy. [18]

Some reassertions of European power are fairly parochial. There are long-standing disputes with the US about trade in steel, agricultural subsidies and the development of genetically engineered foods. However, the ability of Europe effectively to block the merger of Honeywell and GE has created a new appreciation of how important European markets are to American firms. In a growing number of areas, European influence clashes directly with the most central elements of Bush’s foreign policy. The Europeans are monitoring reforms at the Pentagon very closely, and are particularly concerned about suggestions that the US may redeploy into Asia up to a third of the 120,000 troops it currently stations in Europe. Most European leaders are skeptical of, if not outright hostile to, George W.’s NMD proposals, and are likely to support Russia’s rejection of this plan. Most obviously, the Europeans are livid about Washington’s brash reversal on participation in the Kyoto accord. They are pressing the US to stay involved, and apparently will proceed with implementation of the protocols even if the US withdraws.

The EU supports Kyoto for many of the same reasons that the Bush team opposes it: it is a prime example of multilateral diplomacy. Europe is prepared to put real energy into defending multilateralism as a principle, not just as an ad hoc tool. Europe has also shown a willingness to take charge when unilateralism leads the US to drop the ball. When George W. an- nounced that he had no intention of continuing the Clinton administration’s negotiations with North Korea, Europe volunteered to take them over. (The Bush team later reversed its stance on North Korea after being chastised by George W.’s father, Bush Senior.) Similarly, if Washington seriously neglects the Arab-Israeli peace process, Brussels might become increasingly involved. Israel would resist such a shift, but the fact is that although Tel Aviv relies upon Washington militarily, it is much more economically dependent upon Europe. [19] Whether Europe joins, replaces or continues its current role of just supporting the US in the peace process, it will certainly press for a continuation of the negotiations that began at Oslo in 1993. At the very least, Europe will probably succeed in frustrating George W.’s hopes for delinking the issues of Palestine and Gulf security.

Europe has also intervened in North Africa and the other Middle Eastern countries around the Mediterranean through the Euro-Med initiative. (See Sheila Carapico’s article in this issue.) This engagement process, if successful around the Mediterranean, could become a wider model not only for the rest of the Middle East but other developing countries. When contrasted with the neoliberal Washington consensus, the Brussels consensus has four elements that could make it a viable alternative. Europeans are more willing to tolerate multiple political systems (within limits). Second, Brussels is willing to nurture development with money and other economic incentives over a longer time period, recognizing the need for consensus and capacity building among the target states. Implicit in this tolerance for diversity and a longer-term commitment is the notion of reciprocity, instead of the hard conditionality of the Washington consensus. Fourth, despite the tolerance of systems and process, the ultimate aim is to build democracies in these countries not through simple manipulation of institutions — like phony elections and sham political parties — but through alliance with domestic forces who may emerge to push this program forward.

The Brussels consensus will not automatically build new and more viable political and economic systems in the Middle East. But it appears to provide a point of departure toward that end that is acceptable to Middle Eastern regimes, giving the European initiatives an aura of realism and plausibility. Washington, with its model of “our way or no way,” is beginning to exclude itself from the development debate at precisely the time when a new paradigm is desperately needed. In the Middle East and North Africa, this is especially true now that the predominant rentier state model — by which states provide social services with endless oil revenue — is reaching its limits.

Restraints from Riyadh

During the Cold War, the contest between the two superpowers tended to force smaller states into “monogamous” relationships, or a clear alignment with either Moscow or Washington. In local conflicts — Ethiopia vs. Somalia, India vs. Pakistan — once one side accepted arms or aid from either of the superpowers, its opponent tended to align with the other superpower. The few small states that tried to maintain ties to both powers, such as Egypt during the 1950s, were unable to do so for long. The Americans, and to a lesser extent the Russians, tended to believe that “if you are not with us, you are against us” and pressed their local partners to choose sides. Only the most marginal states were allowed to remain neutral. Despite high initial hopes, the non-aligned movement was quickly overwhelmed.

The end of the Cold War altered this pattern dramatically. Not only did America emerge as the sole “hyperpower,” there were no trends suggesting its hegemony would be rivaled by anyone else in the near future. Washington became correspondingly less interested in local conflicts, and less concerned with the alliances of local powers. This allowed small states to pursue a new type of alignment: “polygamy,” in which one state aligns with many others, even with mutually antagonistic countries. This is very useful for small states, because different potential allies have different resource endowments. The country that makes the most potent military ally may not be the one that offers the best package of economic assistance.

Saudi Arabia is an excellent example of this emerging pattern. During the Cold War, the Kingdom was very clearly aligned with Washington, to the extent that it provided budgetary support for South Vietnam, oil for South Africa and funds for the Nicaraguan contras solely because such actions served the US interest. But over the last decade, Riyadh has pursued a much more polygamous pattern of alliances. The US remains the Saudis’ major military sponsor, but Germany is now its main source of imports, Asia (including China) the major recipient of its exports, and in OPEC and Middle Eastern affairs it cooperates closely with Iran—despite US objections.

Saudi Arabia’s polygamous alliances have roots in the economic crisis it faced following the Gulf war, which began to imperil the ruling family’s ability to maintain its control over the Kingdom. Huge deficits in government spending, aggravated by repayment of Gulf war debts to, and major arms purchases from, the US, rapidly depleted the Kingdom’s foreign assets. The ensuing cuts in government expenditures contributed to the increasing domestic instability in the early 1990s. More threatening to the regime was its growing dependence on the Saudi private sector to defray government deficits; the private sector gradually became vociferous in demanding changes in the regime’s economic policy. Its demands ignored, Saudi capital began to emigrate, destabilizing the riyal and further eroding the Kingdom’s foreign assets.

Crown Prince Abdallah, who became the dominant power in the Kingdom after his half-brother King Fahd suffered a debilitating stroke in 1995, began to implement a new “grand strategy.” First and foremost, he aimed to stabilize government finances. A major consequence of Abdallah’s fiscal discipline was that he curtailed arms purchases from the US, a move that required a subtle change in Saudi foreign policy. If Saudi Arabia was not going to honor its side of the bargain — buying arms from the US in return for protection — the Saudis had to count less on US protection in the Gulf. They had to begin making new and less hostile arrangements with their neighbors. This, on one level, was the basis for the new relationship with Iran.

Entente with an Edge

The alliance of Saudi Arabia with Iran is at the heart of some of the most interesting and remarkable changes in recent Middle Eastern politics. The two countries began courting each other in 1995 and 1996. Iranian President Ali Akbar Hashemi-Rafsanjani looked to Riyadh for a way to normalize Iran’s relationships with the outside world. Abdallah was seeking a way to gain greater autonomy from Washington. The alliance they created in their 1997 meeting in Pakistan delivered a host of benefits to both countries. Riyadh immediately gained a margin of protection from foreign intimidation, and Tehran earned a seat at the central table of Middle East politics. The combined power of the two states was further leveraged by inclusion of Syria (an ally of both countries) and Egypt (an old ally of Saudi Arabia) in a wider regional entente. This “Riyadh entente” pooled the powers of two of the most populous states in the region with those of two of the biggest oil producers.

But the emergence of this entente had uncomfortable consequences for the US. The new Saudi foreign policy was less amenable to Washington’s campaign against “international terrorism” and “rogue states,” a label that the US had applied to both Syria and Iran. Riyadh now worked closely with Tehran in seeking higher oil prices, succeeding in imposing a new discipline on OPEC in 1998 that reversed the price slide of 1997. Crown Prince Abdallah was publicly critical of Washington’s lack of an “endgame” for its campaign against Baghdad, and complained that UN sanctions were hurting the people of Iraq rather than Saddam Hussein’s regime. He supported the switch to smart sanctions, but joined the Iranians in seeking to limit the expansion of the US military presence in the Gulf.

Perhaps most painfully for the US, Abdallah is a sincere supporter of the Palestinian cause, and has sharply raised Saudi criticism of the lackluster US role in the peace process. He refused to support Clinton’s effort to force Yasser Arafat to sign a peace accord at Camp David in July 2000, insisting that the final status of Jerusalem was an issue of concern for all Muslims and not for the Palestinians alone. Partly in protest against the clear US tilt in favor of Israel, Abdallah has brushed off recent invitations to visit Washington. The Saudis, even more than the Europeans, have emerged as a major obstruction to the Bush team’s plans for decoupling the issue of Palestine from arrangements for Gulf security.

Finally, the Saudis did not just neglect bilateral ties with the US. In case polygamy did not progress smoothly, they aimed to ensure that the Kingdom remained economically vital for at least one major group of US companies. If Saudi Arabia is less important to the arms lobby, the Saudis could make themselves more important to the oil lobby. Simply opening up the oil sector was out of the question, since control of this sector gives the ruling family its ample means, and flexibility in managing the international oil price. The other commodity that could entice the IOGCs was gas. Given Crown Prince Abdallah’s increasing emphasis on economic development, US and European development of gas — the industrial fuel — appeared to meet both his economic and foreign policy objectives. Even here, the inclusion of European companies like Shell and TotalFinaElf in the three “core” areas recently opened up for gas development was a further indication of the Saudi tendency towards polygamy. By design, this move highlighted the outside restraints on US hegemony in the Middle East — from Houston, from Brussels and from Riyadh — in one stroke.

The Long View

Almost a century ago, toward the end of World War I, the German Social Democratic leader Karl Kautsky made a prediction. [20] He argued that the major industrial powers, reeling from the carnage in the Somme and shuddering from the threat to their collective survival, would form a cartel after the war was over to promote peaceful capitalist exploitation of the globe, and to prevent further international conflicts. Kautsky has been proven right — and wrong — on roughly three different occasions.

After World War I the major industrial powers formed the League of Nations, which fell apart a decade later in the face of German and Japanese expansionism. After World War II they formed the UN, which was quickly paralyzed by the developing tensions between the US and the USSR. Finally, after the Cold War, George Bush the elder declared the “new world order,” a globalization of the Atlantic alliance with NATO at its heart. It is, perhaps, too soon to state that the new world order is dead — but it is certainly in real trouble. Perhaps, over the next decade, Europe will succeed in using its growing influence to hold the new world order together. But if it too falls apart, the unilateralist policies of the second Bush administration will bear much of the responsibility.

Despite the common interest of capitalist states in minimizing war and promoting economic globalization, coordination of their competing interests has proven very difficult. While the general idea produces assent, there are lots of devils in the details. The twentieth century began with a decade of economic growth, unprecedented globalization and dreams of universal peace. It very quickly ran off track and was followed by 80 years of unprecedented bloodshed, an “age of extremes.” [21] The twenty-first century has opened with very similar potential — for both prosperity and horror.


[1] See Michael Klare, “America’s Military Revolution,” Le Monde Diplomatique (July 2001).
[2] Unilateralism, sometimes known as isolationism, is one of the two great traditions in US foreign policy (the other being Wilsonian liberalism). Unilateralists properly object to being called isolationists because they do not advocate an end to overseas adventures, particularly where strategic interests are at stake. But they are deeply suspicious of entanglements in Europe. See Walter McDougall, Promised Land, Crusader State: The American Encounter with the World Since 1776 (Boston: Mariner Books, 1997), ch. 2.
[3] Some unilateralism has been evident in the choices of every US president since World War II. Bill Clinton, who embraced multilateralist rhetoric and was eager to cooperate with Europe in various fora, sometimes behaved this way. But the second Bush administration is unique in its belief that unilateralism is a virtue in itself.
[4] See Charlie Cray, “Bush’s Corporate Cabinet,” Multinational Monitor 22/5 (May 2001).
[5] Frank Rich, “The Backslap Backlash,” New York Times, June 9, 2001.
[6] Condoleezza Rice, “Promoting the National Interest,” Foreign Affairs (January/February 2000).
[7] See Charles Kupchan, “Life After Pax Americana,” World Policy Journal 26/3 (Fall 1999). For an alternative claim, that unilateralism might be a tool for progressive politics, see Ian Robertson, “Progressive Unilateralism,” Foreign Policy in Focus Discussion Paper 3 (November 15, 2000).
[8] Richard Haass, The Reluctant Sheriff: The United States After the Cold War (New York: Council on Foreign Relations, 1998). Haass is now chief of the policy planning staff at the State Department.
[9] For an account of this critical meeting, see Bob Woodward, The Commanders (New York: Simon and Schuster, 1991). Cheney seems never to have realized how much his stance at this meeting shocked and offended the Saudi leadership, particularly Defense Minister Prince Sultan, who has been much more skeptical about the benefits of US support ever since.
[10] William F. Buckley, In Search of Anti-Semitism (New York: Continuum, 1992).
[11] For the origins of the idea of smart sanctions, see Meghan O’Sullivan, “Iraq: Time for a Modified Approach,” Brookings Policy Brief 71 (February 2001).
[12] Alexander Primakov, Putin’s senior advisor on Middle Eastern affairs, has family links to a Russian business that profits greatly from the Iraq trade. There are, of course, means by which the US might overcome Russia’s economic objections if Washington was more prepared to negotiate. China reversed its opposition to smart sanctions, and was rewarded with $100 million of UN-approved contracts for doing work in Iraq. Colum Lynch, “Trade Deal Won Chinese Support of US Policy on Iraq,” Washington Post, July 6, 2001.
[13] Oil independents do seem to affect Bush’s foreign policy initiatives in areas less strategic for the US than the Middle East. See Wayne Madsen, “Big Oil Change,” In These Times, August 20, 2001.
[14] A sober look at the energy business, even on the right, suggests that there is no real crisis, only some short-term bottlenecks that have been exploited by profiteers. See Dan Ackman, “There Is No Energy Crisis,” Forbes, May 2, 2001.
[15] Robert Manning, “The Asian Energy Predicament,” Survival 42 (Autumn 2000).
[16] Koji Morita, “Gas for Oil Markets,” Royal Institute of International Affairs Energy and Environmental Program Briefing Paper 12 (February 2000).
[17] The political affiliations of the multinational corporation remain a subject of great debate and complexity. See John Stopford, “Multinational Corporations,” Foreign Policy (Winter 1998-99). However, the condominium of interests between Big Oil and big government that dominated Washington through most of the twentieth century began to fall apart in the 1980s, when the Reagan administration began to drive US companies out of two of the richest reservoirs in the Middle East, Libya and Iran.
[18] Martin Walker, “Europe: Superstate or Superpower?” World Policy Journal (Winter 2000-01).
[19] Geoffrey Wheatcroft, “Europe’s Chance in the Mideast,” New York Times, July 16, 2001.
[20] Karl Kautsky, “Ultra-Imperialism,” New Left Review 59 (1970).
[21] For a detailed account of this historical detour, see Eric Hobsbawm, The Age of Extremes: A History of the World, 1914-1991 (New York: Vintage, 1996).

Super Majors and Big Majors

Super Majors                     Market Value (1999)                 National Identity

Exxon Mobil                       $278.9 billion                           American

Royal Dutch-Shell               $213.3 billion                           Anglo-Dutch

British Petroleum-Amoco     $195.5 billion                           British

TotalFinaElf                        $95.8 billion                             French

Big Majors                          Market Value (1999)                National Identity

Chevron                             $56.8 billion                            American

Texaco                               $30 billion                               American

Source: Petroleum Finance Company Energy 50, March 6, 2000.


How to cite this article:

Yahya Sadowski, Fareed Mohamedi "The Decline (But Not Fall) of US Hegemony in the Middle East," Middle East Report 220 (Fall 2001).