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Ukraine is About Oil. So Was World War I


March 11, 2014
Robert Freeman / Common Dreams & Pavel Polityuk and Richard Balmforth / Reuters

Ukraine is a lot more portentous than it appears. It is fundamentally about the play for Persian Gulf oil. So was World War I. The danger lies in the chance of runaway escalation, just like World War I. The draw-down on the world's finite supply of oil is accelerating. The rate at which known reserves are being depleted is four times that at which new oil is being discovered. That's why oil cost $26 a barrel in 2001, but $105 today. It's supply and demand. And that's why Chevron is now in Ukraine.

http://www.commondreams.org/view/2014/03/08

Ukraine is About Oil. So Was World War I
Robert Freeman / Common Dreams

(March 8, 2014) -- Ukraine is a lot more portentous than it appears. It is fundamentally about the play for Persian Gulf oil. So was World War I. The danger lies in the chance of runaway escalation, just like World War I.

Let's put Ukraine into a global strategic context.

The oil is running out. God isn't making any more dinosaurs and melting them into the earth's crust. Instead, as developing world countries aspire to first-world living standards, the draw-down on the world's finite supply of oil is accelerating. The rate at which known reserves are being depleted is four times that at which new oil is being discovered. That's why oil cost $26 a barrel in 2001, but $105 today. It's supply and demand.

Oil recalls that old expression: "In the land of the blind, the one-eyed man is king." In industrial civilization, the nation that controls the oil is king. And 60% of the known oil reserves are in the Persian Gulf. That's why the US invaded Iraq in 2003: to seize control of the oil. Alan Greenspan told at least one truth in his life: "I hate to have to admit what everybody knows. Iraq is about oil."

But the US lost the war in Iraq. Remember? The US was going to install a democracy and 14 permanent bases there. They're not there. The US was run out after proving unable to pacify the Islamic jihad it had unleashed under the pretext of searching for non-existent weapons of mass destruction. Instead, Iraq allied itself with Iran, its Shi'ite comrade-in-arms in the Muslim Wars of Religion.

So today, the battle for the Persian Gulf is being carried out through its two regional powers, Saudi Arabia, the champion of Sunni Islam, and Iran, the torch carrier for Shi'ite Islam. Think of the Wars between the Protestants and Catholics in the 1500s. The US backs Saudi Arabia, as it has done since 1945, when Roosevelt cut a deal with Ibn Saud to protect his illegitimate throne in exchange for the House of Saud only selling oil in dollars.

Iran, of course, is implacably hostile to the US after the US overthrew Iran's democratically elected president, Mosaddegh, in 1953 and installed its own fascist puppet, the Shah of Iran. The Iranians overthrew the Shah in 1979 and installed a fundamentalist theocracy that continues to this day.

Iran's main ally in the region is Syria, which the US has been trying to overthrow for three years by helping the al-Qaeda-linked rebels that are attacking Syria. Syria's chief military patron is Russia, which conveniently bailed Obama out of his childish "red line" declaration last year, a declaration he had neither the military nor political nor diplomatic capacity to carry out.

So, the upheaval in Ukraine is really about the US trying to weaken Syria's patron, Russia. If Russia is weakened, Syria is weakened. If Syria is weakened, Iran is weakened. If Iran is weakened, the US has a better chance of seizing control of the world's largest reserves of oil. That is the Great Game that is going on here.

The problem is the risk of escalation. It's not at all fanciful to imagine some ambitious Ukrainian colonel firing at Russian forces. Russia fires back, decisively. This puts Ukraine at risk for its European suitor, the EU. So NATO intervenes to try to intimidate Russia. Russia retaliates to blacken NATO's nose. And before anyone knows it, the US is dragged into a shooting war where no one can understand how it ends. This is almost exactly how World War I started.

The Germans were gunning for Persian Gulf oil via their relationship with the Ottoman Empire. But this would have given Germany a choke hold on England, which had only just converted its navy to oil. So, England reversed its historical rivalry with France, in 1904, and with Russia, in 1907, to try to contain Germany. But a minor, unanticipated dust-up in the Balkans in the summer of 1914 escalated into The Greatest War The World Had Ever Known.

In a freak event, a Serbian teenager killed the heir-apparent to the Austrian-Hungarian throne. So Austria-Hungary attacked Serbia. Russia couldn't stand idle as its sole Balkan ally, Serbia, was humiliated. So it mobilized on Austria-Hungary, an effective declaration of war.

Germany moved to defend its ally, Austria-Hungary, by attacking Russia's ally, France. England, France's ally, responded by declaring war on Germany. Within less than one month of a minor incident in a minor region of the continent, all the major powers of Europe were at war.

World War I would inflict 27 million casualties through the industrialization of human slaughter. It destroyed four great empires, more than had expired in any single event, ever. Eleven new nations were created in its aftermath, including Iraq, Jordan, Syria, Lebanon, and Palestine. It was the event that shifted the locus of global power from Europe to the US, where it has resided ever since. It rearranged the architecture of global power more than any event of the last thousand years.

So the portent of Ukraine is a global strategic order hanging in the balance. The US must subdue Russia to gain control of the world's oil. It is the same strategic objective that is driving the US's subversion of the democratically elected government in Venezuela: it sits on one of the world's largest reserves of oil. Indeed, all of the US' aggressions on Iran, Syria, and Venezuela, and its subversion of the democratically elected government of Ukraine, can be understood in this context.

The wild card in the whole fracas is China. China is the biggest customer of Iranian oil, and the largest international investor in Venezuela. These represent some of China's moves to counter the US attempt to control the world's oil.

The potential escalation from Ukraine as the US pressures Syria, Iran, and Venezuela, inescapably involves China. If China becomes involved, trying to defend its allies and its supply of oil, it is anybody's guess where it ends. But it won't be pretty.

Robert Freeman is the author of The Best One-Hour History series which includes World War I and The Vietnam War. He is the founder of the national non-profit One Dollar For Life which helps American students build schools in the developing world from their contributions of one dollar.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.



Ukraine Signs $10 Billion Shale Gas Deal with Chevron
Pavel Polityuk and Richard Balmforth / Reuters

KIEV (November 5 2013) - Ukraine signed a $10 billion shale gas production-sharing agreement with US Chevron on Tuesday, another step in a drive for more energy independence from Russia.

The deal to develop its western Olesska field followed a similar shale gas agreement with Royal Dutch Shell in January and boosts Ukraine's leadership at a time of fraught relations with Moscow over gas supplies.

"The agreements with Shell and Chevron ... will enable us to have full sufficiency in gas by 2020 and, under an optimistic scenario, even enable us to export energy," President Viktor Yanukovich told investors shortly before the signing.

The highest end of expectations for Olesska's potential reserves would match around three years of European Union gas demand, but similarly sunny hopes for shale reserves in neighboring Poland have been very sharply downsized.

Shale development in Europe is far behind the booming US sector and progress is patchy. Chevron pulled out of a shale exploration tender in Lithuania and has suspended work at a Romanian shale well after local protests.

Ukraine Energy Minister Eduart Stavytsky, who signed the deal with Chevron executive Derek Magness, set it in the context of a high price Ukraine pays Russia for its gas.

"This is one more step towards achieving full energy independence for the state. This will bring cheaper gas prices and the sort of just prices which exist (elsewhere) in the world," he said.

Ukraine pays $400 per thousand cubic meters for Russian gas under a 2009 10-year agreement. Kiev has failed to re-negotiate its terms with Moscow.

The agreement with Chevron, to extend for 50 years, foresaw an initial investment of $350 million by the US major in exploratory work over two or three years, Stavytsky said, aimed at establishing the commercial viability of shale reserves in the 5,260 square km (2,000 square miles) Olesska, part of a band of shale which stretches from the Baltic to the Black Sea.

Earlier government figures set total investments, including extraction after exploratory drilling, at around $10 billion.

FRICTION WITH RUSSIA
Stavytsky said the Ukrainian side hoped that exploratory work would yield more detailed information about reserves at Olesska in 2015.

It was expected that Olesska would produce 5 billion cubic meters per year -- and possibly as much as 8-10 billion cubic meters, he said.

The deal with Shell, which is at a similar level of investment, is for exploration at Yuzivska in eastern Ukraine.

The two shale projects could provide Ukraine with an additional 11 to 16 billion cubic meters (bcm) of gas in five years' time, according to projections by the Kiev government.

With Ukraine also a transit route for Russian gas to Europe, rows in the past which have led to disruption for European consumers.

The two sides clashed over prices in the winters of 2006 and 2009, with Moscow halting deliveries not only to Ukraine but to the rest of Europe.

With Russia angered over Ukraine's plans to sign a landmark agreement with the European Union which will mark a shift away from Russia's sphere of influence, the issue has flared again.

Late last month, Russia's gas export monopoly Gazprom (GAZP.MM: Quote, Profile, Research, Stock Buzz) demanded Ukraine pay a $882 million overdue gas bill urgently.

Stavytsky said on Tuesday that Ukraine had already begun to settle the outstanding bill but gave no details.

Gazprom spokesman Sergei Kupriyanov said his company had recently received $9 million in payments from Naftogaz Ukraine. "It's just a drop in the ocean," he said.

Russian Prime Minister Dmitry Medvedev has since said he sees no reason for Moscow to cut gas supplies to Ukraine over the unpaid bill for now and has played down talk of an imminent "gas war" that might disrupt flows to Europe.

(Additional reporting by Denis Pinchuk in Moscow; Editing by William Hardy)

(c) Thomson Reuters 2013. All rights reserved.

Posted in accordance with Title 17, Section 107, US Code, for noncommercial, educational purposes.

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