A Path Out of the Desert

Unusual book

Part one

America’s Interests in the Middle East
Many americans have only a vague sense of their country’s interests in the Middle East. Some on all parts of the political spectrum believe our engagement in the region brings only trouble and that we should disengage as much as possible. Many who do support American engagement in the region do so without ever having thought through why. Still others overstate American interests, assuming that nothing that happens in the Middle East is unrelated to the well-being of the United States. In arguing for a new, activist grand strategy toward the Middle East (albeit one not quite so activist as the second Bush administration’s), it is incumbent upon me to demonstrate why it is important that we should do so, and that means explaining specifically why and in what ways the region matters to the United States.

Along the same lines, it is impossible to devise a clear strategy without an equally clear understanding of that strategy’s purpose. As the old expression has it, “If you don’t know where you’re going, any road will get you there.” Its converse is also true: picking the right road requires you to know where you are going. Indeed, in the past, America’s approach toward the Middle East and other countries or parts of the world has gone astray precisely because we did not have a clear sense of our own interests. In every instance where that was the case, the result was a bad one—ranging from mere missed opportunities to outright disasters. Thus it is important to articulate America’s interests in the Middle East to have a clear sense of what we should be hoping to achieve, what we should care about, and what we should fear; but it is equally important to understand those interests to discern what it is that we should not fear, what should not concern us, and what is unnecessary for us to achieve.

This last point matters because one of the traps Washington has fallen into in the past is “goal displacement,” in which our true interests become superseded by something else that seems to be consistent with them but really is not. For instance, many American interests in the Middle East are best served by the preservation of stability in the region, but that does not mean that stability itself is our interest. Change is often necessary, especially when the status quo becomes untenable, as is the case in the Middle East today. Unfortunately, for much of the last thirty years American administrations have failed to make that distinction and have often favored stability and opposed change at all costs. The result has been a series of American policies designed to preserve the status quo that have ended in disaster, from the Iranian Revolution to 9/11. Mistakenly substituting stability for our true interests in the Middle East is a dangerous example of goal displacement that we should avoid whenever possible. The best way to avoid it is to have a very clear sense of what our true interests entail.1 Consequently, Part I examines America’s most important interests in the region, starting with oil but also including some interests that apply all over the world but should not be lost amid our specific interests in the Middle East.

chapter 1

Oil

Let’s not kid ourselves: america’s first and most important interest in the Middle East is the region’s oil exports. However, this interest has nothing to do with how much oil we import from the Middle East. Instead, oil is our number one interest in the Middle East because our economic well-being relies generally on plentiful oil. That is true both because of the direct importance of oil to our own economy and, indirectly, because of its importance to the economies of the rest of the world—whose trade is vital to our economy. The Middle East plays a critical role in global oil production and therefore in the well-being of the global economy, of which our own economy is an irreducible part.

The American economy, as well as that of every other developed nation and ever-greater numbers of developing nations, is addicted to oil. In the words of one recent study, “Oil is the lifeblood of modern civilization. It fuels the vast majority of the world’s mechanized transportation equipment: automobiles, trucks, airplanes, trains, ships, farm equipment, the military, etc. Indeed, according to the Department of Transportation, oil accounts for a whopping 97 percent of the energy used for transportation in the United States. Oil is also the primary feedstock for many of the chemicals that are essential to modern life.” Petroleum products are a critical input into the American economy not merely for transportation (which accounts for about two thirds of all American petroleum consumption) but also for industrial production (including plastics) and even some power generation. Petroleum accounts for 40 percent of all of the energy used in the United States, far more than either of the next two biggest sources of American energy, natural gas and coal, which account for only 23 and 22 percent, respectively. In all, the United States consumes roughly 20 million barrels of oil per day, accounting for almost a quarter of global oil consumption by itself.

What this means is that oil is a critical input into the United States’ economy, and any major, sudden increase in the price of oil can have a calamitous effect on our way of life. As former Federal Reserve Chairman Alan Greenspan testified to the Congressional Joint Economic Committee in April 2002, “all economic downturns in the United States since 1973, when oil became a prominent cost factor in business, have been preceded by sharp increases in the price of oil.” In fact, nine of the last ten U.S. recessions were preceded by an increase in crude oil prices, and statistical tests have demonstrated that this was not coincidental. Many economists already believe that the tripling of oil prices in the last four to five years is creating the conditions for another such recession.

It is the price of oil, not its source, that is critical to our economy and those of our major trading partners. Oil is fungible, meaning that a barrel of oil can be burned anywhere in the world and have the same effect. That also means that a tanker full of oil can be sold anywhere in the world, to anyone—and always to the highest bidder. So the fact that we import most of our oil from Canada, Mexico, Venezuela, and Saudi Arabia does not mean that we are immune to problems with Russian oil exports; exactly the opposite. If there is a problem with Russian oil exports, the countries that normally buy from Russia will simply go looking for their oil somewhere else and will likely be willing to pay a higher price to get it. If they are, then our normal Canadian and Mexican suppliers will sell to them instead of to us, unless we meet the new price. Thus, the price of oil is determined by the classic patterns of supply and demand. Whenever the demand increases faster than the supply or the supply unexpectedly drops, the price of oil rises—and it rises for every country, including the United States, no matter where we get our oil from.

Although the source of our imported oil is irrelevant, the amount of oil we import does have some relevance. The fact that the United States imports significant quantities of oil (about 65 percent of the oil we consume) means that we cannot insulate ourselves from the direct impact of oil disruptions caused by sudden imbalances between the global oil supply and global consumption. If domestic American production accounted for all, or nearly all, of American consumption needs, then in time of crisis the government could suspend the impact of market forces by imposing price controls. In other words, if we imported only a very small amount of oil, we could divorce ourselves from the global price of oil at a rather low cost. But given how much we import, it is not economically feasible to do so. As long as we rely on oil for our energy needs while importing a significant amount of oil, our economy will be tied to the international oil market.

It is also important to recognize that the amount of oil we import is not terribly meaningful, at least in terms of our interest in Middle Eastern oil production. Once we cross some immeasurable threshold of importation, after which it is no longer possible for us to cut off all imports without doing tremendous harm to our economy, the exact amount we import becomes irrelevant. Importing 75 percent of our oil is no more harmful than importing 25 percent: since the price of all of our oil will still be set by the international market in either case, we are no more vulnerable importing at the higher rate than at the lower. So merely trying to reduce the amount of oil we import is effectively useless, unless we can somehow get down to a fraction of current import levels.

Even then, virtually eliminating oil imports, if it were somehow possible, would reduce the direct impact we would face from a major oil disruption but would hardly solve the problem because of the indirect impact of higher oil prices on the U.S. economy through their effects on our trade partners. In the globalized world of the twenty-first century, foreign trade is a large, and growing, input into the U.S. economy. The ratio of trade to gross domestic product (GDP) for the United States amounted to 17 percent in 1985, 23.6 percent in 1995, and 26.2 percent in 2005. So even if we could somehow insulate our economy from the direct impact of a sudden spike in oil prices, we would still feel its impact due to a downturn in our trade relations. Higher oil prices would make foreigners less able to buy our goods and services, while driving up the prices we pay for theirs. In particular, as a great deal of the annual U.S. deficit is funded by selling bonds to foreigners (meaning that a great deal of the U.S. national debt is held by foreigners), a worldwide recession could seriously affect U.S....