The Great August Game

Last Summer, the oil wars touched Georgia. Vladimir Putin won a decisive victory and seriously damaged the troubled euro-American scheme of a non-Russian oil line to central Asia by moving to protect Russian communities in the Caucasus. There were other aspects to the game that summer, not least for those who died, which I blogged about at the time.

Now--and I have Conservative Cabbie and his mate Ronnie to thank for this--the game is on in the Americas. Barack Obama's Chevron-associated National Security Advisor seems to have stitched up a deal with George Soros in which the American Administration will pony up billions to back a Brazilian oilfield exploration.

Chevron and Petrobras, the Brazilian oil firm, have been working together for some time. The first serious production from one of their fields has begun this summer, for instance. Now, they wish to exploit the Tupi field in the Santos basin. Great and probably exaggerated claims are being made for it.

CC and Ronnie, and many on the American right, are keen to see the hand of Soros in this. It seems to some that Soros is claiming back influence from the administration his money helped elect. I'd point out that there is a long tradition of American strategic planning which hides behind public figures. Aristotle Onassis, for instance, initially incurred the wrath of Bobby Kennedy by wanting surplus Korean war tankers for a Saudi deal. I've often wondered about how much American opposition to Britain and France during the Suez crisis was influenced by favours owed to oilmen to keep the canal open, but also how much the CIA and others in the American establishment pushed the oil people around.

Both Mohammed Al-Fayed in Haiti and George de Mohrenschildt in the wider Caribbean seem to have been front men (or unwitting patsies in Al-Fayed's case) for CIA oil games.

I'd also point out that the US export-import bank is already into Petrobras for $5 billion; China, on the other hand, is stumping up double that. America couldn't be shut out of this field.

James Jones is likely to be the guiding light in this Brazilian play. I don't believe Barack Obama would have done anything other than approve of it, if he has even been properly briefed. The backdrop, as I've sought to detail on this blog, is that America has concluded that it can't rely on the Venezuelans (who have their own production troubles) or the Middle East, and that Iraq is not a safe long-term bet. With central Asia not in play, because the Af-Pak and Georgian wars were so disastrous, and with the Iranian regime not having fallen to the pressure put upon it after elections, how is America to manage the decline of oil?

Because oil is declining. That's not made up science, its a fact. Viable oil resources are now hard to come by, and deep. The Brazilian one is buried out at sea beneath kilometres of salt and rock. At the same time, the recession means that oil prices aren't high enough to justify investment, and the political fall-out from drilling Alaska more (which America will eventually have to do) would be very great.

The solution, which must have appealed to Chevron and their backers in the White House, seems neat; use American government money, but turn it into a commodity at some point in the future. Inflated or diminished dollars will still buy oil. Obama can get away with it in a way Bush and Cheney (who would be facing screaming blue murder from nationalist Democrats) can't. The Americas being the way they are, few in their right minds would invest too much in pipelines through Mexico or the Isthmus, so naval power plus Brazilian agreement can balance off Chavez's declining stock.

There are many unanswered questions, not the least of which is, 'how long has this all been in the planning?' Is this this why Chevron skipped on the Iraq Oil deal?

A nice, friendly country pumping oil down south would also ease the pressure to grow the strategic reserve of the United States, which is reaching ludicrous heights, or offset its cost as insurance for when oil crashes through the roof again. Who knows--it could even protect America from any arab or Chinese switches to euros or SDRs as denominating currencies for oil, though not by much.

My concern would be twofold. Firstly, if there is not as much oil as people think, this is a waste of a good few billion; if there is much more, the Brazilians aren't going to let it flow away. Whats to stop them using the oil themselves or selling it to the Chinese and dumping rubbishy ethanol on the Americans and their Green-obsessive nonsense politicians when this deal is renegotiated?

Secondly, I think all of this is about deferring dealing with oil decline. Like a man giving up an addiction, or on the edge of bankruptcy, America seems to spend its time hoping against hope for a miracle. Today, it's Brazil's Tupi field, a few years ago, it was Mexico's Jack field. I think people could get carried away and not deal with the real issue--the need for coal, nuclear fission and fusion, and a new energy and transport paradigm. Quick.

Summer oil games in Brazil--what is it about August? Here's a video of Daniela Mercury, on whom Camille Paglia (whom I like) has a crush. At least this oil play has a better soundtrack than The Devil Went Down to Georgia....



Thanks for doing that, I'd have got nowhere near that level of detail. Ronnie and I were right to hand this one on. I'll set up a link to this post.

There are two things that concern me, which you don't quite seemed to have addressed.

My first concern, was not the Soros point, but that the administration is choosing to support drilling off Brazil while the Democrats refuse to allow domestic drilling. Drill, baby Drill played well for the GOP last year, and should fuel prices start to rise, this is a weakness for Obama.

Secondly, and Ronnie was the one that really picked up on this, Soros bought the shares only four days before the announcement of the loan. Isn't that potentially insider trading, or at least the suspicion of?

Anyway, great post.

BTW, do you know the Burkes Corner blog? I was reading it yesterday, it really is excellent and thoroughly recommended.
Martin Meenagh said…

I did see the point about Soros being tipped off--but this is obviously a strategic point on the part of the United States. You need a frontman with cash and access to the market. Equally, I think letting China grab what could be a huge oil field--only could--and just relying on American resources, which could after all be exploited anytime, doesn't make sense.

Many thanks for the Burke's Corner link, I appreciate it!

Natural gas and nuclear energy could solve most of the USA energy needs if there were the political will to do so. The move to hybrid and electric autos will only decrease oil demand. Once the people realize that global warming is not caused by human beings but rather galactic/solar/geological forces at work through millions of years, they will realize (hopefully) that oil is running out anyway and there are very strong strategic reasons to move to more secure and plentiful sources of energy. However, there are strong malignant interests in the background manipulating the current debate.....for their political and economic agendas.
Martin Meenagh said…
I agree, obviously, about the nuclear part; and about peak oil; and as far as I can understand them, the ideas linking variations in earth's natural thermostat, the oceans and cloud cover, to things outside the atmosphere. I wonder about natural gas though...

We're in for a painful few decades as people adjust to falling off the edge of the rapidly-approaching oil cliff. There are people who are actively lying, some who are deluding, and few in positions of leadership who seem to be preparing. God help us!