* Engdahl: USA out-flanked in Eurasia energy politics? *


Richard Moore

USA out-flanked in Eurasia energy politics?

William Engdahl*                   June 3, 2006

Curiously and quietly the United States is being 
out-flanked in its now-obvious strategy of 
controlling major oil and energy sources of the 
Persian Gulf, Central Asia Caspian Basin, Africa 
and beyond.

The US's global energy control strategy, it's now 
clear to most, was the actual reason for the 
highly costly regime change in Iraq, 
euphemistically dubbed 'democracy' by Washington. 
George W. Bush restated his democracy mantra as 
recently as May 28 at the West Point military 
graduating ceremony where he declared that 
America's safety depends on an aggressive push 
for democracy, especially in the Middle East. 
'This is only the beginning,' Bush said. 'The 
message has spread from Damascus to Tehran that 
the future belongs to freedom, and we will not 
rest until the promise of liberty reaches every 
people in every nation.'

If the trend of recent events continues, it won't 
be Bush-style democracy that is spreading, but 
rather, Russian and Chinese influence over major 
oil and gas energy supplies.

The quest for energy control has informed 
Washington's support for high-risk 'color 
revolutions' in Georgia, Ukraine, Uzbekistan, 
Belarus and Kyrgystan in recent months. It lies 
behind US activity in the Western Africa Gulf of 
Guinea states, as well as in Sudan, source of 7% 
of China oil import. It lies behind US policy 
vis-à-vis Hugo Chavez' Venezuela and Evo Morales' 

In recent months, however, this strategy of 
global energy dominance, a strategic US priority, 
has shown signs of producing just the opposite: a 
kind of 'coalition of the unwilling,' states who 
increasingly see no other prospect, despite 
traditional animosities, but to cooperate to 
oppose what they see as a US push to control it 
all, their energy future security.

Some in Washington are beginning to realize they 
might have been too clever by about half, as is 
evident in recent public statements to both China 
and Russia, two nations whose cooperation in some 
form is essential to the success of the global US 
energy project.

Offending both China and Russia

Contrary to advice from older China hands, 
including former Secretary of State Henry 
Kissinger, architect of the Nixon 1972 opening to 
China, the White House denied visiting Chinese 
President Hu Jintao the honor of a full state 
dinner when he visited in April, serving instead 
a short lunch. Hu was publicly humiliated by a 
well-known Falun Gong heckler at the White House 
press conference and by other obvious 
humiliations. In other words, the White House 
welcomed Hu with a diplomatic slap in the face.

At the same time, Vice President Dick Cheney 
slapped Russia's Putin, with the most open attack 
on its internal human rights policy as well as 
its energy policy in a speech in the Baltic state 
of Lithuania in early May. There, Cheney declared 
of Russia, 'the government has unfairly and 
improperly restricted the rights of her people.' 
He accused Russia of energy 'intimidation and 
blackmail.' Some days later, Secretary of State 
Condoleezza Rice reiterated that Russia should be 
'pressed' on democratic reforms. Rice also 
slapped China in the face in March during a trip 
to Southeast Asia, calling China a 'negative 
force' in Asia.

Curiously, Washington has repeatedly accused 
China of 'not playing by the rules,' in terms of 
its oil politics, declaring that China is guilty 
of 'seeking to control energy at the source,' as 
though that had not been US energy policy for the 
past century or so.

The significance of taking aim simultaneously at 
both Russia and China, the two Eurasian giants, 
the one the largest investor in US Treasury 
securities, the other the world's second most 
developed military nuclear power, reflects the 
realization in Washington that all may not be as 
seamless in the quest for global domination as 
originally promised by various strategists in and 
around the Bush Administration.

SCO takes on new weight

On June 15, member nations of the Shanghai 
Co-operation Organization, led by China and 
Russia, will reportedly invite observer, Iran, to 
full membership. That meeting will be held in 
Shanghai. Even if full membership is postponed as 
has been mooted, the fact remains that Russia and 
China both want to seal closer cooperation with 
Iran in Eurasian energy cooperation.

The Shanghai Cooperation Organization, SCO, was 
founded in June 2001 by China, Russia, 
Kazakhstan, Kyrgyzstan, Tajikistan, and 
Uzbekistan. Its stated goal was to facilitate 
'cooperation in political affairs, economy and 
trade, scientific-technical, cultural, and 
educational spheres as well as in energy, 
transportation, tourism, and environment 
protection fields.' Recently, however, the SCO is 
beginning to look like an energy-financial bloc 
in central Asia consciously being developed to 
serve as a counter-pole to US hegemony.

In recent months their members have taken several 
potentially strategic steps to distance 
themselves from US dependence, both in energy as 
well as monetary dependence. A look at the map 
indicates the potential of an expanded SCO.

Russia's energy geopolitics

In his recent State of the Union speech, 
President Putin announced that Russia is planning 
to make the Ruble convertible into other major 
currencies, such as the Euro, and to use the 
Ruble in its oil and gas transactions. The 
convertible Ruble is due to be introduced 
according to latest Russian statements, on July 
1, 2006, six months before originally planned. 
Russia also has stated it plans to shift a share 
of its now considerable dollar reserves away from 
the dollar and that it will use $40 billion in US 
dollars to purchase gold reserves.

Russia's state-owned natural gas transport 
company, Transneft, has consolidated its pipeline 
control to become the sole exporter of Russian 
natural gas. Russia has by far the world's 
largest natural gas reserves and Iran the second 
largest. With Iran, the SCO would control the 
vast majority of the world's natural gas 
reserves, as well as a significant portion of its 
oil reserves, not to mention potential control of 
the Strait of Hormuz, the narrow corridor for a 
majority of Gulf oil tanker shipment to Japan and 
the West.

In late May it was reported that Russia and 
Algeria, the two largest gas suppliers to Europe, 
have agreed to increase energy co-operation. 
Algeria has given Russian companies exclusive 
access to Algerian oil and gas fields, and 
Gazprom and Sonatrach will co-operate in delivery 
of gas to France. Putin has cancelled Algeria's 
$4.7 billion debt to Russia, and for its part, 
Algeria will buy $7.5 billion worth of Russian 
advanced jet fighters, air defense systems and 
weapons. Oh oh.

On May 26 Russian Defense Minister Sergei Ivanov 
also announced Russia will definitely supply Iran 
with sophisticated Tor-M1 anti-aircraft missiles, 
reportedly as a prelude to supply far more 
sophisticated weapons. Ouch.

Then, in one of the more fascinating examples of 
geopolitical chutzpah by Putin's Russia in the 
area of energy, the Kremlin-controlled Gazprom 
gas monopoly has entered into quiet negotiations 
with Israeli Prime Minister Ehud Olmert through 
Olmert's billionaire friend, Benny Steinmetz, to 
secure Russian natural gas supplies to Israel via 
an undersea pipeline from Turkey to Israel.

According to the Israeli paper, Yediot Ahronot, 
Olmert's office has said it will support the 
Gazprom proposal. In several years Israel faces 
gas shortage from Tethys Sea drilling and soon 
gas from Egypt. Tethys Sea gas is projected to 
run dry in a few years. British Gas is in talks 
to supply gas from Gaza but Israel disputes BG 
right to drill. But even with Egypt and Gaza gas 
shortages are expected by 2010 unless Israel is 
able to find new sources. Enter Gazprom and 
Putin. The gas would be diverted from the 
underutilized Russia-Turkey Bluestream pipeline 
which Russia built for increasing influence over 
Turkey two years ago.  Putin clearly seeks to 
gain a lever inside Israel over the one-sided US 
influence on Israel policy. Oyvey!

China energy geopolitics also in high gear

Beijing for its part is also moving to 'secure 
energy at the sources.' China's booming economy, 
with 9% growth, requires massive natural 
resources to sustain its growth. China became a 
net importer of oil in 1993. By 2045, China will 
depend on imported oil for 45% of its energy 

On May 26, Kazakhstan crude oil began to flow 
into China from a newly-completed oil pipeline 
from Atasu in Kazakhstan to the Alataw Pass in 
far western China Xinjiang province, a 1,000 
kilometer route announced only last year. It 
marked the first time oil is being pumped 
directly into China. Kazkhstan is also a member 
of the SCO, but had been regarded by Washington 
since the collapse of the Soviet Union, as its 
sphere of influence, with ChevronTexaco, Condi 
Rice's old oil company, the major oil developer.

By 2011 the pipeline with extend some 3,000 
kilometers to Dushanzi where the Chinese are 
building its largest oil refinery due to complete 
by 2008. China financed the entire $700 million 
pipeline and will buy the oil. In 2005 China's 
CNPC state oil company bought PetroKazkhstan for 
$4.2 billion ands will use it to develop 
oilfields in Kazakhstan.

China is also in negotiations with Russia for a 
pipeline to deliver Siberian oil to Northeast 
China a project that could be completed by 2008, 
and a natural gas pipeline from Russia to 
Heilongjiang in China's Northeast. China just 
passed Japan to rank as world's second largest 
oil importer behind the United States.

Beijing and Moscow are also integrating their 
electricity economies. In late May the China 
State Grid Corp announced it plans to increase 
imports of  Russian electricity fivefold by 2010.

China everywhere in African oil states

In its relentless quest to secure future oil 
supplies 'at the source,' China has also moved 
into traditional US, British and French oil 
domains in Africa. In addition to being the major 
developer of Sudan's oil pipeline which ships 
some 7% of total China oil imports, Beijing has 
been more than active in West Africa in the 
states bordering the oil-rich Gulf of Guinea, 
source of vast fields of highly-prized 
low-sulphur oil.

Since the creation of the China-Africa Forum in 
2000, China has scrapped tariffs on 190 imported 
goods from 28 of the least developed African 
countries, and cancelled $1.2 billion in debt.

Indicative of the way China is doing an end-run 
around the customary IMF-led Western control of 
African states, China's export-import bank 
recently gave a $2 billion soft loan to Angola. 
In return, the Luanda government gave China a 
stake in oil exploration in shallow waters off 
the coast. The loan is to be used for 
infrastructure projects. In contrast, US interest 
in war-torn Angola has rarely gone beyond the 
well-fortified oil enclave of Cabinda, where 
ExxonMobil along with Shell Oil have dominated 
until recently. That is apparently about to 
change with the growing Chinese interest.

Chinese infrastructure projects underway in 
Angola include railways, roads, a fibre-optic 
network, schools, hospitals, offices and 5,000 
units of housing developments. A new airport with 
direct flights from Luanda to Beijing is also 

Indirectly, through its support of the Sudan 
government, China is also a contender in a 
high-stakes game of potential regime change in 
neighboring, oil-rich Chad. Earlier this year, 
World Bank 'tough guy,' Paul Wofowitz, was forced 
to back down from plans to cut off World Bank 
aid, after threat of an oil export cut-off by 
tiny Chad. ExxonMobil is currently the major oil 
company active in Chad. But Sudan backs Chad 
rebels, who were only prevented from toppling the 
notoriously corrupt and unpopular regime of 
President Idriss Deby by 1,500 French soldiers 
propping up the Deby regime. Washington has 
joined with Paris in backing Deby.

Sudan has involved China, rather than Western 
corporations, in exploiting its oil fields, 
largely as a result of misconceived US sanctions 
imposed in 1997, which blocked American oil 
companies from doing business in Sudan. A new 
Sudan-backed regime in Chad would jeopardise the 
Chad-Cameroon pipeline and Western oil firms. One 
can imagine China just might be willing to step 
into such a vacuum and help Chad develop its oil, 
especially if the lion's share went to China.

And immediately after his unpleasant diplomatic 
visit to Washington in April, where the Chinese 
President was greeted by a White House diplomacy 
of deliberate insults reminiscent of a University 
of Texas frat house prank, Hu Jintao went on to 
Nigeria, long regarded by Washington as its 'oil 
sphere of interest.'

In Nigeria, Africa's largest oil producer, Hu 
signed a deal with the Nigerian government where 
Nigeria will give China four oil drilling 
licenses in exchange for a commitment to invest $ 
4 billion in infrastructure. China will buy a 
controlling stake in Nigeria's 110,000-barrel per 
day Kaduna oil refinery and build railway and 
power stations, as well as take a 45% stake in 
developing Nigeria's OML-130 offshore oil and gas 
field, referred to by China CNOOF oil company 
chairman as, 'an oil and gas field of huge 
interestŠlocated in one of the world's largest 
oil and gas basins.'

Almost all of Nigeria's current oil production is 
controlled by Western multinationals. But the 
situation there will also soon change in China's 

Similar soft infrastructure loans or energy 
investment offers are being made by China to 
Gabon, Ivory Coast, Liberia and Equatorial Guinea.

The curious charge against China of 'not playing 
by the rules,' and 'trying to secure energy at 
the source,' begins to assume real dimension when 
these and Russian recent energy moves are taken 
as a totality.

Washington's conclusion? OopsŠ

It's little wonder that some Washington hawks are 
getting alarmed. Suddenly, the world of potential 
'enemies' is no longer restricted to the 
Islam-centered War on Terror. Leading 
neo-conservative ideologue, Robert Kagan wrote a 
prominent OpEd recently in the Washington Post. 
Kagan is privy to pretty high-level thinking in 
Washington, presumably. His wife, Victoria 
Nuland, worked as Vice President Cheney's Deputy 
National Security Advisor until being named US 
Ambassador to NATO.

Kagan declared, in reference to Russia and China, 
'Until now the liberal West's strategy has been 
to try to integrate these two powers into the 
international liberal order, to tame them and 
make them safe for liberalism.' Kagan co-founded 
the hawkish Project for the New American Century 
(PNAC in the late 1990's to among other things 
advocate a major US military buildup and forced 
regime change in Iraq, the latter a year prior to 
the September 11, 2001 attack.

Kagan continued, 'If, instead, China and Russia 
are going to be sturdy pillars of autocracy over 
the coming decades, enduring and perhaps even 
prospering, then they cannot be expected to 
embrace the West's vision of humanity's 
inexorable evolution toward democracy and the end 
of autocratic rule.'

Kagan charged that China and Russia have emerged 
as the protectors of 'an informal league of 
dictators' - that, according to Kagan, currently 
includes the leaders of Belarus, Uzbekistan, 
Burma, Zimbabwe, Sudan, Venezuela, Iran and 
Angola, among others - around the world, who, 
like the leaders of Russia and China themselves, 
resist any efforts by the West to interfere in 
their domestic affairs, either through sanctions 
or other means.

'The question is what the United States and 
Europe decide to do in response,' wrote Kagan. 
'Unfortunately, al-Qaeda may not be the only 
challenge liberalism faces today, or even the 
greatest.' The question, as Kagan wisely states 
it, is what the United States or Europe can do in 
response. The genius of Washington hawk strategy 
is showing its tattered edges.

The mainstream US foreign policy organization, 
the New York Council on Foreign Relations has 
also recently weighed in on the question of 
especially Chinese energy pursuits. In a recent 
report, the CFR accuses the Bush Administration 
of lacking any comprehensive long-term strategy 
for Africa. They criticize US focus on 
humanitarian issues such as in Darfur southern 
Sudan, demanding instead that the US 'act on its 
rising national interests on the continent.' 
Those interests? The CFR lists oil and gas number 
one; growing competition with China (closely 
related to 1) as number two. OopsŠ

* F. William Engdahl is author of the book, 'A 
Century of War: Anglo-American Oil Politics and 
the New World Order,' Pluto Press Ltd. He has a 
soon-to-be published book on GMO titled, 'Seeds 
of Destruction: The Hidden Political Agenda 
Behind GMO'. He may be contacted through his 
website, www.engdahl.oilgeopolitics.net.

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