The high standard of living in the west is a result of the almost constant rise in income per head in the last 60 years. The business cycle has been tamed, although not eliminated, and inflation has been brought down to levels that would have seemed unimaginable 30 years ago. Yet this prosperity has an achilles heel: its dependence on imported oil and gas. When the supply of energy is interrupted, as in the OPEC crisis of 1973, there is panic. It is hardly surprising, therefore, that western foreign policy has been predicated on the need to keep oil and gas flowing through close relations with its exporting countries, protection of the shipping lanes and support for the multinational companies that invest in energy.
Under these circumstances, it would be natural to assume that the west is doing everything possible to reduce its dependence on imported oil and gas. Yet the opposite is happening. In almost all cases, the countries that constitute the west are becoming more, not less, dependent; with oil and gas imports accounting for a growing share of total consumption. The reasons are simple. Domestic reserves of oil and gas are running out, the cost of extraction of those that remain is high and environmental considerations are now much more important. One has only to think of the difficulties the Bush administration, the most energy-friendly government in American history, has faced in opening up the arctic wildlife reserve to exploration by oil companies.
The west’s energy imports come from many sources, but a high proportion (25 per cent in the case of the US) comes from the Middle East. This is hardly surprising. These countries hold enormous stocks of energy (Saudi Arabia alone sits on 25 per cent of the world’s proven oil reserves), the cost of production is extremely low and access to deepwater ports is easy. For all these reasons, the west’s dependence on imports of Middle Eastern oil and gas is expected to rise over the next two decades, unless there are radical changes on the demand and supply sides of the energy equation. At present, rising GDP per head in the west means rising energy consumption, which leads to an increase in imports and greater dependence on the Middle East.
Realists in international affairs have long accepted this causal sequence, and concluded that what is needed is close political ties with the petro-states of the Middle East, regardless of their lack of legitimacy and abuse of human rights. Indeed, this has been the west’s ‘dirty little secret’ ever since President Roosevelt reached an accommodation with the al-Saud family at the end of the second world war: in return for guaranteed supplies of oil (and now gas), the west would turn a blind eye to whatever happened inside the petro-states. Only when Middle Eastern countries trampled on some other vital western interest, as in the hostage crisis in Iran in 1979-1980, did this bargain break down.
This Faustian pact between the west and its energy suppliers survived the OPEC crises of the 1970s because the Middle Eastern states – with a brief exception in 1973 – stuck to their side of the bargain. However, it could not survive the terrorist attacks on 9/11, in which 15 of the 19 hijackers turned out to be from Saudi Arabia. This was a real shock to the system, and different factions in the US – not only the neo-conservatives – concluded that it would never be secure until its oil and gas came from countries that were not incubating international terrorists. The drive to promote democracy and freedom in the Middle East may have begun with the invasion of Iraq, but its principal target has always been Saudi Arabia.
The transformation of Iraq, however, let alone the spread of democracy and freedom to the rest of the Middle East, has not gone to plan. Iran – no friend of the US – is playing an increasingly important part in the development of Iraq, especially the oil-rich south, while progress towards democracy in Saudi Arabia is glacial. At best, the transformation of the region is likely to be slow and, at worst, the situation is liable to get even more dangerous, especially if any of the Middle Eastern states fall under the control of Islamic extremists. Not surprisingly, therefore, western policymakers are looking at ways to render their economies less dependent on imports from the Middle East.
In theory, there are many ways in which reduced dependence on Middle East supplies of oil and gas could come about. Imports from other countries or regions, such as Russia, west Africa and the Caspian, could displace imports from the Middle East. The west’s production of energy could increase through massive investment in renewable sources of energy, such as wind, solar and tidal, or new investment in nuclear power. New technologies could come on stream that either do not require the use of oil and gas, or provide huge efficiency gains in current energy use. The Kyoto Protocol could be extended beyond 2012, with deep cuts required in hydrocarbon energy use by industry, households, transport and energy companies. Finally, some combination of all the above could deliver the 50 to 60 per cent reduction in greenhouse gas emissions that would be needed to significantly reduce dependence on imported oil and gas from the Middle East.
One has to be a great optimist to believe that this will happen, but let us suspend our disbelief temporarily and ask what impact it might have on the relations between the west and the Middle Eastern states. At a stroke, western countries could end the hypocrisy that currently affects their relations with authoritarian regimes in the region. Pressure would mount for political reforms, and human rights abuses would no longer be ignored. The ability of royal families and other dictatorships to pressure foreign governments to rein in media criticism would cease. Western governments might even take a tougher line on the export of arms to these countries, if they no longer depended on oil and gas imports to the same extent. Saudi Arabia, yet alone smaller countries, would start to look like Brazil – important, but not so important as to merit exceptional treatment.
While western policy might become more consistent, it is unlikely to make much difference. The economic expansion of China and India, together with other emerging markets, has generated a thirst for imported energy that has already shifted the balance of power in favour of the petro-states. Uzbekistan, for example, responded to mild criticism of its grotesque human rights abuses by closing its US military base – after China demonstrated its interest in importing energy. China and India would like to reduce their own dependence on imported energy, but annual growth rates of nine per cent and six per cent respectively make that impossible.
Furthermore, the west has consistently shied away from the tough political decisions that would make imported Middle Eastern energy less necessary. There is still the illusion – particularly in the US – that technology will come to the rescue, rendering painful political choices unnecessary. Middle Eastern leaders may feel the heat in the next few years, but they are unlikely to have to leave the kitchen.