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[casi] Iraq & world crisis

Iraq & the World Crisis
by John Smith

(the following appears in the current issue of Los Cabros del Club, a
magazine produced by the Chilean community in Sheffield)


This article stands back from the issues and complexities of the current
Iraq crisis, to survey the global and historical context . It is schematic,
because the subject is too vast to fit into four pages.

In the first sections, war is seen not as aberration or insanity, but as a
logical and necessary response by the ruling families of the USA to growing
depression conditions in their economy and to sharpening competition with
other powers for control over the world's oil supplies.

The decades-long deterioration of US hegemony over the Middle East is then
summarised, and war is seen as necessary if the Bush administration is to
achieve its political objectives: to restore US power  in the region and to
restructure its relations with increasingly unreliable and fragile Arab

Omitted from this condensed survey is an examination of Israel's war on the
Palestinians and the nature of the US-Israel alliance, and how the two
crises of the Middle East are intertwined. Suffice it to say that the coming
war will be fought on two fronts, Iraq and Palestine, that its outcome will
determine the fate not just of Baghdad, but of Al Quds/Jerusalem as well.

US economy stalked by deflation

In the past twenty-four months, the US Federal Reserve has slashed interest
rates from 6% to 1%, in a drastic and desperate attempt to avert an
economic recession. Yet the interest rates paid by US companies with medium
credit rating have hardly declined. And these companies are more numerous -
in the past two years many have lost their blue-chip status and with it
their access to cheap credit.

What makes the problem immeasurably worse is that US companies are losing
their ability to increase prices. From cars to computers to chicken dinners,
sale volumes can only be maintained by offering discounts and price cuts.
And so, despite the decline in the official interest rate, US corporate
debt - similar in size to that owed by all Third World countries - is
actually getting more expensive. This is an important sign of the powerful
deflationary pressures that have started to assert themselves within the US

As well as slashing interest rates, the US government has ordered huge tax
cuts and a big increase in military spending, helping to boost profits of
the giant industrial corporations from Ford to Boeing who make the weapons.
The aim of this electric-shock therapy has been to revive growth. Without
these unprecedented measures, the US would already be in the midst of a
devastating wave of bankruptcies and an extremely severe recession.

The Bush administration senses that the US economy is just one recession
away from entering a Japanese-style deflationary spiral. As Japan has
discovered and Germany is now discovering, from this there is no escape.
Five years ago, there was a joke. "What's the difference between Japan and
the US/Europe?" The answer was: "Five Years"

This is not just another economic crisis. And neither is the coming war on
Iraq just another war against a "rogue state".

How are the two connected? We can put this another way: how is the very
nature of the war on Iraq determined by the overall context, of a capitalist
world economy on the verge of a global depression?

Oil, the "privileged commodity"
Oil behaves completely differently from all other raw material commodities.
Contrast oil with sugar or coffee, with base metals, with cotton or even
coal. world market prices for many of these commodities are at thirty-year
lows and are well below their costs of production. Even this understates the
situation: while the Third World's non-oil export prices have plunged, the
price of imports from the rich countries have risen uninterruptedly. The
combined effect of falling prices for raw material exports and rising import
prices for manufactured imports is known as "unequal exchange", a form of
exploitation and inequality intrinsic to imperialism that has shaped today's
world of extremes of wealth and poverty. Its direct effect is that Third
World raw material producers have, over the past three decades, lost up to
80% of their purchasing power.

Fidel Castro called oil the "privileged commodity". There are two special
characteristics of oil that give it this status. Whereas coffee grows at a
certain altitude, and sugar cane is produced in countries with similar
tropical climate, oil is found in the land and below the oceans; it may be
near the surface or it may be under miles of rock; it may be forty below or
forty degrees in the shade. To the extent that the world oil price bears any
relation to production costs, what matters with oil is its marginal cost of
production. As the oil price rises, higher-cost oilfields become profitable
and come on stream, increasing supply and reducing upward price pressure
until oil finds its natural price, which therefore reflects production costs
in the most marginal field. Those with much lower production costs can reap
super profits. This is why oil is a source of profits like no other raw

Arising in part from the allure of these super profits, the second special
feature of oil is that it is not just a commodity, not just a source of
fuel. In a way that isn't true of any other important raw material, control
over sources and reserves of oil confers political power. Because of this,
oil's world market price bears very little relationship to its costs of
production. Access to and control over, oil supplies is an economic
imperative, a political imperative and a military imperative. Japan
discovered the truth of the last of these in 1940, when the US Navy's sixth
fleet blockaded oil shipments to Japan from the Middle East, provoking Pearl
Harbour and the entry of the US into WW2.

Iraq, Iran, Kuwait and Saudi Arabia are not just the site of 70% of the
world's proven oil reserves; it is so easy to extract the oil that
production costs are often lower than $1 per barrel. With oil prices
bouncing around $30 a barrel, profits are astronomical.

Oil companies, banks, arms manufacturers and others from the imperialist
countries capture the lion's share of oil profits, another slice is taken by
local elites and royal families - yet workers and farmers across the Middle
East face high and rising unemployment, declining wages and agricultural
prices, collapsing public services, and brutal repression of their
democratic rights.

A prime motive for the US/UK drive to war is to recapture from their rivals
the biggest slice of Iraqi - and Iranian - oil profits. They resent the free
reign that French, Russian and Chinese and other oil companies enjoy in
markets largely closed off to them by their own belligerence.

The coming war on Iraq is the sharpest point of friction between the
imperialist powers. In going to war on Iraq, the US ruling families are
seeking to use military might to advance their economic interests at the
expense of their rivals. This is the logic that leads to World War 3.

While Pentagon planners are busy choreographing the coming air-war, top US
lawyers are hard at work planning legal challenges to Iraq's current
contracts with French, Russian and Chinese companies. International law says
that contracts survive changes of government, but the US government's
disdain for international law is even more pronounced in the economic arena
than elsewhere .

But what about Britain's motives? Why is Blair so determined to follow Bush?

We sometimes forget that two of the top four oil companies in the world are
British-owned: British Petroleum (BP) and Shell. Along with its nuclear
weapons and permanent seat on the UN Security Council, Britain's ability to
punch above its weight on the world stage derives from the huge empire of
wealth amassed by its ruling families in other peoples' countries, the
Middle East in particular.

This is why Blair's alliance with Bush is not slavish, it is the mutual
self-interest of two imperialist powers that for different reasons need each
other. The coming war on Iraq will test their strategic alliance to breaking

Despite their alliance with the US, British capitalists still have to fight
their corner: Lord Browne, chief executive of BP, recently intervened in
secret discussions about how Iraq is to be carved up by publicly calling on
the US to grant a "level playing field" to British oil companies.

War to restore a failing empire

Part of popular wisdom, a widely accepted truth that no-one disputes, is
that one of the pillars of US power in the world is its control over the
world's oil supplies. If this is so, then it is also true that over the past
thirty years this pillar has been cracking and has shed large chunks..
The Iranian revolution in 1979 dealt a giant blow to US regional and global
power. Iran's important oil industry, and its geographical location
stretching from the Middle East to the former Soviet Union, were reasons why
Iran under the Shah was the US's biggest military base outside of the US
itself. Through Iran and Israel, the US dominated the whole of the Middle
East and Persian Gulf.
The US would certainly have sent hundreds of thousands of troops to protect
the Shah. What stopped them was defeat in Vietnam just 3 years earlier.
Unable to use its own military forces against the Iranian revolution, they
pushed the Iraqi Army under Saddam Hussein, its new commander-in-chief, into
The hated Shah was toppled on February 12, 1979, following the longest
general strike in human history. A few months later in next-door Iraq,
Saddam (then Vice-President) seized complete power, conducted a ruthless
purge of the government, and then ensconced himself in a series of secret
meetings with the CIA. It is reasonable to assume that Iran was one of the
subjects discussed.
On 22 September 1980, Iraq invaded Iran. But instead of an easy victory,
expected in part because the revolution had executed or put to flight the
Iranian army's entire officer class, the Iranian people fought back
fiercely. So much so that within two years Iraq was on the verge of defeat
and only the use of huge quantities of chemical weapons against Iranian
front-line troops averted catastrophe. The first Gulf war ended in stalemate
in 1988, after the death of 1.5 million people.

How ironic, once it was very important to the US and Britain that Saddam did
possess weapons of mass destruction, that he should use them against his
neighbour, and that he should be rewarded for doing so!

Anyhow, instead of winning back Iran, the US lost control over Iraq as well.
The US had used up Saddam, he was no longer any more value as an ally. but
he still had one more vital task to perform. His invasion of Kuwait in 1990
was exactly the pretext the US needed for a war to reassert its own military
power in the region.

There is a lot of evidence to suggest that the US set a trap for Saddam and
that he walked right into it. But even the 43-day blitz in 1991 known as the
"Gulf War" (a strange war it is which has no battles, and where only one
side gets to do any killing) did not result in a firmer US grip over the
Middle East. In 1991, the US was still hamstrung by Vietnam, and did not
attempt to capture Baghdad or establish a permanent military base in Iraq.
This time, the hawks running the Bush administration are  determined things
will be different.

Crisis in relations with Iran and Iraq was accompanied by lack of US
influence in new areas of critical importance: until September 11 and the
ensuing invasion of Afghanistan, the US had no military bases anywhere near
the central Asian oilfields. US weakness in this region is still a long way
from being overcome.

However, where the imperialists have lost most ground is in the hearts and
minds of the people. The great masses of ordinary people across the Middle
East have learned to see through the imperialists' trick. They recognise the
ruthless self-interest hiding behind their proclamations on democracy, peace
and human rights. They hate and despise them all the more for being thought
of as stupid enough to be taken in by it all.

The economic distress of our sisters and brothers in the Middle  East is
intensifying at the same time as the 50-year struggle between the Zionist
state and the Palestinian people is moving towards a climax, and amid
universal horror and outrage not just at the threat of US invasion of Iraq,
but at the whole century of violence and violation that the peoples of the
Middle East have endured at the hands of the US and Britain.

The US has paid a heavy price for its political and military alliance with
Israel. Throughout this entire period, the irrepressible struggle of the
Palestinian people has provided a focus for radicalisation and a source of
inspiration to new generations. Why does the US reward Israel's occupation
of Palestine but punish Iraq so much for its invasion of Kuwait? This
question is helping to radicalise tens of millions of people across the
Middle East and beyond. It has turned the Middle East into a different

The US, Israel and the Arab regimes.
Why has the US-Israeli partnership proved so enduring throughout the past
fifty years of expansionist wars, uprisings and massacres? Why is GW Bush
risking his relations with pro-US Arab regimes by endorsing Sharon's brutal

One reason often cited is the economic and political power wielded by Jewish
capitalists within the US government. This is a false and dangerous
misreading of US Middle East policy. If alliance with Israel were not also
in the interests of the US capitalists who are not Jews, their
anti-semitism, which is still rife, would be enough on its own to dissolve
the alliance.

The idea that powerful sectors of US capital - for instance, the oil
corporations - support policies towards the Middle East despite judging them
to be against their own interests, out of sympathy for the Jews and their
suffering during WW2, is absurd. It also feeds into dangerous "Jewish
conspiracy" myths.

This misconception about what guides US foreign policy is widespread in the
Middle East. It reflects the desire of Arab bourgeoisies and the middle
class for a more equal relationship with imperialism. Pro-US Arab regimes
are humiliated by US support for Israel's military occupation. It prevents
these regimes from obscuring their subservient status and the fiction of
national sovereignty.

The biggest Egyptian and Lebanese capitalists, the princes of Saudi Arabia
and the emirs and sheiks of the Gulf have moved the bulk of their huge
personal fortunes out of the Middle East, to New York, London and other
imperialist centres.  The Saudi royal family alone has removed an estimated
$600bn from their country, which is suffering from falling living standards,
high unemployment, and a government forced to cut essential services
whenever the price of a barrel of oil drifts below $18. Despite the fabulous
wealth of the Middle East's Arab ruling families, their countries, all of
them, remain oppressed, exploited semicolonies, a status which they share
with the rest of the Third World.

The US and UK governments do not want partnership with the corrupt
super-rich Arab regimes, they want subservience, in return for which the US
will grant protection, just like in those old gangster movies.

The Bush administration has decided to go to war to restore its failing
empire.  'Baghdad first' sums up current US strategy in the Middle East.
A successful invasion of Iraq would - so the extremists who dominate the
Bush administration Bush believe - deal a demoralising blow to the
Palestinians and the oppressed masses of other Arab countries.

Bush and friends are well aware of the peoples' outraged hostility to US
support for Israel and preparations for war against Iraq. They know that a
growing majority despise them and their corrupt and client regimes. They are
hardheaded enough to realise that this political radicalisation, coupled
with deepening economic crisis, threatens to provoke revolutions, and they
need to be ready to intervene. Confidence in the repressive powers of the
Arab regimes has drained away, and the Israeli military must be kept as a
last resort. They can no longer rely on others to do the job. This is
another reason why the Bush administration has concluded that it must go to

In sum, the US is not trying to impose stability, it is trying to recapture
the ground it has lost over the past quarter century. It wants to recover
control of Iraq and Iran; it wants to recover from Vietnam.

They are trying to use weapons to reverse the course of history. Mission
impossible!  There are no weapons, which can do this! Their ultimate defeat
is certain, what is unknown is how much of the Middle East and the world
they will take with them before they are finally forced to retreat.

We mustn't be mesmerised by the military might of the US. Understanding the
context means recognising that US military strength stands in contrast to
its economic weakness and fragility, and that the way that the US has ruled
over the Middle East - through its Israeli garrison and through the servile
dictatorships which they have put in power - is breaking down, as the
radicalisation of their populations forces them to put more and more
daylight between themselves and their imperialist masters.

Understanding the context also means recognising that US imperialism is
forced to go to war because the deflationary slump that stalks the US
economy can only be kept at bay by increasing its share of super-profits. In
a stagnant world economy, this means cutting into their rivals' share. War
is not an aberration, it results from the normal functioning of capitalism
and imperialism.

"Baghdad or bust" was how one newspaper described US policy. This gormless
phrase sums up what's at stake. If the US fails to take and hold Iraq, the
world's final empire will receive a terrible blow, one that would threaten
to turn its decline into a tail-spin.

Because so much is at stake, because it is so important to US imperialism
that it wages and wins a war on Iraq, it will require a momentuous struggle
to force them to retreat.

The coming war will be the first in a series of wars which the US will wage
in a doomed attempt to restore its failing empire. We will stop this war
when we build a movement strong enough to take the means to wage wars out of
their hands.

24  November 2002

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