Another strange week. With the price of gold falling more than 5% and oil down about 3%, both markets that are susceptible to short term manipulation, it looks like they want us to keep our heads in the sand for a few more weeks or at least until after Christmas. But the people don't seem to be falling for it completely this time, as holiday retail sales are okay but not great, due to consumer anxiety:
Malls Full but Sales Not SpectacularThe U.S. consumer's skepticism of the claim that the U.S. economy is healthy is reflected in the U.S. citizen's skepticism that the war in Iraq is going well, even with George Bush saying the United States is winning it. These two things: the Iraq War and the U.S. economy are not as unrelated as it might seem. George Bush bet the fortunes of the entire ruling elite in the United States on the outcome of the invasion of Iraq and now, nearly three years later, the outcome doesn't look good for them. This is why the institutions like the Democratic Party and the New York Times think they have no choice but to go along with Bush's war - EVERYTHING was bet on it.
By THE ASSOCIATED PRESS
December 18, 2005
NEW YORK -- Retailers remained anxious Sunday, after the last full weekend of shopping before Christmas appeared robust but not spectacular, despite generous bargains for many goods.
The retail industry -- which had an uneven start to the holiday season and has seen disappointing crowds at the malls since -- was hoping for a big sales bonanza. But with lean inventories and the final critical days still yet to come, stores are not panicking.
Again, merchants are relying on procrastinators during the final days before Christmas and post-holiday sales -- expected to be boosted by the redemption of gift cards.
"This was a healthy weekend, but it wasn't something to knock your socks off," said Marshal Cohen, chief analyst at NPD Group Inc., a market research company based in Port Washington, N.Y. "But stores aren't panicking because the season has more time to go. The trickiness of the season is that consumers are calling the shots on where they were going shopping."
The winners and losers this weekend were the same ones throughout the season. Discounters and electronics stores drew in the most crowds, while mall-based apparel stores were a mixed bag, Cohen said. Luxury stores did well, though he believes their sales gains aren't as robust as a year ago.
Wal-Mart Stores Inc., the world's largest retailer, said Saturday that December sales growth is still on track to be up anywhere from 2 percent to 4 percent. But it noted that food sales continue to outpace general merchandise sales. That may not bode well for profits, as food carries thin profit margins.
...Nevertheless, analysts have been worried about disappointing business at the mall, a sign that shoppers are frugal amid high energy costs, though they have fallen in recent weeks.
According to the most recent data from ShopperTrak RCT Corp., which tracks sales at more than 40,000 stores, predominantly in malls, average weekly sales for December fell 9 percent through Dec. 10.
"I did more shopping this year in drugstores and small stores like that rather than department stores," said Sharon McKinley of Baltimore, who was at Mondawmin Mall in Baltimore.
She noted that higher gasoline prices and heating costs played a factor.
"I found out I had to pay more for gas and electric. It made a difference," she said.
Amid a challenging economy, stores offered more generous discounts from the start of the season than a year ago, but most bargains have been planned, according to Tamara Pattison, vice president of products for Cairo.com, an online shopping resource that helps consumers track deals locally.
J.C. Penney Co. Inc., which opened its doors for 17 hours straight on Saturday, offered up to 60 percent off on merchandise. At Macy's Herald Square, sweaters were marked half off.
"Because most things are 50 percent or 75 percent off, you can really get a deal. I think this is the best time yet," Denise Jones of Baltimore said Saturday.
While seizing control of Iraq's war was a huge part of the plan to maintain U.S. imperial dominance, it wasn't the only one. There was also to be an intimidating display of technological military dominance (shock and awe) directed at potential rivals all over the world. There would also be healthy profits for military contractors of all types that would stimulate a stumbling economy. To top it all off, the pretext for the war, the conveniently timed 9/11 attacks, allowed the Bush regime to eliminate any vestiges of the Bill of Rights that U.S. citizens had. What Bush is signalling in his speeches of the past couple of weeks is that they still think they can pull it off.
As Professor Pan put it:
If we analyze the spreading chaos in Iraq from a perspective of qui bono -- i.e. "who benefits?" -- the picture painted is quite clear. Not only is the Bush Cult not grossly incompetent, out of touch, and inept, but, in fact, they are brilliant strategists. And they've gotten everything they wanted.The Achilles heel of the plan is the fiscal and economic weakness of the United States, a weakness exacerbated by the wholesale plundering of assets by the very groups who were hell-bent on waging this war. That is why seizing the oil was so important. In case there is any doubt that "terrorism" or "democracy" is behind the invasion of Iraq, the following shows clearly the 'before' and 'after' of the plan, the 'before' being the meetings Cheney had with heads of U.S. oil companies in the spring of 2001 where the invasion of Iraq was promised, months BEFORE September 11. The 'after' is the so-called "Production Sharing Agreement" (PSA) with U.S. and British oil companies and the "government" of Iraq, a agreement that cannot be overturned by any future Iraqi government.
Permanent bases? Not likely, unless Iraq degenerates into a permanent state of chaos and civil war. How to insure permanent chaos and civil war? Enter death squads, torture teams, psyops (recall the British soldiers caught with costumes, fake beards, and explosives), and voila! A country so unstable and violent that the U.S. is required to remain. Permanently.
And while we're there, we'll conveniently siphon off the black gold/Texas tea.
The Bush Cult has conceived and executed a plan to destabilize and permanently occupy a precious piece of resource-rich land that has been coveted by Western countries since the beginning of the oil economy.
It's a wrap. They got the brass ring. Whether or not the administration crumbles under its perverse criminality, the U.S. is never going to pull out of Iraq. Yes, some troops will come home. But if you think any administration -- even a Democratic one -- is going to voluntarily extract itself from the second largest source of oil on the planet, I've got a copy of the Carter Doctrine I'd like you to read.
Report outlines plans for corporate plunder of Iraqi oilNow we see where the intentional destabilization of Iraq by the U.S. and the Britain comes in.
By James Cogan
WSWS.org
8 December 2005
A report published in November by the London-based environmental and social justice network Platform makes clear that the invasion and occupation of Iraq was, and remains, a war for oil. The document, entitled "Crude Designs: the rip-off of Iraq's oil wealth", is a concise review of how Iraq's vast energy resources, worth hundreds of billions of dollars, will be handed to transnational companies over the next several years.
"Crude Designs" found that if just 12 of Iraq's undeveloped fields are contracted in a similar fashion to comparable oil fields in Libya, Oman and Russia, transnationals will reap profits of between $74 billion and $194 billion in 2006 dollars over a 30-year period. The estimate, which the report describes as "conservative", is based on an oil price of $40 per barrel. The current price is closer to $60 per barrel.
The actual bonanza for the oil giants from the invasion of Iraq could run into the trillions. Out of the country's 80 known fields, just 17 are currently in production. A further 63 undeveloped fields have an estimated 75 billion barrels of oil, while industry experts believe between 100 billion and 200 billion barrels lie in unexplored fields. The country also has enormous untapped reserves of natural gas.
The Platform report establishes that control over these resources was the primary motive for the war. The first chapter draws attention to the discussion in US and British ruling circles on the strategic importance of dominating the oil and gas of the Persian Gulf. It cites the May 2001 report of the Bush administration's Energy Task Force, which was headed by Vice President Dick Cheney. The findings declared: "The Gulf will be the primary focus of US international energy policy."
The terror attacks on New York and Washington on September 11, 2001, just four months later, were used to set in motion long-held plans for the military conquest of the region.
In the months before the March 20, 2003 invasion, the looting of Iraq's oil was the key consideration in Washington. The US State Department established a "Future of Iraq" project as early as April 2002. The project's Oil and Energy group decided in four meetings between December 2002 and April 2003 that Iraq's oil industry "should be opened to international oil companies as quickly as possible after the war".
Among the group's participants was Ibrahim al-Uloum, an Iraqi exile with a PhD in petroleum engineering from New Mexico University. Al-Uloum was appointed oil minister in the US-controlled Coalition Provisional Authority (CPA) and, with US backing, fills the same post in the current "transitional" government of Prime Minister Ibrahim al-Jaafari. The reason for Washington's support is not hard to explain. In September 2003, Uloum told the British-based Financial Times that American energy companies should have "priority" over Iraqi oil fields.
The contractual form agreed on by the US experts and Iraqi exiles for the development of Iraq's oil industry was the Production Sharing Agreement (PSA).
Platform characterises PSAs as an "ingenious arrangement". They were first introduced in the 1960s as a means for circumventing constitutional obstacles or political opposition to the privatisation of nationalised oil industries. Under a PSA, the oil remains legally the possession of the state where it is extracted. Only the operation of the field is controlled by the foreign operator, generally for a period of 25 to 40 years.
PSAs have proven to be a far more lucrative form of contract for transnational energy conglomerates than royalty arrangements. Under most royalty deals, the state takes a fixed percentage of the value of each barrel of oil extracted, regardless of the company's costs or profit margin. Under a PSA, because the state still ostensibly "owns" the oil, the revenue from sales is firstly used to pay the company in full for its exploration, production and other capital costs. The remaining profits are split between the state and the company, according to an agreed ratio.
The profit split generally appears to be to the advantage of the state with ratios of 60:40 or even higher. The companies, however, are guaranteed a return, as all their costs are covered before any profit-sharing begins. Moreover, they can increase their share of the total revenue by inflating their costs or by subcontracting work to their own subsidiaries.
A PSA contract can also contain clauses that overtly advantage the company. One such PSA was signed by the Russian government during the 1990s. The agreement, which gave Shell control of the Sakhalin II project near Sakhalin Island in Russia's Far East, stipulated that the Russian government would receive no share at all until the company had achieved a specified profit margin.
Moreover, the Platform report notes that a PSA can specify that any disputes be resolved in international tribunals such as the US-based International Centre for the Settlement of Investment Disputes or the French-based International Chamber of Commerce. These bodies are controlled by the major powers rather than the nation-state where the oil is being extracted.
Summing up the essential characteristic of a PSA, a British academic cited by Platform wrote: "The government can be seen to be running the showand the company can run it behind the camouflage of legal title symbolising the assertion of national sovereignty."
Naked corporate plunder
The decision by the US occupation to apply this PSA model to Iraq amounts to naked corporate plunder. While common in countries that do not possess large reserves of oil and gas, or where the cost of the development of fields is substantialsuch as offshore oil wellsPSAs are virtually unheard of in large oil-producing states like Iraq. Such nations either exploit their energy resources directly or use their bargaining power to negotiate far more equitable contracts.
Platform points out that of the seven largest oil producersSaudi Arabia, Iran, Kuwait, Iraq, the United Arab Emirates, Venezuela and Russia, which collectively sit on top of 72 percent of the world's known reservesonly Russia has ever signed PSAs. During the first stage of capitalist restoration in the 1990s, when the Stalinist regime literally liquidated the state-owned assets of the former Soviet Union, Moscow entered three such agreements. All have cost the Russian state billions of dollars in lost revenues and are the subject of bitter recriminations.
The most expansive period in the history of the Iraqi oil industry was between 1970 and 1979. Financed directly by the government, the state-owned Iraqi National Oil Company increased production from 1.5 million barrels per day to 3.7 million barrels per day, and explored eight of the largest new fields that still have not been developed.
Iraq's new constitution, however, was written by US officials and Iraqi collaborators with the occupation to exclude any possibility of this being repeated.
The clauses referring to oil and gas establish the legal mechanisms for PSAs. Article 108 proscribes the direct privatisation of the energy resources by declaring that oil and gas "are the ownership of all the people of Iraq in all the regions and governorates". Clause two of Article 109, however, stipulates that the different branches of Iraq's government "formulate the necessary strategic policies to develop the oil and gas wealth in a way that achieves the highest benefit to the Iraqi people using the most advanced techniques of market principles and encourages investment" (emphasis added).
Under PSAs, the transnational companies will not "own" Iraq's oil and gas. Rather, they will develop the reserves according to "market principles" on the basis of one-sided contracts that "encourage investment".
Furthermore, the first clause of Article 109 stipulates that the Iraqi federal government only has authority over the "management of oil and gas extracted from current fields". Article 111 declares that "all powers not stipulated in the exclusive authorities of the federal government shall be the powers of the regions and governorates". The implication is that the federal government will control the 17 currently producing fields, while the 63 undeveloped fields, as well as any new discoveries, will be under the jurisdiction of the regions and provinces.
In other words, PSAs can be signed for the exploitation of new fields with regional governments such as the Kurdish Regional Government (KRG) in northern Iraq, or the provincial governments in the predominantly Shiite Arab and oil-rich south. The Platform report notes that of the 25 new fields named by the Iraqi Ministry of Oil in 1995 for "priority development", 11 were in the south, 11 in the north and just 4 were in the central region.
The constitution was ratified by referendum on October 15. Significant portions of Iraq's oil can therefore be hived off to transnational energy giants regardless of who makes up the government in Baghdad after the elections on December 15, or how long the anti-occupation insurgency continues in the predominantly Sunni Arab provinces of central Iraq.
Last week, this process began. The KRG announced that drilling had begun on the Tawke field in northern Iraq on the basis of a PSA signed with the Norwegian company DNO in June 2004. The agreement gives 60 percent profit to the Kurdish region and 40 percent to the company. The project is the first oil development by a foreign company in Iraq for 20 years.
A veritable rush of PSAs can be expected over the coming period, with the terms likely to be even more favourable to the transnational companies than anything seen elsewhere.
"Crude Designs" states: "The key issue here is bargaining power. The Iraqi state is new and weak, and damaged by ongoing violence and by corruption, and the country is still under military occupation ... the oil companies will inevitably wish to focus on the current security situation to push for a deal comparable to - or better than - that in other countries in the world, while downplaying the huge reserves and low production costs that make Iraq an irresistible investment."
The report points to a blatantly neo-colonial contractual clause that is likely to be inserted into PSAs on the demand of the US and other occupying powers - a stipulation against government interference over oil production rates.The problem faced by the criminals perpetrating this theft is how to destabilize Iraq enough to keep control without destabilizing it too much to get any economic value out of it. Bush, along with much of the U.S. ruling elite, still thinks that whether or not the United States wins in Iraq has to do only with U.S. "will" and "resolve." They are leaving the Iraqi people's will and resolve (not to mention Russia and China's) completely out of their equation. They also have little respect for the will and resolve of the American people to force a withdrawal, and in that they may be right - but to keep the U.S. public mollified they need to keep the economy propped up, and to do that they have to get the oil flowing in Iraq. Thus far, they can't pump and transport nearly enough oil out of Iraq to save the U.S. economy.
Platform observes: "Iraq would not be able to control the depletion rate of its oil resources - as an oil dependent country, the depletion rate is absolutely key to Iraq's development strategy, but would be largely out of the government's control. Unable to hold back foreign companies' production rates, Iraq would also be likely to have difficulty complying with OPEC (Organisation of Petroleum Exporting Countries) quotas which would harm Iraq's position within OPEC and potentially the effectiveness of OPEC itself."
A key objective of the major powers since the oil crisis of the 1970s has been to shatter the ability of the main oil-producing states to ever again ration world oil supplies.
In the lead-up to the March 2003 invasion, the propaganda of the Bush administration and its international allies was that the war was motivated by the need to eliminate the threat posed by Iraq's "weapons of mass destruction", particularly its alleged efforts to acquire nuclear weapons. The invading powers also claimed to possess evidence of links between the regime of Saddam Hussein and the Al Qaeda terrorist network.
These lies were the justification for a predatory and illegal war. While Platform did not dwell on the report's political implications, "Crude Designs" provides ample data to underscore that the unanimity in the American political establishment that the occupation of Iraq must continue is bound up with vital economic and strategic interests of the most powerful sections of the American corporate and financial elite.
"Crude Designs: The rip-off of Iraq's oil wealth" is available in html and PDF format from Platform's Unravelling the Carbon Web.
If they fail in their tightrope walk and the economy crashes, it might be a good idea to learn from those who have gone through the process: the Russians. Remember the other "superpower?" They already went through and survived their economic collapse and have been doing fairly well lately from higher oil prices. See this past weekend's Signs page for a remarkable essay by a survivor of the Soviet collapse, Dmitry Orlov, who tells us what we can expect and gives us some advice on how to survive it. Here are a few bits from a piece well worth reading in full:
A decade and a half ago the world went from bipolar to unipolar, because one of the poles fell apart: The S.U. is no more. The other pole symmetrically named the U.S. has not fallen apart yet, but there are ominous rumblings on the horizon. The collapse of the United States seems about as unlikely now as the collapse of the Soviet Union seemed in 1985. The experience of the first collapse may be instructive to those who wish to survive the second.Again, well worth reading in full.
... [W]hat must inevitably come to pass if the Goddess of Technology were to fail us [is] a series of wars over ever more scarce resources Let us not argue that this has never happened, but did it ever amount to anything more than a futile gesture of desperation? Wars take resources, and, when resources are already scarce, fighting wars over resources becomes a lethal exercise in futility. Those with more resources would be expected to win. I am not arguing that wars over resources will not occur. I am suggesting that they will be futile, and that victory in these conflicts will be barely distinguishable from defeat. I would also like to suggest that these conflicts would be self-limiting: modern warfare uses up prodigious amounts of energy, and if the conflicts are over oil and gas installations, then they will get blown up, as has happened repeatedly in Iraq. This will result in less energy being available and, consequently, less warfare.
Take, for example, the last two US involvements in Iraq. In each case, as a result of US actions, Iraqi oil production decreased. It now appears that the whole strategy is a failure. Supporting Saddam, then fighting Saddam, then imposing sanctions on Saddam, then finally overthrowing him, has left Iraqi oil fields so badly damaged that the "ultimate recoverable" estimate for Iraqi oil is now down to 10-12% of what was once thought to be underground (according to the New York Times).
But these are all details; the point I really want to make is that proposing resource wars, even as a worst-case scenario, is still a form of denial. The implicit assumption is this: if all else fails, we will go to war; we will win; the oil will flow again, and we will be back to business as usual in no time. Again, I would suggest against waiting around for the success of a global police action to redirect the lion's share of the dwindling world oil supplies toward the United States.
Outside this last circle of denial lies a vast wilderness called the Collapse of Western Civilization, roamed by the Four Horsemen of the Apocalypse, or so some people will have you believe. Here we find not denial but escapism: a hankering for a grand finale, a heroic final chapter. Civilizations do collapse this is one of the best-known facts about them but as anyone who has read The Decline and Fall of the Roman Empire will tell you, the process can take many centuries.
What tends to collapse rather suddenly is the economy. Economies, too, are known to collapse, and do so with far greater regularity than civilizations. An economy does not collapse into a black hole from which no light can escape. Instead, something else happens: society begins to spontaneously reconfigure itself, establish new relationships, and evolve new rules, in order to find a point of equilibrium at a lower rate of resource expenditure.
Note that the exercise carries a high human cost: without an economy, many people suddenly find themselves as helpless as newborn babes. Many of them die, sooner than they would otherwise: some would call this a "die-off." There is a part of the population that is most vulnerable: the young, the old, and the infirm; the foolish and the suicidal. There is also another part of the population that can survive indefinitely on insects and tree bark. Most people fall somewhere in between.
Economic collapse gives rise to new, smaller and poorer economies. That pattern has been repeated many times, so we can reason inductively about similarities and differences between a collapse that has already occurred and one that is about to occur I hope that my thought experiment will allow me to guess correctly at the general shape of the new economy, and arrive at survival strategies that may be of use to individuals and small communities.
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