Oil politics in changing times

Obama’s presidency found Washington’s long-time foe Castro at his least potent. Yet, having outlasted the Eisenhower, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush Sr, Clinton and Bush Jr administrations, Fidel may also have just lived long enough to witness unraveling of the US imposed economic embargo of 51 years. And, typical of the former communist bloc’s strong man in Havana, the script features all the ingredients of a geopolitical thriller – oil diplomacy, dissident politics, corporate greed, all in the backdrop of an enduring cold war hangover mutating into South America’s socialist revolution.
Ironically, the Cuban government’s swiftness in exploring offshore oil and gas reserves has seriously wrongfooted the American government since the embargo prohibits US companies from engaging with Cuban drilling activities. Cuba’s deposits sit over 43,000 square-miles in the Florida straits between key west and Cuba, where powerful currents are likely to send 90 per cent of any potential spillage into the keys and up Florida’s east coast. And with American stakeholders unable to partake in discussions regarding safe exploitation of resources and anticipating crises, serious differences have emerged in the congress over whether or not the embargo has outlived its utility.
Washington has till the end of the year to decide, when Spanish company Respol-YPF’s chartered submersible rig reaches the straits. Cuba’s offshore reserves are estimated at 5-20b barrels, and reports indicate they have also engaged Norway’s Statoil ASA, India’s ONGC, Brazilian Petroleo Brasileiro (Petrobras) and Mexican Petroleos Mexicanos (Pemex), as if hedging against the risk of US pressure bearing down on one particular entity.
The harshest voices in the US congress understandably come from the Florida belt, where leveraging the anti-Castro émigré vote is mission critical to securing domestic political advantage. Yet even catering to credible dissident concerns will only further US alienation. The 34 members that warned Repsol directly to desist not only deepened the congressional cleavage, but also emboldened Cuba’s oil-rich allies Venezuela and Russia, who will not be held back from drilling. Also, all engaged companies are state enterprises, and Washington will be wary of upsetting parent governments by threats of sanctions against them.
America’s own energy needs also restrict its options, demanding a step away from the half-century embargo. Mexico is America’s second largest oil supplier. And with Pemex announcing increasing its stake in Respol from 4.8 to 9.8 per cent to create a “strategic partnership”, corporate financial interests virtually assure the drilling, leaving Washington’s with the only practical option of relaxing sanctions against Cuba just as cautiously as Havana is posturing towards opening up.
Last month’s Cuba visit of former US environmental protection agency head William Reilly reflects Washington’s appreciation of the need to move forward. If this interaction is followed by more aggressive lobbying, the embargo’s death knell will already have sounded, marking yet another point in recent US history when oil dynamics exposed it as unsatisfactorily behind the curve.
Eight years into the Iraq war, oil tensions and persistent low-level civil war continue to alienate the oil rich Kurdish north from the capital. After a six-month violent uprising in Libya, the country is no where near restoring former production levels or exploring the 75 per cent yet-untapped reserves. Arabia’s sudden spring almost swept away Washington’s closely allied wahabi monarchs in crucial GCC pockets, exposing the fragility of ruling over oil rich areas dominated by the shia. Their recent uprising threatened to seriously upset the regional calculus by bolstering Iran and Syria, and their proxies Hezbollah and Hamas. In Latin America, opec’s recent announcement that Venezuelan reserves might top Saudi’s gives strength to Caracas strongman Hugo Chavez, who continues to personify anti-US sentiment and is a constant reminder of the failed ’04 CIA coup to install a puppet regime.
Oil is not only an indicator of the international economy’s direction, it also sets the stage for political alliances, military posturing and lives and deaths of millions as countries rush to secure energy supplies in the ruthless, zero-sum game of nations. Being the largest energy consumer, in addition to boasting the world’s biggest military, the US naturally takes the lead in deciding the future, be it through negotiations, sanctions, or outright war. Yet of late the superpower’s ability to extend its reach and exercise its influence is seen waning. In addition to its economic problems, Washington must also safeguard against rivals as the energy chess game enters a new, far more complicated phase. It is only fitting that the most disruptive novelty has come from the ageing, ailing Fidel, who has fought-against and observed the empire as it soared to dizzying heights and now appears stalling.

The writer is Business Editor, Pakistan Today