Lawrence Wilkerson: The target of low oil prices is Russia and Iran, throwing their economies into turmoil and opening their doors to sovereign raiders.
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Video: Interview with Lawrence Wilkerson, former chief of staff to United States Secretary of State Colin Powell. Courtesy of The Real News Network (TRNN).
PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I’m Paul Jay.
In the 2007-2008 financial and economic crisis, one of the things that’s been pointed out is that international capital, as such, actually collaborated on a solution. The Fed, American Fed, gave money even to European banks and others. And instead of retreating into trade wars that often lead to real wars, there was a systemic collaboration trying to deal with problem.
So was that the end of this kind of economic warfare? Well, maybe not. We’re seeing economic warfare now. Saudi Arabians have moved the price of oil down into the 40s. There’s a backup into the 60s. There’s a question of might it even go down into the high 30s. It’s undermining, even destroying some major economies in the world–the Russians, the Iranians, the Venezuelans. Maybe it’s even going to harm/hurt the Canadians.
But what’s driving all this? And are we seeing a market mechanism, or are we seeing economic warfare?
Now joining us to talk about all of this is Larry Wilkerson.
Thanks for joining us.
COL. LAWRENCE WILKERSON, FMR. CHIEF OF STAFF TO COLIN POWELL: Thanks for having me, Paul.
JAY: So, one more time, Larry was Colin Powell’s chief of staff. He’s a regular on The Real News and teaches at William & Mary College.
Okay. So the Saudis are arguing, we have no big foul and negative intent here. We’re just doing what the market–we think the market requires from us to our advantage. We’re not trying to kill American shale, which seems to be sort of the predominant theory. We don’t have any geopolitical objectives. We’re not trying to screw the Iranians or the Russians. Except that is what’s happening.
WILKERSON: I think you’re seeing some of the most fundamental precepts being developed and used throughout the globe right now of what I would call the new kind of economic warfare.
I think if you go back to the collapse of the Soviet Union, you will find that the United States, OPEC (the Saudis, principally), in a loose arrangement, force the price of oil down to the point where it was below $15 a barrel for the benchmarks. And that had something to do, along with Afghanistan and the expenditure on that conflict, with the final collapse of the Soviet Union, because that was their principal source of their economy was their petroleum sales.
I think you’re seeing–what you’ve seen of late was an attempt to do some of the same things using the Commodity Futures Trading Commission and a very–if you look at the rules that were abrogated or suspended or whatever for their moving into speculation in a particularly light sweet crude, WTI and Brent and so forth, which is a very, very, very important part of the oil markets, their attempts were to push the price up to $140, $150 a barrel, which we saw it get to. And that was to punish China, that was to rip China’s economy up, if you will, because you look at China, and most of their petroleum that they don’t get internally (which is decreasing every day) has to come from vast distances overseas, lots from the Persian Gulf, for example. And they were contracting for heavy tankers at $200,000. So when you factor all that in, it’s heavy subsidies that the Chinese have to put on that in order to make it efficient within their economy. They’re taking money out of that $2 trillion, $3 trillion in their current accounts balances that they have from United States.
But nonetheless, this is very dangerous, I think, economic warfare. And the signs of it are showing. The president’s working group on financial matters, for example, put into place in its current format and its current energy and power by Bob Rubin under Clinton–called, on Wall Street, the “Plunge Protection Team”. But what it is, in essence, is an attempt to do this on a macro level, to use the economy and economic power to injure other people.
JAY: Well, the American press has been playing this as a Saudi attack or policy to undermine American shale and fracking and all this. But you’re suggesting that in fact, no, the U.S. is in on this with the Saudis.
WILKERSON: I’m suggesting it’s wider than just the Saudis and that you’ve got to have–you don’t have to have the permission of the United States, but you certainly have to have the nod from the United States in order to do this sort of thing. And I think it has to do with more geostrategic important matters than it does with just a temporary setback in fracking or shale extraction or whatever, or whether or not Venezuela’s aided by it or hurt by it and so forth. I think they’re looking at the very tip of the geostrategic ladder, if you will, right now. And Putin and Beijing, Moscow and Beijing, sort of are at that tip. And it’s interesting to see that at one point Putin was probably complicit with this effort in order to injure China.
But now, since Ukraine, Crimea, and the incidences that have developed around that–.
JAY: Complicit to get the price higher.
WILKERSON: Yes, to get the price higher. Now, suddenly, the price is going down. You talk to anyone in the markets who will tell you the truth, and he will tell you, she will tell you there’s absolutely no reason, supply and demand, that these two things should have happened. So there’s got to be another reason they happened.
JAY: So why would the Saudis benefit from this? I mean, I understand how they’re screwing the Iranians. I guess they have a beef with the Russians, given the support for Assad and they would like to weaken Russia. So the Saudis are certainly still intent on overthrowing Assad.
WILKERSON: And there are other wrinkles there, too. The Saudis over time have let it be known that there is a certain benchmark price that incentivizes alternative energy. And they don’t want to see that happen, because they could see themselves at some date in the future perhaps being told, hey, you don’t have any buyers anymore, there’s other energy out there that’s cleaner and better for the environment, and so forth and so on. And then they have a certain benchmark price, too, that they need to make over time on a consistent basis in order to pay their patronage, to pay the royals, who grow every day as the families increase, and to keep their population quiescent.
So they’re caught on this kind of, oh, can’t go too high, can’t go too low; we’d like to stay right here. Well, that stay right here changes as the world situation changes. But nonetheless, you get an appreciation for the dilemma the Saudis are in.
That said, they can do what they need to do for geostrategic purposes for quite a time before they start feeling the worst results from either of these two conditions.
JAY: The Saudis.
WILKERSON: Yeah.
JAY: We’ve heard a year to three years of reserves they’re sitting on.
WILKERSON: They could run something like this for long enough to really hurt another economy or economies.
JAY: So what’s in it for the U.S.?
WILKERSON: What’s in it for the U.S. is punishing Putin in terms of driving the prices down. Look at what’s happening right now. I mean, even though polls show because of his stance against the United States he’s running low 80s in Moscow in the polls, he is having tremendous problems. The inflation now, the ruble is becoming worthless. Inflation is terrible.
JAY: Devaluated about 45 percent than last year.
WILKERSON: Yeah. And the rest of the Russian economy’s not going to pick up. He’s just contracted–many people would say who know the situation well, he’s just contracted Russia out to China in these latest two deals, which is going to give the Chinese even more leeway, more power to develop–’cause that’s what they’re doing–the vast five time zones, 3,000 kilometers Soviet Far East. They’re going to own the Soviet Far East. But Putin has this short-term tactical vision. He doesn’t seem to care.
JAY: But does he have a choice?
WILKERSON: He’s amassing–well, in terms of staying in power, you’re probably right. This is the way he stays in power.
JAY: So Russia’s screwed by this. Iran’s screwed by this. Venezuela’s screwed by this. I mean, the Canadians are, but in the geopolitical equation who cares about the Canadians?
WILKERSON: Actually, I think we do, especially after Harper’s help with Cuba.
JAY: Well, but in terms of the tar sands, they’ll be there when needed.
WILKERSON: Absolutely.
JAY: They’re not going anywhere. If the Canadian economy–.
WILKERSON: That’s something people forget. If you don’t pull it out now, it’s there tomorrow.
JAY: Yeah. So the Canadian economy gets hit, well, so be it.
So, geopolitically it’s going to cause chaos in some significant places. The Americans want chaos?
WILKERSON: I think this kind of economic warfare, as I said earlier, is very dangerous. You’re looking at creating chaos and anarchy in markets that have other factors at work in them. And while you may think the president’s team controls these factors or controls what’s happening in this economic warfare, you may find you don’t. Be careful what you wish for–you may get it. And it may be an awful mess.
I am very reluctant to see this kind of thing, just as I am cyber warfare, as the Sony example might represent, get started big time. These are very dangerous types of warfare for people, especially the United States, who might ultimately be the most vulnerable of all societies to this kind of warfare, to begin experimenting with. It’s simply not the thing we should be doing, in my view.
JAY: Okay. Thanks for joining us.
WILKERSON: Surely.
JAY: And thank you for joining us on The Real News Network.
Lawrence Wilkerson is a retired United States Army soldier and former chief of staff to United States Secretary of State Colin Powell. Wilkerson is an adjunct professor at the College of William & Mary where he teaches courses on US national security. He also instructs a senior seminar in the Honors Department at the George Washington University entitled “National Security Decision Making.”
Courtesy of The Real News Network (TRNN)
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