Back to News

Portrait of an Oil-Addicted Former Superpower
How Rising Oil Prices Are Obliterating America's
Superpower Status

By Michael T. Klare

Nineteen years ago, the fall of the Berlin Wall
effectively eliminated the Soviet Union as the world's
other superpower. Yes, the USSR as a political entity
stumbled on for another two years, but it was clearly an
ex-superpower from the moment it lost control over its
satellites in Eastern Europe.

Less than a month ago, the United States similarly lost
its claim to superpower status when a barrel crude oil
roared past $110 on the international market, gasoline
prices crossed the $3.50 threshold at American pumps,
and diesel fuel topped $4.00. As was true of the USSR
following the dismantling of the Berlin Wall, the USA
will no doubt continue to stumble on like the superpower
it once was; but as the nation's economy continues to be
eviscerated to pay for its daily oil fix, it, too, will
be seen by increasing numbers of savvy observers as an
ex-superpower-in-the-making.

That the fall of the Berlin Wall spelled the erasure of
the Soviet Union's superpower status was obvious to
international observers at the time. After all, the USSR
visibly ceased to exercise dominion over an empire (and
an associated military-industrial complex) encompassing
nearly half of Europe and much of Central Asia. The
relationship between rising oil prices and the
obliteration of America's superpower status is, however,
hardly as self-evident. So let's consider the
connection.

Dry Hole Superpower

The fact is, America's wealth and power has long rested
on the abundance of cheap petroleum. The United States
was, for a long time, the world's leading producer of
oil, supplying its own needs while generating a healthy
surplus for export.

Oil was the basis for the rise of the first giant
multinational corporations in the U.S., notably John D.
Rockefeller's Standard Oil Company (now reconstituted as
Exxon Mobil, the world's wealthiest publicly-traded
corporation). Abundant, exceedingly affordable petroleum
was also responsible for the emergence of the American
automotive and trucking industries, the flourishing of
the domestic airline industry, the development of the
petrochemical and plastics industries, the
suburbanization of America, and the mechanization of its
agriculture. Without cheap and abundant oil, the United
States would never have experienced the historic
economic expansion of the post-World War II era.

No less important was the role of abundant petroleum in
fueling the global reach of U.S. military power. For all
the talk of America's growing reliance on computers,
advanced sensors, and stealth technology to prevail in
warfare, it has been oil above all that gave the U.S.
military its capacity to "project power" onto distant
battlefields like Iraq and Afghanistan. Every Humvee,
tank, helicopter, and jet fighter requires its daily
ration of petroleum, without which America's technology-
driven military would be forced to abandon the
battlefield. No surprise, then, that the U.S. Department
of Defense is the world's single biggest consumer of
petroleum, using more of it every day than the entire
nation of Sweden.

From the end of World War II through the height of the
Cold War, the U.S. claim to superpower status rested on
a vast sea of oil. As long as most of our oil came from
domestic sources and the price remained reasonably low,
the American economy thrived and the annual cost of
deploying vast armies abroad was relatively manageable.
But that sea has been shrinking since the 1950s.
Domestic oil production reached a peak in 1970 and has
been in decline ever since -- with a growing dependency
on imported oil as the result. When it came to reliance
on imports, the United States crossed the 50% threshold
in 1998 and now has passed 65%.

Though few fully realized it, this represented a
significant erosion of sovereign independence even
before the price of a barrel of crude soared above $110.
By now, we are transferring such staggering sums yearly
to foreign oil producers, who are using it to gobble up
valuable American assets, that, whether we know it or
not, we have essentially abandoned our claim to
superpowerdom.

According to the latest data from the U.S. Department of
Energy, the United States is importing 12-14 million
barrels of oil per day. At a current price of about $115
per barrel, that's $1.5 billion per day, or $548 billion
per year. This represents the single largest
contribution to America's balance-of-payments deficit,
and is a leading cause for the dollar's ongoing drop in
value. If oil prices rise any higher -- in response,
perhaps, to a new crisis in the Middle East (as might be
occasioned by U.S. air strikes on Iran) -- our annual
import bill could quickly approach three-quarters of a
trillion dollars or more per year.

While our economy is being depleted of these funds, at a
moment when credit is scarce and economic growth has
screeched to a halt, the oil regimes on which we depend
for our daily fix are depositing their mountains of
accumulating petrodollars in "sovereign wealth funds"
(SWFs) -- state-controlled investment accounts that buy
up prized foreign assets in order to secure non-oil-
dependent sources of wealth. At present, these funds are
already believed to hold in excess of several trillion
dollars; the richest, the Abu Dhabi Investment Authority
(ADIA), alone holds $875 billion.

The ADIA first made headlines in November 2007 when it
acquired a $7.5 billion stake in Citigroup, America's
largest bank holding company. The fund has also made
substantial investments in Advanced Micro Systems, a
major chip maker, and the Carlyle Group, the private
equity giant. Another big SWF, the Kuwait Investment
Authority, also acquired a multibillion-dollar stake in
Citigroup, along with a $6.6 billion chunk of Merrill
Lynch. And these are but the first of a series of major
SWF moves that will be aimed at acquiring stakes in top
American banks and corporations.

The managers of these funds naturally insist that they
have no intention of using their ownership of prime
American properties to influence U.S. policy. In time,
however, a transfer of economic power of this magnitude
cannot help but translate into a transfer of political
power as well. Indeed, this prospect has already stirred
deep misgivings in Congress. "In the short run, that
they [the Middle Eastern SWFs] are investing here is
good," Senator Evan Bayh (D-Indiana) recently observed.
"But in the long run it is unsustainable. Our power and
authority is eroding because of the amounts we are
sending abroad for energy...."

No Summer Tax Holiday for the Pentagon

Foreign ownership of key nodes of our economy is only
one sign of fading American superpower status. Oil's
impact on the military is another.

Every day, the average G.I. in Iraq uses approximately
27 gallons of petroleum-based fuels. With some 160,000
American troops in Iraq, that amounts to 4.37 million
gallons in daily oil usage, including gasoline for vans
and light vehicles, diesel for trucks and armored
vehicles, and aviation fuel for helicopters, drones, and
fixed-wing aircraft. With U.S. forces paying, as of late
April, an average of $3.23 per gallon for these fuels,
the Pentagon is already spending approximately $14
million per day on oil ($98 million per week, $5.1
billion per year) to stay in Iraq. Meanwhile, our Iraqi
allies, who are expected to receive a windfall of $70
billion this year from the rising price of their oil
exports, charge their citizens $1.36 per gallon for
gasoline.

When questioned about why Iraqis are paying almost a
third less for oil than American forces in their
country, senior Iraqi government officials scoff at any
suggestion of impropriety. "America has hardly even
begun to repay its debt to Iraq," said Abdul Basit, the
head of Iraq's Supreme Board of Audit, an independent
body that oversees Iraqi governmental expenditures.
"This is an immoral request because we didn't ask them
to come to Iraq, and before they came in 2003 we didn't
have all these needs."

Needless to say, this is not exactly the way grateful
clients are supposed to address superpower patrons.
"It's totally unacceptable to me that we are spending
tens of billions of dollars on rebuilding Iraq while
they are putting tens of billions of dollars in banks
around the world from oil revenues," said Senator Carl
Levin (D-Michigan), chairman of the Armed Services
Committee. "It doesn't compute as far as I'm concerned."

Certainly, however, our allies in the region, especially
the Sunni kingdoms of Kuwait, Saudi Arabia, and the
United Arab Emirates (UAE) that presumably look to
Washington to stabilize Iraq and curb the growing power
of Shiite Iran, are willing to help the Pentagon out by
supplying U.S. troops with free or deeply-discounted
petroleum. No such luck. Except for some partially
subsidized oil supplied by Kuwait, all oil-producing
U.S. allies in the region charge us the market rate for
petroleum. Take that as a striking reflection of how
little credence even countries whose ruling elites have
traditionally looked to the U.S. for protection now
attach to our supposed superpower status.

Think of this as a strikingly clear-eyed assessment of
American power. As far as they're concerned, we're now
just another of those hopeless oil addicts driving a
monster gas-guzzler up to the pump -- and they're
perfectly happy to collect our cash which they can then
use to cherry-pick our prime assets. So expect no summer
tax holidays for the Pentagon, not in the Middle East,
anyway.

Worse yet, the U.S. military will need even more oil for
the future wars on which the Pentagon is now doing the
planning. In this way, the U.S. experience in Iraq has
especially worrisome implications. Under the military
"transformation" initiated by Secretary of Defense
Donald Rumsfeld in 2001, the future U.S. war machine
will rely less on "boots on the ground" and ever more on
technology. But technology entails an ever-greater
requirement for oil, as the newer weapons sought by
Rumsfeld (and now Secretary of Defense Robert Gates) all
consume many times more fuel than those they will
replace. To put this in perspective: The average G.I in
Iraq now uses about seven times as much oil per day as
G.I.s did in the first Gulf War less than two decades
ago. And every sign indicates that the same ratio of
increase will apply to coming conflicts; that the daily
cost of fighting will skyrocket; and that the Pentagon's
capacity to shoulder multiple foreign military burdens
will unravel. Thus are superpowers undone.

Russia's Gusher

If anything demonstrates the critical role of oil in
determining the fate of superpowers in the current
milieu, it is the spectacular reemergence of Russia as a
Great Power on the basis of its superior energy balance.
Once derided as the humiliated, enfeebled loser in the
U.S.-Soviet rivalry, Russia is again a force to be
reckoned with in world affairs. It possesses the
fastest-growing economy among the G-8 group of major
industrial powers, is the world's second leading
producer of oil (after Saudi Arabia), and is its top
producer of natural gas. Because it produces far more
energy than it consumes, Russia exports a substantial
portion of its oil and gas to neighboring countries,
making it the only Great Power not dependent on other
states for its energy needs.

As Russia has become an energy-exporting state, it has
moved from the list of has-beens to the front rank of
major players. When President Bush first occupied the
White House, in February 2001, one of his highest
priorities was to downgrade U.S. ties with Russia and
annul the various arms-control agreements that had been
forged between the two countries by his predecessors,
agreements that explicitly conferred equal status on the
USA and the USSR.

As an indication of how contemptuously the Bush team
viewed Russia at that time, Condoleezza Rice, while
still an adviser to the Bush presidential campaign,
wrote, in the January/February 2000 issue of the
influential Foreign Affairs, "U.S. policy. must
recognize that American security is threatened less by
Russia's strength than by its weakness and incoherence."
Under such circumstances, she continued, there was no
need to preserve obsolete relics of the dual superpower
past like the Anti-Ballistic Missile (ABM) Treaty;
rather, the focus of U.S. efforts should be on
preventing the further erosion of Russian nuclear
safeguards and the potential escape of nuclear
materials.

In line with this outlook, President Bush believed that
he could convert an impoverished and compliant Russia
into a major source of oil and natural gas for the
United States -- with American energy companies running
the show. This was the evident aim of the U.S.-Russian
"energy dialogue" announced by Bush and Russian
President Vladimir Putin in May 2002. But if Bush
thought Russia was prepared to turn into a northern
version of Kuwait, Saudi Arabia, or Venezuela prior to
the arrival of Hugo Chávez, he was to be sorely
disappointed. Putin never permitted American firms to
acquire substantial energy assets in Russia. Instead, he
presided over a major recentralization of state control
when it came to the country's most valuable oil and gas
reserves, putting most of them in the hands of Gazprom,
the state-controlled natural gas behemoth.

Once in control of these assets, moreover, Putin has
used his renascent energy power to exert influence over
states that were once part of the former Soviet Union,
as well as those in Western Europe that rely on Russian
oil and gas for a substantial share of their energy
needs. In the most extreme case, Moscow turned off the
flow of natural gas to Ukraine on January 1, 2006, in
the midst of an especially cold winter, in what was said
to be a dispute over pricing but was widely viewed as
punishment for Ukraine's political drift westwards. (The
gas was turned back on four days later when Ukraine
agreed to pay a higher price and offered other
concessions.) Gazprom has threatened similar action in
disputes with Armenia, Belarus, and Georgia -- in each
case forcing those former Soviet SSRs to back down.

When it comes to the U.S.-Russian relationship, just how
much the balance of power has shifted was evident at the
NATO summit at Bucharest in early April. There,
President Bush asked that Georgia and Ukraine both be
approved for eventual membership in the alliance, only
to find top U.S. allies (and Russian energy users)
France and Germany blocking the measure out of concern
for straining ties with Russia. "It was a remarkable
rejection of American policy in an alliance normally
dominated by Washington," Steven Erlanger and Steven Lee
Myers of the New York Times reported, "and it sent a
confusing signal to Russia, one that some countries
considered close to appeasement of Moscow."

For Russian officials, however, the restoration of their
country's great power status is not the product of
deceit or bullying, but a natural consequence of being
the world's leading energy provider. No one is more
aware of this than Dmitri Medvedev, the former Chairman
of Gazprom and new Russian president. "The attitude
toward Russia in the world is different now," he
declared on December 11, 2007. "We are not being
lectured like schoolchildren; we are respected and we
are deferred to. Russia has reclaimed its proper place
in the world community. Russia has become a different
country, stronger and more prosperous."

The same, of course, can be said about the United States
-- in reverse. As a result of our addiction to
increasingly costly imported oil, we have become a
different country, weaker and less prosperous. Whether
we know it or not, the energy Berlin Wall has already
fallen and the United States is an ex-superpower-in-the-
making.

Michael Klare is a professor of peace and world security
studies at Hampshire College and author of the just-
released Rising Powers, Shrinking Planet: The New
Geopolitics of Energy (Metropolitan Books). A
documentary film based on his previous book, Blood and
Oil, is available from the Media Education Foundation
and can be ordered at bloodandoilmovie.com.