The conflict in the Gulf regions is one the most important events in the 21st century and it will have huge implications for the whole world. Trump was convinced that the Iranian state would collapse within hours of the massive aerial assault on the country by American and Israeli forces. They did indeed succeed in killing much of the Iranian leadership but the Iranian state did not collapse. Instead they launched a major missile assault on American bases across the regions and on Israel. They also closed down the Strait of Hormuz which effectively prevents the export of oil, gas and other products from the region.
The US found itself trapped in a war which it could not win. It is not surprising that many in the US were reminded of the Vietnam war, which is itself ironic because it was precisely its impending defeat in Vietnam which encouraged the US to become more involved in the politics of West Asia and to develop a closer alliance with Israel.
From South-East Asia to West Asia
It was already clear by the late 1960s that despite its superior weaponry and huge army – close to a million troops on the ground – the US was losing the war in Vietnam. President Nixon and his leading advisor, Kissinger, developed a strategy of establishing more friendly relations with China and becoming much more engaged in West Asia.
The defeat in Vietnam was compounded by economic problems. For decades the US had been the world’s industrial powerhouse. Over the course of the 1960s, Germany and Japan caught up with the US and in some cases pulled ahead. Increased competition and over-production led to falling profits. To make matters worse, the cost of the war against Vietnam greatly increased US public debt.
In the world order created at the end of the Second World War, the dollar was the dominant currency. But it was, like sterling in the 19th and early 20th centuries, based on gold. This was not a problem so long as the US economy overwhelmed all others, but once US industry began to decline it became a potentially huge problem because other countries could reclaim their dollar debts in gold and America’s supply of gold was running out.
In 1970, Nixon broke the connection with gold and the dollar became a fiat currency (one whose value is determined solely by demand for it.) Initially there was concern within the US elite that this shift might weaken the dollar but it turned out to be a great success. Other countries were happy to have the dollar as a trading currency. It was particularly important that oil and gas, arguably the world’s most important commodities, were traded in dollars.
Monetary and military dominance
The dollar’s role as the world’s leading currency gives the US enormous advantages over other countries, both allies and rivals. The US is able to run up huge trade surpluses with other countries: it can import much more than it exports. It also means that other states will buy its government bonds enabling the US to run up huge levels of debt without ever having to pay back. This raised the value of the dollar which was a great advantage to the US financial sector but it worked against US industrial companies because it increased their export price, making them less competitive in the world markets.
The end of the Cold War is widely seen as representing a massive boost to American power, The Soviet Union collapsed and China began to embrace the market system. US capital used the occasion to pour across the world in celebration: there was no alternative to capitalism. But this moment of victory also helped undermine America’s global dominance. If there was no systemic alternative then other states did not need America’s military protection. And if American corporations invested across the world, then how were they to protect those investments unless they also increased their military power?
One solution was to establish American military bases around the world. In Europe, this took the form of NATO expansion. Over the course of the 1990s, an increasing number of influential bodies within the US ruling class – known as think tanks – came around to the view that the US needed to expand its military power and ensure that there were no military competitors: a viewpoint known as ‘neoconservatism’. Initially, this was a minority view within the ruling class but with the coming of the new century it has become the dominant view, endorsed by Republicans and Democrats alike.
Black gold and Israel
The American ruling class are convinced that they need to control most of the world’s oil supply in order to maintain their position of global dominance. We have seen from the earlier invasion of Iraq that this is not primarily about ownership of the oil, it is about control. Control of the oil supply gives the US huge leverage over other states. More than that. Ensuring that oil is sold in dollars is crucial to maintaining the dollar as the world’s leading currency, and all that flows from that.
The concentration of oil and gas in the Middle East ensured that the region was of crucial importance for US global power; it also gave great importance to maintaining a close alliance with Israel. The fact that Israel was a colonial settler state and was politically isolated across the region made the connection to Israel even more valuable to the US. It also created a context where wealthy pro-Israeli networks – the Zionist lobby – were permitted and encouraged to buy the support of American politicians.
Many anti-war commentators in the US, including some of the most astute, argue that Israel controls US foreign policy. This misses the point that Israel is a de facto colony of the United States. The US encourages Israel to engage in policies like mass murder and genocide that it might be unable to pursue itself because of popular opposition at home. The ruling classes of Europe are not much better. Virtually all the European governments have remained silent over Israel’s genocide in Gaza, with some of them – Britain and Germany – actively supporting it. This is not to suggest that Israel does not have a political dynamic of its own. It certainly does and it has become more expansionist and more murderous by the decade, but this suits the foreign policy of the US rulers, Republicans and Democrats alike.
The 9/11 bombings were used to justify the invasion of Afghanistan but it soon became clear that the real object of their military engagement in the region was Iraq, a major oil producer, whose government has no connection with the groups who carried the bombings in New York. In both countries, the major cities were captured easily enough but the US military never established full control of the countryside.
It might seem strange that the US does not seem to have learnt from the wars in Afghanistan and Iraq. If one compares the outcome of these wars to the Second World War, where the US succeeded not only in occupying Japan and (most of) Germany, but in establishing stable allied states, the more recent wars in West Asia might seem like defeats. But that is not how they are seen in Washington. The US has no intention or need to establish stable prosperous states in the region. The real purpose is quite the opposite: to prevent the emergence of strong stable states which are not subservient to the US. In the decades following the Second World War, the US project of global leadership combined coercion and consent. In the 21st century, it is increasing based on coercion.
Oil Wars in the Age of Climate Change
Over the last decade there has been the beginnings of a shift away from the dollar as the trading currency. For example, Saudi Arabia sells its oil to China using the Chinese currency, the yuan. There is another problem here too. From the beginning of the 21st century there has been a growing movement away from carbon fuels like oil and gas towards more environmentally friendly forms of energy like wind power and solar power.
Anyone who pays any attention to what the world’s scientists have been saying about climate change will know that the transition from fossil fuels to renewable forms of energy is crucial to prevent massive damage to human societies across the world. American scientists, many of them working for state-funded bodies, played a key role in discovering and publicising the mechanisms of global warming and climate change. So if the United States is so intent on leading the world, why are they not pushing ahead with alternative forms of energy and encouraging the rest of the world to shift from coal and oil to wind and solar power?
This is not a question which American leaders openly discuss but the main features seem clear enough. One is simple greed. The oil companies are so rich and powerful and lots of other capitalists have invested in shares in these companies, that to abandon oil and gas production would cause great loss of profits to the wealthy classes and that is not something they could lightly embrace. And so they have spent vast sums of money to persuade people that global climate warming is not happening and if it is, it will only happen over a long period of time and it is not something we need to worry too much about here and now.
But the economic interests of the elites here combined with the political leverage that the US gained from controlling the supply of oil or gas to other states. Once renewable energy systems are built, they are able to depend on wind and sun. They didn’t need constant supplies from other regions that could be subjected to political control.
Scientists assumed, reasonably enough, that climate change would impact initially on countries closer to the equator, and this was not something that unduly worried the wealthy elites in America, or their political representatives. But as this century has progressed it has become clear that the consequences of climate change are not only occurring in faraway lands. You don’t have to be a scientist to notice the rise in forest fires, heat waves or flooding. Climate change is coming home.
Over the last couple of years, China has already moved ahead to lead the world in renewable forms of energy. China is by far the largest manufacturer of solar panels and electric vehicles. Instead of seeking to emulate China, the US has doubled down on seeking to control the world’s fossil fuels.
Trump has gone a step further by denying that climate change is happening at all. In his second presidency, he has gone even further and closed down scientific bodies engaged in climate research.
Trump’s approach to climate change provides us with a useful model for understanding his approach to foreign policy. His proclaimed commitment to peace has proven to be fraudulent. He promised to end the Ukraine war within twenty four hours, but since in power has made no serious effort to end that, while pushing instead for the Europeans to pay for it. Trump does not represent a break with the foreign policy of the US ruling class, rather he advocates an intensification of that policy, an escalation of American aggression towards the rest of the world.
US trapped over Iran
If there is increasing concern among the ruling elites of America and Europe about the Iran war, it is not because they are opposed to the illegal assault on Iran or that they are upset by the slaughter of Iranian civilians. They were quite happy to see the US kidnap the Venezuelan leader on the ludicrous charges of narco-terrorism, even while Trump was boasting that he was going to seize Venezuelan oil. The ruling elites of the US and Europe could see that Trump miscalculated massively in launching a war on Iran.
Not only did the Iranian state not collapse after the US and Israeli aerial assault, Iran has succeeded in retaliating with extremely damaging missile attacks on US military bases across the region. They have also caused a lot of damage to the Israeli military. Since then, Hezbollah in Lebanon and the Houthis in Yemen have joined in the war. So too have the Shia militias in Iraq. Most damaging of all, Iran closed the Strait of Hormuz, blocking all ships from sailing through, unless they have Iranian permission. The US found itself trapped. If they pull out of the region the whole world will see that they have been defeated. If they continue the war they will lose more forces and do grave damage to the global economy, not least to the role of the dollar. If the US escalates by sending ground troops, it will be disastrous for these troops. The reality is that the US does not have the troops numbers or the weaponry to defeat Iran. The whole world can see the limits of American – and Israeli – power.
Something between a fifth and a quarter of all the world’s oil supply and an even greater percentage of liquid natural gas passes through the Strait of Hormuz. The Gulf region is also a major supplier of aura, used in fertilizer and helium used to make semiconductors. The closure of the Strait of Hormuz began to significantly increase the price of oil and gas, and other vital commodities. But more than that. We are not just talking about inflation or stagnation. A lot of companies and a lot of economies are dependent on these commodities. If the war on Iran continued, a lot of companies across the world would close and a lot of economies would crash.
The global financial system has never really recovered from the 2008 crash. The measures governments took then prevented a full scale financial collapse but did not resolve the underlying problems. They kicked the can down the road. But debt levels, both public and private are much greater now than they were then. The private credit system (basically unregulated banks) is extremely fragile. The huge rise in share prices in AI companies is a bubble waiting to crash. The last thing that the global capitalist economy needed was the closedown of access to a huge amount of crucial commodities. If this war continued for a few more months we would probably be facing into a global economic crisis as deep as the 1930s. The ceasefire agreed between the US and Iran has put the conflict on hold. It remains to be seen whether they can reach a permanent peace agreement.
