[R-G] Disaster capitalism: State of extortion

Anthony Fenton fentona at shaw.ca
Mon Jul 7 09:21:48 MDT 2008

Disaster capitalism: State of extortion
 >by Naomi Klein
July 7, 2008

Once oil passed $140 a barrel, even the most rabidly right-wing media  
hosts had to prove their populist cred by devoting a portion of every  
show to bashing Big Oil. Some have gone so far as to invite me on for  
a friendly chat about an insidious new phenomenon: "disaster  
capitalism." It usually goes well — until it doesn't.

For instance, "independent conservative" radio host Jerry Doyle and I  
were having a perfectly amiable conversation about sleazy insurance  
companies and inept politicians when this happened: "I think I have a  
quick way to bring the prices down," Doyle announced. "We've invested  
$650 billion to liberate a nation of 25 million people. Shouldn't we  
just demand that they give us oil? There should be tankers after  
tankers backed up like a traffic jam getting into the Lincoln Tunnel,  
the Stinkin' Lincoln, at rush hour with thank-you notes from the Iraqi  
government.... Why don't we just take the oil? We've invested it  
liberating a country. I can have the problem solved of gas prices  
coming down in ten days, not ten years."

There were a couple of problems with Doyle's plan, of course. The  
first was that he was describing the biggest stickup in world history.  
The second, that he was too late: "We" are already heisting Iraq's  
oil, or at least are on the cusp of doing so.

It's been ten months since the publication of my book The Shock  
Doctrine: The Rise of Disaster Capitalism, in which I argue that  
today's preferred method of reshaping the world in the interest of  
multinational corporations is to systematically exploit the state of  
fear and disorientation that accompanies moments of great shock and  
crisis. With the globe being rocked by multiple shocks, this seems  
like a good time to see how and where the strategy is being applied.

And the disaster capitalists have been busy — from private  
firefighters already on the scene in Northern California's wildfires,  
to land grabs in cyclone-hit Burma, to the housing bill making its way  
through Congress. The bill contains little in the way of affordable  
housing, shifts the burden of mortgage default to taxpayers and makes  
sure that the banks that made bad loans get some payouts. No wonder it  
is known in the hallways of Congress as "The Credit Suisse Plan,"  
after one of the banks that generously proposed it.

Iraq Disaster: We broke it, we (just) bought it

But these cases of disaster capitalism are amateurish compared with  
what is unfolding at Iraq's oil ministry. It started with no-bid  
service contracts announced for ExxonMobil, Chevron, Shell, BP and  
Total (they have yet to be signed but are still on course). Paying  
multinationals for their technical expertise is not unusual. What is  
odd is that such contracts almost invariably go to oil service  
companies — not to the oil majors, whose work is exploring, producing  
and owning carbon wealth. As London-based oil expert Greg Muttitt  
points out, the contracts make sense only in the context of reports  
that the oil majors have insisted on the right of first refusal on  
subsequent contracts handed out to manage and produce Iraq's oil  
fields. In other words, other companies will be free to bid on those  
future contracts, but these companies will win.

One week after the no-bid service deals were announced, the world  
caught its first glimpse of the real prize. After years of back-room  
arm-twisting, Iraq is officially flinging open six of its major oil  
fields, accounting for around half of its known reserves, to foreign  
investors. According to Iraq's oil minister, the long-term contracts  
will be signed within a year. While ostensibly under control of the  
Iraq National Oil Company, foreign firms will keep 75 per cent of the  
value of the contracts, leaving just 25 per cent for their Iraqi  

That kind of ratio is unheard of in oil-rich Arab and Persian states,  
where achieving majority national control over oil was the defining  
victory of anticolonial struggles. According to Muttitt, the  
assumption until now was that foreign multinationals would be brought  
in to develop brand-new fields in Iraq — not to take over ones that  
are already in production and therefore require minimal technical  
support. "The policy was always to allocate these fields to the Iraq  
National Oil Company," he told me. This is a total reversal of that  
policy, giving INOC a mere 25 per cent instead of the planned 100 per  

So what makes such lousy deals possible in Iraq, which has already  
suffered so much? Ironically, it is Iraq's suffering — its never- 
ending crisis — that is the rationale for an arrangement that  
threatens to drain its treasury of its main source of revenue. The  
logic goes like this: Iraq's oil industry needs foreign expertise  
because years of punishing sanctions starved it of new technology and  
the invasion and continuing violence degraded it further. And Iraq  
urgently needs to start producing more oil. Why? Again because of the  
war. The country is shattered, and the billions handed out in no-bid  
contracts to Western firms have failed to rebuild the country. And  
that's where the new no-bid contracts come in: they will raise more  
money, but Iraq has become such a treacherous place that the oil  
majors must be induced to take the risk of investing. Thus the  
invasion of Iraq neatly creates the argument for its subsequent pillage.

Several of the architects of the Iraq War no longer even bother to  
deny that oil was a major motivator. On National Public Radio's To the  
Point, Fadhil Chalabi, one of the primary Iraqi advisers to the Bush  
Administration in the lead-up to the invasion, recently described the  
war as "a strategic move on the part of the United States of America  
and the U.K. to have a military presence in the Gulf in order to  
secure [oil] supplies in the future." Chalabi, who served as Iraq's  
oil under secretary and met with the oil majors before the invasion,  
described this as "a primary objective."

Invading countries to seize their natural resources is illegal under  
the Geneva Conventions. That means that the huge task of rebuilding  
Iraq's infrastructure — including its oil infrastructure — is the  
financial responsibility of Iraq's invaders. They should be forced to  
pay reparations. (Recall that Saddam Hussein's regime paid $9 billion  
to Kuwait in reparations for its 1990 invasion.) Instead, Iraq is  
being forced to sell 75 per cent of its national patrimony to pay the  
bills for its own illegal invasion and occupation.

Oil price shock: Give us the arctic or never drive again

Iraq isn't the only country in the midst of an oil-related stickup.  
The Bush Administration is busily using a related crisis — the soaring  
price of fuel — to revive its dream of drilling in the Arctic National  
Wildlife Refuge (ANWR). And of drilling offshore. And in the rock- 
solid shale of the Green River Basin. "Congress must face a hard  
reality," said George W. Bush on June 18. "Unless members are willing  
to accept gas prices at today's painful levels — or even higher — our  
nation must produce more oil."

This is the President as Extortionist in Chief, with gas nozzle  
pointed to the head of his hostage — which happens to be the entire  
country. Give me ANWR, or everyone has to spend their summer vacations  
in the backyard. A final stickup from the cowboy President.

Despite the Drill Here. Drill Now. Pay Less bumper stickers, drilling  
in ANWR would have little discernible impact on actual global oil  
supplies, as its advocates well know. The argument that it could  
nonetheless bring down oil prices is based not on hard economics but  
on market psychoanalysis: drilling would "send a message" to the oil  
traders that more oil is on the way, which would cause them to start  
betting down the price.

Two points follow from this approach. First, trying to psych out  
hyperactive commodity traders is what passes for governing in the Bush  
era, even in the midst of a national emergency. Second, it will never  
work. If there is one thing we can predict from the oil market's  
recent behavior, it is that the price is going to keep going up  
regardless of what new supplies are announced.

Take the massive oil boom under way in Alberta's notorious tar sands.  
The tar sands (sometimes called the oil sands) have the same things  
going for them as Bush's proposed drill sites: they are nearby and  
perfectly secure, since the North American Free Trade Agreement  
contains a provision barring Canada from cutting off supply to the  
United States. And with little fanfare, oil from this largely untapped  
source has been pouring into the market, so much so that Canada is now  
the largest supplier of oil to the United States, surpassing Saudi  
Arabia. Between 2005 and 2007, Canada increased its exports to the  
States by almost 100 million barrels. Yet despite this significant  
increase in secure supplies, oil prices have been going up the entire  

What is driving the ANWR push is not facts but pure shock doctrine  
strategy — the oil crisis has created the conditions in which it is  
possible to sell a previously unsellable (but highly profitable) policy.

Food price shock: Genetic modification or starvation

Intimately connected to the price of oil is the global food crisis.  
Not only do high gas prices drive up food costs but the boom in  
agrofuels has blurred the line between food and fuel, pushing food  
growers off their land and encouraging rampant speculation. Several  
Latin American countries have been pushing to re-examine the push for  
agrofuels and to have food recognized as a human right, not a mere  
commodity. United States Deputy Secretary of State John Negroponte has  
other ideas. In the same speech touting the US commitment to emergency  
food aid, he called on countries to lower their "export restrictions  
and high tariffs" and eliminate "barriers to use of innovative plant  
and animal production technologies, including biotechnology." This was  
an admittedly more subtle stickup, but the message was clear:  
impoverished countries had better crack open their agricultural  
markets to American products and genetically modified seeds, or they  
could risk having their aid cut off.

Genetically modified crops have emerged as the cureall for the food  
crisis, at least according to the World Bank, the European Commission  
president (time to "bite the bullet") and Prime Minister of Britain  
Gordon Brown. And, of course, the agribusiness companies. "You cannot  
today feed the world without genetically modified organisms," Peter  
Brabeck, chairman of Nestlé, told the Financial Times recently. The  
problem with this argument, at least for now, is that there is no  
evidence that GMOs increase crop yields, and they often decrease them.

But even if there was a simple key to solving the global food crisis,  
would we really want it in the hands of the Nestlés and Monsantos?  
What would it cost us to use it? In recent months Monsanto, Syngenta  
and BASF have been frenetically buying up patents on so-called  
"climate ready" seeds — plants that can grow in earth parched from  
drought and salinated from flooding.

In other words, plants built to survive a future of climate chaos. We  
already know the lengths Monsanto will go to protect its intellectual  
property, spying on and suing farmers who dare to save their seeds  
from one year to the next. We have seen patented AIDS medications fail  
to treat millions in sub-Saharan Africa. Why would patented "climate  
ready" crops be any different?

Meanwhile, amid all the talk of exciting new genetic and drilling  
technologies, the Bush Administration announced a moratorium of up to  
two years on new solar energy projects on federal lands — due,  
apparently, to environmental concerns. This is the final frontier for  
disaster capitalism. Our leaders are failing to invest in technology  
that will actually prevent a future of climate chaos, choosing instead  
to work hand in hand with those plotting innovative schemes to profit  
from the mayhem.

Privatizing Iraq's oil, ensuring global dominance for genetically  
modified crops, lowering the last of the trade barriers and opening  
the last of the wildlife refuges... Not so long ago, those goals were  
pursued through polite trade agreements, under the benign pseudonym  
"globalization." Now this discredited agenda is forced to ride on the  
backs of serial crises, selling itself as lifesaving medicine for a  
world in pain.

Naomi Klein is the author of The Shock Doctrine: The Rise of Disaster  
Capitalism. This column has appeared in The Nation.

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