COMPETITION OVER WORLD’S OIL RESOURCES AND THE REPRODUCTION OF THE US HEGEMONY A THESIS SUBMITTED TO THE GRADUATE SOCIAL SCIENCES OF MIDDLE EAST TECHNICAL UNIVERSITY BY MUZAFFER KÜÇÜK IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF SCIENCE IN THE DEPARTMENT OF INTERNATIONAL RELATIONS SEPTEMBER 2011 Approval of the Graduate School of Social Sciences Prof. Dr. Meliha B. Altunışık Director I certify that this thesis satisfies all the requirements as a thesis for the degree of Master of Science. Prof. Dr. Hüseyin Bağcı Head of Department This is to certify that we have read this thesis and that in our opinion it is fully adequate, in scope and quality, as a thesis for the degree of Master of Science. Prof. Dr. Mustafa Türkeş Supervisor Examining Committee Members Prof. Dr. Mustafa Türkeş(METU, IR) Prof. Dr. İlhan Uzgel(AU, FPS/IR) Assoc. Prof. Dr. Ebru Boyar (METU, IR) I hereby declare that all information in this document has been obtained and presented in accordance with academic rules and ethical conduct. I also declare that, as required by these rules and conduct, I have fully cited and referenced material and results that are not original to this work. Name, Last name: Signature : iii ABSTRACT COMPETITION OVER WORLD’S ENERGY RESOURCES AND THE REPRODUCTION OF THE US HEGEMONY Küçük, Muzaffer MS., Department of International Relations Supervisor: Prof. Dr. Mustafa TÜRKEŞ September, 2011, 186 pages This thesis seeks to analyze the role and importance of establishing control over the world’s oil resources in reproduction of the global hegemonic position of the US. It is asserted that dominant position of US dollar in global financial system has an important place in reproduction of US world hegemony and ensuring that oil transactions are made through US dollar has played an important role in maintaining the dominant position of dollar. It is also argued that secure access to cheap energy resources is of utmost importance for advanced industrialized nations of the world in terms of maintaining their economic growth. In this respect, this thesis portrays US policies and strategies to take world’s energy resources under its control and thereby maintain the dollar hegemony and making the advanced industrialized nations of Western Europe and East Asia dependent on US goodwill for secure access to energy. Being an important actor in global energy market, competition and cooperation between Russia and US is also taken into consideration. In this thesis, it is assumed that the US world hegemony is achieved through both cooperation and competition among advanced industrialized states. Keywords: US hegemony, energy, oil, US dollar iv ÖZ DÜNYA PETROL KAYNAKLARI ÜZERİNDE HAKİMİYET MÜCADELESİ VE ABD’NİN DÜNYA HEGEMONYASININ YENİDEN ÜRETİMİ Küçük, Muzaffer Yüksek Lisans, Uluslararası İlişkiler Bölümü Tez Yöneticisi: Prof. Dr. Mustafa Türkeş Eylül 2011, 186 sayfa Bu tez dünya petrol kaynakları üzerinde kurulmaya çalışılan hakimiyetin ABD’nin dünya hegemonyasının yeniden üretimindeki rolü ve önemini incelemeyi amaçlamaktadır. Amerikan dolarının dünya finansal sistemindeki üstün konumunun ABD’nin dünya hegemonyasının yeniden üretimindeki rolünü dikkate alarak uluslararası petrol ticaretinin Amerikan dolarıyla gerçekleştirilmesinin dolar hakimiyetinin devam ettirilmesindeki önemine odaklanır. Öte yandan, ucuz enerji kaynaklarına erişimin gelişmiş kapitalist ülkelerin ekonomik büyümelerinin devam ettrilmesindeki rolünü göz önünde bulundurarak ABD’nin dünya enerji kaynakları üzerinde hakimiyet kurma ve söz konusu gelişmiş kapitalist ülkeleri enerji ihtiyaçları üzerinden kendisine bağımlı hale getirme stratejisini ele alır. Dünya enerji piyasasında önemli bir konuma sahip olması sebebiyle Rusya ve ABD arasındaki rekabet ve işbirliğini içeren ilişkileri de dikkate alır. Global hegemonyasını yeniden üretirken ABD’nin gelişmiş kapitalist ülkelerle bir yandan rekabet ederken bir yandan işbirliği girişimlerinde bulunduğu gözlenir. Anahtar kelimeler: ABD hegemonyası, enerji, petrol, Amerikan doları v ACKNOWLEDGMENTS I wish to express my deepest gratitude to my supervisor Prof. Dr. Mustafa Türkeş for his guidance, advice, criticism, encouragement, insight, kindness and self- sacrificing attitude throughout the research. He even sacrificed from his summer holiday for providing me with his irreplaceable academic assistance. Without him, writing this thesis would not have been possible. I would also like to thank Prof. Dr. İlhan Uzgel and Assoc. Prof. Dr. Ebru Boyar for their suggestions, comments and corrections. Special thanks go to my family, especially to my lovely sister Funda Küçük, for their moral support, caring and patience. Lastly, I woud like to thank TUBİTAK for its financial support throughout my studies. vi TABLE OF CONTENTS PLAGIARISM........................................................................................................ iii ABSTRACT ........................................................................................................... iv ÖZ ............................................................................................................................v ACKNOWLEDGEMENTS .................................................................................... vi TABLE OF CONTENT ......................................................................................... vii LIST OFABBREVIATIONS .................................................................................. ix CHAPTER 1. INTRODUCTION AND THEORETICAL FRAMEWORK..................................1 2. HISTORICAL BACKGROUND OF COMPETITION OVER OIL AND THE US WORLD HEGEMONY ..........................................................................................15 2.1. Introduction.................................................................................................15 2.2. 19th Century British Hegemony and Challenges It Faced .............................16 2.3. Rising Importance of Oil ............................................................................22 2.4. Competition over Oil During and After World War I...................................27 2.5. The Great Depression, Second World War and Oil .....................................38 2.6. Cold War and Rise of the US Hegemony.....................................................41 2.7. The Oil Factor in Consolidation of the US Hegemony .................................49 2.8. Conclusion ..................................................................................................59 3. THE POST-BRETTON WOODS PERIOD, COMPETITION OVER OIL AND REPRODUCTION OF THE US HEGEMONY ..................................................61 3.1. Introduction.................................................................................................61 3.2. Challenges to the US World Hegemony and the Fall of Bretton Woods System ...............................................................................61 3.3. Neo-Liberalism, the US World Hegemony and Oil Factor ...........................67 3.4. Downfall of US Economy, Growing US Debts and Oil Factor.....................82 3.5. The First Gulf War and Consolidation of the US Hegemony……………….86 3.6. Countering the Asian Challenge ..................................................................93 3.7. Passive Revolution in Russia? .....................................................................95 3.8. Conclusion ..................................................................................................97 4. ERA OF PETRO-DOLLAR WARFARE AND THE SECOND GULF WAR .....99 vii 4.1. Introduction.................................................................................................99 4.2. From Clinton to Bush Administration: An Overall Assessment ..............................................................................99 4.3. Franco-German Challenge and Emergence of Euro ...................................102 4.4. Theory of Peak Oil and Bush’s National Energy Policy.............................108 4.5. The Bush Doctrine ....................................................................................115 4.6. More Coercion Than Consent: The Second Gulf War ................................119 4.7. Conclusion ................................................................................................127 5. POST GULF WAR CHALLENGES TO PETRO-DOLLAR HEGEMONY AND OIL GEOPOLITICS ........................................................129 5.1. Introduction...............................................................................................129 5.2. Dollar’s Reserve Currency Status After War: A General Outlook ...................................................................................130 5.3. Intentions of Putin’s Russia and Geopolitics of Caspian Region .........................................................................................139 5.4. Rising Power of China and Oil Factor .......................................................151 5.5. Conclusion ................................................................................................158 6. CONCLUSION.................................................................................................160 BIBLIOGRAPHY.................................................................................................164 viii LIST OF ABBREVIATIONS IMF - International Monetary Fund GATT - General Agreement on Tariffs and Trade SOCAL - Standard Oil Company of California CASOC - Californian-Arabian Standard Oil Company ARAMCO -