Resource Diplomacy: Hidden Weapon of Imperialism

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When most of the economists and financial analysts were on pins and needles over the issue of protracted recession, threatening the US economy, oil prices were, befooling many, falling at a rapid rate, much more than the pace of recession. Energy Intelligence Group in New York observed that the declining energy prices would trigger economic growth by “lowering costs for businesses and consumers, who use heating oil, natural gas and gasoline to heat their homes and fuel their cars.” Besides, governments and central banks will get an opportunity to “balance the risks of inflation and recession and the US Federal Reserve and its counterparts worldwide will resort to massive slash in interest rates thus forcing the governments to spend more. Carl Weinberg at High Frequency Economics estimated that the roughly $12 per barrel decrease in oil prices after the Black Tuesday would mean a $250 billion tax cut for the global economy, or nearly one percent of global economic activity. But the most affected countries will be the OPEC economies.

www.politics.com scanned the phenomenon more deeply, perhaps rightly too in an editorial analysis on 23 October 2001 suggesting that oil still allure the megacorps. “Power politics always walks on the dark side, but when it is played on the international arena, it takes on a truly macabre quality. Casts of characters change costumes as the script is performed, while the playwright worries that improvisation will detour from the scenario” it stated.” The US defence strategists obviously assured the Bush Administration of major gains in the first phase of War – and it happened as the defence experts thought and the depressed oil price was a pre-conceived idea in the US diplomatic vocabulary. War causes inflation but oil prices, which are the most common determinants of inflation dropped when the so-called Operation Infinite Justice had begun. Now after the sweeping victory of the United States in the Afghan war, at an amazing speed, has rekindled the hope that Uncle Sam will establish greater hegemony over the major natural resource If this happens , a complete change in the kaleidoscope of geopolitics is in the waiting. However, the war on terrorism has already been “exceptionally high.” President Bush, according to the Center for Defense Information, has sought $396.1 billion for the military in the fiscal 2003 against $350.6 billion in 2002. This is an indication that Washington will do its best to put pressure on the OPEC countries to reduce prices so that it can reduce the pinch of inflation. This tactic of partial transfer of crisis on to the peripheral economies is due to the prevalence of unipolar geopolitics under the hegemony of US imperialism.

The US super-power began stepping up what is known as resource diplomacy after the collapse of the USSR. Robert Karniol, Asia Times editor, wrote in Jane’s Defense Weekly very recently: “American oil companies are always anxious to locate in any remote corner of the world to drill their prize. Haven’t heard much about Anwar lately, have you? Now that the call ‘March to Afghanistan’ is in full motion, it is not much of a detour to visit the Transcaucasus. Why not, if you have the protection of the US Cavalry and the blessing of ‘Mother Russia’.”

Resource diplomacy is essentially a tactical weapon of neocolonialism, but this is being continuously fine-tuned by the imperialist countries. Most of the critics of neocolonialists among the economists seem inadequately concerned about how “invisible imperialism” had developed resource diplomacy to force the peripheral economies to remain restricted as raw material appendage of metropolitan countries. Mikhail Gorbachev in a short piece during the just-concluded Second Earth Summit in Johannesburg recalled his conversation with the US Secretary of State George Schultz in 1992. He told Schultz,” You Americans want to export your way of life everywhere. But you consume 44 per cent of the world’s electric power. If other countries start living standards by your standards, all reserves on the globe will be exhausted within a few years.”

Gorbachev seems to be facing a dilemma between the imperative of self-criticism for fulsome praise towards the US ruling class and admission of the fact that he made an error in over-acting by his bid to rid the Soviet society of bureaucratism and the ills through perestroika and glasnost. But for this dilemma, he would have pulled up President George W Bush for obstructing the global effort for an ecological renewal. Bush drew flak from the European leaders last year for his stubborn refusal to ratify the international treaty aimed at preventing global warming known as the Kyoto Protocol. Even though Scientists point out that the metropolitan countries have been endangering the earth by using fossil fuels that contribute to global warming, the lord of White House is unperturbed. The rich countries emit carbon dioxide along with carbon monoxide, which is generated inevitably due to incomplete combustion, thereby endangering the life-support system menacingly. Washington refuses to agree to increasing the share of renewable energy production globally to 15 per cent of total energy output by 2010, thus sticking to production of electricity by burning of fossil fuels . This is too an example of resource diplomacy, as the refusal to sign the protocol basically affects the interests of peripheral economies. The US has sympathizers like Canada and Saudi Arabia, although the entire EU is against it. But who cares, after all the shah-en-shah of the unipolar geopolitics presently is President Bush ? Griff Thompson, the director of the Office of Energy, Environment and Technology for the U.S. Agency for International Development, presented a deceptive explanation. “We have maintained consistently that targets alone will not deliver the energy services needed. It’s not the words in and of themselves that will electrify classrooms.” Pity is that the UN eulogises the US as a pioneer in renewable energy. India too is among the five top wind energy producers but why the UN bosses take a servile stance towards Washington?

It is not that the EU countries do not indulge in resource diplomacy. Their refusal to consider environmentalist groups’ proposal at the Johannesburg summit indicated. Gordon Shepherd, the director of international policy at the World Wildlife Fund, stated out of his bitter experience , “You can’t say that the Europeans are dashing around reducing emissions furiously.” The testimony of Maurice Strong, former energy industry executive-turned-world leader, who had a stint as the Secretary General of the Stockholm (1972) UN Conference on the Human Environment and the Rio UNCED/Earth Summit (1992), before the US Senate’s Environment and Public Works Committee was very significant. “We face an ominous paradox as the evidence of our destructive impacts on the earth’s environment and life-support systems has become more compelling while there has been a serious loss of momentum in the political will to deal with them. The United States is at the centre of this dilemma.” The US retreat by way of withdrawal from the Kyoto Protocol of the Climate Change Convention has posed a grave threat to the prospects of progress in collaborative management of environmental problems The reason for American recalcitrance is that the US wants a greater hold on the global resources, which are mainly concentrated in Asia, Africa and Latin America. Resource diplomacy is therefore both a strategic and tactical necessity for imperialism, the hegemonistic US imperialism in particular.

When the Popular Unidad government came to power in Chile in 1970 with President Salvador Allende Gossens at the helm, copper prices at the London Metal Exchange started falling very sharply. Chilean economy was mostly dependent on the copper mines. When Allende government was overthrown by a military coup d’etat in 1973 with the US support ( telecom megacorp IT & T having funded the ouster scheme), copper prices started rising steeply at the LME. The second example is more subtle and penetrating .In January 1972, this scribe had been to the Rishikesh unit of Indian Drugs and Pharmaceuticals Ltd, then the most technologically updated company in pharmaceutical industry in India. It was a visit sponsored by the Ford Foundation for the trainees( on deputation from different state governments) in investment planning and project evaluation at the Institute of Economic Growth, Delhi. IDPL then became the market leader of tetracycline capsules after it had edged out Parke Davis which used to sell the life-saving drug at twice the price that IDPL offered, thanks to the technological know-how it received from the erstwhile Soviet Union. IDPL’s indigenous efforts forced the drug MNC to halve the price of tetracycline that used to be sold at an exorbitant price prior to the initiation of manufacture of the life-saving medicine at Rishikesh. As we entered the unit, we found a graphical chart on production of tetracycline capsules. After 1965, there was a sharp drop in output. We asked why it had happened. The answer came from IDPL higher-ups at Rishikesh. They said that after the Indo-Pak war of 1965, Washington imposed trade sanctions, which resulted in complete stoppage of import of pharmaceutical grade gelatines. A few years thereafter when this scribe joined the Chemicals and Allied Products Export Promotion Council, it was evident that India could easily manufacture pharmaceutical grade gelatines. India is the largest source of crushed bones and hides and skins. India was the largest exporter of crushed bones from which both pharmaceutical and non-pharmaceutical grades of gelatines were manufactured in the metropolitan council. The story did not end there. With the enthusiastic support from the Capexil, India began producing ossein – an intermediate product between crushed bones or hides and skins and gelatines – and began exporting them. The reason, we came to learn later , was that the cost of gelatine manufacture was high in contrast to overall profit over time due to increase in labour wages and environmental restrictions. The MNCs virtually resort to downsizing of manufacturing operations.

Now India manufactures gelatines and does not export crushed bones. These gelatines are exported .But the advantage goes to the importers abroad gain as India has to sell them at cheaper prices, leaving a slender margin of profit that too due to waiver of duties and taxes on export production.

The gelatine issue helps us understand resource diplomacy in a wider way, as it is much beyond the manipulation of raw materials. Singhbhum, for instance, is the richest district in terms of mineral deposits the world over but it has one of the largest number of households below the poverty line. Virgin copper mining blocks have been leased out a couple of years back to some US MNCs there at incredibly low rates, thanks to the hegemony of a Hindu nationalist party, Bharatiya Janata Party in New Delhi.

The success of resource diplomacy depends very much on the role of bureaucrats and politicians of peripheral economies. In countries like India where indigenous capitalism is fairly developed, there had been a gradual disappearance of the class of “comprador bourgeoisie”. Therefore, the role of top bureaucrats, technocrats and some politicians is very crucial for the efficacy of this tool of imperialism. They are the new type of comprador class along with middlemen and touts. Take the case of Indian Iron and Steel Company limited, another sick Central public sector undertaking like IDPL. Of course, the two companies were made sick. Steel Authority of India Limited, which manages IISCO, put in an advertisement(SAIL/BP/IISCO/34, dated 14 April 2000) in some of the national dailies inviting “expression of interest” for purchase of IISCO. It stated that “the interested party should have individually or jointly an annual turnover of Rs 5000 million in any of the preceding years. IISCO has an average annual turnover of Rs 9000 million on an average during the last three years. Dipak Brajabasi, general secretary, IISCO Calcutta Offices’ Employees’ Union, told this scribe that “we, the employees and workers, feel that a conspiracy is on to sell off IISCO including the Chiria ion ore mines with an estimated reserves of 2000 million tonnes with Fe content of 62 per cent, valued at over Rs 11,963,000 million. We do not know how a figure of Rs 5000 million was arrived at. It appears that the foreign companies like BHP of Australia and Mitsui of Japan were discreetly assured of sale of IISCO part by part but the star attraction for each of them is Chiria. Unfortunately, SAIL management is eager to sell it by parts, going beyond the terms of notification. This will make the buyers to have IISCO for a song.” Siddhartha Sen, director, Institute of Cost and Works Accountants of India and editor, Management Accountant is more forthright in expressing his doubts about the role of top policy-makers. ” Annual losses incurred by other steel plants like Durgapur Steel Plant and Rourkela Steel Plant are much more than IISCO, although faulty management practices like lack of control in the increase of raw materials cost and transaction cost, both of which are haven for corrupt staff and officials, led them to losses. But one finds a mysterious eagerness to dispose of IISCO at an absurdly low price. The buyers who are waiting in the wings seem to be sure of dictating what price IISCO should be sold at, thanks to their links with the top bureaucrats and technocrats. Otherwise, IISCO can still be revived.”

In the new era of globalisation, pushed through by the “trinity – International Monetary Fund, World Bank and World Trade Centre”, aptly coined by Sukomal Sen, general secretary, All India State Government Employees’ Federation and Trade Union International of Public and Allied Enterprises, an affiliate of the World Federation of Trade Unions, – there has to be more transparency although the USA and some of the G-7 countries are reluctant to ensure transparency. Secrecy clauses of loan agreements between the loanee countries and the donor institutions such as the IBRD and the Asian Bank are still under wraps. Those who are against the RD under the hegemony of the US megacorps have to step up struggle for transparency, which is a basic condition of globalisation.

The success in resource diplomacy is however structurally unstable. Which was why the Chicago School of economists, led by Nobel laureate in economics, Milton Friedman, failed to ensure a model of sustaining success for Chile during the Pinochet era. Chile ceased to be distinctive in overcoming investors’ wariness of emerging markets. Privatisation of copper mines has also reached its near-upper limits. ”There’s just not much left to be privatized or sold,” observed Michael Mortimore, an investment analyst at the U.N. Economic Commission for Latin America & the Caribbean in Santiago. So exploitation ultimately backfires, however perfected the control of natural resources can be.

In fine, the guiding principles of resource diplomacy and the accompanying hidden financial objectives are “often cloaked in clandestine methods and used to point the finger at an accepted villain.” Those who are serious to combat this phenomenon must have the courage to become a realist, to encourage the masses to be conscious of the real goings-on.

Mr. Sankar Ray contributed above article to Media Monitors Network (MMN) from Calcutta, India.

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