20 Mar 2013

Was the Iraq Invasion “About Oil”?

Economics, Foreign Policy 25 Comments

This is a great question, and David R. Henderson’s answer is what I would say. The only difference is, I am less confident that it is right, as compared to David’s apparent confidence. Here’s what he said:

[W]as the second war against Iraq about oil?

In a sense it was, and in a sense it wasn’t.

Here’s the sense in which it was. Various important participants seemed to havethought that it was. Virtually all involved, will, I think, grant that Vice President Dick Cheney had a large influence on the decision to invade Iraq. Here is David Frum’s recollection of part of Vice-President Dick Cheney’s thinking:

In 2002, Chalabi joined the annual summer retreat of the American Enterprise Institute near Vail, Colorado. He and Cheney spent long hours together, contemplating the possibilities of a Western-oriented Iraq: an additional source of oil, an alternative to U.S. dependency on an unstable-looking Saudi Arabia.

So, for Cheney, oil does seem to have been an important factor in his support of the invasion.

But you can do something with motive x even if motive x doesn’t make sense. Which brings me to the sense in which the war wasn’t about oil: From a narrowly selfish point of view, it didn’t make sense to fight war for oil. Here’s where economics kicks in. There is a world market for oil. There is no danger that a country that wants to keep the United States from getting oil can do so simply by restricting sales to the United States. The reason is that it will then want to sell its oil elsewhere. That means that someone who buys that newly freed-up oil will then want to buy less from his suppliers. Those suppliers then have oil to sell and Americans can buy that oil. It’s a game of musical chairs in which the number of chairs equals the number of players. The game would be awfully boring, but in international trade, boring is good.

The only way a country’s government can hurt the United States using the “oil weapon” is to reduce its own production. But then, that country, unless it produces a huge amount of the world’s supply, will hurt itself as well. And that country will hurt its oil-consuming allies and help its oil-producing enemies. I’ve laid this all out in “Do We Need to Go to War for Oil?”

Now, it’s possible that Cheney, Bush, Abizaid, et al were a bunch of economic illiterates. So, again, in that sense, the war could have been about oil even if it didn’t make sense to be about oil.

As I said, if you ask me my opinion, I would give the above answer. But, it seems undeniable that the reason “we’re over in the Middle East” is oil. In general, when people ask me, “Are the people running the government stupid or evil?” I give the cute answer, “They’re not stupid.” So I am a little uncomfortable saying so casually, as David implies here, that the whole foreign policy of the United States is based purely on basic ignorance of economics. I wonder instead if there is an even more nuanced middle ground, whereby it makes sense (say) for a power-hungry group to want to “control” oil, even if that doesn’t translate into lower pump prices for American motorists (for whom they care not a whit).

I am confident David and I are right on the general economics of what’s good for American consumers and how to keep oil prices low, but I’m not sure we should assume governments are trying to ensure the free-flow of oil to their citizens. I could imagine strategic reasons involved that make it valid to say (from their point of view), “We need to put in a friendly government here, to ensure our uninterrupted access to such-and-such resources.”

25 Responses to “Was the Iraq Invasion “About Oil”?”

  1. guest says:

    what about the petrodollar and reserve status of dollar? do you think theres legitmacy to that view?

    • guest says:

      That’s how I understand it, as well.

      But also, like Bob Murphy surmises, I think the oil thing is a subset of something broader.

      I think the broader belief is that the nation, in the sense of “the collective”, has an interest in the economic activities of its citizens, and therefore the nation has a right to protect “its” trade lanes, “its” interest in the oil which its citizens use in transportation and production, etc.

      So, to me, it seems that there’s a failure to respect the individual property rights of our citizens, and the citizens of other countries, due to collectivist thinking.

      And I think this collectivist thinking manifests itself not just when it comes to wars fought “for oil”, but also when governments presume to manage global trade through international trade agreements.

      (Nobody needs government in order to trade with citizens of other countries.)

      If you’re the country that prints the reserve currency, then that gives you a lot of control over this process of individual property rights violations.

      The solution is a return to commodity money.

    • Bernard King says:

      That has always struck me as the biggest motivating factor. The United States doesn’t want to physically take delivery of Iraqi oil, it can get plenty of oil for the Sauds, Mexico, Canada and its own reserves. But when Saddam decided to sell Iraqi oil for Euros in 2000, that was a threat to U.S. dollar hegemony that the business class in the U.S. could no longer ignore.

    • Tel says:

      The somewhat illogical counter-example would have to be Iran.

      Most of Iran’s oil now goes to China, largely because the United States insisted on that particular state of affairs. Probably Iran does lose some money because of their limited scope of customers, but never the less oil is oil and I’m sure the Chinese are still happy to pay for something slightly below market rates.

      The only way a country’s government can hurt the United States using the “oil weapon” is to reduce its own production. But then, that country, unless it produces a huge amount of the world’s supply, will hurt itself as well.

      But in the case of Iran, hardly hurt at all, and now not only does the US have that much more difficulty procuring oil, but China is that much more competitive in the manufacturing industry. It hurts the US twice over. I would argue it also hurts the reserve status of the US dollar.

  2. Matt M says:

    Perhaps the theory harkened back to the old “domino effect.” Sure, Iraq and Saudi Arabia alone couldn’t hurt America by refusing to sell us oil. Even if the entire Middle East banded together and formed some sort of cartel and the entire cartel refused to sell to us, there are other sellers out there. But of course, Venezuela doesn’t like us too much either, and we’re always suspicious of the Putin regime… Does Canada produce enough oil to meet all of our demand?

    Perhaps we went into Iraq not necessarily because Iraq alone had oil we needed, but rather to send a message to Iran and Venezuela and Saudi Arabia and everyone else. “You sell us the oil we need or we will just come take it.”

    • guest says:

      Good article, here:

      Time to Lay the 1973 Oil Embargo to Rest

      It’s time that we exorcised the ghosts of 1973 once and for all. The embargo was a non-event. The production cutbacks were trivial. The wrong lessons were learned. In short, everything we think we know about the events triggered 30 years ago today is wrong.

      Let’s start with the embargo. Most people believe that it was directly responsible for long gasoline lines and for service stations running dry. The shortages were, in fact, a byproduct of price controls imposed by President Nixon in August 1971, which prevented oil companies from passing on the full cost of imported crude oil to consumers at the pump (small oil companies, however, were exempted from the price control regime in 1973). In the face of increasing world oil prices, “Big Oil” did the only sensible thing: It cut back on imports and stopped selling oil to independent service stations to keep its own franchisees supplied.

      In short, the oil weapon is a myth. It’s high time that we stop believing in ghosts.

  3. Robert Fellner says:

    No War for Oil by Ivan Eland of the Independent Institute really delves into this subject deeper and is an amazing read.

  4. Cody S says:

    Is it not possible that we went into Iraq because we trusted the intelligence community’s assessment of that country’s weapons programs and intentions?

  5. Silas Barta says:

    Well said. In a South Park episode related to this, where Bush lays out an elaborate plan to bomb heaven:

    “So … are you severely retarded, or just high?”
    > I assure you: I am not high.

  6. Ivan Jankovic says:

    the only missing piece here is; ideas. You simply reduce the variety of motives politicians could have for adventurous wars to a narrow dichotomy: economic self-interest or conventional security concerns like WMDs. How that dichotomy could help explain Woodrow Wilson’s folly of the Great War? No oil in Europe, no security threat to America. I think that we should not be underestimating the level of Wilsonian madness that many people around Bush, including himself, their delusion of spreading democracy around the world.

  7. William Anderson says:

    One thing to remember is that the political classes as a whole do not think like economists. They see the world as a sort of chessboard in which we fight for “resources,” and those that have the resources will do well and those that don’t will falter. Now, given the fact that resource-poor Hong Kong and Japan are among the wealthiest societies on earth does not phase these people at all; they just ignore the facts and continue with their narratives.

    For that matter, a lot of economists don’t think like economists. I remember watching Lester Thurow 30 years ago publicly make the claim that “the country that gets HDTV first” will be the “winner,” and everyone else will lose. This is nonsense, and demonstrated at the time that Thurow really did not understand even the basics of exchange and production, but no matter. The pundits and political classes hung on to his every word as though the guy were saying something intelligent.

    Thurow was arguing for “industrial policy” (part of Walter Mondale’s 1894 platform that served him so well) in which the government would identify those technologies that were to be successful and then subsidize them. True, that was more economic illiteracy from an economist, and an MIT economist at that.

    The notion that crude oil is a commodity that in itself is not very useful unless converted into useful fuels simply does not register with the political classes. They see oil as part of the great power play of the world and whoever controls oil also controls power. Yeah, it is stupid, but the political classes run on stupidity. Unfortunately, they are also the ones who control the guns.

    • Major_Freedom says:

      They don’t trust others to control resources in a division of labor because they don’t trust themselves. At some unconscious level, they attribute malice and thirst for power in others, because it reflects upon themselves.

      The loudest and most vociferous voices that seek to paint others as evil, tend to be evil in their own hearts, and don’t want competition.

      • Major_Freedom says:

        And by “others” I mean mankind, humanity, in the abstract.
        “Humans are evil!”, etc…

  8. David R. Henderson says:

    @Bob Murphy,
    Thanks for reposting.
    One thing: You write, “But, it seems undeniable that the reason ‘we’re over in the Middle East’ is oil.” It doesn’t seen undeniable to me. S. Korea doesn’t have oil, Lord knows Japan doesn’t have oil, Germany doesn’t have oil, and yet there’s a large U.S. military presence in all those places. I think many in the U.S. government simply want to control the world. I run into this all the time when I argue with U.S. Admirals and Generals.

    • Major_Freedom says:

      You can’t possibly compare the military presence and activity in Iraq, with the military presence and activity in countries like Germany, Japan, and S. Korea.

      Yes, it’s about wanting to control the world. But then doesn’t that make the argument about it being in large part about oil, even more plausible? Controlling the world is much more likely when you control the money, and the oil.


      THAT’S the one two punch that explains a significant aspect of empire. Didn’t Saddam Hussein threaten to sell oil in Euros just before the invasion?

      Imagine middle east oil being controlled by anti-US dictators. Oh wow, that describes pre-invasion times!

      They’re financing a revolution in Libya, as well as sending in covert agents, and probably military black ops that isn’t being made public (financed probably by the same financiers as those who sent $40 billion to Iraq direct from the NY Fed). Why Libya? There’s plenty of dictators in Africa. Oh that’s right. They have oil.

      • Frank Steiner says:

        Have those dictators been sponsoring terrorists like the “Mad Cow” (Ronald Reagan) had?

    • Major_Freedom says:

      Glenn Greenwald writes:

      Since some commenters, notwithstanding Frum’s revelation, remain absolutely horrified by the suggestion that oil was a significant factor in attacking Iraq – perish the thought! – here is what Gen. John Abizaid, former commander of CENTCOM with responsibility for Iraq, had to say about that war:

      “Of course it’s about oil, it’s very much about oil, and we can’t really deny that. From the standpoint of a solider who’s now fought in the middle east for six years – my son-in-law’s fought there for four years, my daughter’s been over there, my son has served the nation – my family has been fighting for a long time.”

      And here is what the current US Secretary of Defense, Chuck Hagel, said about the Iraq war back in 2007 (via Dick Distardli):

      “People say we’re not fighting for oil. Of course we are. They talk about America’s national interest. What the hell do you think they’re talking about? We’re not there for figs.”

      Former Federal Reserve Chairman Alan Greenspan added in his 2007 book: “I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.” What other evidence do deniers need before accepting this obvious reality?


  9. Cody S says:

    It just seems like there is a disconnect in the Secret War For Oil theory, to me.

    George Bush decides one day, “Hehe…yeah…I think, maybe, War For Oil.”

    And then he goes to Cheney and tells him to trump up some CIA files about dangerous weapons and intentions in Iraq.

    If the president wanted a War For Oil, why didn’t he make that case to the American public and to the UN? If he believed it was in the interest of the US to fight a war for Iraqi oil, what prevented him from saying so?

    Was he afraid no one in the US or the world would support such a war? That no right-minded American economist, journalist, or plain citizen would be in favor of the course he had decided on for the country?

    If you are willing to believe that the president was rational enough to know that the American public would abandon him were he to have expressed his Secret Oil intentions for the war in Iraq, and that therefore he just started making stuff up to get us over there, go ahead and take the last step: it wasn’t even a War For Oil. It was a Secret Racist War. George Bush wanted to use the American military to kill some tan people.

    There is no significant rational distance between believing the one Secret Motive and the other. Pick whichever one you want.

    • Bob Murphy says:

      Cody S., I think you just “proved” that only racists lie.

      • Cody S says:

        My basic intent was to ask, if you believe the president was aware that no one rational would agree with his strategy (of attacking Iraq for its oil,) but he went ahead anyway, then what under Heaven can we place outside the box labelled, “George Bush’s True Irrational/EVIL Reason For War”?

        As well, it is always odd to me that these scheming geniuses are so inept, in the end.

        For instance, George Bush the scheming genius trumped up some CIA reports about Uranium in Iraq, and then neglected to do what any scumbag cop in NYC knows to do on CYA duty, and plant some evidence.

        And, scheming genius George Bush sent the American military to Iraq to steal all of the oil, and then the one thing we neglected to do by the time we had rubbled and rebuilt half the country, killed a quarter of a million people and then left, was steal all of the oil.

    • Tel says:

      There is no significant rational distance between believing the one Secret Motive and the other. Pick whichever one you want.

      Other than the well known motivation of personal gain of course.

      The Bush family after all have been oil merchants for generations, and Cheney has links going back to Haliburton — a company that got a lot of contracts out of the Iraq war, and also has plenty of ties to the oil industry.

      That does not of course represent logical proof that such a motive exists, but it does form a rational basis for choosing between arbitrary scenarios. There’s a very good reason why people are suspicious when they see a conflict of interest you know.

      • Cody S says:

        The Bush family is from the south, too. And that is where racists are.

        As long as we are being simple and requiring no evidence for our assumptions, I do not see where one explanation is clearly more or less rational.

        • Tel says:

          You are deliberately ignoring the bit where I mentioned people being motivated by personal gain, aren’t you?

          In which case, why bother even pretending to study economics? What sort of models do you come up with where people take actions at random?

        • Tel says:

          The Bush family is from the south, too. And that is where racists are.

          I took the trouble to look this up, and it is just outrageously wrong. The Bush family has a long connection with Yale University (Connecticut).

          Prescot Bush was born in Ohio, went to school in Rhode Island, worked in many different states over his career (including as a Wall Street banker) and represented Connecticut as a Senator.

          George H. W. Bush was born in Massachusetts, was educated in Connecticut and Massachusetts and got a job in Texas as a clerk with an oil company. Later he moved into a senior position with Zapata Petroleum Corporation and then Zapata Offshore Company where he made his money.

          The family does not have roots in the South at all, they have roots in the North, but the profits to be made from oil brought them to Texas.

          George “Dubya” Bush was born in Connecticut, was educated in Texas, then went to boarding school in Massachusetts, and university in Connecticut. His connection with Texas has been a lifelong involvement in the oil industry. Bush was also Governor of Texas — a position he won by consistently getting the Hispanic vote because he was willing to support minorities.

          The family is about as far away from stereotypical Deep South plantation owner as is possible to get. They are Northern industrialists who found that oil is a way to make money.

  10. Major_Freedom says:

    Glenn Greenwald has a great piece on the neocons, oil, and particularly “David Frum”.


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