Inter-imperialist rivalry - A fight of hostile brothers

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FRFI 172 April / May 2003

British armed forces have launched their twenty-ninth separate military intervention in the Middle East since the end of the Second World War. In five of the past nine decades the Royal Air Force has bombed Iraq. This repeated violence has been used to build and sustain British imperial power in the interests of British capitalism, often at the expense of other imperialist powers. The latest war on Iraq reveals and accelerates the tendency of imperialism towards inter-imperialist rivalry: the rivalry that brought two world wars. TREVOR RAYNE reports.

The obscenity of this war is demonstrated in the statistics: Iraq’s gross domestic product (GDP) is $15 billion. The US’s GDP is $10.2 trillion or about 700 times bigger than Iraq’s. The US’s military expenditure is almost $400 billion. Iraq’s military expenditure is $1.4 billion or 0.35% of the US’s.

US military spending exceeds that of the next 25 biggest military spenders combined. The National Security Strategy of the United States declares that the US military will be ‘strong enough to dissuade potential adversaries from pursuing a military build-up in hopes of surpassing, or equalling, the power of the US’. Addressing West Point military graduates in June 2002 President Bush stated, ‘America has, and intends to keep, military strengths beyond challenge’. This war is waged amid deepening economic crisis for international capitalism, with growing resistance to US hegemony in Latin America. Venezuela refuses to privatise its oil industry for the multinationals. The US ruling class is demonstrating that it will not tolerate any opposition that could turn the economic crisis into a political crisis for imperialism. It wants to enforce its domination for the foreseeable future over potential rivals on both global and regional scales: the European Union (EU), Russia and China. The Middle East, with around 60% of the world’s oil reserves, is central to this strategy. The US, with Britain, has to reinforce the domination of the Middle East which they have maintained since the Second World War and which they judge to be in peril.

With the collapse of the Soviet Union the US role as bulwark has disappeared and each imperialist power now seeks its own advantage. Through their opposition to this US and British-led war the French and German ruling classes have signalled they do not intend to be subordinate to US interests. Having brushed aside the UN, ignored NATO, insulted France and Germany and launched its first ‘pre-emptive war’, the US ruling class has taken its gloves off in what now threatens to become ‘a fight of hostile brothers’ of capitalism.

In the personality of Tony Blair the British ruling class has an instrument well adapted to its calculations. Behind the self-righteous pose stand nothing more morally persuasive than British overseas investments (second only to those of the US), British oil monopolies (the second and third biggest in the world) and the global role of the City of London (Europe’s financial centre). The Labour government reckons that, in the event of full blown inter-imperialist rivalry, the interests of the British ruling class are best served in alliance with unchallenged US military power. This alliance allows it to ‘punch above its weight’ in world affairs relative to France, Germany and Japan. This is a gamble: the economic crisis and political responses from France and Germany could rapidly change the situation. The British ruling class, with major ties to US and European capital, may be forced to reassess. For now Blair will attempt to restore the British role of bridge between the US and the EU. Thus far, and to the satisfaction of the US ruling class, he has succeeded in pulling part of the EU away from France and Germany towards the US.

Rivals for oil

‘He who owns oil will own the world…who has oil has empire.’ Henry Berenger, Commissioner General for Oil Products in France during the First World War.

Inter-imperialist conflict in the Middle East has often been intricate, but it is a tale of treachery and shifting alliances in the service of power and profits. German interests were evicted after the First World War never to resume a significant foothold. Britain and France then predominated, but the US encroached until after the Second World War and the 1956 Suez crisis when it supplanted Britain and France as the dominant regional power. France and West Germany responded and led the European Union project. The French ruling class never abandoned its ‘sphere of interest’ but it was chief loser as the US asserted itself in the region. The British ruling class accepted a supporting role to its US counterpart.

During the First World War infantry became partly motorised, navies converted to oil and the airforce was introduced. Henceforth, oil was to be a vital commodity and securing its transport routes and production fields a strategic priority for major powers. Availability of oil could make the difference between victory and defeat.

The Turkish Petroleum Company (TPC) was formed by the National Bank of Turkey (owned by three London bankers), Shell and Deutsche Bank to explore Mesopotamia (Iraq). In 1914 the National Bank of Turkey’s 50% share was transferred to the Anglo-Persian Oil Company (later renamed BP), 51% owned by the British government. After 1918 Deutsche Bank’s 25% share was confiscated by the British government as enemy property and transferred to the newly created Compagnie Française des Petroles (CFP – now Total).

Ominously, US interests began to compete with European interests. In 1908 US Admiral Chester negotiated rail and oil concessions with the Ottoman Empire. After the First World War the Turkish government, seeking to enlist US support in its struggle with Britain and France, granted the Chester concessions in 1923, favouring US companies. Among these was the oil-rich Mosul district of Iraq. In the original secret 1916 Sykes-Picot (Franco-British) agreement for the partition of the Ottoman Empire, Mosul was assigned to France on condition that France respect the TPC concession there. However, with the British army having occupied Baghdad in March 1917, the British government persuaded France to include Mosul in the new British mandate of Mesopotamia. Turkey insisted the inhabitants of Mosul were Kurds who should be given the right of self-determination (sic) to belong to Turkey. With similar selflessness the British championed the right of Mesopotamian Arabs to keep Mosul.

When France and Britain signed the 1920 San Remo agreement, dividing up Mosul and the entire Middle East between them, the US government complained bitterly. Henry Cabot Lodge told the US Congress, ‘England has taken possession of the oil supply of the world’. Following sustained US diplomatic pressure a bargain was struck in 1928 that allowed five US companies to buy 25% of TPC stock. British, French and US capital agreed to share in the plunder of Middle East wealth, in proportions reflecting their relative weights in the world.

During this period, 1922-28, US oil company (chiefly Standard Oil of New Jersey/Exxon and Gulf) control of Venezuelan oil grew from 32% to over half. Venezuela went from being a minor oil producer to the world’s second largest producer and exporter. US encroachment into the Middle East was accompanied by moves to monopolise Latin American resources.

The 1928 TPC agreement, known as the Red Line Agreement after a red line drawn on a map of the Middle East presented by France, designated Turkey, Syria, Jordan, Iraq, Palestine and the Arabian Peninsula, excluding Kuwait, subject to its terms. Signatories agreed not to compete with each other for concessions within the Red Line; they set up a monopoly cartel. CFP/Total stated that ‘the execution of the Red Line Agreement marked the beginning of the long-term plan for the world control and distribution of oil in the Near East’. TPC’s name was changed to the Iraq Petroleum Company (IPC, later BP).

In 1929 Standard Oil of California (today Chevron) gained a concession to Bahrain through a Canadian subsidiary. Based in Canada the subsidiary was deemed British and so got through the Red Line Agreement. The same company gained a concession in Saudi Arabia in 1933. By the end of the 1930s the US had footholds in Bahrain, Iraq, Kuwait and Saudi Arabia, but controlled just 13% of Middle East oil production. Britain had 60% of the oil and France was second to Britain. By 1960 Britain had 30% while the US had 65%.

At the onset of the Second World War 60% of Germany’s oil requirement was imported, mostly from Exxon. At the end of 1940 when German troops occupied Romania they possessed the only substantial oil reserves in Europe. Germany then attacked the Ukraine and headed for the oil-rich area of the Soviet Union’s Caucasus. By 1944 synthetically produced fuel supplied 90% of the Luftwaffe’s consumption, but it was inadequate. ‘Shortage of petrol! It’s enough to make one weep’ said General Rommel. Up until June 1941 Japan’s oil needs were largely met by the US. Japanese forces occupied the Dutch East Indies and restored a few oil fields not blown up by the retreating Allies. By the end of the war, with China lost to Japan, synthetic fuel was extracted from all kinds of biological material. Oil was crucial to the Allies victory. The Vice Chairman of the US War Production Board said, ‘the responsibility which rests upon the petroleum industry…is nothing less than the responsibility for victory’. During the war Britain tried to replace the US in Saudi Arabia through loans and currency conversion to the sterling area. The US was having none of it; on 16 February 1943 President Roosevelt announced the extension of lend-lease to Saudi Arabia because, ‘the defence of Saudi Arabia is vital to the defence of the United States’. Henceforth Saudi oil became a matter of US national security.

The Marshall Plan
The 1947 US Marshall Plan ‘to revive free enterprise capitalist economies in Western Europe…’ is presented as a gesture of US generosity. Amounting to 3% of US GDP it was an investment in US hegemony, focusing on oil supplies. The 1944 Bretton Woods conference, led by the US and Britain, established the dollar as the international currency reserve. Possession of dollars was necessary to buy crude oil from US controlled sources. About one third of Marshall Aid was designated for oil and oil related matters, for example refining. The greater the Western European oil imports the greater US companies’ control over Western European economies. Between 1950 and 1965 oil’s share in the (original six) EU countries’ energy grew from 10% to 45% of the total. Refineries were built close to the consumer countries, depriving producer countries of possibilities to develop their infrastructures and petrochemical industries.

After the Second World War Exxon had over 50% of the European market. The Red Line Agreement obstructed US ambitions to get more Middle East oil reserves. US lawyers claimed the Agreement was terminated because two of the IPC partners CFP (Total) and Gulbenkian had become ‘enemies’ during the war. Perfidious Albion, the British Labour government, accepted the argument and the Agreement was cancelled in November 1948. Exxon and Mobil entered Saudi Arabia. France reacted angrily, ‘The French government never forgave the Americans for keeping them out of Saudi Arabia’. (US Senate Report 1975). The dismantling of the Red Line Agreement reflected the changing balance of inter-imperialist power after the Second World War, with the US now dominant.

Suez crisis
France and Britain jointly owned the Suez Canal, the main route from Western Europe to the Gulf oil fields and the Indian Ocean. Egyptian President Nasser nationalised the Canal in July 1956. The French government accused Egypt of supporting the Algerian FLN national liberation guerrillas. France viewed Algeria as central to its colonial empire. The French government said attempts to get the US on the side of military intervention against Egypt were ‘a waste of time’. The US government opposed British and French efforts to impose their own regional domination and it feared being seen as a supporter of colonial rule when the Soviet Union championed independence and increased its regional influence.
In October 1956 Britain, France and Israel agreed to attack Egypt. Israel led the way and France and Britain intervened supposedly to establish a cease-fire, but actually to seize back the Canal Zone. The US Treasury sold off sterling reserves and threatened to sell off the rest if British forces did not stop fighting. Britain stopped the assault and the French resentfully complied with the decision of their British allies. To the French it was the British who had halted the Suez operation. Within five months France signed the Treaty of Rome establishing the European Economic Community, forerunner of the EU. Through European unity French capitalism would seek to regain a position of power and independence in the world. German Chancellor Adenauer remarked that building Europe would be ‘France’s revenge on Britain for buckling under US pressure to withdraw from Suez’.
With oil supplies through the Suez Canal disrupted Western Europe faced economic catastrophe. As British and French troops withdrew from Egypt in December 1956, US oil deliveries were activated. Venezuela increased its oil production in 1956 and 1957 by 14% and 13% respectively. The US-organised oil lift to Europe met 90% of daily requirements until Middle Eastern oil flowed again in mid-1957. US power in Latin America was used both to sustain Western European capitalism and ensure European dependence on the US ruling class.

The EU and the US


‘We used to question each other’s judgments. What is corrosive is that now we question each other’s motives.’
US Senator Joe Biden

Today’s insults flying between the US and Britain on one side and France and Germany on the other have a certain comic character, but this is not funny: deadly consequences can follow. French President Chirac accused the US and Britain of having ‘breached international legality’ in their war on Iraq. German Foreign Minister Joshcka Fischer said the pre-emptive attack was never discussed with NATO and could destroy the alliance. France, Germany, Belgium and Luxembourg blocked a US NATO request for Patriot missiles to be stationed in Turkey.

US Secretary of State Rumsfeld, having called France and Germany ‘old Europe’, tied Germany with Libya and Cuba for opposing the US. Rumsfeld accused Austria of blocking US troop movements from Germany to Italy and said the US was considering bringing home 100,000 troops stationed in Europe (70,000 in Germany) or relocating them to Eastern Europe. He is reported to have ordered sanctions to punish Germany: ‘We are doing this for one reason only: to harm the German economy.’ Bush warned Chirac, he ‘will neither forgive nor forget if France continues to oppose the resolution’. British Foreign Secretary Straw took his cue, ‘I say to France and Germany: take care…we will reap a whirlwind if we push the US into a unilateralist position’.

Just as US capital could not accept the post-First World War status quo in the world, neither can French nor German capital accept whatever share of the world the US ruling class decides is their lot. Capital must expand or perish and in a context of falling profitability this means a fight for resources and markets for commodities and investments. The US ruling class has demonstrated that it will subordinate or destroy the institutions that preserved the Cold War status quo. The gauntlet has been thrown down to France, Germany, Russia and China.

The US has 31.5% of world output, the EU has 26%. However in 2004 ten additional countries are scheduled to join the current 15 EU member states. Their 25 combined economies will match the size of the US’s and their population will exceed the US population. As we showed in FRFI 171 February/March 2003 ‘The world economy – facing war and recession’, EU total foreign direct investment amounts to 52.5% of the world’s total, nearly 2.5 times that of the US. ‘Over the period 1980-2001, the US share of the global total has halved.’ The EU’s share has grown by 25%. For the year 2001 French and German investment in the rest of the world each exceeded that of Britain.

German and Japanese capital have been excluded from Middle Eastern oil reserves. In 1995 the Financial Times reported the heads of Total, Agip of Italy, Repsol of Spain, Deminex of Germany and Mitsubishi Oil of Japan meeting the Iraqi government in Baghdad. US and British loss would be their gain. The Wall Street Journal warned that one day we could wake up to find Total the biggest oil business in the world. Total and Russian oil companies went on to negotiate large contracts with the Iraqi government.

From the start of 2002 to 4 March 2003 the dollar fell 20% against the euro. Iraq prices its oil in euros. Other producers are said to be considering switching from dollars to euros. Some argue that this is a war about petro-dollars, to maintain the dollar as the main oil payment currency and the international currency reserve. The dollar achieved both functions as a result of being the currency of the major economy in the world and through US corporate control over the major oil resources after the Second World War. Ultimately, the strength of a currency reflects the productivity and size of the economy behind it. With French productivity per working hour matching that of the US, and Germany not far behind, with the scale of US indebtedness (see FRFI 171) and its current account deficit heading for $506 billion this year, there is real potential for a challenge to the dollar’s role. Trade disputes between the EU and US show the structural imbalance of their relations and a mendacity that could lead to trade war and currency chaos. The EU and US are defying World Trade Organisation rulings on hormone treated beef, company taxes, copyright and trade marks, beef imports, bananas and steel. The antagonists have taken retaliatory measures.

EU external investment in and exports to the world exceeds those of the US. The number of euro denominated transactions may come to exceed US dollar transactions. The euro would then have the potential to displace the dollar as the world’s leading currency. Historically, international crises and wars accompanied the transfer of capitalism’s financial centre from Amsterdam to London and from London to New York. Political power based on economic power determined the rise of the role of the dollar. This war on Iraq, like the wars on Afghanistan and Yugoslavia before it, is for geo-strategic power and the fates of the euro and the dollar are consequent to the outcome. US, European and Japanese capital dominate the world; together they have bled the under-developed majority of the world close to death. Still the profits obtained are inadequate to sustain capitalist accumulation. Now the imperialists look set to fight each other for the right to rob whatever is left of the world to steal.

EU enlargement

Of the ten countries scheduled to join the EU in 2004 eight are from the former socialist bloc: Slovenia, Czech Republic, Hungary, Slovakia, Estonia, Poland, Lithuania and Latvia. The other two are Malta and Cyprus. Bulgaria, Romania and Turkey are also queuing up to join. In two separate statements, 18 European states opposed the French and German governments and supported the US stance on war against Iraq. The British Labour government carries much of the diplomatic responsibility for this. This ‘New Europe’ can weaken European imperialism’s potential challenge to the US. In February France and Germany combined to stop 13 EU candidate countries, many with a pro-US stance, from attending an EU summit on Iraq. Poland, Hungary, the Czech Republic, Bulgaria, Romania, Slovenia and the three Baltic states are among the signatories to the statements. French President Chirac accused the East European candidates of behaving ‘recklessly’, and of ‘infantile’ and ‘dangerous’ behaviour, adding that Romania and Bulgaria were ‘particularly irresponsible’: ‘If they wanted to diminish their chances of joining Europe they could not have found a better way.’

The former socialist countries offer prospects for EU, US and Japanese capital. While global foreign direct investment fell by 55% in 2001, that to Central and Eastern Europe grew by 2%. Its share of world investment inflows grew from 2% in 2000 to 3.7% in 2001. This is seen as ‘a stable and promising region for FDI’. (UNCTAD World Investment Report 2002). Poland, the Czech Republic, Hungary, Slovakia and Russia accounted for 75% of the region’s inflows. As a proportion of total investment in the region, foreign direct investment varied according to country from 20% to 42%. This suggests great potential outlets for imperialism’s surplus capital.

The EU has been the predominant foreign economic factor in these countries for a decade. The EU accounts for 75% of their trade and 79% of the foreign investment in them. US imperialism is fighting to make up lost ground. As NATO has expanded eastwards so the US has used its military superiority to enforce the rules. New NATO members Poland, Hungary and the Czech Republic have to set aside 20% of their defence budget to buy US weapons – this is a condition of entry.

As we said in FRFI 171 ‘It is no surprise that many countries in the EU, led by Germany and France, want to establish their own regional defence force independent of NATO…’ Germany now has more ‘peace-keeping’ troops on international missions than any other country. France has 8,000 soldiers on operations overseas, including 3,000 in the Ivory Coast. It is possible that the US and EU will find an accommodation over the reconstruction – sharing the spoils – of Iraq, but any lull in the hostilities between the US and France and Germany is likely to be short-lived.

Britain in Iraq

• 1914-16 British press stories of Turkish atrocities in Mesopotamia: ‘The Turk must go.’
• March 1917 Sir Stanley Maude leads British invasion force from the Persian Gulf and proclaims the ‘liberation’ of Baghdad.
• May 1920 Britain assumes the League of Nations mandate to govern a united Iraq. Revolt is crushed. ‘We have killed 10,000 Arabs in this rising this summer. We cannot hope to maintain such an average: it is a poor country and sparsely populated.’ TE Lawrence (of Arabia) in the Sunday Times.
• 1920s Winston Churchill launches the policy of bombing Iraq. Arthur ‘Bomber’ Harris, squadron leader in the 1919 Third Afghan war, was posted to Iraq. He pioneered ‘control without occupation’: ‘In 45 minutes a full sized village… can be practically wiped out and a third of its inhabitants killed or injured by four or five machines which offer them no real target.’
• 1922 The RAF is the first to use poison gas bombs against civilians, gassing Kurdish villagers. Bombing continues into the 1930s.
• 1921 Britain appoints Faisal ibn Hussain king of Iraq. Britain establishes the Iraqi Army to assist in repressing revolt.
• 1941 Anti-British officers seize power. The RAF bomb them into defeat. Four rebellious generals are hanged by the British.
• 1956 Britain closes its last RAF base in Iraq.
• 1958 General Qasim leads overthrow of the monarchy. British and US soldiers land in Lebanon and Jordan to prevent the nationalisation of the Iraq Petroleum Company/BP. Qasim proclaims Kuwait part of Iraq; British troops are deployed to Kuwait.
• 1979 Saddam Hussein becomes President. Britain supplies arms.
• 1991 the RAF resumes bombing Iraq and continues to do so…