PART TWO 11 KEYNOTE ADDRESS By The Honorable James D. Santini My first reaction to the invitation of the World Affairs Council to give this address was this: there are special places you go to speak but where you also learn. You can learn about oil in Houston. You can learn about cars in Detroit. And I am pleased to report that you can learn about materials and minerals in Pittsburgh, especially if you are someone from Washington. And so I want to thank the World Affairs Council of Pittsburgh for this opportunity to speak at this pathbreaking conference on "resource wars." In 1979, as Chairman of the House of Representatives Subcommittee on Mines and Mining, I conducted eight hearings on the Non-Fuel Minerals Policy Review. Several members of Congress and I carried our minerals message and concerns to President Carter in 1977. As a result, he initiated a cabinet-level coordinating committee to conduct a Non-Fuel Minerals Policy Review to analyze the problems and prepare policy option recommendations. Last October I said, and I repeat now: the August 1979 report of the Administration's Non-Fuel Minerals Policy - Phase I of a three-year effort to formulate a minerals policy - "fails to look at the national security aspects of such dependence, the related problems of disruptions, and our increasing loss of flexibility to cope in an emergency." I said that before Americans were taken hostage by a government which happens to be a world supplier of a principal natural resource. I said that before the Soviet Union invaded Afghanistan, which lies at the margins of Persian Gulf oil. And today I am saying it again as the Soviet Union prepares its access to southern African mineral resources through indirect means. The U.S. does not have a global energy and energy resource strategy. We are told that there is no prospect of a materials crisis. Yet there is a raw materials awareness that is spreading through the Western Alliance, through the Soviet Bloc and in different form through the Third World. History demonstrates that the industrialized countries, the Western democracies, must have secure and reasonable sources of mineral resource supplies. Once again, there is a threat from a major adversary. The Soviet Union appears to have concluded that Western commercial influence in the resource-rich but less-developed world is fading rapidly. With its expanded 12 The Resource War in 3-D power projection, its own resource deficiencies, the Soviet Union is a force in international raw materials affairs. It will fill the void created by the withdrawal of Western resource investment and know-how from the "South" or the Third World. Yet in Washington, there is still the wisdom that we may have "problems" - even "chronic problems" - but no "materials crisis." "Energy shock" is well known - inflation, balance of payments, unemployment, monetary disarray and dependency but nothing is acknowledged about "materials and minerals shock." Must we experience such shock before we can agree that it is a real threat? Today there is no contingency planning that preempts the contingency - the shock itself. The Non-Fuel Minerals Policy Review has yet to provide a scenario of such shock and the policy options to avoid it. Everywhere in the world it is recognized that we live on a globe of resource geopolitics - everywhere, it seems, but in Washington, D.C. Should not we begin to recognize that in resource geopolitics there is the potential for conflict, and such conflict has the potential for a localized resource war which could spread? For example, the Iranian oil resources are disputed by Iraq. A seizure and counter-seizure would lead to an oil war which could hardly be limited to the two. How much additional "energy shock" can be absorbed into the consumer country systems? Energy economists have generally failed to account for geopolitical events in their models of price and supply behavior. What is the U.S. national security response if both Iran and Iraq were to stop producing and Saudi Arabia decided to not pump more oil except at higher prices? It is this kind of unknown and the prospect of resource-political violence that led me to conclude that we do have a "materials crisis" and that time is no longer on our side. This crisis is not merely a cyclical problem of supply and demand. It is a crisis of U.S. minerals policy failure - a failure to recognize that the national security of the United States is subordinated to foreign control of mineral resource supplies which we need but do not have. It is a failure to provide a direction - a strategy - policy options if you will - to cope with the fact that the world system of resource access and control is radically changing against us. For nearly a decade, private international mining companies, on which the expansion of the Free World's resource supply historically has depended, have withdrawn from investing capital in less-developed countries which disavow contract stability. A profit on a mineral investment has been attacked universally as the cause for poverty, disease, linguistic and ethnic conflict, the failure of political instructions and suspiciously suggested as the cause of the tsetse fly disease as well. The report of the Independent Commission on International Issues - the so-called "Willy Brandt Report" - repeats this year the call for greater participation of the developing countries in processing and marketing Keynote Address 13 resources through the removal of all tariffs and trade barriers, fair and equitable transport rates, the abolition of restrictive business practices and favorable financial arrangements. But there is silence on how all this would affect U.S. or European mining and resource companies which would have to face such competition competition which is state-owned and supported by non-economic government subsidies. Nothing in this well-meaning report is said about the unemployment in marketing and processing that these objectives will cause in the developed world. There is, of course, no mention of the national security of the developed countries if production, processing, and marketing eventually fall under the state-ownership in the "South" as the result of the withdrawal of the mining and oil companies of the "North". There is absolutely no reference to the projection of the Soviet Union and the geopolitics of raw materials into any "North-South" redistribution of resource power and wealth. We have allowed our political policies to dominate mineral policies with regard to foreign supply dependency. Wherever there is conflict between a political policy and natural resource security, the political policy has so far come first. This often means a sacrifice in terms of the Brandt Commission consequences that lead to shut-down of U.S. ferroalloy processing, for example. On the other hand, our political policy does nothing to prevent host-country "renegotiation" of mineral exploration and development agreements with U.S. companies, which has discouraged further investment in the Third World, thus diminishing U.S. sources of supply. We must have a resource-oriented foreign policy. If we establish foreign supply dependence upon countries which allow the market to prevail, which allow U.S. foreign direct investment without discrimination as to their resources and which practice anti-cartel price and supply behavior, our foreign policy toward those countries should be positive and cooperative. believe that a foreign policy which disregards our national resource interests is no foreign policy at all. Just as we need to expand non-OPEC (Organization of Petroleum Exporting Countries) sources of energy through domestic resource exploration and development, we now need to open the full mineral resource base of the U.S. and thereby help reduce the risk of a "materials crisis." Since the late 1960s, new mineral exploration and development in the U.S. has been severely curtailed. In 1968, 17% of our public lands was withdrawn from mineral entry, and in six years that figure increased to 67%. We are inviting a commodity cartel second wave with sharp shortages between 1982 and 1988. Is it too late to reverse the tide of regulatory self-denial that precludes our domestic industry from providing this nation with domestic supplies? Well, if the severity of such cyclical shortages does not convince the government to de-regulate the mineral resource base and industry in the U.S., then the geopolitics of resources - the potential of resource wars - surely will. 14 The Resource War in 3-D We do not need another comprehensive and exhaustive study from still another agency, commission, or think-tank. We do not need expertise in advisory councils to cover old ground. We need a minerals policy with our national security at its core. The linkage between defense and dependency is abundantly clear. A strong defense posture - power capability is both a cause and effect of national resource security. Without materials for replacement and for other "generations" of weapons technology, defense performance declines; without such a defense posture off-shore mineral access and production become high-risk and dangerously vulnerable. But I am not speaking about just a list of minerals which are essential to our economy and which we import from overseas. My conception of the role of U.S. power in defense of world resource access is much larger. The current minerals policy review has failed to take up the issue of foreign resource dependency as a crisis for the Western Alliance and Japan. It will be irrelevant, if and when it appears with policy recommendations, if raw materials dependency of Europe and Japan is not integrated into a U.S. strategic position. The parallel to oil is unmistakable. Europe and Japan have reacted to OPEC from 1973 to the present with one clear principle: the United States cannot provide reliable leadership in a world energy resource crisis. Now, despite the evidence that no mineral resource agreements have been satisfactory with the Soviet Union, West Germany has entered into negotiations for a major pact with Moscow to provide capital and technology to develop Soviet production. Some of our Western European allies have just sealed an agreement with the U.S.S.R. for delivery of natural gas. There is no reason to believe that this German-Russian agreement will provide a cure for the Soviet resource rundown. But, the fact that the Germans did it now, when the Soviets needed it for political reasons, demonstrates the vital need for American leadership in resource geopolitics. The Germans obviously. concluded that we had nothing to offer them in mineral resource security. Yet the Non-Fuel Minerals Policy Review was devoid of national security implications. We have so little sense of concern for Europe and the Alliance that we have closed our own resources to exploration and development. We have a stockpile that has no provision to assist Europe in an emergency. Thus, the Soviet Union is offering the Germans something which we could. not. They are offering Germany a theoretical share of mineral resources in exchange for capital investment. But, as the Germans must know, that share, if it is ever realized, places them in a resource dependency upon the Soviet Union. What would happen to Germany, say in seven or eight years, if the Soviet Union cut off its share or reduced it because of political objectives? Is Germany's potential dependency on the Soviet Union in raw materials going to be the means by which Germans are turned into political neutrals or worse? 69-057 0 - 81 - 76 Keynote Address 15 From another perspective, witness the recent purchase by Zambia of Russian arms, apparently for cobalt as collateral. In its study of Zambia's accounts, the International Monetary Fund could find no record of the arms purchase in terms of foreign exchange. Notwithstanding the fact that Zambia is an anti-capitalist nation, the involvement. of an important supplier of cobalt in such an arrangement is a further Soviet penetration into unstable southern Africa. Germany and Japan are drifting into special deals to maintain raw materials flows. While the U.S. locks up 500 million acres of withdrawn land and thus denies them as an addition to the world supply that would result from a revived American mining effort, the Soviet Union draws off Germany into a potential resource dependent status a raw materials client – partly because the U.S. offers no initiative to lead the West toward a defense of world access to natural resources. Time is not on our side for more special studies, research and development on substitution and econometric fine-tuning of supply and demand. Nor is it enough to embellish existing agencies with special advisory adjuncts. What we have done to our own resource base makes us less than rational to Europe and Japan. What we have said so far in our effort to establish a minerals policy makes it hard for our allies to take us seriously. Perhaps this is why the North Atlantic Treaty Organization recently has launched a high-priority study of its own to determine the extent of Western European mineral import dependence on South Africa. For most of our history, our foreign policy stood for equal opportunity and the open, door in world mineral exploration and development. This principle is now only a preamble to real policy, and we have not put anything in its place. We must summon the political will to provide ourselves and Europe with a world raw materials policy which is backed up by expanded defense capabilities, from surveillance through intelligence to protection through projected power. Our weapons systems must not become an "endangered species" because foreign supplies of metals are high risk disruption probabilities. Upgrading our national defense stockpile must not depend on foreign government-owned and government-subsidized mineral processing. The capital investment ratio and productivity growth in the U.S. is among the lowest in the industrial world. It is essential that the government's economic policies encourage capital formation for expenditures in the minerals industry to improve its competitive position. American mining and metalworking jobs must not be lost to United Nations North-to-South transfer schemes. We cannot afford to lose the technology or our raw material processing know-how. In the last two weeks, a major U.S. copper producer, unable to meet environmental requirements, has been talking with Japanese producers about refining or buying its copper concentrates |