Foreign Policy and The Crisis in Oil 22 27 be clear from the foregoing what the developing non-OPEC nations and the developed nations could gain from a broad producer-consumer agreement. But because of the critical ingredient of participation by both "radical" and "moderate" OPEC members, let us briefly specify the advantages which could accrue for them: a stable and rising oil price indexed to inflation; more serious developed country import quotas with resulting enhanced conservation efforts; a more stable international climate for their investments and a lessened inflation rate; a mechanism for facilitating and guaranteeing productive investment abroad of the petrodollar surplus; assistance for the non-OPEC developing nation debt crisis and developing country oil emergency assistance that OPEC alone, without downstream production facilities, cannot provide; and, most importantly, increased internal and external stability in the Middle East and lessened risk of a major oil confrontation. 5. Prevent embargoes and encourage the rule of law. We should act consistently with our vital interests in preventing embargoes in essential world commodities, such as oil, and encouraging the rule of law in commercial economic relationships. As great as were the provocation and need for a strong response, it is not clear that the U.S. served its own long-term best interests when it declared a wheat embargo against the U.S.S.R. or when it seized. Iranian assets in the U.S. In line with the "demonstration effect," our actions have certainly been well noted by all nations. The U.S. should attempt to recover from the "damage" and strongly state our opposition to embargoes in fundamental commodities in world trade, especially in oil and food, and our support for the importance of investment guarantees for foreign assets. It is, of course, noteworthy that the wheat embargo and the seizure of the Iranian assets have not had the intended effects. 6. Regular coordination with Canada, Mexico and OPEC moderates. We should seek to coordinate regularly with Canada and Mexico, our continental neighbors, on oil policy and to strengthen mutually advantageous energy ties with them. The same is true also for OPEC moderates, with whom we have already been seeking regular bilateral contracts. Likewise, we should be alert to further opportunities for strengthening energy relationships with our immediate neighbors and the OPEC moderates. Bibliography* W. Brandt, North-South A Program for Survival (The Report of the Independent Commission on International Development Issues Under the Chairmanship of Willy Brandt) (1980), particularly Chapter 10 and the Conclusion. Anwar-I Qadeer, A Multilateral Agreement on Oil (An unpublished paper prepared for a seminar of John Norton Moore at the University of Virginia, December 1979). "Special Trends in International Economics: Oil," Appendix B in R. Cline, World Power Assessment 155-63 (1975) (an assessment prior to the post Iran second "oil shock" of 1979). 28 The Resource War in 3-D A symposium on the New International Economic Order, 16 Va. J. Int'l Law 233 (1976). R. Stobaugh & D. Yergin, Energy: An Emergency Telescoped, 58 Foreign Affairs 563 (1979). Herbert Hansen, Global Energy Options Confrontation or Cooperation (A paper delivered at the *It is a mark of the relative inattention to the foreign policy dimensions of the oil crisis that there is relatively little writing directly on this point, in contrast to the voluminous literature on appropriate national energy programs. PART THREE 31 REPORT OF THE ECONOMIC DEPENDENCY PANEL Panel on U.S. Economic Dependency on Imported Natural Resources met in May and June 1980 to discuss the implications of resource dependency for industry, labor and defense and the future impact of the Soviet Union on world supply availability. The panel consisted of Congressman James D. Santini, chairman, Dr. Daniel I. Fine, rapporteur, Mr. Grant A. Dove, Mr. Dale E. Good and Mr. Bastian (Buz) Hello. Also participating ex officio was Mr. R. Daniel McMichael. Findings and Conclusions The panel reviewed Dr. Fine's "cornerstone" paper and concluded that it was a major departure from the conventional view of the Soviet Union as self-sufficient in non-fuel minerals and, thus, indifferent to world supply availability. The panel recognized that Soviet pressure on natural resources outside its traditional base of mineralization imposes new priorities on U.S. foreign and defense policies. The panelists expressed concern about the emergence in the Soviet Union of a negative non-fuel mineral resource balance following closely behind the well-known negative energy balance by the mid-1980s forecast for the Soviet Union by the Central Intelligence Agency. There was agreement that a negative energy and non-energy minerals balance in the Soviet Union creates an environment for resources conflict in this and the next decade. Soviet self-sufficiency in energy and non-fuel mineral resources has been a principal assumption of U.S. foreign policy. Therefore, the policy process has not sufficiently confronted Soviet interests in obtaining access to natural resources in the developing world. Although the invasion of Afghanistan provoked the Administration to the extent that Persian Gulf oil is now understood to be an indirect Soviet objective, there has been no systematic review of Soviet resource behavior and policy. Moreover, the implications of a deficient Soviet non-fuel minerals position appear to have received scant attention, although the linkage between the negative Soviet energy balance and its Middle East/Southwest Asian policy now seems established. The panelists agreed with the central conceptualization of Dr. Fine's paper: The Soviet Union, while far from a dramatic non-fuel minerals depletion crisis, is, nonetheless, experiencing systemic problems in its 32 The Resource War in 3-D extractive sector. In response, the U.S.S.R. is moving toward a policy of selective and strategic dependency on foreign resource sources as an alternative to the exceptionally high costs of extended self-sufficiency. The panel observed that the U.S. has experienced a contradictory and costly transition from strategic dependency in non-fuel minerals during the 1950s to its present position of reactive dependency. The panelists concluded that the distinction between strategic and reactive mineral resource dependency is highly significant. Strategic mineral resource dependency consists of (1) a directive mineral resource policy in place; (2) the presence of national security objectives within that policy; (3) a natural resource-oriented foreign policy aimed at reasonable access to needed fuel and non-fuel minerals; and (4) diplomatic and power projection capability to establish and maintain a "world share" of resources consonant with security objectives apart from domestic availability and development. In agreement with Dr. Fine's paper, the panel observed that reactive mineral resource dependency is the absence of these elements — it is a "policy" of response to short-term disruption with little more than reliance upon the natural stockpile capacity. The panel concluded that reactive resource dependency in the United States, whether for non-fuel mineral or energy resources, is an unacceptable high-cost vulnerability. This limits. policy options to commodity-specific stockpile releases to meet short-term supply interruptions, which might not occur if there is a preventative capability associated with a strategic dependency resource position. The panel concurred that there is a growing trend in which ownership and control of natural resources are changing from commercial to state dominance. This historic change provides the political environment for Soviet access to Third World natural resources. Soviet support for state ownership and control in the Third World creates a potential for non-market state trading corporation networks through which the flow of minerals can be organized as barter. This expansion of non-commercial mineral resource control, combined with Soviet power projection capabilities to support a claim to a share of Third World resources, are the essential conditions of a Soviet access strategy in the Persian Gulf (oil) and Africa (minerals). See Figures I and II. The panelists also examined the importance of non-fuel minerals to American expectations of progress. Three components of the U.S. socio-economic system were explored: labor, information and defense. Observing that the late President of the AFL-CIO, George Meany, once said, "Everything has to do with the workers," one of the panelists stressed that the condition of the labor force influences everything else (including oil and minerals) in our society. Further, everything else in our society influences the condition of the labor force. Thus, a healthy economy and a strong national security posture are interdependent with a strong and Report of the Economic Dependency Panel healthy labor force. One thing is clear 33 the U.S. does not have to worry about one resource, and that is labor. An example of the strength of the American work force is the fact that the U.S. produces a third of the world's food and half of its grain, even though less than 4% of our labor force is involved. But despite these advantages which accrue from a labor force working. closely with industrial management, noted one panelist, the U.S. is in great danger because of excessive dependency on imported sources of critical raw materials. World War II experience indicated that, given a clear government policy, a resourceful management and skilled labor, these factors can contribute a great deal to overcoming structural problems caused by a cutoff of critical minerals. Without pushing the World War II analogy too far, the panelists asked whether the U.S. will have the technology to confront "resource wars" or worse. The panel supported labor's view that labor and management need to cooperate in developing a national resource strategy, as well as its concern about the export of basic raw material industries from the U.S. and the growing loss of labor's technical know-how. Non-fuel minerals are essential in high-technology manufacturing enterprises from which flow products familiar to every American. The electronics information processing industry, for example, requires cobalt, chromite, tantalum, germanium, platinum, gold and silver. In the case of tantalum, a panelist observed, "this strategic material permits small volume, high capacitance devices used virtually in every electronic product produced by our country, from hi-fi's to computers to the most sophisticated space systems." The United States is 100% dependent on foreign sources for tantalum. Many other products and services intimately familiar to the average American are dependent on these critical minerals, now as much as 90% or more imported by the U.S. They range from medical and dental care equipment and food processing, to house paint, dry cell batteries and fertilizers; the list goes on and on. See Figure III. As a more exotic example of critical mineral dependence, it was noted that an integral link between the electronics information industry and the mining industry lies in the fact that the expensive ships required to explore the ocean deep seabeds for manganese nodules are full of highly sophisticated electronics gear which include satellite communication links. It was also observed that substitution alternatives to disruptions are not always valid in high technology. As technology becomes more complex, reliability becomes more demanding. Substitution almost invariably calls for sacrifice. of performance and reliability. Accordingly, the panelists agreed that sustained interruptions of supply of these critical minerals would have profound adverse effects on our current standard of living. Panel members made it clear that non-fuel minerals are critical to the 69-057 081 - 77 |