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Concocting the Next “Crisis”

The darkest consequence of oil diplomacy, in America, is a political language, a premonition. Already the world energy crisis has brought threatening changes in US economic policy. These changes are evident in Kissinger’s and Nixon’s plans for “energy independence.” But the new policies go beyond oil commerce to world trade in all materials, promising conflict in wheat and copper, metals and minerals.

In its most menacing form, the new US policy anticipates a “next crisis” of raw materials and of US dependence upon the Third World. Strategists of the policy see a need, specifically, for independence in materials other than fuels; they fear that oil power will become a precedent for commodity power in copper or coffee or manganese. Such fears correspond to a theory of US foreign policy which emphasizes economic issues and relations with the Third World. But the new alarmism also has immediate implications in US politics.

In the last few months, US politicians have addressed themselves repeatedly to the “materials crisis,” while discussing issues from deep-sea mining to anti-Americanism, from grain supplies to foreign aid. The boldest recent words came in January, when the House of Representatives defeated a bill allocating $1.5 billion to the World Bank’s International Development Association (IDA), which provides easy credit for the poorest of developing countries.

The bill was supported by the Nixon Administration. Its congressional partisans argued that foreign aid was justified by “enlightened self-interest” and by “economic realities.” They noted that developing countries supply one-third of US raw material imports; that the US imports more than half its consumption of six “basic raw materials,” including, for example, manganese, “from countries like Gabon, Zaire, and Brazil.”1

This argument did not sway the geopoliticians of the Congress. Representative John Dent, for example, a Democrat from Pennsylvania, said that US aid to resource-exporting countries, without “some kind of a string attached,” “puts us in the position of being suckers to the point that an American no longer knows where to stand or how to stand.” A “closedown” by the mineral-producing countries, he said, would make the oil crisis seem like “a little Sunday school picnic.” He declared that “we have only two years to get ourselves in a position to become free and independent for our Bicentennial birthday.”

Other representatives seemed encouraged by Representative Dent. Representative Carter of Kentucky: “We are raiding Uncle Sugar. We are getting too soft.” The precedent of oil-producing countries was invoked. Wayne Hays, the Democrat from Ohio, said that the bill would not help “the poor of the world and all that.” He reminded his colleagues that the Saudi Arabian ambassador was “gliding around this city right now” in a Cadillac limousine, and urged that Congress “sort of serve notice that we are not going to be pushed around by these people.” The bill was defeated by 248 votes to 155.

Representatives Dent and Hays may seem to speak with a peculiarly sharp congressional voice on the particularly charged subject of foreign aid. But many other politicians express similar fears. Senator Charles Percy sees all resource-producing nations, “whether it be bauxite [aluminum ore] or whatever…looking over the shoulder of the sheiks.” Last December, Interior Secretary Rogers Morton noted the efforts at cooperation of bauxite producers, and warned of a “minerals crisis and a materials crisis”; he subsequently described his warning as a necessary attempt to “wave the flag,” because, “You know, there’s a lot of anti-American sentiment around,” and “I’d hate to see us…have to go around the world begging with our hat in our hand for some of these essential minerals.”2

On the same day that the House defeated the IDA bill, Senator Lee Metcalf was also talking, in the Senate, about manganese imports, Gabon, and the “economic clout” of Zaire. Metcalf, a prominent liberal and opponent of the Indochina war, has this month held public hearings to look more closely at manganese. In the Senate, he introduced a bill to “promote” the mining by US corporations of minerals from the ocean floor, and to encourage national “self-sufficiency.” Mineral deposits on the Atlantic and Pacific seabeds, Metcalf said, are “rightfully part of our national heritage”; he feared a “situation” in mineral commerce “similar” to the crisis of oil power at which the world now “gapes.”

The argument about raw materials to which Metcalf and Morton allude, although not new, may appear newly apt. Yet the danger of US “dependence” is hard to demonstrate—the danger, that is, for the US. A raw materials “crisis” may in fact threaten not the rich but the poor world; the security of Zaire not America; the sellers not the buyers of cobalt or copper. Any dangers may have to do less with dependence than with the political apprehension of peril, in US policy. Secretary Morton’s “crisis” has little relation, also, to fears about the rate at which rich countries are using nonrenewable resources. It is concerned, rather, with international politics; with the presumed new economic power of certain poor countries.

The materials argument has been stated clearly by an economic analyst named C. Fred Bergsten, whose work Senator Metcalf cites. Bergsten, of the Brookings Institution and formerly of the National Security Council, is the leading strategist of the next trade crisis.3 He is concerned, in general, to influence US foreign policy toward greater preoccupation with the Third World; he favors a largely economic involvement which he likens explicitly to the Nixon Doctrine in international security.

This involvement is justified, Bergsten argues, because of the threat to US interests posed by the “rising…power of many countries in the Third World.” “It is no longer clear that the United States would emerge ‘the winner’ in confrontation with the Third World.” Recently, watching the successes of oil-exporting countries, Bergsten has emphasized the specific threat of “producer cartels” formed by poor resource-exporting countries.

The present oil situation, in Bergsten’s words, is “just the beginning,” “of course, the prototype,” and OPEC, the Organization of Petroleum Exporting Countries, “has shown other countries how to do it.” OPEC may be, for exporters of other materials, both a model and a source of political or financial support.

Materials “alarmists” point out that the US, which imports only 35 percent of its petroleum, imports a much higher proportion of its supplies of certain strategic materials, including, for example, more than 75 percent of its consumption of aluminum ore, nickel, manganese, cobalt. A few countries dominate world exports of some materials: cobalt from the ubiquitously feared Zaire (once the Belgian Congo); copper from Chile, Zambia, Zaire, and Peru; bauxite from Guinea, Guyana, Surinam, Jamaica, and Australia.

In the alarmists’ scenario, these groups of countries will form increasingly powerful cartels. Bergsten expects that the existing organization of copper exporters, CIPEC, “may soon join OPEC as a household word”; bauxite exporters met last month in Guinea (having been presented, by the US business press, with the scary but unsolicited acronym BAUPEC). Such groups may now use their market dominance—in Bergsten’s phrase, their “tremendous clout”—to raise prices or to insist that “they process the materials themselves.”

The trouble with this scenario is that OPEC provides a fairly unreliable guide for other producers. The National Commission on Materials Policy reported last June that it could “isolate” no commodity except oil “for which the economic and political basis for [effective cartels] exists.” No group of bauxite or copper producers, certainly, has the political affinity of Arab oil-exporting states, the geographical closeness and economic predominance of the Persian Gulf countries.

More important, few Third World countries aside from the oil states have the economic resources and international reserves to emulate Libya, Kuwait, or Saudi Arabia in limiting exports. Zaire, for example, with its manganese and copper “power,” has a national income per capita of $102, compared to $1,850 for Libya, and international reserves of $8 per capita, compared to $1,400 per capita for Libya.4 Bergsten writes that “the monetary reserves of the Third World have risen by $33 billion in the last three years, so many of its members could finance” cartels—but the “Third World” in question includes all the rich oil-exporting states.

The question of OPEC states financing other resource-exporting countries raises separate issues. Very recently, the industrialized nations have begun to worry about what Senator Metcalf describes as “an Arab-led movement to organize developing countries….” This anxiety is based in part on the fact that Zambia and other copper-exporting nations have conferred several times with OPEC countries; the European press has also reported “rumors” that rich Arab states are buying not only gold but also copper, “other commodities such as tin and rubber,” and “even the ‘softs,’ coffee, cocoa, and sugar.”5

Such activity is justifiably alarming to the industrialized countries—as alarming as other likely dispositions of the hundreds of billions of dollars of OPEC revenues. Yet OPEC stockpiling may have little to do with the hopes of the poor Third World, or with the redistribution of money and power. Bergsten suggests that OPEC will “support the formation of other cartels, as one way to avoid opprobrium for bankrupting the ‘developing countries.”’ This is perhaps an inadequate explanation for the motives of, say, Saudi Arabia, which has so far shown little interest either in befriending or in organizing African and Latin American nations.6 Copper is probably, for Saudi Arabia or Kuwait, a rational investment. Any “copper power” would accrue to OPEC, not CIPEC. Like thousands of Western investors, OPEC financiers may see commodities as a safer holding than yen or pounds or Wall Street stocks. But for Peru, or Zambia, a rich Kuwaiti commodity speculator will look much like a rich Swiss.

A further difficulty with OPEC as a model for other cartels has to do with the character of US “dependence.” The effect of material imports on the US balance of payments, which Bergsten emphasizes, is relatively small; in 1972, before the recent oil price increases, net US imports of petroleum were worth $3.85 billion, compared to $268 million for copper metal, $163 million for bauxite, $514 million for all ores and scrap, textile fibers and wood materials.

The copper situation, at least, need hardly cause panic at the US Treasury: the US is the largest world producer and relies on imports for only 8 percent of its copper, down from 35 percent in 1950 and 60 percent in 1945. Bergsten wrote in The New York Times that the US is “or soon will be heavily dependent on imports” of vital commodities, including copper—but the US government estimates that by 2000 the nation will still import only a third of its total copper demand.7

The US—more easily than Japan—could increase national, “independent” production of, for example, timber. It is cheaper to stockpile manganese, or copper, than petroleum.8 Just as “substitute” fuels can be crushed from coal or shale, so many metals can be mined from poor domestic ores, as well as from, say, the ocean floor. Aluminum-bearing rocks are even found in the same parts of Wyoming as oil shale. US mining corporations seem, in fact, about as afraid of the “materials crisis” as oil companies are of the energy crisis; like the oil companies, whose profits have increased with OPEC revenues, they may expect to profit from, and perhaps encourage, price increases by foreign governments.

  1. 1

    Congressional Record, January 23, 1974.

  2. 2

    Interview in Forbes, February 15, 1974.

  3. 3

    The Threat from the Third World,” Foreign Policy, Summer, 1973; Washington Post, January 13, 1974; New York Times, January 27, 1974; also “The Threat Is Real,” answering criticism by Stephen Krasner, both in Foreign Policy, Spring, 1974.

  4. 4

    United Nations, Monthly Bulletin of Statistics, February, 1974.

  5. 5

    London Times, January 14, 1974.

  6. 6

    A recent proposal by Colonel Qaddafi to establish a three-tier oil price has received little support in OPEC, while African countries have accused the Arab Bank for Industrial and Agricultural Development of seeking profit not development. Senator Metcalf’s fear of “Arab-led” cartels was based on a report in the Journal of Commerce of a press conference given by the Shah of Iran. At that press conference, the Shah mentioned neither bauxite nor copper nor any other “endangered” commodity; he suggested that “very rich” oil countries might invest in Indian production of iron ore, a commodity entirely unsuited to the creation of a producers’ cartel.

  7. 7

    The National Commission on Materials Policy, “Final Report,” June, 1973, p. 2:9.

  8. 8

    A year ago, the Nixon Administration decided to sell much of the national stockpile of strategic metals, at the urging of mining corporations and in defense of the “American consumer.” It now seems likely to reverse that decision.

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