Terms of trade: West Asia isn't the Empire's Achilles' heel anymore

Hindustan Times

4 hours ago

This column is being written on a day when US President Donald Trump seems to have, or claims to have engineered a cease fire between Iran and Israel despite the US having helped the latter with its bombing of Iran's underground nuclear installations. The cease fire followed what seems like token missile attacks by Iran on US military bases in Qatar. The developments so far have turned all doomsday predictions of experts from various ideological standpoints -- they include MAGA's fears of the US entering yet another long-drawn war in West Asia, liberal voices fearing an uncontrolled escalation using even non-conventional means and market watchers fearing a large geopolitical disruption to the global economy and trade or energy flows -- gross overestimates. So, are seemingly knowledgeable people getting worked up about nothing? Or is Trump really a master of brokering deals, and most of the commentariat is unable to see this quality because of its prejudice towards him? There is another way to look at this question. It is best approached by quoting from the Wall Street Journal's 23 June Hard on the Street column. The cease fire followed what seems like token missile attacks by Iran on US military bases in Qatar. (AFP)
'Back in 1977, just before the Iranian Revolution began and planted the seeds of the Second Oil Crisis, the US had net imports of about 3.1 billion barrels of petroleum and refined products, or 14 barrels per person. That per-capita number was unchanged as recently as 2003 at the time of the Iraq war. The US also was a significant importer of natural gas in both of those years. Today, because of hydraulic fracturing, the US has net exports of about 2.5 barrels per capita and is also the world's largest seller of liquefied natural gas. The technology isn't new, but improvements in the past 15 years have been transformational,' it says.
The US's military involvement in West Asia, especially in the post-WWII period has had a deep relationship with the petroleum economy. But things have changed in the last decade or so. The US is no longer an energy importer and therefore much more immune from any energy shocks coming from a disruption in this region. To be sure, a lot of friendly oil exporting countries in West Asia continue to be important for the US, more importantly the current US president. The legacy of this energy economy via the petrodollars means that these countries have a lot of money to invest/spend in the rest of the world and both Trump and the US would like a large part of this. But all the US had to do to keep this gravy train going was to derail the transition from fossil fuel use, which Trump has already done by killing the climate deal.
If energy security is not really a concern, then why is Trump risking an involvement with Israel's military aggression in the region, one might ask then. The simplest answer to this question is that being seen as not standing with Israel would put the Trump administration in a position which would force a rupture with the neoconservative and Zionist lobby in US's domestic politics. This will have severe financial and ideological consequences. The pro-Israel lobby still controls a lot of purse strings for political finance in the US. Not standing with Israel at the current moment would also be seen as playing into the hands of a pro-Palestinian voice which does not stand against things such as Hamas, Hezbollah or Iran's other violent proxies.
Also Read:India welcomes Iran-Israel truce, reiterates concern about stability in region
However, Trump is shrewd enough to ensure that it is him and not Benjamin Netanyahu who is seen as the boss in the ongoing chain of events. His outburst including using expletives on Tuesday while referring to both Iran and Israel on Tuesday was meant to send exactly this message. The only other US president who is said to have used an expletive after having met Netanyahu is Bill Clinton, who was frustrated that it was the Israeli and not the American who got away with playing the superpower in that meeting held in 1996. The West Asian or Middle East (as the Americans and Europeans call it) contradiction for the US has lost its economic criticality significantly compared to what it used to be in the 20th century because of the US's self-sufficiency in energy. However, the Israeli aggression in the region – it is only expected to become worse – is creating a deep super-structural fault line in the West, US included, as the Muslim population rises in these countries and they assume a growing role in domestic politics. But it is the non-right-wing parties such as the Democratic Party in the US and Labour in the UK which are facing most of the growing strain because of this cleavage.
Does this mean Trump can keep going from one deal or chutzpah to another? Not necessarily. A politics of schadenfreude – best seen in things such as Trump penalising Harvard University for refusing to crack down on alleged antisemitic behaviour on campus – can keep Trump's working class conservative base animated for some time. But it can do precious little to solve the economic contradiction which drove this lot to Trump's fold in the first place. This contradiction is best described as America's success in keeping down inflation by importing from the Global South, most importantly China, but which also entailed unleashing a deindustrialisation and destruction of blue-collared jobs in its domestic economy. Trump's knee jerk response to this problem, his reciprocal tariffs, which he himself put in abeyance, and even a crackdown on illegal migration will likely create more problems for his working-class base than bring back the glory days of the Golden Age of Capitalism. Trump's, or for that matter, all of the neo-right's political legacy will depend on what they can do to solve this primary contradiction rather than running away from it by seeking gratification from periodic acts of schadenfreude or chutzpah. We are very far from the final act in this larger political economy tension in the advanced capitalist world.
Also Read: Iran Israel's fragile ceasefire in place - What's next? Explained
History, if one were to make a provocative statement to end this column, is still moving at a pace when it changes in decades rather than weeks. an obsessive tracking of flashpoints in the past few weeks seems to have convinced many people that we are living in times where the latter is true.
Roshan Kishore, HT's Data and Political Economy Editor, writes a weekly column on the state of the country's economy and its political fall out, and vice-versa