‘Where the prize ultimately lies’

A California electricity crisis, soaring natural gas and oil prices, and a chaotic U.S. electricity grid were the publicly stated reasons for the president’s asking Cheney to make proposals on a national energy strategy. The Cheney National Energy Policy Report gave a clear signal of what the new administration was about. Its message was buried in partisan debate and ignored. It should have been studied more carefully as a clue to the Bush agenda.

‘WHERE THE PRIZE ULTIMATELY LIES’

The Baker Institute’s energy strategy report formed the basis of the offi cial Cheney task force recommendations to the president, the National Energy Policy Report of April 2001. Both the Baker and Cheney reports projected a dramatic increase in U.S. dependency on imported oil over the coming two decades. Baker’s group identifi ed growing shortages of world oil, and singled out Iraq for attention: ‘Iraq remains a de-stabilizing infl uence to … the fl ow of oil to international markets from the Middle East,’ the Baker study declared. They didn’t explain why. They simply called on Washington to ‘restate goals with respect to Iraq policy.’

The Baker Institute study also recommended that Cheney’s Energy Policy Group include ‘representation from the Department of Defense.’ The U.S. military and energy strategy were in effect to be one. The Baker report concluded, as a portent of what was to come, ‘Unless the United States assumes a leadership role in the formation of new rules of the game, U.S. fi rms, U.S. consumers and the U.S. government [will be left] in a weaker position.’ Cheney and the new administration did not hesitate to assume the leadership role, though few could imagine at that point just how the new rules would be formed.

Cheney’s report emphasized a growing dependency of the United States economy on oil imports, and looked well into the future. After a passing mention of domestic energy alternatives, the core of the recommendations dealt with how the United States might secure new foreign oil sources. In this regard, the report noted a problem. Many of the areas in the world holding the largest oil resources were in the hands of national governments whose interests were not necessarily to help the U.S. energy agenda. Cheney’s report noted that these ‘foreign powers do not always have America’s interests at heart.’ What he meant was that a nationalist government with control of its own energy resources and with its own ideas of national development

might not share the agenda of ExxonMobil or ChevronTexaco or Dick Cheney.

Cheney, Baker and others in the top policy circles of Washington had serious long-term concerns. They were privately alarmed at the state of world oil supplies, a theme which, for good reasons was rarely mentioned in public discussion. They were also thinking of how to get their hands on what remained.

Back in autumn 1999, at a private London Institute of Petroleum meeting, Cheney, then CEO of Halliburton, had told leading international oil executives that the Middle East would become an even more vital strategic center of needed oil reserves over the coming decades. In a preview of his 2001 energy report, Cheney told the oilmen:

by 2010 we will need on the order of an additional fi fty million barrels a day. So where is the oil going to come from? Governments and the national oil companies are obviously controlling about ninety percent of the assets. Oil remains fundamentally a government business.

The fi gure of 50 million barrels a day was almost two-thirds of total world oil output then at the time, a huge volume, equal to more than six times the total oil production of Saudi Arabia. The fact that Cheney also saw it as a problem that governments controlled their oil was highly signifi cant, as Saddam Hussein and other heads of oil states were soon to learn.

Where would the world find six new Saudi Arabias? Cheney answered, ‘While many regions of the world offer great oil opportunities, the Middle East, with two-thirds of the world’s oil and the lowest cost, is still where the prize ultimately lies …’ A year earlier, at a Texas oil meeting, Cheney hinted at what would be the focus of Bush administration oil geopolitics. Talking about the dangers and instability in Kazakhstan, Cheney, who was still CEO at Halliburton, retorted, ‘You’ve got to go where the oil is … I don’t worry about it a lot.’ He had clearly thought about it a lot, though.

With undeveloped oil reserves perhaps even larger than those of Saudi Arabia, Iraq had become an object of intense interest to Cheney and the Bush administration very early on. Paul O’Neill, a Bush cabinet member who had been fi red in late 2002 for not being a good team player, later revealed that, as president, Bush had decided to