Who won Gulf War 2?

 Some say it was China.

T. Boone Pickens to Congress : “They’re opening them (oil fields) up to other companies all over the world ... We’re entitled to it. Heck, we even lost 5,000 of our people, 65,000 injured and a trillion, five hundred billion dollars. We leave there with the Chinese getting the oil!”

Wait … wasn’t the war about nuclear weapons in the hands of a dangerous regime? I won’t deny that’s true. It might even have been what President George Bush had in mind.

One thing that I can say, however, is that when the 369th Corps Support Battalion (aka the Harlem Hellfighters) was preparing to go to war back in 2002, one sergeant liked to motivate his soldiers by saying (among other things) “We’re in, we’re out, and by next year gas will be 60¢ a gallon!”

In other words, it wasn’t just Texan oilmen who thought that the war was fought for the economic benefit of the residents of the United States; cops and roofers and public school teachers (and at least one dude working in the Economic Growth Center at Yale University) pretty much thought the same thing. Moreover, the State Department’s Future of Iraq Project proposed that the industry be privatized after the war, and no less than Ahmed Chalabi promised, “American companies will have a big shot at Iraqi oil.”

So is T. Boone Pickens right? Did China win Gulf War 2? Let me propose here that the answer is “no.” Given the disasterous decision to go to war, America has probably won Gulf War 2, in callous economic and strategic terms. The decision by the Bush Administration to discourage Americans from investing in Kurdistan, followed by the (apparent) decision by the Obama Administration to extend that discouragement to the rest of Iraq, was quite smart. If it works out, two things will follow: (1) the U.S. will gain a huge amount of diplomatic leverage over a dangerous regime that is trying to procure nuclear weapons, and (2) the Second Gulf War may turn out to be a paying propostion in straight-up economic terms.

Don’t believe me? I don’t blame you. I’m not even sure that I believe me. But after writing a case about the Iraqi oil industry, teaching it to a bunch of mostly-American MBA students and then again to a group of mostly-European executives, and running some numbers, I’ve come to think that there’s a reasonable case to be made for the defense.  Over the next few posts, I’m going to try to make it.

Comments

[Bernard Guerrero]

I like where this is going in the first few follow-up posts. The argument, as I see it, is that given the basic fungibility of the product, the well developed nature of the global market and the vast reserves Iraq's sitting on, a "win" is obtained by bringing the fields first explored decades ago on-line. If so, I'm broadly sympathetic and I've made a similar (if not remotely as comprehensive) a case before.

But how do you measure the ultimate gain? Oil prices still look dislocated to me, and I see no sign that the prospect of Iraq coming on-line is driving down prices....unless we're claiming that the $140 or so we were seeing in '08 was "real" and it took a realistic prospect of Iraq coming on-line to drive it down to $80.

[Luke]

Hmm, I'm late to the party. I suppose that this sort of works, at least at certain angles.

Whatever happens to oil, the non-trivial costs of dealing with logistics of the war and the veterans is going to cause a lingering problem for the US. One that probably won't break nicely politically for quite some time. But Siglitz is a pinko.

At first blush, I think your two points are just wrong; I don't think China won cause China has Chinese stuff it needs to sort out internally for it to be a real 'win' for them, whatever a Texas oilman says.

To point one, Iran gained a huge amount of leverage against America, being able to threaten American troops throughout the region; its local enemies (Saddam and the Taliban) were displaced and Iran's emerged all the stronger, picking up either a fully allied, or weakly allied government in Baghdad (though Sadr as kingmaker will ultimately disappoint them). America's invasion of Iraq, and rejection of the Iranian Grand Bargain (plus the sweetheart deal with Libya) helped push Iranian politics towards the acquisition of nuclear weapons. But given that American analysts were willing to go to the press over the immenent Iranian bomb c. 1995, I'm just underwhelmed by the idea that the regime's getting nukes is 1) soon or 2) is really dangerous, at least on the Kim Jong Il level. It's a hell of a lot less scary than Mao with nukes.

As for two...I'll believe it when I see it. As much as I wish Mitch Daniels were right and oil pays for everything in the end, I'll be floored, given that the wildcard not on your discussion of Iraqi politics and oil profits--the Iraqi diaspora in the Sunni Middle East. With a Shi'a Arab nationalist (Sadr) or Shi'a (SCIRI, Maliki) running Iraq, that diaspora is not coming home, and is going to play a regional role like the Palestinians, only worse. So, what we may get from oil may end up going down in subsidies to Israel, Saudi, and Egypt as things get worse, rather than better.