Senator William Cohen
``It's a geopolitical nightmare,''
Mon May 1, 2006 03:07
 


Bush Leverage With Russia, Iran, China Falls as Oil Prices Rise


May 1 (Bloomberg) -- President George W. Bush, already weakened at home by the soaring cost of oil, is finding that it's also eroding his ability to achieve his foreign-policy goals.

``It's a geopolitical nightmare,'' says William Cohen, a former Republican senator from Maine and defense secretary under President Bill Clinton who is now chairman of the Cohen Group, a Washington-based consulting firm. Such nations as Iran, Russia and China ``don't see us as the colossus that can cause them any harm, either by our economy or by our prestige.''

Record-high energy prices are weakening Bush's prospects of assembling an international coalition to counter Iran's nuclear ambitions. They are diminishing his chances of influencing energy-rich nations such as Russia and isolating troublesome ones including Venezuela and Sudan. And they are straining U.S. economic and diplomatic ties with China, whose oil needs are skyrocketing.

Prices show no signs of abating in the last two-and-a-half years of Bush's presidency, with oil futures hovering near $72 a barrel through the November 2008 presidential election. That's creating a windfall for oil-producing nations that may thwart Bush's goal of promoting democracy and free markets from Asia to the Middle East and halting the spread of nuclear arms.

Bush acknowledged last week that high oil prices have decreased the U.S.'s power to sway events.

``Some of the nations we rely on for oil have unstable governments or agendas that are hostile to the United States,'' he said in an April 25 speech to ethanol producers in Washington. ``These countries know we need their oil, and that reduces our influence.''

Security Concern

Bush called the U.S. dependence on imports a ``national- security concern,'' saying the nation now gets about 60 percent of its oil from overseas, up from 25 percent two decades ago.

An ABC News/Washington Post poll showed that 74 percent of Americans disapprove of the way Bush is handling gasoline prices, while 23 percent approve. The poll, conducted April 6-9, also showed Bush's overall approval rating fell to a record-low 38 percent.

While his weakened standing with Americans limits his ability to marshal support for his policies at home, energy- producing countries that view oil as political and diplomatic currency are emboldened, recognizing that the American economy depends largely on them.

`Tied Bush's Hands'

``The high crude prices have tied Bush's hands,'' says David Goldwyn, president of Goldwyn International Strategies, a Washington-based consulting firm, and an assistant energy secretary during the Clinton administration. ``These very high prices really empower other leaders to act with impunity.''

It isn't only oil producers that are ignoring U.S. wishes. China, the world's second-largest consumer of petroleum products behind the U.S., is seeking energy resources wherever it can find them. That includes negotiating for investments in nations such as Iran, Nigeria and Sudan, where Bush is seeking to improve human rights and push democracy.

Chinese President Hu Jintao followed his April 20 visit to the U.S. with a trip to Nigeria, Africa's biggest oil producer, to seek drilling rights. China has accounted for more than 40 percent of the growth in global oil demand during the past four years, according to the U.S. Energy Information Administration.

Russian President Vladimir Putin has frustrated the Bush administration by rolling back democratic rights in his country and seeking to dominate former Soviet republics. Putin has also been reluctant to pressure North Korea and Iran to not develop nuclear weapons. He has resisted U.S. efforts to impose sanctions on Iran, as has China.

Difficulty With Russia

The Bush administration is having difficulty with Russia even though the U.S. buys little oil or natural gas from the country, says Jim Goldgeier, a professor of international affairs at George Washington University in Washington.

``It's not so much our dependence,'' Goldgeier says. ``The bigger impact has been the effect of Russia's energy development on its own assertiveness in foreign policy. There's a real sense that they don't need us very much, so they don't need to listen to us.''

Last year, Russia earned $117 billion from exports of oil and oil products, and another $32 billion from gas, government figures show.

In Iran, the world's second-largest holder of oil and gas reserves, President Mahmoud Ahmadinejad has rejected a UN deadline to suspend the nuclear program. On April 28, the UN's nuclear agency told the Security Council that Iran has enriched uranium and is stonewalling efforts to determine whether the program is intended for the production of nuclear weapons.

Oil Earnings

Iran earned $45 billion in oil revenue in the year ended March 20, almost 50 percent more than it generated a year earlier, the government says.

That income helps keep society calm and reformers at bay. ``High oil prices help the people who are in power to stay in power,'' says Michael Mussa, a senior economist at the Washington-based Institute for International Economics.

White House spokeswoman Dana Perino says rising oil prices reflect U.S.-led global economic growth that has benefited many developing nations. She also says increasing oil revenue has benefited some governments that are hostile to the U.S.

``High prices have supported some regimes that do not share our values,'' Perino says.

One such regime is in Venezuela, the U.S.'s third-biggest oil supplier. President Hugo Chavez has sought to throw his weight across Latin America, urging Colombia to renege on a free- trade accord it signed with the U.S. and tripling trade with Cuba since taking office in 1999. ``A high oil price allows him to get away with a lot of nonsense,'' Mussa says of Chavez.

``We're in the middle of a new wave of resource nationalism because these countries feel like they don't need any help'' from the U.S., says Luis Giusti, who headed Venezuela's state-run oil company before Chavez came to power. ``This is a completely different world.''

To contact the reporter on this story:
Brendan Murray in Washington at brmurray@bloomberg.net;

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