Author: Marin Katusa
Reviewed By: Muhammad Waqar
Marin Katusa, in his book, “The Colder War”, has summarized his experience for being serving as a chief energy investment strategy for Casey Research. In the book, Katusa has tried to elaborate Vladimir Putin’s insight about future of the world politics. Using his professional experience, he has analyzed the energy politics in a way that is a must read for anyone interested in geo-politics. The colder war opens with an increasing significance of energy resources and is a sum of eleven chapters. Katusa, in his book, has sorted out the vulnerabilities of the west in general and United States in particular against the intentions of Putin. Agreeing with entire argument of the book is not the case; however, the phenomenon of colder war, which according to Katusa is the continuation of the cold war, will no doubt shape up future order of the world.
Katusa, in the very first chapter has tried to project the future with the help of a mythical tale. By comparing economic and foreign policies of Putin, Author has visualized his ambitions to hijack both energy resources and energy trade of the world. Punch line of the book is that Putin is using energy resources of Russia as a sword to regain its lost might.
Admiring his farsightedness, Katusa has presented Putin’s policies as practical implementation of his PhD thesis. Nationalization of energy companies (Gazprom and Rosneft) was actually the core finding of his doctoral research.
Making his argument about increasing dependency of Europe on Russian energy resources Katusa counted three reasons; Europe’s own energy resources are rapidly decreasing, industrial growth of Europe requires more energy and importing oil from Russia through pipeline is more economical for Europe instead of trading it with Middle East. Being well conscious of European vulnerabilities, Putin has nationalized Russian energy companies which Katusa has called as “Putinization of Oil”.
The Petrodollar System, conceived in 1973 has been used as a tool by the U.S authorities as dollar hegemony. According to the author, this new “Dollar for Oil System” proved much better to that of the Bretton woods “Dollar for Gold System” for United States. For decades, it has kept the U.S at the top of the global economic system. This system actually enabled America to import oil for free for decades.
Discussing the invasion of Iraq in 2003, author says, it too was driven by the threat to the device of petrodollar as much as anything else. Saddam Hussein, a military dictator, was trying to redirect the Oil for Food Program. Another focal person in this line was but Libya’s Muammar Qaddafi. His only crime was to encourage Arab and African nations to use gold dinar in place of both dollar and euro. Soon, Qaddafi turned into history in the hands of rebels with an assistance of United States and NATO.
Rise and fall of Dollar in comparison with British Pound is just like a remake of an old movie in the words of Katusa. The technological advancement of Britain made her “the workshop of the world,” for being producing low-cost products. The world wanted British products and so the British pounds. Same goes for United States. Her currency monopoly in the oil trade created need for dollar. Everyone needed oil, so, everyone needed dollars. In international export market, dollar was gladly accepted and the system worked on dollars in and dollars out.
Some of the policies of United States are pushing dollar towards decline. India, China and South Korea are the major users of Iranian oil. Sanctions on Iran provided space to these countries for using gold and other currencies in their oil and gas trade with Iran. Only between March 2012 and July 2013, Turkey transferred worth $ 13 billion dollars gold to Tehran, for its natural gas and oil. Moreover, Iran and Russia are negotiating to enter into an oil-for-goods treaty worth $1.5 billion per month for boosting Iranian oil exports. Russia doesn’t need the oil but to resell it in the world market for rubles. Simply, the sanctions are teaching Iran and its oil customers as how to live without dollars.
Rapid economic growth outside the United States has been discussed and pointed out as yet another factor of undermining the dollar’s importance. In 1946, most of the cars were built in United States which in 2013 accounted only 12 percent of world auto production. China, in 2009, becomes Africa’s biggest trading partner and their trade exceeded than $200 billion in 2012. Nigeria’s central bank, in January 2014, announced selling of U.S. dollars to increase its Yuan holdings. These deals have increased the use of Chinese currency, a big threat to dollar.
Currently the petrodollar system rests upon the will of Saudi Arabia which has already been annoyed by USA on the issues of Iraq, Egypt, and Syria and on its talks with Iran. She is looking towards east for its energy exports because the production of shale energy has turned USA self sufficient. Saudi Arabia’s oil exports to five Asian countries (China, Japan, South Korea, India and Singapore) have reached three times to its overall exports to North America and Europe. She has remained a top most trading partner of China among all the GCC countries for almost a decade. Additionally, Putin has become the first ever Russian leader to visit Saudi Arabia in 2007.
Keeping in mind all these factors, author argues, the probability of international trade to switch to alternative currencies (other than dollars) is very high. Ruble and Yuan are the best and top candidates in this regard. There is also a discussion about the possibility of gold to regain its historical role in international trade. Russia, China, India among others has been buying gold from the past decade to be ready for any such development. Such a condition is beneficial for Russia as she currently is the world’s number-three gold producer.
Over all, the book explains how the west is failing in responding to the smart moves of Russian President, Putin. Energy trade in other currencies would greatly affect the value of dollar in international market. According to author, there are more US dollar bills outside of USA than inside the United States, and all countries will surely sell their dollars if they find other alternative currencies to trade oil, resulting in a decline in dollar’s value. Moreover, America’s debts, today, have been exceeded than the 100% of their annual production. Such a condition would give birth to a state of high unemployment, snail-paced or negative economic growth and rapid price inflation. The combination of higher prices for necessities and lower wages would demote much of the middle class to working poor status.
Findings of the book are that, Putinization of the energy resources, in words of Katusa, is a challenge for U.S administration. Putin is stretching his arms to hit the hegemony of U.S by targeting its petrodollar system. His success would result in an economic tsunami for the west in general and United States in particular. In response, what utterly is predictable is that the U.S. government will use all available means to counter threats to the dollar hegemony.
The writer has done M. Phil International Relations from National Defense University.