At a time when a large number of countries, including our own, face serious economic difficulties as a result of two massive increases in the price of crude in quick succession, it is almost bad form for anyone to talk of great opportunities opening up before mankind. Yet this is, indeed, the case. Seldom before has humanity been better placed to bridge the gulfs that divide it and take a big step forward towards the hitherto utopian ideal of shared prosperity.
No change of historic proportions has ever been or can ever be painless. This one is certainly going to be extremely painful and not only for Western Europe and Japan, which have built their phenomenal prosperity in the post-war period on the availability of cheap and abundant supplies of crude from West Asia. Even a country like India faces the threat of recession and inflation in view of its inability to pay for even its relatively small import of oil without disrupting its other equally essential imports.
Also, no change of epoch-making character has been or can be a quick and linear process for the simple reason that old habits of thought and behaviour are too deeply rooted to permit a neat break with the past. In the present case, too, the march into the new era will be greatly hampered by a variety of factors. Two of these deserve special attention.
Reconcile
First, people in the West will take a long time to reconcile themselves to a drop in their standard of living, irrespective of whether it adds to their sense of well-being or not. In the meantime they will do all they can to gain access to all possible sources of energy, regardless of long-term consequences, and resist as far as it is within their power the process of a more rational distribution and use of resources. The willingness of some Western and Japanese companies to pay as much as $I7 for a barrel of Iranian crude at a recent auction, the plans that some US firms have already drawn up for sucking mineral resources from the bottom of the sea and the emphasis that is now being placed on nuclear power through the use of the known fission process illustrate the nature and magnitude of the problem.
The companies in question could not have been unaware that their action would lead to a sharp increase in the prices of crude all over the world. But they did not care. Similarly, though it is well known that a sharp increase in the number of reactors will make it virtually impossible for the governments concerned to dispose of the nuclear wastes and prevent gangsters from stealing plutonium, manufacturing crude a-bombs and holding whole communities to ransom, no industrialised country is likely to accept restraints in this regard. On present showing it can also be taken for granted that the plundering of the oceans will soon begin in right earnest without prior agreement on a proper sharing of these common possessions of mankind. The great powers are not particularly concerned over the new tensions and polarisations this might create.
Secondly, it is possible that instead of using their truly fabulous and growing revenues to help poor countries like India develop, Arab oil producers will tend to think in terms of buying gold and investing in rich countries like the United States and Japan and Western Europe in the illusory belief that their money would be safer there than elsewhere. The Americans, the Europeans and the Japanese will naturally encourage them to believe that a long-term partnership is both desirable and possible.
Obstacles
But while these and other similar obstacles can impede progress, they cannot stultify it because the forces that have been released are too powerful to be checkmated. History took a big turn when the Egyptian and Syrian forces attacked Israel on October 6, 1973, and the Arabs decided to use oil as a political weapon. The process cannot now be reversed even if the United States succeeds in bringing about a negotiated settlement of the Arab-Israeli dispute because the oil producers have for the first time grasped the magnitude of their powder and their capacity to use it. It could have been a different story if the Soviet Union could have been excluded from the region. But it is there and its presence strengthens the position of all Arab countries, irrespective of whether they are friendly towards it or not.
As a result of the changes that have taken place and are bound to take place in coming months and years, it is a safe inference that the east-west and north-south divides, which have dominated our thinking in the past three decades, will not do so for long. The two great divides have not suddenly become irrelevant and they will not quickly disappear. But we shall be grappling with strikingly different problems and our perceptions and attitudes will change.
As for the first divide, several propositions are already reasonably clear. For instance, not to speak of Western Europe and Japan, which are critically dependent on oil imports, even the United States, which was self-sufficient in oil until recently, cannot afford to increase its consumption of crude. This means that at least till such time as they develop an alternative source of energy, they must accept a fairly low, if not a zero, rate of growth. Simultaneously, they cannot but be much more interested in helping the Soviet Union exploit its oil and gas reserves in Siberia and in developing extensive economic ties with it. Their need for its raw materials will in future be as great as its for their technology and capital.
Together the two developments can transform east-west relations. On rational grounds, the Soviet leadership should be able to take a much more relaxed view of its security requirements once the challenge of ever rising consumption standards in the west subsides and it ceases to be haunted by the fear of being surrounded by a hostile coalition of the United States, Japan and China in the east and of the United States and Western Europe in the west. This should persuade it to reduce its defence expenditure and take other steps to reassure its neighbours regarding its future intentions.
It can be assumed that powerful interests and groups in the United States will view with disfavour the prospects of Western Europe and Japan drawing closer to the Soviet Union, and for that matter with China, on their own, and that they would try to freeze the status quo which assures America’s pre-eminence in the world. Dr Kissinger’s suggestion that Western Europe and Japan join the United States in finding a common solution to the energy crisis provides an example of the kind of measures it would like to take. But since the United States is no longer in a position to share its oil and gas supplies with its allies, they will wish to deal with the Soviet Union, China and the Arab world independently of it.
Opportunity
As for the north-south divide, it is hardly necessary to make the point that if the Arabs grasp the opportunity and do not think exclusively in terms of hoarding gold and of partnership with the rich countries, it is possible for the first time to secure massive transfers of know-how and machinery from industrialised to non-industrialised nations to the benefit of all. Indeed, one can go so far as to say that the Arabs have no choice but to play this historic role because there is not enough gold for them to buy and there is a limit beyond which they cannot invest in the west and Japan because that will provoke resistance, resentment and threat of expropriation. This year alone they will be earning upwards of $60 billion even if they do not further raise either the prices or the output of oil.
All in all, the whole non-communist world – both the Soviet Union and China are and will remain for a long time self-sufficient in oil – is caught in a convulsion, which looks like producing more far-reaching results than even such historic developments as the emancipation of India in 1947, the triumph of the communist party in China in 1949, the division of Europe into two hostile blocs in the ‘fifties and the recent Russo-American and Sino-US detente. The challenge cannot be shirked but it can be converted into an opportunity.
The Times of India, 2 January 1974