goldswitzerland.com / By Lars Schall / March 2, 2013
THE MATTERHORN INTERVIEW – February/March 2013: Hossein Askari
“The Middle East will blow up – the only question is when”
In this exclusive interview, the renowned economist and energy expert Hossein Askari reflects on some crucial topics of our time, inter alia: current developments in the energy business; the high oil price and the main drivers of it; the Iranian conflict and other challenges in the Middle East; China as the rising energy power; gold-for-oil trading; and Islamic Finance.
Hossein Askari, who was born in Iran and went to the UK at the age of nine to receive his schooling, earned his Ph.D. in Economics at the Massachusetts Institute of Technology (MIT). Since 1982 he has worked at George Washington University, where he has served as Chairman of the International Business Department and as Director of the Institute of Global Management and Research and is now Iran Professor of International Business and International Affairs.
Askari has written extensively on economic development in the Middle East, international trade and finance, agri-business and oil economics, including twenty books, six monographs and over one hundred refereed journal articles. His latest book is “Conflicts and Wars: Their Fallout and Prevention” (Palgrave Macmillan, July 2012) with another forthcoming entitled “Collaborative Colonialism: The Political Economy of Oil in the Persian Gulf” (Palgrave Macmillan, 2013). His opinion pieces have been published in the New York Times, Washington Post, International Herald Tribune, The Christian Science Monitor, US News and World Report, Foreign Policy and in other newspapers and websites. Moreover, he is a regular contributor to Asia Times Online.
Lars Schall: Professor Askari, are “resource wars” just a phenomenon of modern times or isn’t that something that we see more or less at work throughout history?
Hossein Askari: Historically, resources have been the fuel of colonialism. The colonialist-imperialist powers were after resources from around the world, as they are today. What is different today is that the colonialists are collaborating with despots around the world to get what they want. They support these despots to stay in power. The despots and their cronies enrich themselves. And the colonialist powers get what they want–resources, exports of arms to these countries with their companies and influential officials profiting in the process. All of this at the expense of the citizens of the exploited countries. This is what I call collaborative colonialism in my forthcoming book.
L.S.: To have the control of energy flows is extremely crucial in our time. Which conflicts do you see as “resource wars” that are connected to energy?
H.A.: To my mind, US support of oppressive dictators in the Middle East and Africa are an integral part of the resource wars. China is now stepping in in a big way around the world. I think that the US is very shortsighted. The Middle East, especially the Persian Gulf, will blow up. The only question is when? Instead, the US should use tough love and help these despots to change as the only way forward–fundamental political, social and economic reforms. There is no other way.
L.S.: Is the control over the supply of energy resources for the economy ultimately the predominant factor for the whole social life?
H.A.: Yes, energy is crucial for modern life but I don’t think that it will be oil that matters in 50 or so years. We will need cleaner fuels–natural gas and renewables.
L.S.: I think that an expression of the importance of energy is manifest in the traditional relations between international banks and the major oil companies. Why is it that they seem to have been in a symbiotic relationship with each other for more than a hundred years? To be honest, to me it looks kind of incestuous the way that these oil and financial relationships are all intertwined.
H.A.: Access to finance has been traditionally important in the oil and energy business. Some of these energy projects require massive financing in production and transportation (pipelines and tankers). In the 1940-1970 period, Middle East rulers borrowed from Western institutions to finance their lifestyles and keep their countries afloat. In more recent times, the rich rulers of the Middle East have also parked their ill-gotten gains in Western financial institution.
L.S.: Now that we talk about banking and finance, let us raise the topic of how monetary policies have an impact on oil prices. Can you explain to us the connection, please?
H.A.: To my mind, the main drivers of oil prices have been global GDP growth and supply disruptions. So by affecting economic growth, monetary policy definitely impacts oil prices. Moreover, given that oil is priced in dollars, a depreciation of the dollar will lead to adjustment in oil prices in dollars and in other currencies.