The American Retreat, Part I: Oil

Read the other installments in this series:
 
The American Retreat, Part II: Soldiers of Fortune
The American Retreat, Part III: the Korean Peninsula

I’m going to do something I loathe and quote something I read on Twitter June 24. In a pair of posts U.S. President Donald Trump asserted:

Diction and statistical issues aside, these tweets comprise the 92 most important words used by anyone in the past three decades. Trump just made clear the days of America protecting global shipping – particularly of oil shipping in the Middle East – are over.

There is an easy argument to be made that the United States’ shale revolution will make the United States a net exporter of crude oil in the current calendar year, but to understand just how critical that is for the Americans we must first pick apart just how horrible that is for everyone else.

Let’s talk importance:

In the pre-Order world if you couldn’t obtain fossil fuels yourself, first coal and later oil, you failed to industrialize. Your manufacturing would at most be a step above cottage industries, so no mass education and no consumer goods (aka peasantry and mass poverty). Lack of fuel condemned you to having an at-best rudimentary transport system meaning your cities were very small, only able to exist in regions that could grow their own food (aka high living costs and low quality of life).

The handful of locations that could secure fossil fuels – either by producing it locally or by seizing it from others – could advance into something we today recognize to broadly mean “civilization,” which includes among other things homes that don’t leak and gadgets and full bellies.

This all changed in the late 1940s. After World War II the Americans created a global Order – a mix of security and trade guarantees which they used as a bribe to induce others to join their side in the Cold War against the Soviet Union. With global security now a thing, oil could be shipped safely and at volume without military escort, meaning that countries that didn’t have a military capable of escorting could now access fossil fuels. BAM! Civilization goes global.

Remove the Order, remove global oil markets, and civilization itself goes into screaming reverse in any location that lacks either the ability to produce oil locally, or the ability to venture forth and secure someone else’s.

Let’s talk vulnerability:

Crude tankers are huge. A modern supertanker can shuttle around oil weighing more than four Nimitz-class aircraft carriers. They are so big expressly because of the Order.

Pre-Order, merchant shipping used small, fast vessels because they needed to be able to scatter and hopefully outrun predators whether those predators wore eyepatches or naval uniforms. The Order ended such predation under the watchful eye of the U.S. Navy. Instead of commercial advantage coming as a result of speed and distributed risk, it instead came from efficiencies and economies of scale. Ships evolved to became slower to save on fuel costs, and bigger to get more bang for the buck. Today’s oil tankers are the slowest and biggest of them all and are nearly 50 times the size of some of the biggest cargo ships of the WWII era.

A similar logic holds with ports: size generates economies of scale. In addition, as ships have gotten larger, ports had to expand to match – a city with a small dock simply cannot handle a ship that is longer than the Empire State building is tall. Bigger, slower ships forced fewer, larger ports. Disrupt anything within the system and the damage quickly becomes extreme.

Between oil’s criticality to and ubiquitousness in modern life, oil is by far the most commonly traded product on Earth comprising some 18% of all maritime shipping traffic (by volume). About a third of all waterborne crude and product shipments originate in the Persian Gulf.

Let’s talk stickiness:

There are no shortages of politicians out there who agitate for relocating manufacturing capacity to their countries, provinces or cities. Making a speech is one thing, but actually building industrial plant and infrastructure is another. It costs billions and takes years for large industrial shifts, and even then there is no guarantee that a new industrial park will prove economically viable.

But at least manufacturing can be relocated. Commodity production cannot. Either you have it or you don’t, and the Persian Gulf has the greatest concentrations and volumes of easily-produced conventional crude oil on the planet. It can never not matter.

There’s also the impossibility of substitution.

Simply put, greentech isn’t ready. Most advances in greentech have to do with electricity generation, and since so few countries burn oil for electricity greentech’s impact upon oil markets has been negligible. As a rule greentech is shit for transport. High cost combined with insufficient energy density makes electric cars little more than a niche sector for early adopters, with Tesla’s recent sales figures crash indicating that market may already be saturated.

Even if the medium for most modern batteries – lithium – was sufficiently energy-dense to provide a viable long-term improvement in capacity (it isn’t), the stuff still needs to be mined and processed and fabricated into battery assemblies. Each step along the value-chain is so energy- and transport-intensive that very little of it can even be attempted without fossil-fuel-based energy for processing and transport across the world. As counterintuitive as it sounds, we need more carbon-heavy fuels to get to a lighter-carbon world. And that means coal and oil. A lot of oil.

There’s also the issue of lifespan. Most vehicles put on the roads since 1990 have a long lifespan to the point that even if every passenger vehicle sold from now on was an EV, we’d not see an end to oil in passenger transport for another two decades. Even then, even if every passenger vehicle and light truck were an EV right now, that would only make a dent in global oil demand. About 2/5ths of oil is used for transporting people and heating. The rest is much more difficult to do away with. Another 1/3rd is used for air transport, industry, and other modes that require far more range or power than electric engines can manage. And another 1/5th isn’t going anywhere ever, as it is what makes petrochemicals as varied as paints, plastics and pesticides possible.

(None of which means greentech won’t eventually solve the petroleum problem, but all of which means technology needs another couple decades to give it a go – and even that assumes the capital and educational structures around the world which have made the Digital Revolution possible hold steady at their current historical highs.)

Let’s talk protection:

At the end of World War II every nation of consequence aside from the United Kingdom had lost its navy. The United States in essence inherited the global ocean. America’s creation of the Order gave everyone aside from the Soviets a vested economic interest in not floating a new one. Fast forward to today and the American Navy is over ten times as powerful as the combined blue water fleets of every other country combined. Putting that force disconnect at the service of the global commons is what makes the Order work, and what makes global energy shipments and markets possible.

The world’s second- through sixth-most powerful navies in terms of long-range power projection are (roughly in order) Japan, the United Kingdom, France, China, and Russia. Of these only Russia need not sail forth for oil, as it has plenty of its own. France and the United Kingdom can secure what they need from the North Sea and North and West Africa. China has only 30  combat-capable surface ships of size that can effectively operate over 1000 miles from shore; unfortunately (for the Chinese) Southern China is a cool 5800 or so miles distant from the Persian Gulf. Only India – keeper of the world’s seventh-strongest navy – is even remotely proximate.

End result? Today’s oil markets comprise the greatest concentration of risk in themost critical economic sector at the most vulnerable part of the global system and no one can do anything about it if the Americans leave.

And that’s just the beginning.

By the way, for more on oil’s role in a world without American strategic oversight, I’m happy to refer you to my 2016 book, The Absent Superpower: the Shale Revolution and a World Without America. 

To Hack Or Not To Hack

The New York Times dropped a fun piece last week asserting a coalition of like-minded national security and intelligence professionals are neck-deep in an offensive cyber operation against the Russian electricity system. The article suggests the hacking was meant to provide a cudgel to beat Russia with should it intervene in American elections again. The real kicker was the assertion made by a host of anonymous sources that not only was U.S. President Donald Trump unaware of the operation, but that the sources were afraid to tell him for fear the White House would shut the operation down.

There’s a bit of peeling required for this particular onion:

Computerization didn’t happen all at once. At first computers were multi-billion-dollar monuments of circuitry that only major governments could afford, to be used “simply” to compute complicated math (ergo the term computer). They certainly weren’t hooked into civilian infrastructure. Besides, there was nothing to “hook” into. Pre-1980s tech was analogue and manual, not digital and automatic.

Fast forward to the 1980s and this changed rapidly. The marriage of now-more-attainable computers to telephony brought us modems long before it brought us smartphones. That linkage enabled the first computer networks to snake through the worlds of finance, media, energy, academia and manufacturing. As computers became ubiquitous, the possibility of extreme damage being inflicted upon the average American citizen expanded exponentially.

A new policy was required for this new era.

The president at the time was Ronald Reagan. His executive guidance was threefold:

First, the U.S. government would provide no cyber protection to any part of the civilian system. Individual firms and citizens were wholly responsible for protecting their computer systems from outside threats.

Second, the U.S. government would maintain an absolutely massive hacker corps with standing orders to hack everything and put malware and backdoors into every imaginable foreign system.

Third, the U.S. would deign to identify precisely where its red lines were.

These three points explain why it is so simple for Nigerians to defraud your grandmother, why the Russians could interfere in the U.S. elections with ease, and why everyone is so afraid to go after the really important stuff: infrastructure in the United States. In essence, America’s cyber policy is a lot like the rest of its armed forces: you can poke and prod the exposed flanks of the behemoth and you might or might not get swiped at for your trouble, but if you ever do something that really draws its attention, well… you’d better have a great bunker.

In the event the U.S. ever did decide to cut loose, it would have a remarkably shitty quarter. The lack of cyberdefense would ensure that power grids would fail, vulnerable city bureaucracies would be left helpless, and all the businesses that forgot to update their Windows operating system from last decade’s would find they no longer have computers. In other words, it would hurt. But whoever the U.S. was going to war with would find themselves facing off against nearly four decades of surveillance, planning, and preparation by skilled, vengeful nerds. In the best-case scenario (for the targets), they would regress a century as everything from power to water to communications to shipping simply seized up, never coming on-line again until a complete computer-free overhaul was completed.

The Reagan administration’s guidance on cyber sat broadly unchanged for the next four presidents. Offensive cyber was used rarely and the U.S. refuses to discuss it. It is only under Donald Trump that some shifts have occurred. In Trump’s early months as executive the U.S. government leaked it had done something I find hilarious:

It didn’t simply identify the specific Russian agents who had interfered in the United States’ 2016 presidential elections, it sent cease-and-desist letters to those agents at their home addresses complete with enough personal touches to drive home to the Russian hackers that the U.S. government knew more about their personal lives than the Russian government itself.

What all this makes clear is that the U.S. realized it had undersold itself and underutilized its tools, which is quite literally the last thing you want to do with a deterrent. But times are changing and so, it appears, the pace of operations is picking up.

These operations involve extremely detailed pre-operational surveillance and planning so that when the time comes, the real break-in can happen easily. It creates options. The operation can go farther and, as the Times claims happened here, an implant ready to hurt critical infrastructure can be left at the ready. It’s a line that until recently the Americans claimed they did not cross except in exceptional cases.

The problem, of course, is that none of this, right up until the attack occurs, is public. Which makes deterrence more than a little bit of a problem.

So let’s look at that Times article again:

Is the U.S. hacking the Russian power grid? Certainly. The U.S. has been hacking the Russian power grid since before Gorbachev.

Is there a conspiracy within the U.S. government against Donald Trump? Certainly not. Anyone hacking the Russian power system is simply doing their job as demanded by Reagan and HW Bush and Clinton and W Bush and Obama… and Trump. It’s about planning and, if the Times is right, prepositioning assets. Not executing a broad-scale attack.

Is Trump aware that the Russian power grid is being hacked by American agents? Of course. Everything that matters in Russia is being hacked by American agents. Ditto for China. And Iran. And a follow-on list of countries so long I’m not going to go into because of the hate mail it would generate.

Does the national security establishment dislike Trump? Well duh. Trump is upending seven decades of tradition. That’s awkward even on a good day.

As to the issue with the Times article, however, I’m going to call bullshit. If an anonymous source is concerned the president will shut down his favorite top-secret anti-Russian program, blabbing about his favorite top-secret program to the Times — which makes its bones publishing everything in a public forum — would indicate that said agent isn’t all that bright.

In fact, the only people this article seems to be alerting are the Russians. But as the author pointed out, the government raised no national security concerns about the article. That suggests this is all about sending the Russians a message.

The context of that message is one I can only guess at, but I must underline repeatedly that the United States is not on the verge of shutting off the lights in Russia. There is an enormous difference between hacking something like the Russian power system to install malware and activating said malware. The former is rude… and a normal part of state policy. The latter would crash air traffic control and shut down mass transit and darken hospitals. It would kill a lot of people and be a flat-out act of war.

It also isn’t going to happen without a change in strategic relations far more radical than anything Donald Trump has brought to the table to date.

But the Americans now have drawn a line in the sand, publicly. The question is who is going to cross it.