On Adam Hanieh’s Crude Capitalism

Adam Hanieh, Crude Capitalism: Oil, Corporate Power, and the Making of the World Market (Verso, 2024), 336 pages.

Adam Hanieh’s new book, Crude Capitalism: Oil, Corporate Power, and the Making of the World Market (Verso, 2024) could not be timelier. As all eyes turn to Baku for COP29, the capitalist world heads to yet another performance of misdirection. In contrast to that monumental deception, we need to see things as they really stand and take action accordingly. So, let’s take a deep dive and get the record straight, the basic problem remains that capitalism is destroying planet Earth at an accelerating pace. Crude Capitalism—hereafter CC—goes a long way to explaining why the capitalist powers remain so fully committed to oil, come what may.

CC is deeply impressive for the range it covers and the quality of the analysis. Hanieh’s explanation of how the global oil industry became central to global capitalism is comprehensive and compelling. The arguments presented cover the role of oil in the capitalist system over the long twentieth century, explaining the many connections with the ascendancy of the US as the dominant imperialist power.

Chapter 1, “Approaching Oil,” is a model introduction. It starts with a statement of the problem and outlines the principal thesis. All the data on our current climate disaster point to “something happened around the middle of the twentieth century” (2). Hanieh fastens on this: “Why was the mid-twentieth century the turning point in humanity’s impact on the earth’s systems? The simple—but incomplete—answer is oil” (2).

Hanieh sets out to show “why and how oil emerged as the dominant fossil fuel through the twentieth century (and even more importantly, what must be done about it)” (4). A brief overview of the relevant literature positions his own approach, that I summarize as synthetic, one that is ecologically informed, combining political economy with critical historical analysis.

Hanieh points up three aims for the book. First, to move beyond accounts that concentrate on the extraction of crude, to include both downstream activities and the recycling of oil wealth. Second, to chart and explain how the rise of oil has been used by US capitalism to strengthen its imperial power. Third, “to provide a concrete mapping of the companies and other entities that control the circulation of oil today” (7). CC succeeds on all three fronts. Hanieh brings out how embedded are oil and its products in the entire world capitalist system: materially, in the sheer range of oil-based products we use daily, and financially, in oil’s role in securing U.S. leadership in the configuration of international power secured by the circulation of wealth as petrodollars. Both extend the scope far beyond the extraction of crude in production.

CC is both readable and sophisticated. The readability is due to its narrative form and the author’s skill in weaving together interconnected actors and themes. Chapter by chapter, the main body of the book builds major episodes from the early twentieth century. Some of these are not well known, and where they are Hanieh argues a fresh take, deconstructing the mainstream Western account, as in the notorious OPEC price hikes of the 1970s.

The period after the Second World War is the fulcrum of Hanieh’s extended argument, when U.S. global leadership was cemented through its control of the expansion of oil production in the Middle East. Let’s see how he gets there and how the argument develops onto our contemporary challenges.

The Early Phase

The early phase of capitalist exploitation of oil has two starting points—one inside the United States and the rapid rise to dominance of Standard Oil, and the other outside the United States, led by the multinationals of British and Dutch colonialism, BP and Shell. Hanieh charts how the legal break up of Standard Oil in 1905 left a handful of its offshoot companies in the United States, effectively an oligopoly that has its legacy to this day in the behemoths ExxonMobil and Chevron. He stresses that the particular power of the oil multinationals stems from their vertical integration, commanding all parts of the long chain from extraction through transport to refining and distribution (33).

There is an interesting chapter on the crucial importance of oil production in the early Soviet Union. Between the two world wars, the USSR and Venezuela were the two biggest exporters of crude. In this period, the major Western oil companies collaborated in getting King Faisal I to agree they had privileged access to Iraq’s oil, and at a price much below crude’s market value. Faisal “had been installed by Britain as ruler in 1921 following the bloody suppression by the British Air Force of a mass, nationwide revolt” (61). A consortium of the biggest U.S., British, and French firms converged in their common interest in limiting access to super-profits. In the meantime, there had been a boom in motor cars in the United States, mostly supplied by domestic oil production. Hanieh provides a detailed breakdown of the many actors. A handful of large integrated corporations emerged as the dominant players able to operate at home and abroad.

Refoundation in the 1940s

This brings us to the refoundation of the capitalist world order around U.S. leadership in the 1940s. Hanieh spells out how capturing the major share of Middle East oil super-profits was foundational to U.S. imperial dominance, how the military, economics, and power politics all intersected on this underpinning of the postwar boom.

There are three main directions of expansion. First is the explosion in the industrial use of refined oil derivatives beyond a fuel, in electricity production and especially of oil-based intermediate products that then feed into further processing, especially as feedstock for the production of an enormous range of petrochemical products, from polymers to fertilizer. Hanieh has made an original contribution in drawing attention to how oil is materially embedded in our daily lives, hidden in plain sight (1).

Second is the role that supplying oil played in the consolidation of international order, relating Western Europe to U.S. hegemony. Saudi Arabia emerged as a major producer and, through Aramco, the U.S. majors gained an increased share of Middle East crude. By and large, the U.S. multinationals did not import Middle East oil into the United States. They refined the lion’s share of Gulf crude production that they sold to Western Europe. This strategic arrangement ultimately based on military power killed three birds with one stone. The sale of crude and refined oil not only realized huge super-profits, but it also facilitated the reconstruction of capitalist stability in the West against its Cold War competition. The volume of dollar denominated transactions reinforced the unique economic privilege of the U.S. dollar as the default global currency.

Third, and closely interconnected, is the crucial role that circulating oil revenues began to play in the world financial system. Relations between the Gulf states were already shaped in the colonial period; the British made sure that the City of London was the sheikhs’ banker of choice. Hanieh details how Saudis became major purchasers of U.S. treasury bonds.

In another shift, starting with the nationalization of oil in Mexico and popular uprisings in Venezuela, the 1950s saw producer states benefitting from the rise of anticolonial struggles to negotiate better terms with the Seven Sisters corporations. Fifty-fifty agreements became the norm, which meant that both parties still benefited hugely from the oil bonanza (110). The U.S. government agreed to offset the fall in their profits by reducing tax on the oil companies’ foreign revenues. This arrangement propped up the reactionary monarchs. It exemplifies the collusive alliance between elites in the producer states, corporations, and U.S. state power.

Oil Revenues and the Turn to Neoliberalism

Another important point, after Richard Nixon took the dollar off convertibility with gold, the exchange rate of the dollar and its pre-eminence as international money was largely due to the continuing flow of huge oil revenues (170–71).

Hanieh explains how the notorious oil shocks of the 1970s were in fact predicated on the restructuring of the oil industry in the United States, which in turn ushered in the neoliberal turn. He draws attention to the selling off of BP by the Labour government as the precursor to Margaret Thatcher’s wave of privatizations, which led to the buoyancy of stock markets (236).

The upsurge of oil royalties in the 1970s had to find its outlet in the recycling of petrodollars, again channeled through London. The Gulf states use the petrodollars to purchase arms and military assistance.

Meanwhile, oil importing countries had to borrow to pay for higher prices. CC explains the role of UK and European offshore dollar lending, the so-called Euromarkets, as the conduit for the loans. This debt, taken out in dollars at variable interested rates, exploded under the Volcker shock in 1980, when the U.S. central bank raised interest rates. As a result of this deadly combination of enforced debt at much higher rates, Third World debt service payments catapulted “from $11 billion in 1971 to $131.3 billion by the end of 1982” (192).

In summary, effective control of the wider Gulf region and its oil served as the linchpin for U.S. predominance over the entire world capitalist system in the postwar period. Of all the territories and commodities in the world that have been configured through neocolonial-type deals that share extracted wealth between local elites and the imperial powers, this was the decisive one. To what extent that deal continues to be the case is without doubt a huge issue.

In earlier works, Hanieh explores the internal class structure of the Gulf monarchic regimes, not least their complete reliance on super-exploited immigrant labor. While they still depend heavily on U.S. and UK military support, their enormous oil receipts have positioned the Gulf states as major centers of accumulation, becoming exporters of capital with considerable room to maneuver in their own interests.

Contemporary Challenges

Hanieh traces the changes in pricing mechanisms for internationally traded crude oil, from colonially imposed administered prices to the fifty-fifty deals indicative of neocolonial arrangements (although he does not use that term) to a further development of full market mechanisms of spot markets and futures, the “financialization” of oil (237), explanations for which he has explored in detail elsewhere (3).

CC is very good at drawing together threads in a synthetic explanation. Capitalist globalization from the 1990s into the 2000s saw a fresh wave of environmentally damaging land production in Canada and the United States, the tar sands, fracking, and further probing into deep sea, marked by another environmental disaster (247). Hanieh points to the significance of new fields in Africa, especially offshore of the devastated Niger Delta region, and in the privatized ex-Soviet Union, for the super-majors. Through merger and acquisitions, the Western oil super-majors are “ExxonMobil (US), BP (British), Shell (British), Chevron (US), ENI (Italy), TotalEnergies (France), and ConocoPhillips (US)” (241).

CC’s penultimate chapter on the opening of the new “East-East Hydrocarbon Axis” emphasizes how important crude exports to China have become. China is already a major refiner and industrial user of oil, and moreover is rapidly moving into its supply lines through joint ventures in the Gulf.

What should be added is that the United States and United Kingdom view the rise of China as threatening and have responded militarily. They have positioned their naval assets as a strategic pressure capable of breaking up this axis by force. They control crucial choke points for maritime transport and have militarized the Indian Ocean and Pacific Oceans, conceiving them as an imminent threat of war against China (4).

Even before Barack Obama’s “pivot to Asia,” the Tamils in Sri Lanka suffered an awful genocide akin to the Palestinian genocide today, because similarly their liberation stood in the way of U.S. strategic interests in the region (5).

Summing Up

There are many merits to Hanieh’s new book. His concrete analyses of the shifts in pricing regime are well-researched and critical. If this review were to find an area to strengthen, it would be a deeper probing into the political economy of crude production equipped by Karl Marx’s theory of rent as surplus profit. This would explain, for example, the paradox that, by cutting its production, Saudi Arabia will increase its revenues (6).

But have no doubt, this book is a tour de force. Although Hanieh opens that it is not his intention to write a comprehensive account, this excellent work goes a long way in achieving just that result, if not encyclopedically then by the analysis of crucial, well-selected focal points. Each chapter gives a trenchant analysis of an important episode or feature. It is an exceptionally important book that provides the full background to current events.

CC provides a clear historical framing to understand how the oil industry and imperialism are integrally connected, and with that many of the contradictions in the world system. Although not written as a textbook, CC is strong enough to be the main reference for a whole course. I recommend forming reading groups to study it chapter by chapter.

The conclusions that Hanieh invites us to draw from his work, its overarching purpose, is to convince the reader that oil-embedded capitalism is driving the planet to ecological disaster. He proposes several genuinely radical reforms to confront climate change. They are all against the general interests of capital and they require the complete dismantling of the oil corporations. It is therefore not simplistic nor mere sloganeering to stress the imperative need for ecosocialist revolution. All the arguments in this book, as well as overwhelming evidence around the world, point to the same conclusion.

References

See also Adam Hanieh, “Petrochemical Empire,” New Left Review 130 (2021): 35–71.
Adam Hanieh, Capitalism and Class in the Gulf Arab States (Palgrave Macmillan, 2011); Adam Hanieh, Money, Markets, and Monarchies: The Gulf Cooperation Council and the Political Economy of the Contemporary Middle East (Cambridge University Press, 2018).
Adam Hanieh, “The Commodities Fetish? Financialisation and Finance Capital in the US Oil Industry,” Historical Materialism 29, no. 4 (2021): 70–113.
John Bellamy Foster and Brett Clark, “Imperialism in the Indo-Pacific—An Introduction,” Monthly Review 76, no. 3 (July–August 2024); Cheng Enfu and Li Jing (2024) “Changes in U.S. Grand Strategy in the Indo-Pacific and China’s Countermeasures,” Monthly Review 76, no. 3 (July–August 2024).
See Permanent Peoples’ Tribunal, Peoples’ Tribunal on Sri Lanka, Session III, Berlin, 20–22 May 2022, Judgement (2023); Andy Higginbottom, “Colonialism Still Matters: Militarisation and Imperial Grand Strategy in the Era of US vs. China,” in Resistance to Empire and Militarization: Reclaiming the Sacred, ed. Jude Lal Fernando (Equinox Publishing, 2020).
Tom Wilson, “Saudi Arabia Ready to Abandon $100 Crude Target to Take Back Market Share,” Financial Times, September 26, 2024.

More in MR Online by Andy Higginbottom on oil and imperialism

“Global Britain’s Real Climate Changers: Big Oil Must Be Taken Down,” July 17, 2019
“Oil Price Collapse & the Crisis,” May 26, 2020
“COP28: The Mirage that Capitalism Can Solve Its Destruction,” December 1, 2023