Chapter 81: Chapter 81
il had always been a good bet, Barton reminded himself, on the news Gulf
countries were racing to build an economic system that would help them
survive after-oil. It was not so much after-oil, but after-oil exports; demand
would continue to grow and prices would prices would rise as demand increased
from what seemed the most unlikely sources.
Each day Saudi Arabia, endowed with the world’s largest oil reserves, consumed
vast amounts of energy for the production of fresh water. The desert kingdom was
desperately poor in terms of freshwater. Each day its huge desalination plants
transformed millions of tons of seawater into fresh water, not only for the use its
cities, but also its agricultural needs. In doing so the kingdom consumed vast
amounts of energy, a contradiction in terms, as it tried to achieve self-sufficiency
in food production; an unattainable goal given its burgeoning population.
Inevitably the Saudi government was forced to call a halt to its wheat and barley
production, domestic agriculture was draining its financial and water resources.
The petrodollar kingdoms would always remain dependent on food imports as the
cost required to produce cereals rose. As the pressure on world cereal prices grew
oil rich Arab states emulated China’s planning policies, investing in foreign
farming land in poor African countries.
Fate was strange; on the other side of the world the US was enjoying an energy
boom. The unexpected discovery of large new oil and gas fields in Dakota,
Nevada and Utah was beginning to point towards US self-sufficiency in
hydrocarbon fuels. Within a decade, if estimates turned out to be realistic, its
dependence on imported oil would tumble.
As geologists discovered the existence of large quantities of exploitable shale gas,
oil and alternative mineral energy sources in other regions of the world, accessible
thanks to new cracking technologies, the dependence on Middle East oil could
decline.
Did this mean the Gulf countries suffer the same fate as had Peruvian and Chilean
O
nitrates at the end of the nineteenth century with the exploitation of these new
resources? The prospect of falling demand and prices, together with the conundrum
of after-oil, predictably gnawed at the minds of Middle Eastern kings, princes and
planners.
During the course of the 19th century, the fortunes of poor and newly
independent Peru were miraculously transformed by the discovery of a group of
offshore desert islands almost entirely composed of guano, a natural fertiliser rich
in nitrate. The impact on the Peruvian economy was much the same as that of oil
on mid-twentieth century Saudi Arabia and its Gulf neighbours.
The extraction and exportation of Peruvian guano, for the use as a fertilizer, and
its use for the manufacture of explosives, not only became a bone of contention for
the countries of the region, but also for those who sought to control the market,
namely Victorian Britain. The growing populations of Europe and the US
increased pressure on agricultural production and therefore the need for a cheap
ready to use fertilizer.
Guano was formed by the excrement of countless sea-birds, accumulated over
tens and hundreds of thousands of years on the Chincha Islands, off the coast of
Peru, preserved in a solid form by the region’s extremely dry climate. With its high
concentration of nitrates, it replied to an ever growing demand for fertilisers and
guano exports brought more than half a century of prosperity to Peru and more
specifically its capital Lima.
This period of economic and speculative euphoria went down in history as the
Guano Age. Peru attracted an army of businessmen, ready to cash in on the boom,
as the revenues from guano created fortunes almost overnight. The newly
discovered wealth transformed Lima into a glittering city. Money flowed in, along
with a massive influx of foreign workers, as European and American investors
promised Peru a dazzling future. Modernisation was undertaken, new infrastructure
was built: railways, harbours, industries, irrigations systems, banks, hotels,
theatres, public buildings, hospitals and schools.
Guano soon provided the bulk of Peru’s government revenue, generating seventy
five percent of its financial resources by the middle of the 19th century, during
which the country held a near monopoly of the world’s nitrate supplies.
All good things come to an end and Peru’s period of wealth and power came to an
abrupt and catastrophic stop with the War of the Pacific, also known as the Nitrate
War, in which Peru and Bolivia were defeated by Chile. A long standing dispute
over regional frontiers and territory containing nitrates erupted when Chile seized
the Bolivian port of Antofagasta and claimed all of the Atacama Desert, which led
to a declaration of war by Peru and its ally Bolivia.
Peru, unprepared for war, lost control of its guano and nitrate deposits, and
therefore its principal source of revenue. To make matters worse mineral nitrates
were discovered in the Atacama Desert situated in the Tarapacá Region between
Chile and Peru and the guano market collapsed. The desert, today part of Chile,
held the world’s largest naturally occurring exploitable nitrate deposits.
The nitrate boom moved to Chile. At the height of its glory, cities like Valparaiso
prospered as described by Harry Weston Van Dyke in his book ‘Through South
America’, published at the beginning of the 20th century:
The city had little of the old Spanish-American appearance. There were Germans
Italians and French business people who managed and controlled the vast nitrate
and mining enterprises in the north and the capitalists who financed the big
industrial projects and railway development, the exporters and importers, bankers,
brokers, and insurance men, and among these the ten or twelve thousand English in
the city predominate.
The French have almost a monopoly of the retail trade having to do with
fashionable apparel and luxuries…the Calle Victoria, which parallels the Malecon
almost the entire length, presents an array of government buildings, banks, hotels,
theaters, cafés, retail shops, and office buildings larger and more substantial and
elaborate than can be seen almost anywhere in cities of that size.
The shops are of good size, and leave nothing to be desired in the way of
assortment and quality of their stocks. Probably the most attractive of all the streets
is the Avenida Brazil, which is at once a shaded boulevard, business thoroughfare,
and fashionable promenade.
There are trolley cars—with women conductors— and arc lights, libraries, firstclass educational institutions, beautiful parks and plazas where they have public
band concerts in the evenings, attractive residence districts, and near by, at ViM
del Mar, there are sea bathing, tennis, racing, football, golf, country clubs, and a
first-class hotel for those who are not so fortunate as to have their own houses.
Only about sixty miles away (though it is farther by the railroad, which has to
make a detour to get through the coast range) is the capital, Santiago, the real
metropolis of the country.
To the north was the port of Antofagasta, which lay ‘basking in the tropical sun
on a strip of coast at the foot of a low table-land, seven hundred miles north of
Valparaiso, in the heart of the rainless desert. It is very different, this region, from
the bleak plateau up the twelve-thousand-foot slope, with its llama trains and
poncho-clad natives.
Antofagasta has a population of about 20,000, good broad streets, and a very
businesslike appearance. It is a city that looks like one of our Western mining
towns, and impresses one at first glance with its evidences of a more vigorous and
ambitious civilization. There is a large oficina for the preparation of nitrate, steam
tramcar lines, smelters for the treatment of copper and silver ores, long rows of
barracks for the housing of the laborers, corrugated iron warehouses, crowds of
ships in the offing taking on cargoes of nitrate and metals or unloading supplies;
yet there are a plaza and promenade - and hotels, and most of the residences of the
officers of the companies are decidedly attractive.
For, in addition to being a nitrate and mining port, this is one of the principal
gateways through which Bolivia's commodities still come and her own products
are sent out, and is the distributing center for the Chilean province besides, where
the land is so barren that the inhabitants are dependent on the outside world for
almost everything. There was a time when even water had to be imported into the
city itself—it used to be said that they drank champagne because water was too
expensive!
‘…banks, hotels, theatres, cafés, retail shops, and office buildings larger and more
substantial and elaborate than can be seen almost anywhere in cities of that size,’
echoed the 19th century words that aptly described Dubai and other Gulf states,
and perhaps bearing the warning that a similar fate awaited them.
South American prosperity came abruptly to an end in 1909 when a German
chemist, named Fritz Haber, synthesized ammonia, which contained nitrogen that
could be processed into nitrates. This was transposed into the Haber-Bosch process
by the German firm BASF on an industrial basis, thus replacing the need of all
existing natural sources of nitrates. The use of synthetic nitrates for the production
of explosives resulted in millions of dead and wounded in two world wars, whilst
the production of synthesised fertilizers has led to greatest population explosion in
human history.
‘There was a time when even water had to be imported into the city itself—it
used to be said that they drank champagne because water was too expensive!’ One
could be excused for thinking those words had come from the mouth of an expat
speaking in one of the Gulf kingdoms, where the cost of fresh water and the energy
to produce it reached extravagant proportions. So much so that Saudi Arabia,
which, according to the Arab League, imported nearly almost half of its food,
decided to give priority to water security over food security.
It was predicted that Saudi Arabia would cease to be an oil exporter by 2030;
sombre reading for those who imagine after-oil was some very distant premise.
Saudis consumed a quarter of a ton of water per day each, a need that was growing
at a rate of nearly ten percent annually, with most of the precious liquid produced
in high energy consuming desalination plants. Saudi Arabia consumed more oil per
capita than the US, as well as its total gas production, which has prompted its
government to invest heavily in nuclear power.
The population growth of the desertic Gulf regions had increased at a phenomenal
rate and showed no signs of letting up. In 1950, the population of Saudi Arabia
stood at three million and would reach thirty million by 2015. Without pandering
to the visions of catastrophiles and disaster mongers, it would require a miracle of
some kind to defuse the population time bomb ticking away under Arabia’s
unforgiving sun, even if its energy starved customers found succour in shale gas as
an alternative source for their energy needs.