The Geopolitical Diary: Blue-Skying Brazil

Brazil is a rising power politically, economically and militarily. Not only is it South America’s largest country in terms of population, economic heft, military strength and land area, its geopolitical power is expanding while most of its traditional competitors — namely Argentina and Venezuela — are contracting.

But while Brazil is almost certain in the next few years to evolve into a regional hegemon — a step up from the region’s most powerful state — it is still difficult to see Brazil playing a leading role on the world stage. South America’s geography is too fractured for any power to control the whole space, and the continent is too remote from the world’s power centers — 7,000 miles from Buenos Aires to Brussels, more than 10,000 miles from Santiago to Singapore — for any of its powers ever to be a major global player.

Unless, that is, something changes. And for a few hours on Monday, it appeared that that something had indeed changed.

Initial reports from the Brazilian government asserted that a new oil find in the Carioca offshore block contains 33 billion barrels of crude. Within a few hours, however, an announcement that seemed to have global implications fizzled. By nightfall Petroleo Brasileiro, the state-influenced (and quite competent) national oil firm, had formally denied that test drilling had even reached the depth necessary to confirm or deny the presence of oil — much less a mammoth find.

Offshore region rich in oil
Brazil only began exploring the region in question in 2007, and it already has generated probable finds of at least 13 billion barrels of oil equivalent. Many, many more discoveries not only are possible, they are likely. What has been found to date already has doubled Brazil’s reserves.

This crude will not come online cheaply or quickly, however, and much uncertainty remains in these heady early days of exploration in Brazil’s ultradeep. But with potential discoveries of this size it is worth exploring a possible future.

Brazil has recently become self-sufficient in oil production — not counting the recent (and likely future) finds. And that got our analytical team thinking.

‘What if’ exercise
What would a world look like with a Latin American Saudi Arabia? How would things change on the global scene? At Stratfor we undertake what we term “blue sky” exercises from time to time, albeit typically in a much more compact geography and on a much shorter time line. These exercises help us think outside the tactical minutiae of day-to-day events, and prevent us from becoming too wed to our own predictions. It is not every day that something happens that can change global economic and political interactions on such a grand scale.

So rather than tightly edit our analysts’ responses to this question, here are some of their responses in the raw:

Should Brazil become a significant oil producer, global interest in Latin America will increase in proportion — not only from the United States, but also China, Russia, Europe and others. Competition for access to — and potentially control of — the resources, for security of the shipping routes, and for influence over the Brazilian government and energy companies also would rise. A resource-powerful Brazil, coupled with China’s labor, India’s tech and labor pool, and Russia’s energy and arms could also revive the BRIC (Brazil, Russia, India, and China) concept, perhaps making it a more viable bloc of formerly second-tier players, and bringing some counterbalance to U.S. global hegemony.

Brazil is too far away from energy consumers like India and China to tap without great cost. The United States is a much closer consumer. In time this would lessen U.S. energy dependence on the Middle East, especially Saudi Arabia — leaving that region for other energy consumers, like the aforementioned India and China. Such a shift largely would regionalize energy routes, leaving the United States looking at its own hemisphere for energy supplies, Europe to the former Soviet Union, and Asia to the Middle East (leaving Africa as a swing player). Though this may look like a more peaceable reality, it would be far from it, and could actually lead to more instability as no power would have much of an interest in stabilizing energy supplies going to other regions.

Canada’s tar sands hold anywhere from 800 billion to 1.2 trillion barrels of oil. Oil shale deposits in the U.S. Rocky Mountains are estimated at around 800 billion barrels. The success of tapping these deposits is uncertain, and technological and economic factors must play out, but in 15 to 20 years, substantial oil flows from Brazil, coupled with these potential new sources of North American oil (though more difficult to extract and expensive), and only moderate efficiency gains could guarantee almost complete energy independence for the entire Western Hemisphere.

A legitimate and proximate alternative oil source means the primary geopolitical motivation for immense U.S. investment in military operations in the Middle East begins to slowly evaporate. Though mastery of the world’s oceans remains a core geopolitical imperative for Washington, the disproportionate focus of the U.S. Navy on the Persian Gulf and the maintenance of the Strait of Hormuz becomes far less critical. Suddenly freeing the energy and capability the Pentagon would lead to a very robust and flexible — but far more evenly distributed — global U.S. naval presence. This could also be just the opening for the Navy, which in many ways has failed to re-evaluate its post-Cold War stance, to fundamentally remake itself for the 21st century.

The region with most to worry about from this development is the Middle East. From Washington’s view, getting oil from a relatively friendly and stable country to its south is far, far preferable than dealing with the chaos of the distant Middle East. Saudi Arabia and the other major Gulf powers will become distant not only from their biggest energy customer, but also from their biggest security guarantor. With a diminished U.S. interest in the Middle East, regional fault lines are more likely to erupt, spelling more instability for this already largely volatile region. Israel in particular has much to lose as it sees its regional security framework — which is built around having the United States deeply involved in the Middle East — weaken, and its alliance with the United States strained as a result.

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All best wishes,

Aaric S. Eisenstein
SVP Publishing