Snowden Fallout: U.S. Wary of Brazilian Assertiveness in "Blue Amazon"?

U.S. espionage is hardly surprising in light of the high financial stakes: currently, Brazil seeks to exploit large offshore oil deposits which could utterly transform the country's economic fortunes.
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Recent revelations demonstrating that the United States National Security Agency (NSA) spied on Petrobras by hacking into the Brazilian oil company's computer network and listening to CEO phone calls suggest that Washington is nervous about Brazil's rising energy profile. Petrobras, which is partially owned by the Brazilian state, has developed highly valuable expertise in offshore oil technology and exploration. By hacking into Petrobras' computer networks, the N.S.A. may have gained valuable information about such technology.

U.S. espionage is hardly surprising in light of the high financial stakes: currently, Brazil seeks to exploit large offshore oil deposits which could utterly transform the country's economic fortunes. If the N.S.A. provided intelligence to U.S. oil companies, which reportedly see Petrobras as a rival, then such firms may benefit when it comes to developing vast offshore petroleum deposits.

Coming Falklands Oil Bonanza?

N.S.A. spying highlights not only the growing rivalry for Brazilian offshore oil but also upcoming competition for petroleum deposits located farther afield. Indeed, some reporting suggests that the vast South Atlantic could turn into a goldmine for the oil industry in the not too distant future. In 2011, petroleum company Rockhopper discovered a whopping 1.4 billion barrels of oil in British-controlled waters of the Falkland Basin. Though subsequent oil exploration has only managed to turn up gas and condensate, experts believe that Falkland waters may hold huge potential.

Rockhopper, which takes its name from an emblematic species of penguin common to the Falklands, estimates that there could be up to 320 million barrels of oil within its area of operations, and by 2017 the firm hopes to start pumping oil. All in all, observers estimate that more than eight billion barrels of oil may exist around the Falklands, which is almost three times the amount contained in the British sector of the North Sea.

With so much at stake, it is not surprising that Petrobras wants in on the coming South Atlantic oil bonanza. Reportedly, the Brazilian firm will conduct hydrocarbons exploration in South Atlantic waters, and drilling will commence halfway between the Falkland Islands and Tierra del Fuego. Within the region, the Brazilians have established allied commercial interests with Buenos Aires, and Petrobras has formed a joint venture with Argentine oil company YPF to explore for oil in Argentine-controlled waters off the Falklands.

U.S. Espionage on Brazil

As it combs through files and phone conversations at Petrobras, the N.S.A. may well have uncovered valuable information regarding offshore oil exploration off the Falklands, a territory which has long been disputed between Britain and Argentina. Moreover, Brazilian-Argentine commercial engagement has elicited the attention of Stratfor, a Texas-based company providing "geopolitical analysis" to large corporations but also key U.S. agencies such as the Department of Homeland Defense, the Marines and the Defense Intelligence Agency.

According to hacked company e-mails disclosed by WikiLeaks, Stratfor analysts were tasked with obtaining sensitive information pertaining to Petrobras, and in this sense the company was simply following in the footsteps of the N.S.A. One Stratfor "analyst" approached a former energy advisor to Dilma Rousseff, who agreed to download "a ton of the most recent energy data on Brazil" onto a Stratfor computer. Despite such intelligence coups, Stratfor ran into difficulties in Brazil, since energy was regarded as the most sensitive issue in the country and "everyone feels extremely reluctant to discuss anything related to energy strategy." Though Rousseff's advisor agreed to speak with Stratfor, the official "was really uncomfortable talking about Petrobras strategy."

In another hacked e-mail obtained by WikiLeaks, a perplexed Stratfor analyst inquired about Petrobras involvement in the South Atlantic, which seemed like "a pretty strong show of support for Argentina in a dispute where Argentina has looked completely helpless." "I will try to get insight," writes another colleague in a rejoinder. "Brazil has mentioned a few times that the South Atlantic is a blue Amazon and that no northern country should be occupying it. Since Lula came to power Brazil has shown signs of support to Argentina in the Malvinas [the Argentine name for the Falklands] issue. They do not want to have the UK next to the pre-salt reserves."

What is the U.S. Interest?

While certainly intriguing, such correspondence does not suggest why a U.S.-based intelligence based company would be interested in Brazil or Petrobras in the first place. However, in his book The Next Decade, Stratfor founder George Friedman offers some clues as to how the power elite perceives the sudden rise of Brazil on the world stage. Brazil, he writes, is not a power that is "particularly threatening or important to the United States," and "there is minimal economic friction." In the long term, however, Friedman adds that "there is only one Latin American country with the potential to emerge as a competitor to the United States in its own right, and that is Brazil."

Eventually, adds Friedman, Brazil could pose an economic challenge if it developed its air and naval power so as to dominate the Atlantic between its coast and West Africa, "a region not heavily patrolled by the United States." This could lead to "a South Atlantic not only dominated by Brazil but with Brazilian naval forces based on both the Brazilian and the African coasts."

Given such alarmism, it is not surprising that behind the scenes Stratfor developed a keen interest in Brazilian military developments. In one secret e-mail, the company remarked to researchers that "Brazil will be building up its military capacity over the next decade or so. ANYTHING to do with Brazil's military doctrinal development and military industrial development is of interest. This is a top priority, long-term item."

Beyond mere geostrategic considerations, there may be other reasons why the U.S. is interested in prying open hidden oil secrets at Petrobras. Last year, Noble Energy entered the South Atlantic oil fray after accepting a stake in two licenses owned by Falklands Oil and Gas. It was the first American oil company to start up operations within politically volatile Falkland waters. Noble is bullish about oil exploration in the area, and believes that future finds could be "potentially game-changing."

Memory of Conflict

Currently, the U.S. is politically neutral on the Falklands, though it recognizes the "de facto UK administration" on the islands. The British paper Telegraph however remarks that the Noble deal could risk dragging the U.S. "into the growing political row over the Falkland Islands' oil industry." In recent years, the discovery of lucrative offshore oil deposits has soured relations between Britain and Argentina, with Buenos Aires claiming that the Falklands should come under Argentine control. What is more, Argentina is irate with energy companies working in the Falklands, which are guilty of "stealing the natural resources of Argentina." Already, Buenos Aires has banned Falkland oil companies from working in Argentina.

Despite these tensions, it seems unlikely that the oil bonanza could spur a real military conflict. However, Buenos Aires still smarts from the memory of its defeat in the 1982 Falklands War, and to this day sees the islands as a British "colonial enclave." During the 10-week conflict, a small British naval force expelled the Argentines from the Falklands, at a cost of 650 Argentine and 250 British lives. Currently, Argentina says it has no desire for a rematch, but insists it has the right to seize international supply ships headed to the Falklands and furthermore argues that British ships need permission to head into the area. Britain, on the other hand, rejects any such notion.

During the 1982 Falklands War, Brazil was under military rule and officially neutral in the conflict. Recent reporting, however, shows that the large South American nation secretly provided weapons and logistical support to Argentina. Today, Brazil continues to back Argentina, and like its neighbor to the south refers to the Falklands as the "Malvinas." Furthermore, Brasilia says British offshore oil exploration in the Falklands is "illegal." Recently, Brasilia even took sides against Britain by refusing permission for a Royal navy ship to dock in Rio de Janeiro, and late last year Brazil conducted military maneuvers in the South Atlantic.

Where Does the U.S. Stand?

In 1982, the Reagan administration backed up Margaret Thatcher and opposed the Argentine military junta in Buenos Aires. Since then, the U.S. has maintained neutrality but its own commercial interests as well as spying revelations suggest Washington may be leaning again toward Britain. In addition to the recent N.S.A. disclosures, other reports fill in Washington's secret agenda in the region.

According to the Brazilian magazine Istoé, the U.S. conducts electronic espionage on Argentina and Brazil from a secret listening station located on the small island of Ascension. The island is a British possession located in the Atlantic, and will feed suspicions in South America that the U.S. is taking sides. According to reports, the British collaborate with Washington on Echelon, a super secret spying program.

Fears of Brazilian "Blue Amazon"

Just where is all this oil intrigue and heightened tensions actually leading? Prospect, a British magazine, concedes that "few can imagine Britain and Brazil ever coming to blows." Nevertheless, the publication adds that the discovery of offshore petroleum in the Falklands, combined with renewed Brazilian assertiveness, could create quite a new and confounding political milieu for Britain and its U.S. patron, both of which are used to ruling the high seas.

According to Argentina, Britain has been deploying nuclear submarines to the Falkland Islands. Nevertheless, the UK has been forced to undertake budget cuts and has no aircraft carrier. Brazil, on the other hand, does have a carrier and is jointly developing a fleet of nuclear-powered attack submarines with Argentina. "In effect," notes Prospect, "these weapons give Brazil the ability to impose an updated version of the Monroe Doctrine on regional waters. Call it the 'Lula Doctrine.'" Indeed, just before he left office, Lula remarked that the submarines were "a necessity for a country that not only has the maritime coast that we have but also has the petroleum riches that were recently discovered in the deep sea pre-salt layer."

Like the British, the Americans too might have difficulty projecting force into the South Atlantic. Recently, the Pentagon has also faced budget cuts and has been asked to undertake Obama's so-called "pivot" to Asia. With Washington stationing more and more of its shrinking fleet in the Pacific, the U.S. has become overstretched. Interestingly enough, the Obama administration has asked Brazil no less to help patrol the waters between the West African coast and South America, and currently the two powers conduct joint maneuvers.

Despite such collaboration, recent news of N.S.A. spying has tarnished Brazilian-U.S. relations. Indeed, by conducting underhanded espionage on Petrobras, the U.S. may inadvertently prompt Brazil to become more assertive when it comes to developing offshore oil deposits and staking a claim over its own "blue Amazon."

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