Wisdom from the graybeards: Washington and other capitals are chock-full of experienced policy experts who have "seen it all before." Of these distinguished individuals, James Schlesinger leads the pack. The former CIA Director and U.S. Defense and Energy Departments chief offers unparalleled insights in a TIE exclusive interview.

• Position: FIRST IN A SERIES - Interview

TIE: The Administration and politicians said that the Middle East struggle is not about oil. If it's not, should it be?

Schlesinger: There may be a touch of" ambivalence in that statement that it's not about oil. Oil is always on people's minds. The fact is, the question of oil in Iraq was certainly considered. Oil is the lifeblood of the Iraqi economy. That is why we seized the oil fields and terminals at the outset--to prevent their being sabotaged. However, the left would have it that we wanted permanent control of the oil for ourselves. Some both in and out of the Administration thought, "This is the Middle Eastern country which has been explored the least and whose oil reserves are second only to those of Saudi Arabia. This is an opportunity to build oil supply while possibly limiting the influence of Saudi Arabia on our foreign policy." Oil is always a consideration. The erroneous view that we moved into Iraq in order to control the oil for ourselves was just poppycock.

TIE: Some analysts propose the following theory: After September 11, there was fear Saudi Arabia eventually would become dominated by the faction that views the West as the Great Satan. Suppose this group controlled the Saudi oil fields. They would have command of the world's largest oil reserves, and thus access to real liquidity and a base for global terrorist activities. The Bush Administration couldn't allow this situation to happen. The United States still needed a military presence in that strategic region, if simply as a staging area if the Saudi fields became vulnerable. Yet keeping U.S. troops in Saudi Arabia was too provocative. Instead, the biggest secular state in that region, Iraq, happened to be right next door. Thus, the decision was made to remove the Saddam Hussein regime and establish a long-term U.S. military presence in Iraq. Is this a credible theory--the truth about Iraq that can't be mentioned? The fear of losing control of the Saudi oil fields?

Schlesinger: It has elements of credibility. The first is the notion that the Saudi regime could be displaced by Islamist radicals, and if Saudi Arabia had a democracy such an outcome might well take place. This is something about which we are rightly concerned. But the Saudi regime has always been quite cooperative with respect to oil production policy, with of course the exception of the Arab oil embargo in 1973.

Now it is true that Saudi Arabia is the source of many of the funds for radical Islamists. We don't like that. But there is nothing we can do about the flow of funds into Saudi Arabia because it is, and will remain, the largest source of petroleum in the world. Bringing Iraq back as an oil-producing nation will help, but an expansion of Iraq's oil fields will take years. Even if Iraq were producing five million barrels a day in 2010, by that time world demand will have increased. The Saudis are building production to 12.5 million barrels a day. They have a plan to go to 15 million if necessary. But the biggest problem the world faces is that there are just not that many new oil fields out there. Over the decades ahead, we are going to run into a plateau in terms of oil production that will have a very grave effect on both the world economy and on our economy. In fact, we should be preparing at some point to make the transition to a world in which we no longer can increase production.

TIE: There's been disagreement over the Saudi oil situation. Some experts argue that we are seeing the end of the Saudi supply while others--the Saudis in particular--say there is far more oil than many realize.

Schlesinger: Those who have questioned Saudi capacity to produce crude are right, but only in the large picture, not in detail. This has been underscored by the Saudis themselves. When the Energy Information Administration of the U.S. Department of Energy stated a year ago that in order to satisfy world demand in 2025--only twenty years from now--the Saudis would need to be producing on the order of 24 or 25 million barrels a day, the Saudis came back and said politely that such a statement was unrealistic. Right now the Saudis are talking about a future capacity of fifteen million barrels a day and maintaining a plateau at that level. But the notion that they have already peaked and that they can't go above the present eleven million barrels a day is just wrong.

TIE: To what extent will the Chinese and the Indian economies achieve their economic growth goal? China seems to have an enormous task ahead. Their economy needs to absorb almost the population of Canada into their work force every year for the next twenty years. That requires 9.5 percent growth and 40 percent investment rates for as far a the eye can see. What are the chances that the Chinese in particular will be successful? If not, how will the resulting turmoil throw off predictions on global oil over the next fifteen to twenty years?

Schlesinger: From the standpoint of oil supply, things were a lot easier when Americans were consuming 30 barrels of oil per year per capita and the Chinese were consuming half a barrel per year per capita. Now the Chinese seem to want to raise their consumption somewhat closer to the American level. They will have the same kinds of problems as we do--at the point we all reach the plateau. Until that point they're going to go on expanding their demands on the international oil market.

They see problems with regard to oil supply. For example, one Chinese authority on oil gave an address in Lisbon recently indicating that he expected world production to peak around 2012. Keep in mind that relatively few Chinese go...