StrategyUnit

Introduction on the Gulf of Mexico Discovery:

Via WindsofChange, in "Treasure in the Waters", Publius Pundit covers the story regarding Devon and Chveron’s recent energy discovery in the Gulf of Mexico:

Treasure was discovered in America’s Gulf of Mexico waters today, black gold so vast and so deep and so surprising and so recoverable that overnight, America’s energy reserves have just increased as much as 50%. Chevron, Norway’s Statoil and deep-sea driller Devon Energy have just discovered as many as 15 billion barrels of previously unknown oil in a vast underwater pool five miles under the floor of the sea. No one even had a clue about this huge oil’s existence up until new high technology of deep sea drilling (cost: $1 billion a pop, and every bit as weird and high-tech as a spaceship) came to the fore.

The Many Inaccuracies of Energy/Oil/Natural Gas Discovery

First off, always be very sceptical of new energy (oil, natural gas) discoveries. If you read closely, you’ll usually find a large amount of speculation and political pressure. Randy Kirk brings a very sobering example here:

[The] announcement is reminiscent of the Mexican "huge oil discovery" announced last year, of a possible 10 billion barrels, which was quietly revised this year to around 43 million barrels, a downward revision of 99.57%. This similar "discovery" was made in Mexico last year a few months before the Mexican parliament was to vote on Pemex (state oil co)’s budget and rights to expand drilling. This illustrates the potential political pressure to announce oil and gas discoveries.

 Political Pressure

"Timing is Everything" so the saying goes. Regarding the recent claims of massive discovery in the Gulf of Mexico, timing seems to be an factor to look at regarding the enormous energy claims:

As news of a huge oil discovery deep in the western Gulf of Mexico unfolded, informal talks began in Congress to break an impasse over competing House and Senate plans to expand offshore oil and natural gas-drilling.

Massive Oil and Natural Gas discovery in the Gulf of Mexico. Right while the Senate battles over opening the Gulf of Mexico to offshore drilling. Coincidental?

Speaking of timing, doesnt the Senate report on the lack of links between Bin Laden and Saddam seem very well timed for the coming anniversary of September 11th?  

Links

• "Clarification of the Huge Chevron Gulf Oil Discovery", Energy Bulletin
• "Offshore-drilling legislation heats up", USA Today

Quick Post: Towards a Broader view of Energy Security?

Sebastian Mallaby of the Washington Post does an excellent job in “What ‘Energy Security’ Really Means” on broadening the general public’s view of energy security. Read on.

What everyone thinks about energy security:

“For many American leaders, energy security means producing energy at home and relying less on foreigners. But the United States imports three-fifths of its oil, and the share is heading up. For the foreseeable future, alternative fuel is unlikely to change that.”

The alternative view:

“Energy interdependence can actually be good for energy security: Just look at natural gas markets. Right now nearly all the natural gas that Americans consume comes from U.S. and Canadian fields; only 3 percent comes into the country by tanker in the form of liquefied natural gas. This renders the United States highly vulnerable to disruptions on its home continent. If terrorists or a hurricane took out a key pipeline, it would be hard to bring in alternative supplies from outside North America, and prices would spike upward. By buying more liquefied natural gas from a diverse range of foreigners, the United States would reduce its energy independence but enhance its energy security.”

Also see Daniel Yergin’s Foreign Affairs article, “Ensuring Energy Security“.

Introduction - Lugar, IEA and Energy Cooperation

The Christian Science Monitor has an interesting article, “Bold idea for energy woes: global cooperation“, weighing in on the need for some sort of global cooperation among major importers in terms of energy security and alternative fuel development.

The article touches on a speech Senator Lugar gave at Brookings Institute early March. I highly recommend reading Lugar’s excellent speech here. Additionally, Sen. Lugar (R) and Sen. Obama (D) introduced a bill late March 2006 pushing for alternative fuel development.

The CSM article chiefly focuses on International Energy Agency (IAE) as a potential vehicle for energy cooperation:

So is it time for an OPIC - an organization of petroleum-importing countries - as a way to build up cooperation among the world’s booming and increasingly competitive energy consumers?
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One hurdle in the road to developing cooperation among energy-consuming countries is the Bush administration’s distaste for the kind of international bureaucracy that might be charged with overseeing such a project, some experts say. But others add that the bones of what might be a starting point already exist in the International Energy Agency (IEA), a branch of the Organization for Economic Cooperation and Development that serves developed countries.

James Bartis, an expert in energy security at the RAND Corp. in Arlington, Va., says the IEA or something like it could serve as an “umbrella of oil consumers” that could begin to address fears about stable supplies and develop joint energy-investment strategies - and therefore become a force for stability in a world of tightening energy supplies.

The IEA was founded in 1974 in the wake of the 70s energy crisis. Its last major move was to coordinate the release of +2 million barrels of oil after Katrina. Will it take a bigger energy crisis to move the IEA towards a more robust, pro-active stabilizing force for energy security?

Conclusion

As noted in January 2006 at StrategyUnit, India and China has declared a “Year of Friendship” centering on energy cooperation on the development of alternative fuel, sharing information on energy bids and joint energy development.

That such emerging powers like China and India are taking steps to coordinating their energy policy is a telling development in global affairs. The US must see this as an opportunity to take the next step and slowly build a wider forum for major energy importers. In order to be taken seriously by other states, the US must also take steps to put its own house in order.

Holding hearings on high gasoline prices, while makes on popular with the public opinion, does little and to address the core concerns of our energy security.

Global energy security and coordination is in the US interests as it must seek to avoid a global dependency on oil-rich regimes that are far too often hostile to the US and its interests and even including those of other importing nations. The questionable stability of oil supplies, environmental damage, hostility of oil rich regimes, and oil peak concerns should be more than enough motivation for the US to help lead and shape a global forum to combat these issues. If not by the current Bush Administration (which is facing a lame-duck problems), than hopefully the next.

Quick Post: Update on “Getting India Right : Recreating the Anglosphere”
The Economist Writes on US-India relations

The StrategyUnit has recently posted several articles relating to India, with the strongest being “Getting India Right : Recreating the Anglosphere“, where it is declared:

“There has been discussion that just as Great Britain gracefully passed its world power status to the United States, the United States must look to do the same with India or else face decline in the face of a raising China.”

Now the Economist (Feb 25), ahead of Bush’s March visit to India, leads with two articles highlighting the Bush Administration’s approach with India. The second article, “The Great India Hope Trick“, goes through the three major topics: 1) the difficulty surrounding the Bush Administration’s nuclear technology deal with India; and 2) the American temptation to see India as part of an anti-China axis partner; 3) while India needs and wants to be seen as an equal in any partnership with the US.
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Summary
Many commentators have discussed the possibility of the Six-Party Talks on North Korea - which consist of China, Japan, US, Russia and the two Koreas - as the future basis for a security forum for Northeast Asia. East Asia is an important and dynamic region with growing economies and equally growing security needs, yet formal mechanism exist for communication and dialogue among the major players.

While the need for a security forum is apparent to all players involved, the specific issue that should help bring a security forum into fruitarian is Energy Security. The need for energy security coordination in a region highly dependent on imported oil is well overdue.

Indeed, even in the OSCE, the current chairman has called for a conference for all OSCE members to discuss the need for better coordination on energy security matters. It is time for the even more imported energy dependent nations of Asia to do the same and much more.
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Commentary

Back in January, StrategyUnit posted the article “Iran Crisis: Another War for Oil, Bourse and the US Dollar?” on the scheduled March opening of Iranian oil exchange (bourse), which is based on euros rather than US dollars:

This has fueled (no pun intended) speculation of the real cause of the Iranian crisis. The Iraq War has been criticized as a “War for Oil”. And now, as a second act, there are folks from Daily Kos to Asia Times saying the same of the Iran Crisis. The most aggressive promoter of this view appears to be from Krassimir Petrov.

Indeed, DailyKos writters has also been furthering the Iranian Bourse conspiracy:

“Of course most of the saber-rattling is over Iran’s nuclear program and the word “bourse” is never mentioned. But the IAEA has consistently stated that Iran is in full compliance with its regulations and the conditions of the Nuclear Non-Proliferation Treaty. That doesn’t negate Iran’s political alignment and support for terrorism, but their nuclear energy program is hardly the threat it’s made out to be.

Only time will tell whether regime change is in the cards for Iran, especially at the hands of the United States. But the Fed’s quiet decision to no longer print the M3 is definitely quite ominous.”

Yet, interestingly recently (Feb 24) a writter on DailyKos, Jerome a Paris, writes to counter the other DailyKos writters:

“Crazy scenarios involving Iran’s purported attempts to create an oil bourse to start selling oil in euros make the rounds regularly, and even get recommended with alacrity on DKos.

These things WILL NOT HAPPEN, and we have, as a supposedly reality-based community, to focus on real issues and not imaginary ones.

So let me explain why an Iranian oil bourse will not work for the foreseeable future. I hope that this diary can be used as a handy reference when this crops up again in the future.
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So, say that Iran decides to sell its oil in euros. Fine. Both the Iranians and their clients will determine the price for the transaction in dollars, on one of the established markets, and will trade these dollars for euros for the actual payment operation. It will give banks active on the forex markets a little bit of income, but will change nothing to how oil is traded.
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So please, let’s stop the fantaisies, or the conspiracy theories about a switch to euros or a new bourse. If any transaction, whether by Saddam, the Iranians or anyone else is expressed in euros, it is purely cosmetic. The underlying market is in dollars, and will remain that way.

We are badly undermining the credibility of the site by recommending silly scaremongering stories on that topic.”

Congrats to Jerome a Paris and DailyKos for keeping the balance.

Today’s Quick Links
1. Hamas: Winning the Candidates, not Votes?

Via Chief Wiggum and Coming Anarchy, comes this interesting story:

A close look at the final results of last month’s Palestinian election shows that the apparent landslide that gave Hamas 74 of the 132 seats in the Palestinian Legislative Council and only 45 to the once-dominant Fatah movement was, in the words of one analyst, “an optical illusion.”

Read more Here

2. Can “Psiphon” Beat China’s State Censorship?

Non-State actors continues to undermine state control over information:

[A] band of Internet volunteers headquartered in Cambridge has launched the Tor Project, which uses people’s spare Internet bandwidth to help others bypass the censors. And in Canada, computer scientists at the University of Toronto are working on a similar project, called Psiphon.

Anonymizer and Tor have attracted strong support from the US government. American military and intelligence services are major customers of Anonymizer, because it lets them scan foreign Internet sites without revealing their identities. The Voice of America, a broadcasting service sponsored by the US government, uses Anonymizer to help people in Iran tune in, despite their country’s efforts to block the signal.

Read More

3. Forget Russia, China and Russia, there’s also Japan in Central Asia

From PINR (published by Asia Times):

Japan added a new dimension to its engagement with Central Asia with the formation of the Central Asia Plus Japan (including Uzbekistan, Tajikistan, Kyrgyzstan and Turkmenistan) initiative in August 2004. While low-key compared with the Shanghai Cooperation Organization (SCO - China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan), Japan through the Central Asia Plus Japan initiative is likely to play an increasingly significant geopolitical role, not just in Central Asia but also in Eurasia. An important question is how Japan’s new regional initiative will impact the SCO, which is largely considered the de facto regional organization in Central Asia.

Read More

4. John Yoo on FISA and the War on Terror

Interesting short interview by Foreign Policy:

While an attorney with the U.S. Justice Department after September 11, his legal memos helped lay the groundwork for what some see as the Bush administration’s constitutional power grabs—from the treatment of enemy prisoners to domestic wiretapping. FP recently asked Yoo, now a law professor at Berkeley, about amending FISA, ending the war on terror, and whether torture works.

Read More

5. Refrigerator with Built-In Beer Tap!

Words cannot describe StrategyUnit’s Joy:

Introduction: Chinese and Indian Energy Cooperation

India and China kicked off their “Year of Friendship” to a rather good start. Only a few days ago (Jan 9), China and India’s respective state-owned oil companies agreed on a joint venture on the purchase and development on oil assets in Syria. And now China and India agreed on sharing bid information on bidding on foreign hydrocarbon fuel (to avoid driving prices unnecesarrily) and to encourage joint ventures.

The document that China and India signed, the two most populous states, outlined “cooperation in upstream exploration and production, refining and marketing of petroleum products and petrochemicals, oil and gas pipelines, research and development, and promotion of environmentally friendly fuels.” (source) The document also included agreements on coopertion on the production of biofuels.

In a visit to China, the Indian Petroleum and Natural Gas Minister Mani Shankar Aiyar stated:

“We look on China not as a strategic competitor but a strategic partner,” said Aiyar in an exclusive interview in Beijing. “It is clear to me that any imitation of the ‘Great Game’ between India and China is a danger to peace. We cannot endanger each other’s security in our quest for energy security.”

Aiyar also brought up the idea of joint pipeline connecting India and China, but this is something India has brought-up in the past as well without substantial response from China.

Motives and Benefits?

On the surface, this partnership is quite puzzling. This movement towards cooperation would benefit India far more than China:

• India is more dependent on imported oil (China’s 30-40% to India’s 70%)
• Indian oil companies have been repeatedly outbided by China, so why the need for China to cooperate?
• China’s “Go-Out” oil strategy has been thus far successful with its connections in Central Asia, South American and from Sudan to Iran. So why would China cut a deal now?
• China and India have gone through minor wars in the past and unresolved border disputes. How will these issues loom over China and India’s ability to cooperate?

However, China and India have cooperated in some major instances, such as China’s support of India for permanent membership in the Security Council and in the Russian-Chinese led Shanghai Cooperation Organization (SCO), India sits as an observer and a potential future member.

But in a larger context, Chinese would be foolish to stand-by as US and India continue to forge a closer tie, esp. with word last year about the Bush Administration wishing to “help India become a major world power in the 21st century”, which has mainly manifested itself in the US willingness to help India’s civilian nuclear energy program despite the nuclear testing in 1998.

Broad energy cooperation from China (successful so far in its “Go Out” strategy) would prove very significant for an equally energy hungry India. Indeed, one could say that using energy cooperation would present a more enticing carrot than what the US can offer India: military equipment and nuclear energy technology.

Additionally, engaging and building relationships with neighboring partners would fit into China’s strategy of “Raising Peacefully”. China is continuing to build regional institutions to project its power, such as through the Shanghai Cooperation Organization (SCO) and the recent Easts Asia Summit.

Some would perhaps point out that any partnership would never work between India and China, as they are economic rivals. This is true in the area of energy resources, but when it comes to their economies, the two are very different. China is concentrating on manufacturing where as India moving ahead to high-tech software area and providing advances services, such in the financial industry.

Conclusion

With the exception of Japan (which even signed a $3 billion deal for Iranian oil), things are looking rather lonely for the U.S. in Asia. US must more vigorously appraoch India as natural partners, in its shared Anglo-heritage and as the world’s largest democracy. India can help share the burden as one of the pillars of security in the Middle East and Central Asia. And China too should be approach and incorporated under a new security framework in East Asia, with the United States and Japan.

The U.S. needs to lead in incorporating China, India and other emerging New Core powers into international organizations, as prescribed by Thomas Barnett. Else, these New Core states will look to seize the initiative and form their own alliances and institutions that will increasingly sideline the United States. We can help lead the future or sit back and watch as others make it for us.

PS: Why the lack of any coverage in this on New York Times, Washington Post etc? I am writing this on 1/13/2005 12:36AM, Pacific Time. Only the Financial Timeshas something major so far.

Weekend Reading: Thomas Friedman on Energy Gluttony and Security in the Middle East and Beyond
In Yesterday’s New York Times, columnist and author Tom Friedman writes calls for a mature U.S. energy policy as central to the US and global security. Unfortunately, the piece is behind New York Time’s firewall, but thankfully it is freely available from my city library’s online database.

Most strikingly Friendman states that “A democratization policy in the Middle East without a different energy policy at home is a waste of time, money and, most important, the lives of our young people.”

In a sense he is correct. Reform in the Middle East will be more about economic diversity/connectivity rather than democracy. As we know petrol states suffer from lacking both, but economic connectivity (beyond just state oil companies selling black gold abroad) will help foster political moderation and pull these states from Gap to the Seam and to the Core (to use Thomas Barnett’s terminology).

Here’s an excerpt from Friendman’s article, “Being Green is the New Red White and Blue“:

The biggest threat to America and its values today is not communism, authoritarianism or Islamism. It’s petrolism. Petrolism is my term for the corrupting, antidemocratic governing practices — in oil states from Russia to Nigeria and Iran — that result from a long run of $60-a-barrel oil. Petrolism is the politics of using oil income to buy off one’s citizens with subsidies and government jobs, using oil and gas exports to intimidate or buy off one’s enemies, and using oil profits to build up one’s internal security forces and army to keep oneself ensconced in power, without any transparency or checks and balances.

When a nation’s leaders can practice petrolism, they never have to tap their people’s energy and creativity; they simply have to tap an oil well. And therefore politics in a petrolist state is not about building a society or an educational system that maximizes its people’s ability to innovate, export and compete. It is simply about who controls the oil tap.
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Complimentaring StrategyUnit’s post on the Russia-Ukraine Gas sega, StratFor’s Peter Zeihan has an interesting perspective on the possible role and orientation of Dimitri Mendevev, Putin’s newly selected Prime Minister, and his in the Ukraine-Russian Gas issue.

StratFor’s article is interesting because it takes account to the role of Mendevev, whereas Jamestown Foundation, Eurasianet et al have been more focused on Putin or Russia itself.

So, who is this Medvedev?

In mid-November, Russian President Vladimir Putin named Dmitry Medvedev as first deputy prime minister. Medvedev is a rather rare personality in Russian politics, in that he is a modernizer who has not become unrealistically optimistic about Russia ever looking like — much less joining — the West, and a nationalist who has not fallen prey to the debilitating paranoia that often characterizes Russian policy. He also happens to be Putin’s protégé and the board chairman of Gazprom. The Ukraine natural gas crisis was his first Russian foreign-policy initiative.

Medvedev, like all Russians, recognizes that his country’s long-term prospects without Ukraine are, at best, bleak. That means that Russia’s European relations have become of secondary importance — they are no longer an end in their own right, but rather a means to other ends.

According to Stratfor, Medvedev’s motivations are similar to what was mentioned in StrategyUnit’s article: a method to reassert Russia on the world stage, taking advantage of the G-8 chairmanship to set the tone of its chairmanship. In this case it is to force Europe to consider Russia’s interests, power and importance seriously.

Prior to the Jan. 1 shutoff, the Europeans had become complacent, unappreciative of the scope of their dependency upon Russia or how much they have taken a “friendly” Moscow for granted since the end — or even before the end — of the Cold War. Energy supplies to Europe continued throughout the Afghan war, the 1983 war scare, the Moscow Olympic boycott, the putsch against Gorbachev, the Soviet breakup, the Chechen war, the Kosovo war, and the enlargements of NATO and the EU. The Europeans grew confident that as far as energy supplies were concerned, the Russians — while unpredictable in their rhetoric — were rock-solid in their reliability.

Medvedev’s primary goal was to redefine European perceptions of Russia. As of Dec. 31, Western Europeans perceived Russia primarily as an easily dismissed, benign former foe. But with the Gazprom cutoff — which diminished gas supplies needed for heating in the middle of winter — Russia proved itself not only sufficiently erratic to be taken seriously, but also capable of inflicting very real pain with a modicum of effort.

Now, did the Russians want to hurt the Europeans? Of course not. Europe, particularly “old” Europe, remains a potential partner for Moscow, and there is no reason for the Kremlin to introduce spite into an already complex relationship. But did the Russians want the Europeans to know that the Kremlin has the capacity and chutzpah to turn the screws? Absolutely. And doing so at a time of year when the wind whipping off the North Sea is anything but balmy adds that ever-incisive Russian touch.

This is not about establishing trust, but about establishing in Europe a respect for Russia’s strengths and an awareness of Russia’s concerns.
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The elegance of Medvedev’s strategy lies in the fact that simply causing the Europeans to think about Russian interests means that the Kremlin has driven a wedge not only between the Europeans and the Ukrainians, but between the Europeans and the Americans. If Russia is to recover what it has lost in geopolitical stature these past 15 years, this is precisely the sort of policy that will give it a fighting chance.

The entire article has more details regarding Ukraine’s motivations and calculations as well as its historic importance to Russia. Most interestingly it points to Yushchenko potential use of the gas issue as a way to play the “anti-Russian” card to boost his popularity for the upcoming March parliamentary elections.

If someone would like to see the article, please let me know and I can forward it. I am unsure if its available freely online.

Updated December 03, 2006
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Introduction

With the breakdown in price negotiations during recent days, Russian state-owned Gazprom choose to cut the gas deliveries to Ukraine, the main conduit for exports to the rest of Europe. This is a critical situation because, as mentioned by Bloomberg, “State-run Gazprom supplies about a quarter of gas consumed in Europe and ships about 75 percent of that volume through Ukrainian pipelines.”

Washington Post provides further details on the outcome: “On Sunday, with no agreement on a new price, Russia cut by 120 million cubic meters a day the volume of gas it sent down the Ukrainian pipeline — Ukraine’s share. But there were soon reports that the volume of gas reaching Austria, Italy, France, Hungary, Poland, Slovakia, Romania and Croatia at the other end had fallen by as much as 40 percent.

Gazprom claimed that Ukraine was stealing gas — about $25 million worth on Sunday alone, according to Alexander Medvedev, Gazprom’s deputy chairman”

Russian Climbdown

But only one day after cutting the gas supply, Russia has been forced to restore the supply with mounting criticism from Europe and US on Russia’s ability to be a reliable energy partner. Gazprom, however, tried to square all blame on Ukraine:

“With the aim of preventing a possible energy crisis caused by Ukraine illegally taking gas, Gazprom has taken the decision to deliver additional gas into the gas transport system of Ukraine,” the company said in a statement.

“We stress that the additional delivery of gas is not designed for Ukrainian consumers but is meant for transit through the territory of Ukraine for delivery to consumers outside the borders of Ukraine.”

Europe, IEA and the US are placing blame on Russia for the current crisis, demonstrating the limits of Russia’s “Petro-Power”.

Russian Stabs Itself and Stumbles

In the long term, Ukraine will have to come to a compromise with Russia leading to higher prices. But more substantially, Russia’s heavy handed tactics against Ukraine will backfire throughout Europe and Russia’s energy customers. What Russia has seeming underestimated is the reaction from Europe because of its actions against Ukraine. What Russia’s hardball tactics has done for Europe is to:

1. Highlight Europe’s dangerous energy dependency on an increasingly authoritarian Russia
2. Confirm the fear that Russia will turn to its energy resources as its main leverage of power in the global stage
3. Encourage European states to find alternative energy sources, away from Russia (Neighboring Finland is already building its first nuclear to move away from Russia)
4. Highlight that Putin and Russia cannot be trusted in other important issues like Iran, North Korea et cetera
5. Encourage speeding the process to include Ukraine in western institutions like NATO and the EU
6. Underline that the Russian-German gas pipeline (expected to be completed by 2010) is a naked attempt by Russia to consolidate its power and influence in Europe
7. Seals Former German Chancellor Gerhard Schroder image as sell-out for Moscow, as he is now working on Gazprom’s Russian-German Gas Pipeline
8. Draw increasing criticism to Russia for its increasing authoritarian use of power, such as the banning of NGOs, that will only grow as Russia assumes head of the G-8 this year.
9. Increase calls for Russia to be removed from the G-8 for not being a major world economy, a democracy or even a free-market state

This arrogant move against Ukraine amid recent criticism for restricting NGOs and holding the G-8 chair may be a signal that Putin’s consolidation of power is leading Russia to a belligerent authoritarian state, rather than a corporatist Russia (think Singapore) that can help consolidate Moscow’s power before Russia deteriorates and bring Russia back economically.

Conclusion
Ukraine and Russia are still a long way from resolving the issue, but so far we can conclude that even if Russia gets what it wants from Ukraine, it still come out loser on the world stage and its reputation as reliable energy partner is soiled. At this point in the situation, it is difficult to see how Russia stands to benefit against Ukraine and the world stage. The loss in international standing is costing a lot more than any possible gain from Ukraine.

Post-Script: A Contrarian View, Russia Exerts Power?
To keep the analysis balanced (since events are too early to call), Putin could be purposely timing the move against Ukraine because of its G-8 chairmanship.

It is possible that Putin wants to demonstrate that Russia is willing to flex its economic muscle regardless of its cost to the world stage and that in the face of an increasingly energy vulnerable Europe, Russia’s power is very much real. True, states like Finland are increasingly promoting nuclear energy as an alternative, but they take years to build and Russia has the largest natural gas reserve while Norway and the UK’s has dwindled.

In short, this event could be a move to show that Russia is not to be taken for granted as the world “natural gas tank station” to be tapped freely by Europe or its other customers. Raw/Single commodity export states are viewed somewhat disparging as backward states for advanced states to exploit - this is something that obviously Putin would not like Russia labeled as.

However, such increase in fear and power would only be a short/medium term gain. In the long run, such hardballing tactics would likely motivate Europe to move away from Russia - be it using nuclear power or alternative sources of natural gas. Thus, this is a risky gamble for Russia to make, if indeed this is Putin’s intentions.
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Sorry for the very late posting, work has been extra busy with the coming holidays. I am working on 2-3 articles, but for now here is an interesting development via AsiaTimes’s “The foundations for an Asian oil and gas grid“:

Stung by the rising international price of oil and domestic shortages coupled with high requirements of a growing economy, India has revived a plan for an oil and gas grid for the Asian continent.

The grid is part of a two-fold strategy by the two top Asian oil guzzlers, China and India, to ensure reliable delivery networks and energy security. The other element involves acquiring stakes in production and exploration projects for which New Delhi and Beijing continue to cooperate as well as compete.

The emphasis on the grid comes in wake of reports that India and China, the most aggressive shoppers for oil and gas assets in the world, are coming together to put in a joint bid. The China National Petroleum Corporation (CNPC) and the Oil & Natural Gas Corporation (ONGC), two of the most high-profile emerging global oil companies in the past year, could jointly bid for Petro-Canada’s $1-billion oil and gas fields in Syria. Both India and China feel the strategic need to diversify their energy sources from the current dependence on West Asia.

It will take years before this project turns into fruition if it ever gets there, but such a bold statement alone is a testament of new realities that the Bush Administration nor any political leader in the U.S. have began to address.

More on this later…

Introduction

The Oil Drum has an excellent post covering the recently released findings over the major drop (30%) in the temperature of the the Gulf Stream, the warm currents that from the N. America flow east to warm Europe. (Note that this report was curiously timed against current discussion in Montreal on the successor to the Kyoto Protocol.)

Immediate Implication

What are the obviously implications if the Gulf Stream deteriorates further?

1) Emphasizes the growing need for a stable energy supply to warm a chilling Europe, while the oil peak grows ever nearer and UK is already facing a potential energy crisis this winter.

2) As best said by Oil Drum’s Stuart Staniford:

That’s the warm water that didn’t go to Europe, and is now coming back into the tropics. Where’s it going again?

Smack into the region where North Atlantic hurricanes form, that’s where it’s going.

So if this result holds up and these trends continue, I think we can expect to see plenty more of this in the future: [Staniford shows a picture of wrecked oil rig in the Gulf Coast]

Broader Implications

The changes in the Gulf Steam is a microcosm for the broader implication of climate change:

1. There will be more extreme weather - very cold and very dry/hot. Both will lead to the increase use of heaters on one side and the use of air conditioners on the other. All energy hogs.

2. Extreme weather (like hurricanes) will make it more difficult and *expensive* to extract hydrocarbons (oil, natural gas etc) and difficult to transport.

Closing Remarks
In the distant land of Sudan (distant for the West, that is), a prolonged and extreme drought is partly to blame for the genocide, as conflict for water and land between herders and peasants gave with to a more ethnic conflict between Arabs (mostly herders) and Furs (mostly peasants).

While the role of climate change is little mentioned in the ongoing Darfur Genocide, with the climate change now bearing its weight to Europe we should expect to here more on this. While I doubt Europe will descend so easily to genocide, Sudan represents the extreme changes in human behavior to government policy that are possible and caused partly by climate changes.

Howdy All Y’All…Happy Thanksgiving Day.

Here’s quick Weekend Reading…just in case you need a break from all that turkey and gravy. By the way, I’ve been doing some light posting this past two weeks, but I’ll start going back to the normal beat of things soon.

OxBlog on Jame’s Fellow’s “Why Iraq Has No Army” in December’s Atlantic Monthly

David Adensik does an analysis of James Fallows’ cover story in the Atlantic monthly “Why Iraq Has No Army”. The article has caused such a buzz that even “George Stephanopoulous attempted to use the article to cross-examine Donald Rumsfeld on Sunday morning.”

I agree with David Adesnik that despite the hype of a title, Fallows doesnt really say anything new nor goes into depth about anything groundbreaking. Adesnik also the lack of definately strong position in the article (from critical/pessimistic to hawkish) as reflective of the overall difficult position of the Democrats:

“So is there a third way that will allow Democrats to both criticize the war and be seen as hawkish? Yes there is. They can click their heels three times and say “I agree with John McCain.”"

The article is available for subscribers only, but if you would like a copy let me know and I can email it over. And, dont forget your local library (via online database) may carry a copy.

Oil Drum’s “There’s A New Kid In Town — Iran Versus Kazakhstan”

I’ve done an extensive research on Kazakhstan’s foreign policy and energy resources as part of my thesis in college, so its interesting (but not too surprising) to see Oil Drum’s “There’s A New Kid In Town — Iran Versus Kazakhstan” - which boldy proclaims the growing importance of Kazakhstan OVER Iran on energy resources:

Iran is still a giant and Kazakhstan is a middle tier country among the world’s oil suppliers. Iran produced 4081/kbd in 2004, 5.2% of the world’s total while Kazakhstan produced 1295/kbd, a paltry 1.6% percent of the whole. Iran has 132.5 billon barrels in proven reserves, 11.1% of the world’s total while Kazakhstan has 39.6 billion barrels, a 3.3% world share. But let’s look into our chrystal ball to see what the future may look like.
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Around the years 2008 to 2009 period, Kazakhstan is exporting more total oil supply to the OECD countries, China and (perhaps) India than Iran is (Empahsis mine)

Eurasianet’s “China joins the Central Asian Base Race”

Stephen Blank of Eurasianet writes on China’s recent move to secure a military base in Kyrgyzstan and even in Uzbekistan, which the US has recently been kicked out from.

While Blank focuses on Chinese miltiary presence on Central Asia, we should not forget the joint Chinese-Pakistan naval base in Gwadar, Pakistan.

Beijing’s search for a base has occurred against a backdrop of growing regional militarization and an intensification of great power rivalry in Central Asia. Thus, China’s requests of Kyrgyzstan and Uzbekistan, even if made sotto voce, have served to heighten the geopolitical jockeying in the region. It also suggests a growing willingness entertain the use of the military instrument to address regional issues. This cannot be considered a good sign.

While SCO (which includes Russia, China all all major Central Asian states) asked for the US militray to leave Central Asia, Blank correctly points out that Russia come out more strongly against a Chinese over a US presence in Central Asia.

In the UK: “Gas industry on brink of winter crisis”

The OilDrum and EnergyBulletin have been covering the less known natural gas issues that faces the US, UK and others, but here’s a mainstream news on UK’s winter energy crisis:

The country’s gas industry is on a knife edge this winter and could tip into crisis if there is a major breakdown in its ageing North Sea fields and pipelines, analysts said on Thursday.

Europe’s biggest consumer is fast running out of gas from the fields that once made it self sufficient and kept prices among the lowest in Europe. Today, UK gas is the world’s costliest fuel and winter supply will be the tightest in memory.Government ministers are under pressure to explain how one of the world’s richest nations has left its energy policy hostage to the weather and ageing North Sea equipment.

Quick Posting

The Strategic Overview: Tigerhawk’s Update

Back in 2003, Den Beste of USS Clueless wrote the greatest touchstone piece on the *Islamofacist war, writting out in a relatively short 20 pages the strategic overview of the war.

Today, Tigerhawk writes an excellent update to Den Beste’s essay. Its a must read piece.

Econbrowser on Peak Oil

Econbrowser blogger, James Hamilton economics prof of UCSF, speaks at the American Enterprise Institute on Peak Oil. Check out his transcript at Peak Oil News. Hamilton gets to the finer points on how the oil market works, the power of the market to manage Peak Oil (it wont be like the Long Emergency) And in the end, we’ll see three things:

• We’ll rely on “cruder” oil (more sulpher) which means more expensive to process to refine with stricter enviormental standards
• Intead of getting oil from Texas (which once pumped more oil than Saudi Arabia), we’re now relying on the Middle East…and after that’s done think Nigeria and Central Asian states or rough enviorments difficult places like ANWR
• All this points to higher likelihood of supply disruption and higher oil prices

*Some have asked why I haved used this term. I will post up a reply on this topic.

Quick Posting Only…
The blogsophere, myself included, have been guilty on focusing too much attention on the Paris Riots. Meanwhile, China looks like its taking steps to protect itself from any looming energy crisis and threats…and such a potential crisis is far larger of a strategic threat than the riots in France.

China has made two recent announcements this week:
1. Earmarking 180 billion USD for Renewable Energy
2. Push Towards Building Sustainable Cities (first by 2010)

1. The 180 Billion USD Push for Renewable Energy

From China Daily “Renewable energy gets huge outlay“:

Up to 1.5 trillion yuan (US$184 billion) will be invested by 2020 to achieve China’s plan to boost renewable energy consumption to 15 per cent of the country’s energy mix by the benchmark year.

“We are committed to our promises,” said Zhang Guobao, vice-minister of the National Development and Reform Commission. “Our renewable energy law will take effect beginning next year, and we aim to increase our renewable consumption in the energy mix from the current 7 per cent to 15 per cent by 2020.”

WSJ’s “Beijing vows to increase use of clean energy” points to the practical reason for energy diversification - security and environmental issues (which is also security related):

China has increased its emphasis on the use of alternative power sources out of concern for both the environmental costs of the country’s heavy use of fossil fuels and the security risks of its growing reliance on imported oil. But oil and inexpensive, but dirty, coal still account for most of the energy consumption in China, the world’s second-largest producer of greenhouse gases after the U.S.

Yet even on the issue of the environmental issues, environmental pollution has become an issue of domestic stability. Pollution from factories and power plants have prompted mass protests against the government. The Chinese Government has responded and is well aware of the danger of pollutions issues potentially igniting massive unrest. See my post “China - Environmentalism as a National Security Issue”

There is obviously a good amount of spin in the story, but regardless China’s announcement demonstrates that China is looking to confront energy security issues with greater resolve than the US has done with its latest energy bill.

The Energy Policy Act of 2005 has been rightfully criticized for heavily subsidizes businesses in developing existing energy types (oil and nuclear) and makes exceptions on environmental regulation for various energy-related construction. China seems to be really pushing the development of new and more efficient, clean and renewable energy resources in a bid to avoid dependence on oil (and the global oil prices that dictate oil-based energy cost).

The Energy Bill does state, however, that 10% of energy from utility companies must be from renewable sources by 2020; China appears to be 15% by 2020, but China doesn’t give much detail on what that exactly means.

In addition, the Senate just passed a bill allowing the drilling of Alaska National Wildlife Reserve (ANWR). While I think the US Government should always reserve the right to exploit readily available energy resources when needed, government attention would be better served to pushing for hybrid vehicles or at least more gas-efficient vehicles.

2. Push Towards Sustainable Cities
A British consulting firm, Arup, has won a contract to build sustainable cities in China - with the goals of sustainable energy and water use and zero emissions for its transportation system. See the article here at the Guardian’s “British to help China build ‘eco-cities’” for more information:

British engineers will this week sign a multi-billion contract with the Chinese authorities to design and build a string of ‘eco-cities’ - self-sustaining urban centres the size of a large western capital - in the booming country.

Arup, the London-based consulting firm that has already signed up for one such project near Shanghai, will announce it has clinched a deal to extend the concept into a string of cities around China.
…
The Dongtan development, on an island in the mouth of the Yangtze river near Shanghai, aims to build a city three-quarters the size of Manhattan by 2040. The first phase will accommodate some 50,000 people. It is on target to be open by the time of the Shanghai Expo trade fair in 2010
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The eco-cities are intended to be self-sufficient in energy, water and most food products, with the aim of zero emissions of greenhouse gases in transport systems.

Some hints of the technologies involved are mentioned at Arup’s Press Release, “Arup unveils plans for world’s first sustainable city in Dongtan, China“:

The first phase of Dongtan is planned to be completed by 2010 when the Expo will be held in Shanghai. This phase will include a wide range of developments with urban parks, ecological parks and world class leisure facilities. Priority projects include the process of capturing and purifying water in the landscape to support life in the city. Community waste management recycling will generate clean energy from organic waste, reducing landfills that damage the environment. Combined heat and power systems will provide the technology to source clean and reliable energy. Dongtan will be a model ecological city, and its buildings will help to reduce energy use, making efficient use of energy sources and generating energy from renewable sources.

Again, surely a good amount of spin is involved, but I am not hearing anything remotely similar to this in the United States with such a high level of government involvement. Would the US Government at least try to make suburban sprawl areas more self-sufficient and sustainable?

Conclusion
I have no time to go to any deep analysis at the moment, but sufficient to say that the United States would be foolish in not taking concrete steps in addressing its energy security issues and taking a look at what China is doing.

Energy security can potentially be a more existential threat than terrorism, but its not being fully addressed by the US. In this regards, China is strengthening itself as compared to the US – at least in its stated goals.

More thoroughly analysis later…

Still on light posting mode…but I think this should be noted in contrast to the Oil Drum’s recent discussion I noted on Saudi Oil.

From Reuters:

Russian oil output could peak at more than 510 million tonnes annually in 2010, or 10.2 million barrels per day (bpd), Russian Energy Minister Victor Khristenko said on Monday.

“It will reach a certain plateau of production within the time frame of 2010,” Khristenko told reporters. That plateau would be about 510 to 520 million tonnes a year, he said, or the equivalent of about 10.2 to 10.4 million bpd. In September, Russia produced 9.53 million bpd, which was a post-Soviet high, according to Energy Ministry data.

And let’s not forget that Russia currently is neck-and-neck with the Saudi’s on oil production:

Russia is chasing Saudi Arabia’s title as the world’s top crude oil producer. Saudi Arabia pumped 9.6 million bpd of crude oil in September, according to the U.S. Energy Information Administration.

But unlike the Middle East’s oil giant, which chooses not to pump at full capacity, Russia is keen to see production hit record highs. Saudi Arabia has surplus capacity of up to 1.4 million bpd, according to the EIA.

More oil worries to ponder on.

My blogging has been on a very light schedule as I’ve got the cold. Its days like these I wish there some fellow contributors for this blog. That said, Here’s a list of what I think should be required reading for this weekend:

Tdaxp – a New Blog (new to me)
This is a new blog by a guy named Dan. Great blog with interesting, analytical and unique perspective on a host of issues. Just keep on scrolling.

Especially interesting to me are:

• The Future That Might Have Been
• The Failure of Global Guerrillaism: Democracies Withstand Economic Pain (Disclosure: I posted on the thread on Global Guerillas, 4GW v. 3GW)
• Speaker Hastert Attacks Oil Company Record Profits (Blog Network Attacks)

Hello Saudi Arabia, Hello Oil Peak!
Here’s something I found at NYT that is not receiving enough attention, but is discussed at the Oil Drum:

“a senior intelligence official, who insisted on remaining anonymous because he was not permitted to speak publicly on the issue, said that the Saudi plans to increase production by nearly 14 percent in the next four years were not enough to meet global demand. Even the Energy Information Administration recently scaled back its expectations of how much more oil the Saudis could pump in 20 years.”

Check out The Oil Drum’s coverage here. The Oil Drum also covers other news over doubts of Saudi Arabia’s Aramco on how much reserve and capacity remains in Saudi Arabia.

China is an Unstoppable Graduate Student Factory (or not?)
In “Anoint no economic superpower before its time”, Daniel Drezner has a very good roundup putting some doubt on the opinion that China’s is churning out far more and better engineering students than the US - helping lifting China to superpower level and eventually surpassing the U.S. and the West.

Daniel Drezner’s posting is a great follow-up to my previous post, “China the Roaring Economy - Or Maybe Not “, which points to some doubts on China’s consistently astronomical GDP growth figures.

Central Asia and the Caucasus share the pecular trait of being important geopolitical points, yet so little understood or cared about in the mainstream media. To do my part in remedying that, I’d like to point out to a great article on Central Asia (which more often gets some U.S. media coverage) and contrast that with recent events in the Caucasus (which rarely ever does).

On Central Asia
Tech Central Station has a new article by Ariel Cohen, of the Heritage Foundation, featuring the (tired) title “The Great Game Returns“, where he covers Condoleeza Rice’s imporant trip throughout Central Asia.

Central Asia is the important flash point for the United States, China and Russia (its former imperial power) for several reasons:

• Most hot on everyone’s mind is the resurgence of Islam and the threat of radicalization - of a reason known to embrace sufism and a distinct school of Islam
• Central Asia, while landlocked, has a enormous amount of natural gas resource and a good amount of oil. Kazakhstan alone is set on an ambitious path to exceed the production of the North Sea

Key points from Ariel Cohen:

[On the Purpose of the Condi Rice Trip]
The visit demonstrated Sec. Rice’s balancing act skills. On the one hand, she needs to propel further President Bush’s democratization agenda. But on the other, just like in the Middle East, the imperatives of the war on terrorism and U.S. energy security dictate a more Realpolitik approach.

The stakes are high. Afghanistan and Central Asia are where the rubber of President Bush’s democratization doctrine meets the rocky road of authoritarianism. What’s more, Central Asia is important as a major source of oil and gas. By 2015, the Caspian Sea basin, including Kazakhstan and Azerbaijan, will produce four million barrels a day — more than Kuwait and Iraq today combined. The region is also surrounded by the emerging giants, energy-starved India and China, and bordered by key Islamist states Iran and Pakistan.

[On the challenge from Russia and China]
In August SCO sent a strong message to its Central Asian members when they conducted unprecedented joint military maneuvers in the Far East. The new de-facto Moscow-Beijing bloc is aimed at U.S. “hegemony” as well as to American rhetoric of democracy.

In the meantime, Islamist radicals are spreading their tentacles in the impoverished and drug-ridden villages and slums of the region. Hizb ut-Tahrir, a global Sunni clandestine organization which aims to overthrow secular regimes and create a Califate, has made Uzbekistan its primary target. Islamic Movement of Uzbekistan is allied with Al Qaeda and active in Afghanistan and Pakistan’s border areas.

[Reason for the Special Rice Visit to Kazakhstan]
…
Kazakhstan may be a key to U.S. interests in the region. As Nazarbaev announced in his September speech to the parliament, in ten years his country may surpass Kuwait and Nigeria as an oil exporter, pumping over 2.5 million barrels a day.
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One hopes that Sec. Rice also encouraged Mr. Nazarbaev to finally authorize construction of a pipeline connecting Kazakh oil fields to the Baku-Tbilisi-Ceyhan pipeline which takes Caspian oil to the Mediterranean and global markets.

She could also praise and encouraged Kazakhstan to promote its unique model of peace and harmony among Muslims, Christians and Jews around the Islamic world. Finally, she could encourage Kazakhstan to sponsor the U.S. gaining observer status in the Shanghai Cooperation Organization, so that Washington can alleviate Beijing and Moscow’s fears as to its intentions in the heartland of Eurasia while continue playing an important role there.

I think its a great summary, but on Kazakhstan, I ‘d like to add one more thing to place Kazakhstan’s relationship with the U.S. in greater context: President Nazarbayev has almost alwaysed followed a multi-vectored foreign policy, trying to balance all the major powers in the region:

• Nazarbayev has sought good terms with Russia, its larger and power neighbor in the north and also the original homeland for a sizeable number of Russians in Kazakhstan
• At the same time, Nazarbayev has reached out to China. This year China and Kazakhstan completed the creation of a major pipeline expected to deliver a million bbl of oil per day to China. Before the Sino-Kazakh pipeline, Kazakhstan was wholely dependent on Russia for export of its oil. They are also looking to export Kazakhstan’s natural gas through China.

With Kazakhstan already playing well with Russia and China, naturally Kazakhstan needs to pay attention to the other player in Central Asia: the United States. Especially with the lost of Uzbekistan as a partner in Central Asia, U.S. is in dire need of finding other partners - although Kazakhstan would probably never reach the level of military cooperation with the U.S. that Uzbekistan once did.

And with all this in mind, we move on to the Caucaus…

On the Caucasus
Check back tomorrow…

The threat of Islamofacism (using Christopher Hitckins’s term) is what appears on the new everyday. Most recently, we’ve seen the arrests in France over bombing plots against the Metro and the terror alert in New York City.

While the Public is fearful of the next Bali Bombing or Madrid Bombing, a truly global catastrophe would result from a disruption in the global energy infrastructure; Energy is Modernity’s Achilles Heel. Energy concerns have been growing over unease over dependence on Middle East oil and raising oil prices. But what should be the biggest concern is the threat of Peak Oil changing the geopolitical landscape and attacks on the oil infrastructure.

Bombings targeting the deaths of civilians are all tragic in the sense of the direct effect on human lives – but a major energy crunch could bring modernity to a halt and surely fuel (no pun intended) wars over energy resources. Indeed, Hurricane Katrina and Rita demonstrated the vulnerability of the U.S. oil infrastructure system – lost oil rigs, refineries offline, fuel shortages and scenes of cars running out of fuel as people attempt to evacuate.
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