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Politics & economics - July 5

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Playing Oil Politics in the Caspian Sea

Jela De Franceschi, Voice of America
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The Caspian Sea sits atop one of the world's largest oil and natural gas fields, but its full exploitation only began about a decade ago. Since then the resource-wealthy region has become the center of rivalry between Russian and western, mainly United States, interests.

About a third of the world's undeveloped natural gas and oil deposits lie beneath the Caspian Sea. Still, its energy potential remained largely untouched until the early 1990s, when many observers declared it the world's new "Oil Mecca".

The region has caught the attention of leading energy consumers, such as the United States, Russia, China, Japan, India and perhaps most of all the European Union, which by 2020 could import 80 percent of its natural gas from the area.
(26 June 2006)


Soros: Europe must tackle Russian energy threat

Barbara Lewis, Reuters
Europe must develop a common energy policy and the planned flotation of Russian state oil firm Rosneft should be blocked to tackle the threat Russia poses to energy supplies, billionaire financier George Soros said on Tuesday.

"I think that Russia is working as a monopoly supplier and it is essential for Europe to have a coordinated energy policy to be able to stand up as equal partners in negotiating with Russia," Soros said.

"If it is unable to do it, I think the dependence on Russia is excessive."

Russia is the world's No. 2 crude exporter after Saudi Arabia. Its supplies, which go mainly to Europe, cover more than a quarter of the continent's oil needs.

Soros reiterated his opposition to the Rosneft flotation, which would be Russia's biggest ever share offering and is scheduled to take place in London this year.

"It is an issue that should not be allowed to proceed, but I think it will," said Soros.

Rosneft grew from a mid-sized firm to a giant company after it bought the main production unit of YUKOS, which was brought down by tax claims.
(4 July 2006)
In an Interview with Newsweek, Soros reveals himself to be a believer in peak oil:

We are facing a global energy crisis which is very complex because it has many ingredients, starting with global warming and the peaking of oil discoveries. And there's the dependence of many of the major industrial countries on sources of energy from politically unstable areas of the world and the behavior of some of the energy rich countries like Iran and Venezuela and Russia exploiting the high price of oil and their control of the supply. So we are in fact in a global energy crisis. That instability has certainly added $20-$30 to the price of oil.


Cheneys betting on bad news?

Kiplinger's Personal Finance Magazine via MSN Money
Vice President Dick Cheney's financial advisers are apparently betting on a rise in inflation and interest rates and on a decline in the value of the dollar against foreign currencies. That's the conclusion we draw after scouring the financial disclosure form released by Cheney recently.
(2 July 2006)
As pointed out by Kjell Aleklett on Energy Bulletin in May 2004, Dick Cheney is well aware of the problem of oil depletion. In a 1999 speech to the London Institute of Petroleum Cheney said:

By some estimates there will be an average of two per cent annual growth in global oil demand over the years ahead along with conservatively a three per cent natural decline in production from existing reserves. By 2010 we will need on the order of an additional fifty million barrels a day. So where is the oil going to come from?... Oil is unique in that it is so strategic in nature. We are not talking about soapflakes or leisurewear here. Energy is truly fundamental to the world's economy.

Information Clearing House has some bearish ("The American economy is barrel-rolling towards earth and there are only enough parachutes for Cheney and the gang.") commentary. -AF


How did oil power Iran fall into a petrol crisis?

Alireza Ronaghi and Christian Oliver, Reuters
"One million bicycles do not cause as much pollution as a single car," reads a well-meaning but futile mural above a petrol station in central Tehran.

At the pumps below, the motorists wastefully slopping highly-subsidised gasoline down the sides of their vehicles have no intention of switching to two wheels.

Cheap fuel is seen as a national right in the world's number four crude producer, so drivers are bitter about the government's assertion that rationing could be imminent.

"Rationing would be a negative step. Why can they not just build a couple more refineries?" asked taxi driver Mohammad Moaveni, who shuttles between Tehran and its western satellite town of Karaj.
(4 July 2006)


BP blames Venezuela's Chavez for shortfall in production

Stephen Foley, The Independent
Venezuela's left-wing government is demanding that BP give up an even greater proportion of the oil produced at its fields in the country, as president Hugo Chavez tries to claw back more of the country's oil wealth from multi-national companies.

BP - the UK's largest oil company - said yesterday that it produced less oil in the past three months than many analysts had predicted, leading some to suggest it could miss its production targets for the year.

The company blamed a more aggressive attitude by the Chavez government, which forced the renegotiation of contracts on three of BP's oil fields in Venezuela. It is believed that BP was forced to give up about two-thirds of the oil the fields were producing, handing it instead to the state-owned oil company Petroleos de Venezuela (PDVSA).
(4 July 2006)
Related: BP oil and gas production falls


Last Stand: The military's problem with the President's Iran policy.

Seymour Hersch, The New Yorker
...Inside the Pentagon, senior commanders have increasingly challenged the President's plans, according to active-duty and retired officers and officials. The generals and admirals have told the Administration that the bombing campaign will probably not succeed in destroying Iran's nuclear program. They have also warned that an attack could lead to serious economic, political, and military consequences for the United States.

A crucial issue in the military's dissent, the officers said, is the fact that American and European intelligence agencies have not found specific evidence of clandestine activities or hidden facilities; the war planners are not sure what to hit. "The target array in Iran is huge, but it's amorphous," a high-ranking general told me. "The question we face is, When does innocent infrastructure evolve into something nefarious?" The high-ranking general added that the military's experience in Iraq, where intelligence on weapons of mass destruction was deeply flawed, has affected its approach to Iran. "We built this big monster with Iraq, and there was nothing there. This is son of Iraq," he said.

"There is a war about the war going on inside the building," a Pentagon consultant said. "If we go, we have to find something."...

Leverett [a former National Security Council aide for the Bush Administration] told me that, without a change in U.S. policy, the balance of power in the negotiations will shift to Russia. "Russia sees Iran as a beachhead against American interests in the Middle East, and they're playing a very sophisticated game," he said. "Russia is quite comfortable with Iran having nuclear fuel cycles that would be monitored, and they'll support the Iranian position"—in part, because it gives them the opportunity to sell billions of dollars' worth of nuclear fuel and materials to Tehran. "They believe they can manage their long- and short-term interests with Iran, and still manage the security interests," Leverett said. China, which, like Russia, has veto power on the Security Council, was motivated in part by its growing need for oil, he said.

"They don't want punitive measures, such as sanctions, on energy producers, and they don't want to see the U.S. take a unilateral stance on a state that matters to them." But, he said, "they're happy to let Russia take the lead in this." (China, a major purchaser of Iranian oil, is negotiating a multibillion-dollar deal with Iran for the purchase of liquefied natural gas over a period of twenty-five years.) As for the Bush Administration, he added, "unless there's a shift, it's only a question of when its policy falls apart."
(3 July 2006)
Long, informative article -AF

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