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Geopolitics - Feb 20

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Slouching Towards Petroeurostan

Pepe Escobar, Information Clearing House
It was a discreet, almost hush hush affair, but after almost three years of stalling and endless delays, it finally happened. Now more than ever, it may also signal a true geoeconomic earthquake - way beyond a potentially shattering blow to US dollar hegemony.

This Sunday, the Iranian Oil Bourse - the first-ever oil, gas and petrochemical exchange in the Islamic Republic, and the first within OPEC - was launched by Iran’s Oil Minister Gholam-Hossein Nozari, flanked by Minister of Economy and Financial Affairs Davoud Danesh Ja’fari, the man who will head the bourse.

The bourse’s official name is Iranian International Petroleum Exchange (IIPE), widely known in Iran and the Persian Gulf as the Kish bourse. Kish island is a free zone (declared by the Shah) in an ideal laissez faire setting: lots of condos and duty-free malls, no Khomeini mega-portraits and hordes of young honeymooners shopping for made-in-Europe home appliances.

There was frantic speculation all over the world that the bourse would start trading in euros. But according to Nozari transactions at this early stage will be in Iran’s currency, the rial. Anyway the Iranian ambassador to Moscow Gholam-Reza Ansari has already advanced that “in the future, we'll be able to use the ruble, Russia’s national currency, in our operations”. He added that “Russia and Iran, two major producers of the world’s energy, should encourage oil and gas transactions in various non-dollar currencies, releasing the world from being a slave of dollar”. Russia’s first deputy Prime Minister Dmitry Medvedev said last week that “the ruble will de facto become one of the regional reserve currencies.”
(19 February 2008)
See previous coverage of Iran oil bourse for the skepical argument.


Korea Resources Diplomacy
Prudent, Precise Approach Brings Substantive Benefits

Opinion, The Korea Times
A war without gunfire is going on among major powers over dwindling energy and other natural resources in the world. If Noam Chomsky and Alan Greenspan are right, it could easily escalate into a war with gunfire ? a horrible one at that ? as seen by the U.S. war in Iraq. So the next government's vow to focus on resources diplomacy is more than welcome, if a little belated.

What's left is how to put it into action in the most effective and substantive ways, but what President-elect Lee Myung-bak and his aides did recently fell somewhat short of expectations in this regard. Lee Thursday met Nechirvan Barzani, the visiting head of Iraq's Kurdistan regional government, to ask for cooperation in oil development by Korean firms in the Kurdish region. Lee's transition team said the memorandum of understanding to explore the reserve of up to 2 billion barrels is the ``first fruit'' of its resources diplomacy.

It's questionable whether Lee should have met the Kurdistan leader, considering the Iraqi central government lately took issue with a similar previous MOU as infringing on its authority. Equally uncertain is how the meeting will affect negotiations between SK Corp. and Baghdad to resume Iraq's crude exports to the nation's largest refinery that have since been suspended. The transition team's media play of the contract is self-serving, too, as it owes much to the presence of the Zaytun troops there, which President Roh Moo-hyun pushed through despite fierce opposition even from his own party. It's time for political bragging to give way to cold-headed economic calculation based on a long-term strategy.

The need to make all-out efforts to secure natural resources, particularly oil, can hardly be overemphasized. Korea, the world's 10th largest energy consumer, relies on foreign suppliers for 97 percent of its demand with slightly more than 4 percent coming from its own oil fields abroad. Japan, which meets 16 percent of demand from self-developed offshore fields, plans to raise the ratio to 40 percent.

Securing sufficient fossil fuel, however, should not be all, but a part of a comprehensive energy strategy. The best way for Korea to turn the energy crisis and global warming into another industrial opportunity is to be armed with state-of-the-art energy and an environmental strategy. The nation must expand its world-class technology in building and operating nuclear power plants to designing and engineering know-how. Similar efforts should be made for developing new and renewable energy resources as well as energy-conservation technology.

All this should lead to a cautious and elaborate strategy rather than hasty and exaggerated PR activities, which could backfire. President-elect Lee once said the Korean soldiers should stay in Kurdistan longer, as it ``sits on an oil field.'' The post of the presidency will require a little more careful and adroit diplomatic expressions
(18 February 2008)


Iraq oil law stalled, no end to impasse in sight

Ahmed Rasheed, Reuters
A law that could shape Iraq's future by clearing the way for investment in its oil fields is deadlocked by a battle for control of the reserves and no end to the impasse is in sight, lawmakers and officials say.

The bill is also meant to share revenue equitably from the world's third largest oil reserves, thus helping bridge the deep divides between Iraq's Shi'ites, Sunni Arabs and Kurds.

The one thing all sides agree on is the law is vital to securing foreign investment to boost Iraq's oil output and rebuild its shattered economy after five years of insurgency and sectarian fighting that has killed tens of thousands of people.

But the law remains stalled by bitter rows between Baghdad and the largely autonomous Kurdistan region in the north over who will control the fields and how revenue will be shared.
(18 February 2008)


German regulator warns of Europe power shortages

Reuters
Europe risks power shortages if it does not press ahead with new power station projects to replace and add to ageing generation capacity, German energy regulator Matthias Kurth said on Tuesday.

Coal-to-power projects were being cancelled because operators feared tougher emissions rules or because citizens did not want polluting plants in their neighbourhood, while rising prices of materials and labour added to delays, he said.
(19 February 2008)


Coal markets rocked by Eskom’s ambitious plan

Mathabo le Roux, Business Day
ESKOM’s plan to buy an additional 45-million tons of coal to replenish depleted stockpiles has been met with incredulity internationally, with analysts saying it overlooks severe global coal supply constraints, logistical challenges and price concerns.

This could be the first time that SA, a net exporter of coal, imports coal. A New York-based analyst, who declined to be named, said on Friday Eskom’s plan could be hampered severely by tight global supply caused by Indian and Chinese demand.

“The markets here have been abuzz with the news (of Eskom’s coal procurement plan),” the analyst said. There was concern that Eskom had not taken into account extraneous factors that could affect its plans.

Coal supplies have been constrained severely by disruption in Queensland, Australia, one of the world’s top coal-producing regions, where torrential rains and flash floods led to six big coal producers, including Rio Tinto, BHP Billiton and Xstrata, declaring force majeure, saying they could miss coal deliveries.
(18 February 2008)


Smoke and Mirrors

Bill Powell, TIME Magazine
No country except the U.S. is crawling with more venture capitalists looking to fund green-energy deals these days than China. The rush has not yet reached dotcom-boom proportions, but VCs and entrepreneurs see big opportunities in helping the country cope with its horrendous pollution problems through alternative-energy development.

Deals are getting done. China is applying green principles to the construction of entirely new cities such as Dongtan, an area outside of Shanghai the size of Manhattan, which will use recycled water only and generate electricity using biomass. Last year, 3.4 gigawatts (GW) of wind energy were added to China's electrical grid, making the country the fastest-growing market for wind power in the world. And by 2020, China will quadruple its nuclear capacity from 10 GW to 40, again the fastest rate of growth globally.

No country except the U.S. is crawling with more venture capitalists looking to fund green-energy deals these days than China. The rush has not yet reached dotcom-boom proportions, but VCs and entrepreneurs see big opportunities in helping the country cope with its horrendous pollution problems through alternative-energy development. Deals are getting done. China is applying green principles to the construction of entirely new cities such as Dongtan, an area outside of Shanghai the size of Manhattan, which will use recycled water only and generate electricity using biomass. Last year, 3.4 gigawatts (GW) of wind energy were added to China's electrical grid, making the country the fastest-growing market for wind power in the world. And by 2020, China will quadruple its nuclear capacity from 10 GW to 40, again the fastest rate of growth globally.
(14 February 2008)

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