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Geopolitics - Nov 27

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Russia’s Comeuppance

Stephen Sestanovich, Council on Foreign Relations via Newsweek
Not long ago the balance of global power was shifting toward Russia. The economic crisis has put a stop to that.
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Any international economic crisis afflicts different countries in different ways, but an unfortunate few experience every painful dimension of it. In the current crisis, Russia is confronting virtually all the negatives at once--sharply declining export earnings from energy and metals, over-leveraged corporate balance sheets and a chorus of bailout appeals, a credit crunch and banking failures, a bursting real-estate bubble and mortgage defaults, accelerating capital flight, and unavoidable pressures for devaluation.

The Russian stock market is down 70 percent from late spring. The government has burned through more than 20 percent of its foreign-exchange reserves since August. The outflow of capital in October alone was $50 billion. Next year's budget is based on a projected average price for oil of $95 per barrel; now budget planners have to work with forecasts of $50 or lower. Since Finance Minister Alexei Kudrin has said that Russian government spending goes into deficit at $70 per barrel, pressures for spending cuts are starting to mount. Severe reductions have already been announced in housing and education programs.
(26 November 2008)



Gulf's woes bode ill for the oil and gas we need

Carl Mortished, The Times
Alistair Darling's Pre-Budget Report on Monday contained at least one item that raised not a flicker of attention at Westminster but which will have been keenly noticed far away in the Gulf: he has decided that Islamic bonds will not form part of the Government's borrowing programme in the near future.

The scrapping of Britain's first sukuk (a loan instrument that complies with Islamic strictures on the immorality of interest) will be seen as a slap in the face, a cold shoulder at a time when Islamic financial institutions are being buffeted by a catastrophe of real estate, the seeds of which were planted in America and Europe.

Dubai is not bust, but government debt of $80 billion (£52 billion) casts as big a shadow over the economy as Burj Dubai, the nearly kilometre-high skyscraper under construction in the city-state. As with the tower, no one quite knows how high the debt will go and, in a carefully staged announcement on Monday, nervous property investors were told that the Government of the United Arab Emirates would stand behind Dubai's obligations. Meanwhile, a deal was done to bail out two struggling mortgage banks that dominate the city-state's overheated property market. Amlak Finance and Tamweel, an Islamic lender, were folded into a shadowy government institution out of which emerged a new entity, Emirates Development Bank.

These tiny statelets were supposed to be rich, floating on a magic carpet of hydrocarbons. The oil is still there, but everyone is learning that the Gulf's economies are as connected to the global financial system as are financial markets elsewhere...
(26 November 2008)



Oiligarchy: A game with a message

Naomi Alderman, Guardian
Trash the environment for profit to win! An utterly partial guide to the oil industry, as you 'walk a mile' in a mogul's shoes.
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... the wonderfully simple, sublimely intelligent little online game Oiligarchy, which I discovered via Metafilter. It combines so many fascinating elements: it's part strategy game, part political statement, part chilling near-future narrative. It's charmingly designed, and yet so slyly educational that I've been thinking a little differently about the world ever since I played it.

The game begins with a familiar-seeming business strategy scenario. It's 1945. You the player are CEO of a large oil company in the US. Your job is to make money, keep the shareholders happy. So you start to drill. First in Texas, that's pretty easy, no one's trying to stop you and the black gold starts flowing. But soon the Texas wells aren't enough to meet consumer demand. So you need to look further afield. But where? If you drill in Nigeria, you might find protesters blowing up your rigs. So you'll probably have to employ local militia to defend them. If you try Alaska, you'll have those pesky environmentalists on your back. And of course Iraq is unstable: to drill there you'll really need the support of US soldiers. But to get that you'd have to have a president sympathetic to your cause. Time to start funding political parties, then.

Oiligarchy makes no claims to be an impartial guide to the oil industry.
(25 November 2008)


The slow death of Gaza

Andrea Becker, Guardian
It has been two weeks since Israel imposed a complete closure of Gaza, after months when its crossings have been open only for the most minimal of humanitarian supplies. Now it is even worse: two weeks without United Nations food trucks for the 80% of the population entirely dependent on food aid, and no medical supplies or drugs for Gaza's ailing hospitals. No fuel (paid for by the EU) for Gaza's electricity plant, and no fuel for the generators during the long blackouts. Last Monday morning, 33 trucks of food for UN distribution were finally let in – a few days of few supplies for very few, but as the UN asks, then what?

... In practice, Israel's blockade means the denial of a broad range of items – food, industrial, educational, medical – deemed "non-essential" for a population largely unable to be self-sufficient at the end of decades of occupation. It means that industrial, cooking and diesel fuel, normally scarce, are virtually absent now. There are no queues at petrol stations; they are simply shut. The lack of fuel in turn means that sewage and treatment stations cannot function properly, resulting in decreased potable water and tens of millions of litres of untreated or partly treated sewage being dumped into the sea every day. Electricity cuts – previously around eight hours a day, now up to 16 hours a day in many areas – affect all homes and hospitals. Those lucky enough to have generators struggle to find the fuel to make them work, or spare parts to repair them when they break from overuse. Even candles are running out.

There can be no dispute that measures of collective punishment against the civilian population of Gaza are illegal under international humanitarian law. Fuel and food cannot be withheld or wielded as reward or punishment.
(24 November 2008)
Reader GS writes:
Here is a community that really needs the deep wisdom inherent in the Post Carbon Movement's herculean efforts to develop COMMUNITY as a solution to peak oil.

The entire population ... is already experiencing the PREDICTED PEAK OF OIL.



What the pirates say

James Carroll, Boston Globe
THE WORD "pirate" has come into the news for the first time in memory, as raiders armed with grenade launchers and grappling hooks take over vessels headed through waters off Somalia for the Suez Canal.

... Oil and weapons. The pirates have enriched themselves and now build villas on the Somali coast, but the high-seas drama moves away from mundane thievery to take on the character of a morality tale. A legion of impoverished people were castaways of the world economy, condemned to stand on their forlorn shore and watch passing ships loaded with fuel that creates wealth and arms that protect it. They decided to stop being mere spectators of their own desperation, and became desperados instead. The invisible poor are being seen, and their complaint is heard. Consider:

  • The anarchy that permits piracy dates to the collapse of the Somali government in 1991. In 1992, the United States led the infamous "humanitarian intervention" that ended in the American humiliation at Mogadishu. Somalia has been a failed state ever since. According to UN figures, of the $2 billion spent in that intervention, 90 percent went to a military effort, with the paltry rest going to economic reconstruction. Imported weapons empower the warlords to this day.

  • America's continuing overreliance on weapons is one of the pillars of the problem. Last month, the US Africa Command became fully operational, headquartered in Germany, in part because no African nation wants to be host. The United States no longer pretends that its main way of relating to the continent is through the State Department or the Agency of International Development, and not through the Pentagon - through force of arms instead of foreign aid. It figures. As the captured Ukrainian freighter makes clear, Africa is the world's weapons dump. The pirates, in effect, protest.
  • Somali piracy began when the nation's failed government lost the ability to protect the rights of fishermen. Tuna abound in Somali waters, and in the 1990s vessels from other countries illegally moved in, prompting Somali fishermen to arm themselves and confront the poachers. Soon they confronted everyone.

(24 November 2008)

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