Geopolitics – Jan 28

Click on the headline (link) for the full text.

Many more articles are available through the Energy Bulletin homepage

Saudi officials seek to temper the price of oil
Jad Mouawad, International Herald-Tribune
Saudi Arabia, which benefited immensely from record oil prices last year, has sent signals in the past two weeks that it is committed to keeping oil at around $50 a barrel – down $27 a barrel from the summer peak that shook consumers across the developed world.

The indications came in typically cryptic fashion for the oil-rich kingdom. In Tokyo last week, Ali al-Naimi, the Saudi oil minister, said Saudi Arabia’s policy was to maintain “moderate prices.” The previous week, on a stop in New Delhi, he effectively put his veto on an emergency meeting of the Organization of the Petroleum Exporting Countries to prop up prices after oil briefly dropped below $50 a barrel, the lowest level in nearly two years.

The events that propelled oil prices above $77 a barrel last July, then dragged them down again, were beyond the control of any single producer. Still, Saudi Arabia, which is by far the largest oil producer within OPEC and sets the cartel’s agenda, is seeking to avoid a repeat of the dramatic rise in prices while trying to put a floor beneath them.

Nowhere was last summer’s spike in oil prices felt more profoundly than in the United States. As gasoline rose above $3 a gallon, consumers cut their spending elsewhere, tamping down profits in retail, travel and other industries. United States automakers were devastated as consumers fled from large vehicles to smaller ones, which have historically been the specialty of the Japanese; on Thursday, Ford said that 2006 had been the worst year in its history.

The recent slide back to $50 a barrel for oil – which translates to about $2 for a gallon of gasoline – has eased the pressure on the domestic economy, quieting talk that oil prices and the declining housing market would lead to a recession.

The Saudis appear to be rediscovering that painfully high energy prices take a profound toll on the global economy, which in turn reduces demand for their oil. But other motives seem to be at work, too, including the Saudis’ desire to restrain Iran’s ambitions in the region.
(27 Jan 2007)

“Toughness” against Russia on gas – stupid
Original: “When will we learn? Sometimes toughness is just stupid.”
Jerome a Paris, European Tribune
… I worry (again) about the growing body of institutional support for “toughness” against Russia on gas matters.

A lot of people have discovered in the past year that Europe’s dependence on Russian gas was growing, and have begun to panic. The result has been increasing stridency and hostility against Russia, or coldwaritis, as exemplified by the latest opus from the CSIS (Center for Strategic and International Studies, a well known think tank), written by former ambassador to Lithuania Keith Smith.

The full text of his article can be downloaded from here, but I’ll focus only on his list of recommendations for the EU. It’s scary.

…Thus, we have the same mixture of bluster and wishful thinking as always, an absolute incoherence with the otherwise pushed for liberalisation drive, and an insistence to paint Russia as the evil empire trying to withhold (our) energy from us.

And we have absolutely no mention of what would actually make sense and be within our control: stop building new gas-fired plants (something structurally encouraged by the liberalisation of the markets, which favors the kinds of plants which are easiest to finance by the private sector, i.e. gas- and coal-fired plants), and try to otherwise focus on energy savings.

But no, confrontation is so much more fun, and so much more manly.
(28 Jan 2007)
Also at Daily Kos.

Russia’s Managed Democracy
Perry Anderson, London Review of Books
…Putin’s authority derives, in the first place, from the contrast with the ruler who made him. From a Western standpoint, Yeltsin’s regime was by no means a failure. By ramming through a more sweeping privatisation of industry than any carried out in Eastern Europe, and maintaining a façade of competitive elections, it laid the foundations of a Russian capitalism for the new century. However sodden or buffoonish Yeltsin’s personal conduct, these were solid achievements that secured him unstinting support from the United States, where Clinton, stewing in indignities of his own, was the appropriate leader for mentoring him. As Strobe Talbott characteristically put it, ‘Clinton and Yeltsin bonded. Big time.’ In the eyes of most Russians, on the other hand, Yeltsin’s administration set loose a wave of corruption and criminality; stumbled chaotically from one political crisis to another; presided over an unprecedented decline in living standards and collapse of life expectancy; humiliated the country by obeisance to foreign powers; destroyed the currency and ended in bankruptcy. By 1998, according to official statistics, GDP had fallen over a decade by some 45 per cent; the mortality rate had increased by 50 per cent; government revenues had nearly halved; the crime rate had doubled. It is no surprise that as this misrule drew to a close, Yeltsin’s support among the population was in single figures.

Against this background, any new administration would have been hard put not to do better. Putin, however, had the good luck to arrive in power just as oil prices took off. With export earnings from the energy sector suddenly soaring, economic recovery was rapid and continuous. Since 1999, GDP has grown by 6-7 per cent a year. The budget is now in surplus, with a stabilisation fund of some $80 billion set aside for any downturn in oil prices, and the rouble is convertible. Capitalisation of the stock market stands at 80 per cent of GDP. Foreign debt has been paid down. Reserves top $250 billion. In short, the country has been the largest single beneficiary of the world commodities boom of the early 21st century. For ordinary Russians, this has brought a tangible improvement in living standards. Though average real wages remain very low, less than $400 dollars a month, they have doubled under Putin (personal incomes are nearly two times higher because remuneration is often paid in non-wage form, to avoid some taxes). That increase is the most important basis of his support. To relative prosperity, Putin has added stability. Cabinet convulsions, confrontations with the legislature, lapses into presidential stupor, are things of the past. Administration may not be that much more efficient, but order – at least north of the Caucasus – has been restored. Last but not least, the country is no longer ‘under external management’, as the pointed local phrase puts it. The days when the IMF dictated budgets, and the Foreign Ministry acted as little more than an American consulate, are over. Gone are the campaign managers for re-election of the president, jetting in from California. Freed from foreign debt and diplomatic supervision, Russia is an independent state once again.
(25 Jan 2007)
Recommended by Jerome a Paris. Long article about recent Russian politics by a history teacher at UCLA. As energy supplies become constrained, it becomes more important to understand the culture and history of the energy producers. The same is true of the Middle East, as Professor Muawia Barazangi of Cornell argues:

Barazangi stressed the fact that only seven countries worldwide (Saudi Arabia, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela and Russia) contain 80 percent of the world’s proven recoverable oil reserves. Five of those are notably in the Persian Gulf region and share Islamic cultures.

He argued that in order to better understand oil issues in the Gulf, the world must understand the Arab and Persian people, and Islam’s history and culture. He expressed hope that Cornell would undertake initiatives, such as a Center for Gulf Studies, to strengthen Arab/Islamic studies in which disciplines such as geology, environment, economy, culture and religion could be integrated.

Intelligence Brief: U.S. Moves to Regain Leverage over Iran
Power and Interest News Report (PINR)
In September 2004, PINR released an in-depth report on Iran’s foreign policy objectives.

…In the two years that have passed since the report’s release, developments have clearly moved in a direction closer to Iran’s best-case scenario. Not only has the U.S. intervention in Iraq deteriorated to the point where some form of withdrawal is a likely outcome, but Iran’s influence in southern Iraq has increased; Iranian-supported Hezbollah managed to defend its positions against an Israeli invasion; Afghanistan has grown increasingly unstable; North Korea tested a nuclear weapon without significant repercussions; and Iran’s pursuit of nuclear technology has not been thwarted despite threats and economic sanctions.

All of these developments have proved positive for Iran and explain its aggressive posture on the world stage. Tehran sees developments in the Middle East moving rapidly in its favor and it considers the United States to be in a weak position strategically. As a result, Tehran believes that its window of opportunity to increase its regional power — which formed with the U.S. invasion of Iraq in 2003 — remains open. As a result, it has not backed down on any of its foreign policy ambitions despite mounting pressure.
(26 Jan 2007)
Counterpoint: Debunking Iran’s nuclear myth makers (Asia Times), suggested by SP.

New Report Challenges Blair’s Views on Iran
Campaign Iran, Payvand’s Iran News
Today, a report will be delivered to Number 10 Downing Street and to the news editors of all major media networks in Britain and the world, countering the some misconceptions that surround alleged threat posed by Iran.

The report, ‘Answering the Charges”, drafted by Campaign Iran, sets out 21 of the most popular charges that have been levelled at Iran and answers each of them in turn. Relying on the facts as they are currently known, the report challenges the accuracy of many of the key claims commonly made against Iran. The report follows a spate investigations into standards of reporting on Iran undertaken by the Press Complaints Commission, and is intended to raise the awareness among journalists, politicians and the public, that much of what has become the conventional wisdom on Iran, is incorrect.

…The targeting of Iran has nothing to do with oil or gas

Iran holds the world’s largest supplies of oil after Saudi Arabia and Iraq, and holds more oil and gas combined than any other country on the planet. As Peak Oil rapidly approaches, the US demand to control the lion’s share of what is left. Iran has also just shifted its petrodollars into a Euro-based bourse. The effect on the value of the dollar will be significant.
(26 Jan 2007)
Nothing new to EB readers – just interesting that the memes are familiar to pro-Iranian activists. -BA